Document ID: SEC-2020-0672-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2020-04-28T04:00Z

[Federal Register Volume 85, Number 82 (Tuesday, April 28, 2020)]
[Notices]
[Pages 23583-23587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08936]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88725; File No. SR-NYSE-2020-37]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Add Commentary .01 to Rule 7.35

April 22, 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 April 21, 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 Exchange. 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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[[Page 23584]]

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

    The Exchange proposes to add Commentary .01 to Rule 7.35 to provide 
that, 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, Rule 
7.35(c)(3) 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. 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 .01 to Rule 7.35 to provide 
that, 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, Rule 
7.35(c)(3) 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.
Background
    Since March 9, 2020, markets worldwide have been experiencing 
unprecedented market-wide declines and volatility because of the 
ongoing spread of COVID-19. Beginning on March 16, 2020, to slow the 
spread of COVID-19 through social-distancing measures, significant 
limitations were placed on large gatherings throughout the country.
    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\ Pursuant to Rule 7.1(e), the CEO notified the Board of 
Directors of the Exchange of this determination.
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    \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.
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    On March 26, 2020, the Exchange amended Rule 7.35A to add 
Commentary .02,\5\ which provides:
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    \5\ See Securities Exchange Act Release No. 88488 (March 26, 
2020) (SR-NYSE-2020-23), 85 FR 18286 (April 1, 2020) (Notice of 
filing and immediate effectiveness of proposed rule change) (``Rule 
7.35A Filing'').

    For a temporary period that begins on March 26, 2020 and ends on 
the earlier of the reopening of the Trading Floor facilities or 
after the Exchange closes on May 15, 2020, the Exchange will permit 
a DMM limited entry to the Trading Floor to effect an IPO Auction 
manually. For such an IPO Auction, the Exchange will disseminate the 
following Auction Imbalance Information provided by the DMM via 
Trader Update: The Imbalance Reference Price; the Paired Quantity; 
the Unpaired Quantity; and the Side of the Unpaired Quantity. The 
Exchange will publish such Trader Update(s) promptly after each 
publication by the DMM of a pre-opening indication for such 
security. The Trader Update will also include the pre-opening 
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indication range.

    As described in the Rule 7.35A Filing, the Exchange added this 
Commentary because, while the Trading Floor is temporarily closed, 
Designated Market Makers (``DMMs'') cannot engage in any manual 
actions, such as facilitating an Auction manually or publishing pre-
opening indications before a Core Open or Trading Halt Auction. 
Commentary .02 to Rule 7.35A permits entry to the Trading Floor to a 
single employee from the DMM member organization assigned to such 
security so that this DMM can access the Floor-based systems used to 
effect an Auction manually, and specifies the information that would be 
included in a Trader Update in advance of such IPO Auction.
    On March 27, 2020, the Exchange effected an IPO Auction pursuant to 
Commentary .02 to Rule 7.35A.
    On April 17, 2020, the Exchange amended Rule 7.35A to add 
Commentary .04,\6\ which provides:
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    \6\ See Securities Exchange Act Release No. 88705 (April 21, 
2020) (SR-NYSE-2020-35) (Notice of filing and immediate 
effectiveness of proposed rule change).

    For a temporary period that begins on April 17, 2020 and ends on 
the earlier of the reopening of the Trading Floor facilities or 
after the Exchange closes on May 15, 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. For 
such an IPO Auction, the Exchange will disseminate the following 
Auction Imbalance Information provided by the DMM via Trader Update: 
The Imbalance Reference Price; the Paired Quantity; the Unpaired 
Quantity; and the Side of the Unpaired Quantity. The Exchange will 
publish such Trader Update(s) promptly after each publication by the 
DMM of a pre-opening indication for such security. The Trader Update 
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will also include the pre-opening indication range.

    With these amendments to Rule 7.35A, during the temporary period 
while the Trading Floor is closed, a DMM can effect a manual IPO 
Auction either on the Trading Floor or remotely.
Proposed Rule Change
    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. The Exchange 
proposes to add Commentary .01 to Rule 7.35 to provide that, 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, Rule 7.35(c)(3) 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.
    As noted above, during the temporary period while the Trading Floor 
is closed, pursuant to either Commentary .02 or Commentary .04 to Rule 
7.35A, DMMs will be able to effect IPO Auctions manually, either on the 
Trading Floor or remotely. However, in either case, Floor brokers will 
not be present and therefore would not be available to disseminate 
Floor-based information about the IPO Auction to their customers. 
Accordingly, for this temporary period while the Trading Floor is 
closed and there are no Floor brokers, the Exchange believes it would 
be appropriate to temporarily suspend Rule 7.35(c)(3) relating to IPO 
Auctions.
    The Auction Imbalance Information that the Exchange proposes to 
disseminate for an IPO Auction would be the same information that is 
disseminated in advance of a Core Open Auction, as set forth in Rule 
7.35A(e),

[[Page 23585]]

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 an IPO 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 
an IPO Auction.\7\ 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 an IPO Auction would be the security's offering price, and that 
such Imbalance Reference Price would be updated as provided for in Rule 
7.35A(e)(3)(A)--(C).\8\
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    \7\ 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).
    \8\ 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.
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    To effect this change, the Exchange proposes to add Commentary .01 
to Rule 7.35, which would provide:

    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.''

    Disseminating such Auction Imbalance Information via the 
proprietary data feeds obviates the need to publish the Trader Updates 
described in Commentary .02 and Commentary .04 to Rule 7.35A, as 
described above.\9\ Under these specific circumstances, when Floor 
brokers are absent and unavailable to relay Floor-based information 
about an IPO Auction to their customers, Auction Imbalance Information 
would provide more granular information in advance of an IPO Auction as 
compared to the Trader Updates. Specifically, as noted 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. By contrast, a Trader Update as provided for in 
Commentaries .02 or .04 to Rule 7.35A would be disseminated on a more 
limited basis, and only if the DMM were to publish a pre-opening 
indication. Accordingly, the Exchange proposes to amend those 
Commentaries to delete the following text:
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    \9\ For example, as provided for in Rule 7.35A(d), a pre-opening 
indication is published via both the securities information 
processor and proprietary data feeds. Accordingly, pre-opening 
indications for an IPO Auction would be included in the Auction 
Imbalance Information that would be disseminated via the proprietary 
data feeds pursuant to this proposed rule change.

    For such an IPO Auction, the Exchange will disseminate the 
following Auction Imbalance Information provided by the DMM via 
Trader Update: The Imbalance Reference Price; the Paired Quantity; 
the Unpaired Quantity; and the Side of the Unpaired Quantity. The 
Exchange will publish such Trader Update(s) promptly after each 
publication by the DMM of a pre-opening indication for such 
security. The Trader Update will also include the pre-opening 
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indication range.

    The Exchange has tested the ability to disseminate such Auction 
Imbalance Information on the day of an IPO 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 an IPO 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,\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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    As a result of uncertainty related to the ongoing spread of COVID-
19, the U.S. equities markets are experiencing unprecedented market 
volatility. In addition, social-distancing measures have been 
implemented throughout the country, including in New York City, to 
reduce the spread of COVID-19. Directly related to such social-
distancing measures, 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.
    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 the temporary period while the 
Trading Floor is closed and Floor brokers are not present, it would 
promote fair and orderly IPO Auctions for the Exchange to disseminate 
Auction Imbalance Information on the same terms that such information 
is disseminated for a Core Open Auction. Specifically, during the 
period when the Trading Floor is temporarily closed, Floor brokers are 
not available to disseminate Floor-based information about the IPO 
Auction to their customers. Under these specific circumstances, the 
Exchange believes that the Auction Imbalance Information would provide 
more granular information in advance of an IPO Auction as compared to 
the Trader Updates described in Commentaries .02 and .04 to Rule 7.35A. 
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. By contrast, a Trader Update as provided for in 
Commentaries .02 or .04 to Rule 7.35A would be disseminated on a more 
limited basis, and only if the DMM were to publish a pre-opening 
indication. The Exchange therefore believes that proposed rule change 
would therefore promote transparency in advance of an IPO Auction while 
the Trading Floor is closed.
    The Exchange believes that, by clearly stating that this relief 
will be in effect through the earlier of the reopening of the Trading 
Floor facilities or the close of the Exchange on May 15, 2020, market 
participants will have advance notice that the Exchange would 
disseminate Auction Imbalance Information for an IPO Auction that may

[[Page 23586]]

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 IPO Auctions by providing that the Exchange 
would disseminate Auction Imbalance Information for such auctions via 
its proprietary data feeds during a temporary period when the Exchange 
Trading Floor has been closed 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 \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 proposed 
rule change may become operative immediately. During this temporary 
period when the Exchange Trading Floor is closed, the Exchange would 
disseminate Auction Imbalance Information for IPO Auctions via 
proprietary data feeds. Because Floor brokers are not available to 
disseminate Floor-based information about an IPO Auction to their 
customers during this period, the Exchange believes that the Auction 
Imbalance Information would provide more granular information in 
advance of an IPO Auction as compared to the Trader Updates described 
in Commentaries .02 and .04 to Rule 7.35A. The Exchange represents that 
an IPO is scheduled to price on the Exchange on April 22, 2020, and 
that the Exchange has tested the relevant technology and is able to 
implement this proposed rule change immediately. The Commission 
believes that the Auction Imbalance Information disseminated pursuant 
to this proposed rule change could provide more detailed information 
with greater frequency in advance of an IPO Auction as compared to the 
current Trader Updates. Further, the Commission notes that the Exchange 
has tested this technology, and that the proposal is a temporary 
measure designed to respond to current, unprecedented market 
conditions. 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.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \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'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-2020-37 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-2020-37. 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-2020-37, and should be submitted on 
or before May 19, 2020.
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    \19\ 17 CFR 200.30-3(a)(12), (59).

[[Page 23587]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08936 Filed 4-27-20; 8:45 am]
 BILLING CODE 8011-01-P