[Federal Register Volume 85, Number 92 (Tuesday, May 12, 2020)]
[Notices]
[Pages 28115-28119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10068]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88829; File No. SR-NYSE-2020-41]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Add Commentary .02 to Rule 7.35B
May 6, 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 May 4, 2020, New York Stock Exchange LLC (``NYSE'' 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 add Commentary .02 to Rule 7.35B to
provide that, for a temporary period that begins on May 6, 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 would make
available specified Closing Auction Imbalance Information to member
organizations beginning one hour before the end of Core Trading Hours.
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 add Commentary .02 to Rule 7.35B to
provide that, for a temporary period that begins on May 6, 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 would make
available specified Closing Auction Imbalance Information to member
organizations beginning one hour before the end of Core Trading Hours.
Background
In its listed securities, the Exchange disseminates Auction
Imbalance Information \4\ for the Closing Auction, as provided for in
Rule 7.35B(e), beginning at the Closing Auction Imbalance Freeze Time,
which is 10 minutes before the scheduled end of Core Trading Hours.\5\
[[Page 28116]]
In addition to disseminating Auction Imbalance Information on its
proprietary data feeds, specified Auction Imbalance Information is also
made available to member organizations via the NYSE Pillar Trade Ops
Portal, which is a free web-based management tool for member
organizations to manage their interaction with the Exchange.\6\
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\4\ The term ``Auction Imbalance Information'' means the
information that is disseminated by the Exchange for an Auction (see
Rule 7.35(a)(4)) and, depending on the Auction, can include Total
Imbalance (Rule 7.35(a)(4)(A)(i)); Closing Imbalance (Rule
7.35(a)(4)(A)(ii); Paired Quantity, Unpaired Quantity, and Side of
Unpaired Quantity (Rule 7.35(a)(4)(B)); Continuous Book Clearing
Price (Rule 7.35(a)(4)(C)); and Closing Interest Only Clearing Price
(Rule 7.35(a)(4)(D)).
\5\ For the Closing Auction, the Exchange begins disseminating
the following Auction Imbalance Information at the Closing Auction
Imbalance Freeze Time: Total Imbalance, Side of Total Imbalance,
Paired Quantity, Unpaired Quantity, Side of Unpaired Quantity,
Continuous Book Clearing Price, Closing Interest Only Clearing
Price, and Regulatory Closing Imbalance. See Rules 7.35B(e)(1)(A)
and 7.35B(e)(2). See also Rule 7.35(a)(7) (specifying the Closing
Auction Imbalance Freeze Time).
\6\ Through the NYSE Pillar Trade Ops Portal, NYSE member
organizations can view their executed trade details, review their
Pillar order entry and drop copy sessions, and view their firm's
volume by liquidity tag. To gain access, a member organization's
compliance department must submit a form to establish which
individuals at that firm are authorized to become users of the NYSE
Pillar Trade Ops Portal. Information about the NYSE Pillar Trade Ops
Portal is available here: https://www.nyse.com/pillar/trade-ops-portal.
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Auction Imbalance Information for the Closing Auction becomes
available on the NYSE Pillar Trade Ops Portal at the Closing Auction
Imbalance Freeze time, as provided for in Rule 7.35B(e)(1)(A), and
includes the following content: Total Imbalance, Side of Total
Imbalance, Paired Quantity, Continuous Book Clearing Price, and Closing
Interest Only Clearing Price. On the portal, such data is updated every
30 seconds, and once updated, overwrites the prior data available on
the portal. To access such Auction Imbalance Information, users of the
NYSE Pillar Trade Ops Portal must manually query the tool to view
Auction Imbalance Information.\7\
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\7\ See User Guide for the NYSE Trade Ops Portal, available
here: https://www.nyse.com/publicdocs/nyse/NYSE_Trade_Ops_Portal_User_Guide.pdf. The static information that is
displayed can be manually exported to an Excel table, but is not
otherwise not available for real-time distribution of the data.
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In addition, pursuant to Rule 7.35B(e)(1)(B), beginning two hours
before the end of Core Trading Hours (e.g., beginning at 2 p.m. Eastern
Time) up to the Closing Auction Imbalance Freeze Time (e.g., 3:50 p.m.
Eastern Time), the Exchange makes available Total Imbalance, Side of
Total Imbalance, Paired Quantity, Unpaired Quantity, Side of Unpaired
Quantity, and if published, Manual Closing Imbalance, to Floor brokers
for any security (i) in which a Floor broker has entered an order or
(ii) as specifically requested by a Floor broker. This Auction
Imbalance Information is provided in a manner that does not permit
electronic distribution. Specifically, this information is displayed on
the trading systems that Floor Brokers use on the Trading Floor.
Temporary Floor Closure Impacts Floor Brokers and Their Customers
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.\8\ Pursuant to Rule 7.1(e), the CEO notified the Board of
Directors of the Exchange of this determination.
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\8\ 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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Because the Trading Floor is temporarily closed, Floor brokers are
not present on the Trading Floor and do not have access to their Floor-
based systems for trading and cannot enter orders available to Floor
brokers, such as Closing D Orders. Unlike Market-on-Close (``MOC'') and
Limit-on-Close (``LOC'') Orders, Closing D Orders can be entered into
Exchange systems up to ten seconds before the end of Core Trading
Hours.\9\ By contrast, MOC and LOC Orders can be entered in the last
ten minutes of trading only to offset a published Regulatory Closing
Imbalance.\10\ Accordingly, while the Trading Floor is closed,
customers of Floor brokers seeking to participate in the Closing
Auction must arrange to have their closing-only interest entered before
3:50 p.m.
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\9\ See Rule 7.35B(f)(3).
\10\ See Rule 7.35B(f)(1).
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Notwithstanding the temporary closure of the Trading Floor, Floor
brokers continue to provide services to their institutional investor
customers. For such customers, Floor brokers continue to play an
important role for those transactions that require the expertise of a
professional trading agent, and a key component of that role as agent
for these sophisticated customers is to provide market ``color,''
including providing imbalance information leading into the close.
However, because Floor brokers do not have access to their Floor-based
systems, they no longer have access to the systems that display Auction
Imbalance Information, as provided for under Rule 7.35B(e)(1)(B). As
such, during this temporary period, Floor brokers are no longer able to
provide their customers with the same level of market color about the
Closing Auction as they would when the Trading Floor is open.
Proposed Rule Change
Both Floor brokers and their customers have requested that, during
the temporary period while the Trading Floor is closed, be provided
access to Auction Imbalance before 3:50 p.m. so that Floor brokers can
provide a similar level of service that they provide when the Trading
Floor is open. The Exchange has been advised that Floor brokers' lack
of access to imbalance information is particularly impactful because
Floor brokers cannot use Closing D Orders during this temporary period,
and Floor broker customers need to enter their closing-only interest
before 3:50 p.m. if they want to participate in the Closing Auction.
The Exchange has identified a temporary, interim technology
solution to provide Floor brokers with Auction Imbalance Information
before the Closing Auction Imbalance Freeze Time so that Floor brokers
can continue to provide the type of service to their customers that
they provided before the Trading Floor was temporarily closed.
Specifically, the Exchange proposes to temporarily change the NYSE
Pillar Trade Ops Portal to make the Closing Auction Imbalance
Information available on that portal beginning at 3:00 p.m., rather
than at the Closing Auction Imbalance Freeze Time at 3:50 p.m. Because
the NYSE Pillar Trade Ops Portal is available to all member
organizations, any User authorized to access the portal, including non-
Floor brokers, would have access to this Auction Imbalance Information
beginning at 3:00 p.m.
Because the Exchange would be leveraging different technology, the
Auction Imbalance Information would differ from what is available to
Floor brokers on the Trading Floor pursuant to Rule 7.35B(e)(1)(B). As
described above, the portal would include Total Imbalance, Side of
Total Imbalance, and Paired Quantity, which are provided under Rule
7.35B(e)(1)(B), and would also include Continuous Book Clearing Price
and Closing Interest Only Clearing Price, which are not provided under
Rule 7.35B(e)(1)(B). In addition, the portal does not support Unpaired
[[Page 28117]]
Quantity or Side of Unpaired Quantity, which are provided under Rule
7.35B(e)(1)(B).
As described above, the Exchange provides data pursuant to Rule
7.35B(e)(1)(B) in a manner that does not permit electronic
redistribution. Auction Imbalance Information made available before the
Closing Auction Imbalance Freeze Time would be similarly limited. To
view the data on the NYSE Pillar Trade Ops Portal, a User must manually
query the tool, and the data is updated only every 30 seconds. Once the
data is updated on a 30-second interval, the tool overwrites the last
set of data that was available for display. The tool permits export of
the data to an Excel file, but that export must be performed manually,
and it only exports the static information that is available to be
viewed at that given time. Accordingly, the NYSE Pillar Trade Ops
Portal does not permit real-time electronic redistribution of the data.
The purpose of this proposed rule change is to provide Floor brokers
with a tool to provide preliminary guidance to their customers of
whether to enter MOC or LOC Orders, and on which side of the market,
earlier in the trading session. It would not replace or supersede the
data that is distributed via the Exchange's proprietary data feeds
beginning at the Closing Auction Imbalance Freeze Time.
Finally, this Auction Imbalance Information would be available
beginning at 3:00 p.m., not 2:00 p.m. This proposed time period is
consistent with the period when Auction Imbalance Information is made
available on NYSE Arca, Inc. (``NYSE Arca'') \11\ and NYSE American LLC
(``NYSE American''), which both operate electronic auctions without a
Trading Floor.\12\ For example, NYSE American similarly restricts entry
of MOC and LOC Orders after 3:50 p.m.,\13\ and makes its Auction
Imbalance Information available beginning at 3:00 p.m. The Exchange
believes that providing such imbalance information beginning at 3:00
p.m. during this temporary period would provide sufficient time for
member organizations and their customers to enter MOC and LOC Orders
before the Closing Auction Imbalance Freeze Time.
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\11\ See NYSE Arca Rule 7.35-E(d)(1).
\12\ See NYSE American Rule 7.35E(d)(1).
\13\ See NYSE American Rule 7.35E(d)(2).
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To effect this change, the Exchange proposes to add Commentary .02
to Rule 7.35B, which would provide:
For a temporary period that begins on May 6, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, beginning one hour before
the end of Core Trading Hours up to the Closing Auction Imbalance
Freeze Time, the Exchange will make available Total Imbalance, Side
of Total Imbalance, Paired Quantity, Continuous Book Clearing Price,
and Closing Interest Only Clearing Price to member organizations.
This Auction Imbalance Information will be provided in a manner that
does not permit electronic real-time distribution and will be
updated every 30 seconds.
At the Closing Auction Imbalance Freeze Time, Auction Imbalance
Information for the Closing Auction would be made available as provided
for under Rule 7.35B(e)(1)(A). Accordingly, this proposed rule text
addresses only what would be different during the temporary period
while the Trading Floor is closed, i.e., that specified Auction
Imbalance Information would be available to member organizations for
the period 3:00 p.m. to 3:50 p.m. Eastern Time.
The Exchange has tested the technology change to begin
disseminating such Auction Imbalance Information via the NYSE Pillar
Trade Ops Portal at 3:00 p.m. Eastern Time. In addition, when the
Trading Floors were temporarily closed, numerous Floor brokers received
authorization to become Users of the NYSE Pillar Trade Ops Portal, and
therefore already have connectivity to that portal to access Auction
Imbalance Information. Accordingly, the Exchange would be able to
implement the proposed rule change immediately when the technology is
available, which is anticipated for May 6, 2020.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\14\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\15\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 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 do not have access to Auction
Imbalance Information as provided for in Rule 7.35B(e)(1)(B), providing
Auction Imbalance Information to member organizations via the NYSE
Pillar Trade Ops Portal beginning at 3:00 p.m. would allow Floor
brokers to provide their customers with similar levels of service with
respect to providing market color about the Closing Auction as they
would when the Trading Floor is open.
The proposed rule change is designed to be an interim, temporary
solution that would be in effect only during the temporary period when
the Trading Floor is closed. Because of the temporary nature of the
proposed relief, the Exchange believes that it would remove impediments
to and perfect the mechanism of a free and open market and a national
market system to leverage existing technology rather than attempt to
reproduce the data that is provided to Floor brokers pursuant to Rule
7.35B(e)(1)(B) on the exact same terms. By using existing technology,
the Exchange can provide this service to Floor brokers on an expedited
basis.
In addition, 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 during which the Trading Floor is closed, Closing D Orders are
not available, and therefore, unless a Regulatory Closing Imbalance has
been published, MOC and LOC Orders must be entered by the Closing
Auction Imbalance Freeze Time. The Exchange therefore believes that
during this period when Closing D Orders are not available, providing
all member organizations with access to the Auction Imbalance
Information at 3:00 p.m. would assist them in making their closing-
interest order entry decisions before 3:50 p.m.
The Exchange further believes that providing such information
beginning at 3:00 p.m. would remove impediments to and perfect the
mechanism of a free and open market and a national market
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system because, similar to how NYSE American functions, providing such
imbalance information beginning 50 minutes before the Closing Auction
Imbalance Freeze Time would provide sufficient time for member
organizations to make order entry decisions for the Closing Auction.
The Exchange also believes that it would remove impediments to and
perfect the mechanism of a free and open market and a national market
system to provide that the Auction Imbalance Information that would be
available on the NYSE Pillar Trade Ops Portal would not be provided in
a manner that permits electronic real-time distribution. This proposed
rule change is designed to provide Floor brokers with a tool to provide
guidance to their customers of whether to enter MOC or LOC Orders, and
on which side of the market. It would not replace or supersede the data
that is distributed via the Exchange's proprietary data feeds beginning
at the Closing Auction Imbalance Freeze Time.
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 via the NYSE Pillar Trade Ops
Tool beginning at 3:00 p.m. for only a temporary 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 provide Floor brokers with a tool to provide guidance to their
customers of whether to enter MOC or LOC Orders, and on which side of
the market, before the Closing Auction Imbalance Freeze Time. The
proposed rule change is designed to be in effect only 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 and, as a result, Floor brokers do not have access
to information as provided for in Rule 7.35B(e)(1)(B) and cannot enter
Closing D Orders.
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 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 \16\ and Rule 19b-4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ 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 Exchange believes
that waiver of the operative delay would be consistent with the
protection of investors and the public interest because the proposed
rule change is designed to be in effect only 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
and Floor brokers, as a result, do not have access to their Floor-based
systems for trading and the information as provided for in Rule
7.35B(e)(1)(B) and cannot enter Closing D Orders. In addition, when the
Trading Floors were temporarily closed, numerous Floor brokers received
authorization to become Users of the NYSE Pillar Trade Ops Portal, and
therefore already have connectivity to that portal to access Auction
Imbalance Information. Moreover, the Exchange represents that it has
tested, and will be able to implement, the proposed interim technology
change on May 6, 2020. For the foregoing reasons, the Commission
believes that waiver of the operative delay is consistent with the
protection of investors and the public interest and has determined to
waive the 30-day operative date so that the proposal may take effect
upon filing.\20\
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\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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-NYSE-2020-41 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-2020-41. 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
[[Page 28119]]
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-2020-41 and should be
submitted on or before June 2, 2020.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10068 Filed 5-11-20; 8:45 am]
BILLING CODE 8011-01-P