Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the NYSE American Options Fee Schedule, 26629-26634 [2023-09086]
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Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Notices
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Authority: 5 U.S.C. 552b.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.51
Sherry R. Haywood,
Assistant Secretary.
Dated: April 27, 2023.
Vanessa A. Countryman,
Secretary.
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[Release No. 34–97372; File No. SR–
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Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Modify the NYSE
American Options Fee Schedule
April 25, 2023.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on April 18,
2023, NYSE American LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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 routing fees
and Floor Broker rebates and to delete
text relating to discontinued programs.
The Exchange proposes to implement
the fee change effective April 18, 2023.4
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 March 1, 2023 (SR–NYSEAMER–
2023–18), withdrew such filing and amended the
Fee Schedule on March 15, 2023 (SR–NYSEAMER–
2023–21), withdrew such filing and amended the
Fee Schedule on March 28, 2023 (SR–NYSEAMER–
2023–24), and then withdrew such filing and
amended the Fee Schedule on April 10, 2023 (SR–
2 15
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The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this filing is to amend
the Fee Schedule to (1) delete text
relating to fees and credits for NYSE
FANG+ Index (‘‘FAANG’’) transactions,
(2) simplify the Routing Surcharge
applied to orders routed to other
markets, (3) eliminate the introductory
pricing currently offered for Market
Maker ATP fees and Premium Product
fees, and (4) add a Floor Broker rebate
program. The Exchange believes that the
proposed changes would promote
clarity and transparency in the Fee
Schedule by eliminating fees and credits
relating to programs that the Exchange
proposes to discontinue and simplifying
the fees charged for routed orders. The
Exchange proposes to implement the
rule change on April 18, 2023.
FAANG Transactions
Footnote 7 to Section I.A. of the Fee
Schedule (Rates for Options
transactions) currently provides for fees
and credits relating to FAANG
transactions. The Fee Schedule provides
for a $0.35 per contract, per side fee for
Non-Customer FAANG transactions,
whether executed manually or
electronically. FAANG transactions (i)
on behalf of Customers or (ii) by NYSE
American Options Market Makers,
Specialists, e-Specialists or DOMMs do
not incur a fee. Marketing Charges are
not applied to FAANG transactions.
Volume in FAANG transactions is
included in the calculations to qualify
NYSEAMER–2023–26), which latter filing the
Exchange withdrew on April 18, 2023.
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for any volume-based incentives
currently offered on the Exchange.
The Fee Schedule also provides for a
credit to any firm that is an NYSE
American Options Market Maker,
Specialist, e-Specialist or DOMM that
executes a specified minimum number
of total monthly contract sides that open
a position in FAANG on the Exchange
(‘‘eligible contract sides’’), as set forth
below (‘‘MM FAANG Credit’’):
• A credit of $5,000 for a minimum
of 500 eligible contract sides; provided,
however, that if more than five firms
qualify for this MM FAANG Credit in a
calendar month, the $5,000 MM FAANG
Credit for each qualifying firm will be
a pro rata share of $25,000; or
• A credit of $10,000 for a minimum
of 2,000 eligible contract sides;
provided, however, that if more than
two firms qualify for this MM FAANG
Credit in a calendar month, the $10,000
MM FAANG Credit for each qualifying
firm will be a pro rata share of $25,000.
A firm that qualifies for the $10,000
credit will not be eligible for the $5,000
credit.
Because FAANG options were
delisted after monthly expiration in
February 2023, the Exchange now
proposes to delete the current text of
Footnote 7 to Section I.A. to remove
references to fees and credits relating to
FAANG transactions, which would no
longer be applicable for any market
participants, and designate Footnote 7
as Reserved. The Exchange also
proposes a conforming change to
Section I.D. (Prepayment Program) of
the Fee Schedule to delete the reference
in that section to ‘‘Section 1.A., note 7,’’
to reflect the proposed deletion of the
fees and credits relating to FAANG
transactions. The Exchange believes this
proposed change, which would remove
text relating to a discontinued program,
would promote clarity in the Fee
Schedule.
Routing Surcharge
As set forth in Section I.L. of the Fee
Schedule, the Exchange currently
assesses a routing surcharge on all nonCustomer orders routed to away markets
and on Customer orders including
Professional Customer orders that are
charged transaction fees at another
exchange. If the executing exchange
does not charge a transaction fee for the
execution of the Customer order, the
Routing Surcharge will be waived.
Currently, the Routing Surcharge is
$0.11 per contract plus (i) any
transaction fees assessed by the away
exchange(s) (calculated on an order-byorder basis since different away
exchanges charge different amounts) or
(ii) if the actual transaction fees assessed
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by the away exchange(s) cannot be
determined prior to the execution, the
highest per contract charge assessed by
the away exchange(s) for the relevant
option class and type of market
participant (e.g., Customer, Firm,
Broker/Dealer, Professional Customer or
Market Maker). The Exchange applies
the Routing Surcharge in addition to
any customary execution fees applicable
to the order.
The Exchange now proposes to
modify the Routing Surcharge to be
based on whether the routed order is in
a Penny or non-Penny issue and to
establish a single fee that would be
applicable to all routed orders in Penny
issues, and a single fee for all routed
orders in non-Penny issues.
Specifically, the Exchange proposes that
the fee for routed orders would be set
at a fixed amount intended to
counterbalance the internal resources
required to support the handling of
orders routed away from the Exchange.
The Exchange proposes to implement a
flat fee structure for routing fees, which
the Exchange believes would streamline
the process of calculating fees applied to
orders routed away from the Exchange
because it would, among other things,
reduce the administrative burden of
recalibrating routing fees each time an
away exchange modifies its relevant
transaction fees. Accordingly, the
Exchange proposes a Routing Surcharge
of $0.61 in Penny issues, and $1.21 in
non-Penny issues. The Exchange
believes that having a single published
rate for all routed orders in Penny issues
and a single published rate for all routed
orders in non-Penny issues would also
reduce potential confusion relating to
the amount of the surcharge for a given
routed order (particularly in light of the
variability in transaction fees across
other options markets) and would
permit market participants to determine
execution costs at the time of order
entry, thereby promoting clarity and
transparency in the Fee Schedule. The
Exchange believes the proposed routing
fee structure is not novel, as at least one
other options exchange similarly applies
fixed routing fees based on whether the
routed order is in a Penny or non-Penny
issue, and that the proposed amounts of
the fees are within the range of fees
applied by other markets to routed
orders.5
5 See, e.g., BOX Options Exchange Fee Schedule,
available at: https://boxexchange.com/assets/BOXFee-Schedule-as-of-March-6-2023.pdf (providing for
fixed routing fees of $0.60 per contract fee for
customer orders in Penny classes and $0.85 per
contract fee for customer orders in non-Penny
class); Cboe Exchange, Inc. Options Fee Schedule,
available at: https://cdn.cboe.com/resources/
membership/Cboe_FeeSchedule.pdf (providing, for
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Introductory Pricing for Newly Enrolled
Market Makers
Section III.A. of the Fee Schedule
provides for monthly ATP fees.
Footnote 2 of Section III.A. further
provides that an ATP Holder that newly
enrolls to operate as a Market Maker
may be entitled to introductory pricing
on ATP fees for up to six months.6 The
Exchange similarly offers newly
enrolled Market Makers introductory
pricing on Premium Product Fees for up
to six months, as set forth in Section
III.B, Footnote 1.7
The Exchange now proposes to delete
Section III.A., Footnote 2 and Section
III.B., Footnote 1 to eliminate the
introductory pricing for newly enrolled
Market Makers on ATP fees and
Premium Product Fees, respectively, as
no ATP Holders have qualified for this
pricing in the last few years. The
Exchange adopted this introductory
pricing to encourage ATP Holders to
enroll as Market Makers. However,
because these pricing incentives have
been underutilized (and therefore did
not achieve their intended effect), the
Exchange proposes to eliminate such
pricing from the Fee Schedule and
believes that ATP Holders would not be
impacted by its removal.
Floor Broker Grow With Me Program
The Exchange proposes to add the
Floor Broker Grow With Me program,
example, Customer routing fees of $0.75 for orders
in Penny issues or $1.25 for orders in non-Penny
issues routed to certain away markets and NonCustomer routing fees of $1.17 for all orders in
Penny issues or $1.45 for all orders in non-Penny
issues routed away).
6 A newly enrolled Market Maker on the
Exchange may be entitled to introductory pricing on
its ATP Fees for up to six months, beginning the
first month in which it registers. For the first three
months (i.e., months 1–3), the Exchange waives the
ATP fees, and for the latter three months (i.e.,
months 4–6), the Exchange discounts such ATP fees
by 50%, unless the Market Maker achieves a
monthly ADV equal to at least 0.05% of TCADV,
at which time the Exchange would charge the
Market Maker 100% of its ATP Fees for the
remaining months, regardless of its monthly ADV
in subsequent months. An ATP Holder may qualify
for this introductory pricing only once in a 24month period, which period begins in the first
month the ATP Holder registers on the Exchange.
7 A newly enrolled Market Maker on the
Exchange may be entitled to introductory pricing on
its Premium Product Fees for up to six months,
beginning the first month in which it registers. For
the first three months (i.e., months 1–3), the
Exchange waives Premium Product Fees, and for
the latter three months (i.e., months 4–6), the
Exchange discounts such Premium Product Fees by
50%, unless the Market Maker achieves a monthly
ADV equal to at least 0.05% of TCADV, at which
time the Exchange would charge the Market Maker
100% of its Premium Product Fees for the
remaining months, regardless of its monthly ADV
in subsequent months. An ATP Holder may qualify
for this introductory pricing only once in a 24month period, which period begins in the first
month the ATP Holder registers on the Exchange.
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through which Floor Broker
organizations (‘‘Floor Brokers’’) may
earn a ($0.05) rebate on manual billable
volume. The Exchange proposes to add
this program in Section III.E.2. of the
Fee Schedule, which is currently
designated as Reserved. The Exchange
proposes that the Floor Broker Grow
With Me program would provide Floor
Brokers with an opportunity to earn a
rebate on manual billable volume based
on demonstrated growth as compared to
the Floor Brokers’ manual billable
volume ADV in January 2023 (the ‘‘base
period’’). The Exchange proposes that
Floor Brokers that achieve (1) manual
billable contracts volume of 100% over
their base period volume in a month or
(2) an ADV of 25,000 manual billable
contracts in a month, whichever is
greater, would be eligible for a rebate of
($0.05) per billable side. The Exchange
proposes that Floor Brokers new to the
Exchange would be eligible to qualify
for the program by achieving the second
qualifying criteria, which is not tied to
base period volume. The Exchange
further proposes that the Floor Broker
Grow With Me program would be in
place with these qualifying criteria until
July 31, 2023, which would allow the
Exchange a period to evaluate such
criteria and to submit a proposed rule
change regarding qualifications for the
program beyond that date.
Although the Exchange cannot predict
with certainty whether the proposed
change would encourage Floor Brokers
to increase their manual billable volume
on the Exchange, the proposed change
is designed to continue to incentivize
Floor Brokers to do so by offering a
rebate on manual billable volume. All
Floor Brokers, including new Floor
Brokers, would be eligible to earn a
rebate through the Floor Broker Grow
With Me program, as proposed.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,8 in general, and
furthers the objectives of Sections
6(b)(4) and (5) of the Act,9 in particular,
because it provides for the equitable
allocation of reasonable dues, fees, and
other charges among its members,
issuers and other persons using its
facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.
The Proposed Rule Change Is
Reasonable
The Exchange operates in a highly
competitive market. The Commission
8 15
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4) and (5).
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has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. In Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 10
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.11
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, in January 2023, the
Exchange had less than 8% market
share of executed volume of multiplylisted equity and ETF options trades.12
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue or
reduce use of certain categories of
products, in response to fee changes.
Accordingly, competitive forces
constrain options exchange transaction
fees. Stated otherwise, changes to
exchange transaction fees can have a
direct effect on the ability of an
exchange to compete for order flow.
The Exchange believes the proposed
change to the Routing Surcharge is
reasonable because it would establish a
single fee that would be applicable to all
routed orders in Penny issues and a
single fee that would be applicable to all
routed orders in non-Penny issues, and
such fees would be applicable to all
market participants equally. In addition,
the Exchange believes the proposed
change is reasonable because it would
provide for routing fees that would
counterbalance the internal resources
10 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(S7–10–04) (‘‘Reg NMS Adopting Release’’).
11 The OCC publishes options and futures volume
in a variety of formats, including daily and monthly
volume by exchange, available here: https://
www.theocc.com/Market-Data/Market-DataReports/Volume-and-Open-Interest/MonthlyWeekly-Volume-Statistics.
12 Based on a compilation of OCC data for
monthly volume of equity-based options and
monthly volume of ETF-based options, see id., the
Exchange’s market share in equity-based options
was 7.03% for the month of January 2022 and
7.96% for the month of January 2023.
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26631
required to support the handling of
orders routed away from the Exchange
and would streamline the process of
calculating routing fees by obviating the
need to recalibrate fees based on
individual away market fees (which are
variable and subject to frequent change)
and eliminating any potential confusion
as to routing fees applicable to a given
order. The Exchange also notes that a
fixed fee structure for routing fees is not
novel and that the amounts of the
proposed Routing Surcharge amounts
are within the range of routing fees
currently charged by other options
exchanges.13
The Exchange believes that the
proposed change to delete FAANG
transaction fees and credits is
reasonable because FAANG options
were delisted after monthly expiration
in February 2023, and such fees and
credits are no longer applicable to any
market participants. The Exchange
believes that the proposed change to
eliminate certain introductory pricing
for newly enrolled Market Makers is
reasonable because these programs have
not served to encourage ATP Holders to
enroll as Market Makers on the
Exchange. Accordingly, the Exchange
believes that the proposed changes to
eliminate text from the Fee Schedule
relating to discontinued or
underutilized programs would promote
clarity in the Fee Schedule, to the
benefit of all market participants.
The Exchange believes that the
proposed Floor Broker Grow With Me
Program is reasonable because it is
designed to continue to incent Floor
Brokers to increase their manual billable
volume executed on the Exchange and
provides Floor Brokers with two ways to
earn the additional rebate offered by the
program. The Exchange also believes
that using a Floor Broker organization’s
January 2023 manual billable volume
ADV as a basis for measuring growth is
reasonable because it reflects each
organization’s recent volumes and that
the 25,000 manual billable contracts
alternative requirement is reasonable
because it would permit new Floor
Brokers without base period volume to
qualify for the program by meeting a
requirement that also applies to current
Floor Brokers. The Exchange also
believes that it is reasonable to
implement the program with the
proposed qualifying criteria through
July 31, 2023, as the Exchange would be
able to further evaluate such criteria in
the interim period and prepare a
proposed rule change regarding
appropriate qualifying criteria for the
program beyond such date.
13 See
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To the extent that the proposed
changes improve the clarity and
transparency of the Fee Schedule, the
Exchange believes they would continue
to make the Exchange a more
competitive venue for order execution,
which, in turn, promotes just and
equitable principles of trade and
removes impediments to and perfects
the mechanism of a free and open
market and a national market system.
The Exchange notes that all market
participants stand to benefit from any
increase in volume, which could
promote market depth, facilitate tighter
spreads and enhance price discovery,
particularly to the extent the proposed
change encourages market participants
to utilize the Exchange as a primary
trading venue, and may lead to a
corresponding increase in order flow
from other market participants.
Finally, to the extent the proposed
change continues to attract greater
volume and liquidity, the Exchange
believes the proposed change would
improve the Exchange’s overall
competitiveness and strengthen its
market quality for all market
participants. In the backdrop of the
competitive environment in which the
Exchange operates, the proposed rule
change is a reasonable attempt by the
Exchange to increase the depth of its
market and improve its market share
relative to its competitors. The
Exchange’s fees are constrained by
intermarket competition, as market
participants can choose to direct their
order flow to any of the 16 options
exchanges The Exchange believes that
proposed rule change is designed to
continue to incent market participants
to direct liquidity to the Exchange, and,
to the extent they continue to be
incentivized to aggregate their trading
activity at the Exchange, that increased
liquidity could promote market depth,
price discovery and improvement, and
enhanced order execution opportunities
for all market participants.
The Proposed Rule Change Is an
Equitable Allocation of Fees and Credits
The Exchange believes the proposed
rule change is an equitable allocation of
its fees and credits. The proposed
change to the Routing Surcharge is
equitable because the proposed single
fee for all routed orders in Penny issues
and single fee for all routed orders in
non-Penny issues would apply to all
market participants equally and the
proposed amounts are designed to offset
internal resources necessary to support
the handling of orders routed away from
the Exchange. The proposed change
would also streamline the process of
calculating routing fees for all market
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participants and provide increased
clarity regarding execution costs at the
time of order entry. The proposed
change to delete fees and credits relating
to FAANG transactions is also equitable
because their elimination would
likewise apply to all market participants
equally. The Exchange also believes that
the proposed changes to eliminate
introductory pricing for newly enrolled
Market Makers in ATP fees and
Premium Product Fees are equitable
because the pricing programs would no
longer be available to any ATP Holders,
and, moreover, no ATP Holders have
qualified for the introductory pricing in
recent years. The Exchange believes that
the proposed rebate for Floor Brokers
through the Floor Broker Grow With Me
Program is an equitable allocation of
fees and credits because the rebate
would be available to all qualifying
Floor Brokers equally, and Floor Brokers
may qualify for the rebate based on
either growth over their own base
period volume or an alternative that
would permit new Floor Brokers that do
not have base period volume to qualify
for the program on a basis that is also
applicable to current Floor Brokers. The
Exchange also believes that the proposal
to offer the Floor Broker Grow With Me
program with the current qualifying
criteria through July 31, 2023 is
equitable because the intervening period
would provide the Exchange an
opportunity to evaluate the parameters
of the program and to submit a proposed
rule change regarding the criteria for the
program going forward. The Exchange
further believes that the proposed
change is equitable because it is
intended to encourage the role
performed by Floor Brokers in
facilitating the execution of orders via
open outcry, a function which the
Exchange wishes to support for the
benefit of all market participants.
To the extent that the proposed
changes continue to incent ATP Holders
to utilize the Exchange as a primary
execution venue and attract more
volume on the Exchange, this increased
order flow would continue to make the
Exchange a more competitive venue for,
among other things, order execution.
Thus, the Exchange believes the
proposed rule 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 Proposed Rule Change Is Not
Unfairly Discriminatory
The Exchange believes the proposed
change is not unfairly discriminatory.
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The proposed change to the Routing
Surcharge is not unfairly discriminatory
because the proposed fees are intended
to assess streamlined routing fees in
amounts that would appropriately
account for the internal resources
necessary to support orders routed away
from the Exchange and would apply
equally to all market participants’
routed orders, based on whether such
order is in a Penny or non-Penny issue.
The proposed change would simplify
the calculation of routing fees for all
market participants and add clarity and
transparency to the Fee Schedule
regarding the fees applicable to routed
orders. The proposed change to delete
fees and credits relating to FAANG
transactions is not unfairly
discriminatory because they are no
longer applicable to any market
participants following the delisting of
FAANG options. The Exchange also
believes that the proposed changes to
eliminate introductory pricing for new
Market Makers in ATP fees and
Premium Product Fees are equitable
because the pricing programs would be
eliminated in their entirety and would
no longer be available to any ATP
Holders. Finally, the Exchange believes
that the proposed Floor Broker Grow
With Me Program is not unfairly
discriminatory because current and new
Floor Brokers alike are eligible to
qualify for the rebate and is not unfairly
discriminatory to non-Floor Brokers
because Floor Brokers serve an
important function in facilitating the
execution of orders on the Exchange,
which the Exchange wishes to
encourage and support to promote price
improvement opportunities for all
market participants.
Thus, the Exchange believes that, to
the extent the proposed rule change
would continue to improve market
quality for all market participants on the
Exchange by promoting clarity and
transparency in the Fee Schedule and
attract more order flow to the Exchange,
thereby improving market-wide quality
and price discovery, the resulting
increased volume and liquidity would
provide more trading opportunities and
tighter spreads to all market participants
and thus would promote just and
equitable principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors and the public
interest.
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
E:\FR\FM\01MYN1.SGM
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lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act, the Exchange does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Instead, as discussed above, the
Exchange believes that the proposed
changes would encourage the
submission of additional liquidity to a
public exchange, thereby promoting
market depth, price discovery and
transparency and enhancing order
execution opportunities for all market
participants. As a result, the Exchange
believes that the proposed change
furthers the Commission’s goal in
adopting Regulation NMS of fostering
integrated competition among orders,
which promotes ‘‘more efficient pricing
of individual stocks for all types of
orders, large and small.’’ 14
Intramarket Competition. The
proposed change is designed to improve
the clarity and transparency of the Fee
Schedule and to continue to attract
order flow to the Exchange. The
proposed change to offer Floor Brokers
a rebate on manual billable volume
through the Floor Broker Grow With Me
program is intended to attract additional
order flow to the Exchange, which could
increase the volumes of contracts traded
on the Exchange. Greater liquidity
benefits all market participants on the
Exchange, and increased manual
billable transactions could increase
opportunities for execution of other
trading interest. The Exchange believes
that the proposed change to the Routing
Surcharge would not impose any
burden on competition that is not
necessary or appropriate because it is
intended to simplify the calculation of
fees for routed orders and to continue to
incent Firms to direct order flow to the
Exchange, thereby promoting liquidity
on the Exchange to the benefit of all
market participants. The Exchange does
not believe that the proposed changes
relating to FAANG transactions or
introductory pricing for newly enrolled
Market Makers would impose any
burden on competition that is not
necessary or appropriate because the
changes would apply equally to all ATP
Holders and would add clarity to the
Fee Schedule, to the benefit of all
market participants.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which market
participants can readily favor one of the
16 competing option exchanges if they
14 See
Reg NMS Adopting Release, supra note 9,
at 37499.
VerDate Sep<11>2014
17:10 Apr 28, 2023
Jkt 259001
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually adjust its
fees to remain competitive with other
exchanges and to attract order flow to
the Exchange. Based on publiclyavailable information, and excluding
index-based options, no single exchange
has more than 16% of the market share
of executed volume of multiply-listed
equity and ETF options trades.15
Therefore, no exchange possesses
significant pricing power in the
execution of multiply-listed equity and
ETF options order flow. More
specifically, in January 2023, the
Exchange had less than 8% market
share of executed volume of multiplylisted equity and ETF options trades.16
The Exchange believes that the
proposed rule change reflects this
competitive environment because it
modifies the Exchange’s fees and credits
in a manner designed to continue to
incent Floor Brokers to direct trading
interest (particularly manual billable
volume) to the Exchange, to provide
liquidity, and to attract order flow. In
addition, to the extent that the proposed
change to simplify the Routing
Surcharge incentivizes ATP Holders to
utilize the Exchange as a primary
trading venue for all transactions, all of
the Exchange’s market participants
should benefit from the improved
market quality and increased
opportunities for price improvement.
The Exchange also believes that the
proposed rule change reflects this
competitive environment because it
removes underutilized programs from
the Fee Schedule that did not achieve
their intended purpose. The Exchange
notes that it operates in a highly
competitive market in which market
participants can readily favor competing
venues, including one that offers
similarly structured routing fees.17 In
such an environment, the Exchange
must continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges.
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.
note 11, supra.
note 12, supra.
17 See note 5, supra.
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) 18 of the Act and
subparagraph (f)(2) of Rule 19b–4 19
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) 20 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 Number SR–
NYSEAMER–2023–28 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEAMER–2023–28. 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
15 See
18 15
16 See
19 17
PO 00000
Frm 00118
Fmt 4703
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
20 15 U.S.C. 78s(b)(2)(B).
Sfmt 4703
26633
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Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Notices
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. Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–NYSEAMER–2023–
28, and should be submitted on or
before May 22, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–09086 Filed 4–28–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–97374; File No. SR–
NYSEAMER–2023–27]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing of
Proposed Change To Amend Rule 915
(Criteria for Underlying Securities) To
Accelerate the Listing of Options on
Certain IPOs
lotter on DSK11XQN23PROD with NOTICES1
April 25, 2023
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on April 21,
2023, NYSE American LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘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.
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
17:10 Apr 28, 2023
The Exchange proposes to amend
Rule 915 (Criteria for Underlying
Securities). The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
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
SECURITIES AND EXCHANGE
COMMISSION
VerDate Sep<11>2014
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Jkt 259001
The purpose of the proposed rule
change is to amend Rule 915 (Criteria
for Underlying Securities) (the ‘‘Rule’’)
as set forth below. Following
discussions with other exchanges and a
cross-section of industry participants
and in coordination with the Listed
Options Market Structure Working
Group (‘‘LOMSWG’’) (collectively, the
‘‘Industry Working Group’’), the
Exchange proposes to modify the
standard set forth in the Rule for the
listing and trading of options on
‘‘covered securities’’ to reduce the time
to market.
Commentary .01(4)(a) to Rule 915 sets
forth the guidelines to be considered in
evaluating for option transactions
underlying securities that are ‘‘covered
securities,’’ as defined in Section
18(b)(1)(A) of the Securities Act of 1933
(hereinafter ‘‘covered security’’ or
‘‘covered securities’’).4 Currently, the
Exchange permits the listing of an
option on an underlying covered
security that, amongst other things, has
a market price of at least $3.00 per share
4 Rule 915(a) requires that, for underlying
securities to be eligible for option transactions, such
securities must be duly registered and be an ‘‘NMS
stock’’ as defined in Rule 600 of Regulation NMS
under the Act and will be characterized by a
substantial number of outstanding shares which are
widely held and actively traded. See Rule 915(a)(1)
and (2).
PO 00000
Frm 00119
Fmt 4703
Sfmt 4703
for the previous three consecutive
business days preceding the date on
which the Exchange submits a
certificate to The Options Clearing
Corporation (‘‘OCC’’) to list and trade
options on the underlying security (the
‘‘three-day lookback period’’).5 Under
the current rule, if an initial public
offering (‘‘IPO’’) occurs on a Monday,
the earliest date the Exchange could
submit its listing certificate to OCC
would be on Thursday, with the market
price determined by the closing price
over the three-day lookback period from
Monday through Wednesday. The
option on the IPO’d security would then
be eligible for trading on the Exchange
on Friday (i.e., within four business
days of the IPO inclusive of the day the
listing certificate is submitted to OCC).6
The Exchange notes that the three-day
look back period helps ensure that
options on underlying securities may be
listed and traded in a timely manner
while also allowing time for OCC to
accommodate the certification request.
However, there are certain large IPOs
that issue high-priced securities—well
above the $3.00 per share threshold—
that would obviate the need for the
three-day lookback period. In this
regard, the Industry Working Group has
recently identified proposed changes to
Commentary .01(4)(a) to Rule 915 that
would help options on covered
securities that have a market
capitalization of at least $3 billion based
upon the offering price of its IPO come
to market earlier. The proposed change,
which is intended to be harmonized
across options exchanges, is designed to
provide investors the opportunity to
hedge their interest in IPO investments
in a shorter amount of time than what
is currently permitted.7 The Exchange
believes that options serve a valuable
tool to the trading community and help
markets function efficiently by
mitigating risk. To that end, the
Exchange believes that the absence of
options in the early days after an IPO
5 See Commentary .01(4)(a) to Rule 915. The
Exchange is not proposing to make any changes to
the guidelines for listing securities that are not a
‘‘covered security.’’ See Commentary .01(4)(b) to
Rule 915.
6 See proposed Commentary .01(4)(a)(ii) to Rule
915. The Exchange proposes a non-substantive
change to number the existing and proposed criteria
for covered securities as (i) and (ii) of paragraph
(4)(a). See proposed Commentary .01(4)(a)(i) to Rule
915.
7 While the Exchange acknowledges that market
participants may utilize options for speculative
purposes (in addition to as a hedging tool), the
Exchange believes (as set forth below) that its
existing surveillance technologies and procedures
adequately address potential violations of exchange
rules and federal securities laws applicable to
trading on the Exchange.
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]]>Agencies
[Federal Register Volume 88, Number 83 (Monday, May 1, 2023)]
[Notices]
[Pages 26629-26634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09086]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97372; File No. SR-NYSEAMER-2023-28]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
the NYSE American Options Fee Schedule
April 25, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on April 18, 2023, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 routing fees and Floor Broker
rebates and to delete text relating to discontinued programs. The
Exchange proposes to implement the fee change effective April 18,
2023.\4\ The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\4\ The Exchange originally filed to amend the Fee Schedule on
March 1, 2023 (SR-NYSEAMER-2023-18), withdrew such filing and
amended the Fee Schedule on March 15, 2023 (SR-NYSEAMER-2023-21),
withdrew such filing and amended the Fee Schedule on March 28, 2023
(SR-NYSEAMER-2023-24), and then withdrew such filing and amended the
Fee Schedule on April 10, 2023 (SR-NYSEAMER-2023-26), which latter
filing the Exchange withdrew on April 18, 2023.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend the Fee Schedule to (1)
delete text relating to fees and credits for NYSE FANG+ Index
(``FAANG'') transactions, (2) simplify the Routing Surcharge applied to
orders routed to other markets, (3) eliminate the introductory pricing
currently offered for Market Maker ATP fees and Premium Product fees,
and (4) add a Floor Broker rebate program. The Exchange believes that
the proposed changes would promote clarity and transparency in the Fee
Schedule by eliminating fees and credits relating to programs that the
Exchange proposes to discontinue and simplifying the fees charged for
routed orders. The Exchange proposes to implement the rule change on
April 18, 2023.
FAANG Transactions
Footnote 7 to Section I.A. of the Fee Schedule (Rates for Options
transactions) currently provides for fees and credits relating to FAANG
transactions. The Fee Schedule provides for a $0.35 per contract, per
side fee for Non-Customer FAANG transactions, whether executed manually
or electronically. FAANG transactions (i) on behalf of Customers or
(ii) by NYSE American Options Market Makers, Specialists, e-Specialists
or DOMMs do not incur a fee. Marketing Charges are not applied to FAANG
transactions. Volume in FAANG transactions is included in the
calculations to qualify
[[Page 26630]]
for any volume-based incentives currently offered on the Exchange.
The Fee Schedule also provides for a credit to any firm that is an
NYSE American Options Market Maker, Specialist, e-Specialist or DOMM
that executes a specified minimum number of total monthly contract
sides that open a position in FAANG on the Exchange (``eligible
contract sides''), as set forth below (``MM FAANG Credit''):
A credit of $5,000 for a minimum of 500 eligible contract
sides; provided, however, that if more than five firms qualify for this
MM FAANG Credit in a calendar month, the $5,000 MM FAANG Credit for
each qualifying firm will be a pro rata share of $25,000; or
A credit of $10,000 for a minimum of 2,000 eligible
contract sides; provided, however, that if more than two firms qualify
for this MM FAANG Credit in a calendar month, the $10,000 MM FAANG
Credit for each qualifying firm will be a pro rata share of $25,000. A
firm that qualifies for the $10,000 credit will not be eligible for the
$5,000 credit.
Because FAANG options were delisted after monthly expiration in
February 2023, the Exchange now proposes to delete the current text of
Footnote 7 to Section I.A. to remove references to fees and credits
relating to FAANG transactions, which would no longer be applicable for
any market participants, and designate Footnote 7 as Reserved. The
Exchange also proposes a conforming change to Section I.D. (Prepayment
Program) of the Fee Schedule to delete the reference in that section to
``Section 1.A., note 7,'' to reflect the proposed deletion of the fees
and credits relating to FAANG transactions. The Exchange believes this
proposed change, which would remove text relating to a discontinued
program, would promote clarity in the Fee Schedule.
Routing Surcharge
As set forth in Section I.L. of the Fee Schedule, the Exchange
currently assesses a routing surcharge on all non-Customer orders
routed to away markets and on Customer orders including Professional
Customer orders that are charged transaction fees at another exchange.
If the executing exchange does not charge a transaction fee for the
execution of the Customer order, the Routing Surcharge will be waived.
Currently, the Routing Surcharge is $0.11 per contract plus (i) any
transaction fees assessed by the away exchange(s) (calculated on an
order-by-order basis since different away exchanges charge different
amounts) or (ii) if the actual transaction fees assessed by the away
exchange(s) cannot be determined prior to the execution, the highest
per contract charge assessed by the away exchange(s) for the relevant
option class and type of market participant (e.g., Customer, Firm,
Broker/Dealer, Professional Customer or Market Maker). The Exchange
applies the Routing Surcharge in addition to any customary execution
fees applicable to the order.
The Exchange now proposes to modify the Routing Surcharge to be
based on whether the routed order is in a Penny or non-Penny issue and
to establish a single fee that would be applicable to all routed orders
in Penny issues, and a single fee for all routed orders in non-Penny
issues. Specifically, the Exchange proposes that the fee for routed
orders would be set at a fixed amount intended to counterbalance the
internal resources required to support the handling of orders routed
away from the Exchange. The Exchange proposes to implement a flat fee
structure for routing fees, which the Exchange believes would
streamline the process of calculating fees applied to orders routed
away from the Exchange because it would, among other things, reduce the
administrative burden of recalibrating routing fees each time an away
exchange modifies its relevant transaction fees. Accordingly, the
Exchange proposes a Routing Surcharge of $0.61 in Penny issues, and
$1.21 in non-Penny issues. The Exchange believes that having a single
published rate for all routed orders in Penny issues and a single
published rate for all routed orders in non-Penny issues would also
reduce potential confusion relating to the amount of the surcharge for
a given routed order (particularly in light of the variability in
transaction fees across other options markets) and would permit market
participants to determine execution costs at the time of order entry,
thereby promoting clarity and transparency in the Fee Schedule. The
Exchange believes the proposed routing fee structure is not novel, as
at least one other options exchange similarly applies fixed routing
fees based on whether the routed order is in a Penny or non-Penny
issue, and that the proposed amounts of the fees are within the range
of fees applied by other markets to routed orders.\5\
---------------------------------------------------------------------------
\5\ See, e.g., BOX Options Exchange Fee Schedule, available at:
https://boxexchange.com/assets/BOX-Fee-Schedule-as-of-March-6-2023.pdf (providing for fixed routing fees of $0.60 per contract fee
for customer orders in Penny classes and $0.85 per contract fee for
customer orders in non-Penny class); Cboe Exchange, Inc. Options Fee
Schedule, available at: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing, for example, Customer routing fees
of $0.75 for orders in Penny issues or $1.25 for orders in non-Penny
issues routed to certain away markets and Non-Customer routing fees
of $1.17 for all orders in Penny issues or $1.45 for all orders in
non-Penny issues routed away).
---------------------------------------------------------------------------
Introductory Pricing for Newly Enrolled Market Makers
Section III.A. of the Fee Schedule provides for monthly ATP fees.
Footnote 2 of Section III.A. further provides that an ATP Holder that
newly enrolls to operate as a Market Maker may be entitled to
introductory pricing on ATP fees for up to six months.\6\ The Exchange
similarly offers newly enrolled Market Makers introductory pricing on
Premium Product Fees for up to six months, as set forth in Section
III.B, Footnote 1.\7\
---------------------------------------------------------------------------
\6\ A newly enrolled Market Maker on the Exchange may be
entitled to introductory pricing on its ATP Fees for up to six
months, beginning the first month in which it registers. For the
first three months (i.e., months 1-3), the Exchange waives the ATP
fees, and for the latter three months (i.e., months 4-6), the
Exchange discounts such ATP fees by 50%, unless the Market Maker
achieves a monthly ADV equal to at least 0.05% of TCADV, at which
time the Exchange would charge the Market Maker 100% of its ATP Fees
for the remaining months, regardless of its monthly ADV in
subsequent months. An ATP Holder may qualify for this introductory
pricing only once in a 24-month period, which period begins in the
first month the ATP Holder registers on the Exchange.
\7\ A newly enrolled Market Maker on the Exchange may be
entitled to introductory pricing on its Premium Product Fees for up
to six months, beginning the first month in which it registers. For
the first three months (i.e., months 1-3), the Exchange waives
Premium Product Fees, and for the latter three months (i.e., months
4-6), the Exchange discounts such Premium Product Fees by 50%,
unless the Market Maker achieves a monthly ADV equal to at least
0.05% of TCADV, at which time the Exchange would charge the Market
Maker 100% of its Premium Product Fees for the remaining months,
regardless of its monthly ADV in subsequent months. An ATP Holder
may qualify for this introductory pricing only once in a 24-month
period, which period begins in the first month the ATP Holder
registers on the Exchange.
---------------------------------------------------------------------------
The Exchange now proposes to delete Section III.A., Footnote 2 and
Section III.B., Footnote 1 to eliminate the introductory pricing for
newly enrolled Market Makers on ATP fees and Premium Product Fees,
respectively, as no ATP Holders have qualified for this pricing in the
last few years. The Exchange adopted this introductory pricing to
encourage ATP Holders to enroll as Market Makers. However, because
these pricing incentives have been underutilized (and therefore did not
achieve their intended effect), the Exchange proposes to eliminate such
pricing from the Fee Schedule and believes that ATP Holders would not
be impacted by its removal.
Floor Broker Grow With Me Program
The Exchange proposes to add the Floor Broker Grow With Me program,
[[Page 26631]]
through which Floor Broker organizations (``Floor Brokers'') may earn a
($0.05) rebate on manual billable volume. The Exchange proposes to add
this program in Section III.E.2. of the Fee Schedule, which is
currently designated as Reserved. The Exchange proposes that the Floor
Broker Grow With Me program would provide Floor Brokers with an
opportunity to earn a rebate on manual billable volume based on
demonstrated growth as compared to the Floor Brokers' manual billable
volume ADV in January 2023 (the ``base period''). The Exchange proposes
that Floor Brokers that achieve (1) manual billable contracts volume of
100% over their base period volume in a month or (2) an ADV of 25,000
manual billable contracts in a month, whichever is greater, would be
eligible for a rebate of ($0.05) per billable side. The Exchange
proposes that Floor Brokers new to the Exchange would be eligible to
qualify for the program by achieving the second qualifying criteria,
which is not tied to base period volume. The Exchange further proposes
that the Floor Broker Grow With Me program would be in place with these
qualifying criteria until July 31, 2023, which would allow the Exchange
a period to evaluate such criteria and to submit a proposed rule change
regarding qualifications for the program beyond that date.
Although the Exchange cannot predict with certainty whether the
proposed change would encourage Floor Brokers to increase their manual
billable volume on the Exchange, the proposed change is designed to
continue to incentivize Floor Brokers to do so by offering a rebate on
manual billable volume. All Floor Brokers, including new Floor Brokers,
would be eligible to earn a rebate through the Floor Broker Grow With
Me program, as proposed.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\9\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 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.'' \10\
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\10\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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There are currently 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.\11\ Therefore, no exchange possesses significant pricing power
in the execution of multiply-listed equity and ETF options order flow.
More specifically, in January 2023, the Exchange had less than 8%
market share of executed volume of multiply-listed equity and ETF
options trades.\12\
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\11\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
\12\ Based on a compilation of OCC data for monthly volume of
equity-based options and monthly volume of ETF-based options, see
id., the Exchange's market share in equity-based options was 7.03%
for the month of January 2022 and 7.96% for the month of January
2023.
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain options exchange transaction fees. Stated otherwise, changes
to exchange transaction fees can have a direct effect on the ability of
an exchange to compete for order flow.
The Exchange believes the proposed change to the Routing Surcharge
is reasonable because it would establish a single fee that would be
applicable to all routed orders in Penny issues and a single fee that
would be applicable to all routed orders in non-Penny issues, and such
fees would be applicable to all market participants equally. In
addition, the Exchange believes the proposed change is reasonable
because it would provide for routing fees that would counterbalance the
internal resources required to support the handling of orders routed
away from the Exchange and would streamline the process of calculating
routing fees by obviating the need to recalibrate fees based on
individual away market fees (which are variable and subject to frequent
change) and eliminating any potential confusion as to routing fees
applicable to a given order. The Exchange also notes that a fixed fee
structure for routing fees is not novel and that the amounts of the
proposed Routing Surcharge amounts are within the range of routing fees
currently charged by other options exchanges.\13\
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\13\ See note 5, supra.
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The Exchange believes that the proposed change to delete FAANG
transaction fees and credits is reasonable because FAANG options were
delisted after monthly expiration in February 2023, and such fees and
credits are no longer applicable to any market participants. The
Exchange believes that the proposed change to eliminate certain
introductory pricing for newly enrolled Market Makers is reasonable
because these programs have not served to encourage ATP Holders to
enroll as Market Makers on the Exchange. Accordingly, the Exchange
believes that the proposed changes to eliminate text from the Fee
Schedule relating to discontinued or underutilized programs would
promote clarity in the Fee Schedule, to the benefit of all market
participants.
The Exchange believes that the proposed Floor Broker Grow With Me
Program is reasonable because it is designed to continue to incent
Floor Brokers to increase their manual billable volume executed on the
Exchange and provides Floor Brokers with two ways to earn the
additional rebate offered by the program. The Exchange also believes
that using a Floor Broker organization's January 2023 manual billable
volume ADV as a basis for measuring growth is reasonable because it
reflects each organization's recent volumes and that the 25,000 manual
billable contracts alternative requirement is reasonable because it
would permit new Floor Brokers without base period volume to qualify
for the program by meeting a requirement that also applies to current
Floor Brokers. The Exchange also believes that it is reasonable to
implement the program with the proposed qualifying criteria through
July 31, 2023, as the Exchange would be able to further evaluate such
criteria in the interim period and prepare a proposed rule change
regarding appropriate qualifying criteria for the program beyond such
date.
[[Page 26632]]
To the extent that the proposed changes improve the clarity and
transparency of the Fee Schedule, the Exchange believes they would
continue to make the Exchange a more competitive venue for order
execution, which, in turn, promotes just and equitable principles of
trade and removes impediments to and perfects the mechanism of a free
and open market and a national market system. The Exchange notes that
all market participants stand to benefit from any increase in volume,
which could promote market depth, facilitate tighter spreads and
enhance price discovery, particularly to the extent the proposed change
encourages market participants to utilize the Exchange as a primary
trading venue, and may lead to a corresponding increase in order flow
from other market participants.
Finally, to the extent the proposed change continues to attract
greater volume and liquidity, the Exchange believes the proposed change
would improve the Exchange's overall competitiveness and strengthen its
market quality for all market participants. In the backdrop of the
competitive environment in which the Exchange operates, the proposed
rule change is a reasonable attempt by the Exchange to increase the
depth of its market and improve its market share relative to its
competitors. The Exchange's fees are constrained by intermarket
competition, as market participants can choose to direct their order
flow to any of the 16 options exchanges The Exchange believes that
proposed rule change is designed to continue to incent market
participants to direct liquidity to the Exchange, and, to the extent
they continue to be incentivized to aggregate their trading activity at
the Exchange, that increased liquidity could promote market depth,
price discovery and improvement, and enhanced order execution
opportunities for all market participants.
The Proposed Rule Change Is an Equitable Allocation of Fees and Credits
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits. The proposed change to the Routing
Surcharge is equitable because the proposed single fee for all routed
orders in Penny issues and single fee for all routed orders in non-
Penny issues would apply to all market participants equally and the
proposed amounts are designed to offset internal resources necessary to
support the handling of orders routed away from the Exchange. The
proposed change would also streamline the process of calculating
routing fees for all market participants and provide increased clarity
regarding execution costs at the time of order entry. The proposed
change to delete fees and credits relating to FAANG transactions is
also equitable because their elimination would likewise apply to all
market participants equally. The Exchange also believes that the
proposed changes to eliminate introductory pricing for newly enrolled
Market Makers in ATP fees and Premium Product Fees are equitable
because the pricing programs would no longer be available to any ATP
Holders, and, moreover, no ATP Holders have qualified for the
introductory pricing in recent years. The Exchange believes that the
proposed rebate for Floor Brokers through the Floor Broker Grow With Me
Program is an equitable allocation of fees and credits because the
rebate would be available to all qualifying Floor Brokers equally, and
Floor Brokers may qualify for the rebate based on either growth over
their own base period volume or an alternative that would permit new
Floor Brokers that do not have base period volume to qualify for the
program on a basis that is also applicable to current Floor Brokers.
The Exchange also believes that the proposal to offer the Floor Broker
Grow With Me program with the current qualifying criteria through July
31, 2023 is equitable because the intervening period would provide the
Exchange an opportunity to evaluate the parameters of the program and
to submit a proposed rule change regarding the criteria for the program
going forward. The Exchange further believes that the proposed change
is equitable because it is intended to encourage the role performed by
Floor Brokers in facilitating the execution of orders via open outcry,
a function which the Exchange wishes to support for the benefit of all
market participants.
To the extent that the proposed changes continue to incent ATP
Holders to utilize the Exchange as a primary execution venue and
attract more volume on the Exchange, this increased order flow would
continue to make the Exchange a more competitive venue for, among other
things, order execution. Thus, the Exchange believes the proposed rule
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 Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes the proposed change is not unfairly
discriminatory. The proposed change to the Routing Surcharge is not
unfairly discriminatory because the proposed fees are intended to
assess streamlined routing fees in amounts that would appropriately
account for the internal resources necessary to support orders routed
away from the Exchange and would apply equally to all market
participants' routed orders, based on whether such order is in a Penny
or non-Penny issue. The proposed change would simplify the calculation
of routing fees for all market participants and add clarity and
transparency to the Fee Schedule regarding the fees applicable to
routed orders. The proposed change to delete fees and credits relating
to FAANG transactions is not unfairly discriminatory because they are
no longer applicable to any market participants following the delisting
of FAANG options. The Exchange also believes that the proposed changes
to eliminate introductory pricing for new Market Makers in ATP fees and
Premium Product Fees are equitable because the pricing programs would
be eliminated in their entirety and would no longer be available to any
ATP Holders. Finally, the Exchange believes that the proposed Floor
Broker Grow With Me Program is not unfairly discriminatory because
current and new Floor Brokers alike are eligible to qualify for the
rebate and is not unfairly discriminatory to non-Floor Brokers because
Floor Brokers serve an important function in facilitating the execution
of orders on the Exchange, which the Exchange wishes to encourage and
support to promote price improvement opportunities for all market
participants.
Thus, the Exchange believes that, to the extent the proposed rule
change would continue to improve market quality for all market
participants on the Exchange by promoting clarity and transparency in
the Fee Schedule and attract more order flow to the Exchange, thereby
improving market-wide quality and price discovery, the resulting
increased volume and liquidity would provide more trading opportunities
and tighter spreads to all market participants and thus would promote
just and equitable principles of trade, remove impediments to and
perfect the mechanism of a free and open market and a national market
system and, in general, protect investors and the public interest.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
[[Page 26633]]
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, the Exchange does
not believe that the proposed rule change would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Instead, as discussed above, the Exchange believes
that the proposed changes would encourage the submission of additional
liquidity to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for all market participants. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering integrated competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \14\
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\14\ See Reg NMS Adopting Release, supra note 9, at 37499.
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Intramarket Competition. The proposed change is designed to improve
the clarity and transparency of the Fee Schedule and to continue to
attract order flow to the Exchange. The proposed change to offer Floor
Brokers a rebate on manual billable volume through the Floor Broker
Grow With Me program is intended to attract additional order flow to
the Exchange, which could increase the volumes of contracts traded on
the Exchange. Greater liquidity benefits all market participants on the
Exchange, and increased manual billable transactions could increase
opportunities for execution of other trading interest. The Exchange
believes that the proposed change to the Routing Surcharge would not
impose any burden on competition that is not necessary or appropriate
because it is intended to simplify the calculation of fees for routed
orders and to continue to incent Firms to direct order flow to the
Exchange, thereby promoting liquidity on the Exchange to the benefit of
all market participants. The Exchange does not believe that the
proposed changes relating to FAANG transactions or introductory pricing
for newly enrolled Market Makers would impose any burden on competition
that is not necessary or appropriate because the changes would apply
equally to all ATP Holders and would add clarity to the Fee Schedule,
to the benefit of all market participants.
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange has more than 16% of the market share of executed volume of
multiply-listed equity and ETF options trades.\15\ Therefore, no
exchange possesses significant pricing power in the execution of
multiply-listed equity and ETF options order flow. More specifically,
in January 2023, the Exchange had less than 8% market share of executed
volume of multiply-listed equity and ETF options trades.\16\
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\15\ See note 11, supra.
\16\ See note 12, supra.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees and
credits in a manner designed to continue to incent Floor Brokers to
direct trading interest (particularly manual billable volume) to the
Exchange, to provide liquidity, and to attract order flow. In addition,
to the extent that the proposed change to simplify the Routing
Surcharge incentivizes ATP Holders to utilize the Exchange as a primary
trading venue for all transactions, all of the Exchange's market
participants should benefit from the improved market quality and
increased opportunities for price improvement. The Exchange also
believes that the proposed rule change reflects this competitive
environment because it removes underutilized programs from the Fee
Schedule that did not achieve their intended purpose. The Exchange
notes that it operates in a highly competitive market in which market
participants can readily favor competing venues, including one that
offers similarly structured routing fees.\17\ In such an environment,
the Exchange must continually review, and consider adjusting, its fees
and credits to remain competitive with other exchanges.
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\17\ See note 5, supra.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \18\ of the Act and subparagraph (f)(2) of Rule
19b-4 \19\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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) \20\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2023-28 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAMER-2023-28. 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
[[Page 26634]]
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. Do
not include personal identifiable information in submissions; you
should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-NYSEAMER-2023-28, and
should be submitted on or before May 22, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09086 Filed 4-28-23; 8:45 am]
BILLING CODE 8011-01-P
