[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Notices]
[Pages 106709-106715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30903]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101985; File No. SR-NYSEARCA-2024-89]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 to a Proposed Rule Change To Adopt Temporary Rule
7.34-E(T) and Revise Rules 1.1 and 7.34-E to Lengthen the Current
Extended Trading Sessions
December 19, 2024.
On October 25, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt temporary rule 7.34-E(T) and revise rules
1.1 and 7.34-E to lengthen the current extended trading sessions. The
proposed rule change was published for comment in the Federal Register
on November 14, 2024.\3\ On December 13, 2024, the Exchange filed
Amendment No. 1 to the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. Amendment No.
1
[[Page 106710]]
amended and replaced the proposed rule change in its entirety. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 101559 (November 7,
2024), 89 FR 90143 (``Initial Proposal'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt temporary Rule 7.34-E(T) and revise
Rules 1.1 and 7.34-E to permit the Exchange to lengthen the current
extended trading hours for NMS stocks to 1:30 a.m. E.T. through 11:30
p.m. E.T. on Monday through Thursday, and 1:30 a.m. E.T. through 8:00
p.m. E.T. on Friday. This Amendment No. 1 supersedes the Initial
Proposal in its entirety.
The text of 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 Exchange 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt temporary Rule 7.34-E(T) and revise
Rules 1.1 (Definitions) and 7.34-E (Trading Sessions) to permit the
Exchange to lengthen current extended trading hours for NMS stocks to
1:30 a.m. E.T. through 11:30 p.m. E.T. on Monday through Thursday, and
1:30 a.m. E.T. through 8:00 p.m. E.T. on Friday. The Exchange also
proposes certain technical, conforming changes to Rule 5.1-E(a)
(General Provisions and Unlisted Trading Privileges) and Commentary .08
to Rule 9.5320-E (Prohibition Against Trading Ahead of Customer
Orders).
Background
The Exchange currently offers three trading sessions each day the
Exchange is open for business unless the Exchange determines otherwise,
as follows.
The Exchange's first trading session, the Early Trading Session,
begins at 4:00 a.m. Eastern Time (``E.T.'') and concludes at the
commencement of the Core Trading Session.\4\ The Exchange begins
accepting orders 90 minutes before the Early Trading Session begins.\5\
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\4\ See Rule 7.34-E(a)(1).
\5\ See id.
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The second or Core Trading Session begins for each security at 9:30
a.m. E.T. and ends at the conclusion of Core Trading Hours or the Core
Closing Auction, whichever comes later.\6\ The final session is the
Late Trading Session, which begins following the conclusion of the Core
Trading Session and concludes at 8:00 p.m. E.T.
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\6\ See Rule 7.34-E(a)(2). ``Core Trading Hours'' means the
hours of 9:30 a.m. E.T. through 4:00 p.m. E.T. or such other hours
as may be determined by the Exchange from time to time. See Rule
1.1.
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Current Rule 7.34-E(b) requires that orders entered into the
Exchange marketplace include a designation for which trading session(s)
the order will remain in effect. The Exchange will reject orders
entered without a trading session designation. An order is only
eligible to participate in the designated trading session(s) and may
remain in effect for one or more consecutive trading sessions on a
particular day. Unless otherwise specified, an order designated for a
later trading session will be accepted but not eligible to trade until
the designated trading session begins. The Exchange will reject orders
designated solely for a trading session that has already ended.
Current Rule 7.34-E(c) describes the order types that are permitted
in each session, as follows.
Early Trading Session
Orders and modifiers defined in Rule 7.31-E designated for the
Early Trading Session are eligible to participate in the Early Trading
Session unless otherwise specified in Rule 7.34-E(c)(1)(A)-(F).
Pursuant to Rule 7.34-E(c)(1)(A), Market Orders and Pegged Orders
are not eligible to participate in the Early Trading Session, and such
orders that include a designation for the Early Trading Session will be
rejected. Market Pegged Orders and Discretionary Pegged Orders,
regardless of the session designated for the order, may not be entered
before or during the Early Trading Session and will also be rejected.
Under Rule 7.34-E(c)(1)(B), Limit Orders designated Immediate or Cancel
(``IOC'') are ineligible to participate in the Early Open Auction and
will be rejected if entered before the Early Open Auction concludes.
Pursuant to Rule 7.34-E(c)(1)(C), Limit Orders designated IOC entered
before or during the Early Trading Session and designated for the Core
Trading Session will be rejected if entered before the Auction
Processing Period for the Core Open Auction.
Rule 7.34-E(c)(1)(D) provides that for securities that are not
eligible for an auction on the Exchange, Market Orders designated for
the Core Trading Session and Auction-Only Orders will be routed to the
primary listing market on arrival. Any order routed directly to the
primary listing market on arrival will be cancelled if that market is
not accepting orders.
Pursuant to Rule 7.34-E(c)(1)(E), Market-on-Open Orders (``MOO
Orders''), Market-on-Close Orders (``MOC Orders''), Limit-on-Close
Orders (``LOC Orders''), Primary Only Orders, and Directed Orders
designated for the Early Trading Session will be rejected.
Finally, pursuant to Rule 7.34-E(c)(1)(F), Non-Displayed Limit
Orders, Mid-Point Liquidity Orders (``MPL Orders''), Tracking Orders,
and RPI Orders entered before the Auction Processing Period for the
Early Open Auction concludes will also be rejected.
Core Trading Session
All orders and modifiers defined in Rule 7.31-E that are designated
for the Core Trading Session are eligible to participate in the Core
Trading Session unless otherwise specified in Rules 7.34-E(c)(2)(A)-
(C).
Pursuant to Rule 7.34-E(c)(2)(A), Market Orders in securities that
are not eligible for the Core Open Auction will be routed to the
primary listing market until the first opening print of any size on the
primary listing market or 10:00 a.m. E.T., whichever is earlier.
Pursuant to Rule 7.34-E(c)(2)(B), Auction-Only Orders in securities
that are not eligible for an auction on the Exchange will be accepted
and routed directly to the primary listing market. Finally, Rule 7.34-
E(c)(2)(C) provides that Limit Orders designated IOC entered before or
during the Core Trading Session and designated for the Late Trading
Session will be rejected if entered before the Auction Processing
Period for the Closing Auction.
Late Trading Session
The orders and modifiers defined in Rule 7.31-E that are designated
for the Late Trading Session are eligible to participate in the Late
Trading Session unless otherwise specified in Rules 7.34-E(c)(3)(A)-
(C).
[[Page 106711]]
Pursuant to Rule 7.34-E(c)(3)(A), Market Orders and Pegged Orders
are not eligible to participate in the Late Trading Session. The
Exchange will reject Market Orders and Pegged Orders that include a
designation for the Late Trading Session. Further, under Rule 7.34-
E(c)(3)(B), orders that are routed directly to the primary listing
market on arrival will be cancelled if that market is not accepting
orders. Finally, pursuant to Rule 7.34-E(c)(3)(C), MOO Orders, MOC
Orders, LOC Orders, Primary Only Orders, and Directed Orders designated
for the Late Trading Session will be rejected.
Customer Disclosures
Rule 7.34-E(d) provides that no ETP Holder may accept an order from
a non-ETP Holder for execution in the Early or Late Trading Session
without disclosing to such non-ETP Holder that Limit Orders are the
only orders that are eligible for execution during the Early and Late
Trading Sessions \7\ and that an order must be designated specifically
for trading in the Early and/or Late Trading Session to be eligible for
trading in the Early and/or Late Trading Session.\8\ In addition, Rule
7.34-E(d)(3) provides that an ETP Holder must disclose to non-ETP
Holders that extended hours trading involves material trading risks,
including the possibility of lower liquidity, high volatility, changing
prices, unlinked markets, an exaggerated effect from news
announcements, wider spreads and any other relevant risk. The absence
of an updated underlying index value or intraday indicative value is an
additional trading risk in extended hours for Derivative Securities
Products.
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\7\ See Rule 7.34-E(d)(1).
\8\ See id. at (d)(2).
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The disclosures required pursuant to Rule 7.34-E(d)(3) may take the
form described in subparagraphs (1) through (7) thereunder or such
other form as provides substantially similar information, including
risks of lower liquidity; higher volatility; changing prices; unlinked
markets; news announcements; wider spreads; and lack of calculation or
dissemination of underlying index value or intraday indicative value.
Finally, Rule 7.34-E(e) provides that trades on the Exchange
executed and reported outside of the Core Trading Session are
designated as .T trades.
Proposed Rule Change
As recently announced,\9\ the Exchange proposes to facilitate the
trading of NMS securities on the Exchange beginning at 1:30 a.m. E.T.
through 11:30 p.m. E.T. on Monday through Thursday, and 1:30 a.m. E.T.
through 8:00 p.m. E.T. on Friday. The Exchange would retain the current
structure of the Early and Late Trading Sessions, including eligible
order types and required disclosures as described above, while
extending the beginning of the Early Trading Session and end time of
the Late Trading Session and accepting orders earlier than currently.
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\9\ See ``The New York Stock Exchange Plans to Extend Weekday
Trading on its NYSE Arca Equities Exchange to 22 Hours a Day,''
October 25, 2024, available at https://ir.theice.com/press/news-details/2024/The-New-York-Stock-Exchange-Plans-to-Extend-Weekday-Trading-on-its-NYSE-Arca-Equities-Exchange-to-22-Hours-a-Day/default.aspx.
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To effectuate these changes, the Exchange proposes to adopt a
temporary Rule 7.34-E titled ``7.34-E(T).'' The proposed temporary rule
would be identical to current Rule 7.34-E with three exceptions.
First, the beginning and ending times of the Early and Late Trading
Sessions, respectively, as set forth in Rule 7.34-E(a)(1) and (3) would
be changed to reflect the proposed longer extended trading hours. The
Exchange proposes to end the Late Trading Session at 8:00 p.m. E.T. on
Friday in order to maximize the available time to make changes at the
end of the week before weekend testing.
Second, the Exchange would shorten the time it will begin accepting
orders before commencement of the Early Trading Session as set forth in
proposed Rule 7.34-E(a)(1) from 90 minutes to 30 minutes such that
orders would be accepted beginning at 1:00 a.m. E.T. The Exchange does
not propose to change the time when the Core Trading Session would
begin or end or make any other rule changes impacting the Core Trading
Session.
Third, the Exchange proposes to supplement its current customer
disclosures set forth in proposed Rule 7.34-E(d)(3) to add six
additional potential risks associated with Extended Hours Trading based
on the recently approved rules of 24X National Exchange LLC,\10\ as
follows:
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\10\ See Securities Exchange Act Release No. 101777 (November
27, 2024), 89 FR 97092, 97110-111 (December 06, 2024) (In the Matter
of the Application of 24X National Exchange LLC for Registration as
a National Securities Exchange; Findings, Opinion, and Order of the
Commission) (``Release No. 101777''); see 24X Rule 3.21(g) & (i)(1)-
(5).
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Proposed Rule 7.34-E(d)(viii) would address the potential
risks of trading during when financial market infrastructure companies
such as other markets, banks, Fedwire Funds Service, and certain other
providers of settlement services, would be closed. The proposed rule
would advise that during hours in which these financial market
infrastructure companies are closed may lead to an increased passage of
time between execution and final settlement of the resulting
transaction. Proposed Rule 7.34-E(d)(viii) is based on and
substantially the same as 24X Rule 3.21(g).
Proposed Rule 7.34-E(d)(ix) would address the potential
risks of trading during hours in which primary listing markets may not
be open. As proposed, proposed [sic] Rule 7.34-E(d)(ix) would provide
that during Extended Hours Trading, the primary listing exchanges for
securities traded on the Exchange may not be open and, thus, trading in
listed securities may not be occurring on the primary listing
exchanges. The proposed rule would also advise customers that the
primary listing exchanges may not be available to perform their
regulatory surveillance and other regulatory obligations with regard to
their listed securities during Extended Hours Trading. Proposed Rule
7.34-E(d)(ix) is based on and substantially the same as 24X Rule
3.21(i)(1).
Proposed Rule 7.34-E(d)(x) would address the potential
risks of trading during hours in which there may be limited or
different regulatory protections. As proposed, the rule would advise
that the regulatory protections available during Extended Hours Trading
may be more limited or different than those available during the Core
Trading Session. For example, the proposed rule would note that certain
mechanisms that address volatility in individual symbols and the
equities market may not be available during Extended Hours Trading.
Proposed Rule 7.34-E(d)(x) is based on and substantially the same as
24X Rule 3.21(i)(2).
Proposed Rule 7.34-E(d)(xi) would address the potential
risk of trading because of limited trading alternatives. As proposed,
the rule would advise that Exchange may be the only exchange trading
certain securities during Extended Hours Trading and that, with more
limited trading alternatives during Extended Hours Trading, customers
may experience losses if their orders cannot be executed normally due
to systems failures or other issues on the Exchange. Proposed Rule
7.34-E(d)(xi) is based on and substantially the same as 24X Rule
3.21(i)(3).
Proposed Rule 7.34-E(d)(xii) would address the potential
risk related to continuous trading during Extended Hours Trading. As
proposed, the rule would advise that, with more limited breaks in
trading, there may be a greater
[[Page 106712]]
risk related to system maintenance and testing, as well as the pausing
and resumption of trading. Proposed Rule 7.34-E(d)(xii) is based on and
substantially the same as 24X Rule 3.21(i)(4).
Finally, proposed Rule 7.34-E(d)(xiii) would advise that
Extended Hours Trading may present additional unforeseen risks in
addition to those discussed above. Proposed Rule 7.34-E(d)(xiii) is
based on and substantially the same as 24X Rule 3.21(i)(5).
The current version of Rule 7.34-E would remain operative until
transition to the proposed new Extended Trading Hours set forth in Rule
7.34-E(T)(a) becomes operative. As proposed, the Exchange would not
commence operation of Extended Hours Trading as set forth in Rule 7.34-
E(T)(a) unless the Equity Data Plans (as proposed to be defined in Rule
1.1, discussed below) have established a mechanism to collect,
consolidate, process and disseminate quotation and transaction
information at all times during Extended Trading Hours that is
equivalent to the mechanism established for the Core Trading Session,
and (2) have provided the Exchange with notification that they are
prepared to collect, consolidate, process and disseminate quotation and
transaction information to accommodate Extended Trading Hours.
Specifically, prior to commencing operation during Extended Hours
Trading as set forth in Rule 7.34-E(T)(a), the Exchange will file a
proposed rule change pursuant to Section 19(b) of the Act and the rules
thereunder to amend its rules to delete the current version of Rule
7.34-E and preamble and delete the ``T'' designation in Rule 7.34-E(T),
and confirm that the Exchange is able to comply with its obligations
under the Act and the rules thereunder during Extended Trading Hours
and that such Equity Data Plans are prepared to collect, consolidate,
process and disseminate quotation and transaction information at all
times during Extended Trading Hours. The Exchange believes that these
limitations are designed to reasonably ensure that consolidated
quotation and transaction data are provided in a manner that is
consistent with the existing extended hours sessions on exchanges.\11\
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\11\ See Release No. 101777, 89 FR at 97105.
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The Exchange would accordingly add the following legend to current
Rule 7.34-E (new text italicized):
This version of Rule 7.34-E will remain operative until Extended
Hours Trading as set forth in Rule 7.34-E(T) is operative. For the
avoidance of doubt, notwithstanding anything to the contrary in
these Rules, the Exchange shall not commence operation of Extended
Hours Trading as set forth in Rule 7.34-E(T) unless the Equity Data
Plans (1) have established a mechanism to collect, consolidate,
process and disseminate quotation and transaction information at all
times during Extended Trading Hours that is equivalent to the
mechanism established for the Core Trading Session, and (2) have
provided the Exchange with notification that they are prepared to
collect, consolidate, process and disseminate quotation and
transaction information to accommodate Extended Trading Hours. Prior
to commencing operation during Extended Hours Trading as set forth
in Rule 7.34-E(T), the Exchange will file a proposed rule change
pursuant to Section 19(b) of the Exchange Act and the rules
thereunder to amend its rules to delete the current version of Rule
7.34-E and preamble and delete the ``T'' designation in Rule 7.34-
E(T), and confirm that the Exchange is able to comply with its
obligations under the Exchange Act and the rules thereunder during
Extended Trading Hours and that such Equity Data Plans are prepared
to collect, consolidate, process and disseminate quotation and
transaction information at all times during Extended Trading Hours.
The rule change must be filed with the SEC within 18 months of the
SEC's approval of the Exchange's rule filing adopting Rule 7.34-
E(T). If the Exchange fails to file such a rule change within 18
months of approval of Rule 7.34-E(T), the Exchange will promptly
file a proposed rule change to delete Rule 7.34-E(T).
The proposed language is substantially the same as text contained
in 24X Rule 1.5(c) (Definitions). The Exchange would also revise
current Rule 1.1 to add two definitions.
First, the Exchange would define ``Equity Data Plans'' to mean the
effective national market system plan(s) governing the collection,
consolidation, processing and dissemination of consolidated equity
market data via the exclusive securities information processors
(``SIPs''), including (1) Consolidated Tape Association Plan (``CTA
Plan''), (2) Consolidated Quotation Plan (``CQ Plan''), (3) the Joint
Self-Regulatory Organization Plan Governing the Collection,
Consolidation and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on Exchanges on an
Unlisted Trading Privileges Basis (``UTP Plan''), (4) the CT Plan
established by the Limited Liability Company Agreement of CT Plan LLC,
and (5) any successor thereto to the named Plan(s). Except for the
reference to the CT Plan established by the Limited Liability Company
Agreement of CT Plan LLC, the proposed definition is the same as 24X
Rule 1.5(o).
Second, the Exchange would define Extended Hours Trading to mean
trading during the Early Trading Session and the Late Trading Session.
The term is used without capitalization in current Rule 7.34-E(d)
describing required customer disclosures. The Exchange proposes to use
the proposed definition in proposed Rule 7.34-E(T)(d) and current Rule
7.34-E(d), with the exception of subsection (d)(4) of the current and
proposed temporary rules, which use the phrase generically. The
Exchange believes the proposal would add transparency and clarity to
the Exchange's rules.
The Exchange would also make certain technical, conforming changes
to Rule 5.1-E(a) and Commentary .08 to Rule 9.5320-E as follows.
First, the Exchange would replace obsolete references to the
``Opening session'' and ``Late Trading Session'' and the associated
session start and end times in Pacific Time in Rule 5.1-E(a)(2)(i) with
the defined term ``Extended Hours Trading.'' The Exchange would also
delete a stray period at the end of the rule heading. The proposed
changes would add transparency and clarity to the Exchange's rules.
Finally, the Exchange would replace the obsolete reference to
``6:30 a.m. to 1:00 p.m. Pacific Standard Time'' in Commentary .08 to
Rule 9.5320-E with ``the Core Trading Session.'' The proposed change
would also add transparency and clarity to the Exchange's rules.
The Exchange believes that the proposal will benefit investors and
the national market system by increasing market accessibility,
promoting capital formation, and facilitating portfolio management. The
proposed extended trading sessions would operate in the same fashion as
the current sessions, and the rules that apply to the current sessions
would apply to the proposed longer Early and Late Trading Sessions in
unmodified form. In addition, all NMS stocks would continue to be
eligible to trade in the proposed longer extended hours sessions.
Moreover, as discussed below, the existing safeguards applicable to
pre-market and post-market sessions including, among other things,
operational safeguards, availability of consolidated last sale and
quotation information, and specific disclosures to investors regarding
the heightened risks of after-hours trading, and market surveillance
capabilities, would be applicable to the proposed extended Early and
Late Trading Sessions.
Operations
As noted, the proposed longer trading sessions will operate in the
same way as the current sessions from an operational
[[Page 106713]]
perspective. All order types eligible for such sessions and order type
behaviors will remain unchanged. The Exchange will also route to away
markets between 1:30 a.m. E.T. through 11:30 p.m. E.T. on Monday
through Thursday, and 1:30 a.m. E.T. through 8:00 p.m. E.T. on Friday,
just as it currently does between 4:00 a.m. E.T. and 9:30 a.m. E.T. and
between 4:00 p.m. E.T. and 8:00 p.m. E.T. Order processing during the
proposed longer trading sessions will also function the same way as it
does in the current sessions. There will be no changes to the ranking,
display, or decrementation processes or rules. The Exchange will report
the best bid and offer on the Exchange to the appropriate network
processor, as it currently does beginning at 4:00 a.m. E.T. using the
same formats and delivery mechanisms. Trades executed and reported
outside of the Core Trading Session as proposed will be reported to the
appropriate network processor with the ``.T'' modifier, just as
currently. No fee changes are proposed in connection with this
proposal.
In addition, the Exchange will continue to work with primary
listing exchanges to coordinate trading halts where appropriate,
including halts implemented due to significant material events (i.e., a
bankruptcy declaration). During the proposed extended Early and Late
Trading Sessions, the Exchange would pause trading in the underlying
security until trading resumes on the primary listing market for the
security. Generally, regardless of trading session, when a halt has
been declared on the primary market, the Exchange will also halt
trading automatically in the subject security on NYSE Arca. Exchange
staff will be available during the proposed extended trading sessions
in order to maintain a fair and orderly market, make any necessary
rulings or take any action that may be necessary. Similarly, Exchange
staff will be available if any action such as declaration of a halt in
a NYSE Arca primary symbol would be necessary in the event of a system
malfunction or significant material event such as a bankruptcy
declaration.
The Exchange notes that, to the extent material corporate news is
released during the Extended Trading Hours and the primary listing
market does not impose a halt, the requirements of proposed Rule 7.34-
E(T)(d)(3)(v) (which is part of the current rule) and proposed Rules
7.34-E(T)(d)(3)(viii)-(xiii) that disclosures be provided to investors
relating to the risks associated with news announcements and the
additional risks of trading during Extended Trading Hours,
respectively, will help ensure that market participants, including
investors, are informed about the potential risks associated with
trading during that time period.\12\
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\12\ See Release No. 101777, 89 FR at 97109.
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Securities Information Processor (``SIP'') Readiness
The Exchange will submit all quotes and trades that are generated
in the extended Early and Late Trading Session to the consolidated
quote and trade systems maintained by the SIPs for public
dissemination. Accordingly, once these extended trading hours are
operative, quotes and trades will be made available to the investing
public in the same manner that quotes and trades are currently made
available.
The two SIPs--the Securities Industry Automation Corporation
(``SIAC'') and Nasdaq--both currently operate from 4:00 a.m. E.T.
through 8:00 p.m. E.T. The Exchange has informed both SIPs, as well as
the Operating Committee of the CTA and the CQ Plans and the UTP Plan
(collectively, the ``Operating Committee''), of its intention to extend
trading hours to commence at 1:30 a.m. E.T. through 11:30 p.m. E.T. on
Monday through Thursday, and 1:30 a.m. E.T. through 8:00 p.m. E.T. on
Friday, and has submitted change requests to both SIPs requesting that
the SIPs similarly extend their hours of operation. The Exchange will
work with the Operating Committee and the SIPs regarding the extension
of the SIPs' operating hours and, in the near term, expects to request
a vote of the Operating Committee instructing the SIPs to proceed with
such extension.
As noted above, the Exchange will not make the proposed extended
hours operative unless the Equity Data Plans have established a
mechanism to collect, consolidate, process and disseminate quotation
and transaction information at all times during Extended Trading Hours
that is equivalent to the mechanism established for the Core Trading
Session, and provided the Exchange with notification that they are
prepared to collect, consolidate, process and disseminate quotation and
transaction information to accommodate Extended Trading Hours. As also
previously noted, at that point the Exchange will file a proposed rule
change to, among other things, confirm that such Equity Data Plans are
prepared to collect, consolidate, process and disseminate quotation and
transaction information at all times during Extended Trading Hours.
Market Surveillance
Trading on the Exchange is subject to a comprehensive regulatory
program applicable to the current Early, Core, and Late Trading
Sessions that includes a suite of surveillances that reviews trading
during each trading session as well as routine examinations of ETP
Holders consistent with the current exam-based regulatory program. The
Exchange's current regulatory program would be fully applicable to
trading in the proposed extended Early and Late Trading Sessions.
Customer Disclosures
As noted above, given the potential trading and other risks of
extended hours trading Products, Rule 7.34-E(d) prohibits ETP Holders
from accepting orders from non-ETP Holders for execution during the
Early or Late Trading Session without making the specified disclosures
in the Rule. As further discussed above, the Exchange proposes to
enhance these disclosures by including additional mandatory disclosures
regarding the potential risks associated with trading during Extended
Hours Trading based on recently approved 24X Rule 3.21.\13\ The
Exchange notes that Rule 7.34-E(d), as amended, would be fully
applicable to the proposed extended trading sessions and would place
the same disclosure obligation on ETP Holders.
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\13\ See text accompanying note 10, supra.
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Implementation
The Exchange will begin accepting orders for the extended Early and
Late Trading Session as set forth in proposed Rule 7.34-E(T) subject to
the effectiveness of this proposed rule change and subject to the
conditions set forth in the proposed legend to current Rule 7.34-E
described above.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\14\ 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.
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\14\ 15 U.S.C. 78f(b)(5).
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Generally, the Exchange believes that the proposal, including the
proposed temporary rule to support longer extended hours trading, would
remove
[[Page 106714]]
impediments to and perfect the mechanism of a free and open market and
a national market system by providing a rules framework to support the
lengthening of the current extended trading hours for NMS stocks to
1:30 a.m. E.T. through 11:30 p.m. E.T. on Monday through Thursday, and
1:30 a.m. E.T. through 8:00 p.m. E.T. on Friday, which the Exchange
believes will increase market accessibility, promote capital formation,
and facilitate portfolio management.
The Exchange further believes that adopting a temporary rule that
would only be operative upon transition to the new proposed Extended
Trading Hours, and adding a legend to the current version of Rule 7.34-
E specifying that the current rule will remain operative until that
time, would promote transparency in Exchange rules and add clarity as
to which rules are operative and when, thereby reducing potential
confusion, and making the Exchange's rules easier to navigate.
Moreover, the proposed legend would provide that the Exchange will not
commence operation of the longer Extended Trading Hours prior to filing
a proposed rule change to amend its rules confirming that the Exchange
is able to comply with its obligations under the Act during the longer
extended trading session and that the Equity Data Plans are prepared to
collect, consolidate, process and disseminate quotation and transaction
information at all times during the proposed Extended Trading Hours.
This requirement would promote transparency because trading will not
occur unless the Equity Data Plans are able to collect, consolidate,
process and disseminate consolidated quotation and transaction data
during the proposed longer session. The requirement would also be
designed to ensure that consolidated quotation and transaction data are
provided in a manner that is consistent with the Exchange's current
extended hours sessions, and that the proposed change is thus designed
to prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to and facilitating transactions in NMS
stocks, and perfect the mechanism of a free and open market and a
national market system.
Finally, the Exchange believes that applying the current
requirements for extended hours trading such as order designation,
permitted orders, and mandatory customer disclosures as well as the
operational and regulatory safeguards already in place for the current
Early, Core, and Late Sessions to the proposed extended sessions, would
promote just and equitable principles of trade and protect investors
and the public interest. In addition, the proposed enhanced disclosures
based on the approved rules of another exchange will, together with the
existing disclosures, provide investors with important information that
should help to inform their decisions as to whether trading during the
Exchange's proposed longer extended hours is suitable for them. The
Exchange believes that the expanded customer disclosures are consistent
with the Act and, in particular, the Section 6(b)(5) \15\ requirement
that an exchange's rules be designed to promote just and equitable
principles of trade, remove impediments to and perfect the mechanisms
of a free and open market and a national market system, and protect
investors and the public interest.
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\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that adding a definition of Equity Data Plan
to Rule 1.1 would remove impediments to and perfect the mechanism of a
free and open market and national market system by adding clarity and
transparency to the Exchange's rules with respect to the a [sic]
critical element that must be in place for the proposed longer extended
trading session. As discussed above, trading in the new extended
session will not occur unless the Equity Data Plans are able to
collect, consolidate, process and disseminate consolidated quotation
and transaction data during the new session. Similarly, the Exchange
believes that adding a definition of Extended Hours Trading to Rule 1.1
would remove impediments to and perfect the mechanism of a free and
open market and national market system by adding clarity to the
Exchange's rules through the introduction of a definition that can be
utilized immediately and that would not need to be updated once the
Exchange migrates to 22 hour trading, 5 days a week. The Exchange
further believes that eliminating obsolete legacy material from Rule
5.1-E(a) and Commentary .08 to Rule 9.5320-E similarly removes
impediments to and perfects the mechanism of a free and open market by
removing confusion that may result from having obsolete material in the
Exchange's rulebook. The Exchange believes that eliminating such
obsolete material would not be inconsistent with the public interest
and the protection of investors because investors will not be harmed
and in fact would benefit from increased transparency, thereby reducing
potential confusion.
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 change is
designed to propose rule changes to lengthen the current extended
trading hours for NMS stocks to 1:30 a.m. E.T. through 11:30 p.m. E.T.
on Monday through Thursday, and 1:30 a.m. E.T. through 8:00 p.m. E.T.
on Friday. The Exchange operates in a highly competitive environment in
which unaffiliated exchange competitors and new entrants could compete
to offer extended hours trading of similar duration, and the proposal
would therefore enable the Exchange to compete on a more level playing
field with these competitors.
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. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, 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-2024-89 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-2024-89. 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
[[Page 106715]]
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-2024-89 and should be submitted on or before January 21,
2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-30903 Filed 12-27-24; 8:45 am]
BILLING CODE 8011-01-P