[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Notices]
[Pages 5923-5926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02080]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94083; File No. SR-NYSEAMER-2022-07]


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

January 27, 2022.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 21, 2022, 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, 
II, and III 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 modify certain Market Maker incentives. 
The Exchange proposes to implement the fee change effective January 21, 
2022.\4\ The proposed 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\ The Exchange originally filed to amend the Fee Schedule on 
December 29, 2021 (SR-NYSEAmer-2021-51), with an effective date of 
January 3, 2022, then withdrew such filing and amended the Fee 
Schedule on January 12, 2022 (SR-NYSEAmer-2022-03), which latter 
filing the Exchange withdrew on January 21, 2022.
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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 modify certain incentives 
available to NYSE American Options Market Makers (``Market Makers''), 
as set forth below.
    Currently, Market Makers are entitled to reduced per contract rates 
for Electronic options transactions as set forth in Section I.C. of the 
Fee Schedule, NYSE American Options Market Maker Sliding Scale--
Electronic (the ``Sliding Scale'').\5\ These lower per contract rates 
are applicable to monthly volume within a given tier (expressed as 
Market Maker Electronic ADV as a percentage of TCADV), such that the 
lower per contract rate applies to volume that falls within the range 
specified for each tier.\6\
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    \5\ See Fee Schedule, Section I.C., NYSE American Options Market 
Maker Sliding Scale--Electronic, available at: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
    \6\ In calculating Market Maker Electronic monthly volumes, the 
Exchange will exclude any volumes attributable to QCC trades, CUBE 
Auctions, or Strategy Execution Fee Caps as these transactions are 
subject to separate pricing described in Sections I.F., I.G. and 
I.J. of the Fee Schedule, respectively. Id.
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    The Exchange also offers a prepayment program to Market Makers, in 
which Market Maker firms may prepay a portion of the fees they incur on 
Electronic transactions, including CUBE transactions, ATP Fees, and 
other fees (the ``Prepayment Program''). Market Makers who participate 
in the Prepayment Program are entitled to further reduced rates on the 
Sliding Scale.\7\
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    \7\ See Fee Schedule, Section I.D., Prepayment Program.
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    The Exchange now proposes to modify the requirements to qualify for 
the Market Maker rates set forth in Tiers 1 through 4 of the Sliding 
Scale and to adjust the Prepayment Program Participant Rate for non-
take volume in Tier 1, as modified. The Exchange also proposes to 
eliminate Tier 5 of the Sliding Scale. These proposed changes are 
reflected in the table below with deletions in brackets and new text in 
italics.

[[Page 5924]]



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                                                                                                                    Prepayment Program Participant Rates
                                                                              Rate per contract  Rate per contract -------------------------------------
                    Tier                      Market Maker Electronic ADV as     for non-take     for take volume   Rate per contract  Rate per contract
                                                       a % of TCADV               volume \1\            \1\            for non-take     for take volume
                                                                                                                        volume \1\            \1\
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1...........................................  0.00% to [0.20] 0.25%.........              $0.25              $0.25      [$0.22] $0.21              $0.24
2...........................................  >[0.20% to 0.65%] 0.25% to                   0.22               0.24               0.18               0.22
                                               0.70%.
3...........................................  >[0.65% to 1.40%] 0.70% to                   0.12               0.17               0.09               0.13
                                               1.50%.
4...........................................  >[1.40% to 2.00%] 1.50%.......               0.09               0.14               0.06               0.10
[5..........................................  >2.00%........................               0.06               0.09               0.03              0.06]
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    The Exchange believes that the proposed changes will continue to 
encourage Market Makers to direct orders and quotes to the Exchange and 
to incent Market Makers to participate in the Prepayment Program to 
receive reduced rates on Electronic options transactions, among other 
benefits. Although the Exchange proposes slight increases to the ranges 
covered by each of Tiers 1 through 4, the Exchange believes that the 
Sliding Scale, as modified, would continue to offer a significant 
reduction in overall transaction rates for Market Makers, as well as 
additional reductions for Market Makers that participate in the 
Prepayment Program. The Exchange further believes that the proposed 
reduction to the Tier 1 rate per contract for non-take volume for 
Prepayment Program participants will likewise continue to encourage 
those Market Makers to participate in the program and to direct orders 
and quotes to the Exchange to benefit from the reduced rates under the 
program. Finally, the Exchange proposes to eliminate Tier 5 on the 
Sliding Scale because it has not successfully incented Market Makers to 
achieve the requisite volume to earn the corresponding per contract 
rates.
    Currently, the Exchange also offers Market Makers that participate 
in the Prepayment Program a reduced rate on Manual transactions, as set 
forth in Section I.A. of the Fee Schedule at footnote 6.\8\ 
Specifically, for each contract transacted manually, Market Makers 
receive a $0.02 per contract discount, and NYSE American Options 
Specialists/e-Specialists receive a $0.01 per contract discount. The 
Exchange proposes to eliminate these reduced rates on Manual 
transactions for participants in the Prepayment Program because this 
incentive has not impacted their participation in Manual 
transactions.\9\
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    \8\ See Fee Schedule, Section I.A., Rates for Options 
transactions, note 6.
    \9\ To effect this change, the Exchange also proposes to delete 
the references to footnote 6 in the ``Participant'' column of the 
table in Section I.A. and to designate footnote 6 as ``Reserved.''
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    The Exchange proposes to implement these changes effective January 
12 [sic], 2022.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change Is Reasonable
    The Exchange operates in a highly competitive 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.'' \12\
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    \12\ 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 16 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.\13\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity and ETF 
options order flow. More specifically, in November 2021, the Exchange 
had less than 8% market share of executed volume of multiply-listed 
equity and ETF options trades.\14\
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    \13\ 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.
    \14\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in multiply-listed equity and ETF 
options the Exchange's market share in equity-based options 
decreased from 9.09% for the month of November 2020 to 7.06% for the 
month of November 2021.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes the proposed modifications to the Sliding 
Scale tier requirements for Market Makers and the rates available to 
Prepayment Program participants are reasonable because they would 
continue to incent Market Makers, including Prepayment Program 
participants, to direct orders and quotes to the Exchange and because 
the Sliding Scale fee structure, as modified, would remain in line with 
a similarly structured program on another options exchange.\15\ The 
Exchange also believes the elimination of Tier 5 of the Sliding Scale 
and the reduced Manual rates for Prepayment Program participants is 
reasonable, as neither incentive has fulfilled its intended purpose to 
date.
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    \15\ See CBOE Options Exchange Fee Schedule, Liquidity Provider 
Sliding Scale and footnote 10, available at: https://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf (providing liquidity 
providers that prepay monthly fees with reduced transaction rates).
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    To the extent the proposed change continues to attract greater 
volume and liquidity to the Exchange, the Exchange believes the 
proposed change would improve the Exchange's overall competitiveness 
and strengthen its market quality for all market

[[Page 5925]]

participants. In the backdrop of the competitive environment in which 
the Exchange operates, the proposed rule change is a reasonable attempt 
by the Exchange to increase the depth of its market and improve its 
market share relative to its competitors.
    While the Exchange cannot predict the extent to which Market Makers 
would choose to participate in the Prepayment Program or seek to 
achieve the Sliding Scale tiers, the Exchange believes that Market 
Makers would continue to be encouraged to take advantage of the 
favorable rates available in the Sliding Scale tiers and through the 
Prepayment Program, thereby increasing order flow to the Exchange and 
promoting market quality for all market participants.
The Proposed Rule Change is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposal is based on the amount 
and type of business transacted on the Exchange, and Market Makers can 
opt to participate in the Prepayment Program or not, and to achieve one 
of the tiers on the Sliding Scale, or not. Moreover, to the extent the 
proposal is designed to continue to encourage Market Makers to commit 
capital to the Exchange as a demonstration of long-term participation 
on the Exchange as a primary execution venue, the Exchange believes 
that the proposed modifications to incent Market Maker participation in 
the Prepayment Program are an equitable allocation of fees and credits. 
In addition, to the extent that the proposed change continues to incent 
Market Makers to increase volume on the Exchange in order to qualify 
for the Sliding Scale rates, the resulting increased order flow would 
continue to make the Exchange a more competitive venue for, among other 
things, order execution.
    The Exchange believes that eliminating Tier 5 of the Sliding Scale 
and the reduced Manual rates for Prepayment Program participants is an 
equitable allocation of fees and credits because these incentives have 
not successfully encouraged the intended Market Maker activity.
    Thus, the Exchange believes the proposed rule change would improve 
market quality for all market participants on the Exchange and, as a 
consequence, attract more order flow to the Exchange, thereby improving 
market-wide quality and price discovery.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed modifications are not unfairly 
discriminatory because they would apply and be available to all 
similarly-situated market participants on an equal and non-
discriminatory basis. Specifically, the proposal is based on the amount 
and type of business transacted on the Exchange, and Market Makers are 
not obligated to participate in the Prepayment Program or try to 
achieve any of the Sliding Scale tiers that would provide for reduced 
rates. In addition, because Market Makers have increased obligations 
with respect to trading on the Exchange, the Exchange believes that the 
proposed changes are not unfairly discriminatory to non-Market Makers 
and further believes that the proposed change would continue to incent 
Market Makers to both participate in the Prepayment Program and 
increase orders and quotes directed to the Exchange. To the extent that 
the proposed change attracts a variety of transactions to the Exchange, 
this increased order flow would continue to make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed rule change would improve market quality for all market 
participants on the Exchange and, as a consequence, attract more order 
flow to the Exchange, thereby improving market-wide quality and price 
discovery. The resulting increased volume and liquidity would provide 
more trading opportunities and tighter spreads to all market 
participants and thus would promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system and, in general, to protect 
investors and the public interest.
    The Exchange further believes that the elimination of Sliding Scale 
Tier 5 and the reduced Manual rates for Prepayment Program participants 
is not unfairly discriminatory because the reduced rates have not been 
effective in incenting Market Makers to execute sufficient volume to 
qualify for the tier or to execute Manual transactions, as applicable.
    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.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

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.'' \16\
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    \16\ See Reg NMS Adopting Release, supra note 12, at 37499.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange by offering competitive rates 
based on increased volumes on the Exchange, including further reduced 
rates for Market Makers that participate in the Prepayment Program. The 
Exchange believes that the proposed modifications to the Sliding Scale 
and other incentives available to Market Makers would continue to 
incent Market Makers to direct additional volume to the Exchange. 
Greater liquidity benefits all market participants on the Exchange, and 
increased volume from Market Makers would increase opportunities for 
execution of other trading interest. The proposed modifications would 
apply to all similarly-situated Market Makers and, because Market 
Makers have increased obligations with respect to trading on the 
Exchange, are not unfairly discriminatory to non-Market Makers, and 
thus would not impose a disparate burden on competition among market 
participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 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

[[Page 5926]]

equity and ETF options trades.\17\ Therefore, currently no exchange 
possesses significant pricing power in the execution of multiply-listed 
equity and ETF options order flow. More specifically, in November 2021, 
the Exchange had less than 8% market share of executed volume of 
multiply-listed equity and ETF options trades.\18\
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    \17\ See supra note 13.
    \18\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in multiply-listed equity and ETF 
options the Exchange's market share in equity-based options 
decreased from 9.09% for the month of November 2020 to 7.06% for the 
month of November 2021.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner designed to continue to encourage Market Makers to direct 
trading interest to the Exchange, to provide liquidity and to attract 
order flow. Specifically, the Exchange believes that the modifications 
to the Sliding Scale would continue to offer a significant reduction in 
overall transaction rates for Market Makers, as well as additional 
reductions for Market Makers that participate in the Prepayment 
Program. To the extent that this purpose is achieved, all the 
Exchange's market participants should benefit from the improved market 
quality and increased opportunities for price improvement.
    The Exchange also believes that the proposed change would promote 
competition between the Exchange and other execution venues, by 
encouraging additional orders to be sent to the Exchange for execution.

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) \19\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \20\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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) \21\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \21\ 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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#fd8f889198d09e9290909893898ebd8e989ed39a928b"><span class="__cf_email__" data-cfemail="a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1">[email protected]</span></a>. Please include 
File Number SR-NYSEAMER-2022-07 on the subject line.

Paper Comments

    <bullet> 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-2022-07. 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEAMER-2022-07, and should 
be submitted on or before February 23, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02080 Filed 2-1-22; 8:45 am]
BILLING CODE 8011-01-P


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