[Federal Register Volume 90, Number 2 (Friday, January 3, 2025)]
[Notices]
[Pages 347-351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31503]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102041; File No. SR-NYSEARCA-2024-113]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change to Amend the Connectivity Fee Schedule
December 27, 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 December 17, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III 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 Connectivity Fee Schedule (``Fee
Schedule'') to add connectivity to the New York Stock Exchange LLC,
NYSE American LLC, and NYSE Arca trading floors. 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 the Fee Schedule to add connectivity
to the New York Stock Exchange LLC, NYSE American LLC, and NYSE Arca
trading floors (``Trading Floors'').
A User \4\ may wish to have a connection between the Mahwah, New
Jersey data center (``MDC'') \5\ and a Trading Floor. A connection
between the MDC and a Trading Floor may be between the User and itself
or between the User and a third party. The User may use such connection
for receiving and transmitting trading-related data (including pre- and
post-trade data and clearing information) or providing services to
individuals physically located on the floor (including access to back-
office systems), as determined by the User.
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\4\ For purposes of the Exchange's colocation services, a
``User'' means any market participant that requests to receive
colocation services directly from the Exchange. See Securities
Exchange Act Release No. 76010 (September 29, 2015), 80 FR 60197
(October 5, 2015) (SR-NYSEArca-2015-82). As specified in the Fee
Schedule, a User that incurs colocation fees for a particular
colocation service pursuant thereto would not be subject to
colocation fees for the same colocation service charged by the New
York Stock Exchange LLC, NYSE American LLC, NYSE Chicago, Inc. and
NYSE National, Inc. (together, the ``Affiliate SROs''). Each
Affiliate SRO has submitted substantially the same proposed rule
change to propose the change described herein. See SR-NYSE-2024-81,
SR-NYSEAMER-2024-80, SR-NYSECHX-2024-37, and SR-NYSENAT-2024-33.
\5\ Through its Fixed Income and Data Services (``FIDS'')
business, Intercontinental Exchange, Inc. (``ICE'') operates the
MDC. The Exchange and the Affiliate SROs are indirect subsidiaries
of ICE.
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The Exchange proposes to add an option for such a connection to the
Fee Schedule. Specifically, the Exchange proposes to amend the Fee
Schedule to add unicast connections through which a User can establish
a connection between the MDC and a Trading Floor over dedicated
bandwidth (``TF Connections'').\6\ Presently, a TF Connection can be in
the form of a virtual control circuit between the MDC and a single
Trading Floor (``TF VCC''), or a virtual routing and forwarding service
between the MDC and one or more Trading Floors (``TF VRF''). A TF
Connection may be used for any purpose: neither FIDS nor the Exchange
has any visibility into a TF Connection.
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\6\ Information flows over existing network connections in two
formats: ``unicast'' format, which is a format that allows one-to-
one communication, similar to a phone line, in which information is
sent to and from the Exchange; and ``multicast'' format, which is a
format in which information is sent one-way from the Exchange to
multiple recipients at once, like a radio broadcast.
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All TF Connections must be authorized by both parties to the
connection before FIDS will establish a connection. Establishing a
User's TF Connection will not give FIDS or the Exchange any right to
use the relevant exchange's system. A TF Connection will not provide
direct access or order
[[Page 348]]
entry to the Exchange's execution system, and a User's TF Connection
will not be through the Exchange's execution system.
TF Connections are offered at a monthly fee based on bandwidth
requirements, which fee is consistent with the monthly fees charged for
VCC connections and the same as those charged for connectivity to Third
Party Systems.\7\ When a User requests a TF Connection, it identifies
the size of bandwidth connection it requires, and the monthly charge
for the TF Connection varies based on the size of the bandwidth. The
calculation of the monthly fee may differ based on whether the form
chosen by the User is a TF VCC or TF VRF. This is because the TF VCC
connects the MDC to one Trading Floor, while the TF VRF may connect the
MDC to more than one Trading Floor. Accordingly, the Exchange proposes
to add a note to the Fee Schedule to clarify the difference.
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\7\ See Connectivity Fee Schedule--A. Co-Location Fees.
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To make the change, the Exchange proposes to amend the Fee Schedule
as follows (all text new):
------------------------------------------------------------------------
Type of service Description Amount of charge
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Connectivity to Trading Floor 1Mb................... $200 monthly
*. 3Mb................... charge.
5Mb................... $400 monthly
10Mb.................. charge.
25Mb.................. $500 monthly
50Mb.................. charge.
100Mb................. $800 monthly
charge.
$1,200 monthly
charge.
$1,800 monthly
charge.
$2,500 monthly
charge.
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* The amount of the charge for Connectivity to Trading Floor may differ
based on the connectivity chosen: (a) a virtual control circuit
between the Mahwah data center and a single Trading Floor (``VCC''),
or (b) a virtual routing and forwarding service between the Mahwah
data center and one or more Trading Floors (``VRF''). Specifically, if
the User chooses VCCs or combination of a VCC and VRF for connectivity
to several Trading Floors, it will be charged separately for each
connection. If the User chooses one VRF for connectivity to multiple
trading floors, the User will be charged for one connection.
General
The proposed rule change would not apply differently to distinct
types or sizes of market participants. Rather, it would apply to all
Users equally. As is currently the case, the Fee Schedule would be
applied uniformly to all Users. FIDS does not expect that the proposed
rule change will result in new Users.
Use of the services proposed in this filing are completely
voluntary and available to all Users on a non-discriminatory basis.
The proposed change is not otherwise intended to address any other
issues relating to co-location services and/or related fees, and the
Exchange is not aware of any problems that customers would have in
complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\9\ 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. The Exchange further believes
that the proposed rule change is consistent with Section 6(b)(4) of the
Act,\10\ because it provides for the equitable allocation of reasonable
dues, fees, and other charges among its members and issuers and other
persons using its facilities and does not unfairly discriminate between
customers, issuers, brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(4).
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The Proposed Change is Reasonable
The Exchange believes that the proposed rule change is reasonable.
In considering the reasonableness of proposed services and fees,
the Commission's market-based test considers ``whether the exchange was
subject to significant competitive forces in setting the terms of its
proposal . . . , including the level of any fees.'' \11\ If the
Exchange meets that burden, ``the Commission will find that its
proposal is consistent with the Act unless `there is a substantial
countervailing basis to find that the terms' of the proposal violate
the Act or the rules thereunder.'' \12\ Here, the Exchange is subject
to significant competitive forces in setting the terms on which it
offers its proposal, in particular because substantially similar
substitutes are available, and the third-party vendors are not at a
competitive disadvantage created by the Exchange.
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\11\ Securities Exchange Act Release No. 90209 (October 15,
2020), 85 FR 67044, 67049 (October 21, 2020) (Order Granting
Accelerated Approval to Establish a Wireless Fee Schedule Setting
Forth Available Wireless Bandwidth Connections and Wireless Market
Data Connections) (SR-NYSE-2020-05, SR-NYSEAMER-2020-05, SR-
NYSEArca-2020-08, SR-NYSECHX-2020-02, SR-NYSENAT-2020-03, SR-NYSE-
2020-11, SR-NYSEAMER-2020-10, SR-NYSEArca-2020-15, SR-NYSECHX-2020-
05, SR-NYSENAT-2020-08) (``Wireless Approval Order''), citing
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74781 (December 9, 2008) (``2008 ArcaBook Approval Order'').
See NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010).
\12\ Wireless Approval Order, supra note 11, at 67049, citing
2008 ArcaBook Approval Order, supra note 11, at 74781.
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In 2013 the MDC opened two meet-me-rooms to telecommunications
service providers (``Telecoms''),\13\ to enable Telecoms to offer
circuits into the MDC. The TF Connections compete with circuits
currently offered by the 16 third-party Telecoms that have installed
their equipment in the MDC's two meet-me-rooms.
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\13\ Telecoms are licensed by the Federal Communications
Commission and are not required to be, or be affiliated with, a
member of the Exchange or an Affiliate SRO.
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The Telecom circuits (including any circuit-based network services
a Telecom may offer) are reasonable substitutes for TF Connections. The
Commission has recognized that products do not need to be identical to
be considered substitutable; it is sufficient that they be
substantially similar.\14\ Because Telecoms can connect to the Trading
Floors, the TF Connections and the circuits provided by the Telecoms
perform the same function: connecting into and out of the
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MDC and the Trading Floors. The providers of the TF Connection and
Telecom circuits design them to perform with particular combinations of
latency, bandwidth, price, termination point, and other factors that
they believe will attract Users, and Users choose from among these
competing services on the basis of their business needs.
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\14\ See 2008 ArcaBook Approval Order, supra note 11, at 74789
and note 295 (recognizing that products need not be identical to be
substitutable).
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The TF Connections are sufficiently similar substitutes to the
circuits offered by the 16 Telecoms even though the TF Connections all
terminate on a Trading Floor while circuits from the 16 Telecoms could
terminate on a Trading Floor or other locations. While neither the
Exchange nor FIDS knows the end point of any particular Telecom
circuit, the Exchange understands that the Telecoms can offer circuits
terminating in any location, including the Trading Floors. Moreover,
the Telecoms may offer smaller circuits that are the same as or similar
size to the TF Connections. Ultimately, Users can choose to configure
their pathway in the way that best suits their business needs.
The TF Connections do not have a distance or latency advantage over
the Telecoms' circuits within the MDC. FIDS has normalized (a) the
distance between the meet-me-rooms and the colocation halls and (b) the
distance between the rooms where the FIDS circuits and the TF
Connections exit the MDC and the colocation halls. As a result, a User
choosing whether to use the TF Connections or Telecom circuits does not
face any difference in the distances or latency within the MDC. The
Exchange is not aware of any differences under its control that give
the Exchange a latency advantage.
The Exchange also believes that the TF Connections do not have any
latency or bandwidth advantage over the Telecoms' circuits outside of
the MDC. The Exchange believes that the Telecoms operating in the meet-
me-rooms offer circuits with a variety of latency and bandwidth
specifications, some of which may exceed the specifications of the TF
Connections.\15\ The Exchange believes that Users consider these
latency and bandwidth factors--as well as other factors, such as price
and termination point--in determining which offerings will best serve
their business needs.
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\15\ The specifications of FIDS's competitors' circuits are not
publicly known. The Exchange understands that FIDS has gleaned any
information it has about its competitors through anecdotal
communications, by observing customers' purchasing choices in the
competitive market, and from its own experience as a purchaser of
circuits from telecommunications providers to build FIDS's own
networks.
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In sum, the Exchange is not aware of anything that would make the
Telecoms' circuits inadequate substitutes for the TF Connections.
Nor does the Exchange have a competitive advantage over any third-
party competitors by virtue of the fact that it owns and operates the
MDC's meet-me-rooms. In most cases, circuits coming out of the MDC are
provided by the Telecoms.\16\ Currently, 16 Telecoms operate in the
meet-me-rooms and provide a variety of circuit choices. It is in the
Exchange's best interest to set the fees that Telecoms pay to operate
in the meet-me-rooms at a reasonable level \17\ so that market
participants, including Telecoms, will maximize their use of the MDC.
By setting the meet-me-room fees at a reasonable level, the Exchange
encourages Telecoms to participate in the meet-me-rooms and to sell
circuits to Users for connecting into and out of the MDC. These
Telecoms then compete with each other by pricing such circuits at
competitive rates. These competitive rates for circuits help draw in
more Users and Hosted Customers to the MDC, which directly benefits the
Exchange by increasing the customer base to whom the Exchange can sell
its colocation services, which include cabinets, power, ports, and
connectivity to many third-party data feeds, and because having more
Users and Hosted Customers leads, in many cases, to greater
participation on the Exchange. In this way, by setting the meet-me-room
fees at a level attractive to telecommunications firms, the Exchange
spurs demand for all of the services it sells at the MDC, while setting
the meet-me-room fees too high would negatively affect the Exchange's
ability to sell its services at the MDC.\18\ Accordingly, there are
real constraints on the meet-me-room fees the Exchange charges, such
that the Exchange does not have an advantage in terms of costs when
compared to third parties that enter the MDC through the meet-me-rooms
to provide services to compete with the Exchange's services.
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\16\ Note that in the case of wireless connectivity, a User
still requires a fiber circuit to transport data. If a Telecom is
used, the data is transmitted wirelessly to the relevant pole, and
then from the pole to the meet-me-room using a fiber circuit.
\17\ See Securities Exchange Act Release No. 98000 (July 26,
2023), 88 FR 50244 (August 1, 2023) (SR-NYSEArca-2023-47) (``MMR
Notice'').
\18\ See id. at 50246. Importantly, the Exchange is prevented
from making any alteration to its meet-me-room services or fees
without filing a proposal for such changes with the Commission.
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If anything, the Exchange would be subject to a competitive
disadvantage vis-[agrave]-vis the Telecoms. They are not subject to the
Commission's filing requirements, and therefore can freely change their
services and pricing in response to competitive forces. In contrast,
the Exchange's service and pricing would be standardized as set out in
this filing, and the Exchange would be unable to respond to pricing
pressure from its competitors without seeking a formal fee change in a
filing before the Commission.
If the Exchange were to set the price of the TF Connections at a
level that Users found to be too high, Users would likely respond by
choosing one of the many alternative options offered by the 16
Telecoms. Conversely, if the Exchange were to offer the TF Connections
at prices aimed at undercutting comparable Telecom circuits, the
Telecoms might reassess whether it makes financial sense for them to
continue to participate in the MDC's meet-me-rooms. Their departure
might negatively impact User participation in colocation and on the
Exchange. As a result, the Exchange is not motivated to undercut the
prices of Telecom circuits.
In sum, because the Exchange is subject to significant competitive
forces in setting the terms on which it offers its proposal, in
particular because the Exchange believes that a substantially similar
substitute for TF Connectivity is available, and the Exchange has not
placed third party vendors at a competitive disadvantage created by the
Exchange, the proposed fees for the TF Connectivity are reasonable.\19\
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\19\ See Wireless Approval Order, supra note 11.
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For these reasons, the proposed change is reasonable.
The Proposed Change Is Equitable
The Exchange believes that the proposed change provides for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities and does
not unfairly discriminate between customers, issuers, brokers, or
dealers because it is not designed to permit unfair discrimination
between market participants. Rather, it would apply to all market
participants equally.
In addition, the Exchange believes that the proposal is equitable
because only Users that voluntarily select to receive TF Connectivity
would be charged for it. The proposed TF Connectivity is available to
all Users on an equal basis, and all Users that voluntarily choose to
purchase TF Connectivity would be charged the same amount for that
circuit as all other market participants purchasing that type of TF
Connectivity.
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The Exchange believes that it is equitable that it offers two types
of TF Connectivity: TF VCCs that may connect to one Trading Floor, and
TF VRFs that may connect to one or more Trading Floors. By offering
these varied technological options, FIDS provides potential Users more
choices from which to choose the option that would work best for their
specific needs. The Exchange proposes to add a note to the Fee Schedule
to clarify the difference, thereby making it easier for potential
purchasers of the service to assess what connectivity will best serve
them.
The Proposed Change Is Not Unfairly Discriminatory
The Exchange believes its proposal is not unfairly discriminatory.
The proposed change does not apply differently to distinct types or
sizes of market participants. Rather, it applies to all market
participants equally. The purchase of any proposed service is
completely voluntary and the Fee Schedule will be applied uniformly to
all market participants.
In addition, the Exchange believes that the proposal is not
unfairly discriminatory because only Users that voluntarily select to
receive TF Connectivity would be charged for it. TF Connectivity is
available to all market participants on an equal basis, and all Users
that voluntarily choose to purchase TF Connectivity are charged the
same amount as all other market participants purchasing that type of TF
Connectivity.
The Exchange believes that it is not unfairly discriminatory that
it offers two types of TF Connectivity: TF VCCs that may connect to one
Trading Floor, and TF VRFs that may connect to one or more Trading
Floors. By offering these varied technological options, FIDS provides
potential Users more choices from which to choose the option that would
work best for their specific needs. The Exchange proposes to add a note
to the Fee Schedule to clarify the difference, thereby making it easier
for potential purchasers of the service to assess what connectivity
will best serve them.
For the reasons above, the proposed change does not unfairly
discriminate between or among market participants that are otherwise
capable of satisfying any applicable co-location fees, requirements,
terms, and conditions established from time to time by the Exchange.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal will not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of Section 6(b)(8) of the Act.\20\
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\20\ 15 U.S.C. 78f(b)(8).
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The proposed change would not impose a burden on competition among
national securities exchanges or among members of the Exchange.
The proposed change would enhance competition in the market for
circuits transmitting data into and out of colocation at the MDC to the
Trading Floors, by adding TF Connectivity, in addition to the 16
Telecoms that also sell circuits to Users. TF Connectivity does not
have any latency, bandwidth, or other advantage over the Telecoms'
circuits. The proposal would not burden competition in the sale of such
circuits, but rather, enhance it by providing Users with an additional
choice for their circuit needs.
The Exchange believes that it would not be a burden on competition
that it offers two types of TF Connectivity: TF VCCs that may connect
to one Trading Floor, and TF VRFs that may connect to one or more
Trading Floors. By offering these varied technological options, FIDS
provides potential Users more choices from which to choose the option
that would work best for their specific needs. The Exchange proposes to
add a note to the Fee Schedule to clarify the difference, thereby
making it easier for potential purchasers of the service to assess what
connectivity will best serve them
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-2024-113 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-2024-113. 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-2024-113 and should
be submitted on or before January 24, 2025.
[[Page 351]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-31503 Filed 1-2-25; 8:45 am]
BILLING CODE 8011-01-P