[Federal Register Volume 84, Number 163 (Thursday, August 22, 2019)]
[Notices]
[Pages 43836-43839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18057]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86696; File No. SR-NYSE-2019-44]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Add Certain Rules to the 
List of Minor Rule Violations in Rule 9217; Delete Obsolete Rules and 
Increase the Maximum Fine for Minor Rule Violations

August 16, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 8, 2019, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. 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\ 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 (1) add certain rules to the list of minor 
rule violations in Rule 9217; (2) delete obsolete rules from Rule 9217; 
and (3) increase the maximum fine for minor rule violations to $5,000 
in order to more closely align the Exchange's minor rule plan with that 
of its affiliates. 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

[[Page 43837]]

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 Exchange proposes to (1) add certain rules to the list of minor 
rule violations in Rule 9217; (2) delete obsolete rules from Rule 9217; 
and (3) increase the maximum fine for minor rule violations to $5,000 
in order to more closely align the Exchange's minor rule plan with that 
of its affiliates.
    Rule 9217 sets forth the list of rules under which a member 
organization or covered person may be subject to a fine under a minor 
rule violation plan as described in proposed Rule 9216(b). The Exchange 
proposes the following amendments to Rules 9217 and 9216(b).
Proposed Rule Change
    The Exchange proposes to add the following new introductory 
paragraph to Rule 9217:

    Nothing in this Rule shall require the Exchange to impose a fine 
for a violation of any rule under this Minor Rule Plan. If the Exchange 
determines that any violation is not minor in nature, the Exchange may, 
at its discretion, proceed under the Rule 9000 Series rather than under 
this Rule.

    The language is based on NYSE Arca Rule 10.9217(d).
Proposed Additions to Rule 9217
    The Exchange proposes to add the following rules to the list of 
rules in Rule 9217 eligible for disposition pursuant to a fine under 
Rule 9216(b):

 Rule 7.30 (Authorized Traders)
 Rule 76 (``Crossing'' Orders)
 Rule 103(a)(i) (Registration and Capital Requirements of DMM 
Units)
 Rule 1210 (Registration Requirements)
 Rule 3110(a) and (b)(1) (Supervision)

    The Exchange also proposes that all of the registration and other 
requirements set forth in Rule 345 be eligible for a minor rule fine.
    Rule 7.30 establishes requirements for member organizations 
relating to Authorized Traders. The rule is based on NYSE Arca, Inc.'s 
(``NYSE Arca'') Rule 7.30-E (Authorized Traders), which is eligible for 
NYSE Arca's Minor Rule Plan.\3\
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    \3\ See Securities Exchange Act Release No. 81225 (July 27, 
2017), 82 FR 36033, 36035 (August 2, 2017) (SR-NYSE-2017-35). See 
also NYSE Arca Rule 10.12(i)(4) (NYSE Arca Rule 7.30-E); NYSE Arca 
Rule 10.9217(f)(4). NYSE Arca Rule 10.12 is NYSE Arca's legacy minor 
rule plan and applies only to matters for which a written statement 
was served under Rule 10.12 prior to May 27, 2019; thereafter, Rules 
10.9216(b) and 10.9217 apply. See generally NYSE Arca Rules 10.0 
(preamble) and 10.9001.
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    Rule 76 is substantially similar to NYSE American LLC (``NYSE 
American'') Rule 934NY(a)(1) (Crossing) and NYSE Arca Rule 6.47-O(a)(1) 
(``Crossing'' Orders--OX), which govern manual crosses on those 
respective exchanges' options trading Floors. NYSE American Rule 
934NY(a)(1) is eligible for NYSE American's Minor Rule Plan, and NYSE 
Arca Rule 6.47-O(a)(1) is eligible for NYSE Arca's Minor Rule Plan.\4\
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    \4\ See NYSE American Rule 9217 (Rule 934NY); NYSE Arca Rules 
10.12(h)(3) and 10.9217(e)(3). See note 4, supra.
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    Rule 103(a)(1) provides that no member organization shall act as a 
Designated Market Maker (``DMM'') unit in any security unless such 
member organization is registered as a DMM unit in such security with 
the Exchange and unless the Exchange has approved of the member 
organization acting as a DMM unit and not withdrawn such approval. The 
rule is substantially similar to NYSE Arca Rule 7.20-E(a) (Registration 
of Market Makers) and NYSE National Rule 7.20 (Registration of Market 
Makers), which similarly require that market makers on those exchanges 
be registered in a security and that the registration has not been 
suspended or cancelled. Both NYSE Arca Rule 7.20-E(a) and NYSE National 
Rule 7.20 are eligible for minor rule fines.\5\
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    \5\ See NYSE Arca Rules 10.12(i)(5) and 10.9217(f)(5); NYSE 
National Rule 10.9217(d).
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    Similarly, Rule 1210, which was adopted in October 2018,\6\ sets 
forth the requirements for persons engaged in the investment banking or 
securities business of a member organization to be registered with the 
Exchange as a representative or principal in each category of 
registration appropriate to his or her functions and responsibilities 
as specified in Rule 1220. The Exchange proposes to add Rule 1210 to 
the list of minor rules in Rule 9217. The Exchange believes that having 
the ability to issue a minor rule fine for failing to comply with the 
registration requirements of Rule 1210 would be consistent with and 
complement the Exchange's current ability to issue minor rule fines for 
other registration violations (e.g., Rule 345).
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    \6\ See Securities Exchange Act Release No. 84336 (October 2, 
2018), 83 FR 50727 (October 9, 2018) (SR-NYSE-2018-44).
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    Rule 3110 is the Exchange's supervision rule. The Exchange proposes 
to add subsections (a) and (b)(1) of Rule 3110, governing failure of a 
member organization to establish and maintain a supervisory system and 
failure to establish, maintain, and enforce written supervisory 
procedures, respectively, to Rule 9217. Failure to supervise 
individuals and accounts is currently eligible for minor rule fines in 
the rules of the Exchange's affiliate NYSE Arca.\7\
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    \7\ See NYSE Arca Rules 11.18 (Supervision), 10.12(j)(8) and 
10.9217(g)(8).
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    Finally, Rule 345 sets forth certain employee registration, 
approval and other exchange requirements, including the requirements 
pertaining to the registration of a securities lending representative, 
Securities Trader or direct supervisor thereof. Currently, the only 
violation of Rule 345 that is eligible for a minor rule fine is failure 
of a member organization to have individuals responsible and qualified 
for the position of Securities Lending Supervisor. The Exchange 
proposes that all of registration and other requirements set forth in 
Rule 345 be eligible for a minor rule fine. The proposed change would 
be consistent with the practice on the Exchange's affiliates whose 
comparable rule is eligible for a minor rule fine.\8\
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    \8\ See, e.g., NYSE Arca Rules 2.24.03 (Registration--Employees 
of ETP Holders), 10.12(j)(11) and 10.9217(g)(11). See also NYSE 
National Rules 2.2 (Obligations of ETP Holders and the Exchange) and 
10.9217(e).
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Proposed Deletions From Rule 9217
    The Exchange proposes to delete the following rules from Rule 9217 
as obsolete:
     Rule 706, which was deleted in 2014.\9\
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    \9\ See Securities Exchange Act Release No. 72916 (August 26, 
2014), 79 FR 52094 (September 2, 2014) (SR-NYSE-2014-44).
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     Rule 312(h), which is marked ``Reserved'' in the 
Exchange's rules and was deleted in 2010.\10\
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    \10\ See Securities Exchange Act Release No. 61557 (February 22, 
2010), 75 FR 9472 (March 2, 2010) (SR-NYSE-2010-10). NYSE Rule 
4110(c)(2), based on the comparable FINRA rule, incorporates Rule 
312(h) in part. The Exchange is not proposing to add Rule 4110(c)(2) 
to Rule 9217.
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     Rule 382(a). Rule 382 is also marked ``Reserved'' and was 
deleted in 2011.\11\
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    \11\ See Securities Exchange Act Release No. 64888 (July 14, 
2011), 76 FR 43368 (July 20, 2011) (SR-NYSE-2011-33). NYSE Rule 
4311, based on the comparable FINRA rule, was based in part on NYSE 
Rule 382. The Exchange is not proposing to add Rule 4311 to Rule 
9217.

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[[Page 43838]]

     Rule 791(c), which was also deleted in 2014.\12\
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    \12\ See Release No. 72916, 79 FR at 52094.
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     Rules 352(b) & (c). Rule 352 is marked ``Reserved'' and 
was deleted in 2009.\13\
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    \13\ See Securities Exchange Act Release No. 61158 (December 11, 
2009), 75 FR 67942 (December 21, 2009) (SR-NYSE-2009-123). Rule 352 
was replaced by Rule 2150. Violations of Rule 2150(b) & (c) are 
currently eligible for a minor rule fine under Rule 9217.
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     Rule 392, which is also marked ``Reserved'' and was 
deleted in 2009.\14\
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    \14\ See Securities Exchange Act Release No. 59965 (May 21, 
2009), 74 FR 25783 (May 29, 2009) (SR-NYSE-2009-25).
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     Rule 410A, which was deleted in 2013.\15\
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    \15\ See Securities Exchange Act Release No. 68678 (January 16, 
2013), 78 FR 5213 (January 24, 2013) (SR-NYSE-2013-02) (Notice) 
(``Release No. 68678''); see also Securities Exchange Act Release 
No. 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (SR-NYSE-
2013-02) (Approval Order). Rule 410A was replaced by Rule 8211. Both 
rules were initially retained in Rule 9217, but there is no longer 
any reason to retain Rule 410A in Rule 9217.
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     Rule 445(4), which is marked ``Reserved'' and was deleted 
in 2009.\16\
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    \16\ See Securities Exchange Act Release No. 61273 (December 31, 
2009), 75 FR 1091 (January 1, 2010) (SR-NYSE-2009-134).
     The Exchange proposes to correct a typographical error in Rule 
9217. Rule 9217 refers to Rule 3010(a). The correct reference should 
be to Rule 3110(a), the Exchange's supervision rule, which was added 
to Rule 9217 in 2014. See Securities Exchange Act Release No. 73554 
(November 6, 2014), 79 FR 67508 (November 13, 2014) (SR-NYSE-2014-
56).
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Eligible Fine Amounts
    The maximum fine for minor rule violations under Rule 9216(b) is 
currently $2,500. The maximum fine under the Exchange's legacy minor 
rule plan set forth in Rule 476A previously was $5,000. In adopting its 
current disciplinary rules in 2013, the Exchange believed it 
appropriate to lower the maximum fine amount to achieve harmony with 
the rules of the Financial Industry Regulatory Authority 
(``FINRA'').\17\ The Exchange's affiliates NYSE American, NYSE National 
and NYSE Arca, however, have since harmonized their disciplinary rules 
with the Exchange and adopted or retained a $5,000 maximum fine for 
minor rule violations.\18\ The Exchange accordingly proposes to adopt 
the same maximum fine amount in order to harmonize the maximum fine 
level with its affiliated exchanges. The Exchange also proposes to 
adopt the same 24-month rolling period to calculate second and 
subsequent fines as that used by its affiliated exchanges.
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    \17\ See Release No. 68678, 78 FR at 5226.
    \18\ For instance, the maximum fine for minor rule violations 
under NYSE Arca's legacy Minor Rule Plan set forth in Rule 10.12 is 
$5,000. NYSE Arca retained the $5,000 maximum when it adopted its 
new disciplinary rules. See NYSE Arca Rule 10.9217(a). See also NYSE 
American Rule 9217 & NYSE National Rule 10.9217.
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    To effectuate this change, the Exchange proposes to add the 
following fine chart contained in Rule 476A, the Exchange's legacy rule 
governing the imposition of minor rule fines, to Rule 9217: \19\
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    \19\ When the Exchange adopted Rule 9217 as part of its adoption 
of FINRA's disciplinary rules, the Exchange retained the list of 
rules set forth in Rule 476A. See Release No. 69045, 78 FR at 15396. 
The Exchange did not retain the chart in Rule 476A because, as noted 
above, the maximum fine under Rule 476A previously was $5,000.

------------------------------------------------------------------------
                Fine amount                          Individual
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First Time Fined..........................  $1,000
Second Time Fined **......................  2,500
Subsequent Fines **.......................  5,000
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                Fine amount                      Member organization
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First Time Fined..........................  2,500
Subsequent Fines **.......................  5,000
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** Within a ``rolling'' 24-month period.

    As noted, rather than the 12-month rolling period in Rule 476A, the 
Exchange proposes a 24-month ``rolling'' period from the date of the 
violation in order to harmonize with its affiliates.\20\
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    \20\ See NYSE Arca Rule 10.9217 (violations applied in a rolling 
24-month period); NYSE American Rule 9217 (same).
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    In order to add clarity to the Exchange's rules, the Exchange also 
proposes to add a paragraph immediately before the proposed chart based 
on NYSE Arca Rule 10.9217(h) that sets forth how the beginning and end 
of the 24-month rolling period is to be determined. Except for 
references that reflect the Exchange's membership and use of the phrase 
``minor rule violation plan letter'' rather than ``Notice of Minor Rule 
Plan Fine,'' the paragraph is substantially the same as NYSE Arca Rule 
10.9217(h).\21\
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    \21\ Pursuant to the new paragraph the Exchange proposes to add 
to Rule 9217 based on NYSE Arca Rule 10.9217(d) discussed above, the 
Exchange is not required to impose a fine for a violation under its 
Minor Rule Plan. The Exchange may, at its discretion, bring formal 
disciplinary action against a member or associated person that has 
violated its rules.
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    In order to further harmonize the Exchange's rules with those if 
its affiliates, and because a fine of $5,000 would exceed the maximum 
amount in Securities Exchange Act Rule 19d-1(c)(2) for a minor rule 
plan,\22\ the Exchange proposes to change the titles of Rules 9216 and 
9217. Specifically, the phrase ``Plan Pursuant to SEA Rule 19d-
1(c)(2)'' would be replaced with ``Procedure for Imposition of Fines 
for Minor Violation(s) of Rules'' in the title of Rule 9216. The same 
phrase in Rule 9217 would be replaced with ``Rule 9216(b).'' The titles 
of both rules would thereby be the same as the titles of NYSE Arca 
Rules 10.9216 and 10.9217 and NYSE National Rules 10.9216 and 10.9217, 
respectively. The Exchange proposes to make similar conforming changed 
to Rule 9216(b)(1) by removing references to SEA Rule 19d-1(c)(2) and 
the maximum fine level of $2,500, and by adding language specifying 
that the Exchange may impose a fine in accordance with the fine amounts 
and fine levels set forth in Rule 9217.
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    \22\ 17 CFR 240.19d-1(c)(2).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\23\ in general, and furthers the objectives of Section 
6(b)(5),\24\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
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    Minor rule fines provide a meaningful sanction for minor or 
technical violations of rules. The Exchange believes that the proposed 
rule change will strengthen the Exchange's ability to carry out its 
oversight and enforcement responsibilities in cases where full 
disciplinary proceedings are unwarranted in view of the minor nature of 
the particular violation. Specifically, the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices 
because it will provide the Exchange the ability to issue a minor rule 
fine for violations of its rules governing authorized traders, crossing 
orders, DMM registration and capital requirements, and general 
registration and supervision requirements in situations where a more 
formal disciplinary action may not be warranted or appropriate.
    In addition, the Exchange believes that adding rules based on the 
rules of its affiliate to the Exchange's minor rule plan and the 
associated fine levels would promote fairness and consistency in the 
marketplace by permitting the Exchange to issue a minor rule fine for 
violations of substantially similar rules that are eligible for minor 
rule treatment on the Exchange's affiliate, thereby harmonizing minor 
rule plan fines

[[Page 43839]]

across affiliated exchanges for the same conduct. Deletion of obsolete 
rules from the minor rule plan would thus remove impediments to and 
perfect the mechanism of a free and open market by ensuring that 
persons subject to the Exchange's jurisdiction, regulators, and the 
investing public can more easily navigate and understand the Exchange's 
rulebook.
    Finally, in connection with the fine levels specified in the 
proposed rule change, adding clarifying language describing how the 
``rolling period'' is determined would further the goal of transparency 
and add clarity to the Exchange's rules. The Exchange believes that 
adding such clarifying language would also be consistent with the 
public interest and the protection of investors because investors will 
not be harmed and in fact would benefit from increased transparency, 
thereby reducing potential confusion.
    The Exchange further believes that the proposed amendments to Rule 
9217 are consistent with Section 6(b)(6) of the Act,\25\ which provides 
that members and persons associated with members shall be appropriately 
disciplined for violation of the provisions of the rules of the 
exchange, by expulsion, suspension, limitation of activities, 
functions, and operations, fine, censure, being suspended or barred 
from being associated with a member, or any other fitting sanction. As 
noted, the proposed rule change would provide the Exchange ability to 
sanction minor or technical violations pursuant to the Exchange's rules 
and would increase the amounts of fines in order for the Exchange to 
better deter violative activity.
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    \25\ 15 U.S.C. 78f(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is not 
designed to address any competitive issue but rather to update the 
Exchange's rules to strengthen the Exchange's ability to carry out its 
oversight and enforcement functions and deter potential violative 
conduct.
    The Exchange also believes that the proposed change to remove 
obsolete rules from the list of rules eligible for minor rule fines 
would not be inconsistent with the public interest and the protection 
of investors because investors will not be harmed and in fact would 
benefit from increased clarity and transparency, thereby reducing 
potential confusion.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2019-044 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-NYSE-2019-044. 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-NYSE-2019-044, and should be submitted 
on or before September 12, 2019.
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    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-18057 Filed 8-21-19; 8:45 am]
 BILLING CODE 8011-01-P