Document ID: SEC-2020-0951-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-06-18T04:00Z

[Federal Register Volume 85, Number 118 (Thursday, June 18, 2020)]
[Notices]
[Pages 36911-36913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13119]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89059; File No. SR-NYSE-2020-50]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Temporarily the Auction Collars for Exchange-Facilitated Core 
Open Auctions Under Rule 7.35C

June 12, 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 June 11, 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 to add Commentary .04 to Rule 7.35C to 
provide that, for a temporary period that begins June 15, 2020, and 
ends on the earlier of a full reopening of the Trading Floor facilities 
to Designated Market Makers (``DMMs'') or after the Exchange closes on 
June 30, 2020, the Auction Collar for the Core Open Auction will be a 
price that is the greater of $1.00 or 10% away from the Auction 
Reference Price for the Core Open 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to add Commentary .04 to Rule 7.35C to 
provide that, for a temporary period that begins June 15, 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 Auction 
Collar for the Core Open Auction will be a price that is the greater of 
$1.00 or 10% away from the Auction Reference Price for the Core Open 
Auction.
Background
    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 7.31(c) to reopen the Trading Floor on a 
limited basis on May 26, 2020 to a subset of Floor brokers.\5\
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    \4\ The Exchange's 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. Pursuant to Rule 7.1(e), 
the CEO notified the Board of Directors of the Exchange of this 
determination.
    \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).
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    Because the Trading Floor facilities are now temporarily closed to 
DMMs, DMMs are not on the Trading Floor and therefore cannot manually 
facilitate most types of Auctions.\6\ While the Trading Floor is 
temporarily closed, DMMs electronically participate in continuous 
trading and facilitate Auctions. As provided for under Rule 7.35C, any 
Auctions that cannot be facilitated electronically by the DMM will be 
facilitated by the Exchange.
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    \6\ During this temporary closure of the Trading Floor, a DMM 
may manually facilitate either on the Trading Floor or remotely an 
IPO Auction, a Core Open Auction for a post-IPO public offering, or 
a Trading Halt Auction following a regulatory halt. See Commentaries 
.02, .03, .04, and .05 to Rule 7.35A.
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    Rule 7.35C sets forth the procedures for Exchange-facilitated 
Auctions.

[[Page 36912]]

Currently, the Exchange will facilitate an Auction only if a DMM cannot 
facilitate an Auction for one or more securities. The Exchange 
determines an Auction Price based on the Indicative Match Price for a 
security, which is bound by Auction Collars.\7\ Currently, the Auction 
Collars for the Core Open Auction are at a price that is the greater of 
$0.15 or 10% away from the Auction Reference Price.\8\
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    \7\ See Rule 7.35C(b)(2).
    \8\ See Rule 7.35C(b)(3)(A)(i). Rule 7.35C(b)(1) provides that 
the Auction Reference Price for a Core Open 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 
Core Open 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.
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    During the period while the Trading Floor has been temporarily 
closed, the Exchange has facilitated 2.35% of the Core Open Auctions, 
with DMMs electronically facilitating the balance of more than 97% of 
Core Open Auctions. Approximately 30% of the Exchange-facilitated Core 
Open Auctions have had an Indicative Match Price that was subject to an 
Auction Collar, and approximately 50% of these collared Exchange-
facilitated Core Open Auctions were in securities trading at prices 
under $10.00. If Auction Collars had not been applied to these 
securities priced under $10.00, they would have opened at a price 
between $0.15 and $1.00 away from the Auction Reference Price.
Proposed Rule Change
    The Exchange proposes to add Commentary .04 to Rule 7.35C to 
provide that, for a temporary period that begins June 15, 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 Auction 
Collar for the Core Open Auction will be a price that is the greater of 
$1.00 or 10% away from the Auction Reference Price for the Core Open 
Auction.
    The Exchange believes that this proposed rule change would reduce 
the number of Exchange-facilitated Core Open Auctions subject to 
Auction Collars during the temporary Trading Floor closure, and 
therefore would reduce the potential number of securities that would 
open at a price that may not represent the current value of the 
security due to unfilled marketable auction interest, while still 
preserving investor protections by preventing significantly dislocated 
openings.
    The Exchange proposes to keep the 10% price parameter, but increase 
the size of the static price change from $0.15 to $1.00. This proposed 
rule change would therefore modify the price parameters for determining 
Auction Collars only for securities priced under $10.00.\9\ As noted 
above, approximately 50% of the Exchange-facilitated Core Open Auctions 
that have been subject to Auction Collars have been in securities 
priced under $10.00. Therefore, the Exchange believes that this 
proposed wider Auction Collar would significantly reduce the number of 
securities subject to a collared Exchange-facilitated Core Open 
Auction. More specifically, with this proposed rule change, securities 
with an Auction Reference Price under $10.00 would be more likely to 
open at a price that is consistent with the buy and sell interest in 
the security at the opening.
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    \9\ For example, currently, a security with an Auction Reference 
Price of $9.00 would have Auction Collars of $0.90, and a security 
with an Auction Reference Price of $2.00 would have Auction Collars 
of $0.20. With this proposed change, both securities would have an 
Auction Collar of $1.00.
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    There are technology changes associated with this proposed rule 
change that the Exchange anticipates will be implemented on June 11, 
2020.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 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. However, the Trading Floor has not yet been reopened in 
full to DMMs.
    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 reduce the number of 
securities that would be subject to a collared Exchange-facilitated 
Core Open Auction. As noted above, the Exchange has facilitated only 
2.35% of the Core Open Auctions during the temporary Trading Floor 
closure, and only 30% of those Exchange-facilitated Auctions have been 
subject to an Auction Collar. The proposed rule change would change how 
the Auction Collars are determined for securities with an Auction 
Reference Price under $10.00. Because approximately 50% of the collared 
Exchange-facilitated Auctions to date were priced under $10.00, the 
Exchange believes that this proposed rule change would reduce the 
number of Exchange-facilitated Core Open Auctions subject to Auction 
Collars, and therefore would reduce the potential number of securities 
that would open at a price that may not represent the current value of 
the security due to unfilled marketable auction interest, while still 
preserving investor protections by preventing significantly dislocated 
openings. This proposed rule change would therefore promote the fair 
and orderly operation of Exchange-facilitated Auctions by allowing such 
securities to open at a price that is consistent with the buy and sell 
interest in the security, even if such price is more than $0.15 away 
from the Auction Reference Price, which would also allow more buy and 
sell interest to participate in such Auction.

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 provide for wider Auction Collars for Exchange-facilitated Core Open 
Auctions in securities priced under $10.00 during a temporary period 
when the Trading Floor has been closed in response to social-distancing 
measures designed to reduce the spread of the COVID-19.

[[Page 36913]]

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(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 asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The proposed rule change 
would provide for wider Auction Collars for Exchange-facilitated Core 
Open Auctions in securities priced under $10.00 during a temporary 
period, when the Trading Floor has been closed in response to social-
distancing measures designed to reduce the spread of the COVID-19. The 
Exchange has represented that approximately 50% of the collared 
Exchange-facilitated Auctions are in securities priced under $10.00. 
The Exchange believes that the proposed rule change would promote fair 
and orderly Core Open Auctions by allowing more buy and sell interest 
to participate at prices consistent with such buy and sell interest. 
The Exchange has also represented that it will be able to implement 
these changes on June 15, 2020. The Commission notes that the proposed 
wider collars would only apply to Exchange-facilitated Core Open 
Auctions.\18\ Furthermore, the proposed rule change would modify the 
price parameters for determining Auction Collars only for securities 
priced under $10.00. The Commission also notes that the proposal is a 
temporary measure designed to respond to current, unprecedented market 
conditions, and would end on the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on June 
30, 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.\19\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ As the Exchange notes above, during the period while the 
Trading Floor has been temporarily closed, it has facilitated 2.35% 
of the Core Open Auctions, with DMMs electronically facilitating the 
balance of more than 97% of Core Open Auctions.
    \19\ 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-50 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-2020-50. 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-2020-50, and should be submitted on 
or before July 9, 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), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-13119 Filed 6-17-20; 8:45 am]
BILLING CODE 8011-01-P