[Federal Register Volume 89, Number 81 (Thursday, April 25, 2024)]
[Notices]
[Pages 31779-31782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08803]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99993; File No. SR-NYSEARCA-2024-33]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Modify Rule 
6.91P-O

April 19, 2024
    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 April 5, 2024, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``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 modify Rule 6.91P-O (Electronic Complex 
Order Trading) to specify that a Complex Customer Cross Order received 
during a Complex Order Auction (``COA'') would result in the early end 
of the COA. 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 modify Rule 6.91P-O (Electronic Complex 
Order Trading) to specify that a Complex Customer Cross (``Complex 
C2C'') Order received during a COA would result in the early end of the 
COA. This proposed functionality is not new or novel and mirrors a 
recently adopted rule requiring that a COA in progress ends early upon 
the receipt of a Complex QCC Order in the same complex strategy as the 
COA.\4\ As

[[Page 31780]]

discussed below, the reasons justifying the early end of a COA upon the 
receipt of a Complex QCC Order apply equally to the required early end 
of a COA upon receipt of a Complex C2C Order in the same complex 
strategy.\5\
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    \4\ See Rule 6.91-O(f)(3)(E). See Securities Exchange Act 
Release No. 99597 (February 23, 2024), 89 FR 14906 (February 29, 
2024 (SR-NYSEARCA-2024-17) (adopting, on an immediately effective 
basis, Rule 6.91P-O (f)(3)(E) which specifies that a COA in progress 
ends early upon receipt of a Complex QCC Order in the same complex 
strategy). The Exchange notes that the same rule change has been 
adopted on its affiliated options exchange, NYSE American LLC. See 
NYSE American Rule 980NYP(f)(3)(E). See Securities Exchange Act 
Release No. 99354 (January 17, 2024), 89 FR 4358 (January 17 [sic], 
2024) (SR-NYSEAMER-2024-03) (adopting, on an immediately effective 
basis, NYSE American Rule 980NYP(f)(3)(E) which specifies that a COA 
in progress ends early upon receipt of a Complex QCC Order in the 
same complex strategy).
    \5\ See, e.g., id., 89 FR, at 14906.
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    Rule 6.91P-O reflects how Electronic Complex Orders (``ECOs'') will 
trade on the Exchange \6\ and paragraph (f) to this rule describes the 
handling of ECOs submitted to the Complex Order Auction (COA) 
process.\7\ When a COA Order initiates a COA, the Exchange disseminates 
a Request for Response (``RFR'') to solicit potentially price-improving 
ECO interest--which solicited interest includes interest designated to 
respond to the COA (i.e., ECO GTX Orders) and unrelated price-improving 
ECO interest (resting and newly arriving) that arrives during the 
Response Time Interval (each an ``RFR Response'') (collectively, the 
``auction interest'').\8\ The COA lasts for the duration of the 
Response Time Interval unless, during the COA, the Exchange receives 
certain options trading interest that requires the COA to conclude 
early.\9\ When the COA concludes, the COA Order executes first with 
price-improving ECO interest, next with any contra-side interest, 
including the leg markets (if permissible),\10\ and any remaining 
balance (that is not cancelled) is ranked in the Consolidated Book (the 
``Consolidated Book'' or ``Book'').\11\ Once the COA Order executes to 
the extent possible--whether with the best-priced Complex Orders or the 
best-priced interest in the leg markets--and is placed in the Book, the 
Exchange will update its complex order book and, if applicable, the 
Exchange BBO (as a result of any executions of the COA Order with the 
leg markets).
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    \6\ See generally Rule 6.91P-O (Electronic Complex Order 
Trading). Unless otherwise specified, all capitalized terms used 
herein have the same meaning as is set forth in Rule 6.91P-O.
    \7\ See Rules 6.91P-O(f) (Execution of ECOs During a COA), 
(f)(1) (Initiation of a COA), (f)(2) (Pricing of a COA). See also 
Rule 6.91P-O(a)(3)(A) (defining a ``COA Order'' as an ECO designated 
as eligible to initiate a COA).
    \8\ See Rules 6.91P-O(a)(3)(B) (defining, and detailing the 
information included in, each RFR); (a)(3)(C) (defining each ``RFR 
Response'' as, among other things, ``any ECO'' received during the 
Response Time Interval that is in the same complex strategy as, and 
is marketable against, the COA Order); and (a)(3)(D) (defining the 
Response Time Interval as the period during which RFR Responses may 
be entered, which period ``will not be less than 100 milliseconds 
and will not exceed one (1) second,'' as determined by the Exchange 
and announced by Trader Update). See Rule 6.91P-O(b)(2)(C) (defining 
a ``ECO GTX Order,'' including that such order is submitted in 
response to an RFR announcing a COA and will trade with the COA 
Order to the extent possible and then cancel).
    \9\ See Rule 6.91P-O(f)(3)(A)-(E) (setting forth the 
circumstances under which a COA will conclude before the end of the 
Response Time Interval, including, as discussed infra, upon receipt 
of a Complex QCC Order in the same complex strategy as the COA).
    \10\ The Exchange notes that there are certain limitations to 
how an ECO, including a COA Order post-COA, may interact with the 
leg markets. See, e.g., Rule 6.91P-O(e)(1)(A) (providing, in 
relevant part, that the leg markets will trade first with an ECO, 
but only if the legs can execute with the ECO ``in full or in a 
permissible ratio,'' and, once the leg markets trade with the ECO to 
the extent possible, such ECO will trade with same-priced ECOs 
resting in the Book). See also Rule 6.91P-O(e)(1)(C)-(D) (describing 
ECOs that are not permitted to trade with the leg markets).
    \11\ See Rule 6.91P-O(f)(4)(A)-(C) (Allocation of COA Orders) 
(providing, in relevant part, that when a COA ends early or at the 
end of the Response Time Interval, a COA Order trades first with 
price-improving interest, next ``with any contra-side interest, 
including the leg markets, unless the COA is designated as a Complex 
Only Order'' and any remaining portion is ranked in the Consolidated 
Book and the COA Order is processed as an ECO pursuant to Rule 
6.91P-O(e) (Execution of ECOs During Core Trading Hours). See Rule 
1,1 (defining Consolidated Book as ``the Exchange's electronic book 
of orders and quotes.'').
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    The Exchange proposes to modify Rule 6.91P-O(f)(3)(E) to add an 
additional early end scenario to specify that a COA in progress will 
end early any time there is a Complex C2C Order submitted in the same 
complex strategy as the COA Order.\12\ By its terms, a Complex C2C 
Order ``that is not rejected'' by the Exchange, ``will immediately 
trade in full at its limit price.'' \13\
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    \12\ See proposed Rule 6.91P-O(f)(3)(E).
    \13\ See Rule 6.62P-O (g)(2)(A) (providing that a Customer Cross 
(``C2C'') Order, including a Complex C2C Order, ``that is not 
rejected per paragraph (g)(2)(B) [Execution of C2C Orders] or (C) 
[Execution of Complex C2C Orders] below will immediately trade in 
full at its limit price'').
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    To avoid rejection, a Complex C2C Order must satisfy certain price 
validations, including that each option leg may not be priced worse 
than the Exchange BBO; and, that the transaction price must be equal to 
or better than the best-priced Complex Orders, unless the best-priced 
Complex Orders contains displayed Customer interest, in which case the 
transaction price must improve such interest.\14\ In addition, the 
price of a Complex C2C Order must be priced at or between the DBBO; 
\15\ provided, however, that the Complex C2C Order may not equal the 
DBBO if the DBBO is calculated using the Exchange BBO and the Exchange 
BBO for any component of the complex strategy on either side of the 
market includes displayed Customer interest.\16\ Specifically, if the 
DBB (DBO) includes displayed Customer interest on the Exchange, the 
transaction price must improve the DBB (DBO) by at least one cent 
($0.01).\17\
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    \14\ See Rule 6.62P-O(g)(2)(C) & (g)(2)(C)(ii).
    \15\ The DBBO establishes a derived (theoretical) bid or offer 
for a particular complex strategy. See Rule 6.91P-O(a)(5) (defining 
the DBBO and providing that the bid (offer) price used to calculate 
the DBBO on each leg will be the Exchange BB (BO) (if available), 
bound by the maximum allowable Away Market Deviation). The Away 
Market Deviation, as defined in Rule 6.91P-O(a)(1), ensures that an 
ECO does not execute too far away from the prevailing market. Rule 
6.91P-O(a)(5) also provides for the establishment of the DBBO in the 
absence of an Exchange BB (BO), or ABB (ABO), or both. A Complex C2C 
Order will not be processed if there is no DBBO for any leg of the 
strategy either because there is no Exchange BBO or Away BBO for a 
leg of the complex strategy, or the best bid and offer prices for a 
leg are locked or crossed, per Rule 6.91P-O(a)(5)(B) or (a)(5)(C). 
See Rule 6.62P-O(g)(2)(C).
    \16\ See Rule 6.62P-O(g)(2)(C) & (g)(2)(C)(i).
    \17\ See id.
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    As noted above, until a COA concludes, the Book is not updated to 
reflect any COA Order executions (with price-improving auction interest 
or with resting ECO or leg market interest) or any balance of the COA 
Order ranking in the Book. Thus, to allow the later-arriving Complex 
C2C Order to be evaluated based on the most up-to-date Book, the 
Exchange proposes to end a COA upon the arrival of a Complex QCC [sic] 
Order in the same complex strategy. This proposed early termination 
would allow the Exchange to incorporate executions from the COA, or any 
remaining balance of the COA Order, to conduct the requisite price 
validations per Rule 6.62P-O(g)(2)(C) for the Complex C2C Order--
including based on the Exchange BBO, the DBBO, and best-priced Complex 
Orders on the Exchange following the COA Order executions and ranking.
    Like current Rule 6.91P-O(3)(f)(E), the proposed rule change would 
be consistent with current Rule 6.91P-O(f)(3)(A)-(D), which describes 
four circumstances that cause the early end of a COA to ensure that 
later-arriving interest does not trade ahead of a COA Order and to 
ensure that the Book is updated to reflect executions resulting from 
the COA. The Exchange believes that the proposed rule change achieves 
this same objective. As with the existing early end scenarios, the 
proposed early end of a COA does not prevent the COA Order from trading 
with any interest, including price-improving interest, that arrived 
prior to the early termination (i.e., because of a Complex C2C Order in

[[Page 31781]]

the same complex strategy as the COA). In addition, any portion of the 
COA Order that does not trade in the COA is placed on the Consolidated 
Book where it continues to have opportunities to trade.\18\
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    \18\ See note 11, supra (describing that any remaining portion 
of a COA Order following the COA will be placed on the Consolidated 
Book and will be processed as an ECO).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\19\ in general, and 
furthers the objectives of Section 6(b)(5),\20\ 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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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment to Rule 6.91P-
O(f)(3)(E) regarding the additional circumstance that would cause a COA 
to end early would promote just and equitable principles of trade 
because it would ensure that the COA Order is executed to the extent 
possible and, if applicable, is ranked in the Consolidated Book before 
the Exchange evaluates the later-arriving Complex C2C Order. As noted 
above, until the COA concludes, the Book is not updated to reflect any 
COA Order executions (with price-improving auction interest or with 
resting ECO or leg market interest) or any balance of the COA Order 
ranking in the Book. This proposed early termination would then allow 
the Exchange to incorporate executions from the COA, or any remaining 
balance of the COA Order, to conduct the requisite price validations 
for the Complex C2C Order (per Rule 6.62P-O(g)(2)(C)) based on the most 
up-to-date Book (i.e., based on the DBBO, Exchange BBO, and best-priced 
Complex Orders on the Exchange following the COA).
    As noted herein, the proposed change is being made for the same 
reasons that a COA in progress would end early upon the receipt of 
another Cross Order--a Complex QCC Order, per Rule 6.91P-O(f)(3)(E)--
and therefore raises no new or novel issues and would ensure internal 
consistency of Exchange rules. In addition, Rule 908NYP(f)(A)-(D) 
describes the other four circumstances under which a COA must end early 
to ensure that later-arriving interest does not trade ahead of a COA 
Order and to ensure that the Book is updated to reflect executions 
resulting from the COA. The Exchange believes that the proposed rule 
change achieves this same objective. As with each of the early end 
scenarios, the proposed early end of a COA does not prevent the COA 
Order from trading with any interest, including price-improving 
interest, that arrived prior to the early termination (i.e., because of 
a Complex C2C Order in the same complex strategy as the COA). As such, 
the proposed change would benefit investors because it would ensure the 
timely executions of COA Orders (at potentially improved prices) and 
would also allow a timely execution of the Complex C2C Orders in the 
same complex strategy as the COA Order. In addition, the proposal would 
ensure that the prices used to validate a Complex C2C Order would 
incorporate executions from the COA, or any remaining balance of the 
COA Order.\21\
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    \21\ As noted herein, any portion of the COA Order that does not 
trade in the COA is placed in the Consolidated Book where it 
continues to have opportunities to trade. See, e.g., note 11, supra.
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    For the same reasons articulated when the Exchange adopted Rule 
6.91P-O(f)(3)(E) (early end of a COA upon receipt of a Complex QCC 
Order), the Exchange believes that its proposed approach would provide 
the best protection to investors because ending a COA upon receipt of a 
C2C Order would ensure that the COA Order executes to the extent 
possible and that the Exchange relies on the most-up-to-date Book 
(following executions in the COA) to validate the price of the Complex 
QCC [sic] Order. Thus, the Exchange believes the proposed rule change 
would promote just and equitable principles of trade because it would 
help preserve--and maintain investor's confidence in--the integrity of 
the Exchange's local market.
    Finally, the Exchange believes that modifying the rule as proposed 
would add clarity and transparency to Rule 6.91P-O regarding the 
handling of COA Orders.

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 intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
rule change would apply in the same manner to all similarly-situated 
market participants that opt to utilize the COA process, the use of 
which is voluntary and, as such, market participants are not required 
to avail themselves of this process.
    The Exchange does not believe that its proposed rule change will 
impose any burden on inter-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed change is designed to ensure that both a COA Order and a C2C 
Order receive timely executions based on current market conditions. To 
the extent that other options exchanges offer complex order auctions 
and Complex C2C Orders, such exchanges are free to adopt (if they have 
not already done so) the early termination provision proposed herein.

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 \22\ and Rule 19b-4(f)(6) thereunder.\23\ 
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.\24\
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    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4.
    \24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public

[[Page 31782]]

interest. The Exchange has asked the Commission to waive the 30-day 
operative delay. The Exchange states that waiver of the operative delay 
would allow the Exchange to immediately implement the Complex C2C 
functionality, including the associated early end scenarios in proposed 
Exchange Rule 6.91P-O(f)(3)(E). The Commission finds that waiving the 
operative delay is consistent with the protection of investors and the 
public interest because it will allow a COA Order in a complex strategy 
to execute to the extent possible after the Exchange receives a Complex 
C2C Order in the same strategy while allowing the Exchange to conduct 
the required price validations for the Complex C2C Order \27\ based on 
a Book that has been updated to reflect any executions of the COA 
Order, thereby ensuring that the required price validations for the 
Complex C2C Order have accounted for all trading interest on the 
Exchange.\28\ In addition, any portion of the COA Order that does not 
execute during the COA may be placed in the Consolidated Book, where it 
will continue to have opportunities to trade. For these reasons, the 
Commission designates the proposal operative upon filing.\29\
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    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ 17 CFR 240.19b-4(f)(6)(iii).
    \27\ See Exchange Rule 6.62P-O(g)(2)(C).
    \28\ The Exchange's proposal to end a COA early when it receives 
a Complex C2C Order for the same strategy as the COA Order is 
consistent with current Exchange Rule 6.91P-O(f)(3)(E). 
Specifically, as discussed above, Exchange Rule 6.91P-O(f)(3)(E) 
currently states that a COA will end early if the Exchange receives 
a Complex QCC Order in the same complex strategy as the COA order. 
The Exchange proposes to amend Exchange Rule 6.91P-O(f)(3)(E) to 
provide that a COA also will end early if the Exchange receives a 
Complex C2C Order in the same complex strategy as the COA Order. The 
Exchange states that the purpose of the early termination is the 
same for both Complex QCC and Complex C2C Orders--to allow the 
Exchange to conduct the required price validations for a Complex QCC 
Order or Complex C2C Order based on a Book that has been updated to 
include any executions from the COA for the same complex strategy. 
The Exchange states that ending the COA upon receipt of a Complex 
C2C Order in the same strategy as the COA Order protects investors 
by ensuring that the COA Order executes to the extent possible and 
that the Exchange relies on the most-up-to-date Book (following 
executions in the COA) to validate the price of the Complex C2C 
Order, which the Exchange believes will help to preserve the 
integrity of the Exchange's local market.
    \29\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule should be approved or 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-33 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-NYSEARCA-2024-33. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSEARCA-2024-33 and should 
be submitted on or before May 16, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-08803 Filed 4-24-24; 8:45 am]
BILLING CODE 8011-01-P