8011-01P
SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-100284; File No. SR-NYSEARCA-2024-47)
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness
of Proposed Rule Change to Amend Rule 6.40P-O
June 6, 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 May 31, 2024, NYSE Arca, Inc. (“NYSE
Arca” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”)
the proposed rule change as described in Items I and II, below, which Items have been prepared
by the self-regulatory organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
I.

Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed
Rule Change
The Exchange proposes to amend Rule 6.40P-O (Pre-Trade and Activity-Based Risk

Controls) pertaining to pre-trade risk controls to make additional pre-trade risk controls available
to Entering Firms. 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.

15 U.S.C. 78s(b)(1).

15 U.S.C. 78a.

17 CFR 240.19b-4.

A.

Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory
Basis for, the Proposed Rule Change
1.

Purpose

The Exchange proposes to amend Rule 6.40P-O (Pre-Trade and Activity-Based Risk
Controls) pertaining to pre-trade risk controls to make additional pre-trade risk controls available
to entering Firms.4
Background and Proposal
In 2022, in connection with the Exchange’s migration to Pillar and to better assist OTP
Holders and OTP Firms in managing their risk, the Exchange adopted Rule 6.40P-O, which
included pre-trade risk controls, among other activity-based controls, wherein an Entering Firm
had the option of establishing limits or restrictions on certain of its trading behavior on the
Exchange and authorizing the Exchange to take action if those limits or restrictions were
exceeded.5
The Exchange has recently received several requests from market participants to create an
additional risk control to restrict the overall rate of orders. The Exchange notes that several of the
Cboe affiliated options exchanges currently offer risk controls identical to the one proposed here.6
As such, market participants are already familiar with these risk checks, such that the ones
proposed by the Exchange in this filing are not novel. The Exchange notes that this rule change is
modeled on the proposal recently submitted by the Exchange’s affiliate equities exchanges,
including NYSE Arca, Inc. (“NYSE Arca”).7
The term “Entering Firm” refers to an OTP Holder or OTP Firm (including those acting as Market
Makers). See Rule 6.40P-O(a)(1).

See Securities Exchange Act Release No. 94072 (January 26, 2022), 87 FR 5592 (February 1, 2022)
(Notice of Filing of Amendment No. 4 and Order Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 4) (SR-NYSEArca-2021-47). See also Securities Exchange Act
Release No. 96504 (December 15, 2023), 87 FR 78166 (December 21, 2023) (immediately effective filing
to adopt certain Pre-Trade Risk Controls).

See e.g., Cboe BZX Rule 11.13, Interpretations and Policies .01 paragraph (f) and Cboe EDGX Rule 11.10,
Interpretations and Policies .01 paragraph (f).

See, e.g., SR-NYSEARCA-2024-46 (modifying NYSE Arca Rule 7.19E). The Exchange notes that several
equities exchanges already offer this pre-trade risk control. See, e.g., Cboe BZX Rule 11.13 Interpretations
and Policies .01 paragraph (f); Cboe BYX Rule 11.13 Interpretations and Policies .01 paragraph (f); Cboe
EDGX Rule 11.10 Interpretations and Policies .01 paragraph (f); MEMX Rule 11.10, Interpretations and

In light of these requests, the Exchange proposes to amend Rule 6.40P-O(a)(2)(A) to add a
new subparagraph (vi), which would provide that the Single Order Risk Controls available to
Entering Firms would include “controls to restrict the overall rate of orders.”
As with the Exchange’s existing risk controls, use of the pre-trade risk control proposed
herein would be optional. The Exchange proposes no other changes to Rule 6.40P-O or its
Commentary.
Continuing Obligations of OTP Holders Under Rule 15c3-5
The proposed Pre-Trade Risk Controls described here are meant to supplement, and not
replace, the OTP Holders’ own internal systems, monitoring, and procedures related to risk
management. The Exchange does not guarantee that these controls will be sufficiently
comprehensive to meet all of an OTP Holder’s needs, the controls are not designed to be the sole
means of risk management, and using these controls will not necessarily meet an OTP Holder’s
obligations required by Exchange or federal rules (including, without limitation, the Rule 15c3-5
under the Act8 (“Rule 15c3-5”)). Use of the Exchange’s Pre-Trade Risk Controls will not
automatically constitute compliance with Exchange or federal rules and responsibility for
compliance with all Exchange and SEC rules remains with the OTP Holder.9
Timing and Implementation
The Exchange anticipates implementing the proposed change in the second quarter of
2024 and, in any event, will implement the proposed rule change no later than the end of
September 2024. The Exchange will announce the timing of such changes by Trader Update.
2.

Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of
Policies .01 paragraph (f); and MIAX Pearl Equities Rule 2618(a)(1)(H).
See 17 CFR 240.15c3-5.

See also Commentary .01 to Rule 6.40P-O, which provides that the Pre-Trade Risk Controls set forth in
Rule 6.40P-O “are meant to supplement, and not replace, the OTP Holder’s or OTP Firm’s own internal
systems, monitoring, and procedures related to risk management and are not designed for compliance with
Rule 15c3-5 under the Exchange Act. Responsibility for compliance with all Exchange and SEC rules
remains with the OTP Holder or OTP Firm.”).

the Act,10 in general, and furthers the objectives of Section 6(b)(5) of the Act,11 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.
Specifically, the Exchange believes that the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and a national market
system because the proposed optional additional Pre-Trade Risk Control would provide Entering
Firms with enhanced abilities to manage their risk with respect to orders on the Exchange. The
proposed additional Pre-Trade Risk Control is not novel; they are based on existing risk settings
already in place on Cboe affiliated options exchanges, and market participants are already
familiar with the types of protections that the proposed risk control affords.12 Moreover, the
proposed pre-trade risk control is optional and, as such, Entering Firms are free to utilize this risk
feature or not at their discretion. As such, the Exchange believes that the proposed additional
Pre-Trade Risk Control would provide a means to address potentially market-impacting events,
helping to ensure the proper functioning of the market.
In addition, the Exchange believes that the proposed rule change will protect investors
and the public interest because the proposed additional Pre-Trade Risk Control is a form of
impact mitigation that will aid Entering Firms in minimizing their risk exposure and reduce the
potential for disruptive, market-wide events. The Exchange understands that OTP Holders

15 U.S.C. 78f(b).

15 U.S.C. 78f(b)(5).

See supra note 6. This pre-trade risk control is also offered on several equities exchanges. See supra note 7.

implement a number of different risk-based controls, including those required by Rule 15c3-5.
The controls proposed here will serve as an additional tool for Entering Firms to assist them in
identifying any risk exposure. The Exchange believes the proposed additional Pre-Trade Risk
Controls will assist Entering Firms in managing their financial exposure which, in turn, could
enhance the integrity of trading on the securities markets and help to assure the stability of the
financial system.
Finally, the Exchange believes that the proposed rule change does not unfairly
discriminate among the Exchange’s OTP Holders because use of the proposed additional PreTrade Risk Control is optional and is not a prerequisite for participation on the Exchange.
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. In
fact, the Exchange believes that the proposal will have a positive effect on competition because,
by providing Entering Firms additional means to monitor and control risk, the proposed rule will
increase confidence in the proper functioning of the markets. The Exchange believes the
proposed additional Pre-Trade Risk Control will assist Entering Firms in managing their
financial exposure which, in turn, could enhance the integrity of trading on the securities markets
and help to assure the stability of the financial system. As a result, the level of competition
should increase as public confidence in the markets is solidified.
C.

Self-Regulatory Organization’s Statement on Comments on the Proposed Rule
Change Received from Members, Participants, or Others

No written comments were solicited or received with respect to the proposed rule change.
III.

Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of

the Act13 and Rule 19b-4(f)(6) thereunder.14 Because the foregoing proposed rule change does
not: (i) significantly affect the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30 days from the date on which
it was filed, or such shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act15 and Rule 19b-4(f)(6) thereunder.16
A proposed rule change filed under Rule 19b-4(f)(6)17 normally does not become
operative prior to 30 days after the date of the filing. However, pursuant to Rule
19b-4(f)(6)(iii),18 the Commission may 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 so that the proposed rule change may become
effective and operative upon filing with the Commission. The Exchange states that the proposed
rule change is tied to a technological release that the Exchange plans to implement by the end of
June 2024, that such release may be ready before the 30-day operative delay has elapsed, and the
Exchange seeks to implement the proposed rule change without delay. The Exchange explains
that the proposed rule change will assist Entering Firms in minimizing their risk exposure, which
could enhance the integrity of trading on the securities markets and help to assure the stability of
the financial system, and that the proposed rule change is not novel as it is based on existing risk
settings already in place on other exchanges. For these reasons, and because the proposed rule
change does not raise any new or novel regulatory issues, the Commission believes that waiver
of the 30-day operative delay is consistent with the protection of investors and the public interest.

15 U.S.C. 78s(b)(3)(A)(iii).

17 CFR 240.19b-4(f)(6).

15 U.S.C. 78s(b)(3)(A).

17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to give the
Commission written 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. The Exchange has satisfied this
requirement.

17 CFR 240.19b-4(f)(6).

17 CFR 240.19b-4(f)(6)(iii).

Accordingly, the Commission hereby waives the operative delay and designates the proposed
rule change operative upon filing.19
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. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the proposed rule change should be
approved or 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 rule-comments@sec.gov. Please include file number
SR-NYSEARCA-2024-47 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-2024-47. 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).

For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed
rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

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-2024-47 and should be
submitted on or before [INSERT DATE 21 DAYS AFTER DATE OF PUBLICATION IN THE
FEDERAL REGISTER].
For the Commission, by the Division of Trading and Markets, pursuant to delegated
authority.20

Sherry R. Haywood,
Assistant Secretary.

[FR Doc. 2024-12790 Filed: 6/11/2024 8:45 am; Publication Date: 6/12/2024]

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