[Federal Register Volume 85, Number 63 (Wednesday, April 1, 2020)]
[Notices]
[Pages 18286-18289]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06720]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88488; File No. SR-NYSE-2020-23]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 7.35A To Allow the Exchange, for a Temporary Period, To
Publish Trader Updates With Auction Imbalance Information for IPO
Auctions
March 26, 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 March 26, 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
[[Page 18287]]
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 amend Rule 7.35A relating to IPO Auctions
for a temporary period that begins 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 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, for a temporary period that begins on the
effective date of this filing and ends on the earlier of the reopening
of the Trading Floor facilities or after the Exchange closes on May 15,
2020, that the Exchange would publish Trader Updates with Auction
Imbalance Information \4\ for IPO Auctions.\5\
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\4\ The term ``Auction Imbalance Information'' is defined in
Rule 7.35(4) to mean the information that is disseminated by the
Exchange for an Auction via a proprietary data feed during the times
specified in the Rule 7.35 Series. See Rule 7.35(c).
\5\ An ``IPO Auction'' is defined in Rule 7.35(a)(1)(D) to mean
the Core Open Auction for the first day of trading on the Exchange
of a security that is an IPO.
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Current rules provide that the Exchange does not disseminate
Auction Imbalance Information if a security is an IPO and has not had
its IPO Auction.\6\ The Exchange is proposing to publish specified
Auction Imbalance Information via Trader Update email for such auctions
for the period when the NYSE Trading Floor has temporarily closed as a
precautionary measure to reduce the spread of COVID-19.
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\6\ See Rule 7.35(c)(3).
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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. For
example, in New York City, which is where the NYSE Trading Floor is
located, public and private schools, universities, churches,
restaurants, bars, movie theaters, and other commercial establishments
where large crowds can gather have been closed.
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.\7\ Pursuant to Rule 7.1(e), the CEO notified the Board of
Directors of the Exchange of this determination.
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\7\ 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 facilities are now temporarily closed,
Designated Market Makers (``DMMs'') are not on the Trading Floor and
therefore 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.\8\ The auction process for IPO Auctions
is manual; DMMs are not permitted to effect an IPO Auction
electronically.\9\
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\8\ While the Trading Floor is temporarily closed, DMMs
participate electronically both intraday and for Auctions.
\9\ See Rule 7.35A(c)(1)(C).
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On March 25, 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 an
IPO Auction is scheduled, to allow a DMM on the Trading Floor for the
limited purpose of effecting such IPO Auction 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 IPO Auction manually. Pursuant to Rule 7.1(e), the CEO notified the
Board of Directors of the Exchange of this determination.
If the Trading Floor is partially reopened for an IPO Auction, the
Exchange would permit 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. When effecting an IPO Auction, the DMM would be expected to
publish pre-opening indications consistent with the requirements
specified in Rule 7.35A(d). The Exchange will arrange for a Floor
Governor to be present for such Auctions to approve the publication of
any pre-opening indications.\10\ In addition, Exchange staff on the
Trading Floor will be in communication with the lead underwriter or
financial advisor, as applicable, for such IPO Auction and will 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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\10\ 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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Proposed Rule Change
During normal operations, Floor brokers perform a vital role during
IPO Auctions to convey information that is available on the Trading
Floor about such auctions to their customers. Information available at
the point of sale includes imbalance and paired quantity information
that the Exchange systems and DMM calculate based on the buy and sell
interest in the Book at a given point in time. During any temporary
reopening of the Trading Floor to permit a DMM to effect an IPO Auction
manually, Floor brokers will not be present and therefore unable to
convey this information to their customers.
In the absence of Floor brokers, the Exchange proposes that for the
temporary period while the Trading Floor has been closed and a DMM is
permitted limited entry to facilitate an IPO Auction, the Exchange
would disseminate specified Auction Imbalance Information via Trader
Update.
The Exchange recently amended Rule 7.35A to add Commentary .01 that
describes changes related to DMM electronically-facilitated Auctions
that are in effect beginning March 23, 2020 and ending on the earlier
of the
[[Page 18288]]
reopening of the Trading Floor facilities or after the Exchange closes
on May 15, 2020.\11\ The Exchange proposes to amend Rule 7.35A to add
new Commentary .02 to specify the Auction Imbalance Information that
the Exchange would disseminate relating to an IPO Auction during the
period when the Trading Floor is closed, as follows:
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\11\ See Securities Exchange Act Release No. 88444 (March 20,
2020) (SR-NYSE-2020-22) (Notice of filing and immediate
effectiveness of proposed rule change).
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.
Because publishing such Trader Updates would be a manual process,
the Exchange proposes to disseminate a Trader Update following each
publication of a pre-opening indication by the DMM.\12\ The Exchange
proposes to include in the Trader Update information that a DMM would
convey on the Trading Floor during normal operations:
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\12\ Pre-opening indications are disseminated on both
proprietary and SIP data feeds. See Rule 7.35A(d).
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The Imbalance Reference Price, which is the reference
price that is used for the applicable Auction to determine the Auction
Imbalance Information.\13\ However, unlike the Imbalance Reference
Price used for the Core Open Auction, which is a static number, the
Imbalance Reference Price that would be included in a Trader Update for
an IPO Auction would be a prospective opening price manually selected
by the DMM based on the interest in the Book at that time. The
Imbalance Reference Price would be updated by the DMM as buy and sell
interest in the Book updates.
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\13\ See Rule 7.35(a)(10).
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The Paired Quantity, which is the volume of better-priced
and at-priced buy shares that can be paired with better-priced and at-
priced sell shares at the Imbalance Reference Price.\14\
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\14\ See Rule 7.35(a)(4)(B).
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The Unpaired Quantity, which is the volume of at-priced
buy or sell shares that cannot be paired at the Imbalance Reference
Price.
The Side of the Unpaired Quantity, which is the side (buy
or sell) that cannot be paired at the Imbalance Reference Price.
The Exchange believes that, in the absence of Floor brokers, this
proposed rule change would promote transparency in advance of an IPO
Auction that would be manually effected by the DMM while the Trading
Floor is closed.
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,\15\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\16\ 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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\15\ 15 U.S.C. 78f(b).
\16\ 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 IPO
Auctions on the Exchange by allowing the Exchange to disseminate
specified Auction Imbalance Information in advance of such auctions.
The proposed rule change would therefore promote transparency in
advance of an IPO Auction that would be manually effected by a DMM
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 more certainty regarding what information would
be available about IPO Auctions that are conducted during the temporary
period while the Trading Floor is closed.
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 on the Exchange by allowing the
Exchange to disseminate specified Auction Imbalance Information in
advance of such auctions 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 \17\ and Rule 19b-4(f)(6) thereunder.\18\
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 \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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) \21\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\22\ 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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\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange represents that the proposed rule change is designed
to facilitate fair and orderly IPO Auctions on the Exchange 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. The Exchange proposes to permit a DMM limited entry
to the Trading Floor to facilitate an IPO manually, and, in the absence
of Floor brokers, to have the Exchange disseminate specified Auction
Imbalance Information via Trader Updates. The Exchange represents that
the information it would include in Trader Updates is the same
information that a DMM would normally convey on the Trading Floor
during regular operations. The Exchange believes that the proposed rule
change would promote transparency in advance of an IPO Auction that
would be manually effected by a DMM while the Trading Floor is
partially reopened for the limited purpose of facilitating an IPO
Auction, that could not otherwise be conducted when the Trading Floor
is closed. The Exchange also represents that it is able to implement
this proposed rule change immediately, that an IPO Auction is currently
scheduled for March 27, 2020, and that waiver of the 30-day operative
delay would allow the Exchange to disseminate Trader Updates in
connection with this planned IPO Auction. The Commission notes that by
disclosing that the Exchange will permit a DMM limited entry to the
Trading Floor to effect an IPO Auction manually, and by enabling the
Exchange to disseminate the information as discussed above, the
proposed rule change would promote transparency in advance of an IPO
Auction that would be manually effected by a DMM while the Trading
Floor is partially reopened for this limited purpose. Further, the
Commission notes 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 more certainty regarding what information would
be available about IPO Auctions that are conducted during the temporary
period while the Trading Floor is partially reopened for the limited
purpose of facilitating an IPO Auction. The Commission also 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 delay would allow the Exchange to
implement the proposed rule change immediately and thereby enable it to
enact the proposed procedures for its IPO Auction scheduled on March
27, 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.\23\
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\23\ 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-2020-23 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-2020-23. 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-2020-23, and should be submitted on
or before April 22, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06720 Filed 3-31-20; 8:45 am]
BILLING CODE 8011-01-P