[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 67979-67982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18795]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100748; File No. SR-NYSEARCA-2024-65]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 3.7

August 16, 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 August 12, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

[[Page 67980]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 3.7 (Dues, Fees and Charges) to 
permit direct debiting of undisputed or final fees or other sums due 
the Exchange by ETP Holders with one or more Equities Trading Permits 
(``Trading Permit'') and each applicant for a Trading Permit. 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 Rule 3.7 (Dues, Fees and Charges) to 
permit direct debiting of undisputed or final fees or other sums due 
the Exchange by ETP Holders with one or more Trading Permits and each 
applicant for a Trading Permit.
    Rule 3.7 currently provides that ETP Holders, OTP Holders and OTP 
Firms of the Exchange, whether or not in good standing, shall pay to 
the Exchange such dues, fees and charges as the Board of Directors 
shall prescribe.
    The Exchange proposes to require that ETP Holders that hold a 
Trading Permit, and each applicant for a Trading Permit, provide one or 
more clearing account numbers that correspond to an account(s) at the 
National Securities Clearing Corporation (``NSCC '') for purposes of 
permitting the Exchange to collect through direct debit any undisputed 
or final fees and/or other sums due to the Exchange. The Exchange 
would, however, permit an ETP Holder or applicant for a Trading Permit 
to opt-out of the requirement to provide NSCC clearing account numbers 
and establish alternative payment arrangements. In addition, consistent 
with current Rule 3.8 (Failure to Pay Exchange Fees), the proposed 
change would not apply to disciplinary fines or monetary sanctions 
governed by Rule 10.8320. The proposed rule would also not apply to 
regulatory fees related to the Central Registration Depository (``CRD 
system''), which are collected by the Financial Industry Regulatory 
Authority, Inc. (``FINRA'').\4\ The proposed change is based on the 
rules of the Exchange's affiliates NYSE American LLC (``NYSE 
American'') and NYSE Chicago, Inc. (``NYSE Chicago'') as well as other 
exchanges.\5\
---------------------------------------------------------------------------

    \4\ The CRD system is the central licensing and registration 
system for the U.S. securities industry. The CRD system enables 
individuals and firms seeking registration with multiple states and 
self-regulatory organizations to do so by submitting a single form, 
fingerprint card and a combined payment of fees to FINRA. Through 
the CRD system, FINRA maintains the qualification, employment and 
disciplinary histories of registered associated persons of broker-
dealers. Certain of the regulatory fees provided in the NYSE Arca 
Equities Schedule of Fees and Charges (``Schedule of Fees and 
Charges'') are collected and retained by FINRA via the CRD system 
for the registration of ETP Holders and employees of ETP Holders 
that are not FINRA members. These fees would be excluded from direct 
debiting.
    \5\ See NYSE American Rule 41 (Collection of and Failure to Pay 
Exchange Fees); NYSE Chicago Article 7, Rule 11 (Fixing and Paying 
Fees and Charges). See also, e.g., MEMX LLC (``MEMX'') Rule 15.3(a) 
(Collection of Exchange Fees and Other Claims and Billing Policy) 
requires each MEMX member and all applicants for registration as 
members are required to provide one or more clearing account numbers 
that correspond to an account(s) at the NSCC for purposes of 
permitting the Exchange to debit certain fees, fines, charges and/or 
other monetary sanctions or other monies due to the Exchange. As 
noted, the proposed rule would not apply to disciplinary fines or 
monetary sanctions, and the proposal does not propose to change 
this. The MEMX rule also requires members to submit billing disputes 
within a certain time period. The Exchange's current billing 
disputes policy is set forth in item I under ``Billing Disputes'' in 
the Schedule of Fees and Charges, available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf, 
and provides that all fee disputes must be submitted no later than 
sixty days after receipt of a billing invoice. The proposal does not 
modify or rescind the Exchange's billing disputes policy, and that 
policy would continue to apply to all billing disputes.
---------------------------------------------------------------------------

    Under the proposal, the Exchange would send a monthly invoice to 
each ETP Holder, generally on the 5th business day of each month as is 
currently the practice, for the debit amount due to the Exchange for 
the prior month. The Exchange would also send files to NSCC each month 
on or about the 11th business day of the month in order to initiate the 
debit of the amount due to the Exchange as provided for in the prior 
month's invoice.\6\ The Exchange anticipates that NSCC will process the 
debits on the day it receives the file or the following business day. 
Because ETP Holders would be provided with an invoice approximately 1 
week before the debit date, ETP Holders will have adequate time to 
contact the Exchange with any questions concerning the invoice. If an 
ETP Holder disagrees with the invoice in whole or in part, the Exchange 
would not commence the debit for the disputed amount until the dispute 
is resolved. Specifically, the Exchange would not include the disputed 
amount (or the entire invoice if it is not feasible to identify the 
disputed amounts) in the NSCC debit amount where the ETP Holder 
provides written notification of the dispute to the Exchange by the 
later of the 15th of the month, or the following business day if the 
15th is not a business day, and the amount in dispute is at least 
$10,000 or greater.
---------------------------------------------------------------------------

    \6\ As discussed below, if an ETP Holder disputes an invoice, 
the Exchange would not include the disputed amount in the automatic 
debit if the ETP Holder has disputed the amount in writing to the 
Exchange by the 15th of the month, or the following business day if 
the 15th is not a business day, and the disputed amount is at least 
$10,000 or greater. As a practical matter, the Exchange would not 
send a file to the NSCC until the proposed time in Rule 3.7 for an 
ETP Holder to dispute an invoice subject to automatic debit has 
passed.
---------------------------------------------------------------------------

    Following receipt of the file from the Exchange, NSCC would proceed 
to debit the amounts indicated from the account of the ETP Holder that 
clears the applicable transactions (``Clearing ETP Holder,'' i.e., 
either an ETP Holder that is self-clearing or another ETP Holder that 
provides clearing services on behalf of the ETP Holder) and disburse 
such amounts to the Exchange. Where an ETP Holder clears through 
another a ETP Holder, the Exchange understands that the estimated 
transaction fees owed to the Exchange are typically debited by the 
Clearing ETP Holder on a daily basis using daily transaction detail 
reports provided by the Exchange to the Clearing ETP Holder in order to 
ensure adequate funds have been escrowed. The Exchange notes that it is 
proposing to permit an ETP Holder to designate one or more clearing 
account numbers that correspond to an account(s) at NSCC to permit ETP 
Holders that clear through multiple different clearing accounts to set 
up the billing process with the Exchange in a manner that is most 
efficient for internal reconciliation and billing purposes of the ETP 
Holder.
    The Exchange believes that the proposed debiting process would 
provide an efficient method of collecting undisputed or final fees and/
or sums due to the Exchange consistent with the practice on other 
exchanges.\7\

[[Page 67981]]

Moreover, the Exchange believes that it is reasonable to permit an ETP 
Holder and applicants for a Trading Permit to opt-out of the 
requirement to provide an NSCC account number to permit direct debiting 
and instead establish alternative payment arrangements. Finally, the 
Exchange believes that it is also reasonable to provide for a $10,000 
limitation on pre-debit billing disputes since it would be inefficient 
to delay a direct debit for a de minimis amount. An ETP Holder would 
still be able to dispute billing amounts that are less than $10,000 
pursuant to the billing policy set forth in the Schedule of Fees and 
Charges.\8\
---------------------------------------------------------------------------

    \7\ See note 5, supra. In addition to MEMX, IEX, Nasdaq, Nasdaq 
BX, and Nasdaq Phlx all provide for collection of fees and fines 
through direct debits. See IEX Rule 15.120; Nasdaq Rule Equity 7, 
Section 70; Nasdaq BX Rule Equity 7, Section 111; and Nasdaq Phlx 
Rule Equity 7, Section 2.
    \8\ See note 5, supra.
---------------------------------------------------------------------------

    To effectuate this change, the Exchange would add the following 
text to Rule 3.7 (italicized) as new subsection (b):
    Each ETP Holder that has one or more Equities Trading Permits, and 
each applicant for a Equities Trading Permit, shall be required to 
provide one or more clearing account numbers that correspond to an 
account(s) at the National Securities Clearing Corporation (``NSCC '') 
for purposes of permitting the Exchange to collect through direct debit 
any undisputed or final fees and/or other sums due to the Exchange; 
provided, however, that an ETP Holder or applicant may request to opt-
out of the requirement to provide an NSCC clearing account number and 
establish alternative payment arrangements. If an ETP Holder disputes 
an invoice, the Exchange will not include the disputed amount in the 
debit if the ETP Holder has disputed the amount in writing to the 
Exchange by the 15th of the month, or the following business day if the 
15th is not a business day, and the amount in dispute is at least 
$10,000 or greater. The Exchange will not debit fees related to the CRD 
system set forth in the NYSE Arca Equities Schedule of Fees and 
Charges, which are collected and retained by FINRA.
    The current first sentence of Rule 3.7 would remain unchanged and 
become new subsection (a).
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5),\10\ 
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. Specifically, the Exchange believes that the 
proposed direct debit process would provide ETP Holders with an 
efficient process to pay undisputed or final fees and/or sums due to 
the Exchange.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposal to debit NSCC accounts 
directly is reasonable because it would ease the administrative burden 
on ETP Holders of paying monthly invoices and avoiding overdue 
balances, and would provide efficient collection from all ETP Holders 
who owe monies to the Exchange. Moreover, the Exchange believes that 
the minimum time frame provided to ETP Holders to dispute invoices is 
reasonable and adequate to enable ETP Holders to identify potentially 
erroneous charges. In addition, the Exchange believes that the $10,000 
limitation on pre-debit billing disputes is reasonable because it would 
be inefficient to delay a direct debit for a de minimis amount. The 
same $10,000 limitation is in place on exchanges that have adopted 
direct debit rules.\11\ ETP Holders will still be able to dispute 
billing amounts that are less than $10,000 pursuant to the Exchange's 
Schedule of Fees and Charges. Finally, the Exchange believes that it is 
reasonable to permit ETP Holders or applicants to request to opt-out of 
the requirement to provide NSCC account information and instead 
establish alternative payment arrangements with the Exchange.
---------------------------------------------------------------------------

    \11\ See notes 7 & 8, supra.
---------------------------------------------------------------------------

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 
would apply uniformly to all ETP Holders that have one or more Trading 
Permits and to all applicants for Trading Permits, and will not 
disproportionately burden or otherwise impact any single ETP Holder.
    The Exchange does not believe that the proposal will create an 
intermarket burden on competition since the Exchange will only debit 
fees (other than de minimis fees below $10,000) that are undisputed by 
the ETP Holder and ETP Holders will have a reasonable opportunity to 
dispute the fees both before and after the direct debit process. In 
addition, ETP Holders will have a reasonable opportunity to opt-out of 
the requirement to provide clearing account information and instead 
adopt alternative payment arrangements.
    The Exchange also does not believe that the proposal will create an 
intramarket burden on competition, since the proposed direct debit 
process will be applied equally to all ETP Holders. Moreover, other 
exchanges utilize a similar process which the Exchange believes is 
generally familiar to ETP Holders. Consequently, the Exchange does not 
believe that the proposal raises any new or novel issues that have not 
been previously considered by the Commission in connection with direct 
debit and billing policies of other exchanges. Further, this proposal 
is expected to provide a cost savings to the Exchange in that it would 
alleviate administrative processes related to the collection of monies 
owed to the Exchange. In addition, the debiting process would mitigate 
against ETP Holder accounts becoming overdue.

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not

[[Page 67982]]

become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \14\ Id. In addition, Rule 19b-4(f)(6)(iii) requires the 
Exchange to give the Commission written notice of the Exchange's 
intent to file the proposed rule change along with a brief 
description and the 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 pre-filing requirement.
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    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) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2024-65 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-2024-65. 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-2024-65 and should 
be submitted on or before September 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18795 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P