Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rules 104 and 36 To Require Communications From a Designated Market Maker (“DMM”) to a Designed Senior Representative of an Issuer of Registered Listed Securities, 30262-30266 [2019-13535]
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30262
Federal Register / Vol. 84, No. 123 / Wednesday, June 26, 2019 / Notices
Finally, proposed NYSE Rules
7.34(c)(1)(A), Rule 7.36(e)(5), and Rule
7.37(b)(1) are based on current Exchange
rules related to the order ranking and
display and the order execution and
routing of the CCS. Accordingly, the
Commission believes that these
proposed changes do not raise
regulatory issues or concerns and that
they are consistent with the Act.
IV. Solicitation of Comments on
Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 2 is
consistent with the Act. Comments may
be submitted by any of the following
methods:
jbell on DSK3GLQ082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2019–22 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–2019–22. 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 (https://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
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comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2019–22 and should
be submitted on or before July 17, 2019.
V. Accelerated Approval of
Amendment No. 2
As noted above,57 in Amendment No.
2, as compared to the original
proposal,58 the Exchange proposes to
make conforming amendments to NYSE
Rules 7.18 (Halts) and 7.34 (Trading
Sessions).
As discussed above,59 the
Commission believes that the
amendments to proposed NYSE Rules
7.18 (Halts) and 7.34 (Trading Sessions)
do not raise any regulatory issues and
are consistent with the Act because
these changes introduce no new
functionality, but rather conform
Exchange rules to include references to
RPIs and CCOs in rules related to the
processing of non-displayed orders in
Exchange-listed securities during a halt
or pause in trading or when the order
entry occurs before the beginning of the
Core Trading Session.
Therefore, the Commission finds that
Amendment No. 2 to the proposal raises
no novel regulatory issues, that it is
reasonably designed to protect investors
and the public interest, and that it is
consistent with the requirements of the
Act. Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,60 to approve the proposed
rule change, as modified by Amendment
No. 2, on an accelerated basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,61 that the
proposed rule change (SR–NYSE–2019–
22), as modified by Amendment No. 2,
be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.62
Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019–13536 Filed 6–25–19; 8:45 am]
BILLING CODE 8011–01–P
57 See
supra note 5.
Notice, supra note 4.
59 See supra Section III.
60 15 U.S.C. 78s(b)(2).
61 15 U.S.C. 78s(b)(2).
62 17 CFR 200.30–3(a)(12).
58 See
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86163; File No. SR–NYSE–
2019–09]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend
Exchange Rules 104 and 36 To Require
Communications From a Designated
Market Maker (‘‘DMM’’) to a Designed
Senior Representative of an Issuer of
Registered Listed Securities
June 20, 2019.
I. Introduction
On March 8, 2019, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend NYSE Rules 104 and 36 to
require Designated Market Makers
(‘‘DMMs’’) to communicate with a
designated senior representatives of the
issuers of the DMM’s assigned
securities. The proposed rule change
was published in the Federal Register
on March 26, 2019.3
On May 10, 2019, the Commission
designated a longer time period within
which to approve or disapprove, or
institute proceedings to determine
whether to approve or disapprove, the
proposed rule change.4 On June 18,
2019, the Exchange filed Amendment
No. 1, which superseded the original
filing, to the proposed rule change.5 The
Commission has received no comments
on the proposal.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 85367
(Mar. 20, 2019), 84 FR 11382 (Mar. 26, 2019)
(‘‘Notice’’).
4 See Securities Exchange Act Release No. 85826
(May 10, 2019), 84 FR 22173 (May 16, 2019).
5 In Amendment No. 1, the Exchange modified its
original proposed rule change to clarify in proposed
NYSE Rule 36.31 that a Permitted Communication
Device shall only permit written electronic
communications between individuals located at the
DMM unit’s post on the Floor with: (1) Individuals
with whom telephone communications are
permitted under NYSE Rules 36.30 and 98, subject
to the same content restrictions set forth in those
rules or (2) the listed issuer representatives
designated under NYSE Rules 104(l)(1), subject to
the same content restrictions set forth in that rule,
provided that a DMM unit may not use a Permitted
Communications Device for this purpose from 9:15
a.m. Eastern Time until the security is opened and
from 15 minutes before the scheduled closing time
for a security until the security is closed.
2 17
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Federal Register / Vol. 84, No. 123 / Wednesday, June 26, 2019 / Notices
The Commission is publishing this
notice to solicit comments on
Amendment No. 1 from interested
persons and is approving the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
II. Self-Regulatory Organization’s
Description of the Proposed Rule
Change, as Modified by Amendment
No. 1
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 104
(Dealings and Responsibilities of
DMMs) and Rule 36 (Communication
Between Exchange and Members’
Offices) to require and facilitate routine
DMM communication with designated
representatives of listed issuers.
Proposed Rule Change
As described below, the Exchange
proposes to amend Rule 104 to require
DMM units to communicate with
designated individuals at each issuer of
listed securities in whose securities
DMMs associated with the DMM unit
are registered and would describe how
the communication requirement can be
met. The Exchange also proposes to
amend Rule 36 to facilitate written
electronic communications with issuers
from the Floor of the Exchange (the
‘‘Floor’’) 6 pursuant to proposed Rule
104(l) during specified time periods and
subject to certain restrictions.
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Rule 104
Rule 104 sets forth the obligations of
Exchange DMMs. The Exchange
proposes to add a new paragraph (l) to
Rule 104 titled ‘‘Communication with
Issuers of Listed Securities’’ that would
set forth the obligation of DMMs to
communicate with their listed issuers.
6 Rule 6 defines the Floor as the trading Floor of
the Exchange and the premises immediately
adjacent thereto, such as the various entrances and
lobbies of the 11 Wall Street, 18 New Street, 8
Broad Street, 12 Broad Street and 18 Broad Street
Buildings, and also means the telephone facilities
available in these locations.
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Proposed Rule 104(1)(1) would
provide that, on at least a quarterly
basis, each DMM unit must
communicate with one or more senior
officials of each issuer of listed
securities in whose securities DMMs
associated with the DMM unit are
registered, with the exception of
American Depositary Receipts
(‘‘ADR’’).7 The proposed rule would
also provide that the senior official
designated by the listed issuer for the
proposed contacts must be of the rank
of Corporate Secretary or higher and
must not be involved in market or
trading operations for or on behalf of the
listed issuer or with respect to the listed
security. The Exchange proposes to
provide the senior officials at the issuer
with the option to designate an
individual to communicate with the
DMMs on their behalf by including the
clause ‘‘or a designee thereof’’ following
‘‘Corporate Secretary or above,’’ which
the Exchange believes would enable
issuers to more efficiently manage the
communication process. As proposed,
the designee would also have to be a
person at the issuer who is not be
involved in market or trading operations
for or on behalf of the listed issuer or
with respect to the listed security.
This proposed obligation would be on
the DMM units only. DMM units would
be required to communicate with the
listed issuer contact, but the listed
issuer contact would not be required to
reciprocate. For example, a DMM unit
could meet its obligation by sending an
email communication to the listed
issuer contact. However, the listed
issuer contact would not be obligated to
respond to that communication in
writing or otherwise.
To address the possibility that a DMM
unit may not have contact information
for any individuals at a listed issuer,
proposed Rule 104(1)(A) would provide
that if a DMM unit does not have
contact information for a listed issuer,
the DMM unit can seek to communicate
with the Corporate Secretary most
recently named on a public filing by
such issuer.
Proposed Rule 104(l)(2) would
describe the ways in which the periodic
communication requirement set forth in
proposed subparagraph (l)(1) can be
met. Specifically, proposed
subparagraph (l)(2) would provide that
7 ADRs are certificates representing a specified
number of shares in non-U.S. issuers that are
deposited and issued through U.S. banks. The
shares underlying ADRs are primarily listed and
traded on non-U.S. markets. The Exchange believes
that the purpose for the proposed change is not
furthered by requiring DMMs to contact foreign
issuers whose ordinary listing is not on the
Exchange and therefore proposes to exclude ADRs
from the periodic communication requirement.
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the communication requirement may be
met by either in-person meetings,
telephone calls, or written
communications.
The required communications would
be explicitly subject to existing
restrictions on DMMs. First, as set forth
in proposed Rule 104(l)(2)(A), during
the required communications,
employees of the DMM unit would have
to comply with the requirements of Rule
98 8 with respect to the information that
may be shared with the listed issuer
contact. Second, as described in
proposed Rule 104(l)(2)(B), an employee
of a DMM unit may not communicate
with a listed issuer contact from the
Floor via telephone. However, the
Exchange proposes that an employee of
a DMM unit would be able to
communicate with a listed issuer
contact from the Floor using electronic
written communications, subject to the
requirements and safeguards set forth in
proposed Rule 36.31, described below.
Finally, proposed Rule 104(l)(2)(C)
would provide that DMM units must
establish written policies and
procedures reasonably designed to
ensure that DMMs are in compliance
with the requirements of the proposed
rule.
Proposed Rule 104(l)(3) would
describe the non-regulatory penalties to
be imposed if DMMs fail to initiate the
required contacts with listed issuers.
Specifically, if a DMM unit fails to
initiate the required communication
with the listed issuer for a single
quarter, the Exchange would issue an
initial warning letter to the DMM unit.
If a DMM unit fails to initiate the
required communication with the listed
issuer for a two or more quarters, that
DMM unit would be ineligible to
participate in the allocation process for
a minimum of one month following the
second quarter of its failure to meet its
contact requirement.
The proposed rule is substantively
similar to former NYSE Rule 106(a),
which provided that ‘‘[d]uring each
quarter, each Exchange specialist unit
shall contact one or more senior
officials, of the rank of Corporate
Secretary or above, of each company in
whose stock specialists associated with
the specialist unit are registered.’’ NYSE
Rule 106 was deleted in 2008.9 At the
time, the Exchange determined that the
8 Rule 98 governs the operation of DMM units and
imposes certain restrictions on DMM trading
including, among other things, requiring that DMM
units to protect against the misuse of Floor-based
non-public order information. See, e.g., Rule
98(c)(3).
9 See Securities Exchange Act Release No. 83540
(October 24, 2008), 73 FR 65435 (November 3, 2008)
(SR–NYSE–2008–52).
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Federal Register / Vol. 84, No. 123 / Wednesday, June 26, 2019 / Notices
requirement in former Rule 106 that
specialist units make themselves
available for contact with their listing
companies periodically throughout the
year was unnecessary to ensure that
listed issuers were informed about
trading in their listed securities given
the availability of public information
and the fact that specialist units had
internal departments responsible for
communicating with issuers during the
trading day.10 Following the deletion of
Rule 106, the internal departments
responsible for communicating with
issuers were largely dismantled, and
DMM communications with issuers
have become less regular.
Because each listed security is
assigned to a single DMM, the Exchange
believes that one of the core functions
of the DMM units is to maintain regular
communications with listed issuers
about trading activity in their securities.
While DMM firms may no longer be
structured as they were when former
Rule 106 was in place, DMM units still
regularly communicate with their listed
issuers. The Exchange proposes to
reinstate the mandated interaction
between DMMs and listed issuers 11
because the Exchange believes that this
would ensure that a minimum level of
communication is occurring between
DMM units and all listed issuers. The
proposed rule would therefore establish
a minimum level of required contacts.
The Exchange understands that most
DMM units have more frequent
communications with their listed
issuers.
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Rule 36
Rule 36 governs the establishment of
telephone or electronic communications
connections between the Floor and
other locations, which requires
Exchange approval. Supplementary
Material .31 to Rule 36 (‘‘DMM
Electronically Transmitted Written
Communications’’) permits DMM units
to install and maintain certain written
electronic communications
applications. Specifically, Rule 36.31(a)
permits a DMM unit, subject to
Exchange approval and the conditions
set forth in Rule 36.31, to install and
maintain a wired or wireless device
capable of sending and receiving written
communications electronically through
an Exchange-approved connection (a
10 See
id., 73 FR at 65437.
Rule 106 also required, for instance,
that the specialist unit makes itself available to the
Exchange’s fifteen (15) largest member
organizations through required semiannual ‘‘off the
Exchange Floor’’ contact. See id.
11 Former
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‘‘Permitted Communications Device’’).12
Under Rule 36.31(b), the Permitted
Communications Device shall only
permit written electronic
communications between Floor-based
personnel and individuals with whom
they are otherwise permitted to
communicate pursuant to Rules 36.30
and 98, i.e., certain personnel in the offFloor offices of the DMM unit, the DMM
unit’s clearing operations, and persons
who are permitted to provide nontrading related services to the DMM unit
under Rule 98.
To facilitate the DMM unit’s proposed
obligation to maintain regular
communications with listed issuers, the
Exchange proposes to amend Rule
36.31(b) to permit Floor-based DMM
personnel to utilize Permitted
Communications Devices for written
electronic communications with the
listed issuer representative designated
under Rule 104(l)(1).
To effectuate this change, the
Exchange would amend Rule 36.31(b) to
add new subparagraphs (1) and (2),
which would describe the two
circumstances when using a Permitted
Communications Device would be
permitted.
Proposed Rule 36.31(b)(1) would
reflect the current rule that Permitted
Communications Devices may be used
for electronic written communications
between individuals located at the
DMM unit’s post on the Floor and
persons with whom they are otherwise
permitted to communicate pursuant to
Rules 36.30 and 98.
Proposed Rule 36.31(b)(2) would
reflect the proposed rule that Permitted
Communications Devices may be used
for written electronic communications
with the listed issuer representative
designated under proposed Rule
104(l)(1), subject to the content
restrictions set forth in that rule as
described above and provided that a
DMM unit may not use a Permitted
Communications Device for this
purpose for the periods 9:15 a.m.
Eastern Time (‘‘E.T.’’) until the security
is opened, and again beginning 15
minutes before the scheduled close of
trading until the security is closed.
The proposed time restrictions are
designed to limit communications
between the DMM and listed issuer
during the period when a DMM would
need to access non-public trading
information to facilitate the opening or
closing transactions, i.e., the fifteen
minutes prior to a security being opened
12 Examples of Permitted Communications
Devices include email and instant messaging via a
desktop or laptop computer.
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Sfmt 4703
and closed by the DMM.13 The
Exchange believes that this proposed
bright-line restriction on
communications would eliminate any
potential for non-public information to
be shared by the DMM with a listed
issuer in advance of the opening or
closing of trading. The Exchange further
believes that the Rule 98 requirements
for the DMM to have policies and
procedures reasonably designed to
protect against the misuse of Floorbased non-public order information
would restrict the DMMs from being
able to share any non-public
information the rest of the trading day.14
Finally, the requirements in current
Rule 36.31(c) that a DMM unit must
maintain records of all written
communications sent from or to the
DMM via the Permitted
Communications Device in accordance
with Rule 440 and SEC Rule 17a–
4(b)(4) 15 and in such format as may be
prescribed by the Exchange, and the
requirement in current Rule 36.31(d)
that a DMM’s member organization
must establish policies and procedures
reasonably designed to ensure that use
of the Permitted Communications
Device is consistent with all SEC rules
and Exchange rules, policies and
procedures, would remain unchanged.
The Exchange believes that allowing
DMM units to use a Permitted
Communications Device to
communicate with issuers from the
Floor is appropriate because the DMM
units would continue to be subject to
the requirements of Rule 98 and existing
restrictions on the use of Permitted
Communications Devices.
The proposed rule change would in
no way alter the obligations of a DMM
unit to meet existing requirements
under Rule 98 to, among other things,
protect non-public order information
and maintain appropriate information
barriers in accordance with Rule 98.
Because DMM units would continue to
be subject to Rule 98, while on the
Floor, DMM unit personnel could not
use the Permitted Communications
Device to communicate with issuers in
violation of Rule 98. For example, DMM
units would continue to be subject to
the provisions of Rule 98 governing
restrictions on communications with
13 In connection with opening and closing a
security, DMMs have access to non-public order
information, specifically, the aggregate amount of
specified Reserve Orders that are eligible to
participate in the opening and closing transactions.
See Rule 104(a)(2) and (3) (specifying that DMMs
and DMM unit algorithms have access to aggregate
order information in order to comply with their
requirement to facilitate openings and closings).
14 See Rule 98(c)(3)(A).
15 See Rule 440 (Books and Records) & 17 CFR
240.17a–4(b)(4).
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off-Floor individuals or systems
responsible for making trading decisions
in related products. The Exchange also
believes that prohibiting written
electronic communications from the
Floor before the open and going into the
close further assists DMM units in
protecting non-public order information
when communicating with issuers from
the Floor.
DMM units would also continue to be
obligated to program its
communications system so that a
Permitted Communications Device
would not operate in a manner enabling
written electronic communications to or
from any location or individual other
than as described in proposed amended
Supplementary Material .31. Among
other things, the DMM unit would be
required to program its communications
system to ensure that messages cannot
be forwarded by DMM Floor personnel
to anyone at the issuer with whom Floor
personnel are not permitted to
communicate.
Finally, the Exchange believes that
use of auditable written electronic
communications as the only permitted
method for DMM units to communicate
with issuers from the Floor and the
related retention requirements would
facilitate and enhance the Exchange’s
existing regulatory program. In
particular, the Exchange would be able
to review the email system operating the
connections between the Floor and the
issuer, the related written supervisory
procedures, and both the content of, and
participants in, any written
communications.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,16 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,17 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.
In particular, the Exchange believes
that the proposed requirement that
DMMs maintain regular contact with
listed issuers would foster cooperation
and coordination with persons engaged
in facilitating transactions in securities,
and would remove impediments to and
perfect the mechanism of a free and
16 15
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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open market and a national market
system by promoting a better
understanding of the needs of listed
issuers and fostering communications
among DMMs and listed issuers. The
Exchange believes that routine and
regular contacts between DMMs and
listed issuers should be encouraged and
will help to foster an understanding of
the DMM function, the operations of the
Exchange market, and the markets that
are maintained in the listed issuers’
securities, as well as assisting DMMs to
better perform their functions, thereby
removing impediments to and
perfecting the mechanism of a free and
open market and a national market
system. Moreover, the Exchange
believes that excluding ADRs from the
proposed requirement is not
inconsistent with this goal because the
shares underlying ADRs are not
primarily listed and traded on the
Exchange. The Exchange also believes
that the proposed amendments to Rule
36 support the mechanism of free and
open markets by facilitating DMM
communications with issuers from the
Floor during the trading day, subject to
the safeguards described above.
Further, the proposed rule change is
designed to prevent fraudulent and
manipulative acts and practices and
would be consistent with the public
interest and the protection of investors
because of the numerous safeguards
surrounding the manner and form in
which DMMs can communicate with
listed issuers proposed for inclusion in
Rules 104 and 36. The proposed
safeguards would include:
• Requiring communications to occur
with a very senior official designated by
the listed issuer;
• requiring that the official
designated by the listed issuer not be
involved in market or trading operations
for or on behalf of the listed issuer or
with respect to the listed security;
• requiring employees of the DMM
unit to comply with the requirements of
Rule 98 with respect to the information
that may be shared with the listed issuer
contact during the required
communications, including written
electronic communications from the
Floor;
• preventing employees of the DMM
unit from communicating with a listed
issuer contact from the Floor via
telephone;
• requiring that, while on the Floor,
employees of the DMM unit only
communicate with a listed issuer
contact in written electronic form using
a monitored Permitted Communications
Device; and
• prohibiting written electronic
communications from the Floor with the
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30265
listed issuer contact during the busiest
part of the trading day from 9:15 a.m.
E.T. until the security is opened and
beginning fifteen minutes before the
scheduled close of trading until the
security is closed.
The Exchange believes that these
proposed safeguards establish an
appropriate regulatory framework for
supervising and monitoring mandated
DMM communications with listed
issuers consistent with the objectives of
Section 6(b)(5) of the Act.18
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 does not believe that the
proposed rule change will impose any
burden on competition because the
proposed change relates to how DMMs
communicate with their listed issuers
and proposes no change for other
market participants. In addition, the
Exchange does not believe that the
proposed changes will impose any
competitive burden because DMMs will
operate in the same manner, including
from the Floor, when communicating
with issuers.
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. Discussion and Commission
Findings
After careful review of the proposal,
as modified by Amendment No. 1, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.19 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,20 which
requires that the rules of a national
securities exchange are 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 regulating, clearing,
18 15
U.S.C. 78f(b)(5).
approving the proposed rule change, as
modified by Amendment No. 1, the Commission
has considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
20 15 U.S.C. 78f(b)(5).
19 In
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jbell on DSK3GLQ082PROD with NOTICES
30266
Federal Register / Vol. 84, No. 123 / Wednesday, June 26, 2019 / Notices
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.
The Exchange has proposed to require
that each DMM unit, on at least a
quarterly basis, communicate with one
or more senior officials of each issuer of
listed securities in whose securities
(with the exception of ADRs) DMMs
associated with the DMM unit are
registered. DMMs units that fail to
initiate the required communication for
two or more quarters will be ineligible
to participate in the allocation process
for securities for a minimum of one
month.
The Exchange has also proposed
certain provisions designed to prevent
the misuse of material non-public
information. First, only designated
senior officials of the issuer who are at
or above the rank of Corporate
Secretary, and who are not involved in
market or trading operations for or on
behalf the issuer, may receive these
communications. Second, employees of
the DMM unit must comply with NYSE
Rule 98, which requires DMM units to
protect against the misuse of floor-based
non-public order information. Third, an
employee of a DMM unit may not
communicate with a listed issuer from
the trading floor via telephone—any
communications from the trading floor
to the listed issuer must be made in
writing via a Permitted Communications
Device in accordance with proposed
NYSE Rule 36.31 and cannot take place
in the period before the open or the
close of trading. Fourth, existing Rule
36.31(c) provides that a DMM’s member
organization must maintain records of
all written communications sent from or
to the DMM via the Permitted
Communications Device. And finally,
the proposal requires DMM units to
establish written policies and
procedures reasonably designed to
ensure that DMMs are in compliance
with the proposed rule.
The Commission believes that the
proposal is reasonably designed to
prevent the misuse of material nonpublic information originating on the
Exchange floor and notes that, prior to
2008, NYSE Rule 106 required specialist
units (the precursors to DMMs) to make
themselves available for contact with
their listed issuers quarterly, with at
least one in-person meeting.21 For the
21 See Securities and Exchange Commission
Release No. 58857 (Oct. 24, 2008), 73 FR 65435,
65437 (Nov. 3, 2008) (SR–NYSE–2008–52)
(approving NYSE proposal to, among other things,
rescind NYSE Rule 106).
VerDate Sep<11>2014
18:47 Jun 25, 2019
Jkt 247001
foregoing reasons, the Commission finds
that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act.
2019–09 and should be submitted on or
before July 17, 2019.
IV. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
As noted above, in Amendment No. 1,
the Exchange proposes to clarify NYSE
Rule 36.31 and how a DMM unit may
use permitted communications devices.
The Commission believes that the
amendments to proposed NYSE rule
36.31 are consistent with the
requirements of the Act and raise no
novel regulatory issues. The
amendments closely follow existing
NYSE Rule 36.31 and clearly indicate
that while on the trading floor, written
communications can only come from a
permitted communications device to the
listed issuer. The Commission finds that
Amendment No. 1 is reasonably
designed to prevent fraudulent and
manipulative acts and practices and to
protect investors and the public.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act, to approve the proposal, as
modified by Amendment No. 1, on an
accelerated basis.
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2019–09 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–2019–09. 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 (https://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
a.m. and 3 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–
PO 00000
Frm 00185
Fmt 4703
Sfmt 9990
V. Accelerated Approval of
Amendment No. 1
VI. Conclusion
It is therefore ordered that, pursuant
to Section 19(b)(2) of the Act,22 the
proposed rule change (SR–NYSE–2019–
09), as modified by Amendment No. 1,
be, and it hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019–13535 Filed 6–25–19; 8:45 am]
BILLING CODE 8011–01–P
22 15
23 17
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U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
26JNN1
]]>Agencies
[Federal Register Volume 84, Number 123 (Wednesday, June 26, 2019)]
[Notices]
[Pages 30262-30266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13535]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86163; File No. SR-NYSE-2019-09]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend Exchange Rules 104 and 36 To Require Communications From a
Designated Market Maker (``DMM'') to a Designed Senior Representative
of an Issuer of Registered Listed Securities
June 20, 2019.
I. Introduction
On March 8, 2019, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE Rules 104 and 36 to require
Designated Market Makers (``DMMs'') to communicate with a designated
senior representatives of the issuers of the DMM's assigned securities.
The proposed rule change was published in the Federal Register on March
26, 2019.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 85367 (Mar. 20,
2019), 84 FR 11382 (Mar. 26, 2019) (``Notice'').
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On May 10, 2019, the Commission designated a longer time period
within which to approve or disapprove, or institute proceedings to
determine whether to approve or disapprove, the proposed rule
change.\4\ On June 18, 2019, the Exchange filed Amendment No. 1, which
superseded the original filing, to the proposed rule change.\5\ The
Commission has received no comments on the proposal.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 85826 (May 10,
2019), 84 FR 22173 (May 16, 2019).
\5\ In Amendment No. 1, the Exchange modified its original
proposed rule change to clarify in proposed NYSE Rule 36.31 that a
Permitted Communication Device shall only permit written electronic
communications between individuals located at the DMM unit's post on
the Floor with: (1) Individuals with whom telephone communications
are permitted under NYSE Rules 36.30 and 98, subject to the same
content restrictions set forth in those rules or (2) the listed
issuer representatives designated under NYSE Rules 104(l)(1),
subject to the same content restrictions set forth in that rule,
provided that a DMM unit may not use a Permitted Communications
Device for this purpose from 9:15 a.m. Eastern Time until the
security is opened and from 15 minutes before the scheduled closing
time for a security until the security is closed.
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[[Page 30263]]
The Commission is publishing this notice to solicit comments on
Amendment No. 1 from interested persons and is approving the proposed
rule change, as modified by Amendment No. 1, on an accelerated basis.
II. Self-Regulatory Organization's Description of the Proposed Rule
Change, as Modified by Amendment No. 1
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 104 (Dealings and Responsibilities
of DMMs) and Rule 36 (Communication Between Exchange and Members'
Offices) to require and facilitate routine DMM communication with
designated representatives of listed issuers.
Proposed Rule Change
As described below, the Exchange proposes to amend Rule 104 to
require DMM units to communicate with designated individuals at each
issuer of listed securities in whose securities DMMs associated with
the DMM unit are registered and would describe how the communication
requirement can be met. The Exchange also proposes to amend Rule 36 to
facilitate written electronic communications with issuers from the
Floor of the Exchange (the ``Floor'') \6\ pursuant to proposed Rule
104(l) during specified time periods and subject to certain
restrictions.
---------------------------------------------------------------------------
\6\ Rule 6 defines the Floor as the trading Floor of the
Exchange and the premises immediately adjacent thereto, such as the
various entrances and lobbies of the 11 Wall Street, 18 New Street,
8 Broad Street, 12 Broad Street and 18 Broad Street Buildings, and
also means the telephone facilities available in these locations.
---------------------------------------------------------------------------
Rule 104
Rule 104 sets forth the obligations of Exchange DMMs. The Exchange
proposes to add a new paragraph (l) to Rule 104 titled ``Communication
with Issuers of Listed Securities'' that would set forth the obligation
of DMMs to communicate with their listed issuers.
Proposed Rule 104(1)(1) would provide that, on at least a quarterly
basis, each DMM unit must communicate with one or more senior officials
of each issuer of listed securities in whose securities DMMs associated
with the DMM unit are registered, with the exception of American
Depositary Receipts (``ADR'').\7\ The proposed rule would also provide
that the senior official designated by the listed issuer for the
proposed contacts must be of the rank of Corporate Secretary or higher
and must not be involved in market or trading operations for or on
behalf of the listed issuer or with respect to the listed security. The
Exchange proposes to provide the senior officials at the issuer with
the option to designate an individual to communicate with the DMMs on
their behalf by including the clause ``or a designee thereof''
following ``Corporate Secretary or above,'' which the Exchange believes
would enable issuers to more efficiently manage the communication
process. As proposed, the designee would also have to be a person at
the issuer who is not be involved in market or trading operations for
or on behalf of the listed issuer or with respect to the listed
security.
---------------------------------------------------------------------------
\7\ ADRs are certificates representing a specified number of
shares in non-U.S. issuers that are deposited and issued through
U.S. banks. The shares underlying ADRs are primarily listed and
traded on non-U.S. markets. The Exchange believes that the purpose
for the proposed change is not furthered by requiring DMMs to
contact foreign issuers whose ordinary listing is not on the
Exchange and therefore proposes to exclude ADRs from the periodic
communication requirement.
---------------------------------------------------------------------------
This proposed obligation would be on the DMM units only. DMM units
would be required to communicate with the listed issuer contact, but
the listed issuer contact would not be required to reciprocate. For
example, a DMM unit could meet its obligation by sending an email
communication to the listed issuer contact. However, the listed issuer
contact would not be obligated to respond to that communication in
writing or otherwise.
To address the possibility that a DMM unit may not have contact
information for any individuals at a listed issuer, proposed Rule
104(1)(A) would provide that if a DMM unit does not have contact
information for a listed issuer, the DMM unit can seek to communicate
with the Corporate Secretary most recently named on a public filing by
such issuer.
Proposed Rule 104(l)(2) would describe the ways in which the
periodic communication requirement set forth in proposed subparagraph
(l)(1) can be met. Specifically, proposed subparagraph (l)(2) would
provide that the communication requirement may be met by either in-
person meetings, telephone calls, or written communications.
The required communications would be explicitly subject to existing
restrictions on DMMs. First, as set forth in proposed Rule
104(l)(2)(A), during the required communications, employees of the DMM
unit would have to comply with the requirements of Rule 98 \8\ with
respect to the information that may be shared with the listed issuer
contact. Second, as described in proposed Rule 104(l)(2)(B), an
employee of a DMM unit may not communicate with a listed issuer contact
from the Floor via telephone. However, the Exchange proposes that an
employee of a DMM unit would be able to communicate with a listed
issuer contact from the Floor using electronic written communications,
subject to the requirements and safeguards set forth in proposed Rule
36.31, described below. Finally, proposed Rule 104(l)(2)(C) would
provide that DMM units must establish written policies and procedures
reasonably designed to ensure that DMMs are in compliance with the
requirements of the proposed rule.
---------------------------------------------------------------------------
\8\ Rule 98 governs the operation of DMM units and imposes
certain restrictions on DMM trading including, among other things,
requiring that DMM units to protect against the misuse of Floor-
based non-public order information. See, e.g., Rule 98(c)(3).
---------------------------------------------------------------------------
Proposed Rule 104(l)(3) would describe the non-regulatory penalties
to be imposed if DMMs fail to initiate the required contacts with
listed issuers. Specifically, if a DMM unit fails to initiate the
required communication with the listed issuer for a single quarter, the
Exchange would issue an initial warning letter to the DMM unit. If a
DMM unit fails to initiate the required communication with the listed
issuer for a two or more quarters, that DMM unit would be ineligible to
participate in the allocation process for a minimum of one month
following the second quarter of its failure to meet its contact
requirement.
The proposed rule is substantively similar to former NYSE Rule
106(a), which provided that ``[d]uring each quarter, each Exchange
specialist unit shall contact one or more senior officials, of the rank
of Corporate Secretary or above, of each company in whose stock
specialists associated with the specialist unit are registered.'' NYSE
Rule 106 was deleted in 2008.\9\ At the time, the Exchange determined
that the
[[Page 30264]]
requirement in former Rule 106 that specialist units make themselves
available for contact with their listing companies periodically
throughout the year was unnecessary to ensure that listed issuers were
informed about trading in their listed securities given the
availability of public information and the fact that specialist units
had internal departments responsible for communicating with issuers
during the trading day.\10\ Following the deletion of Rule 106, the
internal departments responsible for communicating with issuers were
largely dismantled, and DMM communications with issuers have become
less regular.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 83540 (October 24,
2008), 73 FR 65435 (November 3, 2008) (SR-NYSE-2008-52).
\10\ See id., 73 FR at 65437.
---------------------------------------------------------------------------
Because each listed security is assigned to a single DMM, the
Exchange believes that one of the core functions of the DMM units is to
maintain regular communications with listed issuers about trading
activity in their securities. While DMM firms may no longer be
structured as they were when former Rule 106 was in place, DMM units
still regularly communicate with their listed issuers. The Exchange
proposes to reinstate the mandated interaction between DMMs and listed
issuers \11\ because the Exchange believes that this would ensure that
a minimum level of communication is occurring between DMM units and all
listed issuers. The proposed rule would therefore establish a minimum
level of required contacts. The Exchange understands that most DMM
units have more frequent communications with their listed issuers.
---------------------------------------------------------------------------
\11\ Former Rule 106 also required, for instance, that the
specialist unit makes itself available to the Exchange's fifteen
(15) largest member organizations through required semiannual ``off
the Exchange Floor'' contact. See id.
---------------------------------------------------------------------------
Rule 36
Rule 36 governs the establishment of telephone or electronic
communications connections between the Floor and other locations, which
requires Exchange approval. Supplementary Material .31 to Rule 36
(``DMM Electronically Transmitted Written Communications'') permits DMM
units to install and maintain certain written electronic communications
applications. Specifically, Rule 36.31(a) permits a DMM unit, subject
to Exchange approval and the conditions set forth in Rule 36.31, to
install and maintain a wired or wireless device capable of sending and
receiving written communications electronically through an Exchange-
approved connection (a ``Permitted Communications Device'').\12\ Under
Rule 36.31(b), the Permitted Communications Device shall only permit
written electronic communications between Floor-based personnel and
individuals with whom they are otherwise permitted to communicate
pursuant to Rules 36.30 and 98, i.e., certain personnel in the off-
Floor offices of the DMM unit, the DMM unit's clearing operations, and
persons who are permitted to provide non-trading related services to
the DMM unit under Rule 98.
---------------------------------------------------------------------------
\12\ Examples of Permitted Communications Devices include email
and instant messaging via a desktop or laptop computer.
---------------------------------------------------------------------------
To facilitate the DMM unit's proposed obligation to maintain
regular communications with listed issuers, the Exchange proposes to
amend Rule 36.31(b) to permit Floor-based DMM personnel to utilize
Permitted Communications Devices for written electronic communications
with the listed issuer representative designated under Rule 104(l)(1).
To effectuate this change, the Exchange would amend Rule 36.31(b)
to add new subparagraphs (1) and (2), which would describe the two
circumstances when using a Permitted Communications Device would be
permitted.
Proposed Rule 36.31(b)(1) would reflect the current rule that
Permitted Communications Devices may be used for electronic written
communications between individuals located at the DMM unit's post on
the Floor and persons with whom they are otherwise permitted to
communicate pursuant to Rules 36.30 and 98.
Proposed Rule 36.31(b)(2) would reflect the proposed rule that
Permitted Communications Devices may be used for written electronic
communications with the listed issuer representative designated under
proposed Rule 104(l)(1), subject to the content restrictions set forth
in that rule as described above and provided that a DMM unit may not
use a Permitted Communications Device for this purpose for the periods
9:15 a.m. Eastern Time (``E.T.'') until the security is opened, and
again beginning 15 minutes before the scheduled close of trading until
the security is closed.
The proposed time restrictions are designed to limit communications
between the DMM and listed issuer during the period when a DMM would
need to access non-public trading information to facilitate the opening
or closing transactions, i.e., the fifteen minutes prior to a security
being opened and closed by the DMM.\13\ The Exchange believes that this
proposed bright-line restriction on communications would eliminate any
potential for non-public information to be shared by the DMM with a
listed issuer in advance of the opening or closing of trading. The
Exchange further believes that the Rule 98 requirements for the DMM to
have policies and procedures reasonably designed to protect against the
misuse of Floor-based non-public order information would restrict the
DMMs from being able to share any non-public information the rest of
the trading day.\14\
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\13\ In connection with opening and closing a security, DMMs
have access to non-public order information, specifically, the
aggregate amount of specified Reserve Orders that are eligible to
participate in the opening and closing transactions. See Rule
104(a)(2) and (3) (specifying that DMMs and DMM unit algorithms have
access to aggregate order information in order to comply with their
requirement to facilitate openings and closings).
\14\ See Rule 98(c)(3)(A).
---------------------------------------------------------------------------
Finally, the requirements in current Rule 36.31(c) that a DMM unit
must maintain records of all written communications sent from or to the
DMM via the Permitted Communications Device in accordance with Rule 440
and SEC Rule 17a-4(b)(4) \15\ and in such format as may be prescribed
by the Exchange, and the requirement in current Rule 36.31(d) that a
DMM's member organization must establish policies and procedures
reasonably designed to ensure that use of the Permitted Communications
Device is consistent with all SEC rules and Exchange rules, policies
and procedures, would remain unchanged.
---------------------------------------------------------------------------
\15\ See Rule 440 (Books and Records) & 17 CFR 240.17a-4(b)(4).
---------------------------------------------------------------------------
The Exchange believes that allowing DMM units to use a Permitted
Communications Device to communicate with issuers from the Floor is
appropriate because the DMM units would continue to be subject to the
requirements of Rule 98 and existing restrictions on the use of
Permitted Communications Devices.
The proposed rule change would in no way alter the obligations of a
DMM unit to meet existing requirements under Rule 98 to, among other
things, protect non-public order information and maintain appropriate
information barriers in accordance with Rule 98. Because DMM units
would continue to be subject to Rule 98, while on the Floor, DMM unit
personnel could not use the Permitted Communications Device to
communicate with issuers in violation of Rule 98. For example, DMM
units would continue to be subject to the provisions of Rule 98
governing restrictions on communications with
[[Page 30265]]
off-Floor individuals or systems responsible for making trading
decisions in related products. The Exchange also believes that
prohibiting written electronic communications from the Floor before the
open and going into the close further assists DMM units in protecting
non-public order information when communicating with issuers from the
Floor.
DMM units would also continue to be obligated to program its
communications system so that a Permitted Communications Device would
not operate in a manner enabling written electronic communications to
or from any location or individual other than as described in proposed
amended Supplementary Material .31. Among other things, the DMM unit
would be required to program its communications system to ensure that
messages cannot be forwarded by DMM Floor personnel to anyone at the
issuer with whom Floor personnel are not permitted to communicate.
Finally, the Exchange believes that use of auditable written
electronic communications as the only permitted method for DMM units to
communicate with issuers from the Floor and the related retention
requirements would facilitate and enhance the Exchange's existing
regulatory program. In particular, the Exchange would be able to review
the email system operating the connections between the Floor and the
issuer, the related written supervisory procedures, and both the
content of, and participants in, any written communications.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\16\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed requirement
that DMMs maintain regular contact with listed issuers would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and would remove impediments to and perfect
the mechanism of a free and open market and a national market system by
promoting a better understanding of the needs of listed issuers and
fostering communications among DMMs and listed issuers. The Exchange
believes that routine and regular contacts between DMMs and listed
issuers should be encouraged and will help to foster an understanding
of the DMM function, the operations of the Exchange market, and the
markets that are maintained in the listed issuers' securities, as well
as assisting DMMs to better perform their functions, thereby removing
impediments to and perfecting the mechanism of a free and open market
and a national market system. Moreover, the Exchange believes that
excluding ADRs from the proposed requirement is not inconsistent with
this goal because the shares underlying ADRs are not primarily listed
and traded on the Exchange. The Exchange also believes that the
proposed amendments to Rule 36 support the mechanism of free and open
markets by facilitating DMM communications with issuers from the Floor
during the trading day, subject to the safeguards described above.
Further, the proposed rule change is designed to prevent fraudulent
and manipulative acts and practices and would be consistent with the
public interest and the protection of investors because of the numerous
safeguards surrounding the manner and form in which DMMs can
communicate with listed issuers proposed for inclusion in Rules 104 and
36. The proposed safeguards would include:
Requiring communications to occur with a very senior
official designated by the listed issuer;
requiring that the official designated by the listed
issuer not be involved in market or trading operations for or on behalf
of the listed issuer or with respect to the listed security;
requiring employees of the DMM unit to comply with the
requirements of Rule 98 with respect to the information that may be
shared with the listed issuer contact during the required
communications, including written electronic communications from the
Floor;
preventing employees of the DMM unit from communicating
with a listed issuer contact from the Floor via telephone;
requiring that, while on the Floor, employees of the DMM
unit only communicate with a listed issuer contact in written
electronic form using a monitored Permitted Communications Device; and
prohibiting written electronic communications from the
Floor with the listed issuer contact during the busiest part of the
trading day from 9:15 a.m. E.T. until the security is opened and
beginning fifteen minutes before the scheduled close of trading until
the security is closed.
The Exchange believes that these proposed safeguards establish an
appropriate regulatory framework for supervising and monitoring
mandated DMM communications with listed issuers consistent with the
objectives of Section 6(b)(5) of the Act.\18\
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 does not
believe that the proposed rule change will impose any burden on
competition because the proposed change relates to how DMMs communicate
with their listed issuers and proposes no change for other market
participants. In addition, the Exchange does not believe that the
proposed changes will impose any competitive burden because DMMs will
operate in the same manner, including from the Floor, when
communicating with issuers.
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. Discussion and Commission Findings
After careful review of the proposal, as modified by Amendment No.
1, the Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\19\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\20\ which requires that the
rules of a national securities exchange are 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 regulating, clearing,
[[Page 30266]]
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.
---------------------------------------------------------------------------
\19\ In approving the proposed rule change, as modified by
Amendment No. 1, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange has proposed to require that each DMM unit, on at
least a quarterly basis, communicate with one or more senior officials
of each issuer of listed securities in whose securities (with the
exception of ADRs) DMMs associated with the DMM unit are registered.
DMMs units that fail to initiate the required communication for two or
more quarters will be ineligible to participate in the allocation
process for securities for a minimum of one month.
The Exchange has also proposed certain provisions designed to
prevent the misuse of material non-public information. First, only
designated senior officials of the issuer who are at or above the rank
of Corporate Secretary, and who are not involved in market or trading
operations for or on behalf the issuer, may receive these
communications. Second, employees of the DMM unit must comply with NYSE
Rule 98, which requires DMM units to protect against the misuse of
floor-based non-public order information. Third, an employee of a DMM
unit may not communicate with a listed issuer from the trading floor
via telephone--any communications from the trading floor to the listed
issuer must be made in writing via a Permitted Communications Device in
accordance with proposed NYSE Rule 36.31 and cannot take place in the
period before the open or the close of trading. Fourth, existing Rule
36.31(c) provides that a DMM's member organization must maintain
records of all written communications sent from or to the DMM via the
Permitted Communications Device. And finally, the proposal requires DMM
units to establish written policies and procedures reasonably designed
to ensure that DMMs are in compliance with the proposed rule.
The Commission believes that the proposal is reasonably designed to
prevent the misuse of material non-public information originating on
the Exchange floor and notes that, prior to 2008, NYSE Rule 106
required specialist units (the precursors to DMMs) to make themselves
available for contact with their listed issuers quarterly, with at
least one in-person meeting.\21\ For the foregoing reasons, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act.
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\21\ See Securities and Exchange Commission Release No. 58857
(Oct. 24, 2008), 73 FR 65435, 65437 (Nov. 3, 2008) (SR-NYSE-2008-52)
(approving NYSE proposal to, among other things, rescind NYSE Rule
106).
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IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2019-09 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-2019-09. 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 (https://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 a.m. and 3
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-2019-09 and should be submitted on
or before July 17, 2019.
V. Accelerated Approval of Amendment No. 1
As noted above, in Amendment No. 1, the Exchange proposes to
clarify NYSE Rule 36.31 and how a DMM unit may use permitted
communications devices. The Commission believes that the amendments to
proposed NYSE rule 36.31 are consistent with the requirements of the
Act and raise no novel regulatory issues. The amendments closely follow
existing NYSE Rule 36.31 and clearly indicate that while on the trading
floor, written communications can only come from a permitted
communications device to the listed issuer. The Commission finds that
Amendment No. 1 is reasonably designed to prevent fraudulent and
manipulative acts and practices and to protect investors and the
public. Accordingly, the Commission finds good cause, pursuant to
Section 19(b)(2) of the Act, to approve the proposal, as modified by
Amendment No. 1, on an accelerated basis.
VI. Conclusion
It is therefore ordered that, pursuant to Section 19(b)(2) of the
Act,\22\ the proposed rule change (SR-NYSE-2019-09), as modified by
Amendment No. 1, be, and it hereby is, approved on an accelerated
basis.
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\22\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-13535 Filed 6-25-19; 8:45 am]
BILLING CODE 8011-01-P
