Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend Rule 7.18E, 22757-22760 [2024-06888]
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Federal Register / Vol. 89, No. 64 / Tuesday, April 2, 2024 / Notices
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Week of April 8, 2024
Dated: March 28, 2024.
For the Nuclear Regulatory Commission.
David Cullison,
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Information Officer.
[FR Doc. 2024–06923 Filed 4–1–24; 8:45 am]
CONTACT PERSON FOR MORE INFORMATION:
For more information or to verify the
status of meetings, contact Wesley Held
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The NRC is holding the meeting
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NUCLEAR REGULATORY
COMMISSION
Dated: March 29, 2024.
For the Nuclear Regulatory Commission.
Monika G. Coflin,
Technical Coordinator, Office of the
Secretary.
[NRC–2024–0001]
[FR Doc. 2024–07041 Filed 3–29–24; 4:15 pm]
BILLING CODE 7590–01–P
BILLING CODE 7590–01–P
Sunshine Act Meetings
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notice is hereby given that, on March
22, 2024, NYSE American LLC (‘‘NYSE
American’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.18E (Halts) to set forth specific
requirements for halting and resuming
trading in a security that is subject to a
reverse stock split. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Week of April 8, 2024.
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at 301–287–0745, by videophone at
TIME AND DATE:
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Tuesday, April 9, 2024
9:55 a.m. Affirmation Session (Public
Meeting) (Tentative) Motion to
Quash Subpoena in Missouri State
Emergency Management Agency
Investigation (Tentative) (Contact:
Wesley Held: 301–287–3591)
Additional Information: The meeting
will be held in the Commissioners’
Hearing Room, 11555 Rockville Pike,
Rockville, Maryland. The public is
invited to attend the Commission’s
meeting in person or watch live via
webcast at the Web address—https://
video.nrc.gov/.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99863; File No. SR–
NYSEAMER–2024–22]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Amend Rule 7.18E
March 27, 2024.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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In conjunction with the increase in
overall reverse stock splits in recent
years, the Exchange proposes to amend
Rule 7.18E (Halts) to set forth specific
requirements for halting and resuming
trading in a security that is subject to a
reverse stock split.
Background
The Commission recently approved a
proposal filed by The Nasdaq Stock
Exchange (‘‘Nasdaq’’) providing for a
regulatory halt at the end of trading on
the day immediately before the market
effective date of a reverse stock split and
a delayed opening of the security on the
market effective date of the reverse stock
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Federal Register / Vol. 89, No. 64 / Tuesday, April 2, 2024 / Notices
split.4 In its filing, Nasdaq noted that it
had observed a recent increase in
reverse stock split activity in the current
market environment.
The Exchange has not itself
experienced the increase in the number
of reverse stock splits that Nasdaq
described in its filings. Nevertheless, the
Exchange proposes to adopt similar
changes at the request of market
participants who say that they would
benefit from a consistent approach
across exchanges with respect to
regulatory halt rules around reverse
stock splits. The Exchange believes that
harmonizing its rules with Nasdaq’s in
this area would enhance investor
protection and maintain fair and orderly
markets by minimizing the chance that
market participants might make
erroneous trades in a security because
they were unaware that it had
undergone a reverse stock split.
Accordingly, the Exchange proposes
to adopt amendments to its trading halt
rules to require the Exchange to declare
a regulatory halt in trading before the
end of after-hours trading on the day
immediately before the market effective
date of a reverse stock split, and to open
the security on the market effective date
of a reverse stock split with a Trading
Halt Auction 5 at 9:00 a.m. This
proposed change is modeled on the
recently-approved Nasdaq rule.
This change would help reduce the
potential for market participants’
misunderstanding of the impact on the
value of the issuer’ securities resulting
from investors’ lack of advance
knowledge of the reverse stock split, as
well as errors resulting in a material
effect on the market resulting from
market participants’ processing of the
reverse stock split, including incorrect
adjustment or entry of orders.
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Proposed Amendment to Rule 7.18E
The Exchange currently processes
reverse stock splits overnight, with the
security available for trading on other
markets at 4:00 a.m.6 and in the
Exchange’s Early Trading Session 7
starting at 7:00 a.m. on a split-adjusted
basis. Market participants have recently
4 See Securities Exchange Act Release No. 98878
(November 7, 2023) (SR–NASDAQ–2023–036)
(approving halt provisions with respect to reverse
stock splits).
5 The term ‘‘Trading Halt Auction’’ is defined in
Rule 7.35E(e) as an auction ‘‘to re-open trading in
an Auction-Eligible Security following a halt or
pause of trading in that security in either the Early
Trading Session, Core Trading Session, or Late
Trading Session, as applicable.’’
6 All times referred to in this filing are Eastern
Time.
7 The term ‘‘Early Trading Session’’ is defined in
Rule 7.34E(a)(1) as the period of time beginning at
7:00 a.m. and concluding with the commencement
of the Core Trading Session.
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expressed concerns with allowing
trading on an adjusted basis during
those early trading sessions, noting that
it is not optimal because system errors
or problems with orders may go
unnoticed for a period of time when a
security that has undergone a reverse
stock split opens for trading with the
other thousands of securities. These
errors have the potential to adversely
affect investors, market participants,
and the issuer. For example, problems
in connection with the processing of a
reverse stock split could result in a
broker executing trades selling more
shares than customers held in their
accounts, resulting in a temporary short
position.
As such, the Exchange believes it is
appropriate to impose a regulatory halt,
which would prohibit pre-market
trading immediately after a reverse stock
split, and to re-open trading in such
securities using a Trading Halt Auction.
These changes would allow the
Exchange and market participants to
better detect any errors or problems
with orders for the security resulting
from the reverse stock split before
trading in the security begins and
thereby avoid any material effect on the
market.
The Exchange proposes to add new
subparagraph (f) to Rule 7.18E, which
would provide that the Exchange would
halt trading in a security for which the
Exchange is the Primary Listing Market 8
before the end of the Late Trading
Session 9 on the day immediately before
the market effective date of the reverse
stock split. Such a trading halt due to a
reverse stock split would be mandatory
pursuant to proposed Rule 7.18E(f). In
general, the Exchange expects to initiate
the halt at 7:50 p.m., prior to the end of
the Late Trading Session at 8:00 p.m. on
the day immediately before the split is
effective.10
8 The term ‘‘Primary Listing Market’’ is defined in
Section XI(a)(i)(H) of the CTA Plan as ‘‘the national
securities exchange on which an Eligible Security
is listed. If an Eligible Security is listed on more
than one national securities exchanges, Primary
Listing Market means the exchange on which the
security has been listed the longest.’’
9 The term ‘‘Late Trading Session’’ is defined in
Rule 7.34E(a)(3) as the period of time following the
conclusion of the Core Trading Session and
concluding at 8:00 p.m.
10 Initiating the halt at approximately 7:50 p.m.
would provide the Exchange with a limited buffer
to ensure that trading in a security that is
undergoing a reverse stock split would not continue
after the close of the Late Trading Session. While
the Exchange does not anticipate halting a security
that undergoes a reverse stock split sooner than 7:50
p.m., the Exchange may halt trading earlier than
7:50 p.m. for other reasons as described elsewhere
in Rule 7.18E. The Exchange would provide notice
of the halt through the SIP and on the Exchange’s
trading halt web page at https://www.nyse.com/
trade-halt.
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Proposed Rule 7.18E(f) would further
provide that trading in the security
would resume with a Trading Halt
Auction at 9:00 a.m. on the day the
reverse stock split is effective.11 The
Exchange believes that re-opening the
security with a Trading Halt Auction at
9:00 a.m.—which is after the start of
early trading on away markets and the
Exchange but before the opening of the
Exchange’s Core Trading Session 12 at
9:30 a.m.—would allow market
participants and the Exchange a better
opportunity to notice errors or problems
with orders for the security because it
would be opening for trading at a
unique time, and not at a time when
thousands of other securities open for
trading.13 The Exchange believes that
this halt and delayed opening 14 would
give sufficient time for investors to
review their orders and the quotes for
the security and allow market
participants to ensure that their systems
have properly adjusted for the reverse
stock split.15
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,16 in general, and
furthers the objectives of section 6(b)(5)
of the Act,17 in particular, because it is
designed to prevent fraudulent and
11 The Exchange may change the resumption time
if, for example, there was ‘‘Extraordinary Market
Activity,’’ as defined in the CTA Plan, that could
interfere with a fair and orderly resumption at the
start of Core Trading Hours. The Exchange would
provide notice of the re-opening of the security
through the SIP and on the Exchange’s trading halt
web page at https://www.nyse.com/trade-halt.
12 The term ‘‘Core Trading Session’’ is defined in
Rule 7.34E(a)(2) as ‘‘begin[ning]for each security at
9:30 a.m. Eastern Time and end[ing] at the
conclusion of Core Trading Hours or the Core
Closing Auction, whichever comes later. The Core
Open Auction will begin the Core Trading Session.’’
13 The Exchange’s proposal to re-open trading in
a security that has undergone a reverse stock split
with a Trading Halt Auction at 9:00 a.m. is
substantively similar to the Commission-approved
Nasdaq rule to reopen such securities with a
Nasdaq Halt Cross at 9:00 a.m., after the start of
early-market trading but before the start of Nasdaq’s
Regular Market Session at 9:30 a.m. See Nasdaq
Rule 4120(b)(4)(D).
14 Trading in a security that has undergone a
reverse stock split would have a delayed opening
because following the reverse stock split, the
security would not be available for early-session
trading at 4:00 a.m. on away markets or at 7:00 a.m.
on the Exchange, but would instead re-open with
a Trading Halt Auction at 9:00 a.m. Orders eligible
for execution in the Early Trading Session (as
defined in Rule 7.34E(a)(1)) that are entered before
the 9:00 a.m. Trading Halt Auction and not
canceled would be eligible to execute in the
Trading Halt Auction.
15 After resuming trading with a Trading Halt
Auction at 9:00 a.m., the security would be eligible
to trade for the remainder of the Early Trading
Session and would then participate in a Core Open
Auction at the start of the Core Trading Session.
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 89, No. 64 / Tuesday, April 2, 2024 / Notices
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
mechanism 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.
The Exchange believes that the
proposal removes impediments to and
perfects the mechanism of a free and
open market and a national market
system and protects investors and the
public interest. The Exchange is
proposing these changes at the request
of market participants who say that they
would benefit from a consistent
approach across exchanges with respect
to regulatory halt rules around reverse
stock splits. As such, the Exchange
believes that harmonizing its rules with
Nasdaq’s in this area would enhance
investor protection and maintain fair
and orderly markets by minimizing the
chance that market participants might
make erroneous trades in a security
because they were unaware that it had
undergone a reverse stock split.
The Exchange believes that its
proposed rule change establishing a
reverse stock split trading halt rule
would protect investors by giving the
Exchange non-discretionary authority to
act in situations where it is necessary to
maintain fair and orderly markets, such
as when a security is subject to a reverse
stock split and companies have not
updated their systems to account for the
new stock price. It would also ensure
that the process for resuming trading
following a reverse stock split halt is
consistent with other types of halts
initiated by the Exchange. Currently,
none of the Exchange’s rules provide
authority to pre-emptively halt the
trading in a security undergoing a
significant corporate action that could
lead to investor or market confusion.
The Exchange believes that the
proposed amendments would provide
greater transparency and clarity with
respect to the manner in which trading
would be halted due to a reverse stock
split, and the process through which
that halt would be implemented and
terminated. Particularly, the Exchange
would not have discretion in
determining whether to declare a
trading halt in a security following the
declaration of a reverse stock split.
Rather, following the reverse stock split
of a security for which the Exchange is
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the Primary Listing Market, trading in
the security would halt prior to the
close of the Late Trading Session on the
day immediately before the market
effective date of the reverse stock split.
The Exchange also believes it is
appropriate to re-open the security with
a Trading Halt Auction at 9:00 a.m. on
the effective date of the reverse stock
split instead of at 4:00 a.m. on away
markets or 7:00 a.m. on the Exchange
because doing so would give the
Exchange and market participants an
opportunity to identify any orders in a
security that has undergone a reverse
stock split that have not correctly
adjusted to the security’s new stock
price. The proposed changes seek to
achieve consistency with respect to the
initiation and termination of a trading
halt with respect to securities that have
undergone a reverse stock split, while
maintaining a fair and orderly market,
protecting investors, and protecting the
public interest.
Additionally, the Exchange believes
that establishing a mandatory trading
halt for securities that have undergone
a reverse stock split and resuming
trading thereafter promotes fair and
orderly markets and the protection of
investors because it allows the Exchange
to protect the broader interests of the
national market system and addresses
potential concerns that system errors
may affect immediate trading in those
securities. The Exchange believes that
given the increase in companies
effecting reverse stock splits, the
proposal would help the Exchange
reduce the potential for errors resulting
in a material effect on the market
resulting from market participants’
processing of the reverse stock split,
including incorrect adjustment or entry
of orders.
The Exchange further believes that reopening a security subject to a reverse
stock split with a Trading Halt Auction
at 9:00 a.m.—which is after the start of
early trading on away markets and the
Exchange but before the opening of the
Exchange’s Core Trading Session at 9:30
a.m.—would promote fair and orderly
trading, protect investors, and promote
the public interest by allowing market
participants and the Exchange a better
opportunity to notice errors or problems
with orders for the security because it
would be opening for trading at a
unique time, and not at a time when
thousands of other securities open for
trading.
Based on the foregoing, the Exchange
believes that the proposal is consistent
with the Act because it would promote
just and equitable principles of trade
and would remove any impediments to
a free and open market and a national
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22759
market system by allowing sufficient
time for investors to review their orders
and the quotes for a security that has
undergone a reverse stock split, and
allow market participants to ensure that
their systems have properly accounted
for the reverse stock split. As discussed
previously, the Exchange believes that
the proposed amendments establishing
the authority and process for reverse
stock split trading halts and the
resumption of trading is consistent with
the Act, which itself imposes
obligations on exchanges with respect to
issuers that are listed.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposal will not impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of section 6(b)(8) of the Act.18
The Exchange believes that the
proposal will not impose a burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because the
proposed rule change is designed to
protect investors and facilitate a fair and
orderly market, which are both
important purposes of the Act. To the
extent that there is any impact on
intermarket competition, it is incidental
to these objectives. In addition, at least
one other exchange (Nasdaq) has
already adopted a substantially similar
rule. The Exchange believes that
harmonizing its rules with Nasdaq’s in
this area would minimize the chance
that market participants might make
erroneous trades in a security because
they were unaware that it had
undergone a reverse stock split.
The Exchange does not believe that
the proposed rule change imposes a
burden on intra-market competition
because the provisions apply to all
market participants and issuers on the
Exchange equally. In addition,
information regarding the timing of
reverse stock splits and the halting and
resumption of trading in connection
with the effecting of reverse splits
would be disseminated using several
freely-accessible sources to ensure the
broad availability of this information.
In addition, the proposal includes
provisions related to the declaration and
timing of trading halts and the
resumption of trading that are designed
to prevent any advantage to those who
can react more quickly than other
market participants.
18 15
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U.S.C. 78f(b)(8).
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Federal Register / Vol. 89, No. 64 / Tuesday, April 2, 2024 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to section
19(b)(3)(A)(iii) of the Act 19 and Rule
19b–4(f)(6) thereunder.20 Because the
proposed rule change does not: (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.21
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under section 19(b)(2)(B) 22 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
19 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires the Exchange to give the
Commission written notice of its intent to file the
proposed rule change, along with a brief description
and text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. The Exchange has
satisfied this requirement.
22 15 U.S.C. 78s(b)(2)(B).
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20 17
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• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEAMER–2024–22 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEAMER–2024–22. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEAMER–2024–22 and should
be submitted on or before April 23,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024–06888 Filed 4–1–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99862; File No. SR–
NYSEARCA–2024–29]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.18–E
March 27, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
22, 2024, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7.18–E (Halts) to set forth specific
requirements for halting and resuming
trading in a security that is subject to a
reverse stock split. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In conjunction with the increase in
overall reverse stock splits in recent
years, the Exchange proposes to amend
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
23 17
PO 00000
CFR 200.30–3(a)(12).
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[Federal Register Volume 89, Number 64 (Tuesday, April 2, 2024)]
[Notices]
[Pages 22757-22760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06888]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99863; File No. SR-NYSEAMER-2024-22]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Rule
7.18E
March 27, 2024.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on March 22, 2024, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.18E (Halts) to set forth
specific requirements for halting and resuming trading in a security
that is subject to a reverse stock split. The proposed rule change is
available on the Exchange's website at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
In conjunction with the increase in overall reverse stock splits in
recent years, the Exchange proposes to amend Rule 7.18E (Halts) to set
forth specific requirements for halting and resuming trading in a
security that is subject to a reverse stock split.
Background
The Commission recently approved a proposal filed by The Nasdaq
Stock Exchange (``Nasdaq'') providing for a regulatory halt at the end
of trading on the day immediately before the market effective date of a
reverse stock split and a delayed opening of the security on the market
effective date of the reverse stock
[[Page 22758]]
split.\4\ In its filing, Nasdaq noted that it had observed a recent
increase in reverse stock split activity in the current market
environment.
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\4\ See Securities Exchange Act Release No. 98878 (November 7,
2023) (SR-NASDAQ-2023-036) (approving halt provisions with respect
to reverse stock splits).
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The Exchange has not itself experienced the increase in the number
of reverse stock splits that Nasdaq described in its filings.
Nevertheless, the Exchange proposes to adopt similar changes at the
request of market participants who say that they would benefit from a
consistent approach across exchanges with respect to regulatory halt
rules around reverse stock splits. The Exchange believes that
harmonizing its rules with Nasdaq's in this area would enhance investor
protection and maintain fair and orderly markets by minimizing the
chance that market participants might make erroneous trades in a
security because they were unaware that it had undergone a reverse
stock split.
Accordingly, the Exchange proposes to adopt amendments to its
trading halt rules to require the Exchange to declare a regulatory halt
in trading before the end of after-hours trading on the day immediately
before the market effective date of a reverse stock split, and to open
the security on the market effective date of a reverse stock split with
a Trading Halt Auction \5\ at 9:00 a.m. This proposed change is modeled
on the recently-approved Nasdaq rule.
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\5\ The term ``Trading Halt Auction'' is defined in Rule
7.35E(e) as an auction ``to re-open trading in an Auction-Eligible
Security following a halt or pause of trading in that security in
either the Early Trading Session, Core Trading Session, or Late
Trading Session, as applicable.''
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This change would help reduce the potential for market
participants' misunderstanding of the impact on the value of the
issuer' securities resulting from investors' lack of advance knowledge
of the reverse stock split, as well as errors resulting in a material
effect on the market resulting from market participants' processing of
the reverse stock split, including incorrect adjustment or entry of
orders.
Proposed Amendment to Rule 7.18E
The Exchange currently processes reverse stock splits overnight,
with the security available for trading on other markets at 4:00
a.m.\6\ and in the Exchange's Early Trading Session \7\ starting at
7:00 a.m. on a split-adjusted basis. Market participants have recently
expressed concerns with allowing trading on an adjusted basis during
those early trading sessions, noting that it is not optimal because
system errors or problems with orders may go unnoticed for a period of
time when a security that has undergone a reverse stock split opens for
trading with the other thousands of securities. These errors have the
potential to adversely affect investors, market participants, and the
issuer. For example, problems in connection with the processing of a
reverse stock split could result in a broker executing trades selling
more shares than customers held in their accounts, resulting in a
temporary short position.
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\6\ All times referred to in this filing are Eastern Time.
\7\ The term ``Early Trading Session'' is defined in Rule
7.34E(a)(1) as the period of time beginning at 7:00 a.m. and
concluding with the commencement of the Core Trading Session.
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As such, the Exchange believes it is appropriate to impose a
regulatory halt, which would prohibit pre-market trading immediately
after a reverse stock split, and to re-open trading in such securities
using a Trading Halt Auction. These changes would allow the Exchange
and market participants to better detect any errors or problems with
orders for the security resulting from the reverse stock split before
trading in the security begins and thereby avoid any material effect on
the market.
The Exchange proposes to add new subparagraph (f) to Rule 7.18E,
which would provide that the Exchange would halt trading in a security
for which the Exchange is the Primary Listing Market \8\ before the end
of the Late Trading Session \9\ on the day immediately before the
market effective date of the reverse stock split. Such a trading halt
due to a reverse stock split would be mandatory pursuant to proposed
Rule 7.18E(f). In general, the Exchange expects to initiate the halt at
7:50 p.m., prior to the end of the Late Trading Session at 8:00 p.m. on
the day immediately before the split is effective.\10\
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\8\ The term ``Primary Listing Market'' is defined in Section
XI(a)(i)(H) of the CTA Plan as ``the national securities exchange on
which an Eligible Security is listed. If an Eligible Security is
listed on more than one national securities exchanges, Primary
Listing Market means the exchange on which the security has been
listed the longest.''
\9\ The term ``Late Trading Session'' is defined in Rule
7.34E(a)(3) as the period of time following the conclusion of the
Core Trading Session and concluding at 8:00 p.m.
\10\ Initiating the halt at approximately 7:50 p.m. would
provide the Exchange with a limited buffer to ensure that trading in
a security that is undergoing a reverse stock split would not
continue after the close of the Late Trading Session. While the
Exchange does not anticipate halting a security that undergoes a
reverse stock split sooner than 7:50 p.m., the Exchange may halt
trading earlier than 7:50 p.m. for other reasons as described
elsewhere in Rule 7.18E. The Exchange would provide notice of the
halt through the SIP and on the Exchange's trading halt web page at
https://www.nyse.com/trade-halt.
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Proposed Rule 7.18E(f) would further provide that trading in the
security would resume with a Trading Halt Auction at 9:00 a.m. on the
day the reverse stock split is effective.\11\ The Exchange believes
that re-opening the security with a Trading Halt Auction at 9:00 a.m.--
which is after the start of early trading on away markets and the
Exchange but before the opening of the Exchange's Core Trading Session
\12\ at 9:30 a.m.--would allow market participants and the Exchange a
better opportunity to notice errors or problems with orders for the
security because it would be opening for trading at a unique time, and
not at a time when thousands of other securities open for trading.\13\
The Exchange believes that this halt and delayed opening \14\ would
give sufficient time for investors to review their orders and the
quotes for the security and allow market participants to ensure that
their systems have properly adjusted for the reverse stock split.\15\
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\11\ The Exchange may change the resumption time if, for
example, there was ``Extraordinary Market Activity,'' as defined in
the CTA Plan, that could interfere with a fair and orderly
resumption at the start of Core Trading Hours. The Exchange would
provide notice of the re-opening of the security through the SIP and
on the Exchange's trading halt web page at https://www.nyse.com/trade-halt.
\12\ The term ``Core Trading Session'' is defined in Rule
7.34E(a)(2) as ``begin[ning]for each security at 9:30 a.m. Eastern
Time and end[ing] at the conclusion of Core Trading Hours or the
Core Closing Auction, whichever comes later. The Core Open Auction
will begin the Core Trading Session.''
\13\ The Exchange's proposal to re-open trading in a security
that has undergone a reverse stock split with a Trading Halt Auction
at 9:00 a.m. is substantively similar to the Commission-approved
Nasdaq rule to reopen such securities with a Nasdaq Halt Cross at
9:00 a.m., after the start of early-market trading but before the
start of Nasdaq's Regular Market Session at 9:30 a.m. See Nasdaq
Rule 4120(b)(4)(D).
\14\ Trading in a security that has undergone a reverse stock
split would have a delayed opening because following the reverse
stock split, the security would not be available for early-session
trading at 4:00 a.m. on away markets or at 7:00 a.m. on the
Exchange, but would instead re-open with a Trading Halt Auction at
9:00 a.m. Orders eligible for execution in the Early Trading Session
(as defined in Rule 7.34E(a)(1)) that are entered before the 9:00
a.m. Trading Halt Auction and not canceled would be eligible to
execute in the Trading Halt Auction.
\15\ After resuming trading with a Trading Halt Auction at 9:00
a.m., the security would be eligible to trade for the remainder of
the Early Trading Session and would then participate in a Core Open
Auction at the start of the Core Trading Session.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\16\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\17\ in particular, because it
is designed to prevent fraudulent and
[[Page 22759]]
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 mechanism 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.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal removes impediments to and
perfects the mechanism of a free and open market and a national market
system and protects investors and the public interest. The Exchange is
proposing these changes at the request of market participants who say
that they would benefit from a consistent approach across exchanges
with respect to regulatory halt rules around reverse stock splits. As
such, the Exchange believes that harmonizing its rules with Nasdaq's in
this area would enhance investor protection and maintain fair and
orderly markets by minimizing the chance that market participants might
make erroneous trades in a security because they were unaware that it
had undergone a reverse stock split.
The Exchange believes that its proposed rule change establishing a
reverse stock split trading halt rule would protect investors by giving
the Exchange non-discretionary authority to act in situations where it
is necessary to maintain fair and orderly markets, such as when a
security is subject to a reverse stock split and companies have not
updated their systems to account for the new stock price. It would also
ensure that the process for resuming trading following a reverse stock
split halt is consistent with other types of halts initiated by the
Exchange. Currently, none of the Exchange's rules provide authority to
pre-emptively halt the trading in a security undergoing a significant
corporate action that could lead to investor or market confusion.
The Exchange believes that the proposed amendments would provide
greater transparency and clarity with respect to the manner in which
trading would be halted due to a reverse stock split, and the process
through which that halt would be implemented and terminated.
Particularly, the Exchange would not have discretion in determining
whether to declare a trading halt in a security following the
declaration of a reverse stock split. Rather, following the reverse
stock split of a security for which the Exchange is the Primary Listing
Market, trading in the security would halt prior to the close of the
Late Trading Session on the day immediately before the market effective
date of the reverse stock split. The Exchange also believes it is
appropriate to re-open the security with a Trading Halt Auction at 9:00
a.m. on the effective date of the reverse stock split instead of at
4:00 a.m. on away markets or 7:00 a.m. on the Exchange because doing so
would give the Exchange and market participants an opportunity to
identify any orders in a security that has undergone a reverse stock
split that have not correctly adjusted to the security's new stock
price. The proposed changes seek to achieve consistency with respect to
the initiation and termination of a trading halt with respect to
securities that have undergone a reverse stock split, while maintaining
a fair and orderly market, protecting investors, and protecting the
public interest.
Additionally, the Exchange believes that establishing a mandatory
trading halt for securities that have undergone a reverse stock split
and resuming trading thereafter promotes fair and orderly markets and
the protection of investors because it allows the Exchange to protect
the broader interests of the national market system and addresses
potential concerns that system errors may affect immediate trading in
those securities. The Exchange believes that given the increase in
companies effecting reverse stock splits, the proposal would help the
Exchange reduce the potential for errors resulting in a material effect
on the market resulting from market participants' processing of the
reverse stock split, including incorrect adjustment or entry of orders.
The Exchange further believes that re-opening a security subject to
a reverse stock split with a Trading Halt Auction at 9:00 a.m.--which
is after the start of early trading on away markets and the Exchange
but before the opening of the Exchange's Core Trading Session at 9:30
a.m.--would promote fair and orderly trading, protect investors, and
promote the public interest by allowing market participants and the
Exchange a better opportunity to notice errors or problems with orders
for the security because it would be opening for trading at a unique
time, and not at a time when thousands of other securities open for
trading.
Based on the foregoing, the Exchange believes that the proposal is
consistent with the Act because it would promote just and equitable
principles of trade and would remove any impediments to a free and open
market and a national market system by allowing sufficient time for
investors to review their orders and the quotes for a security that has
undergone a reverse stock split, and allow market participants to
ensure that their systems have properly accounted for the reverse stock
split. As discussed previously, the Exchange believes that the proposed
amendments establishing the authority and process for reverse stock
split trading halts and the resumption of trading is consistent with
the Act, which itself imposes obligations on exchanges with respect to
issuers that are listed.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal will not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of section 6(b)(8) of the Act.\18\
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\18\ 15 U.S.C. 78f(b)(8).
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The Exchange believes that the proposal will not impose a burden on
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed rule change
is designed to protect investors and facilitate a fair and orderly
market, which are both important purposes of the Act. To the extent
that there is any impact on intermarket competition, it is incidental
to these objectives. In addition, at least one other exchange (Nasdaq)
has already adopted a substantially similar rule. The Exchange believes
that harmonizing its rules with Nasdaq's in this area would minimize
the chance that market participants might make erroneous trades in a
security because they were unaware that it had undergone a reverse
stock split.
The Exchange does not believe that the proposed rule change imposes
a burden on intra-market competition because the provisions apply to
all market participants and issuers on the Exchange equally. In
addition, information regarding the timing of reverse stock splits and
the halting and resumption of trading in connection with the effecting
of reverse splits would be disseminated using several freely-accessible
sources to ensure the broad availability of this information.
In addition, the proposal includes provisions related to the
declaration and timing of trading halts and the resumption of trading
that are designed to prevent any advantage to those who can react more
quickly than other market participants.
[[Page 22760]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to section
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\21\
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\19\ 15 U.S.C. 78s(b)(3)(A)(iii).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
section 19(b)(2)(B) \22\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\22\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSEAMER-2024-22 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEAMER-2024-22. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSEAMER-2024-22 and should
be submitted on or before April 23, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-06888 Filed 4-1-24; 8:45 am]
BILLING CODE 8011-01-P
