Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2, To Make Permanent Commentaries to Rule 7.35A and Commentaries to Rule 7.35B and To Make Related Changes to Rules 7.32, 7.35C, 46B, and 47, 40885-40893 [2021-16122]

Download as PDF Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices significant size? 22 What are commenters’ views on whether there is a reasonable likelihood that a person attempting to manipulate the Shares would also have to trade on CME to manipulate the Shares? What of the Exchange’s assertion that the combination of (a) CME bitcoin futures leading price discovery; (b) the overall size of the bitcoin market; and (c) the ability for market participants to buy or sell large amounts of bitcoin without significant market impact helps to prevent the Shares from becoming the predominant force on pricing in either the bitcoin spot or CME bitcoin futures markets? 23 5. What are commenters’ views on the Exchange’s statement, generally, that bitcoin is resistant to price manipulation and that other means to prevent fraudulent and manipulative acts and practices exist to justify dispensing with the requisite surveillance sharing agreement with a regulated market of significant size related to bitcoin? 24 What of the Exchange’s assertion in support of such statement that significant liquidity in the spot market and the impact of market orders on the overall price of bitcoin mean that attempting to move the price of bitcoin is costly? 25 What of the assertion that offering only in-kind creations and redemptions provides unique protections against potential attempts to manipulate the Shares and that the price the Sponsor uses to value the Trust’s bitcoin ‘‘is not particularly important’’? 26 jbell on DSKJLSW7X2PROD with NOTICES III. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Section 6(b)(5) or any other provision of the Act, and the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an 22 See id. at 22486. 23 See id. at 22492. 24 See id. at 22491 n.55. 25 See id. at 22492. 26 See id. VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 opportunity to make an oral presentation.27 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by August 19, 2021. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by September 2, 2021. 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– CboeBZX–2021–029 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–CboeBZX–2021–029. 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 27 Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 40885 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–CboeBZX–2021–029 and should be submitted by August 19, 2021. Rebuttal comments should be submitted by September 2, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–16121 Filed 7–28–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92480; File No. SR–NYSE– 2020–95] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2, To Make Permanent Commentaries to Rule 7.35A and Commentaries to Rule 7.35B and To Make Related Changes to Rules 7.32, 7.35C, 46B, and 47 July 23, 2021. I. Introduction On November 30, 2020, New York Stock Exchange, Inc. (‘‘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 make permanent Commentaries .01(a) and (b) and .06 to Rule 7.35A (DMMFacilitated Core Open and Trading Halt Auctions) and Commentaries .01 and .03 to Rule 7.35B (DMM-Facilitated Closing Auctions) and to make related changes to NYSE Rules 7.32 (Order Entry), 7.35C (Exchange-Facilitated Closing Auctions), 46B (Regulatory Trading Official), and 47 (Floor Officials—Unusual Situations). The proposed rule change was published for comment in the Federal Register on December 1, 2020.3 On January 13, 2021, the Commission extended to March 1, 2021, the time period in which to approve the 28 17 CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 90495 (Nov. 24, 2020), 85 FR 77304 (Dec. 1, 2020) (SR– NYSE–2020–95) (‘‘Notice’’). 1 15 E:\FR\FM\29JYN1.SGM 29JYN1 40886 Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices proposal, disapprove the proposal, or institute proceedings to determine whether to approve or disapprove the proposal.4 On March 1, 2021, the Commission instituted proceedings under Section 19(b)(2)(B) of the Act 5 to determine whether to approve or disapprove the proposed rule change.6 On April 12, 2021, the Exchange filed Amendment No. 1 to the proposed rule change with the Commission and submitted Amendment No. 1 for inclusion in the public comment file.7 On May 17, 2021, the Exchange filed Amendment No. 2 to the proposed rule change with the Commission, which superseded the original filing, as amended by Amendment No. 1, in its entirety, and submitted Amendment No. 2 for inclusion in the public comment file.8 On May 24, 2021, the Commission extended to July 29, 2021, the time period in which to approve or disapprove the proposal.9 The Commission has received no comment letters on the proposed rule change. The Commission is publishing notice of the filing of Amendment No. 2 to solicit comment from interested persons, and is approving the proposed rule change, as modified by Amendment No. 2, on an accelerated basis. jbell on DSKJLSW7X2PROD with NOTICES II. Self-Regulatory Organization’s Description of the Proposal, as Modified by Amendment No. 2 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. 4 See Securities Exchange Act Release No. 90917 (Jan. 13, 2021), 86 FR 6403 (Jan. 21, 2021). 5 15 U.S.C. 78s(b)(2)(B). 6 See Securities Exchange Act Release No. 91227, (Mar. 1, 2021), 86 FR 12991 (Mar. 5, 2021) (‘‘Order Instituting Proceedings’’). 7 See Letter from Martha Redding, Associate General Counsel, NYSE LLC, to Secretary, Commission (April 12, 2021). Amendment No. 1 is available at https://www.sec.gov/comments/sr-nyse2020-95/srnyse202095-8662901-235314.pdf. 8 In Amendment No. 2, the Exchange proposes to: (i) Amend Rule 7.35A(c)(1)(H) to provide a 5% price parameter and eliminate the volume restrictions for DMM-facilitated Trading Halt Auctions; and (ii) amend Rule 7.35A(d)(3)(B) to provide that the Applicable Price Range for determining whether to publish a pre-opening indication for a Trading Halt Auction would be 5% for securities with an Indication Reference Price over $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. See Letter from Martha Redding, Associate General Counsel, NYSE LLC, to Secretary, Commission (May 17, 2021). Amendment No. 2 is available at https://www.sec.gov/comments/sr-nyse2020-95/srnyse202095-8807418-237986.pdf. 9 See Securities Exchange Act Release No. 91975 (May 24, 2021), 86 FR 28921 (May 28, 2021). VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. to DMMs or after the Exchange closes on April 30, 2021.15 Specifically, Commentary .01 to Rule 7.35A provides: A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change For a temporary period that begins March 23, 2020, when the Trading Floor facilities have been closed pursuant to Rule 7.1(c)(3), and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020: (a) The percentage price parameters in paragraph (c)(1)(G) and (c)(2) of this Rule are suspended and a DMM may not effect a Core Open or Trading Halt Auction electronically if the Core Open or Trading Halt Auction Price will be more than 10% away from the Consolidated Last Sale Price. (b) The volume parameters in paragraph (c)(1)(H) of this Rule are suspended. (c) The requirement to publish a preopening indication pursuant to paragraph (d) of this Rule before either a Core Open or Trading Halt Auction is suspended. 1. Purpose The Exchange proposes to make permanent Commentaries .01(a) and (b) and .06 to Rule 7.35A (DMM-Facilitated Core Open and Trading Halt Auctions) and Commentaries .01 and .03 to Rule 7.35B (DMM-Facilitated Closing Auctions) and make related changes to Rules 7.32 (Order Entry), 7.35C (Exchange-Facilitated Closing Auctions), 46B (Regulatory Trading Official), and 47 (Floor Officials— Unusual Situations).10 Background In connection with the closing of the Trading Floor facilities located at 11 Wall Street in New York City as of March 23, 2020 and moving the Exchange, on a temporary basis, to fully electronic trading,11 and subsequent reopening of the Trading Floor on a limited basis first to Floor Brokers on May 26, 2020 12 and then to DMMs on June 15, 2020,13 the Exchange added Commentaries .01 and .06 to Rule 7.35A and Commentaries .01 and .03 to 7.35B.14 Currently, these Commentaries are in effect until the earlier of a full reopening of the Trading Floor facilities 10 In this Amendment No. 2, the Exchange proposes that the percentage parameter that would be applicable to when a DMM may electronically facilitate a Trading Halt Auction or would be required to publish a pre-opening indication would be 5% instead of 10%. 11 Pursuant to Rule 7.1(e), the CEO notified the Board of Directors of the Exchange of her determination under Rule 7.1(c)(3). The Exchange’s rules establish how the Exchange will function fully-electronically. See Press Release, dated March 18, 2020, available here: https://ir.theice.com/press/ press-releases/all-categories/2020/03-18-2020204202110. 12 See Securities Exchange Act Release No. 88933 (May 22, 2020), 85 FR 32059 (May 28, 2020) (SR– NYSE–2020–47) (Notice of filing and immediate effectiveness of proposed rule change). 13 See Securities Exchange Act Release No. 89086 (June 17, 2020) (SR–NYSE–2020–52) (Notice of filing and immediate effectiveness of proposed rule change). 14 See Securities Exchange Act Release Nos. 88444 (March 20, 2020), 85 FR 17141 (March 26, 2020) (SR–NYSE–2020–22) (amending Rules 7.35A to add Commentary .01, 7.35B to add Commentary .01, and 7.35C to add Commentary .02) and 89086 (June 17, 2020), 85 FR 37712 (SR–NYSE–2020–52) (amending Rules 7.35A to add Commentary .06, 7.35B to add Commentary .03, 76 to add Supplementary Material 20, and Supplementary Material .30 to Rule 36). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 Commentary .06 to Rule 7.35A provides: For a temporary period that begins on June 17, 2020 and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020, the Applicable Price Range specified in paragraphs (d)(3)(A) and (B) of this Rule is suspended and the Applicable Price Range will be 10% for securities with an Indication Reference Price higher than $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00. Commentary .01 to Rule 7.35B provides: For a temporary period that begins March 23, 2020, when the Trading Floor facilities have been closed pursuant to Rule 7.1(c)(3), and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020: (a) The percentage price parameters in paragraph (c)(1)(G) of this Rule are suspended and a DMM may not effect a Closing Auction electronically if the Closing Auction Price will be more than 10% away from the Exchange Last Sale Price. (b) The volume parameters in paragraph (c)(1)(H) of this Rule are suspended Finally, Commentary .03 to Rule 7.35B provides: 15 See Securities Exchange Act Release No. 90795 (December 23, 2020), 85 FR 86608 (December 30, 2020) (SR–NYSE–2020–106) (Notice of filing and immediate effectiveness of proposed rule change to extend the temporary period for Commentaries to Rules 7.35, 7.35A, 7.35B, and 7.35C; and temporary rule relief in Rule 36.30 to end on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on April 30, 2021). [The Commission notes that, after Amendment No. 2 was filed, the Exchange extended the outside date for effectiveness of the temporary relief from April 30, 2021, to August 31, 2021. See Securities Exchange Act Release No. 91778 (May 5, 2021), 85 FR 25902 (May 11, 2021).] E:\FR\FM\29JYN1.SGM 29JYN1 Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices For a temporary period that begins on June 17, 2020 and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020, Floor Broker Interest will not be eligible to participate in the Closing Auction. Proposed Rule Changes Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions jbell on DSKJLSW7X2PROD with NOTICES The Exchange proposes to make permanent the parameters for DMMfacilitated electronic auctions that are currently in effect on a temporary basis as set forth in Commentaries .01(a) and (b) to Rule 7.35A and Commentary .01 to Rule 7.35B, with one proposed change for Trading Halt Auctions. Current Rules 7.35A(c)(1)(G) and (H) provide that a DMM may not effect a Core Open or Trading Halt Auction electronically if (i) the Auction Price will be more than 4% away from the Consolidated Last Sale Price,16 or (ii) the paired volume for the Auction will be more than 1,500 round lots for securities with an average opening volume of 1,000 round lots or fewer in the previous calendar quarter, or 5,000 round lots for securities with an average opening volume of over 1,000 round lots in the previous calendar quarter. Rule 7.35A(c)(2) further provides that if as of 9:00 a.m., the E-mini S&P 500 Futures are +/¥2% from the prior day’s closing price of the E-mini S&P 500 Futures, or if the Exchange determines that it is necessary or appropriate for the maintenance of a fair and orderly market, a DMM may effect an opening or reopening electronically if the Auction Price will be up to 8% away from Consolidated Last Sale Price, without any volume limitations. Current Rule 7.35B(c)(1)(G) and (H) provide that a DMM may not effect a Closing Auction electronically if (i) the Auction Price will be more than a designated percentage away from the Exchange Last Sale Price,17 or (ii) the paired volume for the Closing Auction will be more than 1,000 round lots for such security. The designated percentages are currently as follows: 16 The term ‘‘Consolidated Last Sale Price’’ is defined in Rule 7.35 to mean the most recent consolidated last-sale eligible trade in a security on any market during Core Trading Hours on that trading day, and if none, the Official Closing Price from the prior trading day for that security. 17 The term ‘‘Exchange Last Sale Price’’ is defined in Rule 7.35 to mean the most recent trade on the Exchange of a round lot or more in a security during Core Trading Hours on that trading day, and if none, the Official Closing Price from the prior trading day for that security. VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 40887 Core Open Auctions occurring close to the beginning of Core Trading Hours. For example, in February 2020, 85.9% $25.00 and below ..................... 5 of all Core Open Auctions, and 75.9% $25.01 to $50.00 ...................... 4 of Core Open Auctions in S&P 500 Above $50.00 ........................... 2 securities, occurred within two seconds of 9:30 a.m. Eastern Time. By contrast, The Exchange proposes to make the for the period July 2020 through October price percentage parameter 10% and 2020, 95.9% of all Core Open Auctions, eliminate the volume restrictions for and 89.6% of Core Open Auctions in DMM-facilitated Core Open Auctions and Closing Auctions. These parameters S&P 500 securities, occurred within two seconds of 9:30 a.m. Eastern Time. are currently in effect on a temporary The Exchange has observed similar basis pursuant to Commentaries .01(a) trends for Closing Auctions, with DMMs and (b) to Rule 7.35A and Commentary facilitating more Closing Auctions .01 to Rule 7.35B not only for Core Open electronically, which means more Auctions and Closing Auctions, but also Closing Auctions occurring closer to for Trading Halt Auctions. The 4:00 p.m. Eastern Time. In February Exchange believes that making these 2020, DMMs effected electronically 57% temporary Commentaries permanent of all Closing Auctions and 5.5% of would promote fair and orderly DMMClosing Auctions in S&P 500 securities. facilitated Core Open Auctions and By contrast, for the period July 2020 Closing Auctions. For DMM-facilitated through October 2020, DMMs effected Trading Halt Auctions, the Exchange electronically 90.9% of all Closing proposes to make the price parameter Auctions, and 53.6% of Closing 5% (instead of 10%) and eliminate the Auctions in S&P 500 securities. volume restrictions. Currently, DMM electronicallyIn particular, DMMs have been facilitated Closing Auctions occur operating with the temporary shortly after 4:00 p.m. Eastern Time.18 parameters for Core Open, Trading Halt Accordingly, the increased number of Auctions, and Closing Auctions since DMM electronically-facilitated Closing March 23, 2020. Accordingly, these Auctions translates to an increase in the temporary parameters have been in number of Closing Auctions that occur effect not only during the period when close to 4:00 p.m. Eastern Time. Because the Trading Floor was closed in full, but the temporary wider percentage also for the period when the Trading parameters and eliminated volume Floor has partially reopened to reduced parameters have resulted in more Core staff of DMM and Floor brokers firms. In Open Auctions and Closing Auctions addition, these temporary parameters occurring at 9:30 a.m. Eastern Time or have been in effect during periods of 4:00 p.m. Eastern Time, respectively, both extreme volatility and high trading the Exchange believes that making these volumes. Accordingly, DMMs have had temporary parameters permanent would over six months’ of experience of support the continued fair and orderly electronically facilitating Auctions operation of Auctions on the Exchange. within these temporary parameters and The Exchange also notes that during apply them during varying market the period when the temporary conditions. parameters have been in place, the The Exchange has observed that Exchange has not observed greater during the period when these temporary auction price dislocation compared to parameters have been in effect, DMMs the period immediately preceding have facilitated more Core Open implementation of these temporary Auctions electronically, resulting in a parameters, and has even observed higher percentage of Core Open modest improvement. The Exchange Auctions occurring within two seconds defines auction price dislocation as the of 9:30 a.m. Eastern Time. For example, difference between the Core Open in February 2020, which was before the Auction price and the consolidated Trading Floor closed, DMMs effected 18 When Floor Broker Interest was eligible to electronically 85.9% of all Core Open participate in the Closing Auction, DMM Auctions and 75.9% of Core Open electronically-facilitated Closing Auctions occurred Auctions in S&P 500 securities. By at 4:02 p.m. Eastern Time. Because there has been contrast, for the period July 2020 no Floor Broker Interest for the Closing Auction during the period while the Trading Floor has been through October 2020, after when temporarily closed, the Exchange moved the time DMMs had returned to the Trading for DMM electronically-facilitated Closing Auctions Floor, DMMs effected electronically to closer to 4:00 p.m. With the proposed change, 96% of all Core Open Auctions and described below, to permanently eliminate Floor Broker Interest for the Closing Auction, the 89.6% of Core Open Auctions in S&P 500 securities. The increased number of Exchange would continue to conduct DMM electronically-facilitated Closing Auctions shortly DMM electronically-facilitated Core after 4:00 p.m., rather than revert to the 4:02 p.m. Open Auctions has resulted in more time for such auctions. PO 00000 Exchange last sale price Designated percentage Frm 00086 E:\FR\FM\29JYN1.SGM Fmt 4703 Sfmt 4703 29JYN1 40888 Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES volume-weighted average price (‘‘VWAP’’) over the subsequent fiveminute period, or the difference between the Closing Auction price and the consolidated VWAP over the two minutes preceding the Closing Auction; the lower the difference, the lower the auction price dislocation. In February 2020, the Exchange’s average Core Open Auction dislocation was 3.27x a security’s average spread; for the period July 2020 through October 2020 the average was 3.22x a security’s average spread.19 Similarly, the median Core Open Auction dislocation fell from 1.84x a security’s average spread to 1.78x a security’s average spread. The Exchange also observed similar trends in the Closing Auction price dislocation statistics. In February 2020, the Exchange’s average Closing Auction Price Dislocation was 0.82x a security’s average spread; for the period July 2020 through October 2020, the average was 0.69x a security’s average spread.20 Median Closing Auction dislocation also dropped from 0.5x to 0.43x a security’s average spread in the respective periods. Because the temporary wider percentage parameters have not resulted in greater auction price dislocation, the Exchange believes that making these parameters permanent would continue to support fair and orderly Auctions on the Exchange. To effect these changes, the Exchange proposes to: • Amend Rule 7.35A(c)(1)(G) to replace the current 4% price parameter for Core Open Auctions with a 10% price parameter and amend Rule 7.35A(c)(1)(H) to replace the current 4% price parameter for Trading Halt Auctions with a 5% price parameter. Because the proposed price parameter would be 10% for Core Open Auctions, the Exchange believes that the need for the double-wide parameters set forth in Rule 7.35A(c)(2) for Core Open Auctions would no longer be necessary and the Exchange proposes to delete that text. • Delete the volume parameters specified in Rule 7.35A(c)(1)(H). • Amend Rule 7.35A(j)(1)(A) to delete reference to volume parameters. • Amend Rule 7.35B(c)(1)(G) to replace the reference to ‘‘designated percentage’’ parameter for the Closing Auction with a 10% price parameter. 19 Market volatility was, on average, lower in February 2020 as compared to July 2020–October 2020. Calculating the price dislocation metric in terms of a security’s average spread incorporates the wider spreads in the latter period and allows for a better comparison between the two periods. 20 Closing Auction price dislocation is generally lower than Core Open Auction price dislocation, due to the relatively lower levels of volatility around the Closing Auction compared to the Core Open Auction. VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 The Exchange further proposes to delete the chart specifying the designated percentages for the Closing Auction. • Delete Rule 7.35B(c)(1)(H). • Delete Commentaries .01(a) and (b) to Rule 7.35A. • Delete the entirety of Commentary .01 to Rule 7.35B. The Exchange proposes to maintain Commentary .01(c) to Rule 7.35A, which provides that for a temporary period that begins March 23, 2020, when the Trading Floor facilities have been closed pursuant to Rule 7.1(c)(3), and ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020, the requirement to publish a pre-opening indication pursuant to Rule 7.35A(d) before either a Core Open Auction or Trading Halt Auction is suspended. The Exchange proposes non-substantive amendments to delete subparagraph (c) numbering and move the text of that subparagraph into the body of Commentary .01.21 Proposed Changes to Applicable Price Range for Pre-Opening Indications The Exchange proposes to make permanent that the Applicable Price Range for determining whether to publish a pre-opening indication for a Core Open Auction would be 10% for securities with an Indication Reference Price higher than $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00, which is currently in effect on a temporary basis, as set forth in Commentary .06 to Rule 7.35A. The Exchange further proposes that the Applicable Price Range for determining whether to publish a pre-opening indication for a Trading Halt Auction would be 5% for securities with an Indication Reference Price over $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. Rule 7.35A(d)(1)(A) currently provides that a DMM will publish a preopening indication before a security opens or reopens if the Core Open or Trading Halt Auction is anticipated to be a change of more than the ‘‘Applicable Price Range,’’ as specified in Rule 7.35A(d)(3), from a specified ‘‘Indication Reference Price,’’ as specified in Rule 7.35A(d)(2). Rule 7.35A(d)(3)(A) provides that the Applicable Price Range will be 5% for 21 The Exchange notes that even though the requirement for pre-opening indications has been suspended, since June 17, 2020, when DMMs returned staff to the Trading Floor, DMMs have published pre-opening indications for IPO Auctions and the two Direct Listing Auctions on September 30, 2020. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 securities with an Indication Reference Price over $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. Rule 7.35A(d)(3)(B) further provides that, If as of 9:00 a.m., the E-mini S&P 500 Futures are +/¥2% from the prior day’s closing price of the E-mini S&P 500 Futures, when reopening trading following a marketwide trading halt under Rule 7.12, or if the Exchange determines that it is necessary or appropriate for the maintenance of a fair and order market, the Applicable Price Range for determining whether to publish a preopening indication will be 10% for securities with an Indication Reference Price over $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00. Current Rule 7.35A(1)(A) further provides that a DMM may not effect a Core Open or Trading Halt Auction electronically if a pre-opening indication has been published for the Core Open Auction. Accordingly, Exchange Rules already provide for a correlation between pre-opening indications and whether a DMM may effect a Core Open or Trading Halt Auction electronically. Currently, that is achieved through similar, though not identical, percentage parameters: The price parameter for DMM-facilitated electronic Core Open and Trading Halt Auctions is 4% and the Applicable Price Range for pre-opening indications is 5%. When there is market-wide volatility, both are doubled. The Exchange believes that because of this existing correlation, in connection with permanently widening the price parameters for DMM-facilitated electronic Core Open Auctions to 10%, the Applicable Price Range for determining whether to publish a preopening indication should similarly not only be widened, but also be aligned to 10%. Similarly, because the price parameters for DMM-facilitated electronic Trading Halt Auctions would be 5%, the Applicable Price Range for determining whether to publish a preopening indication should be aligned to be 5%. With these proposed changes, if there is a significant enough price movement to require a DMM to effect a Core Open or Trading Halt Auction manually, the DMM would be required to publish a pre-opening indication for such Core Open or Trading Halt Auction. The Exchange notes that if a DMM chooses to facilitate a Core Open Auction or Trading Halt Auction manually (i.e., if there is less than a 10% price movement for a Core Open Auction or 5% price movement for a Trading Halt Auction), a DMM could still choose to publish a pre-opening indication in connection with such Auction, even if the Applicable Price E:\FR\FM\29JYN1.SGM 29JYN1 Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES Range has not been triggered. For example, DMMs generally publish preopening indications for IPO Auctions and Direct Listing Auctions regardless of whether the Applicable Price Range has been triggered. The Exchange does not believe that permanently widening the Applicable Price Range for when a DMM is required to publish a pre-opening indication would reduce transparency in connection with Core Open Auctions. The Exchange currently disseminates Auction Imbalance Information for all Core Open Auctions.22 Since August 2019, when the Exchange transitioned Exchange-listed securities to the Pillar trading platform, all Floor broker orders for the Core Open Auctions must be entered electronically. Accordingly, all such interest is reflected in the Auction Imbalance Information, which was not the case before the Exchange transitioned to Pillar. Accordingly, the Auction Imbalance Information includes information about all buy and sell orders entered in advance of such Auctions.23 To effect this change, the Exchange proposes to combine and amend current Rule 7.35A(d)(3)(A) and (B) to make it a single subparagraph (A) that would provide that the Applicable Price Range for determining whether to publish a pre-opening indication for a Core Open Auction would be 10% for securities with an Indication Reference Price over $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00. The Exchange proposes to delete the introductory text to Rule 7.35A(d)(3)(B) regarding circumstances when the Exchange could widen the Applicable Price Range under 22 Pursuant to Commentaries .01 and .02 to Rule 7.35, for the temporary period that ends on the earlier of a full reopening of the Trading Floor facilities to DMMs or after the Exchange closes on December 31, 2020, the Exchange includes IPOs and Direct Listings in the Auction Imbalance Information. The Exchange has filed a separate proposed rule change to include IPOs and Direct Listings in the Auction Imbalance Information on a permanent basis. See Securities Exchange Act Release No. 90387 (November 10, 2020) (SR–NYSE– 2020–93) (Notice of Filing). 23 Rule 7.35(a)(4) provides that DMM Auction Liquidity is never included in Auction Imbalance Information. By its terms, DMM Auction Liquidity, as defined in Rule 7.35(d)(8)(A), is entered by the DMM either manually or electronically as part of the DMM unit’s electronic message to conduct an Auction. For an Auction effected electronically by the DMM, DMM Auction Liquidity is entered simultaneously with the DMM facilitating the Auction, which is why it is not included in the Auction Imbalance Information leading up to such Auction. For an Auction effected manually by the DMM, the DMM can factor such interest into the pre-opening indication price range. DMM Orders, as defined in Rule 7.35(d)(8)(B), that may be entered by the DMM in advance of such Auctions would be included in the Auction Imbalance Information. VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 the current Rule. The Exchange further proposes new text for Rule 7.35A(d)(3)(B) that would provide that the Applicable Price Range for determining whether to publish a preopening indication for a Trading Halt Auction would be 5% for securities with an Indication Reference Price over $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. The Exchange further proposes to delete Commentary .06 to Rule 7.35A. Proposed Changes to Floor Broker Interest for the Closing Auction The Exchange proposes to make permanent that Floor Broker Interest would not be eligible to participate in the Closing Auction, as set forth in Commentary .03 to Rule 7.35B. The term ‘‘Floor Broker Interest’’ is defined in Rule 7.35(a)(9) to mean orders represented orally by a Floor broker at the point of sale. Rule 7.35B(a)(1) currently provides that Floor Broker Interest is eligible to participate in the Closing Auction provided that the Floor broker has electronically entered such interest before the Auction Processing Period for the Closing Auction begins. The Rule further provides that for such interest to be eligible to participate in the Closing Auction, a Floor broker must first, by the end of, but not after, Core Trading Hours, orally represent Floor Broker Interest at the point of sale, including symbol, side, size, and limit price, and then second, electronically enter such interest after the end of Core Trading Hours. Current Rules 7.35B(a)(1)(B) and (C) set forth additional requirements relating to electronic acceptance of such interest by the DMM and circumstances when such interest can be cancelled. On June 17, 2020, when the Exchange reopened the Trading Floor to limited numbers of DMMs, the Exchange added Commentary .03 to Rule 7.35B. Accordingly, from June 17, 2020 to the present, even though reduced numbers of DMMs and Floor brokers are present on the Trading Floor, Floor Broker Interest has not been eligible to participate in the Closing Auction. During this period, the Exchange has observed that even in the absence of Floor Broker Interest, Floor broker participation in Closing Auctions has returned to similar levels of Floor broker participation in the Closing Auction for the period before March 23, 2020. For example, in February 2020, 34.5% of Auction-Only Orders for the Closing Auction were entered as Closing D Orders, which are available only to PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 40889 Floor brokers.24 In October 2020, 38.8% of the Auction-Only Orders for the Closing Auction were Closing D Orders, which demonstrates that Floor broker participation in the Closing Auction has not only returned since the Trading Floor reopened, but has actually increased as compared to February 2020. Moreover, in February 2020, only 0.1% of total Floor broker orders for the Closing Auction was represented as Floor Broker Interest, and that Floor Broker Interest represented less than 0.01% of the total interest that participated in the Closing Auction. Based on both the relatively small levels of Floor Broker Interest that was participating in the Closing Auction before the Trading Floor closed and the ongoing availability of Closing D Orders for Floor brokers, the Exchange does not believe that eliminating Floor Broker Interest for the Closing Auction would materially impact the ability of Floor brokers to represent customer orders for the Closing Auction. Based on this experience, the Exchange proposes to make permanent Commentary .03 to Rule 7.35B. To effect this change, the Exchange proposes to amend Rule 7.35B(a)(1) to provide that Floor Broker Interest would not be eligible to participate in the Closing Auction. To provide clarity that a Floor broker would not be permitted to represent verbal interest intended for the Closing Auction, the Exchange further proposes to provide that Floor brokers must enter any orders for the Closing Auction, as defined in Rule 7.31, electronically during Core Trading Hours. The Exchange believes that the cross-reference to Rule 7.31 in the Rule would provide notice to Floor brokers and their customers of which order types are available for electronic entry by Floor brokers for the Closing Auction, which include both AuctionOnly Orders described in Rule 7.31(c) and other orders that may be resting on the Exchange Book that are eligible to participate in the Closing Auction. The Exchange also proposes to delete Commentary .03 to Rule 7.35B. The Exchange proposes to make related changes by deleting the clause ‘‘and Floor Broker Interest intended for the Closing Auction as defined in Rule 7.35B(a)(1)’’ from Rule 7.32. Similarly, the Exchange proposes to delete the text 24 For Exchange-listed securities, Auction-Only Orders are defined in Rule 7.31 to mean a Limit or Market Order that is to be traded only in an auction pursuant to the Rule 7.35 Series. The Exchange accepts the following Auction-Only Orders for the Closing Auction: Limit-on-Close Order (‘‘LOC Order’’), Market-on-Close Order (‘‘MOC Order’’), Closing D Order, and Closing Imbalance Offset Orders. All four types of Auction-Only Orders are available to Floor brokers. E:\FR\FM\29JYN1.SGM 29JYN1 40890 Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES set forth in Rule 7.35C(a)(2) relating to Floor Broker Interest that provides that ‘‘Floor Broker Interest that has been electronically accepted by the DMM and that has not been cancelled as provided for in Rule 7.35B(a)(1)(C) will be eligible to participate in an Exchange-facilitated Closing Auction.’’ The Exchange proposes to designate that subparagraph as ‘‘Reserved.’’ 25 In addition, the Exchange proposes to delete Rule 46B and amend Rule 47(b). Under Rule 47, Floor Officials have the authority to ‘‘supervise and regulate active openings and unusual situations that may arise in connection with the making of bids, offers or transactions on the Floor.’’ The Exchange recently amended its rules to add Regulatory Trading Officials (‘‘RTO’’), which are defined in Rule 46B.26 As described in the RTO Approval Order, unusual situations that may arise in connection with Floor Broker Interest for the Closing Auction could be ‘‘if the Floor broker hand-held device malfunctions or ceases to work or if a Floor broker is physically impeded, as a result of a crowd condition beyond that of normal traffic flow on the Exchange’s trading Floor or some other circumstance beyond the Floor broker’s control, in his or her ability to be present at a post before the DMM closes the security.’’ 27 The Exchange amended Rule 47 to add subparagraph (b), which provides that RTOs, instead of Floor Officials, would be responsible for supervising and regulating situations regarding whether a verbal bid or verbal offer is eligible for inclusion in the Closing Auction by the DMM. Because the Exchange proposes to eliminate verbal bids or verbal offers for the Closing Auction, the Exchange proposes to delete the last clause of Rule 47(a) and subparagraph (b) to Rule 47.28 As proposed, Rule 47 would revert to the rule text in effect prior to the RTO Approval Order and would provide that ‘‘Floor Officials shall have power to supervise and regulate active openings and unusual situations that may arise in connection with the making of bids, offers or transactions on the Floor.’’ 25 The Exchange has a pending proposed rule change to amend Rule 7.35C(a). See (SR–NYSE– 2020–89). 26 See Securities Exchange Act Release No. 88765 (April 29, 2020), 85 FR 26771 (May 5, 2020) (SR– NYSE–2020–03) (‘‘RTO Approval Order’’). 27 Id. at 26772. 28 RTOs were approved when the Trading Floor was temporarily closed. Id. Because Commentary .03 to Rule 7.35B was implemented when DMMs returned to the Trading Floor, there has not been any Floor Broker Interest for Closing Auctions since RTOs were created and therefore RTOs have not had to perform the functions as described in Rule 46(b). VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 With this proposed change, RTOs would no longer have a role under Exchange rules. Therefore, the Exchange proposes to delete Rule 46B. The Exchange also proposes to delete Commentary .02 to Rule 7.35B. This Commentary is obsolete because it has not been in effect since May 22, 2020. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act,29 in general, and furthers the objectives of Sections 6(b)(5) of the Act,30 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanisms of, a free and open market and a national market system and, in general, to protect investors and the public interest and because it is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions The Exchange believes that the proposed change to make permanent the parameters for DMM-facilitated electronic Core Open Auctions and Closing Auctions that are currently in effect on a temporary basis as set forth in Commentaries .01(a) and (b) to Rule 7.35A and Commentary .01 to Rule 7.35B would remove impediments to and perfect the mechanism of a free and open market and a national market system because the Exchange believes that these updated parameters would promote fair and orderly Auctions on the Exchange. These temporary parameters have been in effect not only during the period when the Trading Floor was closed in full, but also for the period when the Trading Floor has partially reopened to reduced staff of DMM and Floor brokers firms. In addition, these temporary parameters have been in effect during periods of both extreme volatility and high trading volumes. Accordingly, DMMs have had over six months’ of experience of electronically facilitating Auctions within these temporary parameters and applying them during varying market conditions. During this period, the Exchange has observed that with these temporary PO 00000 U.S.C. 78f(b). 30 15 U.S.C. 78f(b)(5). Fmt 4703 Proposed Changes to Applicable Price Range for Pre-Opening Indications The Exchange believes that the proposed change to make permanent that the Applicable Price Range for determining whether to publish a preopening indication for a Core Open Auction would be 10% for securities with an Indication Reference Price 31 See, e.g., NYSE Arca, Inc. Rule 7.35–E(e)(7) (specifying initial Auction Collars for Trading Halt Auctions). 29 15 Frm 00089 parameters, a higher number of Core Open Auctions and Closing Auctions have been electronically facilitated by the DMM, which has resulted in a greater number of Core Open Auctions and Closing Auctions occurring shortly after 9:30 a.m. or 4:00 p.m., respectively. The Exchange has further observed that there have been modest improvements in auction price dislocation during the period when these temporary parameters have been in place. Accordingly, the Exchange believes that making these parameters permanent would promote the continued fair and orderly operation of Auctions for Exchange-listed securities. In addition, the Exchange further believes that the proposed 5% percentage parameter for DMMfacilitated electronic Trading Halt Auctions would remove impediments to and perfect the mechanism of a free and open market and a national market system because this percentage parameter would be aligned with the initial collars applicable to electronic reopening auctions following a MWCB Halt or trading pause on the automated primary listing exchanges that do not have trading floors.31 On the Exchange, DMMs are required to facilitate manually a Trading Halt Auction following a regulatory halt issued under Section 2 of the Listed Company Manual. Accordingly, the proposed 5% percentage parameter would be applicable only to DMM-facilitated electronic Trading Halt Auctions following a trading pause or MWCB Halt. This proposed 5% percentage parameter would not require such Trading Halt Auctions to be priced within that range. Rather, if the Trading Halt Auction were to occur outside of that percentage parameter, the DMM would be required to facilitate such Trading Halt Auction manually. Regardless of whether a Trading Halt is facilitated by a DMM manually or electronically, the DMM would be required to determine the Auction Price as provided for in Rule 7.35A(g) and orders would be allocated as provided for in Rule 7.35A(h). Sfmt 4703 E:\FR\FM\29JYN1.SGM 29JYN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices higher than $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00, which are currently in effect on a temporary basis, and to provide for an Applicable Price Range for Trading Halt Auctions of 5% for securities with an Indication Reference Price higher than $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00 would remove impediments to and perfect the mechanism of a free and open market and a national market system because the Exchange believes that these updated Applicable Price Ranges would promote fair and orderly Auctions on the Exchange. Exchange rules already provide for a correlation between the parameters for when a DMM may facilitate an Auction electronically and the Applicable Price Range for determining whether to disseminate a pre-opening indication. The Exchange believes that the proposed Applicable Price Ranges should be aligned with the Exchange’s proposed parameters for when a DMM may facilitate an Auction electronically. Specifically, with this proposed change, if there is a significant enough price movement to require a DMM to effect a Core Open or Trading Halt Auction manually, the DMM would be required to publish a pre-opening indication for such Core Open or Trading Halt Auction. The Exchange notes that if a DMM chooses to facilitate a Core Open Auction or Trading Halt Auction manually (i.e., if there is less than a 10% price movement for a Core Open Auction or 5% for a Trading Halt Auction), a DMM could still choose to publish a pre-opening indication in connection with such Auction, even if the Applicable Price Range has not been triggered. The Exchange does not believe that permanently widening the Applicable Price Range for when a DMM is required to publish a pre-opening indication would reduce transparency in connection with Core Open Auctions. The Exchange currently disseminates Auction Imbalance Information for Core Open Auctions and Trading Halt Auctions. Since August 2019, when the Exchange transitioned Exchange-listed securities to the Pillar trading platform, all Floor broker orders for the Core Open and Trading Halt Auctions must be entered electronically. Accordingly, all such interest is reflected in the Auction Imbalance Information, which was not the case before the Exchange transitioned to Pillar. Accordingly, the Auction Imbalance Information includes information about all buy and sell VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 orders entered in advance of such Auctions. Proposed Changes to Floor Broker Interest for the Closing Auction The Exchange believes that the proposed change to make permanent that Floor Broker Interest would not be eligible to participate in the Closing Auction, which is currently in effect on a temporary basis as set forth in Commentary .03 to Rule 7.35B, would remove impediments to and perfect the mechanism of a free and open market because it would promote fair and orderly Closing Auctions on the Exchange. The Exchange has observed that even in the absence of Floor Broker Interest, Floor broker participation in the Closing Auction has returned, and indeed increased, as compared to the level of Floor broker participation in the Closing Auction for February 2020. Moreover, even when Floor Broker Interest was available to participate in Closing Auctions, such interest represented only 0.1% of total Floor broker orders that participated in Closing Auctions. Accordingly, the Exchange does not believe that the proposed change would materially alter Floor brokers’ ability to meaningfully participate in the Closing Auction. Moreover, in the absence of Floor Broker Interest, the Exchange was able to move the time for DMMfacilitated electronic Closing Auctions from 4:02 p.m. to shortly after 4:00. By making this change permanent, DMMfacilitated electronic Closing Auctions would continue to occur shortly after 4:00. The Exchange further believes that the proposed amendments to Rules 7.32, 7.35, 46B, and 47(b) would remove impediments to and perfect the mechanism of a free and open market and a national market system because such rules would no longer be necessary in the absence of Floor Broker Interest for the Closing Auction. Accordingly, these proposed rule changes would promote transparency and clarity by removing references that would be obsolete. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,32 the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is not designed to address any competitive issues. Instead, the proposed rule changes are designed PO 00000 32 15 U.S.C. 78f(b)(8). Frm 00090 Fmt 4703 Sfmt 4703 40891 to make permanent changes that have been implemented on a temporary basis relating to the functions of Auctions on the Exchange and that have contributed to the fair and orderly Auction process during the period that they have been in effect. The proposed rule change does not have any effect on intermarket competition because these proposed changes relate to Auctions in Exchangelisted securities for which the Exchange is the primary listing exchange. 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. Order Instituting Proceedings In the Order Instituting Proceedings, the Commission requested comment on, among other things: (1) Whether the primary listing exchanges should harmonize their respective processes for reopening trading by fully automated auction after a limit-up/limit-down (‘‘LULD’’) pause or a Level 1 or Level 2 market-wide circuit breaker (‘‘MWCB’’) halt; 33 (2) whether the NYSE should further harmonize its proposed Trading Halt Auction process for fully automated auctions facilitated electronically by DMMs to align with Nasdaq, NYSE Arca, and Cboe BZX regarding the establishment of permitted price bands, and/or the limit (or lack thereof) on price band adjustments; (3) whether the Exchange should permit a DMM to reopen a security up to 10% away from the reference price immediately after an LULD pause or MWCB halt without human intervention; (4) whether there are characteristics of the NYSE market structure that warrant divergence from the price parameters in place for other exchanges’ fully automated reopening auctions immediately following an LULD pause or MWCB halt; and (5) whether the price parameters within which DMMs are permitted to electronically facilitate auctions should be the same for Core Open Auctions, Trading Halt Auctions, and Closing 33 As originally proposed by the Exchange, Trading Halt Auctions facilitated electronically by DMMs would differ from other primary listing markets’ reopening processes after LULD pauses and MWCB halts in that they would permit a fully automated reopening of trading at prices up to 10% away from the auction reference price immediately after trading pauses or halts, whereas Nasdaq, NYSE Arca, and Cboe BZX establish 5% price bands for reopening and then widen those price bands in increments of 5%, with additional auction extension messages associated with each widening, until market interest can be satisfied. E:\FR\FM\29JYN1.SGM 29JYN1 40892 Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices Auctions.34 In response to the questions raised in the Order Instituting Proceedings, the Exchange submitted Amendment No. 2, which changed the percentage parameter that would be applicable to when a DMM may electronically facilitate a Trading Halt Auction or would be required to publish a pre-opening indication from 10%, as originally proposed, to 5%. IV. Discussion and Commission Findings After careful review, the Commission is approving the proposed rule change, as modified by Amendment No. 2, for the reasons discussed below.35 The Commission finds that the proposed rule change, as modified, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, including Section 6(b)(5) of the Exchange Act,36 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. jbell on DSKJLSW7X2PROD with NOTICES Parameters for DMM-Facilitated Electronic Auctions The Commission finds that the proposed change to establish wider permanent parameters for DMMfacilitated electronic Core Open Auctions and Closing Auctions is reasonably designed to promote fair and orderly Auctions on the Exchange. The Commission notes that DMMs have had over six months of experience of electronically facilitating Auctions within these parameters under temporary rules of the Exchange and that the Exchange’s proposal includes statistics indicating that, during this sixmonth period, a higher percentage of Core Open Auctions and Closing Auctions have occurred shortly after 9:30 a.m. or 4:00 p.m., respectively, and that this increase has not been accompanied by an increase in auction price dislocation, but has instead been accompanied by a modest improvement. 34 See Order Instituting Proceedings, supra note 6, 86 FR at 12993. 35 In approving this proposed rule change, the Commission has considered the proposed rule change’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 36 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 The Commission also finds that the proposed 5% percentage parameter for DMM-facilitated electronic Trading Halt Auctions is reasonably designed to remove impediments to and perfect the mechanism of a free and open market and a national market system because this change would align the percentage parameters for immediate electronic reopening auctions after a MWCB halt or trading pause with the initial collars applicable to electronic reopening auctions on the other primary listing exchanges.37 Applicable Price Range for Pre-Opening Indications The Exchange proposes to make permanent that the Applicable Price Range for determining whether to publish a pre-opening indication for a Core Open Auction would be 10% for securities with an Indication Reference Price higher than $3.00 and $0.30 for securities with an Indication Reference Price equal to or lower than $3.00. The Exchange also proposes to change its rules to provide for an Applicable Price Range for Trading Halt Auctions of 5% for securities with an Indication Reference Price higher than $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. The Commission finds that these changes are reasonably designed to remove impediments to and perfect the mechanism of a free and open market and a national market system by promoting fair and orderly Auctions on the Exchange because they would align the parameters within which a DMM may facilitate an Auction electronically and the Applicable Price Range for determining whether to disseminate a pre-opening indication (which, under the Exchange’s rules, prevents a DMM from facilitating an auction electronically). Additionally, the Commission does not believe that widening the Applicable Price Range that governs when a DMM is required to publish a pre-opening indication would reduce transparency in the market because all buy and sell orders entered in advance of Core Open and Trading Halt Auctions are already reflected in Auction Imbalance Information. Proposed Changes to Floor Broker Interest for the Closing Auction The Commission finds that the proposal to make permanent that Floor Broker Interest—orders represented orally by a Floor broker at the point of sale—would not be eligible to 37 See, e.g., NYSE Arca, Inc. Rule 7.35–E(e)(7) (specifying initial Auction Collars for Trading Halt Auctions). PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 participate in the Closing Auction is reasonably designed to remove impediments to and perfect the mechanism of a free and open market by promoting fair and orderly Closing Auctions on the Exchange, because precluding participation by Floor Broker Interest has enabled the exchange to hold DMM-facilitated electronic Closing Auctions more quickly after the 4:00 p.m. scheduled close of trading and because Floor brokers will remain able to participate in the Closing Auction through the use of Closing D Orders.38 For the reasons discussed above, the Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with the requirements of the Act and in particular Section 6(b)(5) because it is reasonably 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. V. 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: 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–2020–95 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–2020–95. 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 38 In fact, the Exchange represents that Floor broker participation in the Closing Auction has increased despite the absence of Floor Broker Interest, as compared to the level of Floor broker participation in the Closing Auction for February 2020. E:\FR\FM\29JYN1.SGM 29JYN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 143 / Thursday, July 29, 2021 / Notices 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–2020–95 and should be submitted on or before August 19, 2021. DMM from effecting a Core Open or Trading Halt Auction electronically if a pre-opening indication has been published for the Core Open Auction. 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,40 to approve the proposed rule change, as modified by Amendment No. 2, on an accelerated basis. VI. Accelerated Approval of Amendment No. 2 As noted above, in Amendment No. 2, as compared to the original proposal,39 the Exchange proposes to: (i) Amend Rule 7.35A(c)(1)(H) to provide a 5% price parameter and eliminate the volume restrictions for DMM-facilitated Trading Halt Auctions; and (ii) amend Rule 7.35A(d)(3)(B) to provide that the Applicable Price Range for determining whether to publish a pre-opening indication for a Trading Halt Auction would be 5% for securities with an Indication Reference Price over $3.00 and $0.15 for securities with an Indication Reference Price equal to or lower than $3.00. The Commission believes that the proposed 5% price parameter for DMM-facilitated Trading Halt Auctions is consistent with the Act because this percentage parameter would be aligned with the initial collars applicable to electronic reopening auctions following a MWCB Halt or trading pause on the automated primary listing exchanges that do not have trading floors. The Commission believes it is reasonable to also align the price parameter for DMM-facilitated Trading Halt Auctions with the parameter for publishing a pre-opening indication because Rule 7.35A(c)(1)(A) prohibits a [Disaster Declaration #17050 and #17051; ALABAMA Disaster Number AL–00122] VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,41 that the proposed rule change (SR–NYSE–2020– 95), 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.42 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–16122 Filed 7–28–21; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION Administrative Declaration of a Disaster for the State of ALABAMA Small Business Administration. Notice. AGENCY: ACTION: This is a notice of an Administrative declaration of a disaster for the State of ALABAMA dated 07/22/ 2021. Incident: Tropical Storm Claudette. Incident Period: 06/19/2021. DATES: Issued on 07/22/2021. Physical Loan Application Deadline Date: 09/20/2021. Economic Injury (EIDL) Loan Application Deadline Date: 04/22/2022. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the SUMMARY: 40 15 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). 42 17 CFR 200.30–3(a)(12). 41 15 39 See Notice, supra note 3. VerDate Sep<11>2014 19:19 Jul 28, 2021 Jkt 253001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 40893 Administrator’s disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Escambia, Tuscaloosa. Contiguous Counties: Alabama: Baldwin, Bibb, Conecuh, Covington, Fayette, Greene, Hale, Jefferson, Monroe, Pickens, Walker. Florida: Escambia, Okaloosa, Santa Rosa. The Interest Rates are: Percent For Physical Damage: Homeowners with Credit Available Elsewhere ...................... Homeowners without Credit Available Elsewhere .............. Businesses with Credit Available Elsewhere ...................... Businesses without Credit Available Elsewhere .............. Non-Profit Organizations with Credit Available Elsewhere ... Non-Profit Organizations without Credit Available Elsewhere ..................................... For Economic Injury: Businesses & Small Agricultural Cooperatives without Credit Available Elsewhere .............. Non-Profit Organizations without Credit Available Elsewhere ..................................... 3.250 1.625 5.760 2.880 2.000 2.000 2.880 2.000 The number assigned to this disaster for physical damage is 17050 8 and for economic injury is 17051 0. The States which received an EIDL Declaration # are Alabama, Florida. (Catalog of Federal Domestic Assistance Number 59008) Isabella Guzman, Administrator. [FR Doc. 2021–16203 Filed 7–28–21; 8:45 am] BILLING CODE 8026–03–P SMALL BUSINESS ADMINISTRATION Data Collection Available for Public Comments Small Business Administration. 60-Day notice; request for comments. AGENCY: ACTION: The Small Business Administration (SBA) is publishing this notice in compliance with the Paperwork Reduction Act (PRA) of 1995, as amended, to solicit public comments on the information collection described below. The PRA requires SUMMARY: E:\FR\FM\29JYN1.SGM 29JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 143 (Thursday, July 29, 2021)]
[Notices]
[Pages 40885-40893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16122]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92480; File No. SR-NYSE-2020-95]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 2 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendment No. 2, To 
Make Permanent Commentaries to Rule 7.35A and Commentaries to Rule 
7.35B and To Make Related Changes to Rules 7.32, 7.35C, 46B, and 47

July 23, 2021.

I. Introduction

    On November 30, 2020, New York Stock Exchange, Inc. (``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 make permanent Commentaries .01(a) and (b) and 
.06 to Rule 7.35A (DMM-Facilitated Core Open and Trading Halt Auctions) 
and Commentaries .01 and .03 to Rule 7.35B (DMM-Facilitated Closing 
Auctions) and to make related changes to NYSE Rules 7.32 (Order Entry), 
7.35C (Exchange-Facilitated Closing Auctions), 46B (Regulatory Trading 
Official), and 47 (Floor Officials--Unusual Situations). The proposed 
rule change was published for comment in the Federal Register on 
December 1, 2020.\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. 90495 (Nov. 24, 
2020), 85 FR 77304 (Dec. 1, 2020) (SR-NYSE-2020-95) (``Notice'').
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    On January 13, 2021, the Commission extended to March 1, 2021, the 
time period in which to approve the

[[Page 40886]]

proposal, disapprove the proposal, or institute proceedings to 
determine whether to approve or disapprove the proposal.\4\ On March 1, 
2021, the Commission instituted proceedings under Section 19(b)(2)(B) 
of the Act \5\ to determine whether to approve or disapprove the 
proposed rule change.\6\ On April 12, 2021, the Exchange filed 
Amendment No. 1 to the proposed rule change with the Commission and 
submitted Amendment No. 1 for inclusion in the public comment file.\7\ 
On May 17, 2021, the Exchange filed Amendment No. 2 to the proposed 
rule change with the Commission, which superseded the original filing, 
as amended by Amendment No. 1, in its entirety, and submitted Amendment 
No. 2 for inclusion in the public comment file.\8\ On May 24, 2021, the 
Commission extended to July 29, 2021, the time period in which to 
approve or disapprove the proposal.\9\ The Commission has received no 
comment letters on the proposed rule change.
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    \4\ See Securities Exchange Act Release No. 90917 (Jan. 13, 
2021), 86 FR 6403 (Jan. 21, 2021).
    \5\ 15 U.S.C. 78s(b)(2)(B).
    \6\ See Securities Exchange Act Release No. 91227, (Mar. 1, 
2021), 86 FR 12991 (Mar. 5, 2021) (``Order Instituting 
Proceedings'').
    \7\ See Letter from Martha Redding, Associate General Counsel, 
NYSE LLC, to Secretary, Commission (April 12, 2021). Amendment No. 1 
is available at https://www.sec.gov/comments/sr-nyse-2020-95/srnyse202095-8662901-235314.pdf.
    \8\ In Amendment No. 2, the Exchange proposes to: (i) Amend Rule 
7.35A(c)(1)(H) to provide a 5% price parameter and eliminate the 
volume restrictions for DMM-facilitated Trading Halt Auctions; and 
(ii) amend Rule 7.35A(d)(3)(B) to provide that the Applicable Price 
Range for determining whether to publish a pre-opening indication 
for a Trading Halt Auction would be 5% for securities with an 
Indication Reference Price over $3.00 and $0.15 for securities with 
an Indication Reference Price equal to or lower than $3.00. See 
Letter from Martha Redding, Associate General Counsel, NYSE LLC, to 
Secretary, Commission (May 17, 2021). Amendment No. 2 is available 
at https://www.sec.gov/comments/sr-nyse-2020-95/srnyse202095-8807418-237986.pdf.
    \9\ See Securities Exchange Act Release No. 91975 (May 24, 
2021), 86 FR 28921 (May 28, 2021).
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    The Commission is publishing notice of the filing of Amendment No. 
2 to solicit comment from interested persons, and is approving the 
proposed rule change, as modified by Amendment No. 2, on an accelerated 
basis.

II. Self-Regulatory Organization's Description of the Proposal, as 
Modified by Amendment No. 2

    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 make permanent Commentaries .01(a) and (b) 
and .06 to Rule 7.35A (DMM-Facilitated Core Open and Trading Halt 
Auctions) and Commentaries .01 and .03 to Rule 7.35B (DMM-Facilitated 
Closing Auctions) and make related changes to Rules 7.32 (Order Entry), 
7.35C (Exchange-Facilitated Closing Auctions), 46B (Regulatory Trading 
Official), and 47 (Floor Officials--Unusual Situations).\10\
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    \10\ In this Amendment No. 2, the Exchange proposes that the 
percentage parameter that would be applicable to when a DMM may 
electronically facilitate a Trading Halt Auction or would be 
required to publish a pre-opening indication would be 5% instead of 
10%.
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Background
    In connection with the closing of the Trading Floor facilities 
located at 11 Wall Street in New York City as of March 23, 2020 and 
moving the Exchange, on a temporary basis, to fully electronic 
trading,\11\ and subsequent reopening of the Trading Floor on a limited 
basis first to Floor Brokers on May 26, 2020 \12\ and then to DMMs on 
June 15, 2020,\13\ the Exchange added Commentaries .01 and .06 to Rule 
7.35A and Commentaries .01 and .03 to 7.35B.\14\ Currently, these 
Commentaries are in effect until the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on April 
30, 2021.\15\
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    \11\ Pursuant to Rule 7.1(e), the CEO notified the Board of 
Directors of the Exchange of her determination under Rule 7.1(c)(3). 
The Exchange's rules establish how the Exchange will function fully-
electronically. See Press Release, dated March 18, 2020, available 
here: https://ir.theice.com/press/press-releases/all-categories/2020/03-18-2020-204202110.
    \12\ See Securities Exchange Act Release No. 88933 (May 22, 
2020), 85 FR 32059 (May 28, 2020) (SR-NYSE-2020-47) (Notice of 
filing and immediate effectiveness of proposed rule change).
    \13\ See Securities Exchange Act Release No. 89086 (June 17, 
2020) (SR-NYSE-2020-52) (Notice of filing and immediate 
effectiveness of proposed rule change).
    \14\ See Securities Exchange Act Release Nos. 88444 (March 20, 
2020), 85 FR 17141 (March 26, 2020) (SR-NYSE-2020-22) (amending 
Rules 7.35A to add Commentary .01, 7.35B to add Commentary .01, and 
7.35C to add Commentary .02) and 89086 (June 17, 2020), 85 FR 37712 
(SR-NYSE-2020-52) (amending Rules 7.35A to add Commentary .06, 7.35B 
to add Commentary .03, 76 to add Supplementary Material 20, and 
Supplementary Material .30 to Rule 36).
    \15\ See Securities Exchange Act Release No. 90795 (December 23, 
2020), 85 FR 86608 (December 30, 2020) (SR-NYSE-2020-106) (Notice of 
filing and immediate effectiveness of proposed rule change to extend 
the temporary period for Commentaries to Rules 7.35, 7.35A, 7.35B, 
and 7.35C; and temporary rule relief in Rule 36.30 to end on the 
earlier of a full reopening of the Trading Floor facilities to DMMs 
or after the Exchange closes on April 30, 2021). [The Commission 
notes that, after Amendment No. 2 was filed, the Exchange extended 
the outside date for effectiveness of the temporary relief from 
April 30, 2021, to August 31, 2021. See Securities Exchange Act 
Release No. 91778 (May 5, 2021), 85 FR 25902 (May 11, 2021).]
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    Specifically, Commentary .01 to Rule 7.35A provides:

    For a temporary period that begins March 23, 2020, when the 
Trading Floor facilities have been closed pursuant to Rule 
7.1(c)(3), and ends on the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on 
December 31, 2020:
    (a) The percentage price parameters in paragraph (c)(1)(G) and 
(c)(2) of this Rule are suspended and a DMM may not effect a Core 
Open or Trading Halt Auction electronically if the Core Open or 
Trading Halt Auction Price will be more than 10% away from the 
Consolidated Last Sale Price.
    (b) The volume parameters in paragraph (c)(1)(H) of this Rule 
are suspended.
    (c) The requirement to publish a pre-opening indication pursuant 
to paragraph (d) of this Rule before either a Core Open or Trading 
Halt Auction is suspended.

    Commentary .06 to Rule 7.35A provides:

    For a temporary period that begins on June 17, 2020 and ends on 
the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on December 31, 2020, the 
Applicable Price Range specified in paragraphs (d)(3)(A) and (B) of 
this Rule is suspended and the Applicable Price Range will be 10% 
for securities with an Indication Reference Price higher than $3.00 
and $0.30 for securities with an Indication Reference Price equal to 
or lower than $3.00.

    Commentary .01 to Rule 7.35B provides:

    For a temporary period that begins March 23, 2020, when the 
Trading Floor facilities have been closed pursuant to Rule 
7.1(c)(3), and ends on the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on 
December 31, 2020:
    (a) The percentage price parameters in paragraph (c)(1)(G) of 
this Rule are suspended and a DMM may not effect a Closing Auction 
electronically if the Closing Auction Price will be more than 10% 
away from the Exchange Last Sale Price.
    (b) The volume parameters in paragraph (c)(1)(H) of this Rule 
are suspended

    Finally, Commentary .03 to Rule 7.35B provides:


[[Page 40887]]


    For a temporary period that begins on June 17, 2020 and ends on 
the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on December 31, 2020, Floor Broker 
Interest will not be eligible to participate in the Closing Auction.
Proposed Rule Changes
Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions
    The Exchange proposes to make permanent the parameters for DMM-
facilitated electronic auctions that are currently in effect on a 
temporary basis as set forth in Commentaries .01(a) and (b) to Rule 
7.35A and Commentary .01 to Rule 7.35B, with one proposed change for 
Trading Halt Auctions.
    Current Rules 7.35A(c)(1)(G) and (H) provide that a DMM may not 
effect a Core Open or Trading Halt Auction electronically if (i) the 
Auction Price will be more than 4% away from the Consolidated Last Sale 
Price,\16\ or (ii) the paired volume for the Auction will be more than 
1,500 round lots for securities with an average opening volume of 1,000 
round lots or fewer in the previous calendar quarter, or 5,000 round 
lots for securities with an average opening volume of over 1,000 round 
lots in the previous calendar quarter. Rule 7.35A(c)(2) further 
provides that if as of 9:00 a.m., the E-mini S&P 500 Futures are +/-2% 
from the prior day's closing price of the E-mini S&P 500 Futures, or if 
the Exchange determines that it is necessary or appropriate for the 
maintenance of a fair and orderly market, a DMM may effect an opening 
or reopening electronically if the Auction Price will be up to 8% away 
from Consolidated Last Sale Price, without any volume limitations.
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    \16\ The term ``Consolidated Last Sale Price'' is defined in 
Rule 7.35 to mean the most recent consolidated last-sale eligible 
trade in a security on any market during Core Trading Hours on that 
trading day, and if none, the Official Closing Price from the prior 
trading day for that security.
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    Current Rule 7.35B(c)(1)(G) and (H) provide that a DMM may not 
effect a Closing Auction electronically if (i) the Auction Price will 
be more than a designated percentage away from the Exchange Last Sale 
Price,\17\ or (ii) the paired volume for the Closing Auction will be 
more than 1,000 round lots for such security. The designated 
percentages are currently as follows:
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    \17\ The term ``Exchange Last Sale Price'' is defined in Rule 
7.35 to mean the most recent trade on the Exchange of a round lot or 
more in a security during Core Trading Hours on that trading day, 
and if none, the Official Closing Price from the prior trading day 
for that security.

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                                                              Designated
                  Exchange last sale price                    percentage
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$25.00 and below...........................................            5
$25.01 to $50.00...........................................            4
Above $50.00...............................................            2
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    The Exchange proposes to make the price percentage parameter 10% 
and eliminate the volume restrictions for DMM-facilitated Core Open 
Auctions and Closing Auctions. These parameters are currently in effect 
on a temporary basis pursuant to Commentaries .01(a) and (b) to Rule 
7.35A and Commentary .01 to Rule 7.35B not only for Core Open Auctions 
and Closing Auctions, but also for Trading Halt Auctions. The Exchange 
believes that making these temporary Commentaries permanent would 
promote fair and orderly DMM-facilitated Core Open Auctions and Closing 
Auctions. For DMM-facilitated Trading Halt Auctions, the Exchange 
proposes to make the price parameter 5% (instead of 10%) and eliminate 
the volume restrictions.
    In particular, DMMs have been operating with the temporary 
parameters for Core Open, Trading Halt Auctions, and Closing Auctions 
since March 23, 2020. Accordingly, these temporary parameters have been 
in effect not only during the period when the Trading Floor was closed 
in full, but also for the period when the Trading Floor has partially 
reopened to reduced staff of DMM and Floor brokers firms. In addition, 
these temporary parameters have been in effect during periods of both 
extreme volatility and high trading volumes. Accordingly, DMMs have had 
over six months' of experience of electronically facilitating Auctions 
within these temporary parameters and apply them during varying market 
conditions.
    The Exchange has observed that during the period when these 
temporary parameters have been in effect, DMMs have facilitated more 
Core Open Auctions electronically, resulting in a higher percentage of 
Core Open Auctions occurring within two seconds of 9:30 a.m. Eastern 
Time. For example, in February 2020, which was before the Trading Floor 
closed, DMMs effected electronically 85.9% of all Core Open Auctions 
and 75.9% of Core Open Auctions in S&P 500 securities. By contrast, for 
the period July 2020 through October 2020, after when DMMs had returned 
to the Trading Floor, DMMs effected electronically 96% of all Core Open 
Auctions and 89.6% of Core Open Auctions in S&P 500 securities. The 
increased number of DMM electronically-facilitated Core Open Auctions 
has resulted in more Core Open Auctions occurring close to the 
beginning of Core Trading Hours. For example, in February 2020, 85.9% 
of all Core Open Auctions, and 75.9% of Core Open Auctions in S&P 500 
securities, occurred within two seconds of 9:30 a.m. Eastern Time. By 
contrast, for the period July 2020 through October 2020, 95.9% of all 
Core Open Auctions, and 89.6% of Core Open Auctions in S&P 500 
securities, occurred within two seconds of 9:30 a.m. Eastern Time.
    The Exchange has observed similar trends for Closing Auctions, with 
DMMs facilitating more Closing Auctions electronically, which means 
more Closing Auctions occurring closer to 4:00 p.m. Eastern Time. In 
February 2020, DMMs effected electronically 57% of all Closing Auctions 
and 5.5% of Closing Auctions in S&P 500 securities. By contrast, for 
the period July 2020 through October 2020, DMMs effected electronically 
90.9% of all Closing Auctions, and 53.6% of Closing Auctions in S&P 500 
securities. Currently, DMM electronically-facilitated Closing Auctions 
occur shortly after 4:00 p.m. Eastern Time.\18\ Accordingly, the 
increased number of DMM electronically-facilitated Closing Auctions 
translates to an increase in the number of Closing Auctions that occur 
close to 4:00 p.m. Eastern Time. Because the temporary wider percentage 
parameters and eliminated volume parameters have resulted in more Core 
Open Auctions and Closing Auctions occurring at 9:30 a.m. Eastern Time 
or 4:00 p.m. Eastern Time, respectively, the Exchange believes that 
making these temporary parameters permanent would support the continued 
fair and orderly operation of Auctions on the Exchange.
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    \18\ When Floor Broker Interest was eligible to participate in 
the Closing Auction, DMM electronically-facilitated Closing Auctions 
occurred at 4:02 p.m. Eastern Time. Because there has been no Floor 
Broker Interest for the Closing Auction during the period while the 
Trading Floor has been temporarily closed, the Exchange moved the 
time for DMM electronically-facilitated Closing Auctions to closer 
to 4:00 p.m. With the proposed change, described below, to 
permanently eliminate Floor Broker Interest for the Closing Auction, 
the Exchange would continue to conduct DMM electronically-
facilitated Closing Auctions shortly after 4:00 p.m., rather than 
revert to the 4:02 p.m. time for such auctions.
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    The Exchange also notes that during the period when the temporary 
parameters have been in place, the Exchange has not observed greater 
auction price dislocation compared to the period immediately preceding 
implementation of these temporary parameters, and has even observed 
modest improvement. The Exchange defines auction price dislocation as 
the difference between the Core Open Auction price and the consolidated

[[Page 40888]]

volume-weighted average price (``VWAP'') over the subsequent five-
minute period, or the difference between the Closing Auction price and 
the consolidated VWAP over the two minutes preceding the Closing 
Auction; the lower the difference, the lower the auction price 
dislocation. In February 2020, the Exchange's average Core Open Auction 
dislocation was 3.27x a security's average spread; for the period July 
2020 through October 2020 the average was 3.22x a security's average 
spread.\19\ Similarly, the median Core Open Auction dislocation fell 
from 1.84x a security's average spread to 1.78x a security's average 
spread.
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    \19\ Market volatility was, on average, lower in February 2020 
as compared to July 2020-October 2020. Calculating the price 
dislocation metric in terms of a security's average spread 
incorporates the wider spreads in the latter period and allows for a 
better comparison between the two periods.
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    The Exchange also observed similar trends in the Closing Auction 
price dislocation statistics. In February 2020, the Exchange's average 
Closing Auction Price Dislocation was 0.82x a security's average 
spread; for the period July 2020 through October 2020, the average was 
0.69x a security's average spread.\20\ Median Closing Auction 
dislocation also dropped from 0.5x to 0.43x a security's average spread 
in the respective periods. Because the temporary wider percentage 
parameters have not resulted in greater auction price dislocation, the 
Exchange believes that making these parameters permanent would continue 
to support fair and orderly Auctions on the Exchange.
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    \20\ Closing Auction price dislocation is generally lower than 
Core Open Auction price dislocation, due to the relatively lower 
levels of volatility around the Closing Auction compared to the Core 
Open Auction.
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    To effect these changes, the Exchange proposes to:
     Amend Rule 7.35A(c)(1)(G) to replace the current 4% price 
parameter for Core Open Auctions with a 10% price parameter and amend 
Rule 7.35A(c)(1)(H) to replace the current 4% price parameter for 
Trading Halt Auctions with a 5% price parameter. Because the proposed 
price parameter would be 10% for Core Open Auctions, the Exchange 
believes that the need for the double-wide parameters set forth in Rule 
7.35A(c)(2) for Core Open Auctions would no longer be necessary and the 
Exchange proposes to delete that text.
     Delete the volume parameters specified in Rule 
7.35A(c)(1)(H).
     Amend Rule 7.35A(j)(1)(A) to delete reference to volume 
parameters.
     Amend Rule 7.35B(c)(1)(G) to replace the reference to 
``designated percentage'' parameter for the Closing Auction with a 10% 
price parameter. The Exchange further proposes to delete the chart 
specifying the designated percentages for the Closing Auction.
     Delete Rule 7.35B(c)(1)(H).
     Delete Commentaries .01(a) and (b) to Rule 7.35A.
     Delete the entirety of Commentary .01 to Rule 7.35B.
    The Exchange proposes to maintain Commentary .01(c) to Rule 7.35A, 
which provides that for a temporary period that begins March 23, 2020, 
when the Trading Floor facilities have been closed pursuant to Rule 
7.1(c)(3), and ends on the earlier of a full reopening of the Trading 
Floor facilities to DMMs or after the Exchange closes on December 31, 
2020, the requirement to publish a pre-opening indication pursuant to 
Rule 7.35A(d) before either a Core Open Auction or Trading Halt Auction 
is suspended. The Exchange proposes non-substantive amendments to 
delete subparagraph (c) numbering and move the text of that 
subparagraph into the body of Commentary .01.\21\
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    \21\ The Exchange notes that even though the requirement for 
pre-opening indications has been suspended, since June 17, 2020, 
when DMMs returned staff to the Trading Floor, DMMs have published 
pre-opening indications for IPO Auctions and the two Direct Listing 
Auctions on September 30, 2020.
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Proposed Changes to Applicable Price Range for Pre-Opening Indications
    The Exchange proposes to make permanent that the Applicable Price 
Range for determining whether to publish a pre-opening indication for a 
Core Open Auction would be 10% for securities with an Indication 
Reference Price higher than $3.00 and $0.30 for securities with an 
Indication Reference Price equal to or lower than $3.00, which is 
currently in effect on a temporary basis, as set forth in Commentary 
.06 to Rule 7.35A. The Exchange further proposes that the Applicable 
Price Range for determining whether to publish a pre-opening indication 
for a Trading Halt Auction would be 5% for securities with an 
Indication Reference Price over $3.00 and $0.15 for securities with an 
Indication Reference Price equal to or lower than $3.00.
    Rule 7.35A(d)(1)(A) currently provides that a DMM will publish a 
pre-opening indication before a security opens or reopens if the Core 
Open or Trading Halt Auction is anticipated to be a change of more than 
the ``Applicable Price Range,'' as specified in Rule 7.35A(d)(3), from 
a specified ``Indication Reference Price,'' as specified in Rule 
7.35A(d)(2).
    Rule 7.35A(d)(3)(A) provides that the Applicable Price Range will 
be 5% for securities with an Indication Reference Price over $3.00 and 
$0.15 for securities with an Indication Reference Price equal to or 
lower than $3.00. Rule 7.35A(d)(3)(B) further provides that,

    If as of 9:00 a.m., the E-mini S&P 500 Futures are +/-2% from 
the prior day's closing price of the E-mini S&P 500 Futures, when 
reopening trading following a market-wide trading halt under Rule 
7.12, or if the Exchange determines that it is necessary or 
appropriate for the maintenance of a fair and order market, the 
Applicable Price Range for determining whether to publish a pre-
opening indication will be 10% for securities with an Indication 
Reference Price over $3.00 and $0.30 for securities with an 
Indication Reference Price equal to or lower than $3.00.

    Current Rule 7.35A(1)(A) further provides that a DMM may not effect 
a Core Open or Trading Halt Auction electronically if a pre-opening 
indication has been published for the Core Open Auction. Accordingly, 
Exchange Rules already provide for a correlation between pre-opening 
indications and whether a DMM may effect a Core Open or Trading Halt 
Auction electronically. Currently, that is achieved through similar, 
though not identical, percentage parameters: The price parameter for 
DMM-facilitated electronic Core Open and Trading Halt Auctions is 4% 
and the Applicable Price Range for pre-opening indications is 5%. When 
there is market-wide volatility, both are doubled.
    The Exchange believes that because of this existing correlation, in 
connection with permanently widening the price parameters for DMM-
facilitated electronic Core Open Auctions to 10%, the Applicable Price 
Range for determining whether to publish a pre-opening indication 
should similarly not only be widened, but also be aligned to 10%. 
Similarly, because the price parameters for DMM-facilitated electronic 
Trading Halt Auctions would be 5%, the Applicable Price Range for 
determining whether to publish a pre-opening indication should be 
aligned to be 5%. With these proposed changes, if there is a 
significant enough price movement to require a DMM to effect a Core 
Open or Trading Halt Auction manually, the DMM would be required to 
publish a pre-opening indication for such Core Open or Trading Halt 
Auction. The Exchange notes that if a DMM chooses to facilitate a Core 
Open Auction or Trading Halt Auction manually (i.e., if there is less 
than a 10% price movement for a Core Open Auction or 5% price movement 
for a Trading Halt Auction), a DMM could still choose to publish a pre-
opening indication in connection with such Auction, even if the 
Applicable Price

[[Page 40889]]

Range has not been triggered. For example, DMMs generally publish pre-
opening indications for IPO Auctions and Direct Listing Auctions 
regardless of whether the Applicable Price Range has been triggered.
    The Exchange does not believe that permanently widening the 
Applicable Price Range for when a DMM is required to publish a pre-
opening indication would reduce transparency in connection with Core 
Open Auctions. The Exchange currently disseminates Auction Imbalance 
Information for all Core Open Auctions.\22\ Since August 2019, when the 
Exchange transitioned Exchange-listed securities to the Pillar trading 
platform, all Floor broker orders for the Core Open Auctions must be 
entered electronically. Accordingly, all such interest is reflected in 
the Auction Imbalance Information, which was not the case before the 
Exchange transitioned to Pillar. Accordingly, the Auction Imbalance 
Information includes information about all buy and sell orders entered 
in advance of such Auctions.\23\
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    \22\ Pursuant to Commentaries .01 and .02 to Rule 7.35, for the 
temporary period that ends on the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on 
December 31, 2020, the Exchange includes IPOs and Direct Listings in 
the Auction Imbalance Information. The Exchange has filed a separate 
proposed rule change to include IPOs and Direct Listings in the 
Auction Imbalance Information on a permanent basis. See Securities 
Exchange Act Release No. 90387 (November 10, 2020) (SR-NYSE-2020-93) 
(Notice of Filing).
    \23\ Rule 7.35(a)(4) provides that DMM Auction Liquidity is 
never included in Auction Imbalance Information. By its terms, DMM 
Auction Liquidity, as defined in Rule 7.35(d)(8)(A), is entered by 
the DMM either manually or electronically as part of the DMM unit's 
electronic message to conduct an Auction. For an Auction effected 
electronically by the DMM, DMM Auction Liquidity is entered 
simultaneously with the DMM facilitating the Auction, which is why 
it is not included in the Auction Imbalance Information leading up 
to such Auction. For an Auction effected manually by the DMM, the 
DMM can factor such interest into the pre-opening indication price 
range. DMM Orders, as defined in Rule 7.35(d)(8)(B), that may be 
entered by the DMM in advance of such Auctions would be included in 
the Auction Imbalance Information.
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    To effect this change, the Exchange proposes to combine and amend 
current Rule 7.35A(d)(3)(A) and (B) to make it a single subparagraph 
(A) that would provide that the Applicable Price Range for determining 
whether to publish a pre-opening indication for a Core Open Auction 
would be 10% for securities with an Indication Reference Price over 
$3.00 and $0.30 for securities with an Indication Reference Price equal 
to or lower than $3.00. The Exchange proposes to delete the 
introductory text to Rule 7.35A(d)(3)(B) regarding circumstances when 
the Exchange could widen the Applicable Price Range under the current 
Rule. The Exchange further proposes new text for Rule 7.35A(d)(3)(B) 
that would provide that the Applicable Price Range for determining 
whether to publish a pre-opening indication for a Trading Halt Auction 
would be 5% for securities with an Indication Reference Price over 
$3.00 and $0.15 for securities with an Indication Reference Price equal 
to or lower than $3.00. The Exchange further proposes to delete 
Commentary .06 to Rule 7.35A.
Proposed Changes to Floor Broker Interest for the Closing Auction
    The Exchange proposes to make permanent that Floor Broker Interest 
would not be eligible to participate in the Closing Auction, as set 
forth in Commentary .03 to Rule 7.35B. The term ``Floor Broker 
Interest'' is defined in Rule 7.35(a)(9) to mean orders represented 
orally by a Floor broker at the point of sale.
    Rule 7.35B(a)(1) currently provides that Floor Broker Interest is 
eligible to participate in the Closing Auction provided that the Floor 
broker has electronically entered such interest before the Auction 
Processing Period for the Closing Auction begins. The Rule further 
provides that for such interest to be eligible to participate in the 
Closing Auction, a Floor broker must first, by the end of, but not 
after, Core Trading Hours, orally represent Floor Broker Interest at 
the point of sale, including symbol, side, size, and limit price, and 
then second, electronically enter such interest after the end of Core 
Trading Hours. Current Rules 7.35B(a)(1)(B) and (C) set forth 
additional requirements relating to electronic acceptance of such 
interest by the DMM and circumstances when such interest can be 
cancelled.
    On June 17, 2020, when the Exchange reopened the Trading Floor to 
limited numbers of DMMs, the Exchange added Commentary .03 to Rule 
7.35B. Accordingly, from June 17, 2020 to the present, even though 
reduced numbers of DMMs and Floor brokers are present on the Trading 
Floor, Floor Broker Interest has not been eligible to participate in 
the Closing Auction.
    During this period, the Exchange has observed that even in the 
absence of Floor Broker Interest, Floor broker participation in Closing 
Auctions has returned to similar levels of Floor broker participation 
in the Closing Auction for the period before March 23, 2020. For 
example, in February 2020, 34.5% of Auction-Only Orders for the Closing 
Auction were entered as Closing D Orders, which are available only to 
Floor brokers.\24\ In October 2020, 38.8% of the Auction-Only Orders 
for the Closing Auction were Closing D Orders, which demonstrates that 
Floor broker participation in the Closing Auction has not only returned 
since the Trading Floor reopened, but has actually increased as 
compared to February 2020. Moreover, in February 2020, only 0.1% of 
total Floor broker orders for the Closing Auction was represented as 
Floor Broker Interest, and that Floor Broker Interest represented less 
than 0.01% of the total interest that participated in the Closing 
Auction. Based on both the relatively small levels of Floor Broker 
Interest that was participating in the Closing Auction before the 
Trading Floor closed and the ongoing availability of Closing D Orders 
for Floor brokers, the Exchange does not believe that eliminating Floor 
Broker Interest for the Closing Auction would materially impact the 
ability of Floor brokers to represent customer orders for the Closing 
Auction.
---------------------------------------------------------------------------

    \24\ For Exchange-listed securities, Auction-Only Orders are 
defined in Rule 7.31 to mean a Limit or Market Order that is to be 
traded only in an auction pursuant to the Rule 7.35 Series. The 
Exchange accepts the following Auction-Only Orders for the Closing 
Auction: Limit-on-Close Order (``LOC Order''), Market-on-Close Order 
(``MOC Order''), Closing D Order, and Closing Imbalance Offset 
Orders. All four types of Auction-Only Orders are available to Floor 
brokers.
---------------------------------------------------------------------------

    Based on this experience, the Exchange proposes to make permanent 
Commentary .03 to Rule 7.35B. To effect this change, the Exchange 
proposes to amend Rule 7.35B(a)(1) to provide that Floor Broker 
Interest would not be eligible to participate in the Closing Auction. 
To provide clarity that a Floor broker would not be permitted to 
represent verbal interest intended for the Closing Auction, the 
Exchange further proposes to provide that Floor brokers must enter any 
orders for the Closing Auction, as defined in Rule 7.31, electronically 
during Core Trading Hours. The Exchange believes that the cross-
reference to Rule 7.31 in the Rule would provide notice to Floor 
brokers and their customers of which order types are available for 
electronic entry by Floor brokers for the Closing Auction, which 
include both Auction-Only Orders described in Rule 7.31(c) and other 
orders that may be resting on the Exchange Book that are eligible to 
participate in the Closing Auction. The Exchange also proposes to 
delete Commentary .03 to Rule 7.35B.
    The Exchange proposes to make related changes by deleting the 
clause ``and Floor Broker Interest intended for the Closing Auction as 
defined in Rule 7.35B(a)(1)'' from Rule 7.32. Similarly, the Exchange 
proposes to delete the text

[[Page 40890]]

set forth in Rule 7.35C(a)(2) relating to Floor Broker Interest that 
provides that ``Floor Broker Interest that has been electronically 
accepted by the DMM and that has not been cancelled as provided for in 
Rule 7.35B(a)(1)(C) will be eligible to participate in an Exchange-
facilitated Closing Auction.'' The Exchange proposes to designate that 
sub-paragraph as ``Reserved.'' \25\
---------------------------------------------------------------------------

    \25\ The Exchange has a pending proposed rule change to amend 
Rule 7.35C(a). See (SR-NYSE-2020-89).
---------------------------------------------------------------------------

    In addition, the Exchange proposes to delete Rule 46B and amend 
Rule 47(b). Under Rule 47, Floor Officials have the authority to 
``supervise and regulate active openings and unusual situations that 
may arise in connection with the making of bids, offers or transactions 
on the Floor.'' The Exchange recently amended its rules to add 
Regulatory Trading Officials (``RTO''), which are defined in Rule 
46B.\26\ As described in the RTO Approval Order, unusual situations 
that may arise in connection with Floor Broker Interest for the Closing 
Auction could be ``if the Floor broker hand-held device malfunctions or 
ceases to work or if a Floor broker is physically impeded, as a result 
of a crowd condition beyond that of normal traffic flow on the 
Exchange's trading Floor or some other circumstance beyond the Floor 
broker's control, in his or her ability to be present at a post before 
the DMM closes the security.'' \27\ The Exchange amended Rule 47 to add 
subparagraph (b), which provides that RTOs, instead of Floor Officials, 
would be responsible for supervising and regulating situations 
regarding whether a verbal bid or verbal offer is eligible for 
inclusion in the Closing Auction by the DMM.
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 88765 (April 29, 
2020), 85 FR 26771 (May 5, 2020) (SR-NYSE-2020-03) (``RTO Approval 
Order'').
    \27\ Id. at 26772.
---------------------------------------------------------------------------

    Because the Exchange proposes to eliminate verbal bids or verbal 
offers for the Closing Auction, the Exchange proposes to delete the 
last clause of Rule 47(a) and subparagraph (b) to Rule 47.\28\ As 
proposed, Rule 47 would revert to the rule text in effect prior to the 
RTO Approval Order and would provide that ``Floor Officials shall have 
power to supervise and regulate active openings and unusual situations 
that may arise in connection with the making of bids, offers or 
transactions on the Floor.'' With this proposed change, RTOs would no 
longer have a role under Exchange rules. Therefore, the Exchange 
proposes to delete Rule 46B.
---------------------------------------------------------------------------

    \28\ RTOs were approved when the Trading Floor was temporarily 
closed. Id. Because Commentary .03 to Rule 7.35B was implemented 
when DMMs returned to the Trading Floor, there has not been any 
Floor Broker Interest for Closing Auctions since RTOs were created 
and therefore RTOs have not had to perform the functions as 
described in Rule 46(b).
---------------------------------------------------------------------------

    The Exchange also proposes to delete Commentary .02 to Rule 7.35B. 
This Commentary is obsolete because it has not been in effect since May 
22, 2020.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\29\ in general, and furthers the objectives of 
Sections 6(b)(5) of the Act,\30\ in particular, because it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to, and perfect the mechanisms of, 
a free and open market and a national market system and, in general, to 
protect investors and the public interest and because it is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions
    The Exchange believes that the proposed change to make permanent 
the parameters for DMM-facilitated electronic Core Open Auctions and 
Closing Auctions that are currently in effect on a temporary basis as 
set forth in Commentaries .01(a) and (b) to Rule 7.35A and Commentary 
.01 to Rule 7.35B would remove impediments to and perfect the mechanism 
of a free and open market and a national market system because the 
Exchange believes that these updated parameters would promote fair and 
orderly Auctions on the Exchange. These temporary parameters have been 
in effect not only during the period when the Trading Floor was closed 
in full, but also for the period when the Trading Floor has partially 
reopened to reduced staff of DMM and Floor brokers firms. In addition, 
these temporary parameters have been in effect during periods of both 
extreme volatility and high trading volumes. Accordingly, DMMs have had 
over six months' of experience of electronically facilitating Auctions 
within these temporary parameters and applying them during varying 
market conditions.
    During this period, the Exchange has observed that with these 
temporary parameters, a higher number of Core Open Auctions and Closing 
Auctions have been electronically facilitated by the DMM, which has 
resulted in a greater number of Core Open Auctions and Closing Auctions 
occurring shortly after 9:30 a.m. or 4:00 p.m., respectively. The 
Exchange has further observed that there have been modest improvements 
in auction price dislocation during the period when these temporary 
parameters have been in place. Accordingly, the Exchange believes that 
making these parameters permanent would promote the continued fair and 
orderly operation of Auctions for Exchange-listed securities.
    In addition, the Exchange further believes that the proposed 5% 
percentage parameter for DMM-facilitated electronic Trading Halt 
Auctions would remove impediments to and perfect the mechanism of a 
free and open market and a national market system because this 
percentage parameter would be aligned with the initial collars 
applicable to electronic reopening auctions following a MWCB Halt or 
trading pause on the automated primary listing exchanges that do not 
have trading floors.\31\ On the Exchange, DMMs are required to 
facilitate manually a Trading Halt Auction following a regulatory halt 
issued under Section 2 of the Listed Company Manual. Accordingly, the 
proposed 5% percentage parameter would be applicable only to DMM-
facilitated electronic Trading Halt Auctions following a trading pause 
or MWCB Halt. This proposed 5% percentage parameter would not require 
such Trading Halt Auctions to be priced within that range. Rather, if 
the Trading Halt Auction were to occur outside of that percentage 
parameter, the DMM would be required to facilitate such Trading Halt 
Auction manually. Regardless of whether a Trading Halt is facilitated 
by a DMM manually or electronically, the DMM would be required to 
determine the Auction Price as provided for in Rule 7.35A(g) and orders 
would be allocated as provided for in Rule 7.35A(h).
---------------------------------------------------------------------------

    \31\ See, e.g., NYSE Arca, Inc. Rule 7.35-E(e)(7) (specifying 
initial Auction Collars for Trading Halt Auctions).
---------------------------------------------------------------------------

Proposed Changes to Applicable Price Range for Pre-Opening Indications
    The Exchange believes that the proposed change to make permanent 
that the Applicable Price Range for determining whether to publish a 
pre-opening indication for a Core Open Auction would be 10% for 
securities with an Indication Reference Price

[[Page 40891]]

higher than $3.00 and $0.30 for securities with an Indication Reference 
Price equal to or lower than $3.00, which are currently in effect on a 
temporary basis, and to provide for an Applicable Price Range for 
Trading Halt Auctions of 5% for securities with an Indication Reference 
Price higher than $3.00 and $0.15 for securities with an Indication 
Reference Price equal to or lower than $3.00 would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system because the Exchange believes that these updated 
Applicable Price Ranges would promote fair and orderly Auctions on the 
Exchange.
    Exchange rules already provide for a correlation between the 
parameters for when a DMM may facilitate an Auction electronically and 
the Applicable Price Range for determining whether to disseminate a 
pre-opening indication. The Exchange believes that the proposed 
Applicable Price Ranges should be aligned with the Exchange's proposed 
parameters for when a DMM may facilitate an Auction electronically. 
Specifically, with this proposed change, if there is a significant 
enough price movement to require a DMM to effect a Core Open or Trading 
Halt Auction manually, the DMM would be required to publish a pre-
opening indication for such Core Open or Trading Halt Auction. The 
Exchange notes that if a DMM chooses to facilitate a Core Open Auction 
or Trading Halt Auction manually (i.e., if there is less than a 10% 
price movement for a Core Open Auction or 5% for a Trading Halt 
Auction), a DMM could still choose to publish a pre-opening indication 
in connection with such Auction, even if the Applicable Price Range has 
not been triggered.
    The Exchange does not believe that permanently widening the 
Applicable Price Range for when a DMM is required to publish a pre-
opening indication would reduce transparency in connection with Core 
Open Auctions. The Exchange currently disseminates Auction Imbalance 
Information for Core Open Auctions and Trading Halt Auctions. Since 
August 2019, when the Exchange transitioned Exchange-listed securities 
to the Pillar trading platform, all Floor broker orders for the Core 
Open and Trading Halt Auctions must be entered electronically. 
Accordingly, all such interest is reflected in the Auction Imbalance 
Information, which was not the case before the Exchange transitioned to 
Pillar. Accordingly, the Auction Imbalance Information includes 
information about all buy and sell orders entered in advance of such 
Auctions.
Proposed Changes to Floor Broker Interest for the Closing Auction
    The Exchange believes that the proposed change to make permanent 
that Floor Broker Interest would not be eligible to participate in the 
Closing Auction, which is currently in effect on a temporary basis as 
set forth in Commentary .03 to Rule 7.35B, would remove impediments to 
and perfect the mechanism of a free and open market because it would 
promote fair and orderly Closing Auctions on the Exchange.
    The Exchange has observed that even in the absence of Floor Broker 
Interest, Floor broker participation in the Closing Auction has 
returned, and indeed increased, as compared to the level of Floor 
broker participation in the Closing Auction for February 2020. 
Moreover, even when Floor Broker Interest was available to participate 
in Closing Auctions, such interest represented only 0.1% of total Floor 
broker orders that participated in Closing Auctions. Accordingly, the 
Exchange does not believe that the proposed change would materially 
alter Floor brokers' ability to meaningfully participate in the Closing 
Auction. Moreover, in the absence of Floor Broker Interest, the 
Exchange was able to move the time for DMM-facilitated electronic 
Closing Auctions from 4:02 p.m. to shortly after 4:00. By making this 
change permanent, DMM-facilitated electronic Closing Auctions would 
continue to occur shortly after 4:00.
    The Exchange further believes that the proposed amendments to Rules 
7.32, 7.35, 46B, and 47(b) would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because such rules would no longer be necessary in the absence of Floor 
Broker Interest for the Closing Auction. Accordingly, these proposed 
rule changes would promote transparency and clarity by removing 
references that would be obsolete.

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

    In accordance with Section 6(b)(8) of the Act,\32\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed change is not designed to address any 
competitive issues. Instead, the proposed rule changes are designed to 
make permanent changes that have been implemented on a temporary basis 
relating to the functions of Auctions on the Exchange and that have 
contributed to the fair and orderly Auction process during the period 
that they have been in effect. The proposed rule change does not have 
any effect on intermarket competition because these proposed changes 
relate to Auctions in Exchange-listed securities for which the Exchange 
is the primary listing exchange.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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. Order Instituting Proceedings

    In the Order Instituting Proceedings, the Commission requested 
comment on, among other things: (1) Whether the primary listing 
exchanges should harmonize their respective processes for reopening 
trading by fully automated auction after a limit-up/limit-down 
(``LULD'') pause or a Level 1 or Level 2 market-wide circuit breaker 
(``MWCB'') halt; \33\ (2) whether the NYSE should further harmonize its 
proposed Trading Halt Auction process for fully automated auctions 
facilitated electronically by DMMs to align with Nasdaq, NYSE Arca, and 
Cboe BZX regarding the establishment of permitted price bands, and/or 
the limit (or lack thereof) on price band adjustments; (3) whether the 
Exchange should permit a DMM to reopen a security up to 10% away from 
the reference price immediately after an LULD pause or MWCB halt 
without human intervention; (4) whether there are characteristics of 
the NYSE market structure that warrant divergence from the price 
parameters in place for other exchanges' fully automated reopening 
auctions immediately following an LULD pause or MWCB halt; and (5) 
whether the price parameters within which DMMs are permitted to 
electronically facilitate auctions should be the same for Core Open 
Auctions, Trading Halt Auctions, and Closing

[[Page 40892]]

Auctions.\34\ In response to the questions raised in the Order 
Instituting Proceedings, the Exchange submitted Amendment No. 2, which 
changed the percentage parameter that would be applicable to when a DMM 
may electronically facilitate a Trading Halt Auction or would be 
required to publish a pre-opening indication from 10%, as originally 
proposed, to 5%.
---------------------------------------------------------------------------

    \33\ As originally proposed by the Exchange, Trading Halt 
Auctions facilitated electronically by DMMs would differ from other 
primary listing markets' reopening processes after LULD pauses and 
MWCB halts in that they would permit a fully automated reopening of 
trading at prices up to 10% away from the auction reference price 
immediately after trading pauses or halts, whereas Nasdaq, NYSE 
Arca, and Cboe BZX establish 5% price bands for reopening and then 
widen those price bands in increments of 5%, with additional auction 
extension messages associated with each widening, until market 
interest can be satisfied.
    \34\ See Order Instituting Proceedings, supra note 6, 86 FR at 
12993.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    After careful review, the Commission is approving the proposed rule 
change, as modified by Amendment No. 2, for the reasons discussed 
below.\35\ The Commission finds that the proposed rule change, as 
modified, is consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to a national securities 
exchange, including Section 6(b)(5) of the Exchange Act,\36\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest; and are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \35\ In approving this proposed rule change, the Commission has 
considered the proposed rule change's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Parameters for DMM-Facilitated Electronic Auctions

    The Commission finds that the proposed change to establish wider 
permanent parameters for DMM-facilitated electronic Core Open Auctions 
and Closing Auctions is reasonably designed to promote fair and orderly 
Auctions on the Exchange. The Commission notes that DMMs have had over 
six months of experience of electronically facilitating Auctions within 
these parameters under temporary rules of the Exchange and that the 
Exchange's proposal includes statistics indicating that, during this 
six-month period, a higher percentage of Core Open Auctions and Closing 
Auctions have occurred shortly after 9:30 a.m. or 4:00 p.m., 
respectively, and that this increase has not been accompanied by an 
increase in auction price dislocation, but has instead been accompanied 
by a modest improvement.
    The Commission also finds that the proposed 5% percentage parameter 
for DMM-facilitated electronic Trading Halt Auctions is reasonably 
designed to remove impediments to and perfect the mechanism of a free 
and open market and a national market system because this change would 
align the percentage parameters for immediate electronic reopening 
auctions after a MWCB halt or trading pause with the initial collars 
applicable to electronic reopening auctions on the other primary 
listing exchanges.\37\
---------------------------------------------------------------------------

    \37\ See, e.g., NYSE Arca, Inc. Rule 7.35-E(e)(7) (specifying 
initial Auction Collars for Trading Halt Auctions).
---------------------------------------------------------------------------

Applicable Price Range for Pre-Opening Indications

    The Exchange proposes to make permanent that the Applicable Price 
Range for determining whether to publish a pre-opening indication for a 
Core Open Auction would be 10% for securities with an Indication 
Reference Price higher than $3.00 and $0.30 for securities with an 
Indication Reference Price equal to or lower than $3.00. The Exchange 
also proposes to change its rules to provide for an Applicable Price 
Range for Trading Halt Auctions of 5% for securities with an Indication 
Reference Price higher than $3.00 and $0.15 for securities with an 
Indication Reference Price equal to or lower than $3.00. The Commission 
finds that these changes are reasonably designed to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system by promoting fair and orderly Auctions on the Exchange 
because they would align the parameters within which a DMM may 
facilitate an Auction electronically and the Applicable Price Range for 
determining whether to disseminate a pre-opening indication (which, 
under the Exchange's rules, prevents a DMM from facilitating an auction 
electronically). Additionally, the Commission does not believe that 
widening the Applicable Price Range that governs when a DMM is required 
to publish a pre-opening indication would reduce transparency in the 
market because all buy and sell orders entered in advance of Core Open 
and Trading Halt Auctions are already reflected in Auction Imbalance 
Information.

Proposed Changes to Floor Broker Interest for the Closing Auction

    The Commission finds that the proposal to make permanent that Floor 
Broker Interest--orders represented orally by a Floor broker at the 
point of sale--would not be eligible to participate in the Closing 
Auction is reasonably designed to remove impediments to and perfect the 
mechanism of a free and open market by promoting fair and orderly 
Closing Auctions on the Exchange, because precluding participation by 
Floor Broker Interest has enabled the exchange to hold DMM-facilitated 
electronic Closing Auctions more quickly after the 4:00 p.m. scheduled 
close of trading and because Floor brokers will remain able to 
participate in the Closing Auction through the use of Closing D 
Orders.\38\
---------------------------------------------------------------------------

    \38\ In fact, the Exchange represents that Floor broker 
participation in the Closing Auction has increased despite the 
absence of Floor Broker Interest, as compared to the level of Floor 
broker participation in the Closing Auction for February 2020.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission finds that the 
proposed rule change, as modified by Amendment No. 2, is consistent 
with the requirements of the Act and in particular Section 6(b)(5) 
because it is reasonably 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.

V. 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:

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-2020-95 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-2020-95. 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

[[Page 40893]]

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-2020-95 and should be submitted on 
or before August 19, 2021.

VI. Accelerated Approval of Amendment No. 2

    As noted above, in Amendment No. 2, as compared to the original 
proposal,\39\ the Exchange proposes to: (i) Amend Rule 7.35A(c)(1)(H) 
to provide a 5% price parameter and eliminate the volume restrictions 
for DMM-facilitated Trading Halt Auctions; and (ii) amend Rule 
7.35A(d)(3)(B) to provide that the Applicable Price Range for 
determining whether to publish a pre-opening indication for a Trading 
Halt Auction would be 5% for securities with an Indication Reference 
Price over $3.00 and $0.15 for securities with an Indication Reference 
Price equal to or lower than $3.00. The Commission believes that the 
proposed 5% price parameter for DMM-facilitated Trading Halt Auctions 
is consistent with the Act because this percentage parameter would be 
aligned with the initial collars applicable to electronic reopening 
auctions following a MWCB Halt or trading pause on the automated 
primary listing exchanges that do not have trading floors. The 
Commission believes it is reasonable to also align the price parameter 
for DMM-facilitated Trading Halt Auctions with the parameter for 
publishing a pre-opening indication because Rule 7.35A(c)(1)(A) 
prohibits a DMM from effecting a Core Open or Trading Halt Auction 
electronically if a pre-opening indication has been published for the 
Core Open Auction.
---------------------------------------------------------------------------

    \39\ See Notice, supra note 3.
---------------------------------------------------------------------------

    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,\40\ to approve the proposed rule change, as modified by Amendment 
No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\41\ that the proposed rule change (SR-NYSE-2020-95), as modified 
by Amendment No. 2, be, and hereby is, approved on an accelerated 
basis.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-16122 Filed 7-28-21; 8:45 am]
BILLING CODE 8011-01-P

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