NYSE American LLC, a self-regulatory organization under the Securities and Exchange Commission, filed a proposed rule change on January 21, 2026, to temporarily waive a cap on credits and rebates for Floor Brokers. Effective immediately upon filing, the waiver applies to the combined maximum of Floor Broker credits for qualified contingent cross (QCC) trades and rebates through the Manual Billable Rebate Program for January and February 2026. This development comes amid elevated open outcry trading volumes, marking the latest in a series of adjustments to incentivize activity on the exchange's floor. The filing, published in the Federal Register on January 30, 2026, highlights the exchange's efforts to retain liquidity in a competitive options market.
Background on the Cap and Previous Adjustments
The cap in question limits the total monthly credits and rebates a Floor Broker firm can receive to $4 million, as outlined in Sections I.F. and III.E.1 of the NYSE American Options Fee Schedule. This limit combines credits for QCC trades—transactions where a buy and sell order for the same options contract are executed simultaneously without exposure to the broader market—and rebates from the Manual Billable Rebate Program, which rewards manual executions on the floor.
NYSE American introduced the cap to manage incentive costs but has adjusted it in response to market conditions. In a prior filing (SR-NYSEAMER-2026-03), the exchange increased the cap from $3 million to $4 million due to high volumes in 2025. Similar temporary waivers occurred in 2025, as noted in SEC releases such as Release No. 102890 (April 18, 2025) for April, Release No. 102985 (May 2, 2025) for May, Release No. 103623 (August 1, 2025) for August, and Release No. 104258 (November 25, 2025) for November and December. These waivers aimed to prevent Floor Brokers from redirecting orders to competitors once the cap was reached.
The current proposal builds on this pattern, citing ongoing elevated open outcry volumes as the rationale. Without the waiver, firms might hit the cap mid-month and shift business elsewhere, potentially reducing liquidity on NYSE American.
Key Players and Regulatory Framework
The primary entities involved are NYSE American, as the self-regulatory organization proposing the change, and the SEC, which oversees such filings under Section 19(b) of the Securities Exchange Act of 1934. The filing invokes Rule 19b-4, allowing immediate effectiveness for fee-related changes, and solicits public comments until February 20, 2026.
Floor Brokers play a central role, acting as intermediaries for manual trades on the exchange floor. They benefit from credits on QCC trades and rebates for billable manual executions. The proposal does not alter incentives for other participants, such as electronic traders or market makers, but indirectly affects them through potential changes in liquidity.
This filing aligns with broader SEC oversight of exchange fees, emphasizing competition and equitable access. Precedents include similar cap adjustments on other exchanges, like those by Cboe or Nasdaq options markets, which have implemented tiered rebates to attract volume without caps in some cases.
Purpose and Rationale for the Waiver
According to the filing, the waiver addresses the risk of order flow diversion. NYSE American states that 'Floor Broker firms may choose to re-direct such order flow to a competing market' if the cap remains in place, given the ease of reaching it amid high volumes. The exchange plans to use the two-month period to assess further cap adjustments.
The proposal emphasizes maintaining the exchange's role in open outcry trading, which facilitates complex orders and price discovery. By waiving the cap, NYSE American aims to encourage Floor Brokers to aggregate executions on its platform, benefiting all participants through increased liquidity. The filing notes that in November 2025, the exchange captured 8.58% of multiply-listed equity and ETF options volume, up from 6.09% a year earlier, underscoring the competitive pressures.
Statutory Basis and Competitive Considerations
The exchange justifies the change under Section 6(b) of the Securities Exchange Act, arguing it promotes equitable fee allocation and avoids unfair discrimination. It is reasonable, the filing claims, because it supports Floor Brokers' facilitation of open outcry without obligating participation, and it enhances competition by attracting volume.
On intramarket competition, the waiver applies uniformly to all Floor Broker firms based on their transaction levels. For intermarket dynamics, NYSE American operates in a fragmented landscape with 18 options exchanges, none holding more than 16% market share. The proposal cites Regulation NMS, which favors market-driven pricing over regulation, and asserts that without the waiver, order flow could shift to rivals, harming overall market quality.
Critics might argue the waiver favors Floor Brokers over electronic participants, but the filing counters that it ultimately improves liquidity for everyone. No comments were received on this specific proposal, though past similar filings have drawn limited feedback.
Potential Implications
Short-term effects could include sustained or increased open outcry volume on NYSE American, as Floor Brokers continue directing orders without cap constraints. This might tighten spreads and improve execution quality for investors. However, if volumes remain high, other exchanges could respond with their own incentives, intensifying competition.
Long-term, the waiver allows time for evaluating a permanent cap increase or alternative structures. It reflects broader trends in options trading, where open outcry persists alongside electronic dominance, and exchanges balance incentives with profitability. Perspectives vary: proponents see it as essential for liquidity, while skeptics might view repeated waivers as a sign of underlying incentive design flaws.
The change does not directly impact retail investors but could indirectly enhance market efficiency. If successful, it might set a precedent for more flexible fee structures across exchanges.
Forward-Looking Conclusion
This waiver represents a tactical response to dynamic market conditions, preserving NYSE American's competitive position. Key takeaways include the exchange's adaptability to volume surges and the ongoing relevance of floor trading. Moving forward, the evaluation period may lead to a revised cap, potentially influencing similar policies elsewhere. Challenges include balancing incentives with fair competition, while debates center on whether such waivers promote or distort market equity. Stakeholders will watch for SEC feedback and volume trends in early 2026.
