Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Amending the NYSE American Options Fee Schedule To Introduce Pricing for the Use of a New AON Functionality in Single-Leg and Complex Customer Best Execution Auctions, 12053-12057 [2021-04177]

Download as PDF Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices well as helping to ensure that C2-only Permit Holders are subject to consistent regulation as Cboe Trading Permit Holders.27 The Exchange believes that, without such an exemption, such Permit Holders could be subject to two different standards.28 The Commission has issued exemptions similar to the Exchange’s request.29 In granting similar exemptions, the Commission stated that it would consider future exemption requests, provided that: • A self-regulatory organization (‘‘SRO’’) wishing to incorporate rules of another SRO by reference has submitted a written request for an order exempting it from the requirement in Section 19(b) of the Exchange Act to file proposed rule changes relating to the rules incorporated by reference, has identified the applicable originating SRO(s), together with the rules it wants to incorporate by reference, and otherwise has complied with the procedural requirements set forth in the Commission’s release governing procedures for requesting exemptive orders pursuant to Rule 0–12 under the Exchange Act; 30 • The incorporating SRO has requested incorporation of categories of rules (rather than individual rules within a category) that are not trading rules (e.g., the SRO has requested incorporation of rules such as margin, suitability, or arbitration); and • The incorporating SRO has reasonable procedures in place to provide written notice to its members each time a change is proposed to the incorporated rules of another SRO.31 The Commission believes that the Exchange has satisfied each of these 27 See Exemptive Request, supra note 3. id. 29 See, e.g., Securities Exchange Act Release Nos. 86896 (September 6, 2019), 84 FR 48186 (September 12, 2019) (order granting exemptive request from Nasdaq BX, Inc. relating to rules of The Nasdaq Stock Market LLC incorporated by reference) (‘‘Nasdaq BX Order’’); 86422 (July 22, 2019), 84 FR 36151 (July 26, 2019) (order granting exemptive request from Nasdaq BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, and Nasdaq Phlx LLC relating to rules of The Nasdaq Stock Market LLC incorporated by reference); 80338 (March 29, 2017), 82 FR 16464 (April 4, 2017) (order granting exemptive request from MIAX PEARL, LLC relating to rules of Miami International Securities Exchange, LLC incorporated by reference); and 72650 (July 22, 2014), 79 FR 44075 (July 29, 2014) (order granting exemptive requests from NASDAQ OMX BX, Inc. and the NASDAQ Stock Market LLC relating to rules of NASDAQ OMX PHLX LLC incorporated by reference). 30 See 17 CFR 240.0–12 and Securities Exchange Act Release No. 39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) (‘‘Commission Procedures for Filing Applications for Orders for Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final Rule’’). 31 See Nasdaq BX Order, supra note 29. 28 See VerDate Sep<11>2014 18:48 Feb 26, 2021 Jkt 253001 conditions. Further, the Commission also believes that granting the Exchange an exemption from the rule filing requirements under Section 19(b) of the Exchange Act will promote efficient use of the Commission’s and the Exchange’s resources by avoiding duplicative rule filings based on simultaneous changes to identical rule text sought by more than one SRO. The Commission therefore finds it appropriate in the public interest and consistent with the protection of investors to exempt the Exchange from the rule filing requirements under Section 19(b) of the Exchange Act with respect to the abovedescribed rules it incorporates by reference. This exemption is conditioned upon the Exchange promptly providing written notice to its applicants and members whenever Cboe changes a Cboe Incorporated Rule. Accordingly, it is ordered, pursuant to Section 36 of the Exchange Act,32 that the Exchange is exempt from the rule filing requirements of Section 19(b) of the Exchange Act solely with respect to changes to the rules identified in the Exemptive Request, provided that the Exchange promptly provides written notice to its applicants and members whenever Cboe proposes to change a Cboe Incorporated Rule. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–04092 Filed 2–26–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91180; File No. SR– NYSEAMER–2021–11] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change Amending the NYSE American Options Fee Schedule To Introduce Pricing for the Use of a New AON Functionality in Single-Leg and Complex Customer Best Execution Auctions 12053 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the NYSE American Options Fee Schedule (‘‘Fee Schedule’’) to introduce pricing for the use of a new AON functionality in Single-Leg and Complex Customer Best Execution (‘‘CUBE’’) auctions. The Exchange proposes to implement the fee change effective February 16, 2021.4 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 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 to introduce pricing for the Exchange’s newly approved optional all-or-none (‘‘AON’’) functionality for larger-sized orders in Single-Leg and Complex CUBE auctions (together, ‘‘AON CUBE’’).5 The February 22, 2021. 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 February 16, 2021, NYSE American LLC (‘‘NYSE 32 15 U.S.C. 78mm. CFR 200.30–3(a)(76). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 33 17 PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 4 On January 27, 2021, the Exchange filed to implement the AON functionality for Complex CUBE auctions, which functionality was operative on an immediately effective basis retroactive to the date of filing given the waiver of the 30-day operative delay, as well as to make clarifications to the AON functionality for Single-Leg CUBE auctions. See Securities Exchange Release No. 91068 (February 5, 2021), 86 FR 9112 (February 11, 2021) (NYSEAMER–2021–06). 5 See Securities Exchange Release Nos. 90584 (December 7, 2020), 85 FR 80196 (December 11, Continued E:\FR\FM\01MRN1.SGM 01MRN1 12054 Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices Exchange proposes to introduce the pricing on February 16, 2021. The Exchange proposes to define ‘‘AON CUBE Order’’ as a ‘‘Single-Leg CUBE Order of at least 500 contracts or a Complex CUBE Order of at least 500 contracts on the smallest leg, that is designated AON per Rule 971.1NY Commentary .05 and Rule 971.2NY Commentary .04, respectively.’’ 6 Similarly, the Exchange proposes to define an AON Contra Order as ‘‘principal interest or solicited interest an Initiating Participant is using to guarantee the execution of an AON CUBE Order in a Single-Leg or Complex CUBE Auction.’’ 7 Section I.G. of the Fee Schedule sets forth the rates for per contract fees and credits for executions associated with CUBE Auctions. The Exchange proposes to include an additional table of fees and credits under Section I.G. to apply to certain contracts executed in AON CUBE Auctions, whether Single-Leg or Complex.8 The process for commencing an AON CUBE auction mirrors that of non-AON CUBE auctions. In particular, the AON CUBE auction process begins with the entry of an AON CUBE Order and a paired AON Contra Order. As with nonAON CUBE auctions, the Exchange similarly proposes to not charge for AON CUBE Order executions on behalf of a Customer or for Customer executions against AON CUBE Orders (i.e., Customer Request for Responses (‘‘RFR’’) to an AON CUBE Order). The Exchange proposes to charge $0.20 per contract for non-Customer executions of AON CUBE Orders and Customer and non-Customer AON Contra Orders alike. As with non-AON CUBE Auctions, the Exchange proposes to charge executions of non-Customer RFR Responses to an AON CUBE Auction $0.50 per contract in Penny issues and $1.05 per contract executed in nonPenny issues. The Exchange proposes an Initiating Participant Credit for each contract in an AON Contra Order that does not trade with the AON CUBE Order because it is replaced in the auction, 2020) (NYSEAMER–2020–64) (approving AON functionality for Single-Leg CUBE auction); 91068 (February 5, 2021), 86 FR 9112 (February 11, 2021) (NYSEAMER–2021–06) (approving AON functionality for Complex CUBE auction). 6 See proposed Fee Schedule, Key Terms and Definitions. See generally Rules 971.1NY (regarding Single-Leg CUBE auctions) and 971.2NY (regarding Complex CUBE auctions). 7 See proposed Fee Schedule, Key Terms and Definitions. 8 See proposed Fee Schedule, Section I.G., CUBE Auction Fees & Credits (setting forth applicable fees and credits for AON Single-Leg and AON Complex CUBE Auctions). VerDate Sep<11>2014 18:48 Feb 26, 2021 Jkt 253001 including when the AON Contra Order is replaced entirely by RFR Responses. As proposed, the Initiating Participant Credit for AON CUBE Orders would be $0.30 per contract in Penny issues and $0.70 per contract in non-Penny issues. The Exchange also proposes an ACE Initiating Participant Rebate payable to Initiating Participants that are ATP Holders who qualify for Tiers 1, 2, 3, 4 or 5 of the ACE Program. The proposed $0.12 per contract rebate would be paid to a qualifying Initiating Participant in an AON Single-Leg CUBE Auction for each of the first 5,000 contracts of an AON CUBE Order executed and/or to a qualifying Initiating Participant in an AON Complex CUBE Auction for each of the first 1,000 contracts per leg of an AON CUBE Order executed. The Exchange also proposes a Floor Broker Initiating Participant Rebate of $0.12 per contract payable to Floor Brokers that execute a minimum of 2,500 contracts average daily volume (‘‘ADV’’) in AON CUBE Orders in either an AON Single-Leg or AON Complex CUBE auction.9 As with the ACE Initiating Participant Rebate, the Floor Broker Initiating Participant Rebate is paid to a qualifying Initiating Participant for each contract in an AON CUBE Order and applies to each of the first 5,000 contracts of an AON CUBE Order executed in an AON Single-Leg CUBE Auction, or to the first 1,000 contracts per leg of an AON CUBE Order in an AON Complex CUBE Auction. 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 auction functionalities and corresponding fees.10 Thus, ATP Holders have a choice of where they direct their order flow, including electronic auction volume. To the extent that the proposed fees and credits relating to the use of the AON CUBE auction functionality encourage ATP Holders to direct their 9 AON CUBE Orders executed by a Floor Broker on behalf of an ATP Holder may only be counted towards the Floor Broker’s eligibility for the Floor Broker Initiating Participant Rebate. An ATP Holder’s AON CUBE Orders that are executed by a Floor Broker are not eligible for the ACE Initiating Participant Rebate. 10 See, e.g., Nasdaq ISE LLC (‘‘Nasdaq ISE’’), Options 7, Pricing Schedule, available here: https:// listingcenter.nasdaq.com/rulebook/ise/rules/iseoptions-7 (setting forth pricing for Solicited Order Mechanism and Complex Solicited Order Mechanism); Cboe EDGX Exchange, Inc. (‘‘Cboe EDGX’’) fee schedule, available here: https:// www.cboe.com/us/options/membership/fee_ schedule/edgx/(setting forth pricing for Solicitation Auction Mechanism (‘‘SAM’’). See Statutory Basis below in ‘‘The Proposed Rule Change is Reasonable’’ section for discussion in greater detail, including infra notes 15 [sic] and 16. PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 order flow to the Exchange, all market participants stand to benefit from increased order flow, which promotes market depth, facilitates tighter spreads and enhances price discovery. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,11 in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act,12 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. 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.’’ 13 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.14 Therefore, currently no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in November 2020, the Exchange had less than 10% market share of executed volume of multiplylisted equity and ETF options trades.15 11 15 U.S.C. 78f(b). U.S.C. 78f(b)(4) and (5). 13 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). 14 The OCC publishes options and futures volume in a variety of formats, including daily and monthly volume by exchange, available here: https:// www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics. 15 Based on a compilation of OCC data for monthly volume of equity-based options and monthly volume of ETF-based options, see id., the Exchange’s market share in multiply-listed equity and ETF options increased from 8.06% for the month of November 2019 to 9.09% for the month of November 2020. 12 15 E:\FR\FM\01MRN1.SGM 01MRN1 Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices 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 rebates can have a direct effect on the ability of an exchange to compete for order flow, including auction volume. The proposed rule change is designed to incent ATP Holders to direct liquidity to the Exchange in AON CUBE Auction 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. Specifically, the Exchange believes that the proposed fee structure for AON CUBE Orders is reasonably designed to incent ATP Holders to direct liquidity to the Exchange in the form of AON CUBE Auction executions, which increased order flow would improve the overall competitiveness and strengthen the market quality of the Exchange to the benefit of all market participants. The Exchange notes that the proposed structure of fees and credits for AON CUBE Auctions is reasonable because it is both consistent with fees and credits already in place for the same types of orders in SingleLeg and Complex CUBE auctions and is likewise within the range of fees and credits assessed by other exchanges employing similar fee structures for auction mechanisms.16 Consistent with this proposal, competing options exchanges similarly offer different fees and credits for initiating orders, contraside orders, and responders to an auction, and competing options exchanges likewise charge different rates for transactions in their price improvement mechanisms for Customers versus non-Customers.17 16 See, e.g., Cboe EDGX fee schedule, supra note 10 (providing, for example, $0.20 per contract fee for non-customer agency orders and $0.20 per contract fee for non-customer contra orders in a SAM auction, in line with the Exchange’s proposed $0.20 per contract fee for non-Customer AON CUBE Orders and AON Contra Orders); Nasdaq ISE Pricing Schedule, supra note 10 (providing, for example, $0.20 per contract fee for non-customer contra orders in Solicited Order Mechanism, in line with the Exchange’s proposed $0.20 per contract fee for non-Customer AON Contra Orders). 17 See, e.g., Cboe EDGX fee schedule and Nasdaq ISE Pricing Schedule, supra note 10 (providing, for example, $0.20 per contract fee for non-customer initiating orders and no fee for customer initiating orders, consistent with the Exchange’s proposal). VerDate Sep<11>2014 18:48 Feb 26, 2021 Jkt 253001 The Exchange also believes that it is reasonable for AON CUBE Orders and AON Contra Orders to be assessed lower fees than those providing RFR Responses, as structuring fees in this manner would incent market participants to direct orders to initiate AON CUBE Auctions (rather than simply respond to them). Further, the Exchange believes that the proposed fees for responding to AON CUBE Auctions would not deter market participants from providing price improvement, as they are consistent with fees for responding to a non-AON CUBE auction—whether Single-Leg or Complex—and are also consistent with fees charged to responders on options exchanges offering similar auction mechanisms. The Exchange also believes that the qualification bases to achieve the ACE Initiating Participant Rebate are reasonably designed to encourage ATP Holders to utilize the optional AON CUBE functionality, which may lead to greater opportunities to trade—and for price improvement—for all participants. In addition, the Exchange believes that the proposed Floor Broker Initiating Participant Rebate would encourage Floor Brokers to use the AON CUBE mechanism to execute larger-size orders (both Single-Leg and Complex), which would also lead to greater opportunities to trade for all participants because such order flow will be exposed to additional market participants. The Exchange also believes that the proposed rebates are reasonably designed because they are (as mentioned above) similar to rebates currently available to participants in non-AON CUBE auctions and, to the extent the proposed rebates are higher than existing rebates, the Exchange believes that they represent a reasonable effort to incent the use of a new functionality. Further, the Exchange believes the proposed fees and credits in connection with AON CUBE auctions would attract more volume and liquidity to the Exchange generally and would therefore benefit all market participants (including those that do not participate in auction mechanisms) through increased opportunities to trade at potentially improved prices as well as enhancing price discovery. To the extent the proposed fees and credits encourage greater volume and liquidity directed to the Exchange, the proposed changes would improve the Exchange’s overall competitiveness and strengthen its market quality for all market participants. PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 12055 The Proposed Rule Change Is an Equitable Allocation of Fees and Rebates 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 the auction mechanism or not. To the extent that the proposed change attracts more auction executions to the Exchange, this increased order flow would make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed fees and credits 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 also believes that the proposed fees and credits are equitable because they would apply equally among Customers and would also apply equally among all non-Customers. With respect to Customers, all similarly situated orders for Customers are subject to the same transaction fee schedule. Furthermore, the Exchange believes that it is equitable that Customers be charged lower fees in AON CUBE Auctions than other market participants, as the exchanges in general have historically aimed to improve markets for investors and develop various features within market structure for customer benefit.18 The Exchange may in some instances assess Customers lower or no transactions fees 19 because Customer order flow enhances liquidity on the Exchange for the benefit of all market participants, and customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may encourage a corresponding increase in order flow from other market participants. The Exchange also believes that it is equitable for AON CUBE Orders and AON Contra Orders to be assessed lower fees than those providing RFR Responses, as structuring fees in this manner would incent market participants to direct orders to participate in AON CUBE Auctions. The Exchange believes that it is equitable to 18 The Exchange also notes that, as discussed above, certain non-Customers may be eligible for various credits and rebates, which would offset their transaction costs. 19 For example, the Exchange offers Customers preferential rates for other trades executed on the Exchange such as for Qualified Contingent Cross orders. E:\FR\FM\01MRN1.SGM 01MRN1 12056 Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices assess fees to responders to AON CUBE Auctions and credits to another participant to provide incentive for participants to submit order flow. The Proposed Rule Change Is Not Unfairly Discriminatory The Exchange believes that the proposal is not unfairly discriminatory because the proposed fees and credits would be available to all similarlysituated market participants on an equal and non-discriminatory basis. The Exchange’s proposed fees and credits for AON CUBE Auctions are designed to encourage greater use of the AON CUBE Auction, which may lead to greater opportunities to trade—and for price improvement—for all participants. To the extent that there is a differentiation between proposed fees assessed to Customers as compared to non-Customers, the Exchange believes that this is not unfairly discriminatory because preferential pricing to Customers is a long-standing options industry practice to incentivize increased Customer order flow through a fee and rebate schedule in order to attract professional liquidity providers. To the extent the proposed fees serve to enhance Customer volume on the Exchange, the Exchange believes increased Customer volume would attract liquidity, including Market Maker activity, by providing more trading opportunities. Increased Market Maker activity could, in turn, facilitate tighter spreads and increased order flow from other market participants, contributing to increased price discovery and overall enhanced quality of the market. The Exchange also believes that the proposed fee structure is not unfairly discriminatory because it is based on the amount and type of business transacted on the Exchange, and ATP Holders are not obligated to participate in AON CUBE Auctions. Rather, the proposal is designed to encourage participants to utilize the Exchange as a primary trading venue (if they have not done so previously) or increase Electronic (auction) volume sent to the Exchange. To the extent that the proposed fees and credits are successful in incenting ATP Holders to utilize AON CUBE Auctions, this increased order flow would improve price discovery and make the Exchange a more competitive venue for order execution, which, in turn, would improve market quality for all market participants (including those that do not participate in AON CUBE Auctions). Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the VerDate Sep<11>2014 18:48 Feb 26, 2021 Jkt 253001 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 for larger-sized orders 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 changes further 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.’’ 20 Intramarket Competition. The proposed change is designed to attract order flow to the Exchange by offering competitive rates and credits based on increased volumes on the Exchange, which would enhance the quality of quoting and may increase the volumes of contracts traded on the Exchange. To the extent that this purpose is achieved, all of the Exchange’s market participants should benefit from the continued market liquidity. Enhanced market quality and increased transaction volume that results from the increase in order flow directed to the Exchange will benefit all market participants and improve competition on the Exchange. The Exchange believes that the proposed change to adopt fees and credits for the use of AON CUBE Auctions would not impose any burden on intramarket competition, but rather, would serve to promote intramarket competition by incentivizing order flow to the Exchange, and in particular, Customer orders, thereby providing for more opportunities to compete at improved prices. 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 mechanisms and fees to remain competitive with other exchanges and to 20 See Reg NMS Adopting Release, supra note 13, at 37499. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 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.21 Therefore, no exchange currently possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in November 2020, the Exchange had less than 10% market share of executed volume of multiplylisted equity and ETF options trades.22 The Exchange believes that the proposed rule change reflects this competitive environment because it introduces new fees and rebates designed 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 changes could promote competition between the Exchange and other execution venues, including those that currently offer similar auction mechanisms for larger-sized orders, by encouraging additional orders to be sent to the Exchange for execution.23 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) 24 of the Act and subparagraph (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 21 See supra note 14. on OCC data, supra note 15, the Exchange’s market share in equity- and ETF-based options increased from 8.06% for the month of November 2019 to 9.09% for the month of November 2020. 23 See, e.g., supra note 10 (regarding Nasdaq ISE’s Solicited Order Mechanism and Complex Solicited Order Mechanism). 24 15 U.S.C. 78s(b)(3)(A). 25 17 CFR 240.19b–4(f)(2). 22 Based E:\FR\FM\01MRN1.SGM 01MRN1 Federal Register / Vol. 86, No. 38 / Monday, March 1, 2021 / Notices 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. 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– NYSEAMER–2021–11 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–2021–11. 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–2021–11, and should be submitted on or before March 22, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 J. Matthew DeLesDernier, Assistant Secretary. 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. Dated: February 25, 2021. Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2021–04273 Filed 2–25–21; 4:15 pm] BILLING CODE 8011–01–P [FR Doc. 2021–04177 Filed 2–26–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91184; File No. SR–OCC– 2021–801] Sunshine Act Meetings Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Advance Notice Relating to OCC’s Establishment of Persistent Minimum Skin-In-The-Game 2:00 p.m. on Thursday, March 4, 2021. PLACE: The meeting will be held via remote means and/or 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 matter 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 examinations and enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that TIME AND DATE: February 23, 2021. Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, entitled Payment, Clearing and Settlement Supervision Act of 2010 (‘‘Clearing Supervision Act’’) 1 and Rule 19b–4(n)(1)(i) 2 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’),3 notice is hereby given that on February 10, 2021, the Options Clearing Corporation (‘‘OCC’’ or ‘‘Corporation’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) an advance notice as described in Items I, II and III below, which Items have been prepared by OCC. The Commission is publishing this notice to solicit comments on the advance notice from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Advance Notice This advance notice is submitted in connection with proposed changes that would amend OCC’s Rules, Capital Management Policy, and certain other OCC policies to establish a persistent minimum level of OCC’s own prefunded financial resources (commonly referred to as ‘‘skin-in-the-game’’) that OCC would contribute to cover default losses or liquidity shortfalls. Amendments to OCC’s Rules are included in Exhibit 5a of filing SR– OCC–2021–801. Amendments to OCC’s Capital Management Policy are included in confidential Exhibit 5b of filing SR– 1 12 U.S.C. 5465(e)(1). CFR 240.19b–4(n)(1)(i). 3 15 U.S.C. 78a et seq. 2 17 26 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 18:48 Feb 26, 2021 27 17 Jkt 253001 12057 PO 00000 CFR 200.30–3(a)(12). Frm 00139 Fmt 4703 Sfmt 4703 E:\FR\FM\01MRN1.SGM 01MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 38 (Monday, March 1, 2021)]
[Notices]
[Pages 12053-12057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04177]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91180; File No. SR-NYSEAMER-2021-11]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change Amending the NYSE 
American Options Fee Schedule To Introduce Pricing for the Use of a New 
AON Functionality in Single-Leg and Complex Customer Best Execution 
Auctions

February 22, 2021.
    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 February 16, 2021, 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 amend the NYSE American Options Fee 
Schedule (``Fee Schedule'') to introduce pricing for the use of a new 
AON functionality in Single-Leg and Complex Customer Best Execution 
(``CUBE'') auctions. The Exchange proposes to implement the fee change 
effective February 16, 2021.\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\ On January 27, 2021, the Exchange filed to implement the AON 
functionality for Complex CUBE auctions, which functionality was 
operative on an immediately effective basis retroactive to the date 
of filing given the waiver of the 30-day operative delay, as well as 
to make clarifications to the AON functionality for Single-Leg CUBE 
auctions. See Securities Exchange Release No. 91068 (February 5, 
2021), 86 FR 9112 (February 11, 2021) (NYSEAMER-2021-06).
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to modify the Fee Schedule to 
introduce pricing for the Exchange's newly approved optional all-or-
none (``AON'') functionality for larger-sized orders in Single-Leg and 
Complex CUBE auctions (together, ``AON CUBE'').\5\ The

[[Page 12054]]

Exchange proposes to introduce the pricing on February 16, 2021.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Release Nos. 90584 (December 7, 
2020), 85 FR 80196 (December 11, 2020) (NYSEAMER-2020-64) (approving 
AON functionality for Single-Leg CUBE auction); 91068 (February 5, 
2021), 86 FR 9112 (February 11, 2021) (NYSEAMER-2021-06) (approving 
AON functionality for Complex CUBE auction).
---------------------------------------------------------------------------

    The Exchange proposes to define ``AON CUBE Order'' as a ``Single-
Leg CUBE Order of at least 500 contracts or a Complex CUBE Order of at 
least 500 contracts on the smallest leg, that is designated AON per 
Rule 971.1NY Commentary .05 and Rule 971.2NY Commentary .04, 
respectively.'' \6\ Similarly, the Exchange proposes to define an AON 
Contra Order as ``principal interest or solicited interest an 
Initiating Participant is using to guarantee the execution of an AON 
CUBE Order in a Single-Leg or Complex CUBE Auction.'' \7\
---------------------------------------------------------------------------

    \6\ See proposed Fee Schedule, Key Terms and Definitions. See 
generally Rules 971.1NY (regarding Single-Leg CUBE auctions) and 
971.2NY (regarding Complex CUBE auctions).
    \7\ See proposed Fee Schedule, Key Terms and Definitions.
---------------------------------------------------------------------------

    Section I.G. of the Fee Schedule sets forth the rates for per 
contract fees and credits for executions associated with CUBE Auctions. 
The Exchange proposes to include an additional table of fees and 
credits under Section I.G. to apply to certain contracts executed in 
AON CUBE Auctions, whether Single-Leg or Complex.\8\
---------------------------------------------------------------------------

    \8\ See proposed Fee Schedule, Section I.G., CUBE Auction Fees & 
Credits (setting forth applicable fees and credits for AON Single-
Leg and AON Complex CUBE Auctions).
---------------------------------------------------------------------------

    The process for commencing an AON CUBE auction mirrors that of non-
AON CUBE auctions. In particular, the AON CUBE auction process begins 
with the entry of an AON CUBE Order and a paired AON Contra Order. As 
with non-AON CUBE auctions, the Exchange similarly proposes to not 
charge for AON CUBE Order executions on behalf of a Customer or for 
Customer executions against AON CUBE Orders (i.e., Customer Request for 
Responses (``RFR'') to an AON CUBE Order). The Exchange proposes to 
charge $0.20 per contract for non-Customer executions of AON CUBE 
Orders and Customer and non-Customer AON Contra Orders alike.
    As with non-AON CUBE Auctions, the Exchange proposes to charge 
executions of non-Customer RFR Responses to an AON CUBE Auction $0.50 
per contract in Penny issues and $1.05 per contract executed in non-
Penny issues.
    The Exchange proposes an Initiating Participant Credit for each 
contract in an AON Contra Order that does not trade with the AON CUBE 
Order because it is replaced in the auction, including when the AON 
Contra Order is replaced entirely by RFR Responses. As proposed, the 
Initiating Participant Credit for AON CUBE Orders would be $0.30 per 
contract in Penny issues and $0.70 per contract in non-Penny issues.
    The Exchange also proposes an ACE Initiating Participant Rebate 
payable to Initiating Participants that are ATP Holders who qualify for 
Tiers 1, 2, 3, 4 or 5 of the ACE Program. The proposed $0.12 per 
contract rebate would be paid to a qualifying Initiating Participant in 
an AON Single-Leg CUBE Auction for each of the first 5,000 contracts of 
an AON CUBE Order executed and/or to a qualifying Initiating 
Participant in an AON Complex CUBE Auction for each of the first 1,000 
contracts per leg of an AON CUBE Order executed.
    The Exchange also proposes a Floor Broker Initiating Participant 
Rebate of $0.12 per contract payable to Floor Brokers that execute a 
minimum of 2,500 contracts average daily volume (``ADV'') in AON CUBE 
Orders in either an AON Single-Leg or AON Complex CUBE auction.\9\ As 
with the ACE Initiating Participant Rebate, the Floor Broker Initiating 
Participant Rebate is paid to a qualifying Initiating Participant for 
each contract in an AON CUBE Order and applies to each of the first 
5,000 contracts of an AON CUBE Order executed in an AON Single-Leg CUBE 
Auction, or to the first 1,000 contracts per leg of an AON CUBE Order 
in an AON Complex CUBE Auction.
---------------------------------------------------------------------------

    \9\ AON CUBE Orders executed by a Floor Broker on behalf of an 
ATP Holder may only be counted towards the Floor Broker's 
eligibility for the Floor Broker Initiating Participant Rebate. An 
ATP Holder's AON CUBE Orders that are executed by a Floor Broker are 
not eligible for the ACE Initiating Participant Rebate.
---------------------------------------------------------------------------

    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 auction functionalities and 
corresponding fees.\10\ Thus, ATP Holders have a choice of where they 
direct their order flow, including electronic auction volume.
---------------------------------------------------------------------------

    \10\ See, e.g., Nasdaq ISE LLC (``Nasdaq ISE''), Options 7, 
Pricing Schedule, available here: https://listingcenter.nasdaq.com/rulebook/ise/rules/ise-options-7 (setting forth pricing for 
Solicited Order Mechanism and Complex Solicited Order Mechanism); 
Cboe EDGX Exchange, Inc. (``Cboe EDGX'') fee schedule, available 
here: https://www.cboe.com/us/options/membership/fee_schedule/edgx/
(setting forth pricing for Solicitation Auction Mechanism (``SAM''). 
See Statutory Basis below in ``The Proposed Rule Change is 
Reasonable'' section for discussion in greater detail, including 
infra notes 15 [sic] and 16.
---------------------------------------------------------------------------

    To the extent that the proposed fees and credits relating to the 
use of the AON CUBE auction functionality encourage ATP Holders to 
direct their order flow to the Exchange, all market participants stand 
to benefit from increased order flow, which promotes market depth, 
facilitates tighter spreads and enhances price discovery.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 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.'' \13\
---------------------------------------------------------------------------

    \13\ 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.\14\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity and ETF 
options order flow. More specifically, in November 2020, the Exchange 
had less than 10% market share of executed volume of multiply-listed 
equity and ETF options trades.\15\
---------------------------------------------------------------------------

    \14\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \15\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id., the Exchange's market share in multiply-listed equity and ETF 
options increased from 8.06% for the month of November 2019 to 9.09% 
for the month of November 2020.

---------------------------------------------------------------------------

[[Page 12055]]

    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 rebates can have a direct effect on 
the ability of an exchange to compete for order flow, including auction 
volume.
    The proposed rule change is designed to incent ATP Holders to 
direct liquidity to the Exchange in AON CUBE Auction 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. 
Specifically, the Exchange believes that the proposed fee structure for 
AON CUBE Orders is reasonably designed to incent ATP Holders to direct 
liquidity to the Exchange in the form of AON CUBE Auction executions, 
which increased order flow would improve the overall competitiveness 
and strengthen the market quality of the Exchange to the benefit of all 
market participants. The Exchange notes that the proposed structure of 
fees and credits for AON CUBE Auctions is reasonable because it is both 
consistent with fees and credits already in place for the same types of 
orders in Single-Leg and Complex CUBE auctions and is likewise within 
the range of fees and credits assessed by other exchanges employing 
similar fee structures for auction mechanisms.\16\ Consistent with this 
proposal, competing options exchanges similarly offer different fees 
and credits for initiating orders, contra-side orders, and responders 
to an auction, and competing options exchanges likewise charge 
different rates for transactions in their price improvement mechanisms 
for Customers versus non-Customers.\17\
---------------------------------------------------------------------------

    \16\ See, e.g., Cboe EDGX fee schedule, supra note 10 
(providing, for example, $0.20 per contract fee for non-customer 
agency orders and $0.20 per contract fee for non-customer contra 
orders in a SAM auction, in line with the Exchange's proposed $0.20 
per contract fee for non-Customer AON CUBE Orders and AON Contra 
Orders); Nasdaq ISE Pricing Schedule, supra note 10 (providing, for 
example, $0.20 per contract fee for non-customer contra orders in 
Solicited Order Mechanism, in line with the Exchange's proposed 
$0.20 per contract fee for non-Customer AON Contra Orders).
    \17\ See, e.g., Cboe EDGX fee schedule and Nasdaq ISE Pricing 
Schedule, supra note 10 (providing, for example, $0.20 per contract 
fee for non-customer initiating orders and no fee for customer 
initiating orders, consistent with the Exchange's proposal).
---------------------------------------------------------------------------

    The Exchange also believes that it is reasonable for AON CUBE 
Orders and AON Contra Orders to be assessed lower fees than those 
providing RFR Responses, as structuring fees in this manner would 
incent market participants to direct orders to initiate AON CUBE 
Auctions (rather than simply respond to them). Further, the Exchange 
believes that the proposed fees for responding to AON CUBE Auctions 
would not deter market participants from providing price improvement, 
as they are consistent with fees for responding to a non-AON CUBE 
auction--whether Single-Leg or Complex--and are also consistent with 
fees charged to responders on options exchanges offering similar 
auction mechanisms.
    The Exchange also believes that the qualification bases to achieve 
the ACE Initiating Participant Rebate are reasonably designed to 
encourage ATP Holders to utilize the optional AON CUBE functionality, 
which may lead to greater opportunities to trade--and for price 
improvement--for all participants. In addition, the Exchange believes 
that the proposed Floor Broker Initiating Participant Rebate would 
encourage Floor Brokers to use the AON CUBE mechanism to execute 
larger-size orders (both Single-Leg and Complex), which would also lead 
to greater opportunities to trade for all participants because such 
order flow will be exposed to additional market participants. The 
Exchange also believes that the proposed rebates are reasonably 
designed because they are (as mentioned above) similar to rebates 
currently available to participants in non-AON CUBE auctions and, to 
the extent the proposed rebates are higher than existing rebates, the 
Exchange believes that they represent a reasonable effort to incent the 
use of a new functionality.
    Further, the Exchange believes the proposed fees and credits in 
connection with AON CUBE auctions would attract more volume and 
liquidity to the Exchange generally and would therefore benefit all 
market participants (including those that do not participate in auction 
mechanisms) through increased opportunities to trade at potentially 
improved prices as well as enhancing price discovery. To the extent the 
proposed fees and credits encourage greater volume and liquidity 
directed to the Exchange, the proposed changes would improve the 
Exchange's overall competitiveness and strengthen its market quality 
for all market participants.
The Proposed Rule Change Is an Equitable Allocation of Fees and Rebates
    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 the auction mechanism or not. To the extent 
that the proposed change attracts more auction executions to the 
Exchange, this increased order flow would make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed fees and credits 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 also believes that the proposed fees and credits are 
equitable because they would apply equally among Customers and would 
also apply equally among all non-Customers. With respect to Customers, 
all similarly situated orders for Customers are subject to the same 
transaction fee schedule. Furthermore, the Exchange believes that it is 
equitable that Customers be charged lower fees in AON CUBE Auctions 
than other market participants, as the exchanges in general have 
historically aimed to improve markets for investors and develop various 
features within market structure for customer benefit.\18\ The Exchange 
may in some instances assess Customers lower or no transactions fees 
\19\ because Customer order flow enhances liquidity on the Exchange for 
the benefit of all market participants, and customer liquidity benefits 
all market participants by providing more trading opportunities, which 
attracts Market Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may encourage a 
corresponding increase in order flow from other market participants.
---------------------------------------------------------------------------

    \18\ The Exchange also notes that, as discussed above, certain 
non-Customers may be eligible for various credits and rebates, which 
would offset their transaction costs.
    \19\ For example, the Exchange offers Customers preferential 
rates for other trades executed on the Exchange such as for 
Qualified Contingent Cross orders.
---------------------------------------------------------------------------

    The Exchange also believes that it is equitable for AON CUBE Orders 
and AON Contra Orders to be assessed lower fees than those providing 
RFR Responses, as structuring fees in this manner would incent market 
participants to direct orders to participate in AON CUBE Auctions. The 
Exchange believes that it is equitable to

[[Page 12056]]

assess fees to responders to AON CUBE Auctions and credits to another 
participant to provide incentive for participants to submit order flow.
The Proposed Rule Change Is Not Unfairly Discriminatory
    The Exchange believes that the proposal is not unfairly 
discriminatory because the proposed fees and credits would be available 
to all similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange's proposed fees and credits for AON 
CUBE Auctions are designed to encourage greater use of the AON CUBE 
Auction, which may lead to greater opportunities to trade--and for 
price improvement--for all participants.
    To the extent that there is a differentiation between proposed fees 
assessed to Customers as compared to non-Customers, the Exchange 
believes that this is not unfairly discriminatory because preferential 
pricing to Customers is a long-standing options industry practice to 
incentivize increased Customer order flow through a fee and rebate 
schedule in order to attract professional liquidity providers. To the 
extent the proposed fees serve to enhance Customer volume on the 
Exchange, the Exchange believes increased Customer volume would attract 
liquidity, including Market Maker activity, by providing more trading 
opportunities. Increased Market Maker activity could, in turn, 
facilitate tighter spreads and increased order flow from other market 
participants, contributing to increased price discovery and overall 
enhanced quality of the market.
    The Exchange also believes that the proposed fee structure is not 
unfairly discriminatory because it is based on the amount and type of 
business transacted on the Exchange, and ATP Holders are not obligated 
to participate in AON CUBE Auctions. Rather, the proposal is designed 
to encourage participants to utilize the Exchange as a primary trading 
venue (if they have not done so previously) or increase Electronic 
(auction) volume sent to the Exchange. To the extent that the proposed 
fees and credits are successful in incenting ATP Holders to utilize AON 
CUBE Auctions, this increased order flow would improve price discovery 
and make the Exchange a more competitive venue for order execution, 
which, in turn, would improve market quality for all market 
participants (including those that do not participate in AON CUBE 
Auctions).
    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 for larger-sized orders 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 changes further 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.'' \20\
---------------------------------------------------------------------------

    \20\ See Reg NMS Adopting Release, supra note 13, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
order flow to the Exchange by offering competitive rates and credits 
based on increased volumes on the Exchange, which would enhance the 
quality of quoting and may increase the volumes of contracts traded on 
the Exchange. To the extent that this purpose is achieved, all of the 
Exchange's market participants should benefit from the continued market 
liquidity. Enhanced market quality and increased transaction volume 
that results from the increase in order flow directed to the Exchange 
will benefit all market participants and improve competition on the 
Exchange.
    The Exchange believes that the proposed change to adopt fees and 
credits for the use of AON CUBE Auctions would not impose any burden on 
intramarket competition, but rather, would serve to promote intramarket 
competition by incentivizing order flow to the Exchange, and in 
particular, Customer orders, thereby providing for more opportunities 
to compete at improved prices.
    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 mechanisms and 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.\21\ 
Therefore, no exchange currently possesses significant pricing power in 
the execution of multiply-listed equity and ETF options order flow. 
More specifically, in November 2020, the Exchange had less than 10% 
market share of executed volume of multiply-listed equity and ETF 
options trades.\22\
---------------------------------------------------------------------------

    \21\ See supra note 14.
    \22\ Based on OCC data, supra note 15, the Exchange's market 
share in equity- and ETF-based options increased from 8.06% for the 
month of November 2019 to 9.09% for the month of November 2020.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change reflects this 
competitive environment because it introduces new fees and rebates 
designed 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 changes could promote 
competition between the Exchange and other execution venues, including 
those that currently offer similar auction mechanisms for larger-sized 
orders, by encouraging additional orders to be sent to the Exchange for 
execution.\23\
---------------------------------------------------------------------------

    \23\ See, e.g., supra note 10 (regarding Nasdaq ISE's Solicited 
Order Mechanism and Complex Solicited Order Mechanism).
---------------------------------------------------------------------------

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) \24\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \25\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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

[[Page 12057]]

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.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEAMER-2021-11 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-2021-11. 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-2021-11, and should be submitted 
on or before March 22, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04177 Filed 2-26-21; 8:45 am]
BILLING CODE 8011-01-P

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