[Federal Register Volume 89, Number 120 (Friday, June 21, 2024)]
[Notices]
[Pages 52182-52185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13535]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100332; File No. SR-NYSEAMER-2024-41]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the NYSE American Options Fee Schedule

    June 14, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on June 12, 2024, NYSE American LLC (``NYSE American'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE American Options Fee 
Schedule (``Fee Schedule'') to replace the Excessive Bandwidth 
Utilization Fees with a single fee. The Exchange proposes to implement 
the fee changes effective June 12, 2024.\4\ The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.
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    \4\ On May 1, 2024, the Exchange originally filed to amend the 
Fee Schedule (NYSEAMER-2024-30) and, on May 16, 2024, the Exchange 
withdrew that filing and submitted NYSEAMER-2024-32. On May 30, 
2024, the Exchange withdrew NYSEAMER-2024-32 and submitted NYSEAMER-
2024-37, which latter filing the Exchange withdrew on June 12, 2024.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend the Fee Schedule to replace 
the Order to Trade Ratio Fee and Messages to Contracts Traded Ratio Fee 
with an Excessive Bandwidth Utilization Fee to reflect the Exchange's 
migration to NYSE Pillar (``Pillar''). The Exchange proposes to 
implement the fee changes effective May 30, 2024 [sic].

[[Page 52183]]

    The Exchange imposes certain fees to discourage excessive message 
traffic (that do not result in executions or otherwise improve market 
quality) that could unnecessarily tax the Exchange's resources, 
bandwidth, and capacity, as no system has unlimited capacity.
    With the Exchange's migration to the Pillar trading platform, 
market participants can send both quote and order message traffic over 
a single connection. This functionality allows the Exchange to monitor 
the message traffic of each ATP Holder, which in turn impacts how the 
Exchange calculates (and assess fees for) each ATP Holder's use of 
Exchange bandwidth and processing resources.
    Currently, the Exchange assesses two fees designed to curtail 
excessive message traffic: an Order to Trade Ratio Fee that is based on 
the number of orders entered as compared to the number of executions 
received in a calendar month and a Messages to Contracts Traded Ratio 
Fees that measures the efficiency of an ATP Holder's orders and quotes, 
subject to certain exceptions (collectively, the ``Excessive Traffic 
fees'').\5\ Because the Pillar trading system enables the Exchange to 
monitor the excessive message traffic of both orders and quotes, the 
Exchange has determined it no longer needs both Excessive Traffic fees. 
The Exchange therefore proposes a single ``Monthly Excessive Bandwidth 
Utilization Fee'' or ``EBUF''.\6\ As detailed below, the proposed EBUF 
is similar in structure to the existing Order to Trade Ratio Fee, 
except that the proposed EBUF would include quotes, which reflects the 
communication protocol available on Pillar. Consistent with the purpose 
of the proposed EBUF, the Exchange believes that assessing one fee 
(instead of two) for excessive message traffic would result in a more 
efficient use of Exchange resources.\7\
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    \5\ See Fee Schedule, Section II. Monthly Excessive Bandwidth 
Utilization Fees, II.A. (Order to Trade Ratio Fees) and II.B. 
(Messages to Contracts Traded Ratio Fees). The calculation for 
assessing the Messages to Contracts Traded Ratio Fees, which 
aggregates the activity of affiliated entities, does not include for 
quotes submitted by a Specialist or e-Specialist that set the NBBO 
in their allocated issues and Market Makers that execute a monthly 
average daily volume electronically of at least 20,000 contracts (as 
aggregated all options issues in their assignment). See Fee 
Schedule, Sections II.A. and B, respectively. If an ATP Holder is 
liable for either or both fees in a given month, that firm is only 
charged the greater of the two fees. See Fee Schedule, Section II.
    \6\ See proposed Fee Schedule, Section II., Monthly Excessive 
Bandwidth Utilization Fee.
    \7\ As discussed further herein, the Exchange does not propose 
to carry forward the existing ``Messages to Contracts Traded Ratio 
Fee'' because the proposed EBUF is designed to capture the excessive 
quote traffic that was captured by that fee. Because Pillar 
processing renders the ``Messages to Contracts Traded Ratio Fee'' 
redundant (and therefore unnecessary), the Exchange believes the 
proposed EBUF would streamline the Fee Schedule.
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    Like the Order to Trade Ratio Fee, the proposed EBUF is designed to 
strike the right balance between deterring ATP Holders from submitting 
an excessive number of messages (that do not result in executions or 
otherwise improve market quality) without discouraging ATP Holders from 
accessing the Exchange, except that it will include quotes. As 
proposed, the EBUF will only be assessed on ATP Holders that send more 
than 50 million messages per day on average during a calendar month.\8\ 
For purposes of EBUF, ``messages'' include quotes, orders, order 
cancellations and modifications.\9\
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    \8\ See proposed Fee Schedule, Section II., Monthly Excessive 
Bandwidth Utilization Fee.
    \9\ Id.
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    The proposed EBUF would calculate an ATP Holder's ``Monthly Message 
to Execution Ratio'' (i.e., the number of messages sent versus the 
number of executions). The Exchange has determined that, on Pillar, 
setting a baseline threshold for this ``Monthly Message to Execution 
Ratio'' at 500,000 to 1 or greater should ensure the efficient use of 
the Exchange's resources, bandwidth, and capacity by ATP Holders that 
are actively trading on the Exchange. Thus, as proposed, the Exchange 
will calculate the number of messages submitted by an ATP Holder, and 
the number of executions by the ATP Holder, and will only assess the 
EBUF if the Monthly Message to Execution Ratio exceeds 500,000 to 1. 
The proposed Fee will be assessed to further encourage efficient use of 
the Exchange's resources as shown here:

------------------------------------------------------------------------
           Monthly message to execution ratio             Monthly charge
------------------------------------------------------------------------
Between 500,000 and 749,999 to 1........................          $5,000
Between 750,000 and 999,999 to 1........................          10,000
1,000,000 to 1 and greater..............................          15,000
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    Like the Order to Trade Ratio Fee, the higher the Messages to 
Executions Ratio (i.e., the more unexecuted message that Pillar 
ingests), the higher the proposed fee, which increase is designed to 
discourage (increasing levels of) excessive message traffic by ATP 
Holders. The Exchange notes that the proposed minimum thresholds for 
triggering the proposed EBUF are higher than the thresholds associated 
with the Order to Trade Ratio Fee (but the associated fees are 
substantially the same), which reflects the fact that both quotes and 
orders (and cancellations or modification thereof) are ``messages'' 
included in the calculation as well as the fact that Pillar can 
accommodate more message traffic than the Exchange's pre-Pillar 
system.\10\ The proposed EBUF thresholds are set at levels that an ATP 
Holder should not hit or exceed in the ordinary course of trading. As 
such, the Exchange believes that the proposed EBUF thresholds and 
associated fees are set at levels reasonable designed to encourage ATP 
Holders to efficiently use message traffic as necessary.
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    \10\ For example, the current Order to Trade Ratio Fee has 
minimum ``order to execution'' ratio thresholds of between 10,000 
and 14,999 to 1, with an accompanying fee of $5,000; between 15,000 
and 19,999 to 1, with an accompanying fee of $10,000; between 20,000 
and 24,999 to 1, with an accompanying fee of $20,000; and 25,000 to 
1 and greater, with an accompanying fee of $35,000.
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    In addition, like both existing Excessive Traffic fees, the 
Exchange will not assess the EBUF for an ATP Holder's first occurrence 
in a rolling twelve-month period (the ``Exemption'').\11\ For example, 
an ATP Holder that exceeds the minimum EBUF threshold in October 2024 
will not be assessed the EBUF as long as that ATP Holder does not 
exceed the minimum EBUF threshold again before October 2025. If that 
same ATP Holder exceeds the minimum EBUF threshold in December 2025, it 
will not incur the EBUF if it does not exceed the minimum EBUF before 
December 2026. As noted above, an ATP Holder should not exceed the EBUF 
in its normal course of trading. Therefore, the proposed Exemption acts 
as a guardrail of sorts that is designed to protect ATP Holders from 
incurring the EBUF when they first encounter lower than expected 
executions in a rolling twelve-month period, such as when they are new 
to the Pillar trading platform, deploying new technologies, or testing 
different trading strategies, thereby encouraging ATP Holders to 
maintain their trading activity on the Exchange by mitigating the 
initial impact of the EBUF.
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    \11\ Compare Section II. of the Fee Schedule with the proposed 
Section II. of the Fee Schedule, Monthly Excessive Bandwidth 
Utilization Fee.
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    Further, consistent with the application of the existing Excessive 
Traffic fees, the Exchange will likewise retain discretion to exclude 
one or more days of data for purposes of calculating the proposed EBUF 
if the Exchange determines, in its sole discretion, that one or more 
ATP Holders or the Exchange was experiencing a bona fide systems 
problem.\12\
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    \12\ See id.
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    In adopting the single EBUF, the Exchange will no longer asses the 
Messages to Contracts Traded Ratio Fee

[[Page 52184]]

(``Ratio''), which was adopted in 2011 to address quote traffic.\13\ In 
calculating this additional Ratio fee, an ATP Holder could aggregate 
all of its activity (orders and quotes and contracts) with its 
affiliates.\14\ To encourage the use of quotes instead of orders, the 
Exchange excluded from the Ratio fee calculation certain quotes (i.e., 
quotes setting the NBBO and those of Specialists). Because the proposed 
EBUF monitors each ATP Holder's orders and quotes, the Exchange 
believes there is no need to carry forward this Ratio fee. Further, the 
Exchange notes that retaining this Ratio fees could result in ATP 
Holders potentially being double charged for similar excessive 
messaging activity. As such, the Exchange believes that adopting a 
single EBUF would be a more efficient use of Exchange resources and 
less burdensome to market participants.
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    \13\ See Securities Exchange Act Release No. 64655 (June 13, 
2011), 76 FR 35495 (June 17, 2011) (immediately effective filing 
that, among other things, adopted the Messages to Contracts Traded 
Ratio Fee) (SR-NYSEAmex-2011-37).
    \14\ The Exchange notes that this aggregation feature of the 
Ratio fee was not being employed by ATP Holders. The Order to Trade 
Ratio Fee does not include an aggregation feature. Accordingly, the 
proposed EBUF (which is similar to this fee) does not include an 
aggregation feature.
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    In connection with the proposed EBUF (and associated removal of the 
current Excessive Traffic fees), the Exchange proposes to delete from 
the Fee Schedule both Excessive Traffic fees and the now-expired 
waivers.\15\
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    \15\ See proposed Fee Schedule, Monthly Excessive Bandwidth 
Utilization Fee.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\17\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed EBUF is reasonable, 
equitable, and not unfairly discriminatory because it is designed to 
strike the right balance between deterring ATP Holders from submitting 
an excessive number of messages that do not result in an execution (or 
improve market quality) without discouraging ATP Holders from accessing 
the Exchange. To the extent that the proposed EBUF results in the 
efficient use of the Exchange's finite resources, all market 
participant stand to benefit from improved market quality.
    The proposal to assess one fee (instead of two) for excessive 
message traffic is reasonable as it would result in a more efficient 
use of Exchange resources and would streamline the Fee Schedule, which 
benefits all market participants. The Exchange believes that the 
proposed EBUF, which captures excessive quote traffic, would render the 
``Messages to Contracts Traded Ratio Fee'' redundant and therefore 
unnecessary.\18\
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    \18\ As noted herein, the Pillar trading system enables the 
Exchange to monitor the excessive message traffic of both orders and 
quotes and the Exchange no longer needs both Excessive Traffic fees.
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    The Exchange believes that the proposed minimum EBUF thresholds, 
which are higher than the thresholds associated with the Order to Trade 
Ratio Fee (but carry roughly the same incremental fees), are reasonable 
because, unlike the Order to Trade Ratio Fee, the proposed EBUF counts 
a broader category of ``message,'' including quotes, orders, order 
cancellations, and modifications. Therefore, the Exchange believes the 
EBUF appropriately accounts for the significantly wider category of 
``messages'' now included and accounts for the increased capacity 
available to Exchange participants on the Pillar trading system. Given 
that the proposed EBUF is meant to operate as a guardrail of sorts that 
an ATP Holder should not ``hit'' or exceed in the ordinary course of 
trading, the Exchange proposes to set the EBUF thresholds at levels 
reasonably designed to encourage ATP Holders to efficiently use message 
traffic as necessary.
    The Exchange believes that the proposed Exemption is reasonable, 
equitable, and not unfairly discriminatory because is designed to 
protect ATP Holders from incurring the EBUF when they first encounter 
lower than expected executions in a rolling twelve-month period, such 
as when they are new to the Pillar trading platform, deploying new 
technologies, or testing different trading strategies, thereby 
encouraging ATP Holders to maintain their trading activity on the 
Exchange by mitigating the initial impact of the EBUF. The Exchange 
believes the proposed Exemption is reasonable as it is intended to 
lessen the initial impact of the EBUF while affording ATP Holders an 
opportunity to moderate or fine tune their message rates as needed 
once-every-twelve-months.
    The proposed EBUF is a reasonable, equitable, and not unfairly 
discriminatory because it neither targets nor will it have a disparate 
impact on any category of market participant. The proposed EBUF would 
impact all similarly situated ATP Holders on an equal basis; all ATP 
Holders would be eligible for the Exemption the first time they incur 
the EBUF in a rolling 12-month period.
    The Exchange believes that eliminating the Ratio fee (in favor of 
the single EBUF) is reasonable, equitable, and not unfairly 
discriminatory because it is rendered redundant by the proposed EBUF, 
which will monitor both order and quotes of each ATP Holder.\19\ 
Because the proposed EBUF monitors quote traffic, the Exchange believes 
that retaining this Ratio fee would risk the potential for ATP Holders 
being double charged for similar excessive messaging activity. The 
proposed EBUF (like the Order to Trade Ratio Fee) would not include the 
option for ATP Holders to aggregate their activity with their 
affiliates.\20\ Moreover, ATP Holders did not employ this aspect of the 
Ratio fee. As such, the Exchange believes that adopting a single EBUF 
would be a more efficient use of Exchange resources and less burdensome 
to market participants.
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    \19\ As noted herein, the Pillar trading system enables the 
Exchange to monitor the excessive message traffic of both orders and 
quotes and the Exchange no longer needs both Excessive Traffic fees.
    \20\ See supra note 14.
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    The Exchange believes that the removal of the obsolete text from 
the Fee Schedule (regarding the Excessive Traffic fees and associated 
stale waiver language) would further the protection of investors and 
the public interest by promoting clarity and transparency in Fee 
Schedule thereby making the Fee Schedule easier to navigate and 
understand.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
    Intramarket Competition. The Exchange believes the proposed EBUF, 
including the Exemption, would not place an unfair burden on 
intramarket competition because it is designed to encourage efficient 
and rational use of the Exchange's finite resources and would apply to 
all market participants. Similarly, the elimination of the Ratio

[[Page 52185]]

fee will impact all similarly situated ATP Holders.
    The deletion of the language relating to the now-expired waivers of 
the Excessive Traffic fees would remove from the Fee Schedule language 
that is no longer applicable to any ATP Holders and, accordingly, would 
not have any impact on intramarket competition. The proposed Exemption 
would apply equally to all ATP Holders; all ATP Holders would be 
eligible for the Exemption for the first occurrence of the proposed 
Ratio Threshold Fee in a rolling 12-month period.
    Intermarket Competition. The Exchange believes the proposed EBUF, 
including the Exemption, would not place an unfair burden on 
intermarket competition as it is not intended to address any 
competitive issues but is instead designed solely to encourage the 
efficient use of the Exchange's resources. The Exchange believes that 
the proposed EBUF should deter excessive message traffic that does not 
improve market quality which, in turn, will sustain the Exchange's 
overall competitiveness.
    The proposed deletion of text related to the Excessive Traffic fees 
would add clarity to the Fee Schedule by removing obsolete pricing and, 
accordingly, would not have any impact on intermarket competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \21\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \22\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEAMER-2024-41 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-NYSEAMER-2024-41. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEAMER-2024-41 and should 
be submitted on or before July 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13535 Filed 6-20-24; 8:45 am]
BILLING CODE 8011-01-P