Document ID: SEC-2020-1526-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-09-24T04:00Z

[Federal Register Volume 85, Number 186 (Thursday, September 24, 2020)]
[Notices]
[Pages 60276-60279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21047]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89925; File No. SR-NYSE-2020-75]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Add Commentary .02 to Rule 7.35

September 18, 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 September 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 7.35 to provide 
that, for a temporary period that begins on September 4, 2020 and ends 
on the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on September 30, 2020, for a Direct 
Listing Auction, Rule 7.35(c)(3) will not be in effect, and the 
Exchange will disseminate Auction Imbalance Information if a security 
is a Direct Listing and has not had its Direct Listing 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

[[Page 60277]]

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 7.35 to provide 
that, for a temporary period that begins on September 4, 2020 and ends 
on the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on September 30, 2020, for a Direct 
Listing Auction, Rule 7.35(c)(3) will not be in effect, and the 
Exchange will disseminate Auction Imbalance Information if a security 
is a Direct Listing and has not had its Direct Listing Auction.
Background
    To slow the spread of COVID-19 through social-distancing measures, 
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\ On May 14, 2020, the CEO of the Exchange made a 
determination under Rule 7.1(c)(3) to reopen the Trading Floor on a 
limited basis on May 26, 2020 to a subset of Floor brokers, subject to 
safety measures designed to prevent the spread of COVID-19.\5\ On June 
15, 2020, the CEO of the Exchange made a determination under Rule 
7.1(c)(3) to begin the second phase of the Trading Floor reopening by 
allowing DMMs to return on June 17, 2020, subject to safety measures 
designed to prevent the spread of COVID-19.\6\ Consistent with these 
safety measures, both DMMs and Floor broker firms continue to operate 
with reduced staff on the Trading Floor.
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    \4\ Pursuant to Rule 7.1(e), the CEO notified the Board of 
Directors of the Exchange of this determination. 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.
    \5\ See Securities Exchange Act Release No. 88933 (May 22, 
2020), 85 FR 32059 (May 28, 2020) (SR-NYSE-2020-47) (Notice of 
filing and immediate effectiveness of proposed rule change).
    \6\ See Securities Exchange Act Release No. 89086 (June 17, 
2020) (SR-NYSE-2020-52) (Notice of filing and immediate 
effectiveness of proposed rule change).
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    On April 21, 2020, the Exchange added Commentary .01 to Rule 7.35, 
which has since been amended to provide: \7\
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    \7\ See Securities Exchange Act Release Nos. 88725 (April 22, 
2020), 85 FR 23583 (April 28, 2020) (SR-NYSE-2020-37) (amending Rule 
7.35 to add Commentary .01) and 89199 (June 30, 2020), 85 FR 40718 
(July 7, 2020) (SR-NYSE-2020-56) (extending the temporary period 
for, among other rules, Commentary .01 to Rule 7.35).
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    For a temporary period that begins on April 21, 2020 and ends on 
the earlier of the reopening of the Trading Floor facilities or after 
the Exchange closes on May 15, 2020, for an IPO Auction, paragraph 
(c)(3) of this Rule will not be in effect, and the Exchange will 
disseminate Auction Imbalance Information if a security is an IPO and 
has not had its IPO Auction. Such Auction Imbalance Information will be 
disseminated in the same manner that Auction Imbalance Information is 
disseminated for a Core Open Auction, as set forth in Rule 7.35A(e)(1)-
(3), except that references to the term ``Consolidated Last Sale 
Price'' in Rule 7.35A(e)(3) and subparagraphs (A)-(C) of that Rule will 
be replaced with the term ``the security's offering price.''
Proposed Rule Change
    The Exchange proposes to amend Rule 7.35 to add Commentary .02 to 
provide that, just as with IPO Auctions, for a temporary period that 
begins on September 4, 2020 and ends on the earlier of a full reopening 
of the Trading Floor facilities to DMMs or after the Exchange closes on 
September 30, 2020, the Exchange would disseminate Auction Imbalance 
Information for a Direct Listing Auction.
    Rule 7.35(c)(3) provides that the Exchange will not disseminate 
Auction Imbalance Information if a security is an IPO or Direct Listing 
and has not had its IPO Auction or Direct Listing Auction. This Rule is 
based on a change that the Exchange made in 2015 to reflect that 
Exchange systems would not publish Order Imbalance Information for an 
IPO.\8\ In 2015, the rationale provided for excluding IPOs from Order 
Imbalance Information was because Exchange systems at the time did not 
have access to interest represented in the crowd by Floor brokers. 
However, since the Exchange transitioned to Pillar in August 2019, all 
Floor broker interest intended for a Core Open Auction, IPO Auction, or 
Direct Listing Auction must be entered electronically and therefore 
Exchange systems would be able to include orders from Floor brokers for 
such Auctions in the Auction Imbalance Information.
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    \8\ See Securities Exchange Act Release No. 74837 (April 29, 
2015), 80 FR 25741 (May 5, 2015) (SR-NYSE-2015-19) (Notice of filing 
and immediate effectiveness of proposed rule change).
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    The Auction Imbalance Information that the Exchange proposes to 
disseminate for a Direct Listing Auction would be the same information 
that is disseminated in advance of a Core Open Auction, as set forth in 
Rule 7.35A(e), except for how the Imbalance Reference Price would be 
determined. Rule 7.35A(e)(1) provides that the Exchange begins 
disseminating Auction Imbalance Information for a Core Open Auction at 
8:00 a.m., and would do the same for a Direct Listing Auction. In 
addition, Rule 7.35A(e)(2) specifies the content of the Auction 
Imbalance Information that is disseminated in advance of a Core Open 
Auction, which would be the same content for a Direct Listing 
Auction.\9\ Finally, Rule 7.35A(e)(3) specifies the Imbalance Reference 
Price, which for a Core Open Auction is the Consolidated Last Sale 
Price. The Exchange proposes that the Imbalance Reference Price for a 
Direct Listing would be the same as the security's Indication Reference 
Price, as determined pursuant to Rule 7.35A(d)(2)(A)(iv), and that such 
Imbalance Reference Price would be updated as provided for in Rule 
7.35A(e)(3)(A)-(C).\10\
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    \9\ For Core Open Auctions, the Exchange disseminates Total 
Imbalance, Side of Total Imbalance, Paired Quantity, and Continuous 
Book Clearing Price, as these terms are defined in Rule 7.35(a)(4).
    \10\ As provided for in Rule 7.35A(e)(3), the Imbalance 
Reference Price changes if a pre-opening indication has been 
published for such Auction. For example, if the security's 
Indication Reference Price as determined under Rule 
7.35A(d)(2)(A)(iv) were lower than the bid price of a pre-opening 
indication, the Imbalance Reference Price for that Direct Listing 
Auction would be the pre-opening indication bid price, and not the 
security's Indication Reference Price. See, e.g., Rule 
7.35A(e)(3)(A).
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    Proposed Commentary .02 to Rule 7.35 would provide:
    For a temporary period that begins on September 4, 2020 and ends on 
the earlier of a full reopening of the Trading Floor facilities to DMMs 
or after the Exchange closes on September 30, 2020, for a Direct 
Listing Auction, paragraph (c)(3) of this Rule will not be in effect, 
and the Exchange will disseminate Auction Imbalance Information if a 
security is a Direct Listing and has not had its Direct Listing 
Auction. Such Auction Imbalance Information will be disseminated in the 
same manner that

[[Page 60278]]

Auction Imbalance Information is disseminated for a Core Open Auction, 
as set forth in Rule 7.35A(e)(1)-(3), except that with respect to a 
Direct Listing Auction, references to the term ``Consolidated Last Sale 
Price'' in Rule 7.35A(e)(3) and subparagraphs (A)-(C) of that Rule will 
be replaced with the term ``the security's Indication Reference Price 
as determined under Rule 7.35A(d)(2)(A)(iv).''
    The Exchange also proposes to make a non-substantive change to 
Commentary .01 to Rule 7.35 to specify that the change to how the 
Imbalance Reference Price would be determined under that Commentary 
would be specific to an IPO Auction.
    The Exchange has tested the ability to disseminate such Auction 
Imbalance Information on the day of Direct Listing Auction. In 
addition, because such Auction Imbalance is already disseminated on a 
daily basis in connection with Core Open Auctions, the Exchange 
believes that member organizations that subscribe to such proprietary 
data feeds would be able to receive, read, and respond to Auction 
Imbalance Information for a Direct Listing Auction without needing to 
make any changes. Accordingly, the Exchange would be able to implement 
the proposed rule change immediately upon effectiveness of this filing.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\11\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\12\ 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    To reduce the spread of COVID-19, 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. On May 14, 2020, the CEO made a determination under 
Rule 7.1(c)(3) that, beginning May 26, 2020, the Trading Floor would be 
partially reopened to allow a subset of Floor brokers to return to the 
Trading Floor. On June 15, 2020, the CEO made a determination under 
Rule 7.1(c)(3) that, beginning June 17, 2020, DMM units may choose to 
return a subset of staff to the Trading Floor. Consistent with these 
safety measures, both DMMs and Floor broker firms continue to operate 
with reduced staff on the Trading Floor.
    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 a temporary period when both 
Floor broker firms and DMMs are operating with reduced staff on the 
Trading Floor, it would promote fair and orderly Direct Listing 
Auctions for the Exchange to disseminate Auction Imbalance Information 
on the same terms that such information is disseminated for a Core Open 
Auction. Because of reduced Floor broker staff, there are fewer 
individuals on the Trading Floor who would have access to imbalance 
information for a Direct Listing Auction to provide to customers. 
Moreover, such Auction Imbalance Information would include Floor broker 
interest eligible to participate in such Direct Listing Auction. The 
Exchange therefore believes that the Auction Imbalance Information 
would provide more granular information in advance of a Direct Listing 
Auction than would otherwise be available during this temporary period 
when there is reduced staff on the Trading Floor. As described above, 
the Auction Imbalance Information disseminated via the proprietary data 
feeds would begin being published at 8:00 a.m. ET, would be published 
every second, and would include Total Imbalance, Side of Total 
Imbalance, Paired Quantity, and Continuous Book Clearing Price 
information. The Exchange therefore believes that proposed rule change 
would promote transparency in advance of a Direct Listing Auction, 
which would benefit investors and the public.
    The Exchange believes that, by clearly stating that this relief 
will be in effect through the earlier of a full reopening of the 
Trading Floor facilities to DMMs or the close of the Exchange on 
September 30, 2020, market participants will have advance notice that 
the Exchange would disseminate Auction Imbalance Information for a 
Direct Listing Auction that may occur during that 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, 
during a temporary period when both Floor broker firms and DMMs are 
operating with reduced staff on the Trading Floor, to ensure fair and 
orderly Direct Listing Auctions by providing that the Exchange would 
disseminate Auction Imbalance Information for such auctions via its 
proprietary data feeds during a temporary period.

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 \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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 prior to 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\16\ 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.\17\ The Commission 
finds that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Exchange believes 
that a number of member organizations that currently subscribe to the 
Exchange's proprietary data feeds are technologically prepared to 
receive, read, and respond to Auction Imbalance Information for a 
Direct Listing. The Exchange further states that two companies recently 
filed registration

[[Page 60279]]

statements with the Commission and could potentially list their 
securities on the Exchange via a Direct Listing within 30 days from the 
date of this filing. The Commission believes that dissemination of 
Auction Imbalance Information as proposed is reasonably designed to 
promote transparency in advance of a Direct Listing Auction and to 
benefit investors and the public. Accordingly, the Commission hereby 
waives the operative delay and designates the proposal operative upon 
filing.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change'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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-75 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-2020-75. 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-2020-75 and should be submitted on 
or before October 15, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21047 Filed 9-23-20; 8:45 am]
BILLING CODE 8011-01-P