[Federal Register Volume 89, Number 131 (Tuesday, July 9, 2024)]
[Notices]
[Pages 56449-56452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14972]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100456; File No. SR-NYSEARCA-2024-57]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE 
Arca Options Fee Schedule

July 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 June 17, 2024, NYSE Arca, Inc. (``NYSE Arca'' 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 the NYSE Arca Options Fee Schedule 
(``Fee Schedule'') to modify the Customer Take Fee Discount Tiers. The 
Exchange proposes to implement the fee change effective June 17, 
2024.\4\ 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.
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    \4\ On June 3, 2024, the Exchange originally filed to amend the 
Fee Schedule (NYSEARCA-2024-51) and, on June 14, 2024, the Exchange 
withdrew that filing and submitted NYSEARCA-2024-56. On June 17, 
2024, the Exchange withdrew NYSEARCA-2024-56.
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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 purpose of this filing is to amend the Fee Schedule to modify 
the Customer Take Fee Discount Tiers. The Exchange proposes to 
implement the rule change on June 17, 2024.
Background
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. In Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \5\
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    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
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    There are currently 17 registered options exchanges competing for 
order flow. Based on publicly-available information, and excluding 
index-based options, no single exchange has more than 16% of the market 
share of executed volume of multiply-listed equity and ETF options 
trades.\6\ Therefore, currently no exchange possesses significant 
pricing power in the execution of multiply-listed equity & ETF options 
order flow. More specifically, in April of 2024, the Exchange had 
13.71% market share of executed volume of multiply-listed equity & ETF 
options trades.\7\ Thus, in such a low-concentrated and highly 
competitive market, no single options exchange possesses significant 
pricing power in the execution of option order flow.
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    \6\ The OCC publishes options and futures volume in a variety of 
formats, including daily and monthly volume by exchange, available 
here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \7\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchanges market share in equity-based options 
increased from 12.54% for the month of April 2023 to 13.71% for the 
month of April 2024.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow, or discontinue use of certain categories of products, 
in response to fee changes. Accordingly, competitive forces constrain 
the Exchange's transaction fees (and credits), and market participants 
can readily trade on competing venues if they deem pricing levels at 
those other venues to be more favorable. In response to the competitive 
environment, the Exchange offers specific rates and credits in its Fees 
Schedule, as do other competing options exchanges, which the Exchange 
believes provide incentive to OTP Holder and OTP Firms (collectively, 
``OTP Holders'') to increase order flow of certain qualifying orders.
Proposal
    In response to these competitive forces, the Exchange has 
established various pricing incentives designed to encourage increased 
volume executed on the Exchange, including volume that

[[Page 56450]]

removes or ``takes'' liquidity on the Exchange (also known as 
``liquidity taking'' or ``liquidity removing'' volume). Currently, if 
an OTP Holder executes a ``liquidity taking'' transaction, the OTP 
Holder is charged a ``Take Liquidity'' fee (referred to herein as a 
``Take Fee'', or collectively, as ``Take Fees'').'' \8\ Currently, 
Customer executions in Penny and non-Penny issues are subject to Take 
Fees of $0.49 and $0.85, respectively.\9\ To offset such Take Fees and 
encourage market participants to direct order flow to the Exchange, the 
Exchange offers Take Fee discounts to some market participants for 
executions in Penny and non-Penny issues.\10\ Last year, in September 
2023, the Exchange introduced the Customer Take Fee Discount Tiers (the 
``Take Fee Discount(s)''), which provides tiered per contract discounts 
on Customer Take Fees (in both Penny and non-Penny issues) based on an 
OTP Holder's achievement of certain volume qualifications in average 
electronic executions per day.\11\ Now that the Take Fee Discounts have 
been in place for approximately nine months, the Exchange is proposing 
certain modifications.
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    \8\ See Fee Schedule, NYSE Arca OPTIONS: TRADE-RELATED CHARGES 
FOR STANDARD OPTIONS, TRANSACTION FEE FOR ELECTRONIC EXECUTIONS--PER 
CONTRACT.
    \9\ See id.
    \10\ See, e.g., Fee Schedule, DISCOUNT IN TAKE LIQUIDITY FEES 
FOR PROFESSIONAL CUSTOMER AND NON-CUSTOMER LIQUIDITY REMOVING 
INTEREST.
    \11\ See Securities Exchange Act Release No. 98422 (September 
18, 2023), 88 FR 65415 (September 22, 2023) (immediately effective 
fee filing to adopt the Customer Take Fee Discount Tiers) (SR-SR-
NYSEARCA-2023-62).
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    Specifically, the Exchange proposes to modify the volume 
qualifications for Tiers 1 and 2 of the Take Fee Discounts (without 
changing the per contract discount) and to delete entirely the Tier 3 
Take Fee Discount of the Program.
    The proposed changes to the Take Fee Discounts are as follows (with 
new text shown in italics and to be deleted text shown in brackets):

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                                        Take fee discount qualification for Penny and Non-Penny      Discount
                Tier                                            Issues                                amount
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Tier 1..............................  At least [0.20%]0.40% of TCADV from Customer liquidity               $0.01
                                       removing interest in all issues.
Tier 2..............................  At least [0.40%]0.60% of TCADV from Customer liquidity                0.02
                                       removing interest in all issues, and 1% of TCADV from
                                       Customer posted interest in all issues.
[Tier 3]............................  [At least 0.60% of TCADV from Customer liquidity removing           [0.03]
                                       interest in all issues, and 1.50% of TCADV from Customer
                                       posted interest in all issues].
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  Professional Customer orders are not included in the above qualifications or in discount-eligible volume. OTP
                Holders and OTP Firms may earn only the highest discount for which they qualify.
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    As proposed, Tier 1 would continue to offer a $0.01 discount on 
Customer Take Fees if an OTP Holder achieves at least 0.40% of TCADV 
(up from 0.20%) in Customer liquidity removing interest in all issues 
and Tier 2 would continue to offer a $0.02 discount on Customer Take 
Fees if an OTP Holder achieves at least 0.60% of TCADV (up from 0.40%) 
in Customer liquidity removing interest in all issues and 1% of TCADV 
from Customer posting in all issues, which 1% threshold is not being 
modified. Further, the Exchange is proposing to remove entirely Tier 3, 
which currently offers a $0.03 discount on Customer Take Fees when an 
OTP Holder achieves at least 0.60% of TCADV from Customer liquidity 
removing interest in all issues and 1.50% of TCADV from Customer 
posting in all issues. The Exchange therefore believes that the 
proposed modifications to Tiers 1 and 2, coupled with the removal of 
Tier 3, would strike the right balance between setting the thresholds 
for the Take Fee Discounts at levels that are achievable, while 
ensuring that the overall Take Fee rates remain competitive with other 
options exchanges.\12\
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    \12\ See notes 16-17, infra.
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    As is the case today, the Take Fee Discounts only apply to Customer 
orders, and the qualifications for the discounts are based only on 
activity in the Customer range; activity in the Professional Customer 
range is not included in the qualifications and is not eligible to 
receive any of the proposed discounts, as Professional Customer orders 
are already eligible for other discounts on Take Fees.\13\ Further, as 
is the case today, OTP Holders may earn only the highest discount for 
which they qualify.
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    \13\ See note 10, supra.
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    Although the Exchange cannot predict with certainty whether any OTP 
Holders would seek to qualify for the Take Fee Discounts, the Exchange 
believes that the proposed change would continue to encourage OTP 
Holders to direct interest--particularly Customer liquidity removing 
interest--to the Exchange to earn the proposed discounts on Take Fees. 
To the extent that the proposed Program, as modified, continues to 
attract Customer order flow, including liquidity taking volume, the 
Exchange believes all market participants stand to benefit from 
increased order flow, which promotes market depth, facilitates tighter 
spreads and enhances price discovery. Such increased liquidity would 
result in enhanced market quality for all participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Sections 6(b)(4) and (5) of the Act,\15\ in particular, 
because it provides for the equitable allocation of reasonable dues, 
fees, and other charges among its members, issuers and other persons 
using its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed change to the Take Fee 
Discounts is reasonable, equitable, and not unfairly discriminatory. As 
noted above, the Exchange operates in highly competitive market. The 
Exchange is only one of several options venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. As such, market participants can 
readily direct order flow to competing venues if they deem fee levels 
at a particular venue to be excessive or incentives to be insufficient. 
The Exchange believes that the proposed fee change is reasonable, 
equitable, and not unfairly discriminatory in that the Exchange and 
competing options exchanges currently offer similar discounts.
    The Exchange believes that the proposed Take Fee Discounts would 
continue to incent OTP Holders to increase the amount of Customer 
interest sent to the Exchange, especially liquidity removing interest, 
which

[[Page 56451]]

benefits all market participants by providing more trading 
opportunities, thereby making the Exchange a more attractive execution 
venue. The Exchange further believes that the proposed qualifications 
for the Take Fee Discounts are attainable for OTP Holders based on 
recent volumes and that the proposed amounts of the discounts are 
reasonable, as the Exchange's rates for Customer liquidity removing 
interest would remain in range of and competitive with the rates 
assessed by other options exchanges.\16\ In particular, the Exchange 
believes that the proposed modifications to Tiers 1 and 2, coupled with 
the removal of Tier 3, would strike the right balance between setting 
the thresholds for the Take Fee Discounts at levels that are 
achievable, while ensuring that the overall Take Fee rates remain 
competitive.
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    \16\ See, e.g., Nasdaq Stock Market, Options 7, Pricing 
Schedule, available at: https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-options-7 (providing for rates of $0.49 for 
Customer liquidity removing interest in Penny issues and rate of 
$0.85 for Customer liquidity removing interest in non-Penny issues); 
MEMX Options Fee Schedule, Transaction Fees, available here: https://info.memxtrading.com/us-options-trading-resources/us-options-fee-schedule/ (providing for rates of $0.46 for Customer liquidity 
removing interest in Penny issues and rate of $0.85 for Customer 
liquidity removing interest in non-Penny issues); and Cboe BZX 
Options, Fee Schedule, Standard Rates, available at: https://www.cboe.com/us/options/membership/fee_schedule/bzx/ (providing for 
rates of $0.45 for Customer liquidity removing interest in Penny 
issues and rate of $0.85 for Customer liquidity removing interest in 
non-Penny issues). Currently, Customer executions in Penny and non-
Penny issues are subject to per contract Take Fees of $0.49 and 
$0.85, respectively. As proposed, an OTP Holder that achieves Tier 1 
or Tier 2 would pay $0.48 or $0.47, respectively, for Penny issues 
and $0.84 or $0.83, respectively, for non-Penny issues, which is 
comparable to rates available on other options exchanges.
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    To the extent the proposed rule change attracts greater volume and 
liquidity by encouraging OTP Holders to increase their options volume 
on the Exchange, the Exchange believes the proposed change would 
improve the Exchange's overall competitiveness and strengthen its 
market quality for all market participants. In the backdrop of the 
competitive environment in which the Exchange operates, the proposed 
rule change is a reasonable attempt by the Exchange to increase the 
depth of its market and improve its market share relative to its 
competitors.\17\
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    \17\ See id.
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The Proposed Rule Change is an Equitable Allocation of Credits and Fees
    The Exchange believes the proposed rule change is an equitable 
allocation of its fees and credits. The proposal is based on the amount 
and type of business transacted on the Exchange, and OTP Holders can 
attempt to qualify for the discounts or not. Moreover, the proposal is 
designed to incent OTP Holders to continue to direct Customer liquidity 
removing interest to the Exchange and to aggregate all liquidity 
removing interest at the Exchange as a primary execution venue. To the 
extent that the proposed change attracts more opportunities for 
execution of Customer interest on the Exchange, this increased order 
flow would continue to make the Exchange a more competitive venue for 
order execution. Thus, the Exchange believes the proposed rule change 
would improve market quality for all market participants on the 
Exchange and, as a consequence, attract more order flow to the Exchange 
thereby improving market-wide quality and price discovery.
    The Exchange also believes the proposed Take Fee Discounts are not 
unfairly discriminatory because they would be available to all 
similarly-situated market participants on an equal and non-
discriminatory basis. The Exchange also believes that the proposed 
change is not unfairly discriminatory to Professional Customers and 
non-Customers, as those market participants are already afforded 
discounts on Take Fees under the current Fee Schedule.\18\
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    \18\ See note 10, supra.
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    The proposal is based on the amount and type of business transacted 
on the Exchange, and OTP Holders are not obligated to try to achieve 
the proposed qualifications to earn the Take Fee Discounts, nor are 
they obligated to direct liquidity removing interest or posted interest 
to the Exchange. To the extent that the proposed change attracts more 
interest, including liquidity removing interest, to the Exchange, this 
increased order flow would continue to make the Exchange a more 
competitive venue for order execution. Thus, the Exchange believes the 
proposed rule change would improve market quality for all market 
participants on the Exchange and, in turn, attract more order flow to 
the Exchange thereby improving market-wide quality and price discovery. 
The resulting increased volume and liquidity would provide more trading 
opportunities and tighter spreads to all market participants and thus 
would promote just and equitable principles of trade, 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.
    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act, the Exchange does 
not believe that the proposed rule change would impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Instead, as discussed above, the Exchange believes 
that the proposed change would encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all market participants. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering integrated competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \19\
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    \19\ See Reg NMS Adopting Release, supra note 5, at 37499.
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    Intramarket Competition. The proposed change is designed to attract 
additional order flow to the Exchange, including both liquidity 
removing interest and posting interest. The Exchange believes that the 
proposed change would incent OTP Holders to continue to direct their 
liquidity removing order flow to the Exchange. Greater liquidity 
benefits all market participants on the Exchange and increased 
liquidity removing order flow would increase opportunities for 
execution of other trading interest. The proposed modifications would 
be available to all similarly-situated market participants and, as 
such, the proposed change would not impose a disparate burden on 
competition among market participants on the Exchange.
    Intermarket Competition. The Exchange operates in a highly 
competitive market in which market participants can readily favor one 
of the 16 competing option exchanges if they deem fee levels at a 
particular venue to be excessive. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges and to attract order flow to the Exchange. Based on publicly-
available information, and excluding index-based options, no single 
exchange has more than 16% of the market share of executed volume of 
multiply-listed

[[Page 56452]]

equity and ETF options trades.\20\ Therefore, currently no exchange 
possesses significant pricing power in the execution of multiply-listed 
equity and ETF options order flow. More specifically, in April 2024, 
the Exchange had 13.71% market share of executed volume of multiply-
listed equity and ETF options trades.\21\
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    \20\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Monthly-Weekly-Volume-Statistics.
    \21\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of equity-based ETF options, 
see id., the Exchanges market share in equity-based options 
increased from 12.54% for the month of April 2023 to 13.71% for the 
month of April 2024.
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    The Exchange believes that the proposed rule change reflects this 
competitive environment because it modifies the Exchange's fees in a 
manner designed to incent OTP Holders to direct trading to the 
Exchange, to provide liquidity and to attract order flow. To the extent 
that this purpose is achieved, all the Exchange's market participants 
should benefit from the improved market quality and increased 
opportunities for price improvement.
    The Exchange believes that the proposed change could promote 
competition between the Exchange and other execution venues, including 
options exchanges that offer comparable rates for Customer liquidity 
removing interest,\22\ by encouraging additional orders to be sent to 
the Exchange for execution.
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    \22\ See notes 16-17, supra.
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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 foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \23\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \24\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(2).
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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) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-57 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-2024-57. 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-2024-57 and should 
be submitted on or before July 30, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-14972 Filed 7-8-24; 8:45 am]
BILLING CODE 8011-01-P