December 16, 2024

Ms. Vanessa A. Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549-1090

RE: NYSE Arca, Inc., Notice of Filing of Proposed Rule Change to Adopt Temporary Rule 7.34-E(T) and Revise Rules 1.1 and 7.34-E to Lengthen Current Extended Trading Sessions (File No. SR-NYSEARCA-2024-89)

Dear Ms. Countryman:

The Securities Industry and Financial Markets Association (“SIFMA”)¹ respectfully submits this comment letter to the U.S. Securities and Exchange Commission (the “Commission”) in response to the rule filing by NYSE Arca, Inc. to extend the hours of trading on its NYSE Arca equities exchange to 22 hours per day, five days per week (the “Proposal”).² NYSE Arca’s Proposal will change the definitions of the terms “Early Trading Session” and “Late Trading Session” in its rulebook to facilitate the expansion of exchange trading hours from 16 hours per day (4:00 a.m. to 8:00 p.m. ET) to 22 hours per day (1:30 a.m. to 11:30 p.m. ET) five days per week, excluding holidays.

Executive Summary

• Consistent with our comments in connection with the 24X Exchange’s Form 1 application (see attached Appendix), we continue to believe there are significant outstanding questions and issues regarding current market structure and operational functions that must be addressed in a holistic manner prior to expanding exchange trading hours.
• The equity market data plans and central-clearing party (“CCP”) hours must be extended to accommodate real-time quote and trade collection and dissemination and real-time CCP trade guarantee for any exchange-executed trades.
• There should be a harmonized approach to the treatment of all trades that take place at the same time, whether on- or off-exchange. This harmonized treatment should include, but not be limited to, clearing, settlement, trade reporting, and quote and trade dissemination.

Discussion

Prior to filing the rule amendments with the Commission, Intercontinental Exchange, Inc. (NYSE Arca’s parent company) published a press release on October 25, 2024 announcing the planned expansion of the NYSE Arca equities exchange’s trading hours to 22/5.³ In that press release, NYSE Arca stated that it would “seek support for extended trading from the U.S. securities information processors.” In addition, the press release stated that “[t]rades taking place on NYSE Arca during these additional extended hours will continue to be cleared by the Depository Trust & Clearing Corporation, which recently announced plans to extend its hours of operation.”

The expansion of trading hours, both on- and off-exchange, has received increased attention over the past several months.⁴ SIFMA submitted two previous comment letters, which are attached as the Appendix to this comment letter, on 24X Exchange’s application to register as a national securities exchange open for trading 23 hours per day, five days per week, including a session from 8:00 p.m. to 4:00 a.m. ET.⁵ The Commission approved 24X Exchange’s application on November 27, 2024.⁶ In its comment letters on the 24X application, SIFMA raised numerous questions and concerns regarding whether the current market and operational infrastructures and regulatory framework are ready to support an expansion of exchange trading hours to include overnight and/or weekend and holiday trading.⁷ We continue to believe these questions and concerns should be addressed in a holistic manner prior to expanding exchange trading hours and respectfully agree with Commissioners Peirce and Crenshaw that the Commission should hold roundtable(s) or an open comment file on these issues.⁸ The Commission also could issue a concept release to garner public input regarding the various issues that need to be carefully considered with the expansion to overnight on-exchange trading. We note that the Proposal lacks significant details on the issues we have raised regarding expanded trading hours that would need to be addressed in a comprehensive way before any exchange is allowed to expand its current trading hours.⁹

For example, two such core exchange trade support functions are the trade guarantee provided by the National Securities Clearing Corporation (“NSCC”) subsidiary of the Depository Trust and Clearing Corporation (“DTCC”) for exchange-executed trades and the transparency provided by securities information processors (“SIPs”) that publicly disseminate exchange quote and trade information. Currently, both functions are performed in real-time for any trade executed on an exchange during regular and extended trading hours (currently 4:00 a.m. to 8:00 p.m. ET). If exchange hours expand as NYSE Arca is proposing, this expansion should not occur unless and until NSCC and the SIPs also are open during these expanded hours. If NSCC is not open and therefore unable to mutualize settlement and clearing risk, it would present unacceptable investor protection risk, especially in light of NYSE Arca’s exchange rulebook that limits the exchange’s liability. Furthermore, an exchange operating at times when real-time quotation and trade dissemination is unavailable would be antithetical to the requirements of transparency in a national market system.¹⁰

Moreover, we believe that there should be equal treatment of on-exchange and off-exchange trading during any expanded trading hours. Currently, we understand that NSCC believes its trade guarantee exists for exchange-executed trades submitted from 1:30 a.m. ET to 11:30 p.m. ET, whereas its trade guarantee for off-exchange trades only exists from 1:30 a.m. ET to 8:00 p.m. ET. As discussed in our letters regarding the 24X Exchange application, NSCC’s real-time trade guarantee is crucial to mitigating the significant clearance and settlement risks introduced by overnight trading without the participation of a central clearing party. DTCC (and NSCC) also should update its rules to define how clearing participants and exchanges trading overnight need to operate and align to margin and risk processes so that overnight trading and clearing is the same across all exchanges operating during these hours and there are not separate approaches across venues.

This uniformity of treatment also should extend to equity trade reporting for both on- and off-exchange trades regardless of the time of execution. For example, if the SIPs are expanded to accommodate public dissemination of exchange-executed trades in real-time during overnight hours, then equity trade reporting facilities (“TRFs”) also should be expanded so that public dissemination of off-exchange trades overnight are not delayed relative to on-exchange trades.

The expansion of trading hours also raises questions about when the trade date starts and ends. Before expanding exchange trading hours, the Commission should work with interested parties to determine if there should be a consistent standard for what constitutes a “trade date” across venues. This seemingly innocuous definition has significant downstream impacts on various market events and functions, such as regulatory compliance, trade reporting, processing of corporate actions, and tax implications. Critically, the definition of trade date also impacts the settlement timeline—if trades executed on a Monday night are considered to have a Tuesday
trade date, they would not settle until Wednesday, or T+2. This would not appear to be consistent with the Commission’s mandate to shorten the settlement cycle to T+1, which market participants have expended significant resources to adopt.

SIFMA also believes that NYSE Arca should provide more detail around the processes and costs associated with clearing, settlement, and margin that market participants should expect from an expansion to overnight exchange trading. For example, NYSE Arca should have a separate member clearing letter of consent to participate in the overnight session to help clearing firms address regulatory concerns specific to give-in risk and their ability to grant access to approved clients. Similarly, NYSE Arca should address how NSCC will assess funding requirements for overnight trading, including whether Supplemental Liquidity Deposits (SLD) processes will change or whether an SLD call issued at 1:30 a.m. ET would need to be satisfied in one hour.

SIFMA looks forward to reviewing future rule filings for more details about NYSE Arca’s plan to expand its hours of operation to 22×5, which we would expect to include significantly more information than the instant Proposal.((89 Fed. Reg. at 90143 (“The current version of Rule 7.34–E would remain operative until the Exchange announces by Trader Update a transition to the new proposed Extended Trading Hours, which may depend on the effectiveness of additional, related rule filings as well as market infrastructure changes.”).))

* * *

SIFMA appreciates the opportunity to submit this letter to the Commission regarding the Proposal. We also look forward to a continued dialogue with NYSE Arca regarding its proposed expansion of trading hours. If you have any questions or need any additional information, please contact Ellen Greene at (212) 313-1287.

Sincerely,

Ellen Greene
Managing Director
Equities & Options Market Structure

Encl.

1. SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (“GFMA”). [↩]
2. Notice of Filing of Proposed Rule Change to Adopt Temporary Rule 7.34-E(T) and Revise Rules 1.1 and 7.34-E to Lengthen Current Extended Trading Sessions, Release No. 34-101559, File No. SR-NYSEARCA-2024-89 (Nov. 7, 2024), 89 Fed. Reg. 90143 (Nov. 14, 2024). [↩]
3. The New York Stock Exchange Plans to Extend Weekday Trading on its NYSE Arca Equities Exchange to 22 Hours a Day, (Oct. 25, 2024), available at https://ir.theice.com/press/news-details/2024/The-New-York-Stock-Exchange-Plans-to-Extend-Weekday-Trading-on-its-NYSE-Arca-Equities-Exchange-to-22-Hours-a-Day/default.aspx. [↩]
4. See, e.g., Basar, Shanny, Is 24/7 Trading Inevitable?, MarketsMedia (Oct. 17, 2024), available at https://www.marketsmedia.com/is-24-7-trading-inevitable/. [↩]
5. See Letters regarding 24X Exchange Application (SEC File No. 10-242) from Ellen Greene, Managing Director, Equities & Options Market Structure, SIFMA to Vannessa Countryman, Secretary, U.S. Securities and Exchange Commission dated June 27, 2024 (available at https://www.sec.gov/comments/10-242/10242-485831-1388714.pdf) and Oct. 29, 2024 (available at https://www.sec.gov/comments/10-242/10242-535475-1535542.pdf). [↩]
6. See 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, Release No. 34-101777, File No. 10-242, available at https://www.sec.gov/files/rules/other/2024/34-101777.pdf. [↩]
7. See, e.g., Appendix A to SIFMA’s Oct. 29, 2024 comment letter, supra n. 5. [↩]
8. See Joint Statement of Commissioners Hester M. Peirce and Carolina A. Crenshaw, Statement on the Commission’s Approval of the 24X National Exchange Application for Registration as a National Securities Exchange (Nov. 26, 2024), available at https://www.sec.gov/newsroom/speeches-statements/peirce-crenshaw-statement-24x-112624 (recognizing the questions and concerns raised by commenters on the 24X application and stating their “hope that the Commission will consider whether a roundtable or an open comment file or both would be helpful in addressing these questions.”). [↩]
9. SIFMA held a preliminary discussion with NYSE regarding the planned expansion of NYSE Arca hours. [↩]
10. If exchange-executed trades are pending DTCC processing and subject to bilateral counterparty risk during that period, then exchanges should have higher liability limits to address this new exposure. [↩]