Document ID: SEC-2016-0479-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT, LLC
Posted Date: 2016-03-17T04:00Z

[Federal Register Volume 81, Number 52 (Thursday, March 17, 2016)]
[Notices]
[Pages 14506-14509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05972]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77348; File No. SR-NYSEMKT-2016-29]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Sections 401 
and 402 of the NYSE MKT Company Guide To Harmonize the Exchange's 
Immediate Release and Trading Halt Policies

March 11, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 29, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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\ 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 Sections 401 and 402 of the NYSE MKT 
Company Guide (the ``Company Guide'') to harmonize the Exchange's 
immediate release and trading halt policies with recent changes made to 
the comparable policies of the New York Stock Exchange (``NYSE''). The 
proposed rule change is available on the Exchange's Web site 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

[[Page 14507]]

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 Sections 401 and 402 of the Company 
Guide to harmonize the Exchange's immediate release and trading halt 
policies with recent changes made to the comparable policies of the 
NYSE (referred to herein as the ``NYSE Amendment'').\3\
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    \3\ See Securities Exchange Release No. 75809 (September 2, 
2015); 80 FR 54362 (September 9, 2015) (SR-NYSE-2015-38).
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    Consistent with the NYSE Amendment, the Exchange proposes to amend 
Sections 401 and 402 of the Company Guide to (i) expand the pre-market 
hours during which listed companies are required to notify the Exchange 
prior to disseminating material news, and (ii) provide the Exchange 
with authority to halt trading (a) during pre-market hours at the 
request of a listed company, (b) when the Exchange believes it is 
necessary to request certain information from listed companies, and (c) 
when an Exchange-listed security is also listed on another national or 
foreign securities exchange and such other exchange halts trading in 
such security for regulatory reasons. The Exchange also proposes to add 
commentary to Section 402 of the Company Guide to provide guidance 
related to the release of material news after the close of trading on 
the Exchange.
    Sections 401 and 402 of the Company Guide give the Exchange 
authority to halt trading in a listed company's security under certain 
circumstances. Currently, the Exchange may impose a regulatory trading 
halt when a listed company announces material news \4\ shortly before 
the opening of trading on the Exchange or during the Exchange trading 
session (currently 9:30 a.m. to 4:00 p.m.). When that happens, the 
Exchange will typically institute a regulatory halt in trading, which 
halts trading on all market centers, to ensure full dissemination of 
the news to investors. The Exchange proposes to expand the hours and 
circumstances under which it can declare a regulatory trading halt.
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    \4\ The Exchange considers material news to be any news that is 
reasonably likely to have a material impact on the price or trading 
volume of a listed security.
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    Currently, Sections 401 and 402 of the Company Guide require listed 
companies to notify the Exchange at least ten minutes in advance of 
releasing material news if such release will take place shortly before 
the opening of trading on the Exchange or during Exchange market hours 
(the ``Material News Policy''). The Exchange proposes to amend Sections 
401 and 402 to require companies to comply with the Material News 
Policy between 7:00 a.m. and 4:00 p.m. Eastern Time. In the Exchange's 
experience, most companies release news related to corporate actions 
and other material events between 7:00 a.m. and 9:30 a.m. Although 
trading on the Exchange does not begin until 9:30 a.m., the Exchange 
believes that material news released between 7:00 a.m. and 9:30 a.m. 
has the potential to cause volatility in both price and volume during 
pre-market trading that occurs on other market centers as well as once 
trading opens on the Exchange. However, because there is a lower volume 
of trading in such pre-market hours, the Exchange believes that a 
listed company is most well positioned to determine whether a trading 
halt is appropriate given the news it intends to release. Therefore, to 
facilitate an orderly opening and ensure thorough dissemination of 
material news, the Exchange believes it is beneficial to require 
companies to comply with the Material News Policy and advise whether a 
trading halt is appropriate during pre-market hours.
    As discussed above, when a listed company releases material news 
during the course of the trading day, the Exchange will typically halt 
trading temporarily to ensure full dissemination of the news. Under the 
proposed rules, between 7:00 a.m. and the opening of trading on the 
Exchange, the Exchange may implement a regulatory halt in circumstances 
where (i) the listed company has informed Exchange staff that it 
intends to make a public announcement of material news and (ii) the 
listed company requests that trading in its listed securities be halted 
pending dissemination of the public announcement (a ``Pre-Market 
Halt'').\5\ While trading on the Exchange does not begin until 9:30 
a.m. Eastern Time, trading (including trading in Exchange listed 
securities) begins on NYSE Arca Equities, Inc., the Nasdaq Stock Market 
and other national securities exchanges at 4:00 a.m. Eastern Time. When 
the Exchange implements a regulatory trading halt to allow for the 
release of material news, other national securities exchanges that 
trade Exchange-listed securities also halt trading in such security 
until the Exchange lifts the halt.\6\
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    \5\ However, the proposed rule will state that if it appears 
that dissemination of material news will not be complete prior to 
the opening of trading on the Exchange at 9:30 a.m., the Exchange 
may temporarily halt trading in order to facilitate an orderly 
opening process. This is consistent with the Exchange's current 
practice.
    \6\ See, for example, NYSE Arca Equities Rule 7.18 and Nasdaq 
Stock Market Rule 4120(a)(2) for the authority to initiate a trading 
halt.
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    The Exchange notes that the volume of trading in the hours before 
trading begins on the Exchange is generally lighter and conducted 
predominantly by professional investors. Because of this reduced 
trading volume and the fact that the Exchange itself is not yet open 
for trading during these hours, the Exchange believes it is appropriate 
to institute a Pre-Market Halt only at the request of a listed company. 
The Exchange notes that the NYSE Amendment contains a similar provision 
and Nasdaq Stock Market (``Nasdaq'') has adopted a comparable rule with 
respect to trading halts between the hours of 7:00 a.m. and 9:30 
a.m.\7\ Lastly, when a trading halt is implemented during Exchange 
market hours, Rule 123D--Equities specifies that a Floor Governor or 
two Floor Officials must approve the halt in trading. However, because 
a Pre-Market Halt will only be instituted at the request of a listed 
company and because Floor Governors and Floor Officials are not 
typically on the trading floor during pre-market hours, the Exchange 
proposes to include a statement that, notwithstanding anything to the 
contrary in Rule 123D(1)--Equities, the approval of the Floor Governors 
or Floor Officials is not required for a Pre-Market Halt.
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    \7\ See Section 202.06(B) of the NYSE Listed Company Manual and 
Nasdaq Stock Market Rule 4120(a)(1) (which applies between the hours 
of 4:00 a.m. and 9:30 a.m.).
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    The Exchange proposes to further amend Section 402 of the Company 
Guide to add proposed Commentary .02, which will set forth 
circumstances in which it may institute a regulatory halt while it 
awaits information requested from a listed company. Sections 401 and 
402 currently limit the Exchange's authority to halt trading to 
situations when a listed company intends to release material news 
shortly before and during market hours. However, in the Exchange's 
experience there are other scenarios when it may be advisable to halt 
trading for the protection of investors. For example, if there is

[[Page 14508]]

uncertainty surrounding material news issued by a listed company or a 
company's compliance with the Exchange's continued listing standards, 
the Exchange believes it may be appropriate to halt trading while it 
gathers information to resolve such ambiguity. Accordingly, the 
Exchange proposes to add proposed Commentary .02 to Section 402 to 
state that if it is necessary to request information from a listed 
company relating to (i) material news, (ii) the listed company's 
compliance with Exchange continued listing requirements, or (iii) any 
other information which is necessary to protect investors and the 
public interest, the Exchange may halt trading in such listed company's 
security until it has received and evaluated the requested 
information.\8\
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    \8\ The proposed change in this regard mirrors Section 202.06(B) 
of the NYSE Listed Company Manual and Nasdaq Stock Market Rule 
4120(a)(5).
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    As discussed above, the Exchange believes that the release of 
material news immediately prior to the commencement of trading on the 
Exchange has the potential to cause significant volatility to the 
opening process. Similarly, material news released immediately after 
4:00 p.m. Eastern Time can interfere with the closing process. Although 
trading on the Exchange stops at 4:00 p.m. Eastern Time, the order book 
for each listed security is manually closed by the security's 
Designated Market Maker (``DMM''), a process that can take several 
minutes before the closing auction is completed. Because trading 
continues after 4:00 p.m. Eastern Time on other exchanges, if a listed 
company releases material news immediately after 4:00 p.m. Eastern Time 
there can be significant price movement on other markets when compared 
to the last sale price on the Exchange. The result, therefore, is that 
a DMM can be executing trades at the Exchange closing price while the 
same security is simultaneously trading on other exchanges at a very 
different price. As this discrepancy can cause confusion to investors, 
the Exchange proposes to include advisory text as proposed new 
Commentary .03 to Section 402 of the Company Guide requesting that 
listed companies intending to release material news after the close of 
trading on the Exchange wait until the earlier of the publication of 
their security's official closing price on the Exchange or 15 minutes 
after the scheduled closing time on the Exchange.\9\ The Exchange 
proposes to specify that trading on the Exchange typically closes at 
4:00 p.m. Eastern Time, except that on certain days trading closes 
early at 1:00 p.m. Eastern Time.
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    \9\ Although the Exchange typically closes at 4:00 p.m. Eastern 
Time, there are certain days each year when it closes at 1:00 p.m. 
Eastern Time. The phrase ``15 minutes after the scheduled closing 
time'' will account for these early closings.
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    Lastly, the Exchange proposes to include in proposed Commentary .02 
to Section 402 a provision stating that it may halt trading in an 
American Depositary Receipt (``ADR'') or other security listed on the 
Exchange, when the Exchange-listed security (or the security underlying 
the ADR) is listed on or registered with another national securities 
exchange or foreign exchange or market and such other exchange (or 
regulatory authority overseeing such exchange) halts trading in such 
security for regulatory reasons.\10\
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    \10\ The Exchange notes that the NYSE follows this practice 
under Section 202.06(B) of the Listed Company Manual and Nasdaq does 
so under Nasdaq Stock Market Rule 4120(a)(4).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \11\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\12\ 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 permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment is consistent 
with the investor protection objectives of section 6(b)(5) because it 
gives the Exchange greater flexibility to implement regulatory trading 
halts in a listed security when such halts may be necessary for the 
protection of investors. Specifically, the proposed rule change will 
alter the hours in which listed companies are required to comply with 
the Material News Policy such that the hours are from 7:00 a.m. to 4:00 
p.m. Eastern Time (rather than just shortly before the opening of 
trading on the Exchange and during the Exchange trading session, as is 
currently the case). The proposed rule change will also enable the 
Exchange to (i) implement a Pre-Market Halt at the request of a listed 
company when the company intends to issue material news between 7:00 
a.m. and 9.30 a.m. Eastern Time, (ii) halt trading when it believes it 
is necessary to request certain information from listed companies, and 
(iii) halt trading in an ADR or other Exchange-listed security when the 
Exchange-listed security or the security underlying the ADR is listed 
on or registered with another national securities exchange or foreign 
exchange or market and is halted on such other exchange or market for 
regulatory reasons. Additionally, the Exchange proposes to include 
advisory text in Section 402 of the Company Guide requesting that 
listed companies intending to release material news after the close of 
trading on the Exchange wait until the earlier of the publication of 
their security's official closing price on the Exchange or 15 minutes 
after the scheduled closing time on the Exchange. The Exchange believes 
this change will eliminate confusion to investors when a DMM is 
executing a trade at the Exchange closing price while the same security 
is simultaneously trading on other exchanges at a very different price.
    The Exchange believes that each of the proposed changes enumerated 
above is consistent with the investor protection objectives of section 
6(b)(5) because they provide the Exchange with additional authority to 
halt trading in circumstances where material news that may impact 
trading is to be released by listed companies or has not yet been fully 
disseminated. The Exchange believes that material news is highly 
relevant to investors when deciding to buy or sell securities and thus 
providing the Exchange with additional authority to halt trading while 
such news is released and disseminated is protective of investors. In 
addition, the Exchange believes the proposed rule change is consistent 
with the protection of investors because it will specify in Exchange 
rules the scenarios in which a trading halt may be necessary, thereby 
promoting transparency in Exchange rules and making them easier to 
navigate. In giving the Exchange authority to declare regulatory 
trading halts in situations described herein, the proposed rule change 
enables the Exchange to act in the best interest of protecting 
investors.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed amendments to Sections 401 
and 402 of the Company Guide do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. As discussed herein, the Exchange's

[[Page 14509]]

proposed amendments to Sections 401 and 402 are designed to give the 
Exchange greater flexibility to halt trading in a particular listed 
security when the Exchange believes a halt is necessary or appropriate. 
Currently, Sections 401 and 402 only permit the Exchange to implement 
regulatory trading halts for the dissemination of material news. As 
currently drafted, the Exchange believes these rules are unnecessarily 
restrictive and do not cover the full spectrum of situations where a 
trading halt may be necessary for the protection of investors. In 
addition, the Exchange believes that its proposed changes are 
consistent with the NYSE and Nasdaq rules with respect to trading 
halts. For the foregoing reasons, therefore, the Exchange does not 
believe that such changes impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.

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

    Because the foregoing 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) \14\ thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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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 under 
Section 19(b)(2)(B) of the Act \15\ to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEMKT-2016-29 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-NYSEMKT-2016-29. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEMKT-2016-29, and should 
be submitted on or before April 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Lynn M. Powalski,
Deputy Secretary.
[FR Doc. 2016-05972 Filed 3-16-16; 8:45 am]
BILLING CODE 8011-01-P