Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add Commentary .04 to Rule 7.35A To Provide DMMs, for a Temporary Period, With Limited Remote Access to Floor-Based Systems, 23413-23416 [2020-08818]
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Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Notices
designates the proposal operative upon
filing.15
At any time within 60 days of the
filing of this 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeEDGA–2020–011 on the subject
line.
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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–CboeEDGA–2020–011. 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,
15 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGA–2020–011, and
should be submitted on or before May
18, 2020.
Floor facilities or after the Exchange
closes on May 15, 2020, the Exchange
would provide a DMM remote access to
Floor-based systems for the sole purpose
of effecting a manual (1) IPO Auction,
or (2) Core Open Auction in connection
with a listed company’s post-IPO public
offering. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
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.
[FR Doc. 2020–08823 Filed 4–24–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88705; File No. SR–NYSE–
2020–35]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Add
Commentary .04 to Rule 7.35A To
Provide DMMs, for a Temporary
Period, With Limited Remote Access to
Floor-Based Systems
April 21, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’),2 and Rule 19b–4 thereunder,3
notice is hereby given that on April 17,
2020, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add
Commentary .04 to Rule 7.35A to
provide that, for a temporary period that
begins April 17, 2020, and ends on the
earlier of the reopening of the Trading
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add
Commentary .04 to Rule 7.35A to
provide that, for a temporary period that
begins April 17, 2020, and ends on the
earlier of the reopening of the Trading
Floor facilities or after the Exchange
closes on May 15, 2020, the Exchange
would provide a DMM remote access to
Floor-based systems for the sole purpose
of effecting a manual (1) IPO Auction,
or (2) Core Open Auction in connection
with a listed company’s post-IPO public
offering.
Background
Since March 9, 2020, markets
worldwide have been experiencing
unprecedented market-wide declines
and volatility because of the ongoing
spread of COVID–19. Beginning on
March 16, 2020, to slow the spread of
COVID–19 through social-distancing
measures, significant limitations were
placed on large gatherings throughout
the country.
On March 18, 2020, the CEO of the
Exchange made a determination under
Rule 7.1(c)(3) that, beginning March 23,
2020, the Trading Floor facilities located
at 11 Wall Street in New York City
would close and the Exchange would
move, on a temporary basis, to fully
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entry to the Trading Floor to effect manually
a Core Open Auction in connection with a
listed company’s post-IPO public offering.
electronic trading.4 Pursuant to Rule
7.1(e), the CEO notified the Board of
Directors of the Exchange of this
determination.
On March 26, 2020, the Exchange
amended Rule 7.35A to add
Commentary .02,5 which provides:
For a temporary period that begins on
March 26, 2020 and ends on the earlier of the
reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020,
the Exchange will permit a DMM limited
entry to the Trading Floor to effect an IPO
Auction manually. For such an IPO Auction,
the Exchange will disseminate the following
Auction Imbalance Information provided by
the DMM via Trader Update: the Imbalance
Reference Price; the Paired Quantity; the
Unpaired Quantity; and the Side of the
Unpaired Quantity. The Exchange will
publish such Trader Update(s) promptly after
each publication by the DMM of a preopening indication for such security. The
Trader Update will also include the preopening indication range.
As described in the Rule 7.35A Filing,
the Exchange added this Commentary
because, while the Trading Floor is
temporarily closed, Designated Market
Makers (‘‘DMMs’’) cannot engage in any
manual actions, such as facilitating an
Auction manually or publishing preopening indications before a Core Open
or Trading Halt Auction. Commentary
.02 to Rule 7.35A permits entry to the
Trading Floor to a single employee from
the DMM member organization assigned
to such security so that this DMM can
access the Floor-based systems used to
effect an Auction manually, and
specifies the information that would be
included in a Trader Update in advance
of such IPO Auction.
On March 27, 2020, the Exchange
effected an IPO Auction pursuant to
Commentary .02 to Rule 7.35A.
On April 2, 2020, the Exchange
amended Rule 7.35A to add
Commentary .03,6 which provides:
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For a temporary period that begins on
April 2, 2020 and ends on the earlier of the
reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020,
the Exchange will permit a DMM limited
4 The Exchange’s current rules establish how the
Exchange will function fully-electronically. The
CEO also closed the NYSE American Options
Trading Floor, which is located at the same 11 Wall
Street facilities, and the NYSE Arca Options
Trading Floor, which is located in San Francisco,
CA. See Press Release, dated March 18, 2020,
available here: https://ir.theice.com/press/pressreleases/all-categories/2020/03-18-2020-204202110.
5 See Securities Exchange Act Release No. 88488
(March 26, 2020) (SR–NYSE–2020–23), 85 FR 18286
(April 1, 2020) (Notice of filing and immediate
effectiveness of proposed rule change) (‘‘Rule 7.35A
Filing’’).
6 See Securities Exchange Act Release No. 88546
(April 2, 2020) (SR–NYSE–2020–28), 85 FR 19782
(April 8, 2020) (Notice of filing and immediate
effectiveness of proposed rule change).
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Similar to the rationale described in
the Rule 7.35A Filing, the Exchange
added this Commentary because, while
the Trading Floor is temporarily closed,
DMMs cannot engage in a manual Core
Open Auction for a post-IPO public
offering.
On April 2, 2020, the Exchange
effected a post-IPO public offering
pursuant to Commentary .03 to Rule
7.35A
Proposed Rule Change
The Exchange proposes to add
Commentary .04 to Rule 7.35A to
provide that, for a temporary period that
begins April 17, 2020, and ends on the
earlier of the reopening of the Trading
Floor facilities or after the Exchange
closes on May 15, 2020, the Exchange
would provide a DMM remote access to
Floor-based systems for the sole purpose
of effecting a manual (1) IPO Auction,
or (2) Core Open Auction in connection
with a listed company’s post-IPO public
offering.
As noted above, during the temporary
period while the Trading Floor is
closed, the Exchange has permitted
limited reentry to the Trading Floor for
the purposes of effecting an IPO Auction
and a post-IPO public offering.
However, during this period, the
business continuity plans implemented
by different DMM member organizations
may not permit one of their employees
to travel to the Trading Floor for the
purpose of effecting an IPO or post-IPO
public offering pursuant to Commentary
.02 or .03 to Rule 7.35A.
Accordingly, the Exchange has
developed technology that can be used
as a stopgap during the period when the
Trading Floor is temporarily closed to
enable a DMM to manually effect an
Auction without being present on the
Trading Floor. This technology is
intended to be a temporary solution to
respond to the unique circumstances
during the period when the Trading
Floor is closed as a precaution to
prevent the spread of COVID–19.
This proposed temporary technology
solution would provide a DMM with
remote access to NYSE trading systems
that are located on the Trading Floor
that DMMs use to facilitate auctions
manually. This interim technology
solution requires manual intervention
by both the DMM and Exchange staff for
each Auction, and therefore the
Exchange does not believe it would be
feasible to deploy this remote-access
technology to all securities. However,
for those IPO Auctions and Core Open
Auctions for post-IPO public offerings
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that the Exchange believes should be
effected manually during the temporary
period when the Trading Floor is
closed, this remote-access technology
provides an alternative to a DMM whose
firm may determine that travel to and
entry to the Trading Floor would not be
advisable or possible during this
temporary period.
Because this limited scope remoteaccess technology is now available to all
DMM firms, the Exchange proposes to
add Commentary .04 to Rule 7.35A to
specify that the Exchange would
provide a DMM remote access to Floorbased systems for the sole purpose of
effecting a manual (1) IPO Auction, or
(2) Core Open Auction for a listed
company’s post-IPO public offering.
Similar to an IPO Auction that would
be effected under current Commentary
.02 to Rule 7.35A, if a DMM uses this
remote-access technology to manually
effect an IPO Auction or Core Open
Auction for a post-IPO public offering,
the Exchange would arrange for a Floor
Governor to be available to the DMM via
telephone for such Auctions to approve
the publication of any pre-opening
indications.7 In addition, Exchange staff
would be in communication via
telephone with the lead underwriter for
such IPO Auction or Core Open Auction
for a post-IPO public offering and would
separately convey to the DMM via
telephone information that the
underwriter would normally convey to
the DMM via a Floor broker, such as
when the underwriter has entered all
interest for such Auction.8 The
Exchange staff person providing this
communication link would use separate
telephone lines to communicate with
the underwriter and to communicate
with the DMM.9 The Exchange will
arrange for any such calls to be
7 See Rule 7.35A(d)(4)(A) (‘‘Publication of a preopening indication requires the supervision and
approval of a Floor Governor.’’) The Exchange will
arrange for a qualified ICE employee that has been
designated as a Floor Governor to perform this
function. See Rule 46(b)(v).
8 Rule 36.30 provides that a DMM unit may
maintain a telephone line at its stock trading post
to the off-Floor offices of the DMM unit, the unit’s
clearing firm, or to persons providing non-trading
related services. Accordingly, pursuant to this Rule,
on the Trading Floor, a DMM cannot have a
telephone line that connects to an underwriter for
an IPO. With this proposed remote-access
functionality, the Exchange proposes that DMMs
would similarly not communicate directly with the
underwriter.
9 Depending on the circumstances of when the
relief in this proposed rule change would be
required, it is likely that the Exchange staff person
facilitating the remote access for the DMM would
also be working remotely and not on Exchange
premises. In addition, the Exchange staff person
providing such access may also be the Exchange
staff person communicating with the underwriter
and serving as the Floor Governor for this
transaction.
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conducted via an Exchange-authorized
secure teleconferencing service.
Similar to an IPO Auction effected
pursuant to Commentary .02 to Rule
7.35A, if a DMM manually effects an
IPO Auction pursuant to proposed
Commentary .04 to Rule 7.35A, the
Exchange would disseminate the
following Auction Imbalance
Information provided by the DMM via
Trader Update: The Imbalance
Reference Price; the Paired Quantity; the
Unpaired Quantity; and the Side of the
Unpaired Quantity. The Exchange
would publish such Trader Update(s)
promptly after each publication by the
DMM of a pre-opening indication for
such security. The Trader Update would
also include the pre-opening indication
range.
Because publishing such Trader
Updates would be a manual process, the
Exchange proposes to disseminate a
Trader Update following each
publication of a pre-opening indication
by the DMM.10 The Exchange proposes
to include in the Trader Update
information that a DMM would convey
on the Trading Floor during normal
operations:
• The Imbalance Reference Price,
which is the reference price that is used
for the applicable Auction to determine
the Auction Imbalance Information.11
However, unlike the Imbalance
Reference Price used for the Core Open
Auction, which is a static number, the
Imbalance Reference Price that would
be included in a Trader Update for an
IPO Auction would be a prospective
opening price manually selected by the
DMM based on the interest in the Book
at that time. The Imbalance Reference
Price would be updated by the DMM as
buy and sell interest in the Book
updates.
• The Paired Quantity, which is the
volume of better-priced and at-priced
buy shares that can be paired with
better-priced and at-priced sell shares at
the Imbalance Reference Price.12
• The Unpaired Quantity, which is
the volume of at-priced buy or sell
shares that cannot be paired at the
Imbalance Reference Price.
• The Side of the Unpaired Quantity,
which is the side (buy or sell) that
cannot be paired at the Imbalance
Reference Price.
The Exchange believes that, in the
absence of Floor brokers, this proposed
rule change would promote
transparency in advance of an IPO
10 Pre-opening indications are disseminated on
both proprietary and SIP data feeds. See Rule
7.35A(d).
11 See Rule 7.35(a)(10).
12 See Rule 7.35(a)(4)(B).
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Auction that would be manually
effected by the DMM remotely while the
Trading Floor is closed.
The Exchange has tested with each
active DMM firm and relevant Exchange
staff the proposed interim technology to
provide DMMs remote access to the
Floor-based systems that would be used
to effect a manual (1) IPO Auction; or
(2) Core Open Auction in connection
with a listed company’s post-IPO public
offering. Accordingly, the Exchange
would be able to implement the
proposed rule change immediately upon
effectiveness of this filing.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Act,13 in general, and furthers the
objectives of Section 6(b)(5) of the Act,14
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.
As a result of uncertainty related to
the ongoing spread of COVID–19, the
U.S. equities markets are experiencing
unprecedented market volatility. In
addition, social-distancing measures
have been implemented throughout the
country, including in New York City, to
reduce the spread of COVID–19.
Directly related to such socialdistancing measures, the CEO of the
Exchange made a determination under
Rule 7.1(c)(3) that beginning March 23,
2020, the Trading Floor facilities located
at 11 Wall Street in New York City
would close and the Exchange would
move, on a temporary basis, to fully
electronic trading.
The Exchange believes that the
proposed rule change would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would promote fair and orderly IPO
Auctions or Core Open Auctions in
connection with a listed company’s
post-IPO public offering. The Exchange
believes that it would promote fair and
orderly markets to provide the DMM
with mechanisms to facilitate such Core
Open Auctions manually because it
would provide flexibility for the DMM
to consider information from the
underwriter when determining when to
conduct the Core Open Auction and at
what price.
13 15
14 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00091
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23415
The Exchange believes that providing
DMMs with limited remote access to
Floor-based trading systems to manually
effect an IPO Auction or Core Open
Auction for a listed company’s post-IPO
public offering would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would provide flexibility to DMMs who
may determine that travel to and entry
to the Trading Floor would not be
advisable or possible during this
temporary period. The Exchange
believes that providing this stopgap
would promote fair and orderly markets
by providing the DMM with a limiteduse mechanism to facilitate such
Auctions manually so the DMM could
consider information from the
underwriter when determining when to
conduct the IPO Auction or specified
Core Open Auction and at what price.
The Exchange believes that the
proposed rule change would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because it
would promote fair and orderly IPO
Auctions on the Exchange by allowing
the Exchange to disseminate specified
Auction Imbalance Information in
advance of such auctions. The proposed
rule change would therefore promote
transparency in advance of an IPO
Auction that would be manually
effected by a DMM remotely while the
Trading Floor is closed.
The Exchange believes that, by clearly
stating that this relief will be in effect
through the earlier of the reopening of
the Trading Floor facilities or the close
of the Exchange on May 15, 2020,
market participants will have advance
notice that an IPO Auction or Core Open
Auction in connection with a post-IPO
public offering may be effected
manually by the DMM during this
period, and therefore may not be
conducted at 9:30 a.m.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather is designed to ensure fair and
orderly IPO Auctions or Core Open
Auctions in connection with a listed
company’s post-IPO public offering by
providing a DMM with remote access to
Floor-based systems for the sole purpose
of effecting such Auctions manually
during a temporary period when the
Exchange Trading Floor has been closed
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in response to social-distancing
measures designed to reduce the spread
of the COVID–19 virus.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 15 and Rule
19b–4(f)(6) thereunder.16 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 17 and Rule 19b–4(f)(6)
thereunder.18
A proposed rule change filed under
Rule 19b–4(f)(6) 19 normally does not
become operative for 30 days after the
date of the filing. However, pursuant to
Rule 19b–4(f)(6)(iii),20 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposed rule change may become
operative immediately. The Exchange
states that the proposed rule change is
designed to ensure fair and orderly IPO
Auctions and Core Open Auctions in
connection with a listed company’s
post-IPO public offering during this
temporary period. The Exchange
believes that the proposed rule change
would provide greater certainty to
prospective listed companies that an
IPO Auction could be conducted by the
DMM manually in a company’s security
15 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
17 15 U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6)(iii).
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16 17
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either on the Trading Floor or remotely,
and that, in either case, the DMM would
be able to receive up-to-date information
about the offering from the underwriter
and manually price the IPO Auction.
The Commission believes that the
proposed rule change would provide
flexibility to a DMM who cannot travel
to the Trading Floor to effect a manual
IPO Auction or Core Open Auction. The
Commission notes that the Exchange
represented that it has already tested its
remote access technology and that the
Exchange is able to implement the
proposed rule change immediately.
Further, the Commission notes that the
Exchange proposes to include in the
Trader Update information that a DMM
would normally convey on the Trading
Floor during regular operations. Lastly,
the Commission notes that the proposal
is a temporary measure designed to
respond to current, unprecedented
market conditions. For these reasons,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.21
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2020–35. 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
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2020–35, and
should be submitted on or before May
18, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–08818 Filed 4–24–20; 8:45 am]
BILLING CODE 8011–01–P
• 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–2020–35 on the subject line.
21 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
PO 00000
Frm 00092
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CFR 200.30–3(a)(12), (59).
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]]>Agencies
[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23413-23416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08818]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88705; File No. SR-NYSE-2020-35]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Add Commentary .04 to Rule 7.35A To Provide DMMs, for a Temporary
Period, With Limited Remote Access to Floor-Based Systems
April 21, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on April 17, 2020, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add Commentary .04 to Rule 7.35A to
provide that, for a temporary period that begins April 17, 2020, and
ends on the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange would provide a
DMM remote access to Floor-based systems for the sole purpose of
effecting a manual (1) IPO Auction, or (2) Core Open Auction in
connection with a listed company's post-IPO public offering. The
proposed rule change is available on the Exchange's website at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add Commentary .04 to Rule 7.35A to
provide that, for a temporary period that begins April 17, 2020, and
ends on the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange would provide a
DMM remote access to Floor-based systems for the sole purpose of
effecting a manual (1) IPO Auction, or (2) Core Open Auction in
connection with a listed company's post-IPO public offering.
Background
Since March 9, 2020, markets worldwide have been experiencing
unprecedented market-wide declines and volatility because of the
ongoing spread of COVID-19. Beginning on March 16, 2020, to slow the
spread of COVID-19 through social-distancing measures, significant
limitations were placed on large gatherings throughout the country.
On March 18, 2020, the CEO of the Exchange made a determination
under Rule 7.1(c)(3) that, beginning March 23, 2020, the Trading Floor
facilities located at 11 Wall Street in New York City would close and
the Exchange would move, on a temporary basis, to fully
[[Page 23414]]
electronic trading.\4\ Pursuant to Rule 7.1(e), the CEO notified the
Board of Directors of the Exchange of this determination.
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\4\ The Exchange's current rules establish how the Exchange will
function fully-electronically. The CEO also closed the NYSE American
Options Trading Floor, which is located at the same 11 Wall Street
facilities, and the NYSE Arca Options Trading Floor, which is
located in San Francisco, CA. See Press Release, dated March 18,
2020, available here: https://ir.theice.com/press/press-releases/all-categories/2020/03-18-2020-204202110.
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On March 26, 2020, the Exchange amended Rule 7.35A to add
Commentary .02,\5\ which provides:
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 88488 (March 26,
2020) (SR-NYSE-2020-23), 85 FR 18286 (April 1, 2020) (Notice of
filing and immediate effectiveness of proposed rule change) (``Rule
7.35A Filing'').
For a temporary period that begins on March 26, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange will permit
a DMM limited entry to the Trading Floor to effect an IPO Auction
manually. For such an IPO Auction, the Exchange will disseminate the
following Auction Imbalance Information provided by the DMM via
Trader Update: the Imbalance Reference Price; the Paired Quantity;
the Unpaired Quantity; and the Side of the Unpaired Quantity. The
Exchange will publish such Trader Update(s) promptly after each
publication by the DMM of a pre-opening indication for such
security. The Trader Update will also include the pre-opening
---------------------------------------------------------------------------
indication range.
As described in the Rule 7.35A Filing, the Exchange added this
Commentary because, while the Trading Floor is temporarily closed,
Designated Market Makers (``DMMs'') cannot engage in any manual
actions, such as facilitating an Auction manually or publishing pre-
opening indications before a Core Open or Trading Halt Auction.
Commentary .02 to Rule 7.35A permits entry to the Trading Floor to a
single employee from the DMM member organization assigned to such
security so that this DMM can access the Floor-based systems used to
effect an Auction manually, and specifies the information that would be
included in a Trader Update in advance of such IPO Auction.
On March 27, 2020, the Exchange effected an IPO Auction pursuant to
Commentary .02 to Rule 7.35A.
On April 2, 2020, the Exchange amended Rule 7.35A to add Commentary
.03,\6\ which provides:
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 88546 (April 2,
2020) (SR-NYSE-2020-28), 85 FR 19782 (April 8, 2020) (Notice of
filing and immediate effectiveness of proposed rule change).
For a temporary period that begins on April 2, 2020 and ends on
the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange will permit
a DMM limited entry to the Trading Floor to effect manually a Core
Open Auction in connection with a listed company's post-IPO public
---------------------------------------------------------------------------
offering.
Similar to the rationale described in the Rule 7.35A Filing, the
Exchange added this Commentary because, while the Trading Floor is
temporarily closed, DMMs cannot engage in a manual Core Open Auction
for a post-IPO public offering.
On April 2, 2020, the Exchange effected a post-IPO public offering
pursuant to Commentary .03 to Rule 7.35A
Proposed Rule Change
The Exchange proposes to add Commentary .04 to Rule 7.35A to
provide that, for a temporary period that begins April 17, 2020, and
ends on the earlier of the reopening of the Trading Floor facilities or
after the Exchange closes on May 15, 2020, the Exchange would provide a
DMM remote access to Floor-based systems for the sole purpose of
effecting a manual (1) IPO Auction, or (2) Core Open Auction in
connection with a listed company's post-IPO public offering.
As noted above, during the temporary period while the Trading Floor
is closed, the Exchange has permitted limited reentry to the Trading
Floor for the purposes of effecting an IPO Auction and a post-IPO
public offering. However, during this period, the business continuity
plans implemented by different DMM member organizations may not permit
one of their employees to travel to the Trading Floor for the purpose
of effecting an IPO or post-IPO public offering pursuant to Commentary
.02 or .03 to Rule 7.35A.
Accordingly, the Exchange has developed technology that can be used
as a stopgap during the period when the Trading Floor is temporarily
closed to enable a DMM to manually effect an Auction without being
present on the Trading Floor. This technology is intended to be a
temporary solution to respond to the unique circumstances during the
period when the Trading Floor is closed as a precaution to prevent the
spread of COVID-19.
This proposed temporary technology solution would provide a DMM
with remote access to NYSE trading systems that are located on the
Trading Floor that DMMs use to facilitate auctions manually. This
interim technology solution requires manual intervention by both the
DMM and Exchange staff for each Auction, and therefore the Exchange
does not believe it would be feasible to deploy this remote-access
technology to all securities. However, for those IPO Auctions and Core
Open Auctions for post-IPO public offerings that the Exchange believes
should be effected manually during the temporary period when the
Trading Floor is closed, this remote-access technology provides an
alternative to a DMM whose firm may determine that travel to and entry
to the Trading Floor would not be advisable or possible during this
temporary period.
Because this limited scope remote-access technology is now
available to all DMM firms, the Exchange proposes to add Commentary .04
to Rule 7.35A to specify that the Exchange would provide a DMM remote
access to Floor-based systems for the sole purpose of effecting a
manual (1) IPO Auction, or (2) Core Open Auction for a listed company's
post-IPO public offering.
Similar to an IPO Auction that would be effected under current
Commentary .02 to Rule 7.35A, if a DMM uses this remote-access
technology to manually effect an IPO Auction or Core Open Auction for a
post-IPO public offering, the Exchange would arrange for a Floor
Governor to be available to the DMM via telephone for such Auctions to
approve the publication of any pre-opening indications.\7\ In addition,
Exchange staff would be in communication via telephone with the lead
underwriter for such IPO Auction or Core Open Auction for a post-IPO
public offering and would separately convey to the DMM via telephone
information that the underwriter would normally convey to the DMM via a
Floor broker, such as when the underwriter has entered all interest for
such Auction.\8\ The Exchange staff person providing this communication
link would use separate telephone lines to communicate with the
underwriter and to communicate with the DMM.\9\ The Exchange will
arrange for any such calls to be
[[Page 23415]]
conducted via an Exchange-authorized secure teleconferencing service.
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\7\ See Rule 7.35A(d)(4)(A) (``Publication of a pre-opening
indication requires the supervision and approval of a Floor
Governor.'') The Exchange will arrange for a qualified ICE employee
that has been designated as a Floor Governor to perform this
function. See Rule 46(b)(v).
\8\ Rule 36.30 provides that a DMM unit may maintain a telephone
line at its stock trading post to the off-Floor offices of the DMM
unit, the unit's clearing firm, or to persons providing non-trading
related services. Accordingly, pursuant to this Rule, on the Trading
Floor, a DMM cannot have a telephone line that connects to an
underwriter for an IPO. With this proposed remote-access
functionality, the Exchange proposes that DMMs would similarly not
communicate directly with the underwriter.
\9\ Depending on the circumstances of when the relief in this
proposed rule change would be required, it is likely that the
Exchange staff person facilitating the remote access for the DMM
would also be working remotely and not on Exchange premises. In
addition, the Exchange staff person providing such access may also
be the Exchange staff person communicating with the underwriter and
serving as the Floor Governor for this transaction.
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Similar to an IPO Auction effected pursuant to Commentary .02 to
Rule 7.35A, if a DMM manually effects an IPO Auction pursuant to
proposed Commentary .04 to Rule 7.35A, the Exchange would disseminate
the following Auction Imbalance Information provided by the DMM via
Trader Update: The Imbalance Reference Price; the Paired Quantity; the
Unpaired Quantity; and the Side of the Unpaired Quantity. The Exchange
would publish such Trader Update(s) promptly after each publication by
the DMM of a pre-opening indication for such security. The Trader
Update would also include the pre-opening indication range.
Because publishing such Trader Updates would be a manual process,
the Exchange proposes to disseminate a Trader Update following each
publication of a pre-opening indication by the DMM.\10\ The Exchange
proposes to include in the Trader Update information that a DMM would
convey on the Trading Floor during normal operations:
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\10\ Pre-opening indications are disseminated on both
proprietary and SIP data feeds. See Rule 7.35A(d).
---------------------------------------------------------------------------
The Imbalance Reference Price, which is the reference
price that is used for the applicable Auction to determine the Auction
Imbalance Information.\11\ However, unlike the Imbalance Reference
Price used for the Core Open Auction, which is a static number, the
Imbalance Reference Price that would be included in a Trader Update for
an IPO Auction would be a prospective opening price manually selected
by the DMM based on the interest in the Book at that time. The
Imbalance Reference Price would be updated by the DMM as buy and sell
interest in the Book updates.
---------------------------------------------------------------------------
\11\ See Rule 7.35(a)(10).
---------------------------------------------------------------------------
The Paired Quantity, which is the volume of better-priced
and at-priced buy shares that can be paired with better-priced and at-
priced sell shares at the Imbalance Reference Price.\12\
---------------------------------------------------------------------------
\12\ See Rule 7.35(a)(4)(B).
---------------------------------------------------------------------------
The Unpaired Quantity, which is the volume of at-priced
buy or sell shares that cannot be paired at the Imbalance Reference
Price.
The Side of the Unpaired Quantity, which is the side (buy
or sell) that cannot be paired at the Imbalance Reference Price.
The Exchange believes that, in the absence of Floor brokers, this
proposed rule change would promote transparency in advance of an IPO
Auction that would be manually effected by the DMM remotely while the
Trading Floor is closed.
The Exchange has tested with each active DMM firm and relevant
Exchange staff the proposed interim technology to provide DMMs remote
access to the Floor-based systems that would be used to effect a manual
(1) IPO Auction; or (2) Core Open Auction in connection with a listed
company's post-IPO public offering. Accordingly, the Exchange would be
able to implement the proposed rule change immediately upon
effectiveness of this filing.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\13\ in general, and furthers the objectives of Section 6(b)(5) of
the Act,\14\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
As a result of uncertainty related to the ongoing spread of COVID-
19, the U.S. equities markets are experiencing unprecedented market
volatility. In addition, social-distancing measures have been
implemented throughout the country, including in New York City, to
reduce the spread of COVID-19. Directly related to such social-
distancing measures, the CEO of the Exchange made a determination under
Rule 7.1(c)(3) that beginning March 23, 2020, the Trading Floor
facilities located at 11 Wall Street in New York City would close and
the Exchange would move, on a temporary basis, to fully electronic
trading.
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would promote fair and orderly IPO
Auctions or Core Open Auctions in connection with a listed company's
post-IPO public offering. The Exchange believes that it would promote
fair and orderly markets to provide the DMM with mechanisms to
facilitate such Core Open Auctions manually because it would provide
flexibility for the DMM to consider information from the underwriter
when determining when to conduct the Core Open Auction and at what
price.
The Exchange believes that providing DMMs with limited remote
access to Floor-based trading systems to manually effect an IPO Auction
or Core Open Auction for a listed company's post-IPO public offering
would remove impediments to and perfect the mechanism of a free and
open market and a national market system because it would provide
flexibility to DMMs who may determine that travel to and entry to the
Trading Floor would not be advisable or possible during this temporary
period. The Exchange believes that providing this stopgap would promote
fair and orderly markets by providing the DMM with a limited-use
mechanism to facilitate such Auctions manually so the DMM could
consider information from the underwriter when determining when to
conduct the IPO Auction or specified Core Open Auction and at what
price.
The Exchange believes that the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would promote fair and orderly IPO
Auctions on the Exchange by allowing the Exchange to disseminate
specified Auction Imbalance Information in advance of such auctions.
The proposed rule change would therefore promote transparency in
advance of an IPO Auction that would be manually effected by a DMM
remotely while the Trading Floor is closed.
The Exchange believes that, by clearly stating that this relief
will be in effect through the earlier of the reopening of the Trading
Floor facilities or the close of the Exchange on May 15, 2020, market
participants will have advance notice that an IPO Auction or Core Open
Auction in connection with a post-IPO public offering may be effected
manually by the DMM during this period, and therefore may not be
conducted at 9:30 a.m.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather is designed
to ensure fair and orderly IPO Auctions or Core Open Auctions in
connection with a listed company's post-IPO public offering by
providing a DMM with remote access to Floor-based systems for the sole
purpose of effecting such Auctions manually during a temporary period
when the Exchange Trading Floor has been closed
[[Page 23416]]
in response to social-distancing measures designed to reduce the spread
of the COVID-19 virus.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative immediately. The Exchange states that
the proposed rule change is designed to ensure fair and orderly IPO
Auctions and Core Open Auctions in connection with a listed company's
post-IPO public offering during this temporary period. The Exchange
believes that the proposed rule change would provide greater certainty
to prospective listed companies that an IPO Auction could be conducted
by the DMM manually in a company's security either on the Trading Floor
or remotely, and that, in either case, the DMM would be able to receive
up-to-date information about the offering from the underwriter and
manually price the IPO Auction. The Commission believes that the
proposed rule change would provide flexibility to a DMM who cannot
travel to the Trading Floor to effect a manual IPO Auction or Core Open
Auction. The Commission notes that the Exchange represented that it has
already tested its remote access technology and that the Exchange is
able to implement the proposed rule change immediately. Further, the
Commission notes that the Exchange proposes to include in the Trader
Update information that a DMM would normally convey on the Trading
Floor during regular operations. Lastly, the Commission notes that the
proposal is a temporary measure designed to respond to current,
unprecedented market conditions. For these reasons, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2020-35 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2020-35. 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 comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2020-35, and should be submitted on
or before May 18, 2020.
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\22\ 17 CFR 200.30-3(a)(12), (59).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08818 Filed 4-24-20; 8:45 am]
BILLING CODE 8011-01-P
