Document ID: SEC-2018-0850-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American LLC
Posted Date: 2018-06-05T04:00Z

[Federal Register Volume 83, Number 108 (Tuesday, June 5, 2018)]
[Notices]
[Pages 26121-26123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-11978]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83341; File No. SR-NYSEAMER-2018-22]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing of Proposed Rule Change To Amend Rule 7.35E Relating to the 
Auction Reference Price for a Trading Halt Auction Following a 
Regulatory Halt

May 30, 2018.
    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 May 15, 2018, NYSE American LLC (the ``Exchange'' or 
``NYSE American'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III 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 amend Rule 7.35E relating to the Auction 
Reference Price for a Trading Halt Auction following a regulatory halt. 
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 amend Rule 7.35E (Auctions) relating to 
the Auction Reference Price for a Trading Halt Auction following a 
regulatory halt.
    Under Rule 7.35E, Auction Reference Prices are used for a number of 
purposes, including determining Auction Collars under Rule 
7.35E(a)(10)(A). Rule 7.35E(a)(8)(A) defines the Auction Reference 
Price applicable to auctions on the Exchange. For the Trading Halt 
Auction, the Reference Price is the last consolidated round-lot price 
of that trading day, and if none, the prior day's Official Closing 
Price (except as provided for in Rule 7.35E(e)(7)(A)).\4\
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    \4\ Rule 7.35E(e)(7)(A) provides for a different Auction 
Reference Price for a Trading Halt Auction following a Trading 
Pause. The ``Official Closing Price'' is defined in Rule 1.1E(gg).
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    The Exchange proposes to amend Rule 7.35E(a)(8)(A) to permit the 
Exchange to designate a different Auction Reference Price for a Trading 
Halt Auction following a regulatory halt. The Exchange believes that if 
the price of a security changes during a regulatory halt, for example, 
due to a news event, an Auction Reference Price based on the last 
consolidated round-lot price of that trading day, or if none, the prior 
day's Official Closing Price, may no longer reflect the value of the 
security. In such case, using that price for purposes of calculating 
Auction Collars for the Trading Halt Auction may unnecessarily 
constrict the price at which such auction would initially be permitted 
and potentially lead to an unnecessary number of extensions before the 
security resumes trading, thereby delaying the Trading Halt Auction.\5\ 
The Exchange believes that for these scenarios, it would be appropriate 
to designate a different Auction Reference Price.\6\
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    \5\ Pursuant to Rule 7.35E(e)(6), the Re-Opening Time for a 
Trading Halt Auction will be extended if the Indicative Match Price, 
before being adjusted based on Auction Collars, would be below 
(above) the Lower (Upper) Auction Collar or if there is a sell (buy) 
Market Imbalance.
    \6\ For example, the Exchange's affiliated exchange, NYSE Arca, 
Inc. (``NYSE Arca'') recently amended NYSE Arca Rule 7.35-
E(a)(8)(A), which is identical to Rule 7.35E(a)(8)(A), on a 
temporary basis to provide for a different Auction Reference Price 
for a security that was the subject of a regulatory halt. See 
Securities Exchange Act Release No. 82716 (February 14, 2018), 83 FR 
7517 (February 21, 2018) (SR-NYSEArca-2018-12). NYSE Arca sought 
such relief to respond to the impact of market-wide trading 
volatility on February 5, 2018 on the pricing of the ProShares Short 
VIX Short-Term Futures ETF (SVXY). In that scenario, NYSE Arca 
halted trading in SVXY before trading began on February 6, 2018. 
Because the Official Closing Price no longer reflected the value of 
the security and would not have been an appropriate Auction 
Reference Price, to protect and fair and orderly market, NYSE Arca 
proposed a different Auction Reference Price for the Trading Halt 
Auction.

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[[Page 26122]]

    To effect this change, the Exchange proposes to amend Rule 
7.35E(a)(8)(A) to provide that if the Auction Reference Price would 
impact a fair and orderly Trading Halt Auction following a regulatory 
halt, the CEO of the Exchange, or his or her designee, may designate a 
different Auction Reference Price.\7\
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    \7\ See, e.g., New York Stock Exchange LLC (``NYSE'') Rule 
15(f)(1) (providing authority for the CEO of the NYSE to suspend the 
requirement to publish pre-opening indications for a security if, 
absent relief, the operation of the Exchange is likely to be 
impaired).
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    Because the specific circumstances for a security and impact on 
pricing cannot be known in advance, the Exchange does not believe it 
would be appropriate, let alone feasible, to specify in the rule what 
the alternate Auction Reference Price should be. For example, NYSE Arca 
designated a revised Auction Reference Price for SVXY that was 84% 
lower than the Auction Reference Price that would have been required 
under the NYSE Arca rule.\8\ But SVXY represents just one example. The 
reasons why an Auction Reference Price for a Trading Halt Auction 
following a regulatory halt may no longer be appropriate are myriad, 
and include external reasons specific to a security, such as news 
relating to an issuer or a corporate action. The Exchange therefore 
believes that the facts and circumstances for individual securities 
should inform the Exchange of an Auction Reference Price to designate 
under the proposed rule.
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    \8\ See supra note 6.
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    As noted above, the Exchange would not conduct a Trading Halt 
Auction until all Market Orders can be satisfied in that auction and 
extends the time before trading in a security resumes until such time. 
The Exchange believes, however, that if the last consolidated sale 
price no longer reflects the value of such security, a Trading Halt 
Auction may be unnecessarily delayed with multiple extensions. By 
contrast, enabling the Exchange to designate a different Auction 
Reference Price could potentially reduce the number of extensions, thus 
eliminating unnecessary delay and allowing for a fair and orderly 
auction process. In such case, the Auction Reference Price designated 
by the Exchange does not need to be perfectly calibrated, as the 
extension logic would ensure that the Trading Halt Auction would not 
occur until equilibrium among all Market Orders is met and the overall 
trading auction interest is satisfied at or within the auction collars. 
The Exchange believes that it would promote a more fair and orderly, 
and timely, Trading Halt Auction, for the Exchange to exercise the 
discretion as proposed when the last consolidated round-lot price of 
that trading day, or if none, the prior day's Official Closing Price, 
would otherwise be significantly out of sync with the value of the 
security. The Exchange believes that having the CEO, or his or her 
designee, designate the Auction Reference Price would ensure that 
proper deliberation would be put into determining such alternative 
Auction Reference Price.
    The proposed rule would further provide that the Exchange would 
announce the updated Auction Reference Price prior to the Trading Halt 
Auction. Pursuant to Rule 7.35E(a)(4), the Exchange publishes the 
Auction Reference Price for a Trading Halt Auction via a proprietary 
data feed. If the Exchange designates a different Auction Reference 
Price, that price would not only be disseminated via the proprietary 
data feed, but the Exchange would also announce the new Auction 
Reference Price by Trader Update.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\9\ in general, and 
furthers the objectives of Section 6(b)(5),\10\ in particular, because 
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, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it would promote the protection of 
investors and the public interest to amend Rule 7.35E(a)(8)(A) to 
permit the Exchange to designate a different Auction Reference Price 
for a Trading Halt Auction following a regulatory halt. In particular, 
the Exchange believes that using an Auction Reference Price based on a 
price that no longer reflects the value of the security could result in 
an unnecessary number of extensions before the Trading Halt Auction 
would be permitted to occur under Rule 7.35E(e)(6). By contrast, 
enabling the Exchange to designate a different Auction Reference Price 
could potentially reduce the number of extensions, thus eliminating 
unnecessary delay and allowing for a fair and orderly auction process. 
In such case, the Auction Reference Price designated by the Exchange 
does not need to be perfectly calibrated, as the extension logic would 
ensure that the Trading Halt Auction would not occur until equilibrium 
among all Market Orders is met and the overall trading auction interest 
is satisfied at or within the auction collars. The Exchange believes 
that it would promote a more fair and orderly, and timely, Trading Halt 
Auction, for the Exchange to exercise the discretion as proposed when 
the last consolidated round-lot price of that trading day, or if none, 
the prior day's Official Closing Price, would otherwise be 
significantly out of sync with the value of the security. The Exchange 
believes that having the CEO, or his or her designee, designate the 
Auction Reference Price would ensure that proper deliberation would be 
put into determining such alternative Auction Reference Price.
    The Exchange therefore believes that it would remove impediments 
to, and perfect the mechanism of, a free and open market and a national 
market system and, in general, protect investors and the public 
interest to amend Rule 7.35E(a)(8)(A) to provide that if the Auction 
Reference Price would impact a fair and orderly Trading Halt Auction 
following a regulatory halt, the CEO of the Exchange, or his or her 
designee, may designate a different Auction Reference Price.
    The Exchange further 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, and in general, protect investors 
and the public interest because the Exchange would provide notice of 
any change to an Auction Reference Price, both via the proprietary data 
feed and a Trader Update, thereby providing transparency to investors 
and the public regarding the Auction Reference Price that would be used 
for a Trading Halt Auction.

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 Exchange believes that 
the proposed

[[Page 26123]]

rule change is not designed to address any competitive issues, but 
rather to protect investors and the public by providing the Exchange 
with authority to designate an Auction Reference Price for a Trading 
Halt Auction following a regulatory halt if the Auction Reference 
Price, as defined in the current rule, would impair a fair and orderly 
auction.

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 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 [email protected]. Please include 
File Number SR-NYSEAMER-2018-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAMER-2018-22. 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-NYSEAMER-2018-22 and 
should be submitted on or before June 26, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-11978 Filed 6-4-18; 8:45 am]
 BILLING CODE 8011-01-P