Document ID: SEC-2020-0858-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-06-01T04:00Z

[Federal Register Volume 85, Number 105 (Monday, June 1, 2020)]
[Notices]
[Pages 33252-33255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11657]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88950; File No. SR-NYSE-2020-48]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
add Commentary .05 to Rule 7.35A

May 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 May 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to add Commentary .05 to Rule 7.35A to 
provide that, for a temporary period that begins May 26, 2020, and ends 
on the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on June 30, 2020, the Exchange would 
(1) permit a DMM limited entry to the Trading Floor or (2) provide a 
DMM remote access to Floor-based systems, for the purpose of effecting 
a manual Trading Halt Auction for reopening a security following a 
regulatory halt issued under Section 2 of the Listed Company Manual. 
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 to add Commentary .05 to Rule 7.35A to 
provide that, for a temporary period that begins May 26, 2020, and ends 
on the earlier of a full reopening of the Trading Floor facilities to 
Designated Market Makers (``DMM'') or after the Exchange closes on June 
30, 2020, the Exchange would (1) permit a DMM limited entry to the 
Trading Floor or (2) provide a DMM remote access to Floor-based 
systems, for the purpose of effecting a manual Trading Halt Auction for 
reopening a security following a regulatory halt issued under Section 2 
of the Listed Company Manual.
Background
    On March 18, 2020, the CEO of the Exchange made a determination 
under

[[Page 33253]]

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 7.31(c) to reopen the Trading Floor on a 
limited basis on May 26, 2020 to a subset of Floor brokers.\5\
---------------------------------------------------------------------------

    \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.
    \5\ See Securities Exchange Act Release No. 88933 (May 22, 2020) 
(SR-NYSE-2020-47) (Notice of filing and immediate effectiveness of 
proposed rule change).
---------------------------------------------------------------------------

    The Trading Floor facilities have been reopened to DMMs for only 
limited circumstances, as described in Commentaries .02-.04 to Rule 
7.35A. Commentary .02 to Rule 7.35A provides that:

    For a temporary period that begins on March 26, 2020 and ends on 
the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on June 30, 2020, the Exchange 
will permit a DMM limited entry to the Trading Floor to effect an 
IPO Auction manually.

    Commentary .03 to Rule 7.35A provides that:

    For a temporary period that begins on April 2, 2020 and ends on 
the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on June 30, 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.

    Commentary .04 to Rule 7.35A provides that:

    For a temporary period that begins on April 17, 2020 and ends on 
the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on June 30, 2020, the Exchange 
will provide a DMM remote access to Floor-based systems for the sole 
purpose of effecting a manual (1) IPO Auction, or (2) Core Open 
Auction in connection with a listed company's post-IPO public 
offering.

    The Exchange added these Commentaries because, while the Trading 
Floor is temporarily closed to DMMs, DMMs cannot engage in a manual IPO 
Auction or Core Open Auction for a post-IPO public offering and these 
Commentaries allow for such Auctions to be conducted manually by a DMM 
either on the Trading Floor or remotely.\6\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release Nos. 88488 (March 26, 
2020), 85 FR 18286 (April 1, 2020) (SR-NYSE-2020-23) (Notice of 
filing and immediate effectiveness of proposed rule change to add 
Commentary .02 to Rule 7.35A); 88546 (April 2, 2020) (SR-NYSE-2020-
28), 85 FR 19782 (April 8, 2020) (Notice of filing and immediate 
effectiveness of proposed rule change to add Commentary .03 to Rule 
7.35A); and 88705 (April 21, 2020), 85 FR 23413 (April 27, 2020) 
(SR-NYSE-2020-35) (Notice of filing and immediate effectiveness of 
proposed rule change to add Commentary .04).
---------------------------------------------------------------------------

Proposed Rule Change
    Rule 7.35A(c)(1)(E) provides that a DMM may not effect a Trading 
Halt Auction electronically if it is a reopening following a regulatory 
halt issued under Section 2 of the Listed Company Manual. Accordingly, 
during the temporary period while the Trading Floor is temporarily 
closed to DMMs, the Exchange has facilitated Trading Halt Auctions 
pursuant to Rule 7.35C to reopen trading in a security following a 
regulatory halt issued under Section 2 of the Listed Company Manual.
    When the Exchange facilitates such a Trading Halt Auction, the 
Exchange determines an Auction Price based on the Indicative Match 
Price for a security, which is bound by Auction Collars.\7\ The Auction 
Reference Price for determining the Auction Collars is the most recent 
consolidated last-sale eligible trade in a security on any market 
during Core Trading Hours, and if none, the Official Closing Price from 
the prior trading day for that security.\8\ Accordingly, an Exchange-
facilitated Auction will be conducted at a price that is no higher or 
lower than the greater of $0.15 or 5% away from that Auction Reference 
Price.\9\
---------------------------------------------------------------------------

    \7\ See Rule 7.35C(b)(2).
    \8\ Rule 7.35C(b)(1) provides that the Auction Reference Price 
for a Trading Halt Auction is the same as the Imbalance Reference 
Price determined under Rule 7.35A(e)(3). Pursuant to Rule 
7.35A(e)(3), the Imbalance Reference Price for a Trading Halt 
Auction is the Consolidated Last Sale Price, unless a pre-opening 
indication has been published. Pursuant to Rule 7.35(a)(11)(A), the 
term ``Consolidated Last Sale Price'' means the most recent 
consolidated last-sale eligible trade in a security during Core 
Trading Hours on that trading day, and if none, the Official Closing 
Price from the prior trading day for that security.
    \9\ See Rule 7.35C(b)(3)(A)(ii).
---------------------------------------------------------------------------

    As noted above, during the temporary period while the Trading Floor 
is closed, the Exchange has permitted limited reentry to the Trading 
Floor for the purposes of effecting an IPO Auction and a post-IPO 
public offering. The Exchange has also provided DMMs with remote access 
to NYSE trading systems that are located on the Trading Floor so that a 
DMM can manually effect such Auctions remotely. The Exchange proposes 
to provide DMMs with limited entry to the Trading Floor or remote 
access to NYSE trading systems so that a DMM may manually effect a 
Trading Halt Auction to reopen a security following a regulatory halt 
issued under Section 2 of the Listed Company Manual.
    To effect this change, the Exchange proposes to add Commentary .05 
to Rule 7.35A to provide that:

    For a temporary period that begins May 26, 2020, and ends on the 
earlier of a full reopening of the Trading Floor facilities to DMMs 
or after the Exchange closes on June 30, 2020, the Exchange would 
(1) permit a DMM limited entry to the Trading Floor or (2) provide a 
DMM remote access to Floor-based systems, for the purpose of 
effecting a manual Trading Halt Auction for reopening a security 
following a regulatory halt issued under Section 2 of the Listed 
Company Manual.

    The Exchange believes that providing DMMs with the ability to 
conduct such Trading Halt Auctions manually would promote fair and 
orderly reopening auctions following a regulatory halt because it would 
allow such reopenings to be facilitated at a price that is consistent 
with the buy and sell interest for such securities. As noted above, an 
Exchange-facilitated Trading Halt Auction is bound by Auction Collars 
that use an Auction Reference Price from before the regulatory halt. 
Accordingly, an Exchange-facilitated Auction would allow for 5% of 
price movement away from such reference price. To date, that has not 
been an issue as the Exchange has been able to facilitate Trading Halt 
Auctions to reopen a security following a regulatory halt issued under 
Section 2 of the Listed Company Manual at Auction Prices that have been 
consistent with the buy and sell interest of the security.
    However, if there has been significant change in price in a 
security during the course of a regulatory halt, an Exchange-
facilitated Auction, which would be bound by the Auction Collars, would 
be conducted at a price that is not consistent with the buy and sell 
interest in the security. This result could be obviated by enabling the 
DMMs to effect such Auctions manually, either on the Trading Floor or 
remotely, pursuant to Rule 7.35A.
    If a DMM were to effect such Auctions manually pursuant to Rule 
7.35A, the Auction Price would not be bound by Auction Collars and all 
better-priced orders on the side of the imbalance would be satisfied in 
the Auction.\10\ In addition, if a DMM were to manually effect such 
Trading Halt Auctions, the

[[Page 33254]]

DMM would publish pre-opening indications pursuant to Rule 7.35A(d), 
which would be in addition to the Auction Imbalance Information 
available for such Trading Halt Auctions.
---------------------------------------------------------------------------

    \10\ See Rule 7.35A(g) (requiring the DMM to select an Auction 
Price at which all better-priced orders on the Side of the Imbalance 
can be satisfied).
---------------------------------------------------------------------------

    During this temporary period while the Trading Floor has been 
closed due to precautionary measures to prevent the spread of COVID-19, 
DMMs are available to conduct such Trading Halt Auctions manually, 
either on the Trading Floor or remotely. Accordingly, this proposed 
rule change could be implemented immediately.
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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Directly related to social-distancing measures 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 
26, 2020, the Trading Floor reopened on a limited basis to a subset of 
Floor brokers, but remains closed to DMMs except under limited 
circumstances specified in Commentary .02 and .03 to Rule 7.35A.
    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 
Trading Halt Auctions in connection with the reopening of trading 
following a regulatory halt issued under Section 2 of the Listed 
Company Manual. The Exchange believes that it would promote fair and 
orderly markets to provide the DMM with mechanisms to facilitate such 
Trading Halt Auctions manually because it would allow such Auctions to 
be conducted consistent with the buy and sell interest in the security, 
and not be bound by Auction Collars based on an Auction Reference Price 
that may no longer reflect the price of the security to investors.
    The Exchange believes that providing DMMs with the option to either 
come to the Trading Floor or use remote access to Floor-based trading 
systems to manually effect a Trading Halt Auction to reopen a security 
following a regulatory halt issued under Section 2 of the Listed 
Company Manual would remove impediments to and perfect the mechanism of 
a free and open market and a national market system because it would 
provide flexibility to DMMs who may determine that travel to and entry 
to the Trading Floor would not be advisable or possible during this 
temporary period.
    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 June 
30, 2020, market participants will have advance notice that a Trading 
Halt Auction for a reopening following a regulatory halt issued under 
Section 2 of the Listed Company Manual may be effected manually by the 
DMM during this 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 
to ensure fair and orderly Trading Halt Auctions for reopening a 
security following a regulatory halt issued under Section 2 of the 
Listed Company Manual during a temporary period when the Exchange 
Trading Floor has been closed to DMMs 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 \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.\15\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 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 this 
requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay. In 
support of this request, the Exchange has represented that the proposal 
would provide the DMM with mechanisms to facilitate manually and to 
conduct Trading Halt Auctions consistent with the buy and sell interest 
in the security, and not be bound by Auction Collars based on an 
Auction Reference Price that may no longer reflect the price of the 
security to investors. Further, the Commission notes that the proposed 
rule change would only be in effect only during a temporary period. For 
these reasons, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest, and designates the proposed rule change to be 
operative upon filing with the Commission.\18\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.\19\ If the 
Commission takes such action, the

[[Page 33255]]

Commission shall institute proceedings to determine whether the 
proposed rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-2020-48 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-2020-48. 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-2020-48 and should be submitted on 
or before June 22, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11657 Filed 5-29-20; 8:45 am]
 BILLING CODE 8011-01-P