Notice2025-02688
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Lengthen Current Extended Trading Sessions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 18, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 31 (Tuesday, February 18, 2025)</title>
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[Federal Register Volume 90, Number 31 (Tuesday, February 18, 2025)]
[Notices]
[Pages 9794-9799]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-02688]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102400; File No. SR-NYSEARCA-2024-89]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To
Lengthen Current Extended Trading Sessions
February 11, 2025.
I. Introduction
On October 25, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and
Rule 19b-4 thereunder,\2\ a proposed rule change to lengthen the hours
of NYSE Arca's extended trading sessions. The proposed rule change was
published for comment in the Federal Register on November 14, 2024.\3\
The Commission received comments on the proposed rule change \4\ and a
letter responding to
[[Page 9795]]
the comments from NYSE Arca.\5\ On December 13, 2024, the Exchange
filed an amendment to the proposed rule change, which superseded and
replaced the Initial Proposal. Amendment No. 1 was published for
comment in the Federal Register on December 30, 2024.\6\ On December
19, 2024, pursuant to Section 19(b)(2) of the Exchange Act,\7\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\8\ On January 27, 2025, the Exchange filed a second amendment
to the proposed rule change, which superseded and replaced the Initial
Proposal and Amendment No. 1 (``Amendment No. 2'').\9\ The Commission
is publishing this notice to solicit comments on Amendment No. 2 from
interested persons and is approving the proposed rule change, as
modified by Amendment No. 2, on an accelerated basis.
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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 (Nov. 7,
2024), 89 FR 90143 (Nov. 14, 2024) (``Initial Proposal'').
\4\ Comment letters on the proposal are available at <a href="https://www.sec.gov/comments/sr-nysearca-2024-89/srnysearca202489.htm">https://www.sec.gov/comments/sr-nysearca-2024-89/srnysearca202489.htm</a>.
\5\ See letter from David De Gregorio, Associate General
Counsel, NYSE Arca, dated Jan. 15, 2025 (``NYSE Arca Letter'').
\6\ See Securities Exchange Act Release No. 101985 (Dec. 19,
2024), 89 FR 106709 (Dec. 30, 2024) (``Amendment No. 1'').
\7\ 15 U.S.C. 78s(b)(2).
\8\ See Securities Exchange Act Release No. 102002 (Dec. 19,
2024), 89 FR 105650 (Dec. 27, 2024).
\9\ In Amendment No. 2, the Exchange, in addition to
incorporating the changes to the Initial Proposal set forth in
Amendment No. 1, corrected typographical errors in the proposed
preamble to NYSE Arca Rule 7.34-E and revised the numbering of NYSE
Arca Rule 7.34-E(d)(3). Amendment No. 2 is available at <a href="https://www.sec.gov/comments/sr-nysearca-2024-89/srnysearca202489-560875-1609542.pdf">https://www.sec.gov/comments/sr-nysearca-2024-89/srnysearca202489-560875-1609542.pdf</a>.
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II. Description of the Proposed Rule Change, as Modified by Amendment
Nos. 1 and 2
The Exchange proposed to amend its rules to lengthen the hours of
trading for its two extended hours trading sessions for NMS stocks so
that it will offer trading 22 hours a day, 5 days a week. Specifically,
the Exchange proposed to adopt temporary NYSE Arca Rule 7.34-E(T) and
revise NYSE Arca Rules 1.1 (Definitions) and 7.34-E (Trading Sessions)
to lengthen its hours of trading. In addition, the Exchange proposed
certain technical, conforming changes to NYSE Arca Rule 5.1-E(a)
(General Provisions and Unlisted Trading Privileges) and Commentary .08
to NYSE Arca Rule 9.5320-E (Prohibition Against Trading Ahead of
Customer Orders).
The Exchange offers three trading sessions each day the Exchange is
open for business unless the Exchange determines otherwise. Under NYSE
Arca Rule 7.34-E, the Exchange's pre-market 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.'' \10\
The 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.\11\ The final, post-market trading
session--the ``Late Trading Session''--begins following the conclusion
of the Core Trading Session and concludes at 8:00 p.m. E.T.\12\
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\10\ See NYSE Arca Rule 7.34-E(a)(1).
\11\ See NYSE Arca Rule 7.34-E(a)(2). NYSE Arca Rule 1.1 defines
``Core Trading Hours'' as 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.
\12\ See NYSE Arca Rule 7.34-E(a)(3).
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The Exchange proposed to extend the hours of its Early Trading
Session and Late Trading Session so that the Exchange will offer
trading from 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.\13\
Specifically, proposed NYSE Arca Rule 7.34-E(T) will require that the
Early Trading Session begin at 1:30 a.m. E.T.\14\ and will require that
the Late Trading Session end at 11:30 p.m. E.T., except on Fridays when
the Late Trading Session will conclude at 8:00 p.m. E.T.\15\
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\13\ The Exchange stated that concluding the Late Trading
Session at 8:00 p.m. E.T. on Friday would ``maximize the available
time to make changes at the end of the week before weekend
testing.'' See Amendment No. 2, at 7.
\14\ NYSE Arca Rule 7.34-E(T)(a)(1).
\15\ NYSE Arca Rule 7.34-E(T)(a)(3).
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Proposed NYSE Arca Rule 7.34-E(T) will be a temporary rule that is
identical to NYSE Arca Rule 7.34-E with the following exceptions.
First, the beginning time of the Early Trading Session and the ending
time of the Late Trading Session will reflect the new hours for these
sessions. Second, the Exchange proposed to shorten the time when the
Exchange will accept orders from 90 minutes before the start of the
Early Trading Session \16\ to 30 minutes before the start of the Early
Trading Session, so that under the amended rule, the Exchange will
accept orders beginning at 1:00 a.m. E.T. Third, proposed NYSE Arca
Rule 7.34-E(T) contains six new disclosures that identify potential
risks associated with Extended Hours Trading to supplement the customer
disclosures that are currently set forth in NYSE Arca Rule 7.34-
E(d).\17\ These disclosures were added to proposed NYSE Arca Rule 7.34-
E(T) in Amendment No. 1, and the Exchange stated that the disclosures
were based on the rules of 24X National Exchange LLC.\18\
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\16\ See NYSE Arca Rule 7.34-E(a)(1).
\17\ The Exchange proposed to define ``Extended Hours Trading''
as trading during the Early Trading Session and the Late Trading
Session. See NYSE Arca Rule 1.1.
\18\ See Amendment No. 2, at 7; see also 24X Rule 3.21(g) and
(i)(1)-(5) and Securities Exchange Act Release No. 101777 (Nov. 27,
2024), 89 FR 97092 (Dec. 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)
(``24X Approval Order'').
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Finally, the Exchange proposed that NYSE Arca Rule 7.34-E remain
operative until the Exchange is ready to transition to the new NYSE
Arca Rule 7.34-E(T). In Amendment No. 1, the Exchange proposed to amend
NYSE Arca Rule 7.34-E to add a preamble stating that the Exchange will
not commence operation of the Extended Hours Trading set forth in
proposed NYSE Arca Rule 7.34-E(T) unless the Equity Data Plans: \19\
(1) have established a mechanism to collect, consolidate, process and
disseminate quotation and transaction information at all times during
Extended Hours Trading \20\ 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 Hours Trading. Further, the
proposed preamble states that prior to commencing operation during
Extended Hours Trading as set forth in proposed NYSE Arca 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 NYSE Arca Rule 7.34-E and the preamble
and to delete the ``T'' designation in proposed NYSE Arca Rule 7.34-
E(T) (``Extended Hours Trading Proposed Rule Change''). The Extended
Hours Trading Proposed Rule
[[Page 9796]]
Change submitted by the Exchange will also confirm that the Exchange is
able to comply with its obligations under the Exchange Act and the
rules thereunder during Extended Hours Trading and that the Equity Data
Plans are prepared to collect, consolidate, process and disseminate
quotation and transaction information at all times during Extended
Hours Trading. The proposed preamble of NYSE Arca Rule 7.34-E further
requires that the Extended Hours Trading Proposed Rule Change must be
filed with the SEC within 18 months of the SEC's approval of the
Exchange's rule filing adopting NYSE Arca Rule 7.34-E(T) and requires
that if the Exchange fails to file such a rule change within 18 months
of approval of NYSE Arca Rule 7.34-E(T), the Exchange will promptly
file a proposed rule change to delete NYSE Arca Rule 7.34-E(T).
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\19\ The Exchange proposed to define ``Equity Data Plans'' as
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). See NYSE Arca Rule 1.1.
\20\ In Amendment No. 2, the Exchange, among other things,
corrected typographical errors in references to the defined term
``Extended Hours Trading'' in the proposed preamble to NYSE Arca
Rule 7.34-E.
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According to the Exchange, notwithstanding the proposed longer
hours of the Early and Late Trading Sessions, the operations of these
sessions will remain the same under NYSE Arca Rule 7.34-E(T) as under
NYSE Arca Rule 7.34-E.\21\ Specifically, all order types eligible for
such sessions and order type behaviors will remain unchanged.\22\ The
Exchange stated that order processing during the proposed longer hours
of the Early and Late Trading Sessions will function the same way as it
does under NYSE Arca Rule 7.34-E and that there will be no changes to
the ranking, display, or decrementation processes or rules. The
Exchange also stated that it will report the best bid and offer on the
Exchange to the appropriate exclusive SIP at the beginning of the Early
Trading Session using the same formats and delivery mechanisms. Trades
executed and reported outside of the Core Trading Session will be
reported to the appropriate exclusive SIP with the ``.T'' modifier.
Finally, the Exchange stated that no fee changes were proposed in
connection with the proposal.
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\21\ See Amendment No. 2, at 7; see also NYSE Arca Letter, at 4.
\22\ 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.
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In addition, the Exchange stated that it 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
hours of the Early and Late Trading Sessions, the Exchange will pause
trading in the underlying security until trading resumes on the primary
listing market for the security. The Exchange stated that it will halt
trading automatically in the subject security on NYSE Arca, regardless
of trading session, when a halt has been declared on the primary
market. As discussed in the amended proposal, Exchange staff will be
available during the proposed Extended Hours 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 a declaration of a halt in a NYSE
Arca primary symbol would be necessary in the event of a system
malfunction or a significant material event, such as a bankruptcy
declaration.
The Exchange also stated that, to the extent material corporate
news is released during the Extended Hours Trading and the primary
listing market does not impose a halt, the requirements of proposed
NYSE Arca Rule 7.34-E(T)(d)(3)(v) (which mirrors existing NYSE Arca
Rule 7.34-E(d)(3)(5)) and proposed NYSE Arca 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 Hours Trading,
respectively, will help ensure that market participants, including
investors, are informed about the potential risks associated with
trading during that time period.
Further, the Exchange stated that ``[t]rading 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.'' \23\ The Exchange stated that its
current regulatory program would be completely applicable to trading
during the extended Early and Late Trading Sessions.\24\
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\23\ See Amendment No. 2, at 12.
\24\ Id.
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III. Discussion and Commission Findings
The Commission finds that the amended proposed rule change is
consistent with the requirements of the Exchange Act and the rules and
regulations thereunder applicable to a national securities
exchange.\25\ In particular, the Commission finds that the amended
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\26\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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 are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\25\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\26\ 15 U.S.C. 78f(b)(5).
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Specifically, proposed NYSE Arca Rule 7.34-E(T) will extend the
hours of the Early and Late Trading Sessions with certain changes that
are necessary to account for the longer timeframe that trading will be
permitted. This proposed NYSE Arca rule is modeled on the Exchange's
existing rule that governs its Early and Late Trading Sessions,\27\ as
well as rules recently approved by the Commission for another
exchange.\28\ For example, as discussed below,\29\ proposed NYSE Arca
Rule 7.34-E(T) will operate the same as NYSE Arca Rule 7.34-E but will
require additional customer disclosures about potential risks of
trading during the newly extended hours.
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\27\ See NYSE Arca Rule 7.34-E.
\28\ See 24X Approval Order.
\29\ See infra section III.C.
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In addition, as discussed below,\30\ the Exchange will not commence
operation of the Extended Hours Trading under NYSE Arca Rule 7.34-E(T)
prior to filing a proposed rule change to confirm its and the Equity
Data Plans' readiness. Specifically, the proposed preamble to NYSE Arca
Rule 7.34-E requires the Exchange, prior to commencing operations
during Extended Hours Trading under NYSE Arca Rule 7.34-E(T), to file a
proposed rule change, pursuant to Section 19(b) of the Exchange Act
\31\ and the rules thereunder, to amend its rules confirming that the
Exchange is able to comply with its obligations under the Exchange Act
during Extended Hours Trading and that the Equity Data Plans are
prepared to collect, consolidate, process and disseminate quotation and
transaction information during that time period.
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\30\ See infra section III.B.
\31\ 15 U.S.C. 78s(b).
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Accordingly, the amended proposal is designed to prevent fraudulent
and manipulative acts and practices, promote just and equitable
principles of trade, foster cooperation and
[[Page 9797]]
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. Moreover, the amended proposal will foster
competition by introducing another trading venue during extended
trading hours. As amended, the Exchange's rules for its Extended Hours
Trading are designed to increase transparency and enhance customer risk
disclosures such that the Exchange will operate its Extended Hours
Trading in a manner that is consistent with the regulatory framework of
the extended hours sessions of other national securities exchanges.
A. General Comments on Extended Hours Trading
The Commission received comments on the proposal and a response
from the Exchange.\32\ Several commenters opposed the proposal to
extend the Exchange's trading hours.\33\ Some commenters raised
concerns about the propriety of lengthening the hours of trading.\34\
Two of these commenters stated that additional deliberation should be
undertaken prior to the Commission's approval of the proposal as the
public, including market participants, should be afforded an
opportunity to provide views on overnight trading.\35\ These commenters
recommended that the Commission host roundtable(s) or open comment
files on the issues raised by the proposed expansion to overnight on-
exchange trading.\36\
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\32\ See supra notes 4 and 5.
\33\ See letters from Bryant, dated Nov. 25, 2024; Kelsey
Greenlake, dated Nov. 25, 2024 (``Greenlake Letter''); Anonymous,
dated Nov. 25, 2024; Blake Campos, dated Nov. 25, 2024; Javier C.
Limon Rodriguez, dated Nov. 25, 2024; Richard Pasquali, dated Nov.
25, 2024 (``Pasquali Letter''); Benjamin L. Schiffrin, Director
Securities Policy, Better Markets, Inc., dated Dec, 5, 2024
(``Better Markets Letter''); and Ellen Green, Managing Director,
Equities & Options Market Structure, Securities Industry and
Financial Markets Association, dated Dec. 16, 2024 (``SIFMA
Letter'').
\34\ Id. See also infra section III.C. (discussing comments
regarding effects of the proposal on retail investors).
\35\ See SIFMA Letter, at 1; Better Markets Letter, at 2.
\36\ See SIFMA Letter, at 2-3; Better Markets Letter, at 1-2.
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In response to the commenters, the Exchange stated that comments
related to roundtables and open comment files on extending exchange
trading hours were raised and contemplated during the Commission's
consideration of the 24X application for exchange registration, which
included extended hours trading sessions that will overlap with NYSE
Arca's Extended Hours Trading.\37\ The Exchange, quoting the
Commission, stated that, ``[t]he public, including market participants,
have been afforded adequate opportunity for comment, and interested
persons have taken the opportunity to provide written data, views, and
arguments concerning this application which has yielded a robust
analysis of the relevant issues. Accordingly, issues related to the 24X
Market Session have been raised, analyzed, and addressed, and the
Commission action on the 24X Form 1 should not be delayed by, and is
not dependent on, a broader study of equity market structure.'' \38\
The Exchange also stated that it ``continues to engage with the
industry to address questions surrounding implementation'' of its
proposal.\39\
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\37\ See NYSE Arca Letter, at 2-3.
\38\ See id., at 2 (quoting 24X Approval Order, 89 FR at 97107).
The 24X Market Session will operate between 8:00 p.m. and 4:00 a.m.
E.T. Sunday, Monday, Tuesday, Wednesday, and Thursday nights that
precede a U.S. Business Day. See 24X Rule 1.5(c).
\39\ See NYSE Arca Letter, at 3.
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As the Commission stated in the 24X Approval Order, the Commission
continually monitors the national market system and the operation of
the Federal securities laws, and the Commission, consistent with its
oversight of the national market system, will continue to monitor the
developments of extended hours trading.\40\ As with the 24X
application, the monitoring of new market developments does not
foreclose Commission action on this proposal.\41\ The Commission finds
that the NYSE Arca rules related to the NYSE Arca's Extended Hours
Trading, as amended, are consistent with the Exchange Act.
Specifically, NYSE Arca Rule 7.34-E(T) is based on NYSE Arca Rule 7.34-
E, which governs the Early and Late Trading Sessions and is designed to
address the potential differences in trading compared to NYSE Arca's
Core Trading Session. NYSE Arca has proposed a preamble to its Rule
7.34-E, as discussed below, as well as additional customer disclosures
in its proposed new Rule 7.34-E(T), to accommodate the further
expansion of trading hours.
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\40\ See 24X Approval Order, 89 FR at 97106.
\41\ Id.
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B. Equity Data Plans and Securities Information Processor Readiness
One commenter stated that the Equity Data Plans must be extended to
accommodate real-time quote and trade collection and dissemination.\42\
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\42\ See SIFMA Letter, at 2. This commenter also stated that if
the Equity Data Plans are extended, then the equity trade reporting
facilities (``TRFs'') should also be expanded so that overnight off-
exchange trades are not delayed relative to on-exchange trades. Id.
at 4. The Commission agrees and believes that the Equity Data Plans
and FINRA should consider accommodating real-time over-the-counter
(``OTC'') trade reporting. See also 24X Approval Order, 89 FR at
97107, n. 291.
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Pursuant to the proposed new preamble to NYSE Arca Rule 7.34-E, the
Exchange will not commence operation of Extended Hours Trading under
NYSE Arca 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 Hours Trading 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. The Exchange stated it will submit all quotes
and trades that are generated in the extended Early and Late Trading
Sessions to the consolidated quote and trade systems maintained by the
exclusive SIPs for public dissemination so that ``quotes and trades
will be made available to the investing public in the same manner that
quotes and trades are currently made available.'' \43\
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\43\ See Amendment No. 2, at 12. The two exclusive 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.
Monday through Friday.
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Further, as stated in the proposed preamble to NYSE Arca Rule 7.34-
E, as amended, the Exchange will not commence operation of the Extended
Hours Trading prior to filing a proposed rule change that specifies its
ability to comply with its obligations under the Exchange Act during
the Extended Hours Trading.\44\ This Extended Hours Trading Proposed
Rule Change will specify that the Equity Data Plans are prepared to
collect, consolidate, process and disseminate quotation and transaction
information at all times during the Extended Hours Trading.\45\ The
Extended Hours Trading Proposed Rule Change must be filed with the
Commission and approved, or otherwise become effective pursuant to
Exchange Act Section 19(b), before NYSE Arca can offer Extended Hours
Trading under
[[Page 9798]]
NYSE Arca Rule 7.34-E(T).\46\ The NYSE Arca rule requiring the
operation of the Equity Data Plans during the Extended Hours Trading is
designed to ensure that consolidated quotation and transaction data are
provided in a manner that is consistent with the existing extended
hours sessions on exchanges, including NYSE Arca. The NYSE Arca rules
for the Extended Hours Trading are designed to provide investor
protections and will foster competition by introducing another trading
venue during these trading hours. The Commission recently approved
another national securities exchange's proposal to introduce extended
trading hours that overlap with the hours proposed by NYSE Arca with
substantively identical provisions.\47\
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\44\ See proposed preamble to NYSE Arca Rule 7.34-E.
\45\ See id.
\46\ See id.
\47\ 24X will not start operating its 24X Market Session unless
the Equity Data Plans have established a mechanism to collect,
consolidate, process, and disseminate quotation and transaction
information at all times during the 24X Market Session that is
equivalent to the mechanism established for Exchange Trading Hours
other than the 24X Market Session, among other things. See 24X Rule
1.5(c).
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C. Effect on Retail Investors and Customer Disclosures
The Commission received several comments in opposition to the
proposal that stated that extended trading sessions adversely harm
retail investors.\48\ One commenter stated that retail investors would
get worse prices for their trades because of low volumes and wider
spreads in extended trading hours and that customer disclosures are
``unlikely to protect investors'' \49\ because investors tend to not
read disclosures.\50\ NYSE Arca stated that customer disclosures about
the risks of extended hours trading have been standard in the
markets.\51\
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\48\ See Better Markets Letter; SIFMA Letter; Greenlake Letter;
Pasquali Letter.
\49\ See Better Markets Letter, at 3. The commenter also stated
that gamification, combined with ``around-the-clock'' trading, would
harm retail investors. In addition, the commenter stated that the
fact that cryptocurrency trading occurs around the clock does not
support the expansion of exchange trading hours in NMS stocks. See
id., at 6-8. As discussed below, trading in NMS stocks occurs during
the overnight hours in the OTC market. The proposal seeks to allow
NYSE Arca to expand the hours of its existing Early Trading Session
and Late Trading Session to overlap with some of the hours available
OTC. NYSE Arca stated that ``the existing safeguards applicable to
the 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 available to the proposed
extended Early and Late Trading Sessions.'' See NYSE Arca Letter at
4. NYSE Arca Rules 7.34-E and 7.34-E(T) are designed to prevent
fraudulent and manipulative acts and practices, promote just and
equitable principles of trade, and protect investors and the public
interest.
\50\ Better Markets Letter, at 4.
\51\ See NYSE Arca Letter, at 2. NYSE Arca's existing rule, Rule
7.34-E, requires disclosures regarding the risks of Extended Hours
Trading and are similar to the rules of other self-regulatory
organizations (``SROs''). See e.g., Cboe EDGX Rule 3.21; MEMX
Exchange Rule 3.21; Nasdaq Rule Equity 2, Section 20; FINRA Rule
2265.
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NYSE Arca Rule 7.34-E(T) includes the customer disclosures that are
required in NYSE Arca Rule 7.34-E. Specifically, NYSE Arca Rule 7.34-
E(T)(d)(3) provides that ETP Holders may not accept orders from non-ETP
Holders for execution during Extended Hours Trading without disclosing,
among other things,\52\ 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.''
\53\ The Exchange proposes, in NYSE Arca Rule 7.34-E(T), to supplement
the existing required customer disclosures in NYSE Arca Rule 7.34-E to
require the disclosure of six additional potential risks: (i) trading
during hours in which financial market infrastructure companies are
closed; (ii) risk of trading during hours in which primary listing
markets may not be open; (iii) trading during hours in which there may
be limited or different regulatory protections; (iv) trading because of
limited alternatives; (v) continuous trading; and (vi) additional
unforeseen risks.\54\ Such disclosures notify investors of potential
risks, and allow them to evaluate whether to trade during either the
Early Trading Session or the Late Trading Session or not. The proposed
new disclosures incorporate and place the same customer disclosure
obligations on NYSE Arca ETP Holders that the Commission approved in
the 24X Approval Order.\55\
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\52\ See NYSE Arca Rule 7.34-E(T)(d)(1) and (d)(2).
\53\ NYSE Arca Rule 7.34-E(T)(d)(3). These disclosures are
required by other SROs. See supra note 51.
\54\ See NYSE Arca Rule 7.34-E(T)(d)(3)(viii)-(xiii).
\55\ See 24X Approval Order, 89 FR at 97110-111.
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Further, under existing NYSE Arca Rule 7.34-E(d) and proposed NYSE
Arca Rule 7.34-E(T)(d), ETP Holders must also disclose to non-ETP
Holders that limit orders are the only order type accepted in Extended
Hours Trading and that orders must be designated for trading in the
Extended Hours Trading sessions. Accepting only limit orders during
extended hours sessions can help to address the potential risks that
there may be wider spreads, or that prices may be affected by news
announcements made by issuers. Requiring that orders be designated for
a specific Extended Hours Trading session also helps to ensure that
investors are aware of when their order will be submitted for
execution.
Finally, the Exchange's extended hours for the Early and Late
Trading Sessions will overlap with some of the hours of trading that
already occurs in the OTC market.\56\ Accordingly, while the Exchange's
proposal represents an extension of the hours of the existing trading
sessions on the Exchange, market participants, including retail
investors, are already able to trade during the times proposed by NYSE
Arca.
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\56\ See, e.g., Blue Ocean ATS, LLC (``BOATS''). The operating
hours for BOATS occur from 8:00 p.m. to 4:00 a.m. E.T. on days when
the NYSE Trade Reporting Facility is open for trade reporting. See
Form ATS-N, available at <a href="http://sec.gov/Archives/edgar/data/1795131/000153949723000091/xslATS-N_X01/primary_doc.xml">sec.gov/Archives/edgar/data/1795131/000153949723000091/xslATS-N_X01/primary_doc.xml</a>.
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D. Other Comments
One commenter stated that the proposed expansion of Extended Hours
Trading sessions should not occur unless the trade guarantee provided
by the National Securities Clearing Corporation (``NSCC''), a
subsidiary of the Depository Trust and Clearing Corporation (``DTCC'')
for exchange-executed trades, is available in real-time as it is
currently during both regular and extended trading hours.\57\
Specifically, the commenter stated that ``central-clearing party
(``CCP'') hours must be extended to accommodate real-time CCP trade
guarantee for any exchange-executed trades.'' \58\ The Exchange
responded that its proposal is ``entirely consistent with that
suggestion'' and that its proposed expanded trading hours were
``entirely within the hours that NSCC is currently available for
clearing.'' \59\
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\57\ See SIFMA Letter, at 2, 3-4.
\58\ See SIFMA Letter, at 2.
\59\ See NYSE Arca Letter, at 3.
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NYSE Arca's proposed hours are within the hours of operation of the
NSCC.\60\ The amended proposal is consistent with the requirements of
Section 6(b)(5) of the Exchange Act that provides, among other things,
that the rules of an exchange must foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities.\61\ Further, as the Commission stated in the 24X Approval
Order, ``while risk cannot be eliminated, it can be appropriately
managed as it relates to: . . . the ability of the relevant clearing
agencies for equities, NSCC and
[[Page 9799]]
the DTC, to address any potential credit, market, and liquidity risks
associated with trades submitted by the Exchange.'' \62\
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\60\ See <a href="https://www.dtcc.com/-/media/Files/pdf/2024/8/15/A9473.pdf">https://www.dtcc.com/-/media/Files/pdf/2024/8/15/A9473.pdf</a>.
\61\ 15 U.S.C. 78f(b)(5).
\62\ See 24X Approval Order, 89 FR at 97112.
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The commenter also stated that ``there should be a harmonized
approach to the treatment of all trades that take place, whether on- or
off-exchange'' and that this should include ``clearing, settlement,
trade reporting, and quote and trade dissemination.'' \63\ The
commenter stated that it ``understand[s] that NSCC believes'' that its
trade guarantees attach at different times for exchange-executed trades
as compared to off-exchange executed trades.\64\ The commenter also
posed a number of questions about NSCC rules. As the Commission stated
in the 24X Approval Order, market participants ``should direct their
interpretative questions'' to the relevant SROs, in this case the NSCC,
for confirmation and clarification about their rules.\65\
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\63\ See SIFMA Letter, at 2. The commenter also posed a number
of questions that were interpretative in nature or technical and
related to implementation of extended trading hours. The Exchange
stated that, ``it continues to engage with the industry to address
questions surrounding implementation of the Proposal, which includes
the issues SIFMA identifies regarding processes and costs associated
with clearing, settlement and margin as well as the specific
suggestion regarding the necessity for a separate member clearing
letter of consent to participate in the overnight session.'' See
NYSE Arca Letter, at 3. Moreover, as discussed above, there are
existing extended hours trading sessions on exchanges, including
NYSE Arca, and the rules that are applicable during extended hours,
including NYSE Arca Rule 7.34-E, are clear. The commenter stated
that it had preliminary discussions with the Exchange regarding the
planned expansion of the Exchange's trading hours. As discussed
above, the Commission continues to monitor the national market
system, including the expansion of trading hours in the equity
market.
\64\ See SIFMA Letter, at 3.
\65\ See 24X Approval Order, 89 FR at 97112, n. 375.
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E. Other Proposed Rules
The Exchange proposed to amend NYSE Arca Rule 5.1-E and Commentary
.08 to NYSE Arca Rule 9.5320-E to make conforming changes and to
replace references to Pacific Time. The Exchange stated that these
changes would replace obsolete references and add clarity in its rules.
These changes are consistent with the requirements under Section
6(b)(5) of the Exchange Act that the rules of an exchange are designed
to remove impediments to and perfect the mechanism of a national market
system, and protect investors and the public interest because they are
designed to provide transparency and clarity to the Exchange's rules.
IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written data, views and
arguments concerning whether the proposed rule change, as modified by
Amendment No. 2 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-regulations/self-regulatory-organization-rulemaking">https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking</a>);
or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3745425b521a54585a5a525943447744525419505841"><span class="__cf_email__" data-cfemail="7d0f081118501e1210101813090e3d0e181e531a120b">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-89 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-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 (<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-NYSEARCA-2024-89 and should
be submitted on or before March 11, 2025.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of the notice of filing of Amendment No.
2 in the Federal Register. In Amendment No. 2, in addition to
incorporating the changes to the Initial Proposal set forth in
Amendment No. 1, the Exchange corrected non-substantive, typographical
errors in the proposed preamble to NYSE Arca Rule 7.34-E and revised
the numbering of NYSE Arca Rule 7.34-E(d)(3). While Amendment No. 2
superseded and replaced the Initial Proposal and Amendment No. 1,
Amendment No. 2 does not modify the operation or the meaning of the
proposed rules, which were published for comment in the Federal
Register.\66\ Accordingly, the Commission finds good cause, pursuant to
Section 19(b)(2) of the Exchange Act,\67\ to approve the proposed rule
change, as modified by Amendment No. 2, on an accelerated basis.
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\66\ See supra notes 3 and 6.
\67\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
For the reasons set forth above, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 1 and 2, is
consistent with the requirements of the Exchange Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, the requirements of Section 6(b)(5) of the Act.\68\
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\68\ 15 U.S.C. 78f(b)(5).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\69\ that the proposed rule change (SR-NYSEARCA-2024-89), as
modified by Amendment Nos. 1 and 2, be, and is hereby, approved on an
accelerated basis.
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\69\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\70\
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\70\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-02688 Filed 2-14-25; 8:45 am]
BILLING CODE 8011-01-P
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