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[Federal Register Volume 89, Number 222 (Monday, November 18, 2024)]
[Notices]
[Pages 90798-90800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26752]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101586; File No. SR-NYSEAMER-2024-66]

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

November 12, 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 November 1, 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 modify the NYSE American Options Fee 
Schedule. 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.

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 [sic] to amend the Fee Schedule to 
increase the maximum combined credits and rebates available to Floor 
Brokers for qualifying Qualified Contingent Cross Trades (``QCCs''). 
The Exchange proposes to implement the rule change on November 1, 2024.
    The Exchange proposes to modify Section I.F. and Section III.E.1. 
to increase the maximum combined Floor Broker credits and rebates paid 
through the Manual Billable Rebate Program, respectively, for 
qualifying QCCs to $2,750,000 per month per Floor Broker firm, an 
increase from the current monthly amount of 2,500,000 (the ``Maximum 
Combined Rebate/Credit'' or ``QCC Cap'').\4\ The proposed increase is 
designed to encourage Floor Broker firms to continue to direct 
transactions to the Exchange, despite increasing industry volumes 
making it less difficult to attain the maximum rebate. By increasing 
the QCC Cap, Floor Brokers are eligible to achieve more QCC credits and 
rebates, thus making the Exchange a more attractive venue for QCC 
transactions.\5\
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    \4\ See proposed Fee Schedule, Sections III.E.1 and I.F. 
(providing, in relevant, part that Floor Broker credits paid for QCC 
trades and rebates paid through the Manual Billable Rebate Program 
shall not combine to exceed $2,500,000 per month per Floor Broker 
firm). The Exchange notes that the Manual Billable Rebate Program is 
available only to Floor Brokers that participate in the FB Prepay 
Program. See Fee Schedule, Section III.E.1. As such, the proposed 
increase to the QCC Cap would likewise encourage more Floor Brokers 
to participate in this Program.
    \5\ The Exchange notes that the Manual Billable Rebate Program 
is available only to Floor Brokers that participate in the FB Prepay 
Program. See Fee Schedule, Section III.E.1. As such, the proposed 
increase to the QCC Cap would likewise encourage more Floor Brokers 
to participate in this Program.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The proposed change [sic] to the Fee Schedule are reasonable, 
equitable, and not unfairly discriminatory. As a threshold matter, the 
Exchange is subject to significant competitive forces in the market for 
options securities transaction services that constrain its pricing 
determinations in that market. The Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
In Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \8\
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    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
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    There are currently 17 [sic] registered options exchanges competing 
for order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than 16% of the market 
share of executed volume of multiply-listed equity and ETF options 
trades.\9\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in September of 2024, the Exchange had 
7.64% market share of executed volume of multiply-listed equity & ETF 
options trades.\10\ In such

[[Page 90799]]

a low-concentrated and highly competitive market, no single options 
exchange possesses significant pricing power in the execution of option 
order flow. Within this environment, market participants can freely and 
often do shift their order flow among the Exchange and competing venues 
in response to changes in their respective pricing schedules. As such, 
the proposal represents a reasonable attempt by the Exchange to remain 
competitive and to continue to attract QCC transactions to the 
Exchange.
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    \9\ The OCC publishes options and futures volume in a variety of 
formats, including daily and monthly volume by exchange, available 
here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \10\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchanges market share in equity-based options 
increased from 7.31% for the month of September 2023 to 7.64% for 
the month of September 2024.
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    The Exchange believes that the proposed increase of the QCC Cap is 
reasonable, equitable, and not unfairly discriminatory because it is 
intended to encourage Floor Brokers to direct QCC transactions to the 
Exchange. The Exchange believes the proposed increase to the QCC Cap is 
reasonable given that increasing industry volumes make it less 
difficult to attain the QCC Cap. Floor Brokers that exceed the monthly 
QCC Cap may be incentivized to direct additional QCC volume (in that 
same month) away from the Exchange to another venue that offers more 
favorable pricing.
    The proposed change is intended to encourage the role performed by 
Floor Brokers in facilitating the execution of orders via open outcry, 
a function which the Exchange wishes to support for the benefit of all 
market participants. Floor Brokers have the option to execute QCC 
transactions on the Exchange to earn the various proposed credits and 
rebates or not. The credits and rebates for QCC transactions (and 
whether a Floor Broker exceeds the increased QCC Cap) are based on the 
amount and type of business a Floor Broker transacts on the Exchange 
and are available--and apply equally to all similarly situated Floor 
Brokers. As such, the proposed increase to the QCC Cap is an equitable 
allocation of its fees and credits that is not unfairly discriminatory.
    To the extent that the proposed changes attract more volume to the 
Exchange, this increased order flow would continue to make the Exchange 
a more competitive venue for order execution, which, in turn, promotes 
just and equitable principles of trade and removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system. The Exchange notes that all market participants stand to 
benefit from any increase in volume by Floor Brokers, which could 
promote market depth, facilitate tighter spreads and enhance price 
discovery, to the extent the proposed change encourages Floor Brokers 
to utilize the Exchange as a primary trading venue, and may lead to a 
corresponding increase in order flow from other market participants. In 
addition, any increased liquidity on the Exchange would result in 
enhanced market quality for all participants.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

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. Instead, as discussed above, the Exchange believes 
that the proposed changes would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \11\
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    \11\ See Reg NMS Adopting Release, supra note 8, at 37499.
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    Intramarket Competition. The proposed increase of the QCC Cap would 
apply equally to all similarly-situated Floor Brokers and is design 
[sic] to continue to incent Floor Brokers to execute QCC transactions 
on the Exchange. To the extent that the proposed change achieves its 
purpose in attracting more Floor Broker volume to the Exchange, this 
increased order flow would continue to make the Exchange a more 
competitive venue for, among other things, order execution. Thus, the 
Exchange believes the proposed rule changes would improve market 
quality for all market participants on the Exchange and, therefore, 
attract more order flow to the Exchange, thereby improving market-wide 
quality and price discovery. To the extent that there is an additional 
competitive burden on non-Floor Brokers, the Exchange believes that any 
such burden would be appropriate because Floor Brokers serve an 
important function in facilitating the execution of orders and price 
discovery for all market participants.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 17 competing option exchanges if they deem fee levels at a 
particular venue to be excessive. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single 
exchange has more than 16% of the market share of executed volume of 
multiply-listed equity and ETF options trades.\12\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in September 2024 the Exchange had less than 8% market share of 
executed volume of multiply-listed equity and ETF options trades.\13\
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    \12\ See note 9, supra.
    \13\ See note 10, supra.
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    The Exchange believes that the proposed change reflects this 
competitive environment because it modifies the Exchange's fees and 
credits in a manner designed to continue to incent Floor Brokers to 
direct trading interest (particularly QCC transactions) to the 
Exchange, to provide liquidity and to attract order flow. To the extent 
that Floor Brokers are encouraged to try to meet the QCC Cap and/or 
incentivized to utilize the Exchange as a primary trading venue for all 
transactions, all of the Exchange's market participants should benefit 
from the improved market quality and increased opportunities for price 
improvement. The Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.

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.

[[Page 90800]]

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) \14\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 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-2024-66 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-2024-66. 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-2024-66 and should 
be submitted on or before December 9, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26752 Filed 11-15-24; 8:45 am]
BILLING CODE 8011-01-P
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