Document ID: SEC-2019-1979-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2019-12-30T05:00Z

[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Notices]
[Pages 72065-72067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28029]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87821; File No. SR-NYSE-2019-67]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, To Amend Chapter One of the Listed Company Manual To Modify the 
Provisions Relating to Direct Listings

December 20, 2019.
    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 December 11, 2019, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change. On December 13, 2019, the 
Exchange filed Amendment No. 1 to the proposed rule change, which 
amended and replaced the proposed rule change in its entirety. The 
proposed rule change, as modified by Amendment No. 1, is described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 1, 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 Chapter One of the Listed Company 
Manual (the ``Manual'') to modify the provisions relating to direct 
listings.\4\ 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.
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    \4\ The Exchange has previously filed a proposed rule change to 
amend Chapter One of the Manual to modify the provisions related to 
direct listings. See SR-NYSE-2019-67. The Exchange is now filing 
this Amendment No. 1 to SR-NYSE-2019-67 to make clear in Exhibit 5 
to this filing that a company conducting a Primary Direct Floor 
Listing in which the company sells shares in the opening auction 
with a market value of less than $100 million will be eligible to 
list if the aggregate of the market value of publicly-held shares 
immediately prior to listing together with the market value of 
shares sold by the company in the opening auction totals at least 
$250 million. This Amendment No.1 to SR-NYSE-2019-67 replaces SR-
NYSE-2019-67 as originally filed and supersedes such filing in its 
entirety.
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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
    Section 102.01B of the Manual includes initial listing requirements 
for a company that has not previously had its common equity securities 
registered under the Act, to list its common equity securities on the 
Exchange at the time of effectiveness of a registration statement filed 
solely for the purpose of allowing existing shareholders to sell their 
shares (a ``Selling Shareholder Direct Floor Listing'').\5\ To allow a 
company to sell shares on its own behalf in connection with its initial 
listing upon effectiveness of a registration statement, without a 
traditional underwritten public offering, the Exchange proposes to 
amend Section 102.01B. The proposed change would allow a company that 
has not previously had its common equity securities registered under 
the Act, to list its common equity securities on the Exchange at the 
time of effectiveness of a registration statement pursuant to which the 
company will sell shares in the opening auction on the first day of 
trading on the Exchange (a ``Primary Direct Floor Listing''). The 
proposal would permit a company to conduct a Primary Direct Floor 
Listing in addition to, or instead of, a Selling Shareholder Direct 
Floor Listing.
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    \5\ Securities Exchange Act Release No. 82627 (February 2, 
2018), 83 FR 5650 (February 8, 2018) (SR-NYSE-2017-30).

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[[Page 72066]]

    In considering the initial listing of a company in connection with 
a Selling Shareholder Direct Floor Listing, Section 102.01B currently 
provides that the Exchange will determine that such company has met the 
applicable $100 million aggregate market value of publicly-held shares 
requirement based on a combination of both (i) an independent third-
party valuation of the company (a ``Valuation'') and (ii) the most 
recent trading price for the company's common stock in a trading system 
for unregistered securities operated by a national securities exchange 
or a registered broker-dealer (a ``Private Placement Market''). The 
Exchange will attribute a market value of publicly-held shares to the 
company equal to the lesser of (i) the value calculable based on the 
Valuation and (ii) the value calculable based on the most recent 
trading price in a Private Placement Market. Alternatively, in the 
absence of any recent trading in a Private Placement Market, Section 
102.01B provides that the Exchange will determine that such company has 
met its market value of publicly-held shares requirement if the company 
provides a Valuation evidencing a market value of publicly-held shares 
of at least $250 million. With respect to this requirement, the 
Exchange is proposing the following:
     The Exchange proposes that a company would qualify for 
listing in connection with a Primary Direct Floor Listing by selling at 
least $100 million in market value of shares in the opening auction.
     The Exchange proposes that a company would qualify for 
listing in connection with a Primary Direct Floor Listing if the 
aggregate of the market value of publicly-held shares immediately prior 
to listing together with the market value of shares sold by the company 
in the opening auction totals at least $250 million.
    The Exchange also proposes to modify the distribution requirements 
for listing in connection with a Selling Shareholder Direct Floor 
Listing or a Primary Direct Floor Listing. Pursuant to Section 102.1A 
of the Manual, any company listing in connection with either a Selling 
Shareholder Direct Floor Listing or a Primary Direct Floor Listing is 
required to have at least 400 round lot holders and 1.1 million 
publicly-held shares at the time of listing. Private companies 
generally do not have as many as 400 round lot shareholders, but this 
is typically not a barrier to listing for a company undertaking an 
initial public offering as the underwriters are able to ensure that the 
shares sold in the IPO are distributed to sufficient accounts to meet 
the Exchange's distribution standards. However, in the absence of an 
underwritten transaction at the time of listing, the initial listing 
distribution standards may represent more of a challenge for a private 
company contemplating listing in connection with a Selling Shareholder 
Direct Floor Listing or a Primary Direct Floor Listing.
    The Exchange believes that a Primary Direct Floor Listing in which 
the company sells at least $250 million of its stock in the opening 
auction on the day of listing would provide an appropriately liquid 
trading market and make highly likely that the company would meet the 
initial listing distribution standards quickly after initial listing. 
Consequently, the Exchange proposes to amend Section 102.01A to provide 
that any company listing in connection with a Primary Direct Floor 
Listing in which the company sells at least $250 million in market 
value of shares in the opening auction on the initial listing date may 
list and commence trading on the basis that the company would have to 
demonstrate compliance with the distribution requirements within 90 
trading days of the listing date (the ``Distribution Standard 
Compliance Period''). Any company that fails to meet the distribution 
standards by the end of the Distribution Standard Compliance Period 
would be deemed to be below compliance. In that case, the company would 
have the opportunity to submit a compliance plan as set forth in the 
applicable procedures in Sections 802.02 and 802.03 of the Manual, but 
will not be granted a plan period that extends more than six months 
from the end of the Distribution Standard Compliance Period. If a 
company does not meet the initial listing distribution standards by the 
end of the maximum six month compliance period, it would be subject to 
immediate suspension and delisting.
    In addition, the Exchange proposes to provide the benefit of the 
same Distribution Standard Compliance Period in the case of: (i) A 
company listing in connection with a Selling Shareholder Direct Floor 
Listing that demonstrates $350 million in market value of publicly-held 
shares; and (ii) a Primary Direct Floor Listing in which the company 
sells less than $250 million of its stock in the opening auction but 
has a market value of publicly-held shares immediately prior to listing 
together with the market value of shares sold by the company in the 
opening auction totaling at least $350 million.
    Currently, a company listing in connection with a Selling 
Shareholder Direct Floor Listing is required to demonstrate at the time 
of initial listing that it has at least 400 round lot holders and (i) 
at least $100 million in market value of publicly-held shares based on 
the lower of a Valuation or the most recent trading price in a Private 
Placement Market or (ii) at least $250 million in market value of 
publicly-held shares. The Exchange proposes that a company with $350 
million in market value of publicly-held shares (including in the case 
of a company listing in connection with a Primary Direct Floor Listing 
where the aggregate of the shares sold by the company in the opening 
auction and the market value of the publicly-held shares outstanding 
immediately before the listing is at least $350 million) may list and 
commence trading on the basis that the company would have to 
demonstrate compliance with the distribution requirements within 90 
trading days of the listing date. The Exchange notes that the market 
value of publicly-held shares requirement for listings other than 
direct floor listings and IPOs is $100 million, so the $350 million 
public float that would be required under this proposal to use the 
Distribution Compliance Period is far higher than what a newly-listed 
company would have to demonstrate under other circumstances. The 
Exchange believes that this heightened standard significantly increases 
the likelihood that a liquid trading market will develop after a 
Selling Shareholder Direct Floor Listing or Primary Direct Floor 
Listing and therefore makes it likely that these companies will meet 
the initial distribution standards within the Distribution Standard 
Compliance Period.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Exchange Act,\7\ in particular in 
that it is designed to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and 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 and is not designed to

[[Page 72067]]

permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment is consistent 
with the protection of investors. The proposal would require that a 
company in a Primary Direct Floor Listing must either sell at least 
$100 million of its listed securities in the opening auction or 
demonstrate that the sum of its market value of publicly-held shares 
immediately prior to listing and the market value of shares sold by the 
company in the opening auction is at least $250 million. These 
requirements would provide that any company conducting a Primary Direct 
Floor Listing would be of a suitable size for Exchange listing and that 
there would be sufficient liquidity for the security to be suitable for 
auction market trading.
    The proposal to provide a limited grace period for companies to 
meet the initial distribution requirements in connection with a Selling 
Shareholder Direct Floor Listing or a Primary Direct Floor Listing is 
consistent with the protection of investors because the enhanced public 
float requirements of $350 million for Selling Shareholder Direct Floor 
Listings and Primary Direct Floor Listings in which the company sells 
less than $250 million in market value of shares in the opening auction 
and the $250 million minimum opening trade requirement for all other 
Primary Direct Floor Listings would make it probable that there would 
be a quick development of a liquid trading market and that the company 
would comply with the initial listing distribution standards within the 
Distribution Standard Compliance 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 amendments 
would not impose any burden on competition, but would rather increase 
competition by providing new pathways for companies to access the 
public markets.

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, as modified by Amendment No. 1, 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-2019-67 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-2019-67. 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 such 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-2019-67, and should be submitted on 
or before January 21, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28029 Filed 12-27-19; 8:45 am]
BILLING CODE 8011-01-P