[Federal Register Volume 89, Number 114 (Wednesday, June 12, 2024)]
[Notices]
[Pages 49945-49948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12790]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100284; File No. SR-NYSEARCA-2024-47]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 
6.40P-O

June 6, 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 May 31, 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 amend Rule 6.40P-O (Pre-Trade and 
Activity-Based Risk Controls) pertaining to pre-trade risk controls to 
make additional pre-trade risk controls available to Entering Firms. 
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,

[[Page 49946]]

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 Rule 6.40P-O (Pre-Trade and 
Activity-Based Risk Controls) pertaining to pre-trade risk controls to 
make additional pre-trade risk controls available to entering Firms.\4\
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    \4\ The term ``Entering Firm'' refers to an OTP Holder or OTP 
Firm (including those acting as Market Makers). See Rule 6.40P-
O(a)(1).
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Background and Proposal
    In 2022, in connection with the Exchange's migration to Pillar and 
to better assist OTP Holders and OTP Firms in managing their risk, the 
Exchange adopted Rule 6.40P-O, which included pre-trade risk controls, 
among other activity-based controls, wherein an Entering Firm had the 
option of establishing limits or restrictions on certain of its trading 
behavior on the Exchange and authorizing the Exchange to take action if 
those limits or restrictions were exceeded.\5\
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    \5\ See Securities Exchange Act Release No. 94072 (January 26, 
2022), 87 FR 5592 (February 1, 2022) (Notice of Filing of Amendment 
No. 4 and Order Granting Accelerated Approval of a Proposed Rule 
Change, as Modified by Amendment No. 4) (SR-NYSEArca-2021-47). See 
also Securities Exchange Act Release No. 96504 (December 15, 2023), 
87 FR 78166 (December 21, 2023) (immediately effective filing to 
adopt certain Pre-Trade Risk Controls).
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    The Exchange has recently received several requests from market 
participants to create an additional risk control to restrict the 
overall rate of orders. The Exchange notes that several of the Cboe 
affiliated options exchanges currently offer risk controls identical to 
the one proposed here.\6\ As such, market participants are already 
familiar with these risk checks, such that the ones proposed by the 
Exchange in this filing are not novel. The Exchange notes that this 
rule change is modeled on the proposal recently submitted by the 
Exchange's affiliate equities exchanges, including NYSE Arca, Inc. 
(``NYSE Arca'').\7\
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    \6\ See e.g., Cboe BZX Rule 11.13, Interpretations and Policies 
.01 paragraph (f) and Cboe EDGX Rule 11.10, Interpretations and 
Policies .01 paragraph (f).
    \7\ See, e.g., SR-NYSEARCA-2024-46 (modifying NYSE Arca Rule 
7.19E). The Exchange notes that several equities exchanges already 
offer this pre-trade risk control. See, e.g., Cboe BZX Rule 11.13 
Interpretations and Policies .01 paragraph (f); Cboe BYX Rule 11.13 
Interpretations and Policies .01 paragraph (f); Cboe EDGX Rule 11.10 
Interpretations and Policies .01 paragraph (f); MEMX Rule 11.10, 
Interpretations and Policies .01 paragraph (f); and MIAX Pearl 
Equities Rule 2618(a)(1)(H).
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    In light of these requests, the Exchange proposes to amend Rule 
6.40P-O(a)(2)(A) to add a new subparagraph (vi), which would provide 
that the Single Order Risk Controls available to Entering Firms would 
include ``controls to restrict the overall rate of orders.''
    As with the Exchange's existing risk controls, use of the pre-trade 
risk control proposed herein would be optional. The Exchange proposes 
no other changes to Rule 6.40P-O or its Commentary.
Continuing Obligations of OTP Holders Under Rule 15c3-5
    The proposed Pre-Trade Risk Controls described here are meant to 
supplement, and not replace, the OTP Holders' own internal systems, 
monitoring, and procedures related to risk management. The Exchange 
does not guarantee that these controls will be sufficiently 
comprehensive to meet all of an OTP Holder's needs, the controls are 
not designed to be the sole means of risk management, and using these 
controls will not necessarily meet an OTP Holder's obligations required 
by Exchange or federal rules (including, without limitation, the Rule 
15c3-5 under the Act \8\ (``Rule 15c3-5'')). Use of the Exchange's Pre-
Trade Risk Controls will not automatically constitute compliance with 
Exchange or federal rules and responsibility for compliance with all 
Exchange and SEC rules remains with the OTP Holder.\9\
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    \8\ See 17 CFR 240.15c3-5.
    \9\ See also Commentary .01 to Rule 6.40P-O, which provides that 
the Pre-Trade Risk Controls set forth in Rule 6.40P-O ``are meant to 
supplement, and not replace, the OTP Holder's or OTP Firm's own 
internal systems, monitoring, and procedures related to risk 
management and are not designed for compliance with Rule 15c3-5 
under the Exchange Act. Responsibility for compliance with all 
Exchange and SEC rules remains with the OTP Holder or OTP Firm.'').
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Timing and Implementation
    The Exchange anticipates implementing the proposed change in the 
second quarter of 2024 and, in any event, will implement the proposed 
rule change no later than the end of September 2024. The Exchange will 
announce the timing of such changes by Trader Update.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ 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 regulating, 
clearing, settling, processing information with respect to, and 
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, 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change 
will remove impediments to and perfect the mechanism of a free and open 
market and a national market system because the proposed optional 
additional Pre-Trade Risk Control would provide Entering Firms with 
enhanced abilities to manage their risk with respect to orders on the 
Exchange. The proposed additional Pre-Trade Risk Control is not novel; 
they are based on existing risk settings already in place on Cboe 
affiliated options exchanges, and market participants are already 
familiar with the types of protections that the proposed risk control 
affords.\12\ Moreover, the proposed pre-trade risk control is optional 
and, as such, Entering Firms are free to utilize this risk feature or 
not at their discretion. As such, the Exchange believes that the 
proposed additional Pre-Trade Risk Control would provide a means to 
address potentially market-impacting events, helping to ensure the 
proper functioning of the market.
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    \12\ See supra note 6. This pre-trade risk control is also 
offered on several equities exchanges. See supra note 7.
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    In addition, the Exchange believes that the proposed rule change 
will protect investors and the public interest because the proposed 
additional Pre-Trade Risk Control is a form of impact mitigation that 
will aid Entering Firms in minimizing their risk exposure and reduce 
the potential for disruptive, market-wide events. The Exchange 
understands that OTP Holders implement a number of different risk-based 
controls, including those required by Rule 15c3-5. The controls 
proposed here will serve as an additional tool for Entering Firms to 
assist them in identifying any risk exposure. The Exchange believes the 
proposed additional Pre-Trade Risk Controls will assist Entering Firms 
in managing their financial exposure which, in turn, could enhance the 
integrity of trading on the securities markets and help to assure the 
stability of the financial system.

[[Page 49947]]

    Finally, the Exchange believes that the proposed rule change does 
not unfairly discriminate among the Exchange's OTP Holders because use 
of the proposed additional Pre-Trade Risk Control is optional and is 
not a prerequisite for participation on the Exchange.

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. In fact, the Exchange 
believes that the proposal will have a positive effect on competition 
because, by providing Entering Firms additional means to monitor and 
control risk, the proposed rule will increase confidence in the proper 
functioning of the markets. The Exchange believes the proposed 
additional Pre-Trade Risk Control will assist Entering Firms in 
managing their financial exposure which, in turn, could enhance the 
integrity of trading on the securities markets and help to assure the 
stability of the financial system. As a result, the level of 
competition should increase as public confidence in the markets is 
solidified.

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 \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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 \15\ and Rule 19b-4(f)(6) 
thereunder.\16\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization 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) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay so that 
the proposed rule change may become effective and operative upon filing 
with the Commission. The Exchange states that the proposed rule change 
is tied to a technological release that the Exchange plans to implement 
by the end of June 2024, that such release may be ready before the 30-
day operative delay has elapsed, and the Exchange seeks to implement 
the proposed rule change without delay. The Exchange explains that the 
proposed rule change will assist Entering Firms in minimizing their 
risk exposure, which could enhance the integrity of trading on the 
securities markets and help to assure the stability of the financial 
system, and that the proposed rule change is not novel as it is based 
on existing risk settings already in place on other exchanges. For 
these reasons, and because the proposed rule change does not raise any 
new or novel regulatory issues, the Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the operative delay and designates the proposed rule change 
operative upon filing.\19\
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule'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 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 change 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-2024-47 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-2024-47. 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-2024-47 and should 
be submitted on or before July 3, 2024.


[[Page 49948]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12790 Filed 6-11-24; 8:45 am]
BILLING CODE 8011-01-P