Document ID: SEC-2023-0291-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-03-14T04:00Z

[Federal Register Volume 88, Number 49 (Tuesday, March 14, 2023)]
[Notices]
[Pages 15822-15825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05123]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97065; File No. SR-NYSEARCA-2023-18]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Its 
Certificate of Incorporation

March 8, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on February 23, 2023, NYSE Arca, Inc. (``NYSE Arca'' 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 Exchange. 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 its certificate of incorporation to 
provide that the board of directors of its ultimate parent or that 
board's compensation committee may fix the compensation of the board of 
directors of the Exchange, and make certain clarifying, technical and 
conforming changes to the certificate of incorporation. The proposed 
rule change is available on the Exchange's website at www.nyse.com, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend the Amended and Restated Certificate 
of Incorporation of the Exchange (``Certificate'') to (a) provide that 
the board of directors of its ultimate parent, Intercontinental 
Exchange, Inc. (``ICE,'' and its board of directors, the ``ICE 
Board''), or the compensation committee of the ICE Board (the ``ICE 
Compensation Committee'') may fix the compensation of the board of 
directors of the Exchange (the ``Exchange Board''), and (b) make 
certain clarifying, technical and conforming changes to the 
Certificate.
    The changes described herein would become operative upon the 
Certificate becoming effective pursuant to its filing with the 
Secretary of State of the State of Delaware.
Proposed Amendment to Article 6
    Currently, the Exchange Board sets its own compensation. Through an 
amendment to Article 6 of the Certificate, the Exchange proposes to

[[Page 15823]]

have the ICE Board or the ICE Compensation Committee set director 
compensation instead.
    The Exchange is wholly owned by NYSE Group, which in turn is wholly 
owned by NYSE Holdings LLC, a wholly owned subsidiary of 
Intercontinental Exchange Holdings, Inc. Intercontinental Exchange 
Holdings, Inc. is wholly owned by ICE, a public company listed on the 
New York Stock Exchange LLC (``NYSE'').\4\
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    \4\ See Exchange Act Release No. 72157 (May 13, 2014), 79 FR 
28792 (May 19, 2014) (SR-NYSEArca-2014-52) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to Name 
Changes of Its Ultimate Parent, IntercontinentalExchange Group, 
Inc., and Its Indirect Parents, IntercontinentalExchange, Inc. and 
NYSE Euronext Holdings LLC).
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    To make the change, the Exchange proposes to amend Article 6 of the 
Certificate as follows (proposed additions italicized):

    6. Except as set forth in this Article 6 and Article 9 of this 
Amended and Restated Certificate of Incorporation, the Exchange 
shall be managed by or under the direction of the Board of Directors 
which shall exercise all powers conferred under the laws of the 
State of Delaware. The Board of Directors of Intercontinental 
Exchange, Inc. or the compensation committee thereof shall have the 
authority to fix the compensation of directors of the Exchange. The 
directors of the Exchange may be paid their expenses, if any, of 
attendance at each meeting of the Board of Directors of the Exchange 
and may be paid a fixed sum for attendance at each meeting of the 
Board of Directors of the Exchange or a stated salary as director 
(which amounts may be paid in cash or such other form as the Board 
of Directors of Intercontinental Exchange, Inc. or the compensation 
committee thereof may from time to time authorize). No such payment 
shall preclude any director from serving the Exchange in any other 
capacity and receiving compensation therefor.

    If the ICE Board fixed the compensation of the Exchange Board, the 
decision would be made by a body that was required to have at least a 
majority of its members be independent.\5\ The requirement is in 
accordance with NYSE listing requirements, which require that listed 
companies have a majority of independent directors.\6\
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    \5\ See Securities Exchange Act Release No. 70210 (August 15, 
2013), 78 FR 51758 (August 21, 2013) (SR-NYSE-2013-42; SR-NYSEMKT-
2013-50; SR-NYSEArca-2013-62) (Order Granting Approval of Proposed 
Rule Change Relating to a Corporate Transaction in which NYSE 
Euronext Will Become a Wholly-Owned Subsidiary of 
IntercontinentalExchange Group, Inc.). IntercontinentalExchange 
Group, Inc., subsequently changed its name to 
IntercontinentalExchange, Inc. See 79 FR 28792, supra note 4. The 
ICE Board is subject to the requirements of the Independence Policy 
of the Board of Directors of Intercontinental Exchange, Inc., 
available at https://s2.q4cdn.com/154085107/files/doc_downloads/governance_docs/ICE-Independence-Policy.pdf. The bylaws of ICE 
require that the members of the ICE Board take into consideration 
the effect that ICE's actions would have on the ability of the 
Exchange to carry out its responsibility under Exchange Act. See the 
Ninth Amended and Restated Bylaws of Intercontinental Exchange, Inc. 
(``ICE Bylaws''), Article III, Section 3.14. The ICE Bylaws are 
available at https://s2.q4cdn.com/154085107/files/doc_downloads/governance_docs/2022/ICE-Ninth-Amended-and-Restated-Bylaws.pdf.
    \6\ See NYSE Listed Company Manual Sections 303A.01 (Independent 
Directors) and 303A.02(a)(ii) (Independence Tests), and ICE Bylaws, 
Article III, Section 3.4.
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    If the ICE Compensation Committee fixed the Exchange Board 
compensation,\7\ compensation decisions would be made by a body that is 
made up of independent members. As a company listed on the NYSE, ICE is 
required to have a compensation committee that is composed entirely of 
independent directors that satisfy the additional independence 
requirements specific to compensation committee members.\8\
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    \7\ Pursuant to its Charter, the Compensation Committee of the 
ICE Board is charged with, among other things, reviewing and 
approving compensation for the members of the board of directors of 
any ICE subsidiary, which includes the Exchange. See Charter of the 
Compensation Committee of the Board of Directors of ICE, at https://s2.q4cdn.com/154085107/files/doc_downloads/governance_docs/2022/Intercontinental-Exchange-Inc.-Compensation-Committee-Charter-March-3-2022.pdf. See also NYSE Listed Company Manual Section 303A.05(b).
    \8\ See NYSE Listed Company Manual Section 303A.05(a) 
(Compensation Committee). See also NYSE Listed Company Manual 
Section 303A.02(a)(ii) and ICE annual report on Form 10-K for the 
fiscal year ended December 31, 2021, at 19, available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1571949/000157194922000006/ice-20211231.htm.
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    The proposed rule text is comprehensive. Rather than just setting 
forth what body fixes director compensation, it would provide that 
directors may be paid their expenses for attending board meetings and 
that they may receive compensation on a per-meeting basis or as a 
salary, clarify the form of compensation that may be granted, and note 
that the payment does not preclude a director from serving the Exchange 
in another capacity.
    The Exchange operates as a separate self-regulatory organization 
and has rules, membership rosters and listings distinct from the rules, 
membership rosters and, where applicable, listings of its affiliates 
the NYSE, NYSE American LLC, NYSE Chicago, Inc., and NYSE National, 
Inc. (collectively with the Exchange, the ``NYSE Group Exchanges''). At 
the same time, however, the Exchange believes it is important for each 
of the NYSE Group Exchanges to have a consistent approach to corporate 
governance in certain matters, to simplify complexity and create 
greater consistency among the NYSE Group Exchanges.\9\ To that end, 
each of the NYSE Group Exchanges is proposing a substantially similar 
change to its governing documents.\10\
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    \9\ See Exchange Act Release No. 84648 (November 26, 2018), 83 
FR 61692 (November 30, 2018) (SR-NYSEArca-2018-85).
    \10\ See SR-NYSE-2023-13; SR-NYSEAmer-2023-15, SR-NYSECHX-2023-
10, and SR-NYSENat-2023-08. Presently, three different entities fix 
the compensation of the boards of directors of the NYSE Group 
Exchanges: NYSE Group fixes the compensation of the directors of the 
NYSE, NYSE American LLC, and NYSE National, Inc.; NYSE Chicago 
Holdings, Inc. fixes the compensation of the directors of NYSE 
Chicago, Inc.; and the board of directors of NYSE Arca fixes its own 
compensation.
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    The proposed amendment is based on Article III, Section 3.13 
(Compensation of Directors) of the ICE Bylaws.\11\
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    \11\ See ICE Bylaws, Article III, Section 3.13.
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Additional Proposed Amendments
    The Exchange proposes to make the following non-substantive 
technical and conforming changes to the Certificate: \12\
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    \12\ See 83 FR 61692, supra note 9, at 61693-61694 (proposing to 
make technical and conforming changes to the Certificate of 
Incorporation of the Exchange).
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     Move the definition of ``Corporation'' from the second 
paragraph to the first paragraph.
     Throughout the Certificate, add ``Amended and Restated'' 
before ``Certificate of Incorporation'' or ``certificate of 
incorporation'' and capitalize the latter.
     Update the dates in Article 13 and the signature line and 
update the time in Article 13.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act,\13\ in general, and furthers the 
objectives of Section 6(b)(1) \14\ in particular, in that it enables 
the Exchange to be so organized as to have the capacity to be able to 
carry out the purposes of the Exchange Act and to comply, and to 
enforce compliance by its exchange members and persons associated with 
its exchange members, with the provisions of the Exchange Act, the 
rules and regulations thereunder, and the rules of the Exchange. The 
Exchange also believes that the proposed rule change is consistent with 
Section 6(b)(5) of the Exchange Act,\15\ in that 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

[[Page 15824]]

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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(1).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that, because at least a majority of the 
members of the ICE Board and all of the ICE Compensation Committee must 
be independent, there is no substantial likelihood of a potential 
conflict of interest. Indeed, the Exchange believes that the proposal 
lessens the potential for conflicts of interest by eliminating the 
current practice, where the Exchange Board sets its own compensation. 
The Exchange believes that it is more advisable to have compensation 
determinations made by a body that is not the same as the one that will 
receive the compensation. Further, the governing documents of ICE 
require that the members of the ICE Board take into consideration the 
effect that ICE's actions--including actions by the ICE Board or ICE 
Compensation Committee--would have on the ability of the Exchange ``to 
carry out [its] responsibilities under the Exchange Act'' and ``to 
engage in conduct that fosters and does not interfere with the ability 
of the Exchange[ ] . . . to remove impediments to and perfect the 
mechanisms of a free and open market in securities and a U.S. national 
securities market system; and . . . to protect investors and the public 
interest.'' \16\ For the foregoing reasons, the Exchange believes that 
the proposed change would allow the Exchange to be so organized as to 
have the capacity to carry out the purposes of the Exchange Act and 
comply with the provisions of the Exchange Act by its members and 
persons associated with members, and would contribute to the orderly 
operation of the Exchange and would promote the maintenance of a fair 
and orderly market, the protection of investors and the protection of 
the public interest.
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    \16\ See ICE Bylaws, Article III, Section 3.14(a). The NYSE Arca 
Rules set forth additional review and reporting requirements for 
listed ICE affiliate securities. See Rule 5.1-E(c) (Listing of an 
Affiliate or Entity that Operates and/or Owns a Trading System or 
Facility of the Exchange).
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    Indeed, the change would be consistent with prior practice, as when 
the New York Stock Exchange, Inc. combined with Archipelago Holdings, 
Inc. under NYSE Group in 2006, NYSE Group was publicly traded, required 
to have an independent board of directors, and subject to an 
independence policy.\17\ That changed when NYSE Group combined with 
Euronext N.V. After that combination, NYSE Euronext, the publicly 
traded parent company, had an independent board of directors subject to 
an independence policy, and the board of directors of NYSE Group, which 
became a subsidiary of NYSE Euronext, did not.\18\ When ICE acquired 
NYSE Euronext, the requirement to have a majority of independent 
directors moved to ICE.\19\
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    \17\ See Securities Exchange Act Release No. 53382 (February 27, 
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (Order Granting 
Approval of Proposed Rule Change and Amendment Nos. 1, 3, and 5 
Thereto and Notice of Filing and Order Granting Accelerated Approval 
to Amendment Nos. 6 and 8 Relating to the NYSE's Business 
Combination With Archipelago Holdings, Inc.). The NYSE Group was 
expected to fix the compensation of the Exchange Board through a 
compensation committee. Id. at 11256 (``It is expected that, upon 
completion of the Merger, the NYSE Group board of directors will 
have [a] . . . compensation committee'') and 11257 (``[T]he board of 
directors of New York Stock Exchange LLC is not expected to have its 
own committees and that any necessary functions with respect to . . 
. compensation . . . will be performed by the relevant committee[ ] 
of the NYSE Group board of directors''). Having ICE, a public 
company, or the ICE Compensation Committee, which is required to be 
made up of independent directors, fix Exchange Board compensation 
would be consistent with this practice. See also Securities Exchange 
Act Release No. 53383 (February 7, 2006), 71 FR 11271 (March 6, 
2006) (SR-PCX-2005-134) (Order Approving Proposed Rule Change and 
Amendment No. 1 and Notice of Filing and Order Granting Accelerated 
Approval to Amendment No. 2 Relating to the Certificate of 
Incorporation and Bylaws of Archipelago Holdings, Inc.).
    \18\ See Securities Exchange Act Release No. 55294 (February 14, 
2007), 72 FR 8046 (February 22, 2007) (SR-NYSEArca-2007-05) (Order 
Granting Accelerated Approval of Proposed Rule Change and Notice of 
Filing and Order Granting Accelerated Approval to Amendment No. 1 
Regarding a Proposed Combination Between NYSE Group, Inc. and 
Euronext N.V.). See also Exhibit 5E to SR-NYSEArca-2007-05, Section 
3.2 (deleting the independence requirements for the NYSE Group board 
of directors).
    \19\ See supra note 5.
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    Moreover, the Exchange believes that the proposal would promote 
greater consistency in the compensation philosophy and director 
compensation structure across affiliated exchanges, thereby promoting 
the maintenance of a fair and orderly markets, the protection of 
investors and the public interest. As noted above, the other NYSE Group 
Exchanges are filing similar proposed changes to their governing 
documents. By locating the authority to fix compensation in the hands 
of the ICE Board or the ICE Compensation Committee, the proposed change 
would permit compensation for each board of directors of an NYSE Group 
Exchange to be set centrally and with greater uniformity and 
consistency across affiliated exchanges. The Exchange believes that 
such conformity would streamline the NYSE Group Exchanges' corporate 
processes and create more equivalent compensation processes among them, 
to the benefit of both investors and the public interest. The proposal 
also reflects the fact that, no matter the size or role of the relevant 
NYSE Group Exchange, every NYSE Group Exchange board of directors must 
manage its business while considering the government of the exchange as 
an ``exchange'' within the meaning of the Exchange Act.\20\
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    \20\ See Bylaws of NYSE Arca, Article III, Section 3.01 
(Powers); Thirteenth Amended and Restated Operating Agreement of 
NYSE, Article II, Section 2.03(k) (Board); Twelfth Amended and 
Restated Operating Agreement of NYSE American, Inc., Article II, 
Section 2.03(k) (Board); Second Amended and Restated Bylaws of NYSE 
Chicago, Inc., Article II, Section 1 (Powers) and Article IX, Sec. 1 
(Management of the Corporation); and Seventh Amended and Restated 
By-laws of NYSE National, Inc., Article III, Section 3.1 (Powers) 
and Article X, Section 10.1 (Management of the Exchange).
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    The Exchange also believes that the comprehensive provision would 
remove impediments to and perfect the mechanism of a free and open 
market, as it would make the provision relating to director 
compensation comprehensive and transparent for market participants, 
making it so that they can more easily navigate and understand the 
governing documents. There is currently no provision regarding 
compensation other than the general statement that the Exchange Board 
has all the powers conferred under the laws of the State of Delaware. 
The proposed text would set forth detail regarding the compensation 
that directors may receive, such as whether expenses for attending 
board meetings may be paid, whether directors may receive compensation 
on a per-meeting basis or as a salary, and what form of compensation 
may be granted, and would clarify that payment does not preclude a 
director from serving the Exchange in another capacity. The Exchange 
believes that the level of detail would add transparency and clarity to 
the Exchange's governing documents and would not be inconsistent with 
the public interest and the protection of investors because investors 
will not be harmed and in fact would benefit from increased 
transparency and clarity, thereby reducing potential confusion.
    Finally, the proposed non-substantive technical and conforming 
changes would remove impediments to and perfect the mechanism of a free 
and open market by ensuring that persons subject to the Exchange's 
jurisdiction, regulators, and the investing public can more easily 
navigate and understand the governing documents. The proposed non-
substantive amendments also would not be inconsistent with the public 
interest and the protection of

[[Page 15825]]

investors because investors will not be harmed and in fact would 
benefit from increased transparency and clarity, thereby reducing 
potential confusion.

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 Exchange Act. The proposed rule 
change is not intended to address competitive issues but rather is 
concerned solely with the corporate governance of the Exchange.

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

    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 Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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.
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2023-18 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-2023-18. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEARCA-2023-18, and should be 
submitted on or before April 4, 2023.

    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. 2023-05123 Filed 3-13-23; 8:45 am]
BILLING CODE 8011-01-P