[Federal Register Volume 82, Number 235 (Friday, December 8, 2017)]
[Notices]
[Pages 58032-58034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26459]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82213; File No. SR-NYSE-2017-32]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendment No. 1 
Thereto, To Amend Section 202.06 of the NYSE Listed Company Manual To 
Prohibit Listed Companies From Issuing Material News After the Official 
Closing Time for the Exchange's Trading Session Until the Earlier of 
Publication of Such Company's Official Closing Price on the Exchange or 
Five Minutes After the Official Closing Time

December 4, 2017.

I. Introduction

    On August 17, 2017, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend the NYSE Listed Company 
Manual (the ``Manual'') to prohibit listed companies from issuing 
material news after the official closing time for the Exchange's 
trading session until the earlier of publication of such company's 
official closing price on the Exchange or five minutes after the 
official closing time. The proposed rule change was published for 
comment in the Federal Register on September 5, 2017.\3\ The Commission 
received one comment letter on the proposed rule change.\4\ On October 
20, 2017, the Commission extended the time period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to approve or disapprove 
the proposed rule change to December 4, 2017.\5\ On November 28, 2017, 
the Exchange filed Amendment No. 1 to the proposed rule change, which 
replaced and superceded the original filing in its entirety.\6\ This 
order approves the proposed rule change, as modified by Amendment No. 
1.
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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. 81494 (August 29, 
2017), 82 FR 42008 (``Notice'').
    \4\ See letter to Eduardo A. Aleman, Assistant Secretary, 
Commission from John Dibacco Virtu Financial LLC (``Virtu''), dated 
September 20, 2017 (``Virtu Letter''). The Virtu Letter expressed 
support for the proposed rule change.
    \5\ See Securities Exchange Act Release No. 81914, 82 FR 49690 
(October 26, 2017).
    \6\ In Amendment No. 1, the Exchange amended the proposed rule 
language to clarify that the proposed restriction on issuing 
material news will not apply where a listed company was publicly 
disclosing material information following a non-intentional 
disclosure in order to comply with Regulation FD. Amendment No. 1 
was also submitted as a comment to the rule proposal. See letter to 
Brent J. Fields, Secretary, Commission from Martha Redding, 
Associate General Counsel and Assistant Secretary, New York Stock 
Exchange, dated November 29, 2017 (``Amendment No. 1'').
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    Currently, the Exchange's rules for the public release of material 
information, set forth in Section 202.06 (Procedure for Public Release 
of Information; Trading Halts) of the Manual, contains an advisory that 
requests that listed companies that intend to issue material news after 
the close of trading on the Exchange delay such issuance until the 
earlier of publication of such company's official closing price or 
fifteen minutes after the close of trading in order to facilitate an 
orderly closing auction process. Continuous trading on the Exchange 
ends at the Exchange's official closing time of 4:00 p.m. Eastern Time,

[[Page 58033]]

except for certain days on which trading closes early at 1:00 p.m. 
Eastern Time. After continuous trading ends at the official closing 
time (generally 4:00 p.m. unless there is a 1:00 p.m. close), the 
Designated Market Maker (``DMM'') in a security facilitates the close 
of trading in a closing auction.\7\ The closing auction is a manual 
process unless the DMM chooses to automate the closing auction.\8\ At 
the official closing time, the Exchange stops accepting any new orders, 
including those orders designated for the closing auction and requests 
to cancel orders.
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    \7\ See Section 202.06 of the Manual. A DMM has a responsibility 
and duty to facilitate the close of trading for each of the 
securities in which the DMM is registered. See id. at 42009. Up 
until 4:00 p.m., the Exchange publishes order imbalance information, 
which includes real-time order imbalance information and information 
indicating the price at which closing interest may be executed in 
full and the price at which Exchange Book and closing-only interest 
may be executed in full. See id. Accordingly, a DMM facilitates a 
closing auction based on an order imbalance and order information 
established before 4:00 p.m. See id.
    \8\ See NYSE Rule 123C, which establishes the Exchange's Closing 
Procedures, including that closings may be effectuated manually or 
electronically by the DMM (Supplementary Material .10 to Rule 123C).
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    In its proposal, the Exchange stated that because there is trading 
after 4:00 p.m. Eastern Time on other exchange and non-exchange venues 
(``away markets''), if a listed company issues material news 
immediately after 4:00 p.m., but before the closing auction on the 
Exchange is completed, there can be a significant price difference in 
nearly contemporaneous trades on away markets and the official closing 
price on the Exchange.\9\ The Exchange previously had added the 
advisory text in Section 202.06 of the Manual, noted above, in order to 
mitigate investor confusion as a result of possible discrepancy between 
the official closing price on the Exchange and the prices of executions 
in away markets.\10\ The Exchange stated in its proposal, however, that 
it has continued to experience situations where material news issued by 
companies shortly after 4:00 p.m. has caused significant investor 
confusion.\11\ Specifically, when a listed company releases material 
news shortly after 4.00 p.m., but before the DMM has been able to 
complete the Exchange closing auction, the material news release can 
cause the company's stock to trade on away markets at materially 
different prices than the price of the NYSE's closing auction.\12\
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    \9\ See Notice, supra note 3, at 42009.
    \10\ See Securities Exchange Act Release No. 75809 (September 2, 
2015), 80 FR 54362 (September 9, 2015).
    \11\ See Notice, supra note 3, at 42009.
    \12\ See Id.
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    The Exchange has therefore proposed to amend Section 202.06 of the 
Manual to prohibit listed companies from issuing material news after 
the official closing time for the Exchange's trading session until the 
earlier of publication of such company's official closing price on the 
Exchange or five minutes after the Exchange's official closing time, 
except when publicly disclosing material information following a non-
intentional disclosure in order to comply with Regulation FD under the 
Act. The Exchange has also proposed to retain the existing advisory 
text in Section 202.06 of the Manual. Finally, the Exchange proposed to 
modify its description of the Exchange's trading hours to specify the 
official closing time is typically 4:00 p.m. Eastern Time, except for 
certain days on which the official closing time occurs early at 1:00 
p.m. Eastern Time.\13\
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    \13\ See proposed Section 202.06 of the Manual.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Exchange Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\14\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Exchange Act,\15\ 
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.
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    \14\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed amendment is reasonably 
designed to promote just and equitable principles of trade by ensuring 
that participants in the closing auction on the Exchange do not have 
their trades executed at a price that is different from essentially 
contemporaneous trades being executed on away markets. As is noted 
above, the price on such away markets can reflect material news that 
was released after the Exchange's official closing time but before the 
DMM is able to complete the closing auction. Such an occurance can 
increase the risk of market disruption and reduce investor confidence 
in trading on the Exchange given that once the official closing time 
occurs on the Exchange, orders cannot be cancelled or modified 
(including orders designated for the closing price) to take into 
account the material news even though the Exchange closing price may 
not yet have been established by the closing auction process.
    According to Section 202.05 (Timely Disclosure of Material News 
Developments) of the Manual, a listed company is expected to release 
quickly to the public any news or information which might reasonably be 
expected to materially affect the market for its securities.\16\ While 
the Commission recognizes the importance of the requirement in Section 
202.05 that listed companies release material news to the public as 
quickly as possible, the Commission also believes that the maximum five 
minute delay mandated by the proposal is consistent with investor 
protection in that it will reduce the likelihood of investor confusion 
that could result if material news is issued prior to the completion of 
the Exchange's closing auction but while trading is continuing on away 
markets. The Exchange has also represented that DMMs are able to 
complete the closing auctions for the securities assigned to a DMM in 
almost all cases within five minutes of the Exchange's official closing 
time, thereby minimizing the possible amount of time delay for a listed 
company to issue material news after the Exchange's official closing 
time, consistent with the protection of investors and the public 
interest.\17\
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    \16\ Section 202.05 of the Manual further states that a listed 
company should also act promptly to dispel unfounded rumors which 
result in unusual market activity or price variations.
    \17\ See Notice, supra note 3, at 42009.
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    The Commission further notes that the commenter supported the goals 
of the proposal stating that they agreed with the Exchange that, in 
order to prevent investor confusion, the closing price for NYSE listed 
companies must be consistent with the contemporanious trading prices on 
other markets and a brief ``coolling off'' period was warranted to 
enable the DMM to complete the closing auction process.\18\
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    \18\ See Virtu Letter at 2. Additionally, Virtu requested that 
the Exchange review compliance with Section 202.06 of the Manual to 
determine whether appropriate actions are being taken to prevent the 
dissemination of material news during the trading day. The 
Commission believes that Virtu's request to review Section 202.06 of 
the Manual is beyond the scope of the proposed rule change.
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    The amended proposed rule language, moreover, makes clear that, 
despite the

[[Page 58034]]

limited time prohibition in the rule for releasing material information 
after the Exchange's official closing time, a listed company is never 
expected to withhold material information if doing so would violate 
Regulation FD under the Act. The Commisison notes that this exception 
in the new rule requirement ensures that listed companies will not be 
prohibited from disclosing material information following a non-
intentional disclosure in compliance with Regulation FD, even if the 
closing auction on the Exchange has not yet been completed. The 
Commisison believes that this provision is designed to ensure, among 
other things, that all market participants have equal access to 
information that is material to trading in the securities of listed 
companies and therefore finds it is consistent with the protection of 
investors and the public interest.\19\ Finally, the Commission believes 
that making clear the official closing time of the Exchange is 
consistent with investor protection and the public interest in that it 
reduces potential confusion in determining when the rule applies.
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    \19\ The Commission notes that it expects listed companies to 
comply with their obligations under the federal securities laws, 
including Regulation FD, notwithstanding provisions in the Exchange 
rules that require listed companies to provide the Exchange advance 
notice of material news announcements, such as in Section 202.05 (B) 
of the Manual.
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    Accordingly, for the reasons discussed above, the Commission finds 
that the proposed rule change, as modified by Amendment No. 1, is 
consistent with the Exchange Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether this filing, as 
modified by whether Amendment No. 1, is consistent with the Exchange 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2017-32 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-2017-32. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. 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-2017-32 and should be 
submitted on or before December 29, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Exchange Act, to approve the proposed rule change, as modified by 
Amendment No. 1, prior to the 30th day after the date of publication of 
Amendment No. 1 in the Federal Register. As discussed above, Amendment 
No. 1 explicitly makes clear that the proposed restriction on issuing 
material news will not apply when a listed company is publicly 
disclosing material information following a non-intentional disclosure 
in order to comply with Regulation FD.\20\ The Commission believes that 
this revision provides greater clarity on the application of the 
proposed amendments to Section 202.06 of the Manual and removes 
uncertainty as to the new prohibitions in the Exchange rules and a 
listed company's obligation to make disclosures that would be required 
under Regulation FD pursuant to the federal securities laws.
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    \20\ See supra note 6.
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    Accordingly, the Commission finds good cause for approving the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis, pursuant to Section 19(b)(2) of the Exchange Act.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\21\ that the proposed rule change (SR-NYSE-2017-32), as 
modified by Amendment No. 1, be, and hereby is, approved.
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    \21\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26459 Filed 12-7-17; 8:45 am]
BILLING CODE 8011-01-P


