[Federal Register Volume 85, Number 68 (Wednesday, April 8, 2020)]
[Notices]
[Pages 19782-19785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07335]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88546; File No. SR-NYSE-2020-28]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Add Commentary .03 to Rule 7.35A To Provide That, for a Temporary
Period, the Exchange Would Permit a DMM Limited Entry To the Trading
Floor To Effect Manually a Core Open Auction in Connection With a
Listed Company's Post-IPO Public Offering
April 2, 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 2, 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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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add Commentary .03 to Rule 7.35A to
provide that, for a temporary period that begins April 2, 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 permit a
DMM limited entry to the Trading Floor to effect manually a Core Open
Auction in connection with a listed company's post-IPO public offering.
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 .03 to Rule 7.35A to
provide that, for a temporary period that begins April 2, 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 permit a
DMM limited entry to the Trading Floor to effect manually a Core Open
Auction in connection with a listed company's post-IPO public offering.
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.
[[Page 19783]]
Proposed Rule Change
The Exchange proposes to add Commentary .03 to Rule 7.35A to permit
a DMM limited entry to the Trading Floor to effect manually a Core Open
Auction in connection with a listed company's post-IPO public offering,
for a temporary period that begins April 2, 2020, and ends on the
earlier of the reopening of the Trading Floor facilities or after the
Exchange closes on May 15, 2020.
As proposed, during this temporary period, the Exchange would
permit a DMM limited entry to the Trading Floor to effect manually a
Core Open Auction in connection with a listed company's post-IPO public
offering. Such Core Open Auction would be effected in a manner similar
to how an IPO Auction would be conducted under Commentary .02 to Rule
7.35A: A Floor Governor would be present on the Trading Floor to
approve the publication of pre-opening indications \6\ and Exchange
staff would be in communication with the lead underwriter and would
convey to the DMM information that the underwriter would normally
convey to the DMM via a Floor broker, such as when the underwriter has
entered all interest for such auction.
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\6\ See Rule 7.35A(d)(4)(A) (``Publication of a pre-opening
indication requires the supervision and approval of a Floor
Governor.'') The Exchange will arrange for a qualified ICE employee
that has been designated as a Floor Governor to perform this
function. See Rule 46(b)(v).
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Unlike an IPO Auction, this type of Core Open Auction is eligible
to be effected electronically by a DMM. In addition, the Exchange
publishes Auction Imbalance Information in advance of a Core Open
Auction for a post-IPO public offering. However, similar to IPO
Auctions, when the Trading Floor is open, DMMs generally facilitate a
post-IPO public offering manually so that information about the pricing
of an Auction can be communicated from an underwriter to the DMM via a
Floor broker. This information is helpful for the DMM to determine when
to facilitate such Core Open Auction and at what price. By contrast, if
a DMM were to facilitate such Core Open Auctions electronically, the
DMM would not be able to take this information into account when
pricing the Auction, and the DMM would not have any flexibility with
respect to the timing of such Core Open Auctions. Accordingly, for
reasons similar to those set forth in the Rule 7.35A Filing regarding
providing limited access to the Trading Floor for IPO Auctions to be
effected manually, the Exchange believes it would promote fair and
orderly markets to provide a DMM limited entry to the Trading Floor to
effect manually a Core Open Auction in connection with a listed
company's post-IPO public offering for the temporary period during
which the Trading Floor is closed.
To effect these changes, the Exchange proposes to add Commentary
.03 to Rule 7.35A, which would provide as follows:
For a temporary period that begins on April 2, 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 manually a Core
Open Auction in connection with a listed company's post-IPO public
offering.
On April 1, 2020, the CEO of the Exchange determined pursuant to
Rule 7.1(c) that, for the period while the Trading Floor is temporarily
closed as a precautionary measure to prevent the spread of COVID-19,
the Trading Floor will be partially reopened on trading days when a
Core Open Auction is scheduled in connection with a listed company's
post-IPO public offering, to allow a DMM on the Trading Floor for the
limited purpose of effecting such Core Open Auctions manually. During
this temporary reopening, the Trading Floor will not be open to Floor
brokers or for the DMM to perform any functions other than effecting
the Core Open Auction manually. Pursuant to Rule 7.1(e), the CEO
notified the Board of Directors of the Exchange of this determination.
The Exchange would be able to implement the proposed rule change
immediately upon effectiveness of this proposed rule change.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\7\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 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 it would promote fair and orderly Core
Open Auctions in connection with a listed company's post-IPO public
offering. The Exchange believes that it would promote fair and orderly
markets to provide the DMM with mechanisms to facilitate such Core Open
Auctions manually because it would provide flexibility for the DMM to
consider information from the underwriter when determining when to
conduct the Core Open Auction and at what price.
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 a Core Open Auction in
connection with a post-IPO public offering may be effected manually by
the DMM during this period, and therefore may not be conducted at 9:30
a.m.
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 Core Open Auctions in connection with a
post-IPO public offering by providing a DMM with limited entry to the
Trading Floor to effect such Core Open Auction manually 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.
[[Page 19784]]
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 \9\ and Rule 19b-4(f)(6) thereunder.\10\
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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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
Commission has waived that requirement for this proposed rule
change.
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A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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.
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
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During the temporary period when the Exchange's Trading Floor has
been closed in response to social-distancing measures designed to
reduce the spread of the COVID-19 virus time, the Exchange has proposed
to provide a DMM with limited entry to the Trading Floor to effect
manually a Core Open Auction in connection with a listed company's
post-IPO public offering. The Exchange contends that this proposed rule
change would promote fair and orderly markets because it would provide
flexibility for the DMM to consider information from the underwriter
when determining when to conduct the Core Open Auction and at what
price. The Exchange also asserts 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 a Core Open Auction
in connection with a post-IPO public offering may be effected manually
by the DMM during this period, and therefore may not be conducted at
9:30 a.m. In addition, the Exchange represents that a post-IPO public
offering in an Exchange-listed security has been priced to proceed for
the Core Open Auction on April 2, 2020, and that the Exchange is able
to implement this proposed rule change immediately. The Commission
notes that the proposed rule change provides the DMM with limited entry
to effect manually Core Open Auctions in connection with post-IPO
public offerings, which is similar to what is currently provided for
DMMs effecting IPO Auctions under Commentary .02 of NYSE Rule 7.35A.
The Commission also notes that the proposed rule change would provide
DMMs the ability to consider information from the underwriter when
determining when to conduct the Core Open Auction and at what price,
and would inform market participants on how and when a Core Open
Auction in connection with a post-IPO public offering may be effected
manually by the DMM during this period. Moreover, the Commission notes
that the proposal is a temporary measure designed to respond to
current, unprecedented market conditions. Finally, the Commission notes
that waiving the 30-day operative would allow the Exchange to implement
the proposed rule change immediately, and thereby enable it to enact
the proposed procedures for the post-IPO public offering in an
Exchange-listed security that has been priced to proceed for the Core
Open Auction on April 2, 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.\15\
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\15\ 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 [email protected]. Please include
File Number SR-NYSE-2020-28 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-2020-28. 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-2020-28, and should be submitted on
or before April 29, 2020.
[[Page 19785]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07335 Filed 4-7-20; 8:45 am]
BILLING CODE 8011-01-P