Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Modify the NYSE American Options Fee Schedule, 44552-44556 [2020-15910]
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Federal Register / Vol. 85, No. 142 / Thursday, July 23, 2020 / Notices
www.prc.gov, Docket Nos. MC2020–198,
CP2020–223.
POSTAL SERVICE
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
Product Change—Priority Mail
Negotiated Service Agreement
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
AGENCY:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: July 23,
2020.
FOR FURTHER INFORMATION CONTACT:
Sean Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 6, 2020, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 635 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2020–194, CP2020–219.
SUMMARY:
Sean Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2020–15918 Filed 7–22–20; 8:45 am]
ACTION:
[FR Doc. 2020–15922 Filed 7–22–20; 8:45 am]
Postal ServiceTM.
BILLING CODE 7710–12–P
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
SUMMARY:
DATES:
Date of required notice: July 23,
2020.
FOR FURTHER INFORMATION CONTACT:
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 July 10,
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
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.
POSTAL SERVICE
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: July 23,
2020.
FOR FURTHER INFORMATION CONTACT:
Sean Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 13, 2020,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 641 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2020–201, CP2020–226.
jbell on DSKJLSW7X2PROD with NOTICES
SUMMARY:
Sean Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2020–15925 Filed 7–22–20; 8:45 am]
BILLING CODE 7710–12–P
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Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Modify the NYSE American
Options Fee Schedule
July 17, 2020.
BILLING CODE 7710–12–P
Product Change—Priority Mail
Negotiated Service Agreement
[Release No. 34–89338; File No. SR–
NYSEAMER–2020–55]
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 9, 2020, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 638 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2020–197, CP2020–222.
[FR Doc. 2020–15921 Filed 7–22–20; 8:45 am]
POSTAL SERVICE
SECURITIES AND EXCHANGE
COMMISSION
Sean Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION:
Sean Robinson,
Attorney, Corporate and Postal Business Law.
BILLING CODE 7710–12–P
Sean Robinson,
Attorney, Corporate and Postal Business Law.
Product Change—Priority Mail Express
and Priority Mail Negotiated Service
Agreement
AGENCY:
ACTION:
Postal ServiceTM.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
SUMMARY:
DATES:
Date of required notice: July 23,
2020.
FOR FURTHER INFORMATION CONTACT:
Sean Robinson, 202–268–8405.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 9, 2020, it
filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express & Priority Mail
Contract 115 to Competitive Product
List. Documents are available at
SUPPLEMENTARY INFORMATION:
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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 certain
limits or caps on transactions fee and
credits. The Exchange proposes to
implement the fee change effective July
10, 2020.4 The proposed change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
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
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 The Exchange originally filed to amend the Fee
Schedule on June 26, 2020, effective July 1, 2020
(SR–NYSEAMER–2020–48), and withdrew such
filing on July 10, 2020.
2 15
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Federal Register / Vol. 85, No. 142 / Thursday, July 23, 2020 / Notices
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to modify
the Fee Schedule regarding certain
limits or caps on transactions fee and
credits. The Exchange proposes to
implement the fee change effective July
10, 2020.
Background
On March 18, 2020, the Exchange
announced that it would temporarily
close the Trading Floor, effective
Monday, March 23, 2020, as a
precautionary measure to prevent the
potential spread of COVID–19.
Following the temporary closure of the
Trading Floor, the Exchange modified
certain fees for April and May 2020 and,
after the Floor partially reopened, the
Exchange extended those changes
through June 2020.5 The
aforementioned changes—applicable
April, May and June 2020 only—
included (i) raising the Floor Broker
QCC Cap from $425,000 to $625,000 and
(ii) modifying the $1,000 daily Strategy
Execution Cap to allow the inclusion of
reversal and conversion strategies
executed as QCCs in such Cap.
The Exchange proposes to (i)
indefinitely increase the Floor Broker
QCC Cap to from $425,000 to $525,000,
and (ii) continue to allow reversal and
conversion strategies executed as QCCs
to be included in the Strategy Execution
Cap.
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Floor Broker QCC Cap
Currently, Floor Brokers earn a credit
for executed QCC orders of $0.07 per
contact up to 300,000 contracts or $0.10
per contract above 300,000.6 The
5 See Securities Exchange Act Release Nos. 88595
(April 8, 2020), 85 FR 20737 (April 14, 2020) (SR–
NYSEAMER–2020–25) (waiving Floor-based fixed
fees); 88594 (April 8, 2020), 85 FR 20799 (April 14,
2020) (SR–NYSEAMER–2020–26) (raising the
regular FB QCC Rebate Cap); 88682 (April 17,
2020), 85 FR 22772 (April 23, 2020) (SR–
NYSEAMER–2020–31) (including reversals and
conversions in Strategy Execution Fee Cap). See
also Securities Exchange Act Release Nos. 88840
(May 8, 2020), 85 FR 28992 (May 14, 2020) (SR–
NYSEAMER–2020–37) (extending April 2020 fee
changes through May 2020); and 89049 (June 11,
2020), 85 FR 36649 (June 17, 2020) (SR–
NYSEAMER–2020–44) (extending April and May
fee changes through June 2020).
6 See Fee Schedule, Section I.F., QCC Fees &
Credits, n. 1, available here, https://www.nyse.com/
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Exchange currently limits the maximum
Floor Broker credit to $425,000 per
month per Floor Broker firm (the
‘‘regular FB QCC Cap’’). As noted above,
during the months of April through
June, when the Trading Floor was either
temporarily closed or reopened with
limited capacity, the Exchange
experienced a surge in QCC trades and
increased the regular FB QCC Cap up to
$625,000 per month per Floor Broker
(the ‘‘temporary FB QCC Cap’’).7
The temporary FB QCC Cap increase,
which expires at the end of June, was
designed to accommodate the
unanticipated and unprecedented Floor
closure resulting from the COVID–19
pandemic. However, even with the
partial reopening of the Trading Floor,
the Exchange has continued to receive
increased volumes of QCC trades.
Accordingly, the Exchange proposes to
raise the regular FB QCC Cap of
$425,000 to $525,000, which reduces
the temporary FB QCC Cap as the Floor
is no longer closed, but still increases
the regular FB QCC Cap to
accommodate the level of QCC trading
on the Exchange.8 This proposed
change—to increase by $100,000 the
regular FB QCC Cap—is designed to
continue to encourage ATP Holders
acting as Floor Brokers to execute QCCs
on the Exchange, particularly given the
increase in QCC transactions on the
Exchange over the last several months.
The Exchange believes that $525,000 is
a reasonable increase and remains
competitive with similar incentives
offered on other options markets.9
publicdocs/nyse/markets/american-options/NYSE_
American_Options_Fee_Schedule.pdf. QCC
executions in which a Customer or Professional
Customer is on both sides of the QCC trade are not
eligible for the Floor Broker credit.
7 See id.
8 See proposed Fee Schedule, Section I.F., QCC
Fees & Credits, n. 1 (setting forth available credits
to Floor Brokers and providing that ‘‘[t]he
maximum Floor Broker credit paid shall not exceed
$525,000 per month per Floor Broker firm’’ and
deleting the following, now obsolete, text: ‘‘(the
‘Cap’), except that for the months of April, May and
June 2020, the Cap would be $625,000 per Floor
Broker firm’’).
9 See, e.g., NASDAQ PHLX, Options 7 Pricing
Schedule, Section 4. Multiply Listed Options Fees,
QCC Rebate Schedule, available here, https://
nasdaqphlx.cchwallstreet.com/
NASDAQPHLXTools/PlatformViewer.asp?
selectednode=chp%5F1%5F1%5F3%5F1&manual=
%2Fnasdaqomxphlx%2Fphlx%2Fphlx
%2Dllcrules%2F (providing that ‘‘[t]he maximum
QCC Rebate to be paid in a given month will not
exceed $550,000’’); NASDAQ ISE, Options 7 Pricing
Schedule, Section 6. Other Options Fees and
Rebates, A. QCC and Solicitation Rebate, available
here, https://ise.cchwallstreet.com/tools/
PlatformViewer.asp?selectednode=chp_1_1_
22&manual=/contents/ise/ise-rules/ (providing no
cap on the maximum on the amount of QCC rebate
to be paid in a given month).
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44553
Strategy Fee Execution Cap
Currently, the Exchange offers a
$1,000 daily Strategy Execution Cap (the
‘‘Strategy Cap’’) for certain strategy
executions, including (a) reversals and
conversions, (b) box spreads, (c) short
stock interest spreads, (d) merger
spreads, and (e) jelly rolls, which are
described in detail in the Fee Schedule
(the ‘‘Strategy Executions’’).10 Any
qualifying Strategy Execution executed
as a QCC order is not eligible for this fee
cap. As noted above, during the months
of April through June, when the Trading
Floor was either temporarily closed or
reopened with limited capacity, in
response to the increase of reversals and
conversions executed as QCCs (‘‘RevCon
QCCs’’), the Exchange modified the Fee
Schedule to include RevCon QCCs in
the Strategy Cap (the ‘‘temporary
Strategy Cap’’).
Although the temporary Strategy Cap
expires at the end of June, because of
the continued increase use of RevCon
QCCs, the Exchange proposes to
continue to allow the inclusion of
RevCon QCCs in the Strategy Cap, and
will therefore remove language
regarding the time limitation.11 Absent
this change, RevCon QCCs would no
longer be eligible for the Strategy Cap
(but instead revert to being subject to
QCC Fees & Credits).12 Although the
Floor has partially reopened and open
outcry is supported, the Exchange
believes that the proposed continued
inclusion of RevCon QCCs in the
Strategy Cap, which is available to all
ATP Holders, would encourage ATP
Holders (including those acting as Floor
Brokers) to execute their RevCon QCC
volume on the Exchange, and to
increase the number of such RevCon
QCC transactions. The Exchange
believes that proposed change is a
reasonable increase and remains
competitive with similar incentives
offered on other options markets.13
10 See Fee Schedule, Section I.J. (Strategy
Execution Fee Cap), supra note 6.
11 See proposed Fee Schedule, Sections I.J.,
Strategy Execution Fee Cap (including RevCon
QCCs in the Strategy Cap) and Section I.F., QCC
Fees & Credits, n. 1 (providing that ‘‘[t]he Floor
Broker credit will not apply to any QCC trades that
are included in the Strategy Cap (per Section I.J.)’’).
12 See Fee Schedule, Section I.F., QCC Fees &
Credits, supra note 6.
13 See e.g., BOX Options Market LLC (‘‘BOX’’) fee
schedule, Section II.D (Strategy QOO Order Fee Cap
and Rebate). BOX caps fees for each participants at
$1,000 for the following strategies executed on the
same trading day: Short stock interest, long stock
interest, merger, reversal, conversion, jelly roll, and
box spread strategies. BOX also caps participant
fees at $1,000 for all dividend strategies executed
on the same trading day in the same options class.
BOX also offers a $500 rebate to floor brokers for
presenting certain Strategy QOO Orders on the BOX
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Federal Register / Vol. 85, No. 142 / Thursday, July 23, 2020 / Notices
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, currently no exchange
possesses significant pricing power in
the execution of multiply-listed equity &
ETF options order flow. More
specifically, in June 2020, the Exchange
had less than 10% market share of
executed volume of multiply-listed
equity & ETF options trades.18
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 and credits
can have a direct effect on the ability of
an exchange to compete for order flow.
2. Statutory Basis
The proposed rule change is a
The Exchange believes that the
reasonable attempt by the Exchange to
proposed rule change is consistent with increase the depth of its market and
Section 6(b) of the Act,14 in general, and improve its market share relative to its
furthers the objectives of Sections
competitors. The Exchange’s fees are
6(b)(4) and (5) of the Act,15 in particular, constrained by intermarket competition,
because it provides for the equitable
as ATP Holders (including those who
allocation of reasonable dues, fees, and
act as Floor Brokers) may direct their
other charges among its members,
order flow to any of the 16 options
issuers and other persons using its
exchanges.
facilities and does not unfairly
FB QCC Cap
discriminate between customers,
issuers, brokers or dealers.
This proposed modification of the
The Exchange operates in a highly
regular FB QCC Cap is reasonable,
competitive market. The Commission
equitable, and not unfairly
has repeatedly expressed its preference
discriminatory because it would allow
for competition over regulatory
Exchange incentives to operate as
intervention in determining prices,
intended and continue to encourage
products, and services in the securities
QCC volume. As noted above, the
markets. In Regulation NMS, the
temporary FB QCC Cap increase (in
Commission highlighted the importance effect from April through June), was
of market forces in determining prices
designed to accommodate the
and SRO revenues and, also, recognized unanticipated and unprecedented Floor
that current regulation of the market
closure resulting from the COVID–19
system ‘‘has been remarkably successful pandemic. Given that the Exchange has
in promoting market competition in its
continued to receive increased volumes
broader forms that are most important to of QCC trades even with the partial
investors and listed companies.’’ 16
reopening of the Floor, the Exchange
There are currently 16 registered
believes the proposed increase of the
options exchanges competing for order
regular FB QCC Cap by $100,000—from
flow. Based on publicly-available
$425,000 to $525,000—is reasonable to
information, and excluding index-based accommodate the level of QCC trading
on the Exchange. In addition, this
trading floor, which is applied ‘‘once the $1,000 fee
proposed change is designed to
cap, per customer, for all dividend, short stock
continue to encourage ATP Holders
interest, long stock interest, merger, reversal,
acting as Floor Brokers to execute QCCs
conversion, jelly roll, and box spread strategies is
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The Exchange cannot predict with
certainty whether any Floor Brokers
would benefit from the proposed change
to the FB QCC Cap; however, the
Exchange believes the proposal would
encourage Floor Brokers from diverting
QCC order flow from the Exchange if
and when they hit the revised (and
indefinitely increased) Cap. The
Exchange likewise cannot predict with
certainty whether any ATP Holders
would benefit from the proposed
Strategy Cap because, at present,
whether or when an ATP Holder
qualifies for the Strategy Cap varies dayto-day, month-to-month. That said, the
Exchange believes that ATP Holders
would be encouraged to take advantage
of the modified Strategy Cap. In
addition, the Exchange believes the
proposed change is necessary to prevent
ATP Holders from diverting RevCon
QCC order flow from the Exchange to a
more economical venue.
met.’’ See id. The Exchange does not include
dividend or long stock interest strategies in the
Strategy Cap, nor does the Exchange offer a similar
rebate.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(4) and (5).
16 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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17 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.
18 Based on OCC data, see id., the Exchange’s
market share in equity-based options increased
slightly from 8.20% for the month of June 2019 to
8.32% for the month of June 2020.
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on the Exchange, particularly given the
increase in QCC transactions on the
Exchange over the last several months.
The Exchange believes that $525,000 is
a reasonable increase and remains
competitive with similar incentives
offered on other options markets.19
This proposed change—which
increases indefinitely the maximum
available monthly credit for Floor
Brokers executing QCCs—is designed to
incent Floor Brokers to increase their
QCC volumes on the Exchange. The
Exchange notes that all market
participants stand to benefit from
increased volume, which promotes
market depth, facilitates tighter spreads
and enhances price discovery, and may
lead to a corresponding increase in
order flow from other market
participants.
To the extent that the proposed
change attracts more QCC trades to the
Exchange, this increased order flow
would continue to make the Exchange a
more competitive venue for order
execution, which, in turn, promotes just
and equitable principles of trade and
removes impediments to and perfects
the mechanism of a free and open
market and a national market system.
The Exchange cannot predict with
certainty whether any Floor Brokers
would benefit from this proposed fee
change. However, the Exchange also
believes the proposed change is
necessary to prevent Floor Brokers from
diverting QCC order flow from the
Exchange if and when they hit the
proposed regular FB QCC Cap.
The Exchange believes the proposed
rule change is an equitable allocation of
its fees and credits and not unfairly
discriminatory because it is based on
the amount and type of business
transacted on the Exchange and Floor
Brokers can opt to avail themselves of
the modified regular FB QCC Cap (i.e.,
by executing more QCC transactions) or
not. The proposed change would incent
Floor Brokers to attract increased QCC
order flow to the Exchange that might
otherwise go to other options exchanges.
The Exchange believes it is not
unfairly discriminatory to modify the
maximum allowable credit on QCC
transactions to Floor Brokers because
the proposed modification would be
available to all similarly-situated market
participants (i.e., Floor Brokers) on an
equal and non-discriminatory basis.
Strategy Cap
This proposed modification to
continue to allow the inclusion of
19 See supra note 9 (regarding NASDAQ PHLX’s
$550,000 monthly cap on QCC rebate and NASDAQ
ISE’s lack of any such monthly cap of QCC rebate).
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Federal Register / Vol. 85, No. 142 / Thursday, July 23, 2020 / Notices
RevCon QCCs in the $1,000 daily
Strategy Cap (and remove the month-tomonth time limitation) is reasonable,
equitable, and not unfairly
discriminatory because it would
(continue to) encourage ATP Holders to
execute their RevCon QCC volume on
the Exchange. Further, the proposal is
designed to encourage ATP Holders to
aggregate all Strategy Executions—
particularly RevCon QCCs—at the
Exchange as a primary execution venue.
To the extent that the proposed change
attracts more Strategy Executions
(including to the Exchange Trading
Floor), this increased order flow would
continue to make the Exchange a more
competitive venue for order execution,
which, in turn, promotes just and
equitable principles of trade and
removes impediments to and perfects
the mechanism of a free and open
market and a national market system.
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 marketwide quality and price discovery.
The Exchange believes the proposed
rule change is an equitable allocation of
its fees and credits and not unfairly
discriminatory because it is based on
the amount and type of business
transacted on the Exchange and ATP
Holders can opt to avail themselves of
the modified Strategy Cap (i.e., by
executing more RevCon QCC
transactions) or not. In addition, the
proposal caps fees on all similar
transactions, regardless of size and
similarly-situated ATP Holders can opt
to try to achieve the modified Strategy
Cap. The proposal is designed to
encourage ATP Holders to send all
Strategy Executions to the Exchange
regardless of size or type.
The Exchange believes the Strategy
Cap, as modified, it is not unfairly
discriminatory because the proposed
change would be available to all
similarly-situated market participants
on an equal and non-discriminatory
basis.
Further, to the extent the proposed
change continues to attract greater
volume and liquidity (to the Floor or
otherwise), 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
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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 Strategy
Fee Caps.20 Thus, ATP Holders have a
choice of where they direct their order
flow—including their Strategy
Executions. The proposed rule change is
designed to incent ATP Holders to
direct liquidity to the Exchange—in
particular RevCon QCCs, thereby
promoting market depth, price
discovery and improvement and
enhancing order execution
opportunities for market participants.
The Exchange cannot predict with
certainty whether any ATP Holders
would benefit from this proposed fee
change. At present, whether or when an
ATP Holder qualifies for the Strategy
Cap varies day-to-day, month-to-month.
That said, the Exchange believes that
ATP Holders would be encouraged to
take advantage of the modified Cap. In
addition, the Exchange believes the
proposed change is necessary to prevent
ATP Holders from diverting RevCon
QCC order flow from the Exchange to a
more economical venue.
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.
The Exchange believes that the
proposed changes would encourage the
continued participation of affected ATP
Holders, 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.’’ 21
Intramarket Competition. The
proposed fee changes are designed to
attract additional order flow
(particularly Floor Broker executed
QCCs and RevCon QCCs) to the
Exchange. The Exchange believes that
the proposal would incent market
participants to direct their volume to the
Exchange. Greater liquidity benefits all
market participants on the Exchange
and increased Floor Broker executed
QCCs and RevCon QCCs would increase
opportunities for execution of other
trading interest. The proposed Strategy
Cap would be available to all similarlysituated market participants that incur
transaction fees or credits on QCCs or
Strategy Executions, and, as such, the
proposed change would not impose a
disparate burden on competition among
market participants on the Exchange.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily favor one of the
16 competing option exchanges if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. Based on publiclyavailable information, and excluding
index-based options, no single exchange
currently has more than 16% of the
market share of executed volume of
multiply-listed equity and ETF options
trades.22 Therefore, currently no
exchange possesses significant pricing
power in the execution of multiplylisted equity & ETF options order flow.
More specifically, in June 2020, the
Exchange had less than 10% market
share of executed volume of multiplylisted equity & ETF options trades.23
The Exchange believes that the
proposed rule change reflects this
competitive environment because it
modifies the Exchange’s fees in a
manner designed to be competitive with
other options markets and to encourage
ATP Holders to direct trading interest
(particularly QCCs and RevCon QCCs)
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.
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.
22 See
supra note 13 (regarding BOX’s Strategy
QOO Order Fee Cap and Rebate).
21 See Reg NMS Adopting Release, supra note 16,
at 37499.
PO 00000
20 See
Frm 00057
Fmt 4703
Sfmt 4703
44555
supra note 17.
on OCC data, supra note 18, the
Exchange’s market share in equity-based options
was 8.20% for the month of June 2019 and 8.32%
for the month of June 2020.
23 Based
E:\FR\FM\23JYN1.SGM
23JYN1
44556
Federal Register / Vol. 85, No. 142 / Thursday, July 23, 2020 / Notices
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) 24 of the Act and paragraph
(f)(2) of Rule 19b–4 25 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) 26 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEAMER–2020–55, and
should be submitted on or before
August 13, 2020.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Assistant Secretary.
jbell on DSKJLSW7X2PROD with NOTICES
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–
NYSEAMER–2020–55 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–2020–55. 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
[FR Doc. 2020–15910 Filed 7–22–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89339; File No. SR–
NASDAQ–2020–042]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Order Granting Accelerated
Approval of a Proposed Rule Change
To Add the Consolidated Audit Trail
Industry Member Compliance Rules to
the List of Minor Rule Violations
July 17, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 14,
2020, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘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 Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons and approving
the proposal on an accelerated basis.
24 15
27 17
25 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
26 15 U.S.C. 78s(b)(2)(B).
1 15
VerDate Sep<11>2014
17:10 Jul 22, 2020
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Jkt 250001
PO 00000
Frm 00058
Fmt 4703
Sfmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add the
Consolidated Audit Trail (‘‘CAT’’)
industry member compliance rules to
the list of minor rule violations in IM–
9216 and in Options 11, Section 1.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, 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
Exchange 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 these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add
Nasdaq’s CAT industry member
compliance rules (the ‘‘CAT Compliance
Rules’’) to the list of minor rule
violations in IM–9216 and in Options
11, Section 1. This proposal is based
upon the Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filing to
amend FINRA Rule 9217 in order to add
FINRA’s corresponding CAT
Compliance Rules to FINRA’s list of
rules that are eligible for minor rule
violation plan treatment.3
Proposed Rule Change
The Exchange adopted the CAT
Compliance Rules in General 7, Sections
1 through 13 in order to implement the
National Market System Plan Governing
the Consolidated Audit Trail (the ‘‘CAT
NMS Plan’’ or ‘‘Plan’’).4 The CAT NMS
Plan was filed by the Plan Participants
3 See Securities Exchange Act Release No. 88870
(May 14, 2020), 85 FR 30768 (May 20, 2020) (SR–
FINRA–2020–013); see also Release No. 89123 (June
23, 2020), 85 FR 39016 (June 29, 2020) (SR–NYSE–
2020–51).
4 See Securities Exchange Act Release No. 80256
(March 15, 2017), 82 FR 14526 (March 21, 2017)
(SR–NASDAQ–2017–008) (Order Approving
Proposed Rule Changes To Adopt Consolidated
Audit Trail Compliance Rules).
E:\FR\FM\23JYN1.SGM
23JYN1
]]>Agencies
[Federal Register Volume 85, Number 142 (Thursday, July 23, 2020)]
[Notices]
[Pages 44552-44556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15910]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89338; File No. SR-NYSEAMER-2020-55]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Modify the
NYSE American Options Fee Schedule
July 17, 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 July 10, 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 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 modify the NYSE American Options Fee
Schedule (``Fee Schedule'') regarding certain limits or caps on
transactions fee and credits. The Exchange proposes to implement the
fee change effective July 10, 2020.\4\ The proposed change is available
on the Exchange's website at www.nyse.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\4\ The Exchange originally filed to amend the Fee Schedule on
June 26, 2020, effective July 1, 2020 (SR-NYSEAMER-2020-48), and
withdrew such filing on July 10, 2020.
---------------------------------------------------------------------------
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
[[Page 44553]]
of those statements may be examined at the places specified in Item IV
below. The Exchange has prepared summaries, set forth in sections A, B,
and C below, of the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Fee Schedule regarding
certain limits or caps on transactions fee and credits. The Exchange
proposes to implement the fee change effective July 10, 2020.
Background
On March 18, 2020, the Exchange announced that it would temporarily
close the Trading Floor, effective Monday, March 23, 2020, as a
precautionary measure to prevent the potential spread of COVID-19.
Following the temporary closure of the Trading Floor, the Exchange
modified certain fees for April and May 2020 and, after the Floor
partially reopened, the Exchange extended those changes through June
2020.\5\ The aforementioned changes--applicable April, May and June
2020 only--included (i) raising the Floor Broker QCC Cap from $425,000
to $625,000 and (ii) modifying the $1,000 daily Strategy Execution Cap
to allow the inclusion of reversal and conversion strategies executed
as QCCs in such Cap.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 88595 (April 8,
2020), 85 FR 20737 (April 14, 2020) (SR-NYSEAMER-2020-25) (waiving
Floor-based fixed fees); 88594 (April 8, 2020), 85 FR 20799 (April
14, 2020) (SR-NYSEAMER-2020-26) (raising the regular FB QCC Rebate
Cap); 88682 (April 17, 2020), 85 FR 22772 (April 23, 2020) (SR-
NYSEAMER-2020-31) (including reversals and conversions in Strategy
Execution Fee Cap). See also Securities Exchange Act Release Nos.
88840 (May 8, 2020), 85 FR 28992 (May 14, 2020) (SR-NYSEAMER-2020-
37) (extending April 2020 fee changes through May 2020); and 89049
(June 11, 2020), 85 FR 36649 (June 17, 2020) (SR-NYSEAMER-2020-44)
(extending April and May fee changes through June 2020).
---------------------------------------------------------------------------
The Exchange proposes to (i) indefinitely increase the Floor Broker
QCC Cap to from $425,000 to $525,000, and (ii) continue to allow
reversal and conversion strategies executed as QCCs to be included in
the Strategy Execution Cap.
Floor Broker QCC Cap
Currently, Floor Brokers earn a credit for executed QCC orders of
$0.07 per contact up to 300,000 contracts or $0.10 per contract above
300,000.\6\ The Exchange currently limits the maximum Floor Broker
credit to $425,000 per month per Floor Broker firm (the ``regular FB
QCC Cap''). As noted above, during the months of April through June,
when the Trading Floor was either temporarily closed or reopened with
limited capacity, the Exchange experienced a surge in QCC trades and
increased the regular FB QCC Cap up to $625,000 per month per Floor
Broker (the ``temporary FB QCC Cap'').\7\
---------------------------------------------------------------------------
\6\ See Fee Schedule, Section I.F., QCC Fees & Credits, n. 1,
available here, https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf. QCC
executions in which a Customer or Professional Customer is on both
sides of the QCC trade are not eligible for the Floor Broker credit.
\7\ See id.
---------------------------------------------------------------------------
The temporary FB QCC Cap increase, which expires at the end of
June, was designed to accommodate the unanticipated and unprecedented
Floor closure resulting from the COVID-19 pandemic. However, even with
the partial reopening of the Trading Floor, the Exchange has continued
to receive increased volumes of QCC trades. Accordingly, the Exchange
proposes to raise the regular FB QCC Cap of $425,000 to $525,000, which
reduces the temporary FB QCC Cap as the Floor is no longer closed, but
still increases the regular FB QCC Cap to accommodate the level of QCC
trading on the Exchange.\8\ This proposed change--to increase by
$100,000 the regular FB QCC Cap--is designed to continue to encourage
ATP Holders acting as Floor Brokers to execute QCCs on the Exchange,
particularly given the increase in QCC transactions on the Exchange
over the last several months. The Exchange believes that $525,000 is a
reasonable increase and remains competitive with similar incentives
offered on other options markets.\9\
---------------------------------------------------------------------------
\8\ See proposed Fee Schedule, Section I.F., QCC Fees & Credits,
n. 1 (setting forth available credits to Floor Brokers and providing
that ``[t]he maximum Floor Broker credit paid shall not exceed
$525,000 per month per Floor Broker firm'' and deleting the
following, now obsolete, text: ``(the `Cap'), except that for the
months of April, May and June 2020, the Cap would be $625,000 per
Floor Broker firm'').
\9\ See, e.g., NASDAQ PHLX, Options 7 Pricing Schedule, Section
4. Multiply Listed Options Fees, QCC Rebate Schedule, available
here, https://nasdaqphlx.cchwallstreet.com/NASDAQPHLXTools/PlatformViewer.asp?selectednode=chp%5F1%5F1%5F3%5F1&manual=%2Fnasdaqomxphlx%2Fphlx%2Fphlx%2Dllcrules%2F (providing that ``[t]he maximum
QCC Rebate to be paid in a given month will not exceed $550,000'');
NASDAQ ISE, Options 7 Pricing Schedule, Section 6. Other Options
Fees and Rebates, A. QCC and Solicitation Rebate, available here,
https://ise.cchwallstreet.com/tools/PlatformViewer.asp?selectednode=chp_1_1_22&manual=/contents/ise/ise-rules/ (providing no cap on the maximum on the amount of QCC rebate
to be paid in a given month).
---------------------------------------------------------------------------
Strategy Fee Execution Cap
Currently, the Exchange offers a $1,000 daily Strategy Execution
Cap (the ``Strategy Cap'') for certain strategy executions, including
(a) reversals and conversions, (b) box spreads, (c) short stock
interest spreads, (d) merger spreads, and (e) jelly rolls, which are
described in detail in the Fee Schedule (the ``Strategy
Executions'').\10\ Any qualifying Strategy Execution executed as a QCC
order is not eligible for this fee cap. As noted above, during the
months of April through June, when the Trading Floor was either
temporarily closed or reopened with limited capacity, in response to
the increase of reversals and conversions executed as QCCs (``RevCon
QCCs''), the Exchange modified the Fee Schedule to include RevCon QCCs
in the Strategy Cap (the ``temporary Strategy Cap'').
---------------------------------------------------------------------------
\10\ See Fee Schedule, Section I.J. (Strategy Execution Fee
Cap), supra note 6.
---------------------------------------------------------------------------
Although the temporary Strategy Cap expires at the end of June,
because of the continued increase use of RevCon QCCs, the Exchange
proposes to continue to allow the inclusion of RevCon QCCs in the
Strategy Cap, and will therefore remove language regarding the time
limitation.\11\ Absent this change, RevCon QCCs would no longer be
eligible for the Strategy Cap (but instead revert to being subject to
QCC Fees & Credits).\12\ Although the Floor has partially reopened and
open outcry is supported, the Exchange believes that the proposed
continued inclusion of RevCon QCCs in the Strategy Cap, which is
available to all ATP Holders, would encourage ATP Holders (including
those acting as Floor Brokers) to execute their RevCon QCC volume on
the Exchange, and to increase the number of such RevCon QCC
transactions. The Exchange believes that proposed change is a
reasonable increase and remains competitive with similar incentives
offered on other options markets.\13\
---------------------------------------------------------------------------
\11\ See proposed Fee Schedule, Sections I.J., Strategy
Execution Fee Cap (including RevCon QCCs in the Strategy Cap) and
Section I.F., QCC Fees & Credits, n. 1 (providing that ``[t]he Floor
Broker credit will not apply to any QCC trades that are included in
the Strategy Cap (per Section I.J.)'').
\12\ See Fee Schedule, Section I.F., QCC Fees & Credits, supra
note 6.
\13\ See e.g., BOX Options Market LLC (``BOX'') fee schedule,
Section II.D (Strategy QOO Order Fee Cap and Rebate). BOX caps fees
for each participants at $1,000 for the following strategies
executed on the same trading day: Short stock interest, long stock
interest, merger, reversal, conversion, jelly roll, and box spread
strategies. BOX also caps participant fees at $1,000 for all
dividend strategies executed on the same trading day in the same
options class. BOX also offers a $500 rebate to floor brokers for
presenting certain Strategy QOO Orders on the BOX trading floor,
which is applied ``once the $1,000 fee cap, per customer, for all
dividend, short stock interest, long stock interest, merger,
reversal, conversion, jelly roll, and box spread strategies is
met.'' See id. The Exchange does not include dividend or long stock
interest strategies in the Strategy Cap, nor does the Exchange offer
a similar rebate.
---------------------------------------------------------------------------
[[Page 44554]]
The Exchange cannot predict with certainty whether any Floor
Brokers would benefit from the proposed change to the FB QCC Cap;
however, the Exchange believes the proposal would encourage Floor
Brokers from diverting QCC order flow from the Exchange if and when
they hit the revised (and indefinitely increased) Cap. The Exchange
likewise cannot predict with certainty whether any ATP Holders would
benefit from the proposed Strategy Cap because, at present, whether or
when an ATP Holder qualifies for the Strategy Cap varies day-to-day,
month-to-month. That said, the Exchange believes that ATP Holders would
be encouraged to take advantage of the modified Strategy Cap. In
addition, the Exchange believes the proposed change is necessary to
prevent ATP Holders from diverting RevCon QCC order flow from the
Exchange to a more economical venue.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\14\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
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.'' \16\
---------------------------------------------------------------------------
\16\ 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.\17\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in June 2020, the Exchange had less than
10% market share of executed volume of multiply-listed equity & ETF
options trades.\18\
---------------------------------------------------------------------------
\17\ 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.
\18\ Based on OCC data, see id., the Exchange's market share in
equity-based options increased slightly from 8.20% for the month of
June 2019 to 8.32% for the month of June 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. Stated otherwise, changes
to exchange transaction fees and credits can have a direct effect on
the ability of an exchange to compete for order flow. 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 ATP
Holders (including those who act as Floor Brokers) may direct their
order flow to any of the 16 options exchanges.
FB QCC Cap
This proposed modification of the regular FB QCC Cap is reasonable,
equitable, and not unfairly discriminatory because it would allow
Exchange incentives to operate as intended and continue to encourage
QCC volume. As noted above, the temporary FB QCC Cap increase (in
effect from April through June), was designed to accommodate the
unanticipated and unprecedented Floor closure resulting from the COVID-
19 pandemic. Given that the Exchange has continued to receive increased
volumes of QCC trades even with the partial reopening of the Floor, the
Exchange believes the proposed increase of the regular FB QCC Cap by
$100,000--from $425,000 to $525,000--is reasonable to accommodate the
level of QCC trading on the Exchange. In addition, this proposed change
is designed to continue to encourage ATP Holders acting as Floor
Brokers to execute QCCs on the Exchange, particularly given the
increase in QCC transactions on the Exchange over the last several
months. The Exchange believes that $525,000 is a reasonable increase
and remains competitive with similar incentives offered on other
options markets.\19\
---------------------------------------------------------------------------
\19\ See supra note 9 (regarding NASDAQ PHLX's $550,000 monthly
cap on QCC rebate and NASDAQ ISE's lack of any such monthly cap of
QCC rebate).
---------------------------------------------------------------------------
This proposed change--which increases indefinitely the maximum
available monthly credit for Floor Brokers executing QCCs--is designed
to incent Floor Brokers to increase their QCC volumes on the Exchange.
The Exchange notes that all market participants stand to benefit from
increased volume, which promotes market depth, facilitates tighter
spreads and enhances price discovery, and may lead to a corresponding
increase in order flow from other market participants.
To the extent that the proposed change attracts more QCC trades to
the Exchange, this increased order flow would continue to make the
Exchange a more competitive venue for order execution, which, in turn,
promotes just and equitable principles of trade and removes impediments
to and perfects the mechanism of a free and open market and a national
market system.
The Exchange cannot predict with certainty whether any Floor
Brokers would benefit from this proposed fee change. However, the
Exchange also believes the proposed change is necessary to prevent
Floor Brokers from diverting QCC order flow from the Exchange if and
when they hit the proposed regular FB QCC Cap.
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits and not unfairly discriminatory
because it is based on the amount and type of business transacted on
the Exchange and Floor Brokers can opt to avail themselves of the
modified regular FB QCC Cap (i.e., by executing more QCC transactions)
or not. The proposed change would incent Floor Brokers to attract
increased QCC order flow to the Exchange that might otherwise go to
other options exchanges.
The Exchange believes it is not unfairly discriminatory to modify
the maximum allowable credit on QCC transactions to Floor Brokers
because the proposed modification would be available to all similarly-
situated market participants (i.e., Floor Brokers) on an equal and non-
discriminatory basis.
Strategy Cap
This proposed modification to continue to allow the inclusion of
[[Page 44555]]
RevCon QCCs in the $1,000 daily Strategy Cap (and remove the month-to-
month time limitation) is reasonable, equitable, and not unfairly
discriminatory because it would (continue to) encourage ATP Holders to
execute their RevCon QCC volume on the Exchange. Further, the proposal
is designed to encourage ATP Holders to aggregate all Strategy
Executions--particularly RevCon QCCs--at the Exchange as a primary
execution venue. To the extent that the proposed change attracts more
Strategy Executions (including to the Exchange Trading Floor), this
increased order flow would continue to make the Exchange a more
competitive venue for order execution, which, in turn, promotes just
and equitable principles of trade and removes impediments to and
perfects the mechanism of a free and open market and a national market
system. 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 Exchange believes the proposed rule change is an equitable
allocation of its fees and credits and not unfairly discriminatory
because it is based on the amount and type of business transacted on
the Exchange and ATP Holders can opt to avail themselves of the
modified Strategy Cap (i.e., by executing more RevCon QCC transactions)
or not. In addition, the proposal caps fees on all similar
transactions, regardless of size and similarly-situated ATP Holders can
opt to try to achieve the modified Strategy Cap. The proposal is
designed to encourage ATP Holders to send all Strategy Executions to
the Exchange regardless of size or type.
The Exchange believes the Strategy Cap, as modified, it is not
unfairly discriminatory because the proposed change would be available
to all similarly-situated market participants on an equal and non-
discriminatory basis.
Further, to the extent the proposed change continues to attract
greater volume and liquidity (to the Floor or otherwise), 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 ATP Holders may direct their
order flow to any of the 16 options exchanges, including those with
similar Strategy Fee Caps.\20\ Thus, ATP Holders have a choice of where
they direct their order flow--including their Strategy Executions. The
proposed rule change is designed to incent ATP Holders to direct
liquidity to the Exchange--in particular RevCon QCCs, thereby promoting
market depth, price discovery and improvement and enhancing order
execution opportunities for market participants.
---------------------------------------------------------------------------
\20\ See supra note 13 (regarding BOX's Strategy QOO Order Fee
Cap and Rebate).
---------------------------------------------------------------------------
The Exchange cannot predict with certainty whether any ATP Holders
would benefit from this proposed fee change. At present, whether or
when an ATP Holder qualifies for the Strategy Cap varies day-to-day,
month-to-month. That said, the Exchange believes that ATP Holders would
be encouraged to take advantage of the modified Cap. In addition, the
Exchange believes the proposed change is necessary to prevent ATP
Holders from diverting RevCon QCC order flow from the Exchange to a
more economical venue.
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. The Exchange believes that the proposed changes
would encourage the continued participation of affected ATP Holders,
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.'' \21\
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\21\ See Reg NMS Adopting Release, supra note 16, at 37499.
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Intramarket Competition. The proposed fee changes are designed to
attract additional order flow (particularly Floor Broker executed QCCs
and RevCon QCCs) to the Exchange. The Exchange believes that the
proposal would incent market participants to direct their volume to the
Exchange. Greater liquidity benefits all market participants on the
Exchange and increased Floor Broker executed QCCs and RevCon QCCs would
increase opportunities for execution of other trading interest. The
proposed Strategy Cap would be available to all similarly-situated
market participants that incur transaction fees or credits on QCCs or
Strategy Executions, and, as such, the proposed change would not impose
a disparate burden on competition among market participants on the
Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange currently has more than 16% of the market share of executed
volume of multiply-listed equity and ETF options trades.\22\ Therefore,
currently no exchange possesses significant pricing power in the
execution of multiply-listed equity & ETF options order flow. More
specifically, in June 2020, 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 17.
\23\ Based on OCC data, supra note 18, the Exchange's market
share in equity-based options was 8.20% for the month of June 2019
and 8.32% for the month of June 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 be competitive with other options markets and to
encourage ATP Holders to direct trading interest (particularly QCCs and
RevCon QCCs) 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 44556]]
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) \24\ of the Act and paragraph (f)(2) of Rule 19b-4
\25\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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) \26\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\26\ 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-2020-55 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-2020-55. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2020-55, and should be
submitted on or before August 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15910 Filed 7-22-20; 8:45 am]
BILLING CODE 8011-01-P
