Document ID: SEC-2023-0106-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2023-01-30T05:00Z

[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Notices]
[Pages 5942-5947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01745]

[[Page 5942]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96743; File No. SR-NYSEAMER-2023-08]

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

January 24, 2023.
    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 January 13, 2023, 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 (``Fee Schedule'') regarding (1) fees and credits for 
Qualified Contingent Cross (``QCC'') transactions and (2) the Floor 
Broker Fixed Cost Prepayment Incentive Program (the ``FB Prepay 
Program''). The Exchange proposes to implement the fee change effective 
January 13, 2023.\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\ The Exchange previously filed to amend the Fee Schedule on 
December 30, 2022 (SR-NYSEAMER-2022-58) and withdrew such filing on 
January 13, 2023.
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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 to amend the Fee Schedule to (1) modify 
the fees and credits for QCC transactions \5\ and (2) modify the FB 
Prepay Program. The Exchange proposes to implement the rule change on 
January 13, 2023.
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    \5\ A QCC is defined as an originating order to buy or sell at 
least 1,000 contracts, or 10,000 mini-options contracts, that is 
identified as being part of a qualified contingent trade (as that 
term is defined in Commentary .01 to Rule 900.3NY), coupled with a 
contra side order or orders totaling an equal number of contracts. 
See Rule 900.3NY(y).
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Modifications to QCC Fees and Credits
    The table in Section I.F. of the Fee Schedule sets forth the per 
contract fees and credits applicable to volume executed as part of a 
QCC trade.\6\ Currently, Customers and Professional Customers do not 
incur a fee or earn a credit; Non-Customers, excluding Specialists and 
e-Specialists, are subject to a $0.20 per contract fee; and Specialists 
and e-Specialists are subject to a $0.13 per contract fee. Floor 
Brokers earn a credit for executed QCC orders of ($0.11) per contract 
for the first 500,000 contracts or ($0.14) per contract in excess of 
500,000.\7\
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    \6\ See Fee Schedule, Section I.F., QCC Fees & Credits.
    \7\ QCC executions in which a Customer or Professional Customer, 
or both, is on both sides of the QCC trade are not eligible for the 
Floor Broker credit. The current Floor Broker credit is paid only on 
volume within the applicable tier and is not retroactive to the 
first contract traded. See Fee Schedule, Section I.F., QCC Fees & 
Credits at Footnote 1.
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    The Exchange proposes to modify the table in Section I.F. to 
replace the term ``Non-Customer'' with ``Market Maker, Firm, or Broker 
Dealer'' and eliminate the exception of Specialists and e-Specialists, 
which would add clarity to the Fee Schedule regarding which market 
participants are considered ``Non-Customers'' for purposes of QCC fees 
and credits. The table would thus provide for a $0.20 fee on QCC 
transactions by a Market Maker, Firm, or Broker-Dealer (as such terms 
are defined in the KEY TERMS and DEFINITIONS section of the Fee 
Schedule). Consistent with this change, the Exchange also proposes to 
eliminate the $0.13 fee currently applicable to QCC transactions by 
Specialists and e-Specialists; as Specialists and e-Specialists are 
registered with the Exchange as Market Makers, they would, as proposed, 
be charged as such for QCC transactions.
    The Exchange further proposes to modify the table in Section I.F. 
regarding credits applicable to Floor Brokers' QCC transactions and 
proposes to provide Floor Brokers with credits based on the account 
type of the parties to the trade.\8\ Specifically, the Exchange 
proposes that Floor Brokers may earn a credit of ($0.12) per contract 
for QCC transactions of a Customer or Professional Customer vs. a 
Market Maker, Firm, or Broker Dealer, and a credit of ($0.18) per 
contract for QCC transactions of a Market Maker, Firm, or Broker Dealer 
vs. a Market Maker, Firm, or Broker Dealer.
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    \8\ The Exchange also proposes to delete the sentence in 
Footnote 1 to Section I.F. providing that the Floor Broker credit is 
paid only on volume within the applicable tier and is not 
retroactive to the first contract traded, as such concept would not 
apply to the proposed Floor Broker credits.
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    Finally, the Exchange proposes to modify the last sentence of 
Footnote 1 to Section I.F., which currently provides that the maximum 
Floor Broker credit paid for QCC transactions is $525,000 per month per 
Floor Broker firm. The Exchange proposes to amend Footnote 1 to instead 
provide that Floor Broker credits paid for QCC trades and rebates paid 
through the Manual Billable Rebate Program (as proposed below) shall 
not combine to exceed $2,000,000 per month per Floor Broker firm.
    Although the Exchange cannot predict with certainty whether the 
proposed change would encourage Floor Brokers to increase their QCC 
volume, the Exchange believes that the proposed change would continue 
to incent additional QCC executions by Floor Brokers by offering 
increased credits on QCC transactions and raising the maximum monthly 
amount that a Floor Broker firm could earn from Floor Broker QCC 
credits (or rebates via the proposed Manual Billable Rebate Program), 
and all Floor Brokers are eligible for the proposed credits, including 
the proposed higher credit on QCC transactions with a Market Maker, 
Firm or Broker on both sides of the trade, without any minimum volume 
requirement. The Exchange also believes that the proposed change with 
respect to the fee for QCC transactions by a Market Maker (including a 
Specialist or e-Specialist), Firm, or Broker-Dealer would improve the 
clarity of the Fee Schedule and, although the proposed change would 
increase the fee for QCC transactions by Specialists and e-Specialists, 
is reasonable and equitable because it would provide for the same fee 
on QCC transactions for all Market Makers, Firms, and Broker-Dealers.

[[Page 5943]]

FB Prepay Program
    The Exchange also proposes to modify the FB Prepay Program, a 
prepayment incentive program that allows Floor Brokers to prepay 
certain of their annual Eligible Fixed Costs in exchange for volume 
rebates.\9\
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    \9\ See Fee Schedule, Section III.E.1., Floor Broker Fixed Cost 
Prepayment Incentive Program (the ``FB Prepay Program''). ``Eligible 
Fixed Costs'' include monthly ATP Fees, the Floor Access Fee, and 
certain monthly Floor communication, connectivity, equipment and 
booth or podia fees, as set forth in the table in Section III.E.1.
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    Currently, the FB Prepay Program offers participating Floor Brokers 
an opportunity to qualify for rebates by achieving growth in billable 
manual volume by a certain percentage as measured against one of two 
benchmarks (the ``Percentage Growth Incentive''). Specifically, the 
Percentage Growth Incentive is designed to encourage Floor Brokers to 
increase their average daily volume (``ADV'') in billable manual 
contract sides to qualify for a Tier; each Tier of the FB Prepay 
Program corresponds to an annual rebate equal to the greater of the 
``Total Percentage Reduction of pre-paid annual Eligible Fixed Costs'' 
or the annualization of the monthly ``Alternative Rebate.'' \10\ In 
either case, participating Floor Brokers receive their annual rebate 
amount in the following January.\11\ Floor Brokers that wish to 
participate in the FB Prepay Program for the following calendar year 
must notify the Exchange no later than the last business day of 
December in the current year.\12\
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    \10\ See id. The Percentage Growth Incentive excludes Customer 
volume, Firm Facilitation trades, and QCCs. Any volume calculated to 
achieve the Firm Monthly Fee Cap and the Strategy Execution Fee Cap, 
regardless of whether either of these caps is achieved, will 
likewise be excluded from the Percentage Growth Incentive because 
fees on such volume are already capped and therefore do not increase 
billable manual volume. See id.
    \11\ See Fee Schedule, Section III.E.1.
    \12\ See id.
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    The Exchange now proposes to modify the FB Prepay Program to 
eliminate the Percentage Growth Incentive and accompanying annual 
rebates \13\ and instead provide Floor Brokers participating in the 
program with monthly rebates based on manual billable transaction 
volume (the ``Manual Billable Rebate Program''). The calculation of 
volume on which rebates earned through the Manual Billable Rebate 
Program would be paid is based on transactions including at least one 
side for which manual transaction fees are applicable and excludes 
volume from QCC transactions.\14\ The Exchange proposes to continue to 
exclude any volume calculated to achieve the Strategy Execution Fee 
Cap, regardless of whether the cap is achieved, from the Manual 
Billable Rebate Program because fees on such volume are already capped 
and therefore such volume does not increase billable manual volume.\15\
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    \13\ To effect the proposed change to eliminate the Percentage 
Growth Incentive and related rebates, the Exchange also proposes to 
delete the last sentence in Section III.E.1., which currently 
provides that Floor Brokers in the FB Prepay Program will receive 
their rebate in the following January, as no longer applicable.
    \14\ The Exchange proposes to continue to exclude volume from 
QCC transactions from the calculation of eligible volume for rebates 
paid through the Manual Billable Rebate Program, as proposed, 
because Floor Brokers would be eligible for separate credits and 
rebates for QCC transactions.
    \15\ The Exchange proposes to remove references to the exclusion 
of Customer volume and Firm Facilitation trades as redundant because 
such volume is not billable. The Exchange also proposes that it 
would no longer exclude volume calculated to achieve the Firm 
Monthly Fee Cap from the Manual Billable Rebate Program and proposes 
conforming changes to reflect the deletion of the reference to the 
Firm Monthly Fee Cap in Section III.E.1. The Exchange proposes to 
include volume calculated to achieve the Firm Monthly Fee Cap in 
calculations for the Manual Billable Rebate Program in light of the 
recent change to increase the amount of the Firm Monthly Fee Cap and 
eliminate lower fee caps for firms that qualify for American 
Customer Engagement Program tiers, which results in more non-
facilitation Firm volume being subject to regular transaction fees. 
See Securities Exchange Act Release No. 96501 (December 15, 2022) 
(SR-NYSEAMER-2022-55) (Notice of Filing and Immediate Effectiveness 
of a Proposed Rule Change to Modify the NYSE American Options Fee 
Schedule).
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    Participants in the FB Prepay Program that achieve the following 
monthly qualifications will be eligible for rebates through the Manual 
Billable Rebate Program, payable on a monthly basis:

------------------------------------------------------------------------
                                                           Rebate per
         Manual billable rebate qualification            billable side
------------------------------------------------------------------------
Execute 1 million combined manual billable and QCC               ($0.05)
 billable contracts..................................
Execute 3 million combined manual billable and QCC                (0.08)
 billable contracts..................................
Execute 5 million combined manual billable and QCC                (0.10)
 billable contracts..................................
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    The FB Prepay Program also currently offers participating Floor 
Brokers that increase their QCC credit eligible contracts in a month by 
at least 20% over the greater of their second half of 2021 average 
monthly QCC credit eligible volume or 1,500,000 contracts an additional 
credit of $0.04 per contract on the first 300,000 QCC credit eligible 
QCC trades and an additional credit of $0.01 per contract on all QCC 
credit eligible QCC trades above 300,000, subject to the monthly 
maximum credit per Floor Broker firm. The Exchange now proposes to 
eliminate these QCC credits currently offered through the FB Prepay 
Program, and provide that program participants would instead be 
eligible to qualify for monthly rebates on QCC transactions in addition 
to the credits set forth in Section I.F. (as modified in this filing) 
(the ``QCC Billable Bonus Rebate''), as described in the table below, 
provided that they execute the required number of billable QCC 
transactions in a month. The Exchange proposes that the QCC Billable 
Bonus Rebate (including the Additional Bonus) would be payable back to 
the first billable side.

------------------------------------------------------------------------
                                    Additional rebate
     QCC billable bonus rebate          on single      Additional rebate
           qualification            billable side QCC   on two billable
                                         contract      side QCC contract
------------------------------------------------------------------------
Prepay Bonus Level--achieved with             ($0.02)            ($0.04)
 2 million QCC billable contracts.
Additional Bonus Level--achieved               (0.04)             (0.06)
 with 100% above Prepay Bonus
 Level............................
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    The Exchange further proposes to provide in Section III.E.1., 
consistent with Section I.F., that the maximum Floor Broker credits 
paid for QCC trades and rebates paid through the Manual Billable Rebate 
Program shall not combine to exceed $2,000,000 per month per Floor 
Broker firm.
    Finally, the Exchange proposes to modify the date it will use for 
the calculation of a Floor Broker's Eligible Fixed Costs for the 
following calendar

[[Page 5944]]

year. The FB Prepay Program currently specifies that a Floor Broker 
that commits to the program will be invoiced in January for Eligible 
Fixed Costs, based on annualizing their Eligible Fixed Costs incurred 
in November 2020. The Exchange proposes to modify the Fee Schedule to 
specify that the annualization of Eligible Fixed Costs would be based 
on costs incurred in November 2022, which the Exchange believes would 
more accurately reflect Eligible Fixed Costs for the coming calendar 
year.
    Although the Exchange cannot predict with certainty whether the 
proposed changes to the FB Prepay Program would encourage Floor Brokers 
to participate in the program or to increase either their manual 
billable volume or QCC volume, the Exchange believes that the proposed 
changes would continue to incentivize Floor Brokers to participate in 
the FB Prepay Program by simplifying the structure of the program, 
modifying the qualifying criteria and rebates offered through the 
program to be on a monthly (rather than annual) basis, and offering 
rebates on manual billable volume and QCC transactions, thereby 
encouraging additional manual billable volume and QCC executions by 
Floor Brokers. All Floor Brokers are eligible to participate in the FB 
Prepay Program and qualify for the proposed rebates, and the rebates 
are achievable in any given month without regard to volumes from any 
other month.
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 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.'' \18\
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    \18\ 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.\19\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in November 2022, the Exchange had less than 7% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\20\
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    \19\ 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.
    \20\ 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 equity-based options was 7.06% 
for the month of November 2021 and 6.98% for the month of November 
2022.
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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 that the proposed credits offered to Floor 
Brokers on QCC transactions, as well as the additional rebates on QCC 
transactions and manual billable volume offered through the FB Prepay 
Program, as proposed, are reasonable because they are designed to 
continue to incent Floor Brokers to increase the number of QCC 
transactions and manual billable orders executed on the Exchange. The 
Exchange also believes that the proposed increase in the maximum 
monthly amount that a Floor Broker firm could earn from Floor Broker 
QCC credits or from rebates via the proposed Manual Billable Rebate 
Program is reasonable because it is likewise intended to encourage 
Floor Brokers to direct QCC transactions and manual billable volume to 
the Exchange.
    The Exchange believes that the proposed changes to QCC transaction 
fees and credits, as set forth in Section I.F., are reasonable because 
they are designed to improve the clarity of the Fee Schedule regarding 
the fee applicable to ``Non-Customer'' QCC transactions and to apply a 
consistent fee to QCC transactions by Market Makers (including 
Specialists and e-Specialists), Firms, and Broker-Dealers. The Exchange 
also believes it is reasonable to provide an increased credit to Floor 
Brokers on QCC transactions with a Market Maker, Firm, or Broker-Dealer 
on both sides because such transactions are billable on both sides. To 
the extent that the proposed change attracts more volume to the 
Exchange and does not disincentivize Specialists and e-Specialists from 
directing orders to the Exchange, this 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.
    With respect to the FB Prepay Program, the Exchange also believes 
that the proposed changes are reasonable because participation in the 
program is optional, and Floor Brokers can elect to participate in the 
program to be eligible to earn the proposed rebates on manual billable 
transactions and QCC transactions or not. The Exchange also believes 
that the proposed modification of the FB Prepay Program is reasonable 
because it is designed to simplify the program, to continue to 
encourage Floor Brokers to participate in the FB Prepay Program, and to 
provide liquidity on the Exchange. Specifically, the Exchange believes 
that the proposed qualifying thresholds for the Manual Billable Rebate 
Program and QCC Bonus Rebate are achievable by Floor Broker firms based 
on recent Floor Broker activity and in consideration of the proposed 
changes in this filing (including the proposed modification to Floor 
Broker QCC credits). The Exchange further believes that the proposed 
change to focus the FB Prepay Program on manual billable volume and QCC 
transactions is reasonable because it is intended to encourage Floor 
Brokers to increase manual billable volume and QCC transactions to the 
Exchange, and any increase in such volume would benefit all market 
participants. The Exchange also believes that the proposed rebate 
amounts are reasonable and comparable to rebate amounts offered by 
another options exchange to Floor Brokers on

[[Page 5945]]

manual transactions.\21\ Finally, the Exchange believes that the 
proposed modification of the qualifying criteria for and rebates 
offered through the FB Prepay Program to be on a monthly basis is 
reasonable and could increase opportunities for participating Floor 
Brokers to qualify for and receive the benefit of the incentives 
offered. 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.
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    \21\ See, e.g., BOX Options Exchange Fee Schedule, Section V.C. 
(offering rebates to Floor Brokers on orders presented on the 
Trading Floor, including a $0.075 rebate for Broker Dealer and 
Market Maker orders).
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    The Exchange also believes that the proposed change to update the 
date used for the calculation of Eligible Fixed Costs from November 
2020 to November 2022 is reasonable because it expects Floor Broker 
organizations' more recent November 2022 costs to provide a more 
accurate basis for annualizing Eligible Fixed Costs for the coming 
calendar year based on anticipated fixed costs in 2023.
    Finally, to the extent the proposed changes continue to attract 
greater volume and liquidity, the Exchange believes the proposed 
changes would improve the Exchange's overall competitiveness and 
strengthen its market quality for all market 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. The Exchange's fees are constrained by intermarket 
competition, as Floor Brokers may direct their order flow to any of the 
16 options exchanges, including those offering rebates on QCC orders 
\22\ and Floor Broker rebates on manual billable orders.\23\ Thus, 
Floor Brokers have a choice of where they direct their order flow, 
including their QCC transactions and manual billable orders. The 
proposed rule changes are designed to continue to incent Floor Brokers 
to direct liquidity (and, in particular, QCC orders and manual billable 
orders) to the Exchange; to the extent Floor Brokers are incentivized 
to aggregate their trading activity at the Exchange, that increased 
liquidity could promote market depth, price discovery and improvement, 
and enhanced order execution opportunities for market participants.
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    \22\ See, e.g., EDGX Options Exchange Fee Schedule, QCC 
Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract 
rebate up to 999,999 contracts for QCC transactions when only one 
side of the transaction is a non-customer or ($0.22) per contract 
rebate up to 999,999 contracts for QCC transactions with non-
customers on both sides); BOX Options Fee Schedule at Section 
IV.D.1. (QCC Rebate) (providing for ($0.14) per contract rebate up 
to 1,499,999 contracts for QCC transactions when only one side of 
the QCC transaction is a broker-dealer or market maker or ($0.22) 
per contract rebate up to 1,499,999 contracts for QCC transactions 
when both parties are a broker-dealer or market maker); Nasdaq ISE, 
Options 7, Section 6.B. (QCC Rebate) (offering rebates on QCC 
transactions of ($0.14) per contract when only one side of the QCC 
transaction is a non-customer or ($0.22) per contract when both 
sides of the QCC transaction are non-customers).
    \23\ See note 21, supra.
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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; Floor Brokers are not 
obligated to participate in the FB Prepay Program and can choose to 
execute QCC transactions or manual billable transactions to earn the 
various proposed credits and rebates or not. In addition, the proposed 
credits and rebates are available to all Floor Brokers equally, and the 
proposed monthly limit on the amount that Floor Brokers could earn from 
credits and rebates on QCC transactions and manual billable 
transactions would apply to all Floor Brokers equally. The Exchange 
also believes that the proposed modification of the qualifying criteria 
for and rebates offered through the FB Prepay Program to be on a 
monthly basis is equitable because it could provide participating Floor 
Brokers opportunities each month to qualify for and receive the benefit 
of the incentives offered through the program.
    The Exchange also believes that the proposed increased credit for 
QCC transactions with a Market Maker, Firm, or Broker-Dealer on both 
sides is equitable because such transactions are billable on both sides 
(whereas a QCC transaction with a Customer or Professional Customer on 
one side is only billable on one side). In addition, the Exchange 
believes that the proposed changes with respect to the fees for QCC 
transactions executed by Market Makers (including Specialists and e-
Specialists), Firms, and Broker-Dealers modify the Fee Schedule to 
provide clarity regarding QCC transaction fees for ``Non-Customers'' 
and are equitable because they provide that these similarly-situated 
market participants would be equally subject to a $0.20 fee on their 
QCC transactions.
    The Exchange also notes that the proposed changes are designed to 
encourage Floor Brokers that have previously enrolled in the FB Prepay 
Program to reenroll for the upcoming year, as well as to attract Floor 
Brokers that have not yet participated in the program. Moreover, the 
Exchange believes that the proposed modifications to the FB Prepay 
Program are an equitable allocation of fees and credits because they 
would apply to participating Floor Brokers equally and are 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. The 
Exchange further believes that the proposed change with respect to the 
calculation of Eligible Fixed Costs is equitable because it would 
continue to be based on each Floor Broker organization's annualized 
costs and because the November 2022 basis for annualizing costs would 
provide a more accurate reflection of Eligible Fixed Costs for the 
coming calendar year based on anticipated fixed costs in 2023.
    Moreover, the proposed changes are designed to continue to incent 
Floor Brokers to encourage ATP Holders to aggregate their executions--
including QCC transactions and manual orders--at the Exchange as a 
primary execution venue. 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, as a 
consequence, attract more order flow to the Exchange, thereby improving 
market-wide quality and price discovery.

[[Page 5946]]

The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes the proposed fees, credits, and rebates 
applicable to Floor Brokers on QCC transactions and manual billable 
transactions are not unfairly discriminatory because they are based on 
the amount and type of business transacted on the Exchange, and Floor 
Brokers are not obligated to execute QCC or manual billable volume, or 
to participate in the FB Prepay Program. Rather, the proposal is 
designed to streamline the structure of the FB Prepay Program and to 
encourage Floor Brokers to utilize the Exchange as a primary trading 
venue for all transactions (if they have not done so previously) and 
increase QCC and manual billable volume sent to the Exchange. In 
addition, the proposed changes, including the modification of the 
monthly maximum Floor Broker credits paid for QCC trades and rebates 
paid through the Manual Billable Rebate Program, would apply to all 
similarly-situated Floor Brokers on an equal and non-discriminatory 
basis. The proposed credits and rebates are also not unfairly 
discriminatory to non-Floor Brokers because Floor Brokers serve an 
important function in facilitating the execution of orders on the 
Exchange, which the Exchange wishes to encourage and support to promote 
price improvement opportunities for all market participants.
    The Exchange also believes that the proposed change relating to 
``Non-Customer'' QCC transactions is not unfairly discriminatory 
because it is intended to clarify that the existing $0.20 fee is 
applicable to QCC transactions by Market Makers, Firms, and Broker-
Dealers and further believes that the proposed change with respect to 
Specialists and e-Specialists is not unfairly discriminatory because it 
would modify the Fee Schedule to charge the same fee on any QCC 
transactions executed by Market Makers (including Specialists and e-
Specialists), Firms, and Broker-Dealers.
    The Exchange further believes that the proposed change with respect 
to the calculation of Eligible Fixed Costs is not unfairly 
discriminatory because it would continue to be based on each Floor 
Broker organization's annualized costs and because the Exchange expects 
that using November 2022 as the basis for annualizing costs would 
provide a more accurate reflection of Eligible Fixed Costs for the 
coming calendar year.
    To the extent that the proposed changes attract more QCC orders and 
manual orders 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, protect investors and the public interest.
    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,\24\ 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.'' \25\
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    \24\ See 15 U.S.C. 78f(b)(8).
    \25\ See Reg NMS Adopting Release, supra note 18, at 37499.
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    Intramarket Competition. The proposed modification of the FB Prepay 
Program and the proposed credits and rebates offered to Floor Brokers 
on QCC transactions and manual billable orders are designed to incent 
participation in the FB Prepay Program and to attract additional order 
flow to the Exchange, which could increase the volumes of contracts 
traded on the Exchange. Greater liquidity benefits all market 
participants on the Exchange, and increased QCC and manual billable 
transactions could increase opportunities for execution of other 
trading interest. The proposed QCC credits would be available to all 
similarly-situated Floor Brokers that execute QCC trades and the 
rebates available through the Manual Billable Rebate Program and QCC 
Billable Bonus Rebate would be available to all Floor Brokers that 
choose to participate in the FB Prepay Program and meet the qualifying 
criteria for such rebates. The modification of the monthly maximum 
Floor Broker credits paid for QCC trades and rebates paid through the 
Manual Billable Rebate Program, would likewise apply equally to all 
similarly-situated Floor Brokers. 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. Finally, the 
Exchange believes the elimination of a lower QCC fee for Specialists 
and e-Specialists could also promote intramarket competition by 
establishing the same fee for all Market Makers, Firms, and Broker 
Dealers on QCC transactions.
    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 equity and ETF options trades.\26\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in November 2022, the Exchange had less than 7% market share of 
executed volume of multiply-listed equity and ETF options trades.\27\
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    \26\ See note 19, supra.
    \27\ See note 20, supra.
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    The Exchange believes that the proposed changes reflect this 
competitive environment because they modify the Exchange's fees and 
credits in a manner designed to continue to incent Floor Brokers to 
direct trading interest (particularly QCC transactions and manual 
orders) to the Exchange, to provide liquidity and to attract order 
flow. To the extent that Floor Brokers are encouraged to participate in 
the FB Prepay Program and/or incentivized to

[[Page 5947]]

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.
    The Exchange further believes that the proposed change could 
promote competition between the Exchange and other execution venues, 
including those that currently offer rebates on QCC transactions and 
Floor Broker rebates on manual billable volume,\28\ by encouraging 
additional orders to be sent to the Exchange for execution.
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    \28\ See notes 21 & 22, supra.
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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) \29\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \30\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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) \31\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \31\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEAMER-2023-08 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-2023-08. 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 (http://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-2023-08, and should be 
submitted on or before February 21, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01745 Filed 1-27-23; 8:45 am]
BILLING CODE 8011-01-P