[Federal Register Volume 85, Number 118 (Thursday, June 18, 2020)]
[Notices]
[Pages 36911-36913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13119]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89059; File No. SR-NYSE-2020-50]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify Temporarily the Auction Collars for Exchange-Facilitated Core
Open Auctions Under Rule 7.35C
June 12, 2020.
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 June 11, 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 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 add Commentary .04 to Rule 7.35C to
provide that, for a temporary period that begins June 15, 2020, and
ends on the earlier of a full reopening of the Trading Floor facilities
to Designated Market Makers (``DMMs'') or after the Exchange closes on
June 30, 2020, the Auction Collar for the Core Open Auction will be a
price that is the greater of $1.00 or 10% away from the Auction
Reference Price for the Core Open 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 .04 to Rule 7.35C to
provide that, for a temporary period that begins June 15, 2020, and
ends on the earlier of a full reopening of the Trading Floor facilities
to DMMs or after the Exchange closes on June 30, 2020, the Auction
Collar for the Core Open Auction will be a price that is the greater of
$1.00 or 10% away from the Auction Reference Price for the Core Open
Auction.
Background
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\ On May 14, 2020, the CEO of the Exchange made a
determination under Rule 7.31(c) to reopen the Trading Floor on a
limited basis on May 26, 2020 to a subset of Floor brokers.\5\
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\4\ The Exchange's 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. Pursuant to Rule 7.1(e),
the CEO notified the Board of Directors of the Exchange of this
determination.
\5\ See Securities Exchange Act Release No. 88933 (May 22, 2020)
(SR-NYSE-2020-47) (Notice of filing and immediate effectiveness of
proposed rule change).
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Because the Trading Floor facilities are now temporarily closed to
DMMs, DMMs are not on the Trading Floor and therefore cannot manually
facilitate most types of Auctions.\6\ While the Trading Floor is
temporarily closed, DMMs electronically participate in continuous
trading and facilitate Auctions. As provided for under Rule 7.35C, any
Auctions that cannot be facilitated electronically by the DMM will be
facilitated by the Exchange.
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\6\ During this temporary closure of the Trading Floor, a DMM
may manually facilitate either on the Trading Floor or remotely an
IPO Auction, a Core Open Auction for a post-IPO public offering, or
a Trading Halt Auction following a regulatory halt. See Commentaries
.02, .03, .04, and .05 to Rule 7.35A.
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Rule 7.35C sets forth the procedures for Exchange-facilitated
Auctions.
[[Page 36912]]
Currently, the Exchange will facilitate an Auction only if a DMM cannot
facilitate an Auction for one or more securities. The Exchange
determines an Auction Price based on the Indicative Match Price for a
security, which is bound by Auction Collars.\7\ Currently, the Auction
Collars for the Core Open Auction are at a price that is the greater of
$0.15 or 10% away from the Auction Reference Price.\8\
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\7\ See Rule 7.35C(b)(2).
\8\ See Rule 7.35C(b)(3)(A)(i). Rule 7.35C(b)(1) provides that
the Auction Reference Price for a Core Open Auction is the same as
the Imbalance Reference Price determined under Rule 7.35A(e)(3).
Pursuant to Rule 7.35A(e)(3), the Imbalance Reference Price for a
Core Open Auction is the Consolidated Last Sale Price, unless a pre-
opening indication has been published. Pursuant to Rule
7.35(a)(11)(A), the term ``Consolidated Last Sale Price'' means the
most recent consolidated last-sale eligible trade in a security
during Core Trading Hours on that trading day, and if none, the
Official Closing Price from the prior trading day for that security.
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During the period while the Trading Floor has been temporarily
closed, the Exchange has facilitated 2.35% of the Core Open Auctions,
with DMMs electronically facilitating the balance of more than 97% of
Core Open Auctions. Approximately 30% of the Exchange-facilitated Core
Open Auctions have had an Indicative Match Price that was subject to an
Auction Collar, and approximately 50% of these collared Exchange-
facilitated Core Open Auctions were in securities trading at prices
under $10.00. If Auction Collars had not been applied to these
securities priced under $10.00, they would have opened at a price
between $0.15 and $1.00 away from the Auction Reference Price.
Proposed Rule Change
The Exchange proposes to add Commentary .04 to Rule 7.35C to
provide that, for a temporary period that begins June 15, 2020, and
ends on the earlier of a full reopening of the Trading Floor facilities
to DMMs or after the Exchange closes on June 30, 2020, the Auction
Collar for the Core Open Auction will be a price that is the greater of
$1.00 or 10% away from the Auction Reference Price for the Core Open
Auction.
The Exchange believes that this proposed rule change would reduce
the number of Exchange-facilitated Core Open Auctions subject to
Auction Collars during the temporary Trading Floor closure, and
therefore would reduce the potential number of securities that would
open at a price that may not represent the current value of the
security due to unfilled marketable auction interest, while still
preserving investor protections by preventing significantly dislocated
openings.
The Exchange proposes to keep the 10% price parameter, but increase
the size of the static price change from $0.15 to $1.00. This proposed
rule change would therefore modify the price parameters for determining
Auction Collars only for securities priced under $10.00.\9\ As noted
above, approximately 50% of the Exchange-facilitated Core Open Auctions
that have been subject to Auction Collars have been in securities
priced under $10.00. Therefore, the Exchange believes that this
proposed wider Auction Collar would significantly reduce the number of
securities subject to a collared Exchange-facilitated Core Open
Auction. More specifically, with this proposed rule change, securities
with an Auction Reference Price under $10.00 would be more likely to
open at a price that is consistent with the buy and sell interest in
the security at the opening.
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\9\ For example, currently, a security with an Auction Reference
Price of $9.00 would have Auction Collars of $0.90, and a security
with an Auction Reference Price of $2.00 would have Auction Collars
of $0.20. With this proposed change, both securities would have an
Auction Collar of $1.00.
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There are technology changes associated with this proposed rule
change that the Exchange anticipates will be implemented on June 11,
2020.
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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To reduce the spread of COVID-19, 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. On May 14, 2020, the CEO made a determination under
Rule 7.1(c)(3) that, beginning May 26, 2020, the Trading Floor would be
partially reopened to allow a subset of Floor brokers to return to the
Trading Floor. However, the Trading Floor has not yet been reopened in
full to DMMs.
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 it would reduce the number of
securities that would be subject to a collared Exchange-facilitated
Core Open Auction. As noted above, the Exchange has facilitated only
2.35% of the Core Open Auctions during the temporary Trading Floor
closure, and only 30% of those Exchange-facilitated Auctions have been
subject to an Auction Collar. The proposed rule change would change how
the Auction Collars are determined for securities with an Auction
Reference Price under $10.00. Because approximately 50% of the collared
Exchange-facilitated Auctions to date were priced under $10.00, the
Exchange believes that this proposed rule change would reduce the
number of Exchange-facilitated Core Open Auctions subject to Auction
Collars, and therefore would reduce the potential number of securities
that would open at a price that may not represent the current value of
the security due to unfilled marketable auction interest, while still
preserving investor protections by preventing significantly dislocated
openings. This proposed rule change would therefore promote the fair
and orderly operation of Exchange-facilitated Auctions by allowing such
securities to open at a price that is consistent with the buy and sell
interest in the security, even if such price is more than $0.15 away
from the Auction Reference Price, which would also allow more buy and
sell interest to participate in such Auction.
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 provide for wider Auction Collars for Exchange-facilitated Core Open
Auctions in securities priced under $10.00 during a temporary period
when the Trading Floor has been closed in response to social-distancing
measures designed to reduce the spread of the COVID-19.
[[Page 36913]]
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 proposal
may become operative immediately upon filing. The proposed rule change
would provide for wider Auction Collars for Exchange-facilitated Core
Open Auctions in securities priced under $10.00 during a temporary
period, when the Trading Floor has been closed in response to social-
distancing measures designed to reduce the spread of the COVID-19. The
Exchange has represented that approximately 50% of the collared
Exchange-facilitated Auctions are in securities priced under $10.00.
The Exchange believes that the proposed rule change would promote fair
and orderly Core Open Auctions by allowing more buy and sell interest
to participate at prices consistent with such buy and sell interest.
The Exchange has also represented that it will be able to implement
these changes on June 15, 2020. The Commission notes that the proposed
wider collars would only apply to Exchange-facilitated Core Open
Auctions.\18\ Furthermore, the proposed rule change would modify the
price parameters for determining Auction Collars only for securities
priced under $10.00. The Commission also notes that the proposal is a
temporary measure designed to respond to current, unprecedented market
conditions, and would end on the earlier of a full reopening of the
Trading Floor facilities to DMMs or after the Exchange closes on June
30, 2020. 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.\19\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ As the Exchange notes above, during the period while the
Trading Floor has been temporarily closed, it has facilitated 2.35%
of the Core Open Auctions, with DMMs electronically facilitating the
balance of more than 97% of Core Open Auctions.
\19\ 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-2020-50 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-2020-50. 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-2020-50, and should be submitted on
or before July 9, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-13119 Filed 6-17-20; 8:45 am]
BILLING CODE 8011-01-P