88 FR 236 pgs. 85938-85941 - 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
Type: NOTICEVolume: 88Number: 236Pages: 85938 - 85941
Pages: 85938, 85939, 85940, 85941Docket number: [Release No. 34–99087; File No. SR–NYSEAMER–2023–63]
FR document: [FR Doc. 2023–27065 Filed 12–8–23; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99087; File No. SR-NYSEAMER-2023-63]
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
December 5, 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 November 27, 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.
Footnotes:
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 the Firm Monthly Fee Cap. The Exchange proposes to implement the fee change effective November 27, 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.
Footnotes:
4 ?The Exchange originally filed to amend the Fee Schedule on October 31, 2023 (SR-NYSEAMER-2023-55), then withdrew such filing and amended the Fee Schedule on November 15, 2023 (SR-NYSEAMER-2023-60), which latter filing the Exchange withdrew on November 27, 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 modify the Firm Monthly Fee Cap. The Exchange proposes to implement the rule change on November 15, 2023.
The Firm Monthly Fee Cap is set forth in Section I.I. of the Fee Schedule. 5 Currently, a Firm's fees associated with Manual transactions are capped at $200,000 per month per Firm. 6
Footnotes:
5 ? See Fee Schedule, Section I.I., Firm Monthly Fee Cap, available at: https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
6 ?The Exchange also proposes two clarifying changes to the description of the Firm Monthly Fee Cap. First, the Exchange proposes to add text to specify that fees for QCC transactions are included in the Manual transaction fees eligible to be capped. This proposed change is not intended to modify the applicability of the Firm Monthly Fee Cap, but rather to ensure that the Fee Schedule clearly reflects the fees that are eligible for the Firm Monthly Fee Cap. Second, the Exchange proposes to delete the last sentence of the description of the Firm Monthly Fee Cap as extraneous. This proposed change similarly does not impact the applicability of the Firm Monthly Fee Cap and is instead intended to promote clarity in the Fee Schedule.
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The Exchange proposes to raise the Firm Monthly Fee Cap to $250,000 per month per Firm. To effect this change, the Exchange proposes to modify Section I.I. to replace references to a $200,000 cap with references to a $250,000 cap. 7 Once a Firm has reached the Firm Monthly Fee Cap, an incremental service fee of $0.02 per contract for Firm Manual transactions will apply, including for the execution of a QCC order. Royalty Fees and fees or volumes associated with Strategy Executions will continue to be excluded from the calculation of fees towards the Firm Monthly Fee Cap. Firm Facilitation Manual trades will also continue to be executed at the rate of $0.00 per contract regardless of whether a Firm has reached the Firm Monthly Fee Cap.
Footnotes:
7 ?The Exchange also proposes a conforming change to footnote 4 in Section I.A. (Rates for Options transactions) of the Fee Schedule, which cross-references the Firm Monthly Fee Cap as set forth in Section I.I. The Exchange likewise proposes to modify footnote 4 to replace the reference to a $200,000 cap with a reference to a $250,000 cap.
The Exchange believes that the proposed change, despite increasing the amount of the Firm Monthly Fee Cap, would continue to incent Firms to direct order flow to the Exchange to receive the benefits of a fee cap on Manual transaction fees (including fees for QCC transactions).
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.
Footnotes:
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
Footnotes:
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").
There are currently 17 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 September 2023, the Exchange had less than 8% market share of executed volume of multiply-listed equity and ETF options trades. 12
Footnotes:
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 decreased from 8.66% for the month of September 2022 to 7.31% for the month of September 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 proposed increase to the Firm Monthly Fee Cap is reasonable because the Exchange believes the fee cap, although higher, would continue to incent Firms to direct order flow to the Exchange to receive the benefits of capped fees for their Manual transactions (including QCC transactions). The Exchange also believes the proposed change is reasonable because the proposed fee cap amount would be applicable to all Firms. In addition, although the proposed change would raise the amount of the Firm Monthly Fee Cap, it would continue to offer Firms the opportunity to qualify for capped fees on Manual transactions (including QCC transactions), which the Exchange believes provides Firms with a benefit not offered by at least one other options exchange. 13 The Exchange also believes that the proposed clarifying changes are reasonable, as they are intended only to improve the clarity of the Fee Schedule (and are not intended to effect any substantive changes).
Footnotes:
13 ? See, e.g., BOX Options Fee Schedule, available at: https://boxoptions.com/fee-schedule/ (no cap on Firm manual transaction fees).
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 17 options exchanges. The Exchange believes that proposed rule change is designed to continue to incent market participants to direct liquidity and, in particular, Manual (including QCC) transactions, 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 Credits and Fees
[top] The Exchange believes the proposed rule change is an equitable allocation of its fees and credits. The proposed change is equitable because the proposal is based on the amount and type of business transacted on the Exchange. The Exchange also believes that the proposed modification of the Firm Monthly Fee Cap is equitable because it would be available to all Firms equally and would continue to provide the same fee cap amount for all Firms. The Exchange also believes that the proposed rule change is equitable with respect to non-Firm market participants because the Firm Monthly Fee Cap would not be as meaningful for Customers and because Market Makers are offered other incentives to reduce
Footnotes:
14 ?For example, Customers are not subject to a fee for Manual transactions, and the Exchange offers various incentives to Market Makers, including the Market Maker Sliding Scale and Prepayment Program. See Fee Schedule at Sections I.A., I.C., and I.D.
The Proposed Rule Change Is Not Unfairly Discriminatory
The Exchange believes that the modification of the Firm Monthly Fee Cap is not unfairly discriminatory because the fee cap amount, as proposed, would continue to be applicable to all similarly situated Firms, any of which could continue to be incentivized to direct order flow to the Exchange to qualify for the fee cap. Moreover, the proposed change to the Firm Monthly Fee Cap is not unfairly discriminatory because it would continue to apply the same fee cap amount to all Firms. The Exchange notes that offering the Firm Monthly Fee Cap, as proposed, to Firms but not to other market participants is not unfairly discriminatory because the Firm Monthly Fee Cap would not be as meaningful for Customers and because Market Makers are offered other incentives to reduce transaction fees. 15
Footnotes:
15 ? See id.
To the extent the proposed change continues to attract Manual (including QCC) transactions to the Exchange, this increased order flow would continue to make the Exchange a more competitive venue for order execution. Thus, the Exchange believes the proposed rule 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 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.
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 change 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."? 16
Footnotes:
16 ? See Reg NMS Adopting Release, supra note 9, at 37499.
Intramarket Competition. The proposed change is designed to continue to attract 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 the Exchange believes that the proposed modification of the Firm Monthly Fee Cap (even though it would raise the amount of the fee cap) would not impose any burden on competition that is not necessary or appropriate because it is intended to continue to incentivize Firms to direct order flow to the Exchange to be eligible for the benefits of capped fees on Manual transactions (including QCC transactions), thereby promoting liquidity on the Exchange 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 17 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. 17 Therefore, no exchange possesses significant pricing power in the execution of multiply-listed equity and ETF options order flow. More specifically, in September 2023, the Exchange had less than 8% market share of executed volume of multiply-listed equity and ETF options trades. 18
Footnotes:
17 ? See note 10, supra.
18 ? See note 11, supra.
The Exchange believes that the proposed rule change reflects this competitive environment because it modifies the Exchange's fees in a manner designed to continue to incent market participants to direct trading interest to the Exchange, to provide liquidity and to attract order flow. To the extent that Firms are incentivized 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 further believes that the proposed change could promote competition between the Exchange and other execution venues, including those that do not offer a cap on Firm fees, 19 by encouraging additional orders to be sent to the Exchange for execution. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges.
Footnotes:
19 ? See note 12, supra.
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
[top] The foregoing rule change is effective upon filing pursuant to section 19(b)(3)(A)? 20 of the Act and
Footnotes:
20 ?15 U.S.C. 78s(b)(3)(A).
21 ?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)? 22 of the Act to determine whether the proposed rule change should be approved or disapproved.
Footnotes:
22 ?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 rule-comments@sec.gov. Please include file number SR-NYSEAMER-2023-63 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-2023-63. 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 subject to copyright protection. All submissions should refer to file number SR-NYSEAMER-2023-63 and should be submitted on or before January 2, 2024.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 23
Footnotes:
23 ?17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27065 Filed 12-8-23; 8:45 am]
BILLING CODE 8011-01-P