[Federal Register Volume 89, Number 90 (Wednesday, May 8, 2024)]
[Notices]
[Pages 38939-38941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10000]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100047; File No. SR-NYSEARCA-2024-34]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Revise Rule 
10.16

May 2, 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 23, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the 
``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 revise Rule 10.16 to adopt streamlined 
sanction guidelines for its options marketplace based on NYSE American 
LLC Rule 601 and make certain conforming changes. 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 revise Rule 10.16 (NYSE Arca Sanctioning 
Guidelines--Options) to adopt streamlined sanction guidelines for its 
options marketplace based on NYSE American LLC (``NYSE American'') Rule 
601 and make certain conforming changes.
Background and Proposed Rule Change
    The current Sanction Guidelines in Rule 10.16 were adopted pursuant 
to the provisions of Section IV.B.i of the Commission's September 11, 
2000 Order Instituting Administrative Proceedings Pursuant to Section 
19(h)(1) of the Act (the ``2000 Order''), which required the Exchange 
to adopt rules establishing, or modifying existing, sanctioning 
guidelines such that they are reasonably designed to effectively 
enforce compliance with options order handling rules, including the 
duty of best execution with respect to the handling of orders after the 
broker-dealer routes the order to such respondent exchange, limit order 
display, priority, firm quote, and trade reporting rules.\4\ Like its 
affiliate NYSE American, which also adopted sanction guidelines in 
response to the 2000 Order,\5\ the Exchange incorporated fine ranges in 
its sanctions guidelines for specific rule violations. Unlike NYSE 
American, the Exchange's suggested monetary sanctions are very broad 
($10,000-$100,000 in four instances and $10,000-$150,000 in two 
instances). The current Exchange sanction guidelines are otherwise 
similar to the sanction guidelines adopted by NYSE American in response 
to the 2000 Order.
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    \4\ See Securities Exchange Act Release Nos. 45416 (February 7, 
2002), 67 FR 6777 (February 13, 2002) (SR-PCX-2001-23) (Notice); 
45567 (March 15, 2002), 67 FR 13392 (March 22, 2002) (SR-PCX-2001-
23) (Order). See generally Securities Exchange Act Release No. 43268 
(September 11, 2000), Administrative Proceeding File No. 3-10282.
    \5\ Other exchanges subject to the 2000 Order, however, did not 
adopt specific fine ranges as part of their sanction guidelines. 
See, e.g., Securities Exchange Act Release Nos. 45427 (February 8, 
2002), 67 FR 6958 (February 14, 2002) (Notice); 45571 (March 15, 
2002), 67 FR 13382 (March 22, 2002) (SR-CBOE-2001-71) (Order 
Granting Accelerated Approval of Proposed Rule Change and Notice of 
Filing and Order Granting Accelerated Approval of Amendment No. 1 
Thereto by the Chicago Board Options Exchange, Inc. To Incorporate 
Certain Principal Considerations in Determining Sanctions and To 
Incorporate in the Exchange's Minor Rule Violation Plan Violations 
of the Exchange's Order Handling Rules).
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    Recently, NYSE American adopted a new Rule 601 incorporating 
sanctions guidelines similar to Cboe Exchange, Inc. (``Cboe'') Rule 
13.11, Supplementary Material .01, in place of those original sanction 
guidelines.\6\ The new, streamlined sanction guidelines adopted by NYSE 
American eliminated specific fine ranges for violations and continued 
to reflect a principles-based approach to sanctions guidelines 
applicable to all options rules. The Exchange believes that adopting 
the same NYSE American sanction guidelines that do not contain specific 
recommended fine ranges for a subset of rules would similarly modernize 
and update Rule 10.16 in important respects while continuing to provide 
flexible guidelines for determining appropriate remedial sanctions 
consistent with the intention of the original rule.\7\ Further, because 
both NYSE American Rule 601 and Cboe Rule 13.11 take a more streamlined 
approach, the Exchange believes the proposed rule would more clearly 
and succinctly set forth current relevant considerations regarding the 
adjudication of disciplinary actions.
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    \6\ See Securities Exchange Act Release No. 98798 (October 25, 
2023), 88 FR 74544 (October 31, 2023) (SR-NYSEAMER-2023-49) (Notice 
of Filing and Immediate Effectiveness of Proposed Change To Delete 
Legacy Disciplinary Rules 475, 476, 476A, and 477 and Make 
Conforming Changes to Rule 41, Rules 8001, 8130(d), 8320(d), 9001, 
9216(b)(1), 9810(a), and 781 of the Office Rules, Rules 2A, 12E, 
3170(a)(3), 902NY and Adopt a New Rule 600 and Make Conforming 
Changes to Rules 3170(C)(3), and Adopt a New Rule 601).
    \7\ See 67 FR at 6771.
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    In addition, the Exchange believes that the proposed rule would be 
consistent with the 2000 Order. The Exchange's current sanction 
guidelines are similar to the guidelines that NYSE American replaced. 
Moreover, the text of NYSE American Rule 601 was based on Cboe Rule 
13.11 that was also adopted to satisfy the 2000 Order. As proposed, the 
Exchange would reproduce the text of NYSE American Rule 601 almost 
verbatim. In addition, by modernizing and updating the Exchange's 
sanctions guidelines, the Exchange would further enhance its 
disciplinary processes consistent with the 2000 Order. Finally, the 
proposed rule would promote regulatory consistency across options 
exchanges in determining appropriate remedial sanctions for violations 
of options rules.
    As is currently the case, proposed Rule 10.16 would not apply to 
the equities market.\8\ As such, proposed Rule 10.16 would carry 
forward the current practice whereby the various bodies with 
responsibility for the adjudication of disciplinary actions, including 
Hearing Panels, Hearing Officers, the Committee for Review (``CFR''), 
and the Board of Directors (``Board''), defined in the proposed Rule 
collectively as ``Adjudicatory Bodies,'' would consider relevant 
Exchange precedent or such other precedent as they deem appropriate in 
determining sanctions imposed against OTP Holders or OTP Firms and 
their covered persons as defined in Rule 10.9120(g) of the

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Exchange's disciplinary rules. The proposed definition of Adjudicatory 
Bodies would be updated to reflect the terms provided for in the 
current disciplinary rules, including ``Hearing Panels'' and ``Extended 
Hearing Panels'' in place of ``Ethics and Business Conduct Committee,'' 
and ``Committee for Review'' and ``Chief Regulatory Officer 
(``CRO''),'' given the role of each in the disciplinary and settlement 
processes. In addition, for the avoidance of doubt, the Exchange would 
include the CRO's delegees in the definition of Adjudicatory Bodies, 
which corresponds to the current definition of Adjudicatory Bodies as 
inclusive of Exchange regulatory staff. Similarly for the avoidance of 
doubt, the Exchange would add letters of acceptance, waiver and consent 
to the list of ways a disciplinary matter can be resolved as well as 
summary sanctions in options-related matters governed by Rule 10.13 and 
appeals of Floor citations and summary sanctions governed by Rule 
10.11, which are unique to the Exchange.\9\ The remainder of the 
proposed Rule would be identical to NYSE American Rule 601.
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    \8\ See note 4 and accompanying text, supra.
    \9\ For the further avoidance of doubt, neither the list of ways 
that a proposed disciplinary matter can be resolved nor the persons 
and entities comprising the definition of Adjudicatory Bodies in 
proposed Rule 10.16 are intended to be exhaustive.
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    Finally, the Exchange would conform Rules 10.0 (Legacy Disciplinary 
Proceedings, Other Hearings and Appeals) and 10.9001 (Effective Date of 
Rule 10.9000 Series) to reflect the change in the title of Rule 10.16 
replacing ``Sanctioning'' with ``Sanctions.''
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\10\ in that 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. In addition, the Exchange believes 
that the proposed rule change furthers the objectives of Section 
6(b)(7) of the Act,\11\ in particular, in that it provides fair 
procedures for the disciplining of members and persons associated with 
members, the denial of membership to any person seeking membership 
therein, the barring of any person from becoming associated with a 
member thereof, and the prohibition or limitation by the Exchange of 
any person with respect to access to services offered by the Exchange 
or a member thereof.
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    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(7).
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    Specifically, the Exchange believes that adopting sanction 
guidelines that are substantively the same as NYSE American Rule 601 
would continue to permit the Exchange to impose sanctions consistently 
and fairly by reference to a streamlined rule, thereby continuing to 
provide fair procedures for the disciplining of members and persons 
associated with members, the denial of membership to any person seeking 
Exchange membership, the barring of any person from becoming associated 
with a member, and the prohibition or limitation by the Exchange of any 
person with respect to access to services offered by the Exchange or a 
member thereof pursuant to Section 6(b)(7) \12\ of the Act.
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    \12\ 15 U.S.C. 78f(b)(7).
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    The proposed rule would provide flexible and appropriate 
principles-based guidelines applicable to all options rules for 
determining remedial sanctions consistent with the intention of the 
Exchange's current sanctions guidelines rule.\13\ Moreover, the 
Exchange believes that by adopting NYSE American Rule 601's more 
streamlined approach to sanctions guidelines, the Exchange believes the 
proposed rule would more clearly and succinctly set forth the current 
relevant considerations regarding the adjudication of disciplinary 
actions. Further, the Exchange believes that the proposed rule would 
also be consistent with the 2000 Order because the proposed rule is 
substantively the same as NYSE American Rule 601, which was in turn 
based on Cboe Rule 13.11 that was adopted to satisfy the same 
Commission order. Indeed, the Exchange believes that by modernizing and 
updating its sanctions guidelines, proposed Rule 10.16 would further 
enhance its disciplinary processes consistent with the 2000 Order and 
further ensure that the Exchange implements the most appropriate 
disciplinary mechanisms for violations and a fair process in 
determining same. Finally, the proposed rule would promote regulatory 
consistency and uniformity across options exchanges in determining 
appropriate remedial sanctions and the imposition of penalties.
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    \13\ See 67 FR at 6771.
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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 Exchange Act. The proposed rule 
change is not intended to address competitive issues but rather is 
concerned solely with adopting updated, streamlined sanction guidelines 
based on the rules of the Exchange's affiliate that are consistent with 
a previous Commission order and continue to permit the Exchange to 
impose sanctions consistently and fairly.

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

    Because the foregoing 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 for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 
19b-4(f)(6) thereunder.\14\
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    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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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    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.

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:

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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-2024-34 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-2024-34. 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-2024-34 and should 
be submitted on or before May 29, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-10000 Filed 5-7-24; 8:45 am]
BILLING CODE 8011-01-P