[Federal Register Volume 88, Number 15 (Tuesday, January 24, 2023)]
[Notices]
[Pages 4236-4239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01266]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96689; File No. SR-NYSEAMER-2023-04]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Rules
9132, 9133, 9135, 9146, 9522, 9524, 9559 and 9630
January 18, 2023.
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 January 4, 2023, 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 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 to amend Rules 9132, 9133, 9135, 9146, 9522,
9524, 9559 and 9630 to permit, and in some instances require,
electronic service and filing of documents in disciplinary and other
proceedings and appeals, in conformity with recent changes by the
Financial Industry Regulatory Authority, Inc. (``FINRA''). 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 to amend Rules 9132, 9133, 9135, 9146, 9522,
9524, 9559 and 9630 to permit, and in some instances require,
electronic service and filing of documents in disciplinary and other
proceedings, in conformity with recent changes by FINRA.
In 2020, following the outbreak of the Coronavirus Disease
(``COVID-19''), FINRA temporarily amended certain of its rules,
including related to the method of service and filing in disciplinary
proceedings before the Office of Hearing Officers (OHO) and appeals
before the National Adjudicatory Council (NAC), among other types of
administrative proceedings (the ``temporary amendments'').\4\ The
temporary
[[Page 4237]]
amendments allowed, and in some instances required, FINRA (in its
capacity as an Adjudicator per Rule 9120) to serve certain documents on
parties by electronic mail (``email'') and required parties to file or
serve documents by email, unless the parties agreed to an alternative
method of service.\5\ Earlier this year, FINRA made permanent the
temporary amendments to its rules regarding electronic service and
filing permanent, with some modifications.\6\
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\4\ See, e.g., Securities Exchange Act Release No. 88917 (May
20, 2020), 85 FR 31832 (May 27, 2020) (SR-FINRA-2020-015) (Notice
and immediate effectiveness of filing to temporarily amend certain
timing, method of service and other procedural requirements in FINRA
Rules during the outbreak of COVID-19). FINRA extended the temporary
amendments several times before filing to make certain of the
aforementioned amendments permanent. The temporary amendments
included rule changes to permit the conduct of virtual hearings
(i.e., Rules 9261 and 9830), which rule changes are not being
included in this proposal. Rather, the Exchange is solely copying a
subset of rules covered by the temporary amendments as discussed
herein.
\5\ See id.
\6\ See Securities Exchange Act Release Nos. 95147 (June 23,
2022), 87 FR 38803 (June 29, 2022) (order approving change to
certain FINRA rules to permit, and in some instances require,
electronic service and filing of documents in disciplinary and other
proceedings and appeals) (``Approval Order of FINRA Rules''); 94654
(April 8, 2022), 87 FR 22264 (April 14, 2022) (SR-FINRA-2022-009)
(``FINRA Notice''). The Approval Order of FINRA Rules related to
FINRA Rules 1012, 1015, 6490, 9132, 9133, 9135, 9146, 9321, 9341,
9349, 9351, 9522, 9524, 9559 and 9630 (collectively, ``the approved
FINRA Rules'').
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In support of its filing, FINRA noted that advances in technology
and its availability made filing and service permitted by the temporary
amendments more efficient than under FINRA's ``original'' (non-amended)
rules.\7\ Moreover, FINRA determined that electronic service and filing
is beneficial for parties, panelists and FINRA staff.\8\ FINRA also
noted that the Commission likewise amended its rules in November 2020
to require electronic filing and service of documents in its
administrative proceedings.\9\ For these reasons, FINRA determined that
making permanent the temporary amendments would similarly improve and
modernize FINRA's operations.\10\
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\7\ See FINRA Notice, 87 FR at 22267.
\8\ See FINRA Notice, 87 FR at 22267.
\9\ See Amendments to the Commission's Rules of Practice,
Securities Exchange Act Release No. 90442 (November 17, 2020), 85 FR
86464 (File No. S7-18-15) (December 30, 2020) (codified at 17 CFR
201 (2020)).
\10\ See FINRA Notice, 87 FR at 22266-67.
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To likewise improve and modernize Exchange rules, the Exchange
proposes to modify certain of its disciplinary rules to allow for
electronic service and filing of documents in disciplinary and other
proceedings in conformity with the approved FINRA Rules.\11\
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\11\ Consistent with the Approval Order of FINRA Rules, the
Exchange is not proposing to permit electronic service of an initial
complaint on a respondent due to heightened fair process concerns.
As is the case today, the only permissible methods of serving the
initial complaint are by hand, mail or courier. See Rule 9131(b)
(requiring that service be pursuant to Rule 9134(a)).
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Background
In 2016, NYSE American (then known as NYSE MKT LLC) adopted
disciplinary rules that are, with certain exceptions, substantially the
same as the Rule 8000 Series and Rule 9000 Series of FINRA and its
affiliate the New York Stock Exchange LLC (``NYSE''), and which set
forth rules for conducting investigations and enforcement actions.\12\
The NYSE American disciplinary rules were implemented on April 15,
2016.\13\ The Exchange notes that FINRA and OHO administers
disciplinary hearings on the Exchange's behalf.
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\12\ See Securities Exchange Act Release Nos. 77241 (February
26, 2016), 81 FR 11311 (March 3, 2016) (SR-NYSEMKT-2016-30).
\13\ See NYSE MKT Information Memorandum 16-02 (March 14, 2016).
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In adopting disciplinary rules modeled on FINRA's rules, the
Exchange adopted the filing, service and other procedural requirements
as contained the FINRA Rule 9100, 9500, and 9600 Series. As adopted,
the text of Exchange Rules 9132, 9133, 9135, 9146, 9522, 9524, 9559 and
9630 are based on, and are substantially the same as, their counterpart
FINRA rules.\14\
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\14\ The Exchange notes that this proposal adopts a subset of
the approved FINRA Rules, which subset are applicable to the
Exchange rules. As noted herein, this proposal does not extend to
the temporary amendments related to the conduct of virtual hearings
(i.e., Rules 9261 and 9830).
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Consistent with FINRA's recent proposal, the Exchange proposes to
amend certain of its disciplinary rules related to filing, service and
other procedural requirements and appeals. The proposed rule change
includes provisions to allow, and in some instances require, FINRA (in
its capacity as an Adjudicator per Rule 9120) to serve certain
documents on parties by email and require parties to file or serve
documents by email, unless another method of service is ordered by the
Adjudicator.\15\ In addition, to support the transition to email
service and filing, the Exchange proposes to require parties in OHO
proceedings to file and serve all parties with their current email
address and contact information at the time of their first appearance,
and to file and serve any change in email address or contact
information during the course of the proceeding.
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\15\ To the extent that a party lacks the ability to use or
access technology needed to file, serve or accept service by email,
FINRA, as adjudicator, may order an alternative method of service
upon a showing of good cause. See FINRA Notice, 87 FR at 22265.
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The proposed rule change would permit service of documents other
than the initial complaint by email among various other methods of
service, such as personal service, mail and courier, and to provide
that service by email is deemed complete upon sending. The Exchange
intends to elect email service whenever possible. If the Exchange has
knowledge that the address used for service is not current or not
functional (i.e., the Exchange receives a bounce back or other message
indicating that there was a failure to deliver the email), the Exchange
will use other permissible methods of service until it can verify the
party's email address.\16\ The Exchange notes that, in most cases, the
Exchange and the relevant party, or their counsel, will have already
engaged in communications prior to the service of documents or other
information. Accordingly, in most cases, the Exchange will already have
information regarding the relevant party, or their counsel's, preferred
method of service.
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\16\ As indicated in the proposed rule text, the Exchange will
consider service by email complete upon sending of the relevant
document or other information. This is consistent with service by
mail under the current rules.
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The Rule 9000 Series, among other things, sets forth the procedure
for disciplinary proceedings concerning a member, associated person or
formerly associated person. The Rule 9100 Series is of general
applicability to all proceedings set forth in the Rule 9000 Series,
unless a rule specifically provides otherwise. Rules 9132(b),\17\
9133(b),\18\ and 9146(l) \19\ provide that the documents and other
information governed by those rules be served pursuant to Rule 9134,
which permits service on the parties using the following methods: (1)
personal service, (2) mail, or (3) courier. Rule 9134 does not permit
service by email. The proposed rule change would amend Rule 9132(b) to
allow service of the relevant documents or information by email, and
Rules 9133(b) and 9146(l) to require parties to serve documents by
email, unless an alternative method of service is ordered by the
Adjudicator.
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\17\ Rule 9132(b) (Service of Orders, Notices, and Decisions by
Adjudicator; How Served).
\18\ Rule 9133(b) (Service of Papers Other Than Complaints,
Orders, Notices or Decisions; How Served).
\19\ Rule 9146(l) (Motions; General).
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In addition, to support the transition to email service and filing,
the Exchange proposes to amend Rule 9135 to add paragraph (d), which
would require parties in OHO proceedings to file and serve the parties
with their current
[[Page 4238]]
email address and contact information at the time of their first
appearance, and to file and serve any change in email address or
contact information during the course of the proceeding.\20\ The
Exchange believes this proposed rule change will help ensure that
documents are successfully sent from and received at a valid email
address. It will also ensure that all participants, including the
Exchange, applicants, respondents and any other parties, have accurate
contact information for all parties.
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\20\ See proposed Rule 9135(d) (Filing of Papers with
Adjudicator: Procedure; Party Contact Information).
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The Rule 9520 Series sets forth the procedures for eligibility
proceedings and review of those proceedings by the Exchange Board.
Because the applicable rules in this series do not allow for email as a
method of service, the Exchange proposes to modify Rule 9522(a)(4) \21\
and to add new paragraph (d) to Rule 9524 \22\ to permit effective
service by email.
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\21\ See proposed Rule 9522(a)(4) (Initiation of Eligibility
Proceeding; Member Regulation Consideration; Service).
\22\ See proposed Rule 9524(d) (Exchange Board of Directors
Consideration; Service by Electronic Mail; When Service is
Complete).
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The Rule 9550 Series sets forth the procedures for expedited
proceedings and the ability of the Exchange Board to call for review a
proposed decision prepared under the Rule 9550 Series. Rule 9559(h)
\23\ sets forth the timing and method of service requirements for the
parties' exchange of proposed exhibit and witness lists in advance of
an expedited proceeding, but do not allow for email as a method of
service. The Exchange proposes to amend Rule 9559(h)(2) to require
service of exhibit and witness lists by email, unless an alternative
method of service is ordered by the Adjudicator and to remove text from
Rule 9559(h)(1) that requires that documents served by email must also
be served by overnight courier or personal service.\24\ Finally, the
Exchange proposes to add new paragraph (s) to Rule 9559 to provide
that, for purposes of proposed Rule 9559(h), service by email is
complete upon sending the documents or decision.\25\
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\23\ Rule 9559(h) (Hearing Procedures for Expedited Proceedings
Under the Rule 9550 Series). Rule 9559(h) currently permits email as
a method of service.
\24\ See proposed Rule 9559(h)(1), (2) (Hearing Procedures for
Expedited Proceedings Under the Rule 9550 Series; Transmission of
Documents).
\25\ See proposed Rule 9559(s) (Hearing Procedures for Expedited
Proceedings Under the Rule 9550 Series; Service by Email; When
Service is Complete). Rule 9559(h) currently permits email as a
method of service.
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The Rule 9600 Series sets forth the procedures for members to seek
exemptive relief from a variety of Exchange rules. Rule 9630(e) \26\
requires the Exchange (via the Chief Regulatory Officer) to serve its
decision pursuant to Rules 9132 and 9134, which do not allow for email
as a method of service. The proposed rule change would amend Rule 9630
to add new paragraph (d) to allow for email as a method of service.\27\
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\26\ See Rule 9630 (Procedures for Exemptions; Appeal).
\27\ See proposed Rule 9630(f) (Appeal; Service by Electronic
Mail; When Service is Complete).
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The Exchange believes that this proposal, like the approved FINRA
Rules, will modernize the rules and make service and filing more
efficient and effective. Email technology is widely available, and use
of electronic methods of service and filing is common practice in the
courts and other regulatory agencies, including the Commission.\28\
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\28\ See supra note 9 (regarding Amendments to the Commission's
Rules of Practice).
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As noted below, the Exchange has filed the proposed rule change for
immediate effectiveness and has requested that the Commission 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,\29\ in general, and furthers the objectives of section
6(b)(5),\30\ 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.\31\
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\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(5).
\31\ 15 U.S.C. 78f(b)(7) & 78f(d).
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The Exchange believes that the proposed rule change protects
investors and the public interest by requiring use of broadly available
technology to make service and filing processes more efficient and
effective. The Exchange's disciplinary and eligibility proceedings and
other review processes serve a critical role in providing investor
protection and maintaining fair and orderly markets by, for example,
sanctioning misconduct and preventing further customer harm by members
and associated persons.
The proposed rule change promotes efficiency in these processes by
permitting electronic service and filing in most instances. To ensure
that documents are effectively sent and received, the Exchange is
proposing to require parties to provide and update their contact
information, including their email address, during the course of a
proceeding. These amendments reduce the reliance on paper documents in
favor of more efficient electronic formats. The Exchange believes that
the proposed rule change regarding electronic service and filing is
especially important as hybrid and remote work become more common.
The Exchange notes that, per the approved FINRA Rules, there are
procedures in place for persons who lack the ability to use or access
technology necessary to send or receive documents electronically to
request relief from FINRA (as the Adjudicator) to file or serve
documents by another method. Per FINRA, requests to use non-electronic
methods of service were rare during the approximately two year period
that it operated under the temporary amendments and, as such, FINRA
anticipates that such requests under the approved FINRA Rules will be
rare.
In addition, the proposed rule change balances the interests of
fairness and efficiency. As discussed, service of the initial complaint
will continue to occur by hand, mail or courier, rather than by
electronic means, thus ensuring there is satisfactory notice and fair
process.
Thus, the proposed rule change represents a significant step toward
modernizing the service and filing processes in a manner that will
protect investors and the public interest by promoting efficiency while
preserving fair process.
The Exchange believes that the proposed rule change supports 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.
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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 rule change is
not intended to address competitive issues but is designed to modernize
the service and filing process in harmonization with the approved FINRA
Rules.
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 \32\ and Rule 19b-4(f)(6) thereunder.\33\
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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\32\ 15 U.S.C. 78s(b)(3)(A)(iii).
\33\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \34\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\35\ 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 states that
this filing is non-controversial and eligible to become effective
immediately because the proposal promotes uniformity in disciplinary
rules across self-regulatory organizations and thereby enables the
Exchange to modernize the service and filing process related to the
conduct of disciplinary hearings.\36\ The Exchange further states that
the proposed rule change would not significantly affect the protection
of investors or the public interest or impose any significant burden on
competition because the proposed rule change is based on the approved
FINRA Rules. After reviewing the filing, 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.\37\
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\34\ 17 CFR 240.19b-4(f)(6).
\35\ 17 CFR 240.19b-4(f)(6)(iii).
\36\ See supra Item II.
\37\ 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) \38\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\38\ 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-2023-04 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-2023-04. 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-2023-04 and should be submitted
on or before February 14, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01266 Filed 1-23-23; 8:45 am]
BILLING CODE 8011-01-P