Document ID: SEC-2023-1420-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American LLC
Posted Date: 2023-12-11T05:00Z

[Federal Register Volume 88, Number 236 (Monday, December 11, 2023)]
[Notices]
[Pages 85938-85941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27065]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99087; File No. SR-NYSEAMER-2023-63]

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

December 5, 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 November 27, 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 the Firm Monthly Fee Cap. The 
Exchange proposes to implement the fee change effective November 27, 
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 originally filed to amend the Fee Schedule on 
October 31, 2023 (SR-NYSEAMER-2023-55), then withdrew such filing 
and amended the Fee Schedule on November 15, 2023 (SR-NYSEAMER-2023-
60), which latter filing the Exchange withdrew on November 27, 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 is to amend the Fee Schedule to modify 
the Firm Monthly Fee Cap. The Exchange proposes to implement the rule 
change on November 15, 2023.
    The Firm Monthly Fee Cap is set forth in Section I.I. of the Fee 
Schedule.\5\ Currently, a Firm's fees associated with Manual 
transactions are capped at $200,000 per month per Firm.\6\
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    \5\ See Fee Schedule, Section I.I., Firm Monthly Fee Cap, 
available at: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
    \6\ The Exchange also proposes two clarifying changes to the 
description of the Firm Monthly Fee Cap. First, the Exchange 
proposes to add text to specify that fees for QCC transactions are 
included in the Manual transaction fees eligible to be capped. This 
proposed change is not intended to modify the applicability of the 
Firm Monthly Fee Cap, but rather to ensure that the Fee Schedule 
clearly reflects the fees that are eligible for the Firm Monthly Fee 
Cap. Second, the Exchange proposes to delete the last sentence of 
the description of the Firm Monthly Fee Cap as extraneous. This 
proposed change similarly does not impact the applicability of the 
Firm Monthly Fee Cap and is instead intended to promote clarity in 
the Fee Schedule.

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[[Page 85939]]

    The Exchange proposes to raise the Firm Monthly Fee Cap to $250,000 
per month per Firm. To effect this change, the Exchange proposes to 
modify Section I.I. to replace references to a $200,000 cap with 
references to a $250,000 cap.\7\ Once a Firm has reached the Firm 
Monthly Fee Cap, an incremental service fee of $0.02 per contract for 
Firm Manual transactions will apply, including for the execution of a 
QCC order. Royalty Fees and fees or volumes associated with Strategy 
Executions will continue to be excluded from the calculation of fees 
towards the Firm Monthly Fee Cap. Firm Facilitation Manual trades will 
also continue to be executed at the rate of $0.00 per contract 
regardless of whether a Firm has reached the Firm Monthly Fee Cap.
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    \7\ The Exchange also proposes a conforming change to footnote 4 
in Section I.A. (Rates for Options transactions) of the Fee 
Schedule, which cross-references the Firm Monthly Fee Cap as set 
forth in Section I.I. The Exchange likewise proposes to modify 
footnote 4 to replace the reference to a $200,000 cap with a 
reference to a $250,000 cap.
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    The Exchange believes that the proposed change, despite increasing 
the amount of the Firm Monthly Fee Cap, would continue to incent Firms 
to direct order flow to the Exchange to receive the benefits of a fee 
cap on Manual transaction fees (including fees for QCC transactions).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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.'' \10\
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    \10\ 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 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.\11\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in September 2023, the Exchange had less than 8% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\12\
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    \11\ 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.
    \12\ 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 decreased 
from 8.66% for the month of September 2022 to 7.31% for the month of 
September 2023.
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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 proposed increase to the Firm Monthly Fee Cap is reasonable 
because the Exchange believes the fee cap, although higher, would 
continue to incent Firms to direct order flow to the Exchange to 
receive the benefits of capped fees for their Manual transactions 
(including QCC transactions). The Exchange also believes the proposed 
change is reasonable because the proposed fee cap amount would be 
applicable to all Firms. In addition, although the proposed change 
would raise the amount of the Firm Monthly Fee Cap, it would continue 
to offer Firms the opportunity to qualify for capped fees on Manual 
transactions (including QCC transactions), which the Exchange believes 
provides Firms with a benefit not offered by at least one other options 
exchange.\13\ The Exchange also believes that the proposed clarifying 
changes are reasonable, as they are intended only to improve the 
clarity of the Fee Schedule (and are not intended to effect any 
substantive changes).
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    \13\ See, e.g., BOX Options Fee Schedule, available at: https://boxoptions.com/fee-schedule/ (no cap on Firm manual transaction 
fees).
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    To the extent the proposed change continues to attract greater 
volume and liquidity, the Exchange believes the proposed change 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 market participants can choose to direct their order 
flow to any of the 17 options exchanges. The Exchange believes that 
proposed rule change is designed to continue to incent market 
participants to direct liquidity and, in particular, Manual (including 
QCC) transactions, to the Exchange, and, to the extent they continue to 
be 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 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 proposed change is equitable 
because the proposal is based on the amount and type of business 
transacted on the Exchange. The Exchange also believes that the 
proposed modification of the Firm Monthly Fee Cap is equitable because 
it would be available to all Firms equally and would continue to 
provide the same fee cap amount for all Firms. The Exchange also 
believes that the proposed rule change is equitable with respect to 
non-Firm market participants because the Firm Monthly Fee Cap would not 
be as meaningful for Customers and because Market Makers are offered 
other incentives to reduce

[[Page 85940]]

transaction fees.\14\ The Exchange believes that the proposed change, 
although it increases the fee cap amount, would not discourage Firms 
from directing order flow to the Exchange. To the extent that the 
proposed change achieves its purpose in continuing to incent Firms to 
aggregate their executions at the Exchange as a primary execution venue 
and does not discourage Firms from continuing to direct order flow to 
the Exchange to achieve the benefits of capped fees, this increased 
order flow would continue to make the Exchange a more competitive venue 
for, among other things, order execution, and all market participants 
would benefit from enhanced opportunities for price improvement and 
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.
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    \14\ For example, Customers are not subject to a fee for Manual 
transactions, and the Exchange offers various incentives to Market 
Makers, including the Market Maker Sliding Scale and Prepayment 
Program. See Fee Schedule at Sections I.A., I.C., and I.D.
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The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the modification of the Firm Monthly Fee 
Cap is not unfairly discriminatory because the fee cap amount, as 
proposed, would continue to be applicable to all similarly situated 
Firms, any of which could continue to be incentivized to direct order 
flow to the Exchange to qualify for the fee cap. Moreover, the proposed 
change to the Firm Monthly Fee Cap is not unfairly discriminatory 
because it would continue to apply the same fee cap amount to all 
Firms. The Exchange notes that offering the Firm Monthly Fee Cap, as 
proposed, to Firms but not to other market participants is not unfairly 
discriminatory because the Firm Monthly Fee Cap would not be as 
meaningful for Customers and because Market Makers are offered other 
incentives to reduce transaction fees.\15\
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    \15\ See id.
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    To the extent the proposed change continues to attract Manual 
(including QCC) 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, 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, 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 change 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 9, at 37499.
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    Intramarket Competition. The proposed change is designed to 
continue to attract 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 the Exchange 
believes that the proposed modification of the Firm Monthly Fee Cap 
(even though it would raise the amount of the fee cap) would not impose 
any burden on competition that is not necessary or appropriate because 
it is intended to continue to incentivize Firms to direct order flow to 
the Exchange to be eligible for the benefits of capped fees on Manual 
transactions (including QCC transactions), thereby promoting liquidity 
on the Exchange to the benefit of 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.\17\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in September 2023, 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 note 10, supra.
    \18\ See note 11, supra.
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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 incent market participants to direct 
trading interest to the Exchange, to provide liquidity and to attract 
order flow. To the extent that Firms are 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 
further believes that the proposed change could promote competition 
between the Exchange and other execution venues, including those that 
do not offer a cap on Firm fees,\19\ by encouraging additional orders 
to be sent to the Exchange for execution. In such an environment, the 
Exchange must continually review, and consider adjusting, its fees and 
credits to remain competitive with other exchanges.
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    \19\ See note 12, 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) \20\ of the Act and

[[Page 85941]]

subparagraph (f)(2) of Rule 19b-4 \21\ thereunder, because it 
establishes a due, fee, or other charge imposed by the Exchange.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 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-2023-63 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-2023-63. 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-2023-63 and should 
be submitted on or before January 2, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27065 Filed 12-8-23; 8:45 am]
BILLING CODE 8011-01-P