[Federal Register Volume 85, Number 20 (Thursday, January 30, 2020)]
[Notices]
[Pages 5511-5513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01646]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88033; File No. SR-NYSE-2020-03]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Add New Rule 46B To Permit
the Appointment of Regulatory Trading Officials and Amend Rules 47 and
75
January 24, 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 January 14, 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 a new Rule 46B to permit the appointment of
Regulatory Trading Officials and corresponding amendments to Rules 47
and 75 to permit Regulatory Trading Officials to review whether a bid
or offer was verbalized at the point of sale in time to be eligible for
inclusion in the Closing 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes a new Rule 46B to permit the appointment of
Regulatory Trading Officials and corresponding amendments to Rules 47
and 75 to permit Regulatory Trading Officials to review whether a bid
or offer was verbalized at the point of sale in time to be eligible for
inclusion in the Closing Auction.
Background
Rule 46 permits the Exchange to appoint active NYSE members \4\ as
Floor Officials. Rule 46 also permits the Exchange to appoint
``qualified'' \5\ ICE employees to act as Floor Governors, one of the
more senior types of Floor Officials (``Staff Governors'').\6\ Floor
Officials are delegated certain authority from the Board of Directors
of the Exchange to supervise and regulate active openings and unusual
situations that arise in connection with the making of bids, offers or
transactions on the Trading Floor,\7\ and to review and approve certain
trading actions.
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\4\ Rule 2(a) states that the term ``member,'' when referring to
a natural person, means a natural person associated with a member
organization who has been approved by the Exchange and designated by
such member organization to effect transactions on the Exchange
Trading Floor or any facility thereof. See also note 7, infra.
\5\ Supplementary Material .10 defines ``qualified'' employees
as ``employees of ICE or any of its subsidiaries, excluding
employees of NYSE Regulation, Inc., who shall have satisfied any
applicable testing or qualification required by the NYSE for all
Floor Governors.''
\6\ Pursuant to Rules 46 and 46A, Floor Governors are one of
several ranks of the broader category of Floor Officials, including,
in order of increasing seniority, Floor Officials, Senior Floor
Officials, Executive Floor Officials, Floor Governors and Executive
Floor Governors. See Securities Exchange Act Release No. 57627
(April 4, 2008), 73 FR 19919 (April 11, 2008) (SR-NYSE-2008-19).
\7\ The term ``Trading Floor'' is defined in Rule 6A to mean the
restricted-access physical areas designated by the Exchange for the
trading of securities, commonly known as the ``Main Room'' and the
``Buttonwood Room.''
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Currently, only Floor Officials are authorized to act under the
Exchange's rules in connection with certain situations involving bids,
offers or transactions on the Trading Floor. Specifically, Rule 75
(Disputes as to Bids and Offers) mandates that disputes arising on bids
or offers that are not settled by agreement between the interested
members shall be settled by a Floor Official. Under Rule 47 (Floor
Officials--Unusual Situations), Floor Officials have the authority to
``supervise and regulate active openings and unusual situations that
may arise in connection with the making of bids, offers or transactions
on the Floor.''
Unusual situations may arise that could impede or prevent Floor
brokers from representing customer interest before the end of Core
Trading Hours.\8\ In the event of such a potentially unusual
situation,\9\ a Floor broker may
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consult with a Floor Official and the Designated Market Maker (``DMM'')
in the relevant security regarding whether and how that customer
interest can be represented so that it is eligible to participate in
the Closing Auction.\10\ The Floor Official's role in this consultation
is to provide an impartial professional assessment of the situation
consistent with NYSE Rule 47. Currently, the DMM makes the final
determination whether to include or exclude Floor broker verbal
interest in the Closing Auction.
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\8\ See NYSE Rule 52. Core Trading Hours are defined in Rule
1.1(d) to mean the hours of 9:30 a.m. ET through 4:00 p.m. ET, or
such other hours as may be determined by the Exchange, for example,
an early scheduled closing time.
\9\ Unusual situations may arise, for example, if the Floor
broker hand-held device malfunctions or ceases to work or if a Floor
broker is physically impeded, as a result of a crowd condition
beyond that of normal traffic flow on the Exchange's trading Floor
or some other circumstance beyond the Floor broker's control, in his
or her ability to be present at a post before the DMM closes the
security. See NYSE Member Education Bulletin 19-01 (June 21, 2019).
\10\ Floor broker buy and sell interest is eligible to
participate in the Closing Auction if, by the end of Core Trading
Hours, such interest is (1) entered into an Exchange system and
recorded in accordance with Rule 123(e), and (2) either entered
electronically or verbally represented at the point of sale. When
verbally representing customer interest, Floor brokers must bid or
offer by articulating the following elements: Symbol, side (buy or
sell), size, and, if the order is a limit order, the price. See
Member Education Bulletin 19-01 (June 21, 2019); see generally Rule
123(b) (record of orders must contain the required terms of the
order, including the name and amount of the security, the terms of
the order and the time when such order was received).
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Proposed Rule Change
The Exchange proposes a new ``Regulatory Trading Official'' that
may be consulted regarding whether a bid or offer was verbalized at the
point of sale in time to be eligible for inclusion in the Closing
Auction by the DMM.
Under proposed Rule 46B, Regulatory Trading Officials would be an
Exchange employee or officer designated by the Chief Regulatory Officer
or its designee to perform the functions specified in Exchange rules.
As proposed, Regulatory Trading Officials would have the authority to
review whether a bid or offer was verbalized at the point of sale in
time to be eligible for inclusion in the Closing Auction. The final
determination to include or exclude verbal interest from the Closing
Auction will be made by the DMM pursuant to Rule 104. Floor Officials
would retain the authority to settle disputes arising on bids or offers
for all transactions on the Exchange other than the Closing Auction.
The Exchange believes that it is more appropriate for a regulatory
employee to consult with a Floor broker and DMM relating to the timely
entry of verbal interest in the Closing Auction. Whether a bid or offer
was verbalized at the point of sale in time to be eligible for
inclusion in the Closing Auction will often require assessing whether a
Floor broker complied with the rules for entry of verbal interest prior
to the Closing Auction.\11\ The Exchange believes that having a
regulatory employee involved in such discussions will emphasize the
importance of including verbal interest entered in a timely manner in
the closing auction.
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\11\ See note 10, supra.
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To effectuate these changes, the Exchange proposes a new Rule 46B
that would provide that a Regulatory Trading Official would be an
Exchange employee or officer designated by the Chief Regulatory Officer
or its designee to perform those functions specified in Exchange rules.
The Exchange further proposes to amend Rule 47 to specify that,
whether a bid or offer was verbalized at the point of sale in time to
be eligible for inclusion in the Closing Auction by a DMM, would be
governed by Rule 75(b). The proposed changes to Rule 75 would separate
the current rule text into two sections. First, the existing text of
Rule 75 relating to the authority of Floor Officials to resolve
disputes between members arising on bids or offers would be renumbered
as new subsection (a)(1) and the existing text of Supplementary
Material .10 would be renumbered as new subsection (a)(2). The Exchange
proposes no substantive changes to the existing text of Rule 75 or
current Supplementary Material .10.
The proposed authority of Regulatory Trading Officials would be set
forth in a new subsection (b) to Rule 75. Proposed Rule 75(b) would
provide that a Regulatory Trading Official may be consulted regarding
whether a bid or offer was verbalized at the point of sale in time to
be eligible for inclusion in the Closing Auction by the DMM. The
proposed rule would provide that either the Floor broker with the
verbal interest or the DMM responsible for the Closing Auction in the
relevant security may request Regulatory Trading Official review.
Proposed Rule 75(b) would also provide that if such a request has been
made, the DMM will not facilitate the Closing Auction until a
Regulatory Trading Official has completed his or her review. Finally,
the proposed rule would provide, consistent with current rules, that
the final determination to include or exclude verbal interest from the
Closing Auction will be made by the DMM pursuant to Rule 104.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\13\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes that creating a new category
of trading official to review whether a bid or offer was verbalized in
time to be included in the Closing Auction would promote just and
equitable principles of trade and remove impediments to a free and open
market by providing additional certainty to the Closing Auction when a
dispute arises, thereby facilitating fair competition among brokers and
dealers and among exchange markets. The Exchange's Closing Auction is a
recognized industry reference point,\14\ and the Exchange believes that
having a regulatory employee review whether verbal interest was
correctly and timely entered at the end of the trading day would
promote the efficient execution of the Closing Auction, thereby
contributing to fair and orderly markets and strengthening investor
confidence in the market.
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\14\ For example, the pricing and valuation of certain indices,
funds, and derivative products require primary market prints.
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The Exchange believes that assigning responsibility for reviewing
whether verbal interest was eligible for inclusion in the Closing
Auction to a regulatory employee designated by the Chief Regulatory
Officer will contribute to the protection of investors and the public
interest. As noted above, the Exchange believes that regulatory
employees are appropriately suited to the role of consultation
regarding entry of verbal interest in time to participate in the
Closing Auction. The Exchange also believes the proposed amendments
further the goal of transparency and add clarity to the Exchange's
rules, which would not be inconsistent with the public interest and the
protection of investors because investors would not be harmed and in
fact would benefit from the increased transparency and clarity in the
Exchange's rules, thereby reducing potential confusion.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The
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proposed rule change is not designed to address and competitive issues,
but rather assign responsibility for reviewing eligibility of verbal
interest for inclusion in the Closing Auction to a regulatory employee.
Since the proposal does not substantively modify the Closing Auction or
system functionality, the proposed changes will not impose any burden
on competition.
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
Within 45 days of the date of publication of this notice in the
Federal Register, or such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-2020-03 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-2020-03. 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-2020-03 and should be submitted on
or before February 20, 2020.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-01646 Filed 1-29-20; 8:45 am]
BILLING CODE 8011-01-P