[Federal Register Volume 87, Number 219 (Tuesday, November 15, 2022)]
[Notices]
[Pages 68529-68532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24761]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96260; File No. SR-NYSECHX-2022-24]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Extending
the Expiration Date of the Temporary Amendments to Rules 10.9261 and
10.9830.
November 8, 2022.
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 October 28, 2022, the NYSE Chicago, Inc. (``NYSE Chicago'' 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.
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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 extending the expiration date of the
temporary amendments to Rules 10.9261 and 10.9830 as set forth in SR-
NYSECHX-2022-19 from October 31, 2022 to January 31, 2023, in
conformity with recent changes by the Financial Industry Regulatory
Authority, Inc. (``FINRA''). The proposed rule change would not make
any changes to the text of Rules 10.9261 and 10.9830. 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 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 extending the expiration date of the
temporary amendments as set forth in NYSECHX-2022-19 \4\ to Rules
10.9261 (Evidence and Procedure in Hearing) and 10.9830 (Hearing) from
October 31, 2022 to January 31, 2023 to harmonize with recent changes
by FINRA to extend the expiration of temporary amendments to its Rules
9261 and 9830. NYSECHX-2022-19 temporarily granted to the Chief or
Deputy Chief Hearing Officer the authority to order that hearings be
conducted by video conference if warranted by the current COVID-19
public health risks posed by in-person hearings. The proposed rule
change would not make any changes to the text
[[Page 68530]]
of Exchange Rules 10.9261 and 10.9830.\5\
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\4\ See Securities Exchange Act Release No. 95477 (August 11,
2022), 85 FR 50680 (August 17, 2022) (SR-NYSECHX-2022-19) (``SR-
NYSECHX-2022-19'').
\5\ The Exchange may submit a separate rule filing to extend the
expiration date of the proposed temporary amendments if the Exchange
requires temporary relief from the rule requirements identified in
this proposal beyond January 31, 2023. The amended NYSE Chicago
rules will revert back to their original state at the conclusion of
the temporary relief period and any extension thereof.
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Background
In 2022, NYSE Chicago adopted disciplinary rules that are, with
certain exceptions, substantially the same as the disciplinary rules of
its affiliate NYSE Arca, Inc., which are in turn substantially similar
to the FINRA Rule 8000 Series and Rule 9000 Series, and which set forth
rules for conducting investigations and enforcement actions.\6\
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\6\ See Securities Exchange Act Release No. 95020 (June 1,
2022), 87 FR 35034, (June 8, 2022) (SR-NYSECHX-2022-10) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Adopt
Investigation, Disciplinary, Sanction, and Other Procedural Rules
Modeled on the Rules of the Exchange's Affiliates) (``2022 Notice of
Disciplinary Rules'').
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In adopting disciplinary rules modeled on FINRA's rules, NYSE
Chicago adopted the hearing and evidentiary processes set forth in Rule
10.9261 and in Rule 10.9830 for hearings in matters involving temporary
and permanent cease and desist orders under the Rule 9800 Series. As
adopted, the text of Rule 10.9261 and Rule 10.9830 are substantially
the same as the FINRA rules with certain modifications.\7\
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\7\ See id.
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In 2020, in view of the ongoing spread of COVID-19 and its effect
on FINRA's adjudicatory functions nationwide, FINRA filed a temporary
rule change to grant FINRA's Office of Hearing Officers (``OHO'') and
the National Adjudicatory Council (``NAC'') the authority to conduct
certain hearings by video conference, if warranted by the current
COVID-19-related public health risks posed by in-person hearings. Among
the rules FINRA amended were Rules 9261 and 9830.\8\
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\8\ See Securities Exchange Act Release Nos. 83289 (September 2,
2020), 85 FR 55712 (September 9, 2020) (SR-FINRA-2020-027)
(``Initial FINRA Filing''). FINRA also proposed to temporarily amend
FINRA Rules 1015 and 9524. FINRA Rule 1015 governs the process by
which an applicant for new or continuing membership can appeal a
decision rendered by FINRA's Department of Member Supervision under
FINRA Rule 1014 or 1017 and request a hearing which would be
conducted by a subcommittee of the NAC. See id. at 55714. The
Exchange has not adopted FINRA Rule 1015. FINRA Rule 9524 governs
the process by which a statutorily disqualified member firm or
associated person can appeal the Department's recommendation to deny
a firm or sponsoring firm's application to the NAC. See id. Under
the Exchange's version of Rule 10.9524, if the CRO rejects the
application, the ETP Holder or applicant may request a review by the
Exchange Board of Directors. This differs from FINRA's process,
which provides for a hearing before the NAC and further
consideration by the FINRA Board of Directors.
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FINRA represented in its filing that its protocol for conducting
hearings by video conference would ensure that such hearings maintain
fair process for the parties by, among other things, FINRA's use of a
high quality, secure and user-friendly video conferencing service and
provide thorough instructions, training and technical support to all
hearing participants.\9\ According to FINRA, the proposed changes were
a reasonable interim solution to allow FINRA's critical adjudicatory
processes to continue to function while protecting the health and
safety of hearing participants as FINRA works towards resuming in-
person hearings in a manner that is compliant with the current guidance
of public health authorities.\10\
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\9\ See Initial FINRA Filing, 85 FR at 55713.
\10\ See id.
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Since the Initial FINRA Filing (in 2020), FINRA periodically
extended the temporary relief as the COVID-19 pandemic and concerns
surrounding its spread persisted.\11\ Due to the continued presence and
uncertainty of COVID-19, FINRA believes that there is a continued need
for temporary relief beyond October 31, 2022.\12\ On date, 2022, the
Exchange filed to temporarily grants the Chief or Deputy Chief Hearing
Officer the authority to order that hearings be conducted by video
conference if warranted by public health risks posed by in-person
hearings during the ongoing COVID-19 pandemic.\13\
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\11\ See, e.g., Securities Exchange Act Release No. 94430 (March
16, 2022), 87 FR 16262 (March 22, 2022) (SR-FINRA-2022-018) (earlier
extension of temporary relief from July 31, 2022 until October 31,
2022).
\12\ See Securities Exchange Act Release No. 96107 (October 19,
2022), 87 FR 64526 (October 25, 2022) (SR-FINRA-2022-029) (``SR-
FINRA-2022-029'').
\13\ See supra note 4, SR-NYSECHX-2022-19.
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According to FINRA, although there has been a downward trend in the
number of COVID-19 cases since July 2022--when FINRA last filed to
extend the temporary relief, COVID-19 still remains a public health
concern.\14\ For example, according to the Centers for Disease Control
and Prevention (``CDC''), the 7-day moving average of new deaths from
COVID-19 in the United States during September 2022 ranged from
approximately 300 to 500 deaths per day,\15\ and approximately 23
percent of counties in the United States have a medium or high COVID-19
Community Level based on the CDC's most recent calculations.\16\ Much
uncertainty also remains as to whether there will be a significant
increase in the number of cases of COVID-19 in the future given the
emergence of new Omicron variants that the CDC currently is tracking
\17\ and the dissimilar vaccination rates (completed primary series and
a first booster dose) throughout the United States.\18\ Due to the
continued presence and uncertainty of COVID-19, FINRA believes that
there is a continued need for temporary relief beyond October 31,
2022.\19\ On October 17, 2022, FINRA accordingly filed to extend the
expiration date of the temporary rule amendments to, among other rules,
FINRA Rule 9261 and 9830 from October 31, 2022 to January 31, 2023.\20\
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\14\ See id.
\15\ See CDC, COVID Data Tracker--Trends in Number of COVID-19
Cases and Deaths in the U.S. Reported to CDC, by State/Territory,
https://covid.cdc.gov/covid-data-tracker/#trends_dailydeaths_select_00 (last visited Oct. 11, 2022).
\16\ See CDC, COVID Data Tracker--COVID-19 Integrated County
View, https://covid.cdc.gov/covid-data-tracker/#county-view?list_select_state=all_states&list_select_county=all_counties&data-type=CommunityLevels&null=CommunityLevels (last visited Oct. 11,
2022).
\17\ These new Omicron variants include BA.4.6, BF.7, and
BA.2.75. See CDC, COVID Data Tracker--Variant Proportions, https://covid.cdc.gov/covid-data-tracker/#variant-proportions (last visited
Oct. 11, 2022).
\18\ A state-by-state comparison of vaccination rates is
available at https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-people-additional-dose-totalpop.
\19\ See SR-FINRA-2022-029, 87 FR at 64526-28.
\20\ See generally SR-FINRA-2022-029.
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Proposed Rule Change
Consistent with FINRA's recent proposal, the Exchange proposes to
extend the expiration date of the temporary rule amendments to NYSE
Chicago Rules 10.9261 and 10.9830 as set forth in SR-NYSECHX-2022-19
from October 31, 2022 to January 31, 2023.
As set forth in SR-FINRA-2022-029, although there has been a
downward trend in the number of COVID-19 cases since July 2022--when
FINRA last filed to extend the temporary relief, that COVID-19 still
remains a public health concern. For example, according to the Centers
for Disease Control and Prevention (``CDC''), the 7-day moving average
of new deaths from COVID-19 in the United States during September 2022
ranged from approximately 300 to 500 deaths per day,\21\ and
approximately 23 percent of counties in the United States have a medium
or high COVID-19 Community Level based on the CDC's most recent
calculations.\22\ Much uncertainty also remains as to
[[Page 68531]]
whether there will be a significant increase in the number of cases of
COVID-19 in the future given the emergence of new Omicron variants that
the CDC currently is tracking \23\ and the dissimilar vaccination rates
(completed primary series and a first booster dose) throughout the
United States.\24\ Due to the continued presence and uncertainty of
COVID-19, FINRA believes that there is a continued need for temporary
relief beyond October 31, 2022.\25\ FINRA accordingly proposed to
extend the expiration date of the temporary rule amendments from
October 31, 2022 to January 31, 2023.
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\21\ See supra note 15 (CDC, COVID Data Tracker--Trends in
Number of COVID-19 Cases and Deaths in the U.S. Reported to CDC, by
State/Territory).
\22\ See supra note 16 (CDC, COVID Data Tracker--COVID-19
Integrated County View).
\23\ See supra note 17 (regarding the new Omicron variants
include BA.4.6, BF.7, and BA.2.75 described in CDC, COVID Data
Tracker--Variant Proportions).
\24\ See supra note 18 (regarding state-by-state comparison of
COVID-19 vaccination rates).
\25\ See SR-FINRA-2022-029, 87 FR at 64526-28.
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The Exchange proposes to similarly extend the expiration date of
the temporary rule amendments to NYSE Chicago Rules 10.9261 and 10.9830
as set forth in SR-NYSECHX-2022-19 from October 31, 2022 to January 31,
2023. The Exchange agrees with FINRA that, although there has been a
downward trend in the number of COVID-19 cases since July 2022--when
FINRA last filed to extend the temporary relief, that COVID-19 still
remains a public health concern. The Exchange also agrees that, due to
the continued presence and uncertainty of COVID-19, for the reasons set
forth in SR-FINRA-2022-029, there is a continued need for this
temporary relief beyond October 31, 2022. The proposed change would
permit OHO to continue to assess, based on critical COVID-19 data and
criteria and the guidance of health and security consultants, whether
an in-person hearing would compromise the health and safety of the
hearing participants such that the hearing should proceed by video
conference. As noted in SR-FINRA-2022-029, in deciding whether to
schedule a hearing by video conference, OHO may consider a variety of
other factors in addition to COVID-19 trends. Similarly, as noted in
SR-FINRA-2022-029, in SR-FINRA-2020-027, FINRA provided a non-
exhaustive list of other factors OHO may take into consideration,
including a hearing participant's individual health concerns and access
to the connectivity and technology necessary to participate in a video
conference hearing.\26\ The Exchange believes that this is a reasonable
procedure to continue to follow for hearings under Rules 10.9261 and
10.9830 chaired by a FINRA employee.
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\26\ See SR-FINRA-2022-029, 87 FR at 64527, n. 15.
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As noted below, the Exchange has filed the proposed rule change for
immediate effectiveness and has requested that the SEC waive the
requirement that the proposed rule change not become operative for 30
days after the date of the filing, so the Exchange can implement the
proposed rule change immediately.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\27\ in general, and furthers the objectives of Section
6(b)(5),\28\ 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. Additionally, the Exchange believes
the proposed rule change is designed to provide a fair procedure for
the disciplining of members and persons associated with members,
consistent with Sections 6(b)(7) and 6(d) of the Act.\29\
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\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(5).
\29\ 15 U.S.C. 78f(b)(7) and 78f(d).
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The Exchange believes that the proposed rule change support the
objectives of the Act by providing greater harmonization between
Exchange rules and FINRA rules of similar purpose, resulting in less
burdensome and more efficient regulatory compliance. As such, the
proposed rule change will foster cooperation and coordination with
persons engaged in facilitating transactions in securities and will
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
The proposed rule change, which extends the expiration date of the
temporary amendments to Exchange rules consistent with FINRA's
extension to its Rules 9261 and 9830 as set forth in SR-FINRA-2022-029,
will permit the Exchange to continue to effectively conduct hearings
given the continued presence and uncertainty of COVID-19. Given that
COVID-19 remains a public health concern and the uncertainty around a
potential spike in cases of the disease, without this relief allowing
OHO to proceed by video conference, some or all hearings may have to be
postponed. The ability to conduct hearings by video conference will
permit the adjudicatory functions of the Exchange's disciplinary rules
to continue unabated, thereby avoiding protracted delays. The Exchange
believes that this is especially important in matters where temporary
and permanent cease and desist orders are sought because the proposed
rule change would enable those hearings to continue to proceed without
delay, thereby enabling the Exchange to continue to take immediate
action to stop significant, ongoing customer harm, to the benefit of
the investing public.
As set forth in detail in NYSECHX-2022-19, the temporary relief to
permit hearings to be conducted via video conference maintains fair
process and will continue to provide fair process consistent with
Sections 6(b)(7) and 6(d) of the Act \30\ while striking an appropriate
balance between providing fair process and enabling the Exchange to
fulfill its statutory obligations to protect investors and maintain
fair and orderly markets while avoiding the COVID-19-related public
health risks for hearing participants. The Exchange notes that this
proposal, like NYSECHX-2022-19, provides only temporary relief. As
proposed, the changes would be in place through January 31, 2023. As
noted in NYSECHX-2022-19 and above, the amended rules will revert back
to their original state at the conclusion of the temporary relief
period and, if applicable, any extension thereof.
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\30\ 15 U.S.C. 78f(b)(7) & 78f(d).
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Accordingly, the proposed rule change extending this temporary
relief is in the public interest and consistent with the Act's purpose.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed temporary rule
change will impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
rule change is not intended to address competitive issues but is rather
intended to extend temporary relief necessitated by the continued
presence and uncertainty of COVID-19 and the related health and safety
risks of conducting in-person activities. The Exchange believes that
the proposed rule change will prevent unnecessary impediments to
critical adjudicatory processes and its ability to fulfill its
statutory obligations to protect investors and maintain fair and
orderly markets that would otherwise result if
[[Page 68532]]
the temporary amendments were to expire on October 31, 2022.
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \31\ and Rule 19b-4(f)(6) thereunder.\32\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\31\ 15 U.S.C. 78s(b)(3)(A)(iii).
\32\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \33\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\34\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange has
indicated that there is a continued need to extend the temporary relief
because the Exchange agrees with FINRA that the COVID-19 related health
concerns necessitating this relief will continue beyond October 31,
2022.\35\ The Exchange also states that the temporary relief provided
in this proposal immediately upon filing and without a 30-day operative
delay will allow the Exchange to continue critical adjudicatory and
review processes so that the Exchange may continue to operate
effectively and meet its critical investor protection goals, while also
protecting the health and safety of hearing participants.\36\ The
Commission also notes that this proposal extends without change the
temporary relief previously provided by SR-NYSECHX-2022-19.\37\ As
proposed, the temporary changes would be in place through January 31,
2023 and the amended rules will revert back to their original state at
the conclusion of the temporary relief period and, if applicable, any
extension thereof.\38\ For these reasons, the Commission believes that
waiver of the 30-day operative delay for this proposal is consistent
with the protection of investors and the public interest. Accordingly,
the Commission hereby waives the 30-day operative delay and designates
the proposal operative upon filing.\39\
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\33\ 17 CFR 240.19b-4(f)(6).
\34\ 17 CFR 240.19b-4(f)(6)(iii).
\35\ See supra Item II; see also SR-FINRA-2022-029, 87 FR 64526,
at 64527.
\36\ See 87 FR 64526, at 64528-29 (noting the same in granting
FINRA's request to waive the 30-day operative delay so that SR-
FINRA-2022-029 would become operative immediately upon filing).
\37\ See supra note 4.
\38\ See supra note 5. As noted above, the Exchange states that
if it requires temporary relief from the rule requirements
identified in this proposal beyond January 31, 2023, it may submit a
separate rule filing to extend the effectiveness of the temporary
relief under these rules.
\39\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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) \40\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\40\ 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-NYSECHX-2022-24 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-NYSECHX-2022-24. 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-NYSECHX-2022-24 and should be submitted
on or before December 6, 2022.
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\41\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24761 Filed 11-14-22; 8:45 am]
BILLING CODE 8011-01-P