Notice2024-12889
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Article 7, Rule 11
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Published
June 13, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 115 (Thursday, June 13, 2024)</title>
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[Federal Register Volume 89, Number 115 (Thursday, June 13, 2024)]
[Notices]
[Pages 50395-50398]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-12889]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100297; File No. SR-NYSECHX-2024-22]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Article 7, Rule 11
June 7, 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 4, 2024, the NYSE Chicago, Inc. (``NYSE Chicago'' 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
[[Page 50396]]
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 Article 7, Rule 11 (Fixing and
Paying Fees and Charges) to permit direct debiting of undisputed or
final fees or other sums due the Exchange by Participants and
Participant Firms with one or more Trading Permits and each applicant
for a Trading Permit. The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 Article 7, Rule 11 (Fixing and
Paying Fees and Charges) to permit direct debiting of undisputed or
final fees or other sums due the Exchange by Participants and
Participant Firms with one or more Trading Permits and each applicant
for a Trading Permit.
Article 7, Rule 11 currently provides that the Exchange may fix the
fees and other charges payable by a Participant in such amount as the
Exchange deems necessary. Article 7, Rule 11 further provides that fees
and charges shall be payable in accordance with the Exchange's schedule
of fees and charges.
The Exchange proposes to require that Participants and Participant
Firms 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 a Participant,
Participant Firm 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
Article 7, Rule 12, 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 affiliate NYSE
American LLC (``NYSE American'') and other exchanges.\5\
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\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 Fee Schedule
are collected and retained by FINRA via the CRD system for the
registration of employees of Participants and Participant Firms of
the Exchange 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). 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 under section ``P'' of the Fee
Schedule, available at <a href="https://www.nyse.com/publicdocs/nyse/NYSE_Chicago_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/NYSE_Chicago_Fee_Schedule.pdf</a>, and provides that all fee disputes
must be submitted no later than sixty days after receipt of a
billing invoice.
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Under the proposal, the Exchange would send a monthly invoice to
each Participant and Participant Firm, 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 by 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. The Exchange anticipates that NSCC will
process the debits on the day it receives the file or the following
business day. Because Participants and Participant Firms would be
provided with an invoice approximately 1 week before the debit date,
Participants and Participant Firms will have adequate time to contact
the Exchange with any questions concerning the invoice. If a
Participant or Participant Firm 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 Participant or Participant Firm 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.
Following receipt of the file from the Exchange, NSCC would proceed
to debit the amounts indicated from the account of the Participant or
Participant Firm that clears the applicable transactions (``Clearing
Participant,'' i.e., either a Participant or Participant Firm that is
self-clearing or another Participant or Participant Firm that provides
clearing services on behalf of the Participant or Participant Firm) and
disburse such amounts to the Exchange. Where a Participant or
Participant Firm clears through another a Participant or Participant
Firm, the Exchange understands that the estimated transaction fees owed
to the Exchange are typically debited by the Clearing Participant on a
daily basis using daily transaction detail reports provided by the
Exchange to the Clearing Participant in order to ensure adequate funds
have been escrowed. The Exchange notes that it is proposing to permit a
Participant or Participant Firm to designate one or more clearing
account numbers that correspond to an account(s) at NSCC to permit
Participants and Participant Firms 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 Participant or Participant Firm.
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
[[Page 50397]]
with the practice on other exchanges.\6\ Moreover, the Exchange
believes that it is reasonable to permit a Participant, Participant
Firm and applicants for 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. A Participant or Participant Firm
would still be able to dispute billing amounts that are less than
$10,000 pursuant to the billing policy set forth in the Fee
Schedule.\7\
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\6\ 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.
\7\ See note 5, supra. The Exchange would also change ``schedule
of fees and charges'' in Article 7, Rule 11(a) to ``Fee Schedule.''
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To effectuate this change, the Exchange would add the following
text to Article 7, Rule 11(a) (italicized):
The Exchange shall fix the fees and other charges payable by a
Participant in such amount as the Exchange deems necessary. Fees and
charges shall be payable in accordance with the Exchange's Fee
[s]Schedule[ of fees and charges]. Each Participant and Participant
Firm that has one or more equity Trading Permits, and each applicant
for a 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 a Participant, Participant Firm or applicant
may request to opt-out of the requirement to provide an NSCC
clearing account number and establish alternative payment
arrangements. If a Participant or Participant Firm disputes an
invoice, the Exchange will not include the disputed amount in the
debit if the Participant or Participant Firm 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 Fee
Schedule, which are collected and retained by FINRA.
The remaining provisions of the current rule would remain
unchanged.
2. Statutory Basis
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),\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 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 Participants and
Participant Firms with an efficient process to pay undisputed or final
fees and/or sums due to the Exchange.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal to debit NSCC accounts
directly is reasonable because it would ease the administrative burden
on Participants and Participant Firms of paying monthly invoices and
avoiding overdue balances, and would provide efficient collection from
all Participants and Participant Firms who owe monies to the Exchange.
Moreover, the Exchange believes that the minimum time frame provided to
Participants and Participant Firms to dispute invoices is reasonable
and adequate to enable Participants and Participant Firms 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.\10\ Participants and Participant
Firms will still be able to dispute billing amounts that are less than
$10,000 pursuant to the Exchange's Fee Schedule. Finally, the Exchange
believes that it is reasonable to permit Participants, Participant
Firms or applicants to request to opt-out of the requirement to provide
NSCC account information and instead establish alternative payment
arrangements with the Exchange.
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\10\ See notes 6 & 7, supra.
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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 Participants and Participant Firms that
have one or more Trading Permits and to all applicants for Trading
Permits, and will not disproportionately burden or otherwise impact any
single Participant or Participant Firm.
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 Participant or Participant Firm and Participants and Participant
Firms will have a reasonable opportunity to dispute the fees both
before and after the direct debit process. In addition, Participants
and Participant Firms 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 Participants and Participant
Firms. Moreover, other exchanges utilize a similar process which the
Exchange believes is generally familiar to Participants and Participant
Firms. 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 Participant and
Participant Firm 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 foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\ thereunder
because the proposal does not: (i) significantly affect the protection
of investors or the public interest; (ii) impose any significant burden
on competition; and (iii) by its terms, become operative for 30 days
from the date on which it was filed, or such
[[Page 50398]]
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, provided that the
Exchange has given the Commission notice of its intent to file the
proposed rule change, along with a brief description and text of the
proposed rule change, at least five business days prior to the date of
filing of the proposed rule change, or such shorter time as designated
by the Commission.\13\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 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 text of
the proposed rule change, at least five business days prior to the
date of filing of the proposed rule change, or such shorter time as
designated by the Commission. The Exchange has satisfied this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay period. The Commission
believes that waiver of the 30-day operative delay period is consistent
with the protection of investors and the public interest. Specifically,
the proposal would permit the direct debiting of Exchange invoices
comparable to the process in place at other exchanges.\15\ Waiver of
the operative delay would allow the Exchange to implement the direct
debiting process for the billing cycle starting in July. For these
reasons, the Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest, and designates the proposed rule change to be operative upon
filing with the Commission.\16\
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\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ See supra note 5.
\16\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.\17\ If the
Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule change should be
approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(3)(C).
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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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#453730292068262a2828202b3136053620266b222a33"><span class="__cf_email__" data-cfemail="9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8">[email protected]</span></a>. Please include
file number SR-NYSECHX-2024-22 on the subject line.
Paper Comments
<bullet> 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-NYSECHX-2024-22. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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-NYSECHX-2024-22 and should
be submitted on or before July 5, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12889 Filed 6-12-24; 8:45 am]
BILLING CODE 8011-01-P
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