Document ID: SEC-2020-0122-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-01-30T05:00Z

[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

[[Page 5512]]

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

[[Page 5513]]

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 rule-comments@sec.gov. 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