[Federal Register Volume 85, Number 94 (Thursday, May 14, 2020)]
[Notices]
[Pages 28992-28996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10286]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88840; File No. SR-NYSEAMER-2020-37]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change Modifying the
NYSE American Options Fee Schedule
May 8, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 6, 2020, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in
[[Page 28993]]
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\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'') to extend through May 2020 certain fee
changes implemented for April 2020. The Exchange proposes to implement
the fee change effective May 6, 2020.\4\ The proposed change is
available on the Exchange's website at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
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\4\ The Exchange originally filed to amend the Fee Schedule on
May 1, 2020 (SR-NYSEAMER-2020-36) and withdrew such filing on May 6,
2020.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to modify the Fee Schedule to extend
through May 2020 certain fee changes implemented for April 2020, as
described below. The Exchange proposes to implement the fee change
effective May 6, 2020.
On March 18, 2020, the Exchange announced that it would temporarily
close the Trading Floor, effective Monday, March 23, 2020, as a
precautionary measure to prevent the potential spread of COVID-19.
Following the temporary closure of the Trading Floor, the Exchange
temporarily modified certain fees for April 2020.\5\ Because the
Trading Floor remains closed and has been closed for a longer period
than expected--including seven business days in March, the Exchange
proposes to extend the April 2020 fee changes through May 2020.
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\5\ See Securities Exchange Act Release Nos. 88595 (April 8,
2020), 85 FR 20737 (April 14, 2020) (SR-NYSEAMER-2020-25) (waiving
Floor-based fixed fees); 88682 (April 8, 2020), 85 FR 20799 (April
14, 2020) (SR-NYSEAMER-2020-26) (raising Floor Broker QCC Rebate
Cap); 88682 (April 17, 2020), 85 FR 22772 (April 23, 2020) (SR-
NYSEAMER-2020-31) (including reversals and conversions in Strategy
Execution Fee Cap).
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Waiver of Floor-Based Fixed Fees
First, the Exchange proposes to extend through May 2020 the waiver
of the following Floor-based fix fees, which relate directly to Floor
operations, are charged only to Floor participants and do not apply to
participants that conduct business off-Floor:
Floor Access Fee;
Floor Broker Handheld
Transport Charges
Floor Market Maker Podia;
Booth Premises; and
Wire Services.\6\
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\6\ See proposed Fee Schedule, Section III.B, Monthly Trading
Permit, Rights, Floor Access and Premium Product Fees, and IV.
Monthly Floor Communication, Connectivity, Equipment and Booth or
Podia Fees.
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This proposed extension of the fee waiver would reduce monthly
costs for Floor participants whose operations have been disrupted by
the unanticipated Floor closure. In reducing this monthly financial
burden while the Floor remains temporarily closed, the proposed change
would allow affected participants to reallocate funds to assist with
the cost of shifting and maintaining their previously on-Floor
operations to off-Floor and recoup losses as a result of the
unanticipated Floor closure. Absent this change, such participants may
experience an unexpected increase in the cost of doing business on the
Exchange.\7\ The Exchange believes that all ATP Holders that conduct
business on the Trading Floor would benefit from this proposed fee
change.
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\7\ The Exchange will refund participants of the Floor Broker
Prepayment Program for any prepaid May 2020 fees that are waived.
See proposed Fee Schedule, Section III.E (providing that ``the
Exchange will refund certain of the prepaid Eligible Fixed costs
that were waived for April and May 2020, per Sections III.B and
IV'').
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Floor Broker QCC Cap
Second, the Exchange proposes to extend through May 2020 the
increase in the maximum allowable Floor Broker credit, which is
typically $425,000 up to $625,000 per month per Floor Broker (the ``FB
QCC Cap'').\8\ Following the temporary closure of the Trading Floor,
the Exchange experienced an unanticipated surge in QCC trades. The
Exchange therefore believes that extending this fee change during the
period while the Trading Floor remains temporarily closed would allow
incentives to operate as intended--to encourage Floor Brokers to
execute volume on the Exchange and to continue to execute all QCC
transactions on the Exchange and, for the month of May, to continue to
increase the number of such QCC transactions.
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\8\ See proposed Fee Schedule, Section I.F., QCC Fees & Credits,
n. 1 (setting forth available credits to Floor Brokers and providing
that ``[t]he maximum Floor Broker credit paid shall not exceed
$425,000 per month per Floor Broker firm (the ``Cap''), except that
for the months of April and May 2020, the Cap would be $625,000 per
Floor Broker firm'').
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Absent the proposed change, participating Floor Brokers--whose
operations have been disrupted by the unanticipated Floor closure for
more than a month--could experience an unintended increase in the cost
of trading on the Exchange, a result that is unintended and undesirable
to the Exchange and its Floor Brokers trading QCCs. The Exchange
believes that extending the increase in the FB QCC Cap through May
would provide Floor Brokers with greater certainty as to their monthly
costs and diminish the likelihood of an effective increase in the cost
of trading.
The Exchange cannot predict with certainty whether any Floor
Brokers would benefit from this proposed fee change. However, without
this proposed change during a time when Floor Brokers have increasingly
turned to QCCs because the temporary Trading Floor closure prevents
open outcry trading, the Exchange believes the proposed change is
necessary to prevent Floor Brokers from diverting QCC order flow from
the Exchange if and when they hit the Cap.
Strategy Fee Execution Cap
Finally, the Exchange proposes to extend through May 2020 the
inclusion of reversals and conversions executed as QCCs (``RevCon
QCCs'') in the $1,000 daily Strategy Execution Cap (the ``Strategy
Cap'').\9\ Absent this change, RevCon QCCs are not eligible for the
Strategy Cap (but instead are subject to QCC Fees & Credits).\10\ With
the temporary closure of the Trading Floor, which has continued longer
than anticipated, Floor Brokers are unable to execute RevCons in open
outcry. Floor
[[Page 28994]]
Brokers, however, are able to execute RevCon QCCs electronically via
the Exchange systems. The Exchange believes the proposed inclusion of
RevCon QCCs in the Strategy Cap, which is available to all ATP Holders,
would encourage ATP Holders (including those acting as Floor Brokers)
to execute their RevCon QCC volume on the Exchange, particularly during
the period when open outcry is unavailable and to continue to increase
the number of such RevCon QCC transactions during the month of May.
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\9\ See proposed Fee Schedule, Sections I.J., Strategy Execution
Fee Cap (including RevCon QCCs in the Strategy Cap during May 2020)
and Section I.F., QCC Fees & Credits, n. 1 (providing that ``[t]he
Floor Broker credit will not apply to any QCC trades that qualify
for the Strategy Cap during the months of April and May 2020 (per
Section I.J.)'').
\10\ See Fee Schedule, Section I.F., QCC Fees & Credits.
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The Exchange cannot predict with certainty whether any ATP Holders
would benefit from this proposed fee change. At present, whether or
when an ATP Holder qualifies for the Strategy Cap varies day-to-day,
month-to-month. That said, the Exchange believes that ATP Holders would
be encouraged to take advantage of the modified Cap. In addition, the
Exchange believes the proposed change is necessary to prevent ATP
Holders from diverting RevCon QCC order flow from the Exchange to a
more economical venue.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Sections 6(b)(4) and (5) of the Act,\12\ in particular,
because it provides for the equitable allocation of reasonable dues,
fees, and other charges among its members, issuers and other persons
using its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange operates in a highly competitive market. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. In Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.''\13\
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\13\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS
Adopting Release'').
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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.\14\ Therefore, currently no exchange possesses significant
pricing power in the execution of multiply-listed equity & ETF options
order flow. More specifically, in January 2020, the Exchange had less
than 10% market share of executed volume of multiply-listed equity &
ETF options trades.\15\
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\14\ The OCC publishes options and futures volume in a variety
of formats, including daily and monthly volume by exchange,
available here: https://www.theocc.com/market-data/volume/default.jsp.
\15\ Based on OCC data, see id., the Exchange's market share in
equity-based options declined from 9.82% for the month of January
2019 to 8.08% for the month of January 2020.
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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 and credits can have a direct effect on
the ability of an exchange to compete for order flow. The proposed rule
change is a reasonable attempt by the Exchange to increase the depth of
its market and improve its market share relative to its competitors.
The Exchange's fees are constrained by intermarket competition, as ATP
Holders--whose operations may have been (unintentionally) disrupted by
the unanticipated temporary closure of the Floor--may direct their
order flow to any of the 16 options exchanges.
Waiver of Floor-Based Fixed Fees
This proposed extension of the fee waiver is reasonable, equitable,
and not unfairly discriminatory because it would reduce monthly costs
for Floor participants whose operations have been disrupted by the
unanticipated Floor closure for more than a month. In reducing this
monthly financial burden, the proposed change would allow affected
participants to reallocate funds to assist with the cost of shifting
and maintaining their previously on-Floor operations to off-Floor and
recoup losses as a result of the unanticipated Floor closure. Absent
this change, such participants may experience an unexpected increase in
the cost of doing business on the Exchange.
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits as it merely continues the fee
waiver granted in April 2020, which impacts fees charged only to Floor
participants and do not apply to participants that conduct business
off-Floor.
The Exchange believes that the proposal is not unfairly
discriminatory because the proposed continuation of the fee waiver
would affect all similarly-situated market participants on an equal and
non-discriminatory basis.
The Exchange believes that all ATP Holders that conduct business on
the Trading Floor would benefit from this proposed fee change.
FB QCC Cap
This proposed extension of the increase to the FB QCC Cap through
May is reasonable, equitable, and not unfairly discriminatory because
it would allow Exchange incentives to operate as intended and continue
encourage QCC volume, which has seen an uptick in volume on the
Exchange following the temporary closure of the Trading Floor. The
proposed change would also facilitate fair and orderly markets by
attempting to avoid an unintended increase in the cost of Floor
Brokers' QCC trading on the Exchange. Absent the proposed change,
participating Floor Brokers could experience an unintended increase in
the cost of trading on the Exchange, a result that is unintended and
undesirable to the Exchange and its Floor Brokers trading QCCs. The
Exchange believes that the proposed increase to the Cap for May when
the Trading Floor continues to be unavailable would provide Floor
Brokers with greater certainty as to their monthly costs and diminish
the likelihood of an effective increase in the cost of trading. To the
extent that the proposed change attracts more QCC trades to the
Exchange, this increased order flow would continue to make the Exchange
a more competitive venue for, among other things, order execution,
which, in turn, promotes just and equitable principles of trade and
removes impediments to and perfects the mechanism of a free and open
market and a national market system.
The Exchange cannot predict with certainty whether any Floor
Brokers would benefit from this proposed fee change. However, without
this proposed change during a time when Floor Brokers have increasingly
turned to QCCs because the ongoing temporary Trading Floor closure
prevents open outcry trading, the Exchange believes the proposed change
is necessary to prevent Floor Brokers from diverting QCC order flow
from the Exchange if and when they hit the FB QCC Cap.
The Exchange believes the proposed rule change is an equitable
allocation of its fees and credits and not unfairly
[[Page 28995]]
discriminatory because it is based on the amount and type of business
transacted on the Exchange during May and Floor Brokers can opt to
avail themselves of the modified Cap (i.e., by executing more QCC
transactions) or not. The proposed change would incent Floor Brokers to
attract increased QCC order flow to the Exchange that might otherwise
go to other options exchanges.
The Exchange believes it is not unfairly discriminatory to modify
the maximum allowable credit on QCC transactions to Floor Brokers
because the proposed modification would be available to all similarly-
situated market participants (i.e., Floor Brokers) on an equal and non-
discriminatory basis.
Strategy Cap
This proposed extension of the inclusion of RevCon QCCs in the
$1,000 daily Strategy Cap for May 2020 is reasonable, equitable, and
not unfairly discriminatory because it would encourage ATP Holders to
execute their RevCon QCC volume on the Exchange, particularly during
the period when open outcry is unavailable due to the ongoing temporary
closure of the Trading Floor and to increase the number of such RevCon
QCC transactions during the month of May. Further, the proposal is
designed to encourage ATP Holders to aggregate all Strategy
Executions--including RevCon QCCs--at the Exchange as a primary
execution venue. To the extent that the proposed change attracts more
Strategy Executions 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 Exchange believes the proposed rule change is an equitable
allocation of its fees and credits and not unfairly discriminatory
because it is based on the amount and type of business transacted on
the Exchange and ATP Holders can opt to avail themselves of the
modified Strategy Cap (i.e., by executing more RevCon QCC transactions)
or not.
The Exchange believes it is not unfairly discriminatory to extend
the modification of the Strategy Cap through May because the proposed
change would be available to all similarly-situated market participants
on an equal and non-discriminatory basis.
Finally, the Exchange believes that it is subject to significant
competitive forces, as described below in the Exchange's statement
regarding the burden on competition.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act, the Exchange does
not believe that the proposed rule change would impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange believes that the proposed changes
would encourage the continued participation of affected ATP Holders,
thereby promoting market depth, price discovery and transparency and
enhancing order execution opportunities for all market participants. As
a result, the Exchange believes that the proposed change furthers the
Commission's goal in adopting Regulation NMS of fostering integrated
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \16\
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\16\ See Reg NMS Adopting Release, supra note 13, at 37499.
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Intramarket Competition. The proposed continuation of the April
2020 fee changes through May 2020 are designed to reduce monthly costs
for Floor participants whose operations have been disrupted by the
unanticipated Floor closure as well as to avoid an unintended increase
in trading costs given the unavailability of open outcry trading on the
Exchange. In addition, the continuation of the April 2020 fee changes
is designed to attract additional order flow (particularly QCC trades
and RevCon QCCs) to the Exchange
Intermarket Competition. The Exchange operates in a highly
competitive market in which market participants can readily favor one
of the 16 competing option exchanges if they deem fee levels at a
particular venue to be excessive. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single
exchange currently has more than 16% of the market share of executed
volume of multiply-listed equity and ETF options trades.\17\ Therefore,
currently no exchange possesses significant pricing power in the
execution of multiply-listed equity & ETF options order flow. More
specifically, in January 2020, the Exchange had less than 10% market
share of executed volume of multiply-listed equity & ETF options
trades.\18\
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\17\ See supra note 14.
\18\ Based on OCC data, supra note 15, the Exchange's market
share in equity-based options was 9.57% for the month of January
2019 and 9.59% for the month of January, 2020.
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The Exchange believes that the proposed rule change reflects this
competitive environment because it modifies the Exchange's fees in a
manner designed to reduce monthly costs for Floor participants whose
operations have been disrupted by the unanticipated Floor closure and
to encourage ATP Holders to direct trading interest (particularly QCCs
and RevCon QCCs) to the Exchange, to provide liquidity and to attract
order flow. To the extent that this purpose is achieved, all the
Exchange's market participants should benefit from the improved market
quality and increased opportunities for price improvement.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
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) \19\ of the Act and subparagraph (f)(2) of Rule
19b-4 \20\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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.
[[Page 28996]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEAMER-2020-37 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEAMER-2020-37. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEAMER-2020-37, and should be
submitted on or before June 4, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10286 Filed 5-13-20; 8:45 am]
BILLING CODE 8011-01-P