[Federal Register Volume 85, Number 82 (Tuesday, April 28, 2020)]
[Notices]
[Pages 23583-23587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08936]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88725; File No. SR-NYSE-2020-37]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Add Commentary .01 to Rule 7.35
April 22, 2020.
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 April 21, 2020, New York Stock Exchange LLC (``NYSE'' or
``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 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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[[Page 23584]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add Commentary .01 to Rule 7.35 to provide
that, for a temporary period that begins on April 21, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or after
the Exchange closes on May 15, 2020, for an IPO Auction, Rule
7.35(c)(3) will not be in effect, and the Exchange will disseminate
Auction Imbalance Information if a security is an IPO and has not had
its IPO Auction. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add Commentary .01 to Rule 7.35 to provide
that, for a temporary period that begins on April 21, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or after
the Exchange closes on May 15, 2020, for an IPO Auction, Rule
7.35(c)(3) will not be in effect, and the Exchange will disseminate
Auction Imbalance Information if a security is an IPO and has not had
its IPO Auction.
Background
Since March 9, 2020, markets worldwide have been experiencing
unprecedented market-wide declines and volatility because of the
ongoing spread of COVID-19. Beginning on March 16, 2020, to slow the
spread of COVID-19 through social-distancing measures, significant
limitations were placed on large gatherings throughout the country.
On March 18, 2020, the CEO of the Exchange made a determination
under Rule 7.1(c)(3) that, beginning March 23, 2020, the Trading Floor
facilities located at 11 Wall Street in New York City would close and
the Exchange would move, on a temporary basis, to fully electronic
trading.\4\ Pursuant to Rule 7.1(e), the CEO notified the Board of
Directors of the Exchange of this determination.
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\4\ The Exchange's current rules establish how the Exchange will
function fully-electronically. The CEO also closed the NYSE American
Options Trading Floor, which is located at the same 11 Wall Street
facilities, and the NYSE Arca Options Trading Floor, which is
located in San Francisco, CA. See Press Release, dated March 18,
2020, available here: https://ir.theice.com/press/press-releases/all-categories/2020/03-18-2020-204202110.
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On March 26, 2020, the Exchange amended Rule 7.35A to add
Commentary .02,\5\ which provides:
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\5\ See Securities Exchange Act Release No. 88488 (March 26,
2020) (SR-NYSE-2020-23), 85 FR 18286 (April 1, 2020) (Notice of
filing and immediate effectiveness of proposed rule change) (``Rule
7.35A Filing'').
For a temporary period that begins on March 26, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange will permit
a DMM limited entry to the Trading Floor to effect an IPO Auction
manually. For such an IPO Auction, the Exchange will disseminate the
following Auction Imbalance Information provided by the DMM via
Trader Update: The Imbalance Reference Price; the Paired Quantity;
the Unpaired Quantity; and the Side of the Unpaired Quantity. The
Exchange will publish such Trader Update(s) promptly after each
publication by the DMM of a pre-opening indication for such
security. The Trader Update will also include the pre-opening
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indication range.
As described in the Rule 7.35A Filing, the Exchange added this
Commentary because, while the Trading Floor is temporarily closed,
Designated Market Makers (``DMMs'') cannot engage in any manual
actions, such as facilitating an Auction manually or publishing pre-
opening indications before a Core Open or Trading Halt Auction.
Commentary .02 to Rule 7.35A permits entry to the Trading Floor to a
single employee from the DMM member organization assigned to such
security so that this DMM can access the Floor-based systems used to
effect an Auction manually, and specifies the information that would be
included in a Trader Update in advance of such IPO Auction.
On March 27, 2020, the Exchange effected an IPO Auction pursuant to
Commentary .02 to Rule 7.35A.
On April 17, 2020, the Exchange amended Rule 7.35A to add
Commentary .04,\6\ which provides:
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\6\ See Securities Exchange Act Release No. 88705 (April 21,
2020) (SR-NYSE-2020-35) (Notice of filing and immediate
effectiveness of proposed rule change).
For a temporary period that begins on April 17, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange will provide
a DMM remote access to Floor-based systems for the sole purpose of
effecting a manual (1) IPO Auction, or (2) Core Open Auction in
connection with a listed company's post-IPO public offering. For
such an IPO Auction, the Exchange will disseminate the following
Auction Imbalance Information provided by the DMM via Trader Update:
The Imbalance Reference Price; the Paired Quantity; the Unpaired
Quantity; and the Side of the Unpaired Quantity. The Exchange will
publish such Trader Update(s) promptly after each publication by the
DMM of a pre-opening indication for such security. The Trader Update
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will also include the pre-opening indication range.
With these amendments to Rule 7.35A, during the temporary period
while the Trading Floor is closed, a DMM can effect a manual IPO
Auction either on the Trading Floor or remotely.
Proposed Rule Change
Rule 7.35(c)(3) provides that the Exchange will not disseminate
Auction Imbalance Information if a security is an IPO or Direct Listing
and has not had its IPO Auction or Direct Listing Auction. The Exchange
proposes to add Commentary .01 to Rule 7.35 to provide that, for a
temporary period that begins on April 21, 2020 and ends on the earlier
of the reopening of the Trading Floor facilities or after the Exchange
closes on May 15, 2020, for an IPO Auction, Rule 7.35(c)(3) will not be
in effect, and the Exchange will disseminate Auction Imbalance
Information if a security is an IPO and has not had its IPO Auction.
As noted above, during the temporary period while the Trading Floor
is closed, pursuant to either Commentary .02 or Commentary .04 to Rule
7.35A, DMMs will be able to effect IPO Auctions manually, either on the
Trading Floor or remotely. However, in either case, Floor brokers will
not be present and therefore would not be available to disseminate
Floor-based information about the IPO Auction to their customers.
Accordingly, for this temporary period while the Trading Floor is
closed and there are no Floor brokers, the Exchange believes it would
be appropriate to temporarily suspend Rule 7.35(c)(3) relating to IPO
Auctions.
The Auction Imbalance Information that the Exchange proposes to
disseminate for an IPO Auction would be the same information that is
disseminated in advance of a Core Open Auction, as set forth in Rule
7.35A(e),
[[Page 23585]]
except for how the Imbalance Reference Price would be determined. Rule
7.35A(e)(1) provides that the Exchange begins disseminating Auction
Imbalance Information for a Core Open Auction at 8:00 a.m., and would
do the same for an IPO Auction. In addition, Rule 7.35A(e)(2) specifies
the content of the Auction Imbalance Information that is disseminated
in advance of a Core Open Auction, which would be the same content for
an IPO Auction.\7\ Finally, Rule 7.35A(e)(3) specifies the Imbalance
Reference Price, which for a Core Open Auction is the Consolidated Last
Sale Price. The Exchange proposes that the Imbalance Reference Price
for an IPO Auction would be the security's offering price, and that
such Imbalance Reference Price would be updated as provided for in Rule
7.35A(e)(3)(A)--(C).\8\
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\7\ For Core Open Auctions, the Exchange disseminates Total
Imbalance, Side of Total Imbalance, Paired Quantity, and Continuous
Book Clearing Price, as these terms are defined in Rule 7.35(a)(4).
\8\ As provided for in Rule 7.35A(e)(3), the Imbalance Reference
Price changes if a pre-opening indication has been published for
such Auction.
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To effect this change, the Exchange proposes to add Commentary .01
to Rule 7.35, which would provide:
For a temporary period that begins on April 21, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, for an IPO Auction,
paragraph (c)(3) of this Rule will not be in effect, and the
Exchange will disseminate Auction Imbalance Information if a
security is an IPO and has not had its IPO Auction. Such Auction
Imbalance Information will be disseminated in the same manner that
Auction Imbalance Information is disseminated for a Core Open
Auction, as set forth in Rule 7.35A(e)(1)--(3), except that
references to the term ``Consolidated Last Sale Price'' in Rule
7.35A(e)(3) and subparagraphs (A)--(C) of that Rule will be replaced
with the term ``the security's offering price.''
Disseminating such Auction Imbalance Information via the
proprietary data feeds obviates the need to publish the Trader Updates
described in Commentary .02 and Commentary .04 to Rule 7.35A, as
described above.\9\ Under these specific circumstances, when Floor
brokers are absent and unavailable to relay Floor-based information
about an IPO Auction to their customers, Auction Imbalance Information
would provide more granular information in advance of an IPO Auction as
compared to the Trader Updates. Specifically, as noted above, the
Auction Imbalance Information disseminated via the proprietary data
feeds would begin being published at 8:00 a.m. ET, would be published
every second, and would include Total Imbalance, Side of Total
Imbalance, Paired Quantity, and Continuous Book Clearing Price
information. By contrast, a Trader Update as provided for in
Commentaries .02 or .04 to Rule 7.35A would be disseminated on a more
limited basis, and only if the DMM were to publish a pre-opening
indication. Accordingly, the Exchange proposes to amend those
Commentaries to delete the following text:
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\9\ For example, as provided for in Rule 7.35A(d), a pre-opening
indication is published via both the securities information
processor and proprietary data feeds. Accordingly, pre-opening
indications for an IPO Auction would be included in the Auction
Imbalance Information that would be disseminated via the proprietary
data feeds pursuant to this proposed rule change.
For such an IPO Auction, the Exchange will disseminate the
following Auction Imbalance Information provided by the DMM via
Trader Update: The Imbalance Reference Price; the Paired Quantity;
the Unpaired Quantity; and the Side of the Unpaired Quantity. The
Exchange will publish such Trader Update(s) promptly after each
publication by the DMM of a pre-opening indication for such
security. The Trader Update will also include the pre-opening
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indication range.
The Exchange has tested the ability to disseminate such Auction
Imbalance Information on the day of an IPO Auction. In addition,
because such Auction Imbalance is already disseminated on a daily basis
in connection with Core Open Auctions, the Exchange believes that
member organizations that subscribe to such proprietary data feeds
would be able to receive, read, and respond to Auction Imbalance
Information for an IPO Auction without needing to make any changes.
Accordingly, the Exchange would be able to implement the proposed rule
change immediately upon effectiveness of this filing.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\11\ in particular, 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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As a result of uncertainty related to the ongoing spread of COVID-
19, the U.S. equities markets are experiencing unprecedented market
volatility. In addition, social-distancing measures have been
implemented throughout the country, including in New York City, to
reduce the spread of COVID-19. Directly related to such social-
distancing measures, the CEO of the Exchange made a determination under
Rule 7.1(c)(3) that beginning March 23, 2020, the Trading Floor
facilities located at 11 Wall Street in New York City would close and
the Exchange would move, on a temporary basis, to fully electronic
trading.
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because, during the temporary period while the
Trading Floor is closed and Floor brokers are not present, it would
promote fair and orderly IPO Auctions for the Exchange to disseminate
Auction Imbalance Information on the same terms that such information
is disseminated for a Core Open Auction. Specifically, during the
period when the Trading Floor is temporarily closed, Floor brokers are
not available to disseminate Floor-based information about the IPO
Auction to their customers. Under these specific circumstances, the
Exchange believes that the Auction Imbalance Information would provide
more granular information in advance of an IPO Auction as compared to
the Trader Updates described in Commentaries .02 and .04 to Rule 7.35A.
As described above, the Auction Imbalance Information disseminated via
the proprietary data feeds would begin being published at 8:00 a.m. ET,
would be published every second, and would include Total Imbalance,
Side of Total Imbalance, Paired Quantity, and Continuous Book Clearing
Price information. By contrast, a Trader Update as provided for in
Commentaries .02 or .04 to Rule 7.35A would be disseminated on a more
limited basis, and only if the DMM were to publish a pre-opening
indication. The Exchange therefore believes that proposed rule change
would therefore promote transparency in advance of an IPO Auction while
the Trading Floor is closed.
The Exchange believes that, by clearly stating that this relief
will be in effect through the earlier of the reopening of the Trading
Floor facilities or the close of the Exchange on May 15, 2020, market
participants will have advance notice that the Exchange would
disseminate Auction Imbalance Information for an IPO Auction that may
[[Page 23586]]
be effected manually by the DMM during this period.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to ensure fair and orderly IPO Auctions by providing that the Exchange
would disseminate Auction Imbalance Information for such auctions via
its proprietary data feeds during a temporary period when the Exchange
Trading Floor has been closed in response to social-distancing measures
designed to reduce the spread of the COVID-19 virus.
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 \12\ and Rule 19b-4(f)(6) thereunder.\13\
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 for 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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately. During this temporary
period when the Exchange Trading Floor is closed, the Exchange would
disseminate Auction Imbalance Information for IPO Auctions via
proprietary data feeds. Because Floor brokers are not available to
disseminate Floor-based information about an IPO Auction to their
customers during this period, the Exchange believes that the Auction
Imbalance Information would provide more granular information in
advance of an IPO Auction as compared to the Trader Updates described
in Commentaries .02 and .04 to Rule 7.35A. The Exchange represents that
an IPO is scheduled to price on the Exchange on April 22, 2020, and
that the Exchange has tested the relevant technology and is able to
implement this proposed rule change immediately. The Commission
believes that the Auction Imbalance Information disseminated pursuant
to this proposed rule change could provide more detailed information
with greater frequency in advance of an IPO Auction as compared to the
current Trader Updates. Further, the Commission notes that the Exchange
has tested this technology, and that the proposal is a temporary
measure designed to respond to current, unprecedented market
conditions. For these reasons, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the 30-day operative delay and designates the proposal operative
upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2020-37 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-NYSE-2020-37. 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-NYSE-2020-37, and should be submitted on
or before May 19, 2020.
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\19\ 17 CFR 200.30-3(a)(12), (59).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08936 Filed 4-27-20; 8:45 am]
BILLING CODE 8011-01-P