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, 39311-39314 [2023-12764]

Download as PDF Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97679; File No. SR–CBOE– 2023–020] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Make the Nonstandard Expirations Pilot Program Permanent For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–12753 Filed 6–14–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97694; File No. SR– NYSEAMER–2023–31] lotter on DSK11XQN23PROD with NOTICES1 June 9, 2023. On April 11, 2023, Cboe Exchange, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to make permanent the operation of its pilot program that permits the Exchange to list broad-based index options with nonstandard expirations. The proposed rule change was published for comment in the Federal Register on May 1, 2023.3 Section 19(b)(2) of the Act 4 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is June 15, 2023. The Commission is extending this 45day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. Accordingly, the Commission, pursuant to section 19(b)(2) of the Act,5 designates July 30, 2023, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR– CBOE–2023–020). 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 97371 (April 25, 2023), 88 FR 26621. 4 15 U.S.C. 78s(b)(2). 5 Id. 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 June 9, 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 June 1, 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 a rebate for Qualified Contingent Cross (‘‘QCC’’) transactions. The Exchange proposes to implement the fee change effective June 1, 2023. 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. 2 17 VerDate Sep<11>2014 17:54 Jun 14, 2023 Jkt 259001 6 17 CFR 200.30–3(a)(31). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 39311 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 offer Floor Brokers an additional incentive for executing QCC transactions.4 The Exchange proposes to implement the rule change on June 1, 2023. Section I.F. of the Fee Schedule sets forth fees and credits applicable to QCC transactions.5 Currently, Floor Brokers may earn a credit of ($0.12) per contract for QCC transactions of a Customer or Professional Customer vs. a Market Maker, Firm, or Broker Dealer, and a credit of ($0.18) per contract for QCC transactions of a Market Maker, Firm, or Broker Dealer vs. a Market Maker, Firm, or Broker Dealer. The Exchange proposes to modify Section I.F. to add a QCC Billable Bonus Rebate (the ‘‘Rebate’’) for Floor Brokers’ QCC transactions. Specifically, the Exchange proposes that the Rebate would provide Floor Brokers that achieve (1) 1 million manual billable sides in a month and (2) 3 million QCC billable contracts in a month with a rebate of ($0.02) per two billable side QCC contract, payable on a monthly basis. Although the Exchange cannot predict with certainty whether the proposed change would encourage Floor Brokers to increase their manual billable volume or QCC billable volume on the Exchange, the proposed change is designed to continue to incentivize Floor Brokers to do so in order to earn an additional rebate on QCC two billable side volume. All Floor Brokers would be eligible to qualify for the Rebate, as proposed. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,6 in general, and furthers the objectives of sections 6(b)(4) and (5) of the Act,7 in particular, 4 A QCC is defined as an originating order to buy or sell at least 1,000 contracts, or 10,000 minioptions contracts, that is identified as being part of a qualified contingent trade (as that term is defined in Commentary .01 to Rule 900.3NY), coupled with a contra side order or orders totaling an equal number of contracts. See Rule 900.3NY(y). 5 See Fee Schedule, Section I.F. (QCC Fees & Credits). 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\15JNN1.SGM 15JNN1 39312 Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices 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. lotter on DSK11XQN23PROD with NOTICES1 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.’’ 8 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.9 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in April 2023, the Exchange had less than 8% market share of executed volume of multiply-listed equity and ETF options trades.10 The Exchange believes that the evershifting market share among the exchanges from month to month demonstrates that market participants can shift order flow, or discontinue or reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces constrain options exchange transaction fees. Stated otherwise, changes to exchange transaction fees can have a direct effect on the ability of an exchange to compete for order flow. The Exchange believes that the proposed Rebate is reasonable because it 8 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). 9 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. 10 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 8.14% for the month of April 2022 and 7.87% for the month of April 2023. VerDate Sep<11>2014 17:54 Jun 14, 2023 Jkt 259001 is designed to continue to incent Floor Brokers to increase their manual billable volume and QCC billable contracts executed on the Exchange. 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, including those offering rebates on QCC transactions.11 The Exchange believes that proposed rule change is designed to continue to incent Floor Brokers 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 proposal is 11 See, e.g., EDGX Options Exchange Fee Schedule, QCC Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract rebate up to 999,999 contracts for QCC transactions when only one side of the transaction is a non-customer or ($0.22) per contract rebate up to 999,999 contracts for QCC transactions with non-customers on both sides); BOX Options Fee Schedule at Section IV.D.1. (QCC Rebate) (providing for ($0.14) per contract rebate up to 1,499,999 contracts for QCC transactions when only one side of the QCC transaction is a brokerdealer or market maker or ($0.22) per contract rebate up to 1,499,999 contracts for QCC transactions when both parties are a broker-dealer or market maker); Nasdaq ISE, Options 7, Section 6.B. (QCC Rebate) (offering rebates on QCC transactions of ($0.14) per contract when only one side of the QCC transaction is a non-customer or ($0.22) per contract when both sides of the QCC transaction are non-customers). PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 based on the amount and type of business transacted on the Exchange, and Floor Brokers can choose to execute manual billable transactions and QCC billable transactions to earn the proposed Rebate or not. The Exchange also believes that the proposed Rebate is an equitable allocation of fees and credits because it would be available to all Floor Brokers equally, and all Floor Brokers would be eligible to qualify for the Rebate based on achieving the same volume requirements. 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 because the proposed Rebate is based on the amount and type of business transacted on the Exchange, and Floor Brokers are not obligated to execute billable manual or QCC volume. The Exchange also believes that the proposed change 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 attracting 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 E:\FR\FM\15JNN1.SGM 15JNN1 Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors and the public interest. Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange’s statement regarding the burden on competition. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with section 6(b)(8) of the Act, the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed 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.’’ 12 Intramarket Competition. The proposed change is designed to attract order flow to the Exchange. Specifically, the proposed change is intended to continue to incent Floor Brokers to direct manual billable volume and QCC billable volume to the Exchange by offering them a rebate on QCC billable volume, which could increase the volumes of contracts traded on the Exchange. Greater liquidity benefits all market participants on the Exchange, and increased manual billable and QCC billable transactions could increase opportunities for execution of other trading interest. Intermarket Competition. The Exchange operates in a highly competitive market in which market participants can readily favor one of the 16 competing option exchanges if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and to attract order flow to the Exchange. Based on publiclyavailable information, and excluding index-based options, no single exchange has more than 16% of the market share 12 See Reg NMS Adopting Release, supra note 8, at 37499. VerDate Sep<11>2014 17:54 Jun 14, 2023 Jkt 259001 of executed volume of multiply-listed equity and ETF options trades.13 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in April 2023, the Exchange had less than 8% market share of executed volume of multiply-listed equity and ETF options trades.14 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 and QCC billable volume) to the Exchange, to provide liquidity, and to attract order flow. To the extent that Floor Brokers are encouraged 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 notes that it operates in a highly competitive market in which market participants can readily favor competing venues, including those that offer rebates on QCC transactions.15 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. 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) 16 of the Act and subparagraph (f)(2) of Rule 19b–4 17 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 13 See note 9, supra. note 10, supra. 15 See note 11, supra. 16 15 U.S.C. 78s(b)(3)(A). 17 17 CFR 240.19b–4(f)(2). 14 See PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 39313 the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under section 19(b)(2)(B) 18 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–2023–31 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–2023–31. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or 18 15 E:\FR\FM\15JNN1.SGM U.S.C. 78s(b)(2)(B). 15JNN1 39314 Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices subject to copyright protection. All submissions should refer to file number SR–NYSEAMER–2023–31 and should be submitted on or before July 6, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–12764 Filed 6–14–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97682; File No. SR– NYSEARCA–2023–41] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule June 9, 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 June 1, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ 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. lotter on DSK11XQN23PROD with NOTICES1 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify the NYSE Arca Options Fee Schedule (‘‘Fee Schedule’’) regarding credits for Qualified Contingent Cross (‘‘QCC’’) transactions. The Exchange proposes to implement the fee change effective June 1, 2023. 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 19 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 VerDate Sep<11>2014 17:54 Jun 14, 2023 Jkt 259001 on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to amend the Fee Schedule to modify a credit offered to qualifying Submitting Brokers for QCC transactions.4 The Exchange proposes to implement the rule change on June 1, 2023. Currently, the Exchange offers Submitting Brokers a credit of ($0.22) per contract for Non-Customer vs. NonCustomer QCC transactions or ($0.16) per contract for Customer vs. NonCustomer QCC transactions.5 QCC executions in which a Customer is on both sides of the QCC trade are not eligible for a credit.6 In addition, Submitting Brokers who achieve 3 million QCC contracts in a month currently receive an additional ($0.02) credit on Customer vs. Non-Customer QCC transactions, and an additional ($0.06) credit on Non-Customer vs. NonCustomer QCC transactions. The Exchange now proposes to increase the credit on Non-Customer vs. Non-Customer QCC transactions for those Submitting Brokers that achieve the 3 million monthly QCC contract requirement from ($0.06) to ($0.08).7 The proposed ($0.08) credit will continue to be applicable back to the first QCC contract executed by a Submitting Broker in a month and will not be cumulative across tiers.8 4 A QCC Order is defined as an originating order to buy or sell at least 1,000 contracts that is identified as being part of a qualified contingent trade coupled with a contra-side order or orders totaling an equal number of contracts. See Rule 6.62P–O(g)(1)(A). 5 See Fee Schedule, QUALIFIED CONTINGENT CROSS (‘‘QCC’’) TRANSACTION FEES AND CREDITS. 6 See id. 7 The Exchange notes that the proposed change does not impact the applicability of Endnote 17, which provides that Submitting Broker QCC credits and Floor Broker rebates earned through the Manual Billable Rebate Program may not combine to exceed $2,000,000 per month per firm. See Fee Schedule, Endnote 17. 8 The Exchange currently offers an additional ($0.01) credit on Customer vs. Non-Customer QCC transactions and an additional ($0.03) credit on Non-Customer vs. Non-Customer QCC transactions to Submitting Brokers that achieve 1.5 million QCC contracts in a month. The Exchange does not propose any changes to these credits or qualifying requirements. As is currently the case, the additional QCC credits available to Submitting PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 Although the Exchange cannot predict with certainty whether the proposed change would encourage Submitting Brokers to increase their QCC volume, the proposed change is intended to continue to incentivize additional QCC executions by Submitting Brokers by increasing the credits available on certain such orders. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,9 in general, and furthers the objectives of sections 6(b)(4) and (5) of the Act,10 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.’’ 11 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.12 Therefore, no exchange possesses Brokers that achieve 1.5 million QCC contracts in a month and those available to Submitting Brokers that achieve 3 million QCC contracts in a month are not cumulative across qualifying tiers. For example, a Submitting Broker who transacts 3.1 million QCC contracts in a month would be eligible for an additional ($0.08) credit on Non-Customer vs. NonCustomer QCC transactions, as proposed, but would not also earn the additional credits offered to Submitting Brokers that achieve 1.5 million QCC contracts in a month. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4) and (5). 11 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (S7–10–04) (‘‘Reg NMS Adopting Release’’). 12 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. E:\FR\FM\15JNN1.SGM 15JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 115 (Thursday, June 15, 2023)]
[Notices]
[Pages 39311-39314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97694; File No. SR-NYSEAMER-2023-31]


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

June 9, 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 June 1, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the NYSE American Options Fee 
Schedule (``Fee Schedule'') regarding a rebate for Qualified Contingent 
Cross (``QCC'') transactions. The Exchange proposes to implement the 
fee change effective June 1, 2023. 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 offer 
Floor Brokers an additional incentive for executing QCC 
transactions.\4\ The Exchange proposes to implement the rule change on 
June 1, 2023.
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    \4\ A QCC is defined as an originating order to buy or sell at 
least 1,000 contracts, or 10,000 mini-options contracts, that is 
identified as being part of a qualified contingent trade (as that 
term is defined in Commentary .01 to Rule 900.3NY), coupled with a 
contra side order or orders totaling an equal number of contracts. 
See Rule 900.3NY(y).
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    Section I.F. of the Fee Schedule sets forth fees and credits 
applicable to QCC transactions.\5\ Currently, Floor Brokers may earn a 
credit of ($0.12) per contract for QCC transactions of a Customer or 
Professional Customer vs. a Market Maker, Firm, or Broker Dealer, and a 
credit of ($0.18) per contract for QCC transactions of a Market Maker, 
Firm, or Broker Dealer vs. a Market Maker, Firm, or Broker Dealer.
---------------------------------------------------------------------------

    \5\ See Fee Schedule, Section I.F. (QCC Fees & Credits).
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    The Exchange proposes to modify Section I.F. to add a QCC Billable 
Bonus Rebate (the ``Rebate'') for Floor Brokers' QCC transactions. 
Specifically, the Exchange proposes that the Rebate would provide Floor 
Brokers that achieve (1) 1 million manual billable sides in a month and 
(2) 3 million QCC billable contracts in a month with a rebate of 
($0.02) per two billable side QCC contract, payable on a monthly basis.
    Although the Exchange cannot predict with certainty whether the 
proposed change would encourage Floor Brokers to increase their manual 
billable volume or QCC billable volume on the Exchange, the proposed 
change is designed to continue to incentivize Floor Brokers to do so in 
order to earn an additional rebate on QCC two billable side volume. All 
Floor Brokers would be eligible to qualify for the Rebate, as proposed.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\6\ in general, and furthers the 
objectives of sections 6(b)(4) and (5) of the Act,\7\ in particular,

[[Page 39312]]

because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Rule Change is Reasonable
    The Exchange operates in a highly competitive market. The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \8\
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    \8\ 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.\9\ Therefore, no exchange possesses significant pricing power 
in the execution of multiply-listed equity and ETF options order flow. 
More specifically, in April 2023, the Exchange had less than 8% market 
share of executed volume of multiply-listed equity and ETF options 
trades.\10\
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    \9\ 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.
    \10\ 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 8.14% 
for the month of April 2022 and 7.87% for the month of April 2023.
---------------------------------------------------------------------------

    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees can have a direct effect on the ability of 
an exchange to compete for order flow.
    The Exchange believes that the proposed Rebate is reasonable 
because it is designed to continue to incent Floor Brokers to increase 
their manual billable volume and QCC billable contracts executed on the 
Exchange. 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, including those offering 
rebates on QCC transactions.\11\ The Exchange believes that proposed 
rule change is designed to continue to incent Floor Brokers 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.
---------------------------------------------------------------------------

    \11\ See, e.g., EDGX Options Exchange Fee Schedule, QCC 
Initiator/Solicitation Rebate Tiers (applying ($0.14) per contract 
rebate up to 999,999 contracts for QCC transactions when only one 
side of the transaction is a non-customer or ($0.22) per contract 
rebate up to 999,999 contracts for QCC transactions with non-
customers on both sides); BOX Options Fee Schedule at Section 
IV.D.1. (QCC Rebate) (providing for ($0.14) per contract rebate up 
to 1,499,999 contracts for QCC transactions when only one side of 
the QCC transaction is a broker-dealer or market maker or ($0.22) 
per contract rebate up to 1,499,999 contracts for QCC transactions 
when both parties are a broker-dealer or market maker); Nasdaq ISE, 
Options 7, Section 6.B. (QCC Rebate) (offering rebates on QCC 
transactions of ($0.14) per contract when only one side of the QCC 
transaction is a non-customer or ($0.22) per contract when both 
sides of the QCC transaction are non-customers).
---------------------------------------------------------------------------

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 proposal is based on the amount 
and type of business transacted on the Exchange, and Floor Brokers can 
choose to execute manual billable transactions and QCC billable 
transactions to earn the proposed Rebate or not. The Exchange also 
believes that the proposed Rebate is an equitable allocation of fees 
and credits because it would be available to all Floor Brokers equally, 
and all Floor Brokers would be eligible to qualify for the Rebate based 
on achieving the same volume requirements. 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 because the proposed Rebate is based on the amount and 
type of business transacted on the Exchange, and Floor Brokers are not 
obligated to execute billable manual or QCC volume. The Exchange also 
believes that the proposed change 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 attracting 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

[[Page 39313]]

principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national market system and, in general, 
protect investors and the public interest.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed 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.'' \12\
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    \12\ See Reg NMS Adopting Release, supra note 8, at 37499.
---------------------------------------------------------------------------

    Intramarket Competition. The proposed change is designed to attract 
order flow to the Exchange. Specifically, the proposed change is 
intended to continue to incent Floor Brokers to direct manual billable 
volume and QCC billable volume to the Exchange by offering them a 
rebate on QCC billable volume, which could increase the volumes of 
contracts traded on the Exchange. Greater liquidity benefits all market 
participants on the Exchange, and increased manual billable and QCC 
billable transactions could increase opportunities for execution of 
other trading interest.
    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.\13\ Therefore, no 
exchange possesses significant pricing power in the execution of 
multiply-listed equity and ETF options order flow. More specifically, 
in April 2023, the Exchange had less than 8% market share of executed 
volume of multiply-listed equity and ETF options trades.\14\
---------------------------------------------------------------------------

    \13\ See note 9, supra.
    \14\ See note 10, supra.
---------------------------------------------------------------------------

    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 and QCC 
billable volume) to the Exchange, to provide liquidity, and to attract 
order flow. To the extent that Floor Brokers are encouraged 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 notes that it operates in a highly competitive market in which 
market participants can readily favor competing venues, including those 
that offer rebates on QCC transactions.\15\ In such an environment, the 
Exchange must continually review, and consider adjusting, its fees and 
credits to remain competitive with other exchanges.
---------------------------------------------------------------------------

    \15\ See note 11, 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) \16\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \17\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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 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) \18\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 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 number
    SR-NYSEAMER-2023-31 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-2023-31. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or

[[Page 39314]]

subject to copyright protection. All submissions should refer to file 
number SR-NYSEAMER-2023-31 and should be submitted on or before July 6, 
2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12764 Filed 6-14-23; 8:45 am]
BILLING CODE 8011-01-P

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