Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE American Options Fee Schedule, 16172-16177 [2020-05849]
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
reasons, the proposal is also designed to
protect investors as well as the public
interest.
Additionally, the proposed rule is
nearly identical to NYSE Rule 28 15 and
corrects an erroneous reference to
FINRA in LTSE Rule 1.180(c).16
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not intended to
address competitive issues but rather
update its existing fingerprint rule to
match, with only minor differences,
NYSE Rule 28, and to allow the use of
an FBI-approved Channel Partner as
described above.17
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
jbell on DSKJLSW7X2PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 18 and Rule 19b–
4(f)(6) thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
2015) (SR–NYSE–2015–45) (citing Securities
Exchange Act Release No. 71066 (December 12,
2013), 78 FR 76667, 76668 n. 12 (December 18,
2013) (SR–ISE–2013–66) (noting that ‘‘[a]n FBIapproved Channel Partner simply helps expedite
the delivery of Criminal History Summary
information on behalf of the FBI’’, and that the
‘‘process for making a request through an FBIapproved Channel Partner is consistent with FBI
submission procedures’’)).
15 See supra text accompanying note 4.
16 See supra note 7.
17 See supra text accompanying note 8 [sic].
18 15 U.S.C. 78s(b)(3)(A).
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
20 17 CFR 240.19b–4(f)(6).
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filing. However, Rule 19b–4(f)(6)(iii) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay to permit the
Exchange to amend its fingerprinting
rule to be accurate, tailored to the
Exchange, and substantially similar to
NYSE Rule 28 and to begin utilizing the
services of an FBI-approved Channel
Partner as soon as practicable. The
minor differences noted herein do not
raise substantive or novel issues.22 Thus
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest and hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.23
At any time within 60 days of the
filing of the 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.
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:
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–LTSE–2020–05 and should
be submitted on or before April 10,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–05840 Filed 3–19–20; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
LTSE–2020–05 on the subject line.
BILLING CODE 8011–01–P
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–LTSE–2020–05. 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
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Amend the NYSE American
Options Fee Schedule
21 17
CFR 240.19b–4(f)(6)(iii).
supra Background and Proposed Rule
Change.
23 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
22 See
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88391; File No. SR–
NYSEAMER–2020–18]
March 16, 2020.
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 March
12, 2020, NYSE American LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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’’) regarding the
Professional Step-Up Incentive program
and rebates for initiating a Customer
Best Execution (‘‘CUBE’’) Auction. The
Exchange proposes to implement the fee
change effective March 12, 2020. 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.
The purpose of this filing is modify
the Fee Schedule regarding the
Professional Step-Up Incentive program
and rebates for initiating a Customer
Best Execution (‘‘CUBE’’) Auction.
In brief, the proposed changes are
designed to encourage ATP Holders to
increase their Electronic volume in the
‘‘Professional’’ range as well as to
Background
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.’’ 5
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.6
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity &
ETF options order flow. More
specifically, in the fourth quarter of
2019, the Exchange had less than 10%
market share of executed volume of
multiply-listed equity & ETF options
trades.7
The Exchange believes that the evershifting 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.
4 For purposes of this filing, ‘‘Professional’’
Electronic volume includes: Professional Customer,
Broker Dealer, Non-NYSE American Options
Market Maker, and Firm (the ‘‘Professional
volume’’).
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
6 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/volume/default.jsp.
7 Based on OCC data, see id., the Exchange’s
market share in equity-based options declined from
9.82% for the month of January 2019 to 8.08% for
the month of January 2020.
8 See Fee Schedule, Section I.H., Professional
Step-Up Incentive, available here, https://
www.nyse.com/publicdocs/nyse/markets/americanoptions/NYSE_American_Options_Fee_
Schedule.pdf.
9 See id. See also Fee Schedule, Section I.E.
(describing the ACE Program and associated
credits). The Exchange notes that under the current
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
jbell on DSKJLSW7X2PROD with NOTICES
submit initiating CUBE Orders.4
Specifically, the Exchange proposes to
modify the Professional Step-Up
Incentive, which offers discounted rates
on monthly Professional volume, and to
offer a new rebate on initiating CUBE
volume for those ATP Holders that meet
certain Professional volume
requirements and increase their
initiating CUBE volume by a specified
amount, as described further below.
The Exchange proposes to implement
the rule changes on March 12, 2020.
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In response to this competitive
environment, the Exchange has
established various pricing incentives
designed to encourage increased
Electronic volume executed on the
Exchange, including (but not limited to)
the American Customer Engagement
(‘‘ACE’’) Program and the Professional
Step-Up Program. The Exchange also
offers an ACE Initiating Participant
Rebate to participants in the ACE
Program that initiate CUBE Auctions.
The Exchange is proposing to modify
the Professional Step-Up program to
continue to encourage Professional
volume and to introduce an alternative
to the ACE Initiating Participant Rebate
that would enable non-ACE Program
participants to qualify for a rebate on
certain initiating CUBE Orders provided
they meet certain Professional volume
requirements and increase their
initiating CUBE volume. To the extent
that these incentives succeed, the
increased liquidity on the Exchange
would result in enhanced market
quality for all participants.
Proposed Rule Change
Professional Step-Up Incentive
Section I.H. of the Fee Schedule sets
forth the Professional Step-Up Incentive
program (the ‘‘Professional Incentive’’),
which is comprised of Tiers A, B, and
C, and offers discounted rates on
monthly Professional volume for ATP
Holders that increase their Professional
volume by specified percentages of
TCADV over their August 2019
volume—or, for new ATP Holders that
increase such volume by a specified
percentages of TCADV above 10,000
contracts ADV) (the ‘‘Qualifying
Volume’’).8 Under the current Fee
Schedule, ATP Holders that qualify for
Tiers B and C of the Professional
Incentive are also eligible to receive
certain ACE Program, Tier 1 credits.9
The Exchange proposes to modify the
Professional Incentive program as
shown in the table below. (Proposed
text is italicized, while text to be deleted
is in brackets).10
Fee Schedule participants that qualify for Tier B of
the Professional Incentive do not receive all of the
benefits that inure to ATP Holders that qualify for
ACE Tier 1; they are solely entitled to the reduce
rates on Customer Electronic Volume. See Fee
Schedule, Section I.H., Professional Step-Up
Incentive.
10 See proposed Fee Schedule, Section I.H.,
Professional Step-Up Incentive.
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
PROFESSIONAL STEP-UP INCENTIVE
Qualifying
volume as a
% of TCADV
Tier A ..................
Tier B ..................
Tier C ..................
[0.04] 0.06
[0.07] 0.08
[0.09] 0.10
Per contract
Penny Pilot
rate
[$0.42] 0.45
0.35
0.25
As shown in the table above, the
Exchange proposes to increase the
Qualifying Volume requirement for each
of the Tiers A, B and C to 0.06%, 0.08%
and 0.10% (up from 0.04%, 0.07% and
0.09%), respectively. For Tier A, the
Exchange also proposes to increase the
rate per contract to $0.45 (up from
$0.42) for Penny Pilot issues, which
would still be a discounted rate, and
$0.70 (up from $0.65) for non-Penny
Pilot Issues, which would still be a
discounted rate.11 For Tier B, the
Exchange proposes to increase the rate
per contract to $0.60 (up from $0.55) for
non-Penny Pilot issues, which would
still be a discounted rate, and to remove
the ACE Program ‘‘Tier 1 Customer only
credits.’’ 12 The Exchange proposes to
remove the ACE benefit from Tier B as
it did not incent Professional Customer
order flow as anticipated, likely because
the ACE benefits were limited to
Customer transactions and thus did not
incent increased Professional volume.
The Exchange believes that a better
incentive is the Alternative Initiating
Participant Rebate, as described below.
Because the Exchange is removing the
limited ACE Benefit for Tier B
participants, it proposes to streamline
the description of ACE Benefits
available in the preamble of Section I.H.
and regarding Tier C to simply read:
‘‘Tier 1,’’ which the Exchange believes
would make the Fee Schedule easier to
navigate and comprehend.13
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CUBE Auction Fees & Credits:
Alternative Initiating Participant Rebate
Section I.G. of the Fee Schedule sets
forth the rates for per contract fees and
credits for executions associated with a
CUBE Auction. The Exchange currently
offers ATP Holders that qualify for Tiers
11 See Fee Schedule, Section I. A., supra note 8
(setting forth options transactions rates for
Electronic Professional volume of $0.50 and $0.75
for Penny and Non-Penny issues respectively;
except that Firm execution in Penny issues are
charged $0.47 per contract).
12 See id.
13 See proposed Fee Schedule, Section I. H,
Professional Step-up Incentive (citing only ACE
‘‘Tier 1’’ in the preamble to Section I.H. and Tier
C, thus removing the now extraneous references
to—and verbiage regarding—ACE ‘‘Section I.E.’’
Customer credits and ‘‘Section I.G.’’ CUBE Initiating
Participant Rebate.’’
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Per contract
non Penny
Pilot rate
[$0.65] 0.70
[0.55] 0.60
0.50
ACE benefits
N/A.
[Tier 1 Customer Credits only (per Section I.E.)] N/A.
Tier 1 [Customer Credits (per Section I.E.), plus ACE Initiating Participant Rebate—All issues (per Section I.G.)].
1–5 of the ACE Program a ($0.12) per
contract rebate for up to 5,000 Customer
contracts per CUBE Order executed in a
CUBE Auction (the ‘‘ACE Initiating
Participant Rebate.’’) 14 The Exchange
proposes to offer an alternative to the
ACE Initiating Participant Rebate, which
would be a ($0.10) per contract rebate
for all issues that would likewise apply
to first 5,000 Customer contracts per
CUBE Order executed in a CUBE
Auction, provided the ATP Holder met
certain volume requirements (the
‘‘Alternative Initiating Participant
Rebate’’).15
Specifically, to qualify for the
Alternative Initiating Participant Rebate,
an ATP would have to execute:
• A minimum of 10,000 contracts
average daily volume (‘‘ADV’’) in the
‘‘Professional range, as defined in
Section I.H.’’ of the Fee Schedule, (i.e.,
in the Professional Incentive program);
and
• Increase their Initiating CUBE
Orders by the greater of 20% over their
August 2019 volume or 10,000 contracts
ADV.16
The proposed Alternative Initiating
Participant Rebate would be payable in
addition to the Initiating Participant
Credit for both Penny and non-Penny
Pilot issues, which provide per contract
credits of ($0.30) and ($0.70),
respectively. However, an ATP Holder
that qualifies for both the ACE Initiating
Participant Rebate (which is ($0.12))
and the Alternative Initiating
Participant Rebate (which is ($0.10))
would be entitled only to the greater of
the two rebates (i.e., the ACE Initiating
Participant Rebate).17
The Exchange’s fees are constrained
by intermarket competition, as ATP
Holders may direct their order flow to
any of the 16 options exchanges,
including those with similar incentive
programs.18 Thus, ATP Holders have a
14 See Section I.G. of the Fee Schedule, CUBE
Auction Fees & Credits, note 2, see supra note 8.
15 See proposed Section I.G. of the Fee Schedule,
CUBE Auction Fees & Credits, note 2.
16 See id.
17 See id.
18 See e.g., MIAX Options fee schedule, Section
1.a.iv, Professional Rebate Program, available here,
https://www.miaxoptions.com/sites/default/files/
fee_schedule-files/MIAX_Options_Fee_Schedule_
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choice of where they direct their order
flow. The proposed modification to the
Professional Incentive program as well
as the Alternative Initiating Participant
Rebate are designed to encourage ATP
Holders to increase the amount of
Professional volume directed to and
executed on the Exchange. In addition,
the proposed Alternative Initiating
Participant Rebate is designed to
increase incentives for submission of
CUBE Orders, which should maximize
price improvement opportunities for
Customers. The Exchange notes that all
market participants stand to benefit
from increased volume, as increased
liquidity promotes market depth,
facilitates tighter spreads and enhances
price discovery, and may lead to a
corresponding increase in order flow
from other market participants.
The Exchange cannot predict with
certainty whether any ATP Holders
would avail themselves of this proposed
fee change. Assuming historical
behavior can be predictive of future
behavior, however, the Exchange
believes that at present participation
rates, between two and four firms may
be able to qualify for Professional
Incentive program and between two and
four firms may qualify for the
Alternative Initiating Participant Rebate
on initiating CUBE volume.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,19 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,20 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
01142020.pdf (setting forth per contract credits on
volume submitted for the account of Public
Customers that are not Priority Customers, NonMIAX Market Makers, Non-Member Broker Dealers,
and Firms (collectively, Professional for purposes of
MIAX program), provided the Member achieves
certain Professional volume increase percentage
thresholds (set forth in the schedule) in the month
relative to the fourth quarter of 2015).
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(4) and (5).
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
discriminate between customers,
issuers, brokers or dealers.
jbell on DSKJLSW7X2PROD with NOTICES
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.’’ 21
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.22
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity &
ETF options order flow. More
specifically, in the fourth quarter of
2019, the Exchange had less than 10%
market share of executed volume of
multiply-listed equity & ETF options
trades.23
The Exchange believes that the evershifting 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 modifications to the existing
Professional Incentive program are
reasonable because, although the
proposed volume requirements and
associated fees would increase, the rates
would still be discounted and the
Program would continue to be designed
to incent ATP Holders to increase the
amount of Professional order flow
directed to the Exchange. The Exchange
also notes that with the Alternative
21 See Reg NMS Adopting Release, supra note 5,
at 37499.
22 See supra note 6.
23 Based on OCC data, see supra note 7, the
Exchange’s market share in equity-based options
declined from 9.82% for the month of January 2019
to 8.08% for the month of January 2020.
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Initiating Participant Rebate, it is
offering participants another means of
achieving a rebate based on Professional
volume, which should provide
additional incentive to direct such order
flow to the Exchange. The Exchange
proposes to remove the ACE benefit
from Tier B of the Professional Incentive
program because it did not increase
Professional order flow as anticipated,
likely because the ACE benefits were
limited to Customer transactions and
thus did not incent increased
Professional volume. Instead, the
Exchange believes that the Alternative
Initiating Participant Rebate may better
incent ATP Holder’s to increase
Professional volume.
The Exchange also believes that the
proposed Alternative Initiating
Participant Rebate for initiating CUBE
volume is reasonable because it may
encourage ATP Holders that choose to
participate in the CUBE to direct order
flow, including initiating CUBE volume
to the Exchange. The Exchange notes
that all market participants stand to
benefit from increased Electronic
transaction volume, as such increase
promotes market depth, facilitates
tighter spreads and enhances price
discovery, and may lead to a
corresponding increase in order flow
from other market participants that do
not participant in (or qualify for) the
Professional Incentive program or the
Alternative Initiating Participant Rebate.
The Exchange believes that the baseline
of 10,000 ADV Professional volumes for
new ATP Holders is reasonable because
these volumes are comparable to trading
volumes in August 2019 for those firms
that were active on the Exchange and
eligible to increase their CUBE initiating
volume by 20% to qualify for the
Alternative Initiating Participant Rebate.
Moreover, the proposed Alternative
Initiating Participant Rebate provides
another avenue (outside of the ACE
Program) for participants to avail
themselves of a rebate for initiating
CUBE Auctions.
The Exchange cannot predict with
certainty whether any ATP Holders
would avail themselves of this proposed
fee change. Assuming historical
behavior can be predictive of future
behavior, however, the Exchange
believes that at present participation
rates, between two and four firms may
be able to qualify for Professional
Incentive program and between two and
four additional firms may qualify for the
Alternative Initiating Participant Rebate
on initiating CUBE volume.
Finally, to the extent the proposed
pricing incentives continue to attract
volume and liquidity, the Exchange
believes the proposed changes would
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16175
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
changes are a reasonable attempt by the
Exchange to increase the depth of its
market and improve its market share
relative to its competitors. The proposed
rule changes are designed to continue to
incent ATP Holders to direct liquidity to
the Exchange in Electronic executions,
similar to other exchange programs with
competitive pricing programs, thereby
promoting market depth, price
discovery and improvement and
enhancing order execution
opportunities for market participants.24
On 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 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 ATP Holders can opt to avail
themselves of these incentives or not.
Moreover, the proposals are designed to
encourage ATP Holders to aggregate
their executions at the Exchange as a
primary execution venue. To the extent
that the proposed changes attract more
Professional and Customer 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.
The Proposed Rule Change Is Not
Unfairly Discriminatory
The Exchange believes that the
proposal is not unfairly discriminatory
because the proposed modifications
would be available to all similarlysituated market participants on an equal
and non-discriminatory basis. ATP
Holders would continue to have the
option of availing themselves of the
still-reduced rates available under the
Professional Incentive program and
24 See, e.g., supra note 18 (regarding MIAX
Professional Rebate Program).
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would have increased opportunity to
qualify for rebates based on their
Professional volume with the
Alternative Initiating Participant Rebate.
The Alternative Initiating Participant
Rebate also offers participants that
choose to participate in the CUBE, but
do not qualify for the ACE Initiating
Participant Program to be eligible to
receive a rebate on initiating CUBE
volume. The Exchange believes that this
proposal should incent ATP Holders to
direct volume to the Exchange, which
would increase liquidity on the
Exchange to the benefit of all market
participants.
The proposals are based on the
amount and type of business transacted
on the Exchange and ATP Holders are
not obligated to try to achieve either of
the incentive pricing options. Rather,
the proposals are designed to encourage
participants to utilize the Exchange as a
primary trading venue (if they have not
done so previously) or increase
Electronic volume sent to the Exchange.
To the extent that the proposed changes
attract more executions 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 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 marketwide 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.
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act, the Exchange does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Instead, as discussed above, the
Exchange believes that the proposed
changes would encourage the
submission of additional liquidity to a
public exchange, thereby promoting
market depth, price discovery and
transparency and enhancing order
VerDate Sep<11>2014
19:01 Mar 19, 2020
Jkt 250001
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
Intramarket Competition. The
proposed change is designed to
continue to attract order flow to the
Exchange by offering competitive rates
and credits (via the Professional
Incentive program and the Alternative
Initiating Participant Rebate) based on
increased volumes on the Exchange,
which would enhance the quality of
quoting and may increase the volumes
of contracts trade on the Exchange. To
the extent that this purpose is achieved,
all of the Exchange’s market participants
should benefit from the improved
market liquidity. Enhanced market
quality and increased transaction
volume that results from the anticipated
increase in order flow directed to the
Exchange will benefit all market
participants and improve competition
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 publiclyavailable 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 &
ETF options order flow. More
specifically, in the fourth quarter of
2019, the Exchange had less than 10%
market share of executed volume of
multiply-listed equity & ETF options
trades.27
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 ATP Holders to direct trading
interest to the Exchange, to provide
25 See Reg NMS Adopting Release, supra note 5,
at 37499.
26 See supra note 6.
27 Based on OCC data, supra note 7, the
Exchange’s market share in equity-based options
declined from 9.82% for the month of January 2019
to 8.08% for the month of January 2020.
PO 00000
Frm 00130
Fmt 4703
Sfmt 4703
liquidity and to attract order flow. 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 believes that the
proposed change could promote
competition between the Exchange and
other execution venues, including those
that currently offer similar pricing
incentives, by encouraging additional
orders to be sent to the Exchange for
execution.28
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.
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.
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 rule-comments@
sec.gov. Please include File No. SR–
28 See, e.g., supra note 18 (regarding MIAX
Professional Rebate Program).
29 15 U.S.C. 78s(b)(3)(A).
30 17 CFR 240.19b–4(f)(2).
31 15 U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 85, No. 55 / Friday, March 20, 2020 / Notices
NYSEAMER–2020–18 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 No.
SR–NYSEAMER–2020–18. 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 No.
SR–NYSEAMER–2020–18, and should
be submitted on or before April 10,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–05849 Filed 3–19–20; 8:45 am]
BILLING CODE 8011–01–P
jbell on DSKJLSW7X2PROD with NOTICES
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
1:30 p.m. on Tuesday,
March 24, 2020.
TIME AND DATE:
32 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
19:01 Mar 19, 2020
Jkt 250001
The meeting will be held at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matters of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
PLACE:
Dated: March 17, 2020.
Vanessa A. Countryman,
Secretary.
16177
December 1–31, 2019.
Susquehanna River Basin
Commission, 4423 North Front Street,
Harrisburg, PA 17110–1788.
FOR FURTHER INFORMATION CONTACT:
Jason E. Oyler, General Counsel and
Secretary to the Commission, telephone:
(717) 238–0423, ext. 1312; fax: (717)
238–2436; email: joyler@srbc.net.
Regular mail inquiries May be sent to
the above address.
SUPPLEMENTARY INFORMATION: This
notice lists the projects, described
below, that have been revoked for the
time period specified above:
DATES:
ADDRESSES:
Revocation of Approvals by Rule—
Issued Under 18 CFR 806.22(f):
1. XPR Resources, LLC; Pad ID:
Resource Recovery Well #1; ABR–
201010059.R1; Snow Shoe Township,
Centre County, Pa.; Revocation of
Approval Date: December 24, 2019.
2. Seneca Resources Company, LLC;
Pad ID: Gamble Pad G; ABR–201906005;
Gamble Township, Lycoming County,
Pa.; Revocation of Approval Date:
December 26, 2019.
3. Seneca Resources Company, LLC;
Pad ID: C09–E; ABR–201512009;
Shippen Township, Cameron County,
Pa.; Revocation of Approval Date:
December 26, 2019.
4. Chief Oil & Gas, LLC; Pad ID:
Andrus Drilling Pad #1; ABR–
201101023.R1; Franklin and Granville
Townships, Bradford County, Pa.;
Revocation of Approval Date: December
30, 2019.
(Authority: Pub. L. 91–575, 84 Stat. 1509 et
seq., 18 CFR parts 806, 807, and 808)
Dated: March 16, 2020.
Jason E. Oyler,
General Counsel and Secretary to the
Commission.
[FR Doc. 2020–05873 Filed 3–19–20; 8:45 am]
BILLING CODE 7040–01–P
SUSQUEHANNA RIVER BASIN
COMMISSION
[FR Doc. 2020–06012 Filed 3–18–20; 11:15 am]
BILLING CODE 8011–01–P
Grandfathering (GF) Registration
Notice
Susquehanna River Basin
Commission.
ACTION: Notice.
AGENCY:
SUSQUEHANNA RIVER BASIN
COMMISSION
Revocation of Approvals
Susquehanna River Basin
Commission.
ACTION: Notice.
AGENCY:
SUMMARY: This notice lists the projects
approved by rule by the Susquehanna
River Basin Commission during the
period set forth in DATES.
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SUMMARY: This notice lists
Grandfathering Registration for projects
by the Susquehanna River Basin
Commission during the period set forth
in DATES.
DATES: February 1–29, 2020.
ADDRESSES: Susquehanna River Basin
Commission, 4423 North Front Street,
Harrisburg, PA 17110–1788.
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]]>Agencies
[Federal Register Volume 85, Number 55 (Friday, March 20, 2020)]
[Notices]
[Pages 16172-16177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05849]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88391; File No. SR-NYSEAMER-2020-18]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend the NYSE
American Options Fee Schedule
March 16, 2020.
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 March 12, 2020, NYSE American LLC (``NYSE American'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in
[[Page 16173]]
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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'') regarding the Professional Step-Up
Incentive program and rebates for initiating a Customer Best Execution
(``CUBE'') Auction. The Exchange proposes to implement the fee change
effective March 12, 2020. 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.
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 modify the Fee Schedule regarding the
Professional Step-Up Incentive program and rebates for initiating a
Customer Best Execution (``CUBE'') Auction.
In brief, the proposed changes are designed to encourage ATP
Holders to increase their Electronic volume in the ``Professional''
range as well as to submit initiating CUBE Orders.\4\ Specifically, the
Exchange proposes to modify the Professional Step-Up Incentive, which
offers discounted rates on monthly Professional volume, and to offer a
new rebate on initiating CUBE volume for those ATP Holders that meet
certain Professional volume requirements and increase their initiating
CUBE volume by a specified amount, as described further below.
---------------------------------------------------------------------------
\4\ For purposes of this filing, ``Professional'' Electronic
volume includes: Professional Customer, Broker Dealer, Non-NYSE
American Options Market Maker, and Firm (the ``Professional
volume'').
---------------------------------------------------------------------------
The Exchange proposes to implement the rule changes on March 12,
2020.
Background
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.'' \5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
---------------------------------------------------------------------------
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.\6\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity & ETF options order flow.
More specifically, in the fourth quarter of 2019, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\7\
---------------------------------------------------------------------------
\6\ 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/volume/default.jsp.
\7\ Based on OCC data, see id., the Exchange's market share in
equity-based options declined from 9.82% for the month of January
2019 to 8.08% for the month of January 2020.
---------------------------------------------------------------------------
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.
In response to this competitive environment, the Exchange has
established various pricing incentives designed to encourage increased
Electronic volume executed on the Exchange, including (but not limited
to) the American Customer Engagement (``ACE'') Program and the
Professional Step-Up Program. The Exchange also offers an ACE
Initiating Participant Rebate to participants in the ACE Program that
initiate CUBE Auctions. The Exchange is proposing to modify the
Professional Step-Up program to continue to encourage Professional
volume and to introduce an alternative to the ACE Initiating
Participant Rebate that would enable non-ACE Program participants to
qualify for a rebate on certain initiating CUBE Orders provided they
meet certain Professional volume requirements and increase their
initiating CUBE volume. To the extent that these incentives succeed,
the increased liquidity on the Exchange would result in enhanced market
quality for all participants.
Proposed Rule Change
Professional Step-Up Incentive
Section I.H. of the Fee Schedule sets forth the Professional Step-
Up Incentive program (the ``Professional Incentive''), which is
comprised of Tiers A, B, and C, and offers discounted rates on monthly
Professional volume for ATP Holders that increase their Professional
volume by specified percentages of TCADV over their August 2019
volume--or, for new ATP Holders that increase such volume by a
specified percentages of TCADV above 10,000 contracts ADV) (the
``Qualifying Volume'').\8\ Under the current Fee Schedule, ATP Holders
that qualify for Tiers B and C of the Professional Incentive are also
eligible to receive certain ACE Program, Tier 1 credits.\9\
---------------------------------------------------------------------------
\8\ See Fee Schedule, Section I.H., Professional Step-Up
Incentive, available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
\9\ See id. See also Fee Schedule, Section I.E. (describing the
ACE Program and associated credits). The Exchange notes that under
the current Fee Schedule participants that qualify for Tier B of the
Professional Incentive do not receive all of the benefits that inure
to ATP Holders that qualify for ACE Tier 1; they are solely entitled
to the reduce rates on Customer Electronic Volume. See Fee Schedule,
Section I.H., Professional Step-Up Incentive.
---------------------------------------------------------------------------
The Exchange proposes to modify the Professional Incentive program
as shown in the table below. (Proposed text is italicized, while text
to be deleted is in brackets).\10\
---------------------------------------------------------------------------
\10\ See proposed Fee Schedule, Section I.H., Professional Step-
Up Incentive.
[[Page 16174]]
Professional Step-Up Incentive
----------------------------------------------------------------------------------------------------------------
Qualifying Per contract Per contract
volume as a % Penny Pilot non Penny ACE benefits
of TCADV rate Pilot rate
----------------------------------------------------------------------------------------------------------------
Tier A............................. [0.04] 0.06 [$0.42] 0.45 [$0.65] 0.70 N/A.
Tier B............................. [0.07] 0.08 0.35 [0.55] 0.60 [Tier 1 Customer Credits
only (per Section I.E.)] N/
A.
Tier C............................. [0.09] 0.10 0.25 0.50 Tier 1 [Customer Credits
(per Section I.E.), plus
ACE Initiating Participant
Rebate--All issues (per
Section I.G.)].
----------------------------------------------------------------------------------------------------------------
As shown in the table above, the Exchange proposes to increase the
Qualifying Volume requirement for each of the Tiers A, B and C to
0.06%, 0.08% and 0.10% (up from 0.04%, 0.07% and 0.09%), respectively.
For Tier A, the Exchange also proposes to increase the rate per
contract to $0.45 (up from $0.42) for Penny Pilot issues, which would
still be a discounted rate, and $0.70 (up from $0.65) for non-Penny
Pilot Issues, which would still be a discounted rate.\11\ For Tier B,
the Exchange proposes to increase the rate per contract to $0.60 (up
from $0.55) for non-Penny Pilot issues, which would still be a
discounted rate, and to remove the ACE Program ``Tier 1 Customer only
credits.'' \12\ The Exchange proposes to remove the ACE benefit from
Tier B as it did not incent Professional Customer order flow as
anticipated, likely because the ACE benefits were limited to Customer
transactions and thus did not incent increased Professional volume. The
Exchange believes that a better incentive is the Alternative Initiating
Participant Rebate, as described below. Because the Exchange is
removing the limited ACE Benefit for Tier B participants, it proposes
to streamline the description of ACE Benefits available in the preamble
of Section I.H. and regarding Tier C to simply read: ``Tier 1,'' which
the Exchange believes would make the Fee Schedule easier to navigate
and comprehend.\13\
---------------------------------------------------------------------------
\11\ See Fee Schedule, Section I. A., supra note 8 (setting
forth options transactions rates for Electronic Professional volume
of $0.50 and $0.75 for Penny and Non-Penny issues respectively;
except that Firm execution in Penny issues are charged $0.47 per
contract).
\12\ See id.
\13\ See proposed Fee Schedule, Section I. H, Professional Step-
up Incentive (citing only ACE ``Tier 1'' in the preamble to Section
I.H. and Tier C, thus removing the now extraneous references to--and
verbiage regarding--ACE ``Section I.E.'' Customer credits and
``Section I.G.'' CUBE Initiating Participant Rebate.''
---------------------------------------------------------------------------
CUBE Auction Fees & Credits: Alternative Initiating Participant Rebate
Section I.G. of the Fee Schedule sets forth the rates for per
contract fees and credits for executions associated with a CUBE
Auction. The Exchange currently offers ATP Holders that qualify for
Tiers 1-5 of the ACE Program a ($0.12) per contract rebate for up to
5,000 Customer contracts per CUBE Order executed in a CUBE Auction (the
``ACE Initiating Participant Rebate.'') \14\ The Exchange proposes to
offer an alternative to the ACE Initiating Participant Rebate, which
would be a ($0.10) per contract rebate for all issues that would
likewise apply to first 5,000 Customer contracts per CUBE Order
executed in a CUBE Auction, provided the ATP Holder met certain volume
requirements (the ``Alternative Initiating Participant Rebate'').\15\
---------------------------------------------------------------------------
\14\ See Section I.G. of the Fee Schedule, CUBE Auction Fees &
Credits, note 2, see supra note 8.
\15\ See proposed Section I.G. of the Fee Schedule, CUBE Auction
Fees & Credits, note 2.
---------------------------------------------------------------------------
Specifically, to qualify for the Alternative Initiating Participant
Rebate, an ATP would have to execute:
A minimum of 10,000 contracts average daily volume
(``ADV'') in the ``Professional range, as defined in Section I.H.'' of
the Fee Schedule, (i.e., in the Professional Incentive program); and
Increase their Initiating CUBE Orders by the greater of
20% over their August 2019 volume or 10,000 contracts ADV.\16\
---------------------------------------------------------------------------
\16\ See id.
---------------------------------------------------------------------------
The proposed Alternative Initiating Participant Rebate would be
payable in addition to the Initiating Participant Credit for both Penny
and non-Penny Pilot issues, which provide per contract credits of
($0.30) and ($0.70), respectively. However, an ATP Holder that
qualifies for both the ACE Initiating Participant Rebate (which is
($0.12)) and the Alternative Initiating Participant Rebate (which is
($0.10)) would be entitled only to the greater of the two rebates
(i.e., the ACE Initiating Participant Rebate).\17\
---------------------------------------------------------------------------
\17\ See id.
---------------------------------------------------------------------------
The Exchange's fees are constrained by intermarket competition, as
ATP Holders may direct their order flow to any of the 16 options
exchanges, including those with similar incentive programs.\18\ Thus,
ATP Holders have a choice of where they direct their order flow. The
proposed modification to the Professional Incentive program as well as
the Alternative Initiating Participant Rebate are designed to encourage
ATP Holders to increase the amount of Professional volume directed to
and executed on the Exchange. In addition, the proposed Alternative
Initiating Participant Rebate is designed to increase incentives for
submission of CUBE Orders, which should maximize price improvement
opportunities for Customers. The Exchange notes that all market
participants stand to benefit from increased volume, as increased
liquidity promotes market depth, facilitates tighter spreads and
enhances price discovery, and may lead to a corresponding increase in
order flow from other market participants.
---------------------------------------------------------------------------
\18\ See e.g., MIAX Options fee schedule, Section 1.a.iv,
Professional Rebate Program, available here, https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_Options_Fee_Schedule_01142020.pdf (setting forth per contract
credits on volume submitted for the account of Public Customers that
are not Priority Customers, Non-MIAX Market Makers, Non-Member
Broker Dealers, and Firms (collectively, Professional for purposes
of MIAX program), provided the Member achieves certain Professional
volume increase percentage thresholds (set forth in the schedule) in
the month relative to the fourth quarter of 2015).
---------------------------------------------------------------------------
The Exchange cannot predict with certainty whether any ATP Holders
would avail themselves of this proposed fee change. Assuming historical
behavior can be predictive of future behavior, however, the Exchange
believes that at present participation rates, between two and four
firms may be able to qualify for Professional Incentive program and
between two and four firms may qualify for the Alternative Initiating
Participant Rebate on initiating CUBE volume.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\19\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\20\ 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
[[Page 16175]]
discriminate between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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.'' \21\
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\21\ See Reg NMS Adopting Release, supra note 5, at 37499.
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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.\22\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity & ETF options order flow.
More specifically, in the fourth quarter of 2019, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\23\
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\22\ See supra note 6.
\23\ Based on OCC data, see supra note 7, the Exchange's market
share in equity-based options declined from 9.82% for the month of
January 2019 to 8.08% for the month of January 2020.
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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 modifications to the
existing Professional Incentive program are reasonable because,
although the proposed volume requirements and associated fees would
increase, the rates would still be discounted and the Program would
continue to be designed to incent ATP Holders to increase the amount of
Professional order flow directed to the Exchange. The Exchange also
notes that with the Alternative Initiating Participant Rebate, it is
offering participants another means of achieving a rebate based on
Professional volume, which should provide additional incentive to
direct such order flow to the Exchange. The Exchange proposes to remove
the ACE benefit from Tier B of the Professional Incentive program
because it did not increase Professional order flow as anticipated,
likely because the ACE benefits were limited to Customer transactions
and thus did not incent increased Professional volume. Instead, the
Exchange believes that the Alternative Initiating Participant Rebate
may better incent ATP Holder's to increase Professional volume.
The Exchange also believes that the proposed Alternative Initiating
Participant Rebate for initiating CUBE volume is reasonable because it
may encourage ATP Holders that choose to participate in the CUBE to
direct order flow, including initiating CUBE volume to the Exchange.
The Exchange notes that all market participants stand to benefit from
increased Electronic transaction volume, as such increase promotes
market depth, facilitates tighter spreads and enhances price discovery,
and may lead to a corresponding increase in order flow from other
market participants that do not participant in (or qualify for) the
Professional Incentive program or the Alternative Initiating
Participant Rebate. The Exchange believes that the baseline of 10,000
ADV Professional volumes for new ATP Holders is reasonable because
these volumes are comparable to trading volumes in August 2019 for
those firms that were active on the Exchange and eligible to increase
their CUBE initiating volume by 20% to qualify for the Alternative
Initiating Participant Rebate. Moreover, the proposed Alternative
Initiating Participant Rebate provides another avenue (outside of the
ACE Program) for participants to avail themselves of a rebate for
initiating CUBE Auctions.
The Exchange cannot predict with certainty whether any ATP Holders
would avail themselves of this proposed fee change. Assuming historical
behavior can be predictive of future behavior, however, the Exchange
believes that at present participation rates, between two and four
firms may be able to qualify for Professional Incentive program and
between two and four additional firms may qualify for the Alternative
Initiating Participant Rebate on initiating CUBE volume.
Finally, to the extent the proposed pricing incentives continue to
attract 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 changes are a reasonable attempt by the Exchange to
increase the depth of its market and improve its market share relative
to its competitors. The proposed rule changes are designed to continue
to incent ATP Holders to direct liquidity to the Exchange in Electronic
executions, similar to other exchange programs with competitive pricing
programs, thereby promoting market depth, price discovery and
improvement and enhancing order execution opportunities for market
participants.\24\
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\24\ See, e.g., supra note 18 (regarding MIAX Professional
Rebate Program).
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On 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 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 ATP Holders can opt
to avail themselves of these incentives or not. Moreover, the proposals
are designed to encourage ATP Holders to aggregate their executions at
the Exchange as a primary execution venue. To the extent that the
proposed changes attract more Professional and Customer 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.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes that the proposal is not unfairly
discriminatory because the proposed modifications would be available to
all similarly-situated market participants on an equal and non-
discriminatory basis. ATP Holders would continue to have the option of
availing themselves of the still-reduced rates available under the
Professional Incentive program and
[[Page 16176]]
would have increased opportunity to qualify for rebates based on their
Professional volume with the Alternative Initiating Participant Rebate.
The Alternative Initiating Participant Rebate also offers participants
that choose to participate in the CUBE, but do not qualify for the ACE
Initiating Participant Program to be eligible to receive a rebate on
initiating CUBE volume. The Exchange believes that this proposal should
incent ATP Holders to direct volume to the Exchange, which would
increase liquidity on the Exchange to the benefit of all market
participants.
The proposals are based on the amount and type of business
transacted on the Exchange and ATP Holders are not obligated to try to
achieve either of the incentive pricing options. Rather, the proposals
are designed to encourage participants to utilize the Exchange as a
primary trading venue (if they have not done so previously) or increase
Electronic volume sent to the Exchange. To the extent that the proposed
changes attract more executions 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 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. 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.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, the Exchange does
not believe that the proposed rule change would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for all market participants. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering integrated competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \25\
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\25\ See Reg NMS Adopting Release, supra note 5, at 37499.
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Intramarket Competition. The proposed change is designed to
continue to attract order flow to the Exchange by offering competitive
rates and credits (via the Professional Incentive program and the
Alternative Initiating Participant Rebate) based on increased volumes
on the Exchange, which would enhance the quality of quoting and may
increase the volumes of contracts trade on the Exchange. To the extent
that this purpose is achieved, all of the Exchange's market
participants should benefit from the improved market liquidity.
Enhanced market quality and increased transaction volume that results
from the anticipated increase in order flow directed to the Exchange
will benefit all market participants and improve competition 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 equity and ETF options trades.\26\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity & ETF options order flow. More specifically, in
the fourth quarter of 2019, the Exchange had less than 10% market share
of executed volume of multiply-listed equity & ETF options trades.\27\
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\26\ See supra note 6.
\27\ Based on OCC data, supra note 7, the Exchange's market
share in equity-based options declined from 9.82% for the month of
January 2019 to 8.08% for the month of January 2020.
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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 ATP Holders to direct trading
interest to the Exchange, to provide liquidity and to attract order
flow. 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 believes that the proposed change could promote
competition between the Exchange and other execution venues, including
those that currently offer similar pricing incentives, by encouraging
additional orders to be sent to the Exchange for execution.\28\
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\28\ See, e.g., supra note 18 (regarding MIAX Professional
Rebate Program).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-
[[Page 16177]]
NYSEAMER-2020-18 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 No. SR-NYSEAMER-2020-18. 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 No. SR-NYSEAMER-2020-18, and should be submitted
on or before April 10, 2020.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-05849 Filed 3-19-20; 8:45 am]
BILLING CODE 8011-01-P
