[Federal Register Volume 85, Number 117 (Wednesday, June 17, 2020)]
[Notices]
[Pages 36649-36653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12988]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89049; File No. SR-NYSEAMER-2020-44]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Modifying
the NYSE American Options Fee Schedule
June 11, 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 June 5, 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 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 June 2020 certain fee
changes implemented for April and May 2020. The Exchange proposes to
implement the fee change effective June 5, 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 28, 2020 (SR-NYSEAMER-2020-42) and withdrew such filing on June
5, 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 June 2020 certain fee changes implemented for April and May
2020, as described below. The Exchange proposes to implement the fee
change effective May 28, 2020.
On March 18, 2020, the Exchange announced that it would temporarily
close the Trading Floor, effective Monday, March 23, 2020, as a
[[Page 36650]]
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 and May 2020.\5\ Although
the Trading Floor partially reopened on May 26, 2020 and normal open
outcry activity is now supported, because the Trading Floor remained
closed for a longer period than expected--including seven business days
in March, all of April and the first three weeks of May and will
continue to operate with reduced capacity due to COVID-19
considerations, the Exchange proposes to extend the fee waiver through
June 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). See also Securities Exchange Act Release No.
88840 (May 8, 2020), 85 FR 28992 (May 14, 2020) (SR-NYSEAMER-2020-
37) (extending April 2020 fee changes through May 2020).
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Waiver of Floor-Based Fixed Fees
First, the Exchange proposes to extend through June 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. The Exchange notes that it will correct a typographical
error, that states ``for April 2020 and May only,'' which adds
clarity and transparency to the Fee Schedule. See proposed Fee
Schedule, Section IV. Monthly Floor Communication, Connectivity,
Equipment and Booth or Podia Fees (providing that certain fees are
waived, ``[f]or April, May and June 2020 only . . .'').
This proposed extension of the fee waiver would reduce monthly
costs for Floor participants whose operations continue to be disrupted,
despite the fact that the Trading Floor has partially reopened. 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 prior fully-staffed on-Floor operations
to off-Floor (and now staffing back on-Floor) and recoup losses as a
result of the unanticipated Floor closure and partial reopening. 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 June 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, May and June 2020, per Sections III.B
and IV'').
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Floor Broker QCC Cap
Second, the Exchange proposes to extend through June 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. Despite
the fact that the Floor has partially reopened, the Exchange believes
that extending this fee change would allow incentives to operate as
intended and encourage Floor Brokers (particularly those whose
operations continue to be disrupted during the partial reopening of the
Floor) to execute volume on the Exchange and to continue to execute
all--and increase the number of--QCC transactions on the Exchange.
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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, May and June 2020, the Cap would be
$625,000 per Floor Broker firm'').
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Absent the proposed change, participating Floor Brokers--whose
operations were disrupted by the unanticipated Floor closure and now
partial reopening--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 June
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, 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, particularly those Floor Brokers whose operations may
continue to be disrupted as the Floor has only partially reopened.
Strategy Fee Execution Cap
Finally, the Exchange proposes to extend through June 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 continued longer than
anticipated, Floor Brokers were unable to execute RevCons in open
outcry. Floor Brokers, however, were able to execute RevCon QCCs
electronically via the Exchange systems. Although the Floor has
reopened with limited capacity due to COVID-19 considerations, 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 given that the Floor has reopened
only in a limited capacity, and to continue to increase the number of
such RevCon QCC transactions during the month of June.
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\9\ See proposed Fee Schedule, Sections I.J., Strategy Execution
Fee Cap (including RevCon QCCs in the Strategy Cap during April, May
and June 2020) and Section I.F., QCC Fees & Credits, n. 1 (providing
that ``[the Floor Broker credit will not apply to any QCC trades
that qualify for the Strategy Cap during the months of April, May
and June 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
[[Page 36651]]
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 and may continue to be
(unintentionally) disrupted by the unanticipated temporary closure of
the Floor and subsequent reopening in a limited capacity--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 approximately two months. 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 prior fully-staffed on-Floor operations to off-
Floor (and now staffing back on-Floor) and recoup losses as a result of
the unanticipated Floor closure and partial reopening. 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 and May 2020, which impacts fees charged only
to Floor participants whose operations continue to be disrupted by the
partial reopening of the Floor 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
June is reasonable, equitable, and not unfairly discriminatory because
it would allow Exchange incentives to operate as intended and continue
encourage QCC volume, which saw 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, given that the Floor has only
reopened on a partial basis due to COVID-19 considerations. 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 June when the Trading Floor is open, but only in a
limited capacity, 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 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, Exchange
also 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, particularly those Floor Brokers whose operations
continue to be disrupted as the Trading Floor has only opened in a
limited capacity due to COVID-19 considerations.
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 during June 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 June 2020 is reasonable, equitable, and
not unfairly discriminatory because it would encourage ATP Holders to
execute their RevCon QCC volume on the Exchange, particularly those
whose operations continue to be impacted by the partial reopening of
the Floor, and to increase the number of such RevCon QCC transactions
during the month of June. Further, the proposal is designed to
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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 June 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 and
May 2020 fee changes through June 2020 are designed to reduce monthly
costs for Floor participants whose operations continue to be disrupted,
despite the fact that the Trading Floor has partially reopened, as well
as to avoid an unintended increase in trading costs given that the
Floor has only reopened in a limited capacity. In reducing this monthly
financial burden, the proposed change would allow Floor participants to
reallocate funds to assist with the cost of shifting and maintaining
their previously on-Floor operations to off-Floor. In addition, the
continuation of the April/May 2020 fee changes is designed to attract
additional order flow (particularly QCC trades and RevCon QCCs) to the
Exchange. The Exchange believes that the proposed fee waiver would not
impose a disparate burden on competition among market participants on
the Exchange because off-Floor market participants are not subject to
these Floor-based fixed fees.
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. 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-2020-44 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-2020-44. This
file number should be included on the subject line if email is used. To
help the Commission process and review your
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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-2020-44, and should be submitted on or before July 8, 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. 2020-12988 Filed 6-16-20; 8:45 am]
BILLING CODE 8011-01-P