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[Federal Register Volume 89, Number 222 (Monday, November 18, 2024)]
[Notices]
[Pages 90794-90798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26747]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101578; File No. SR-NYSENAT-2024-28]

Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Service for Virtual Control Circuits in the Connectivity Fee Schedule

November 12, 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 October 30, 2024, NYSE National, Inc. (``NYSE National'' 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 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 service for virtual control 
circuits in the Connectivity Fee Schedule. 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.

[[Page 90795]]

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 existing service for virtual 
control circuits (``VCCs'') in the Connectivity Fee Schedule.
    A VCC (previously called a ``peer to peer'' connection) is a 
unicast connection through which two participants can establish a 
connection between two points over dedicated bandwidth, to be used for 
any purpose. At the Mahwah, New Jersey data center (``MDC'') \4\ the 
Exchange offers VCCs between two Users.\5\ The recurring monthly fees 
are based upon the bandwidth requirements per VCC connection between 
two Users.\6\
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    \4\ Through its Fixed Income and Data Services (``FIDS'') 
(previously ICE Data Services) business, Intercontinental Exchange, 
Inc. (``ICE'') operates the MDC. The Exchange and the New York Stock 
Exchange LLC, NYSE American LLC, NYSE Arca, Inc., and NYSE Chicago, 
Inc. (together, the ``Affiliate SROs'') are indirect subsidiaries of 
ICE.
    \5\ 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. 83351 (May 31, 2018), 83 FR 26314 at n.9 
(June 6, 2018) (SR-NYSENAT-2018-07). 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 
Affiliate SROs. Each Affiliate SRO has submitted substantially the 
same proposed rule change to propose the change described herein. 
SeeSR-NYSE-2024-69, SR-NYSEAMER-2024-64, SR-NYSEARCA-2024-91, and 
SR-NYSECHX-2024-31.
    \6\ See 83 FR 26314, supra note 5, at 26318.
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    However, not all VCCs are between two Users in the MDC. Although 
all VCCs have at least one end that is a User inside the MDC, the other 
party may be a non-User outside of the MDC at a remote access center, 
or the VCC can be between a User in the MDC and the same User outside 
of the MDC at a remote access center. A VCC that goes outside of the 
MDC herein is called a ``MDC VCC.''
    Accordingly, the Exchange proposes to amend the Connectivity Fee 
Schedule to delete ``between two Users'' after ``Virtual Control 
Circuit.'' Fees for the service would not change and, as now, 
connectivity to a VCC would require the permission of the non-billed 
party before the Exchange would establish the connection.
    As background, Users require wired circuits to connect into and out 
of the MDC. A User's equipment in the MDC's colocation hall connects to 
a circuit leading out of the MDC, which connects to the User's 
equipment in their back office or another data center.
    Before 2013, all such circuits were provided by ICE's predecessor, 
NYSE Euronext. In response to customer demand for more connectivity 
options, in 2013, the MDC opened two ``meet-me-rooms'' to 
telecommunications service providers (``Telecoms''),\7\ to enable 
Telecoms to offer circuits into the MDC in competition with NYSE 
Euronext. Currently, 16 Telecoms operate in the meet-me-rooms and 
provide circuit options to Users requiring connectivity into and out of 
the MDC.
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    \7\ Telecommunication service providers that choose to provide 
circuits at the MDC are referred to as ``Telecoms.'' Telecoms are 
licensed by the Federal Communications Commission (``FCC'') and are 
not required to be, or be affiliated with, a member of the Exchange 
or an Affiliate SRO.
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    In addition, FIDS provides two different types of circuits, Optic 
Low Latency and Optic Access. Optic Access,\8\ which is more similar to 
the MDC VCC, is a circuit between the MDC and the FIDS access centers 
at five third-party owned data centers: (1) 111 Eighth Avenue, New 
York, NY; (2) 32 Avenue of the Americas, New York, NY; (3) 165 Halsey, 
Newark, NJ; (4) Secaucus, NJ; and (5) Carteret, NJ.
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    \8\ The ``Optic Low Latency'' circuits are lower latency. See 
Securities Exchange Act Release No. 99168 (December 14, 2023), 88 FR 
88152 (December 20, 2023) (SR-NYSENAT-2023-29).
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    Ultimately, the MDC VCCs are similar to the Optic Access FIDS 
circuits in that, like Optic Access, the MDC VCCs run between the MDC 
and five FIDS access centers as well as, in the case of the MDC VCCs, 
additional U.S. FIDS access centers. They are smaller than the Optic 
Access FIDS circuits, however. While the Exchange has no visibility 
into how a User utilizes its connections, the Exchange believes that 
the Optic Access FIDS circuit is used for items that require more 
bandwidth, like market data, while the MDC VCCs are used for items that 
require smaller amounts of bandwidth, such as messaging, pre- and post-
trade data, or clearing information, as determined by the User. 
Accordingly, if a User wants a smaller connection to a U.S. access 
center, or wants to reach an access center that Optic Access does not 
reach, the MDC VCCs are a viable option.
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.
    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,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ 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,\11\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 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.
    Although all VCCs have at least one end that is a User inside the 
MDC, the other party may be a non-User outside of the MDC at a remote 
access center, or the VCC can be between a User in the MDC and the same 
User outside of the MDC at a remote access center. Accordingly, the 
proposed change is reasonable because it would make the Connectivity 
Fee Schedule more accurately reflect the usage of VCCs. It would ensure 
that the description of VCCs was complete, accessible and transparent, 
and thereby provide market participants with greater clarity.
    In considering the reasonableness of proposed services and fees, 
the Commission's market-based test considers ``whether the exchange was

[[Page 90796]]

subject to significant competitive forces in setting the terms of its 
proposal. . . , including the level of any fees.'' \12\ 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.'' \13\ 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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    \12\ 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).
    \13\ Wireless Approval Order, supra note 12, at 67049, citing 
2008 ArcaBook Approval Order, supra note 12, at 74781.
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    MDC VCCs would compete with circuits currently offered by the 16 
third-party Telecoms that have installed their equipment in the MDC's 
two meet-me-rooms. The Telecom circuits are reasonable substitutes for 
the MDC VCCs. 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\ The MDC VCCs, the FIDS circuits, and 
the circuits provided by the Telecoms all perform the same function: 
connecting into and out of the MDC. The providers of the MDC VCCs, VCCs 
between Users, FIDS circuits 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 12, at 74789 
and note 295 (recognizing that products need not be identical to be 
substitutable).
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    The MDC VCCs are sufficiently similar substitutes to the circuits 
offered by the 16 Telecoms even though the MDC VCCs all terminate in 
one of the U.S. remote access centers, while circuits from the 16 
Telecoms could terminate in those locations or additional 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 remote 
access centers where the MDC VCCs would terminate. Moreover, the 
Telecoms may offer smaller circuits that are the same as or similar 
size to the MDC VCCs. Ultimately, Users can choose to configure their 
pathway leading out of colocation in the way that best suits their 
business needs, which may include connecting to the User's equipment at 
one of the U.S. remote access center locations that serve as 
termination points for MDC VCCs, or connecting first to one of those 
remote access centers with a FIDS- or Telecom-supplied circuit and then 
further connecting to another remote location using a telecommunication 
provider-supplied circuit.
    Neither the MDC VCCs, Optic Access circuits, nor the Optic Low 
Latency circuits 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 MDC VCCs exit the MDC 
and the colocation halls. As a result, a User choosing whether to use 
the MDC VCCs or Telecom circuits does not face any difference in the 
distances or latency within the MDC.
    The Exchange also believes that the MDC VCCs 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 
proposed MDC VCCs.\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 does not believe that there is anything about 
the MDC VCCs that would make the Telecoms' circuits inadequate 
substitutes.
    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 in 
colocation 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. 98002 (July 26, 
2023), 88 FR 50232 (August 1, 2023) (SR-NYSENAT-2023-12).
    \18\ See id. at 50235. 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 the Exchange were to set the price of the MDC VCCs 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 MDC VCCs 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

[[Page 90797]]

colocation and on the Exchange. As a result, the Exchange is not 
motivated to undercut the prices of Telecom circuits.
    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. The proposed change would apply equally to 
all types and sizes of market participants. It would clarify that all 
VCCs, irrespective of whether between two Users, a User and non-User 
outside of the VCC, or the same User, are subject to the same size and 
cost provisions. In addition, the Exchange believes that the proposal 
is equitable because only market participants that voluntarily select 
to receive MDC VCCs would be charged for them.
    Moreover, the proposed change would ensure that the Connectivity 
Fee Schedule accurately reflects the usage of VCCs. It would ensure 
that the description of VCCs was complete, accessible and transparent, 
and provide market participants with greater clarity.
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 equitable 
because only market participants that voluntarily select to receive MDC 
VCCs would be charged for them. The MDC VCCs are available to all 
market participants on an equal basis, and all market participants that 
voluntarily choose to purchase a MDC VCC are charged the same amount as 
all other market participants purchasing that type of MDC VCC.
    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.\19\ The proposed rule 
change is designed to ensure that the provision on VCCs clarifies that 
all VCCs, irrespective of whether between two Users, a User and non-
User outside of the VCC, or the same User, are subject to the same size 
and cost provisions. It is not meant to address intramarket or 
intermarket competition.
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    \19\ 15 U.S.C. 78f(b)(8).
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    The proposed change would enhance competition in the market for 
circuits transmitting data into and out of colocation at the MDC by 
adding VCCs, in addition to the 16 Telecoms that also sell circuits to 
Users and the FIDS circuits. The MDC VCCs do 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.

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 Act \20\ and Rule 19b-4(f)(6) thereunder.\21\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\22\
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange 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.
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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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

     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-NYSENAT-2024-28 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-NYSENAT-2024-28. 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

[[Page 90798]]

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-NYSENAT-2024-28 and should 
be submitted on or before December 9, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26747 Filed 11-15-24; 8:45 am]
BILLING CODE 8011-01-P
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