
[Federal Register Volume 83, Number 239 (Thursday, December 13, 2018)]
[Notices]
[Pages 64168-64170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26944]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84755; File No. SR-NYSE-2018-60]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 15 Relating to the Reference Price for Exchange-Listed 
Securities

December 7, 2018.
    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 December 4, 2018, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 15 relating to the Reference 
Price for Exchange-listed securities. 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
    The Exchange proposes to amend Rule 15 relating to a security's 
Reference Price that is used in determining whether to publish a pre-
opening indication prior to an opening auction in a security that is 
already listed on the Exchange. The Exchange proposes to use the 
``Official Closing Price'' (``OCP'') rather than the last reported sale 
price \4\ as an Exchange-listed security's Reference Price and to 
clarify that such Reference Price would be adjusted as applicable based 
on the publicly disclosed terms of a corporate action.
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    \4\ All references to ``last reported sale price'' or ``last-
sale eligible trade'' are to a trade that is of at least one round 
lot.
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    Rule 15(a) states that a pre-opening indication will include the 
security and the price range within which the opening price is 
anticipated to occur and that a pre-opening indication is published via 
the securities information processor and the Exchange's proprietary 
data feeds. Rule 15(b) provides that a designated market maker 
(``DMM'') will publish a pre-opening indication either: (i) Before a 
security opens if the opening transaction on the Exchange is 
anticipated to be at a price that represents a change of more than the 
``Applicable Price Range,'' as specified in Rule 15(d),\5\ from a 
specified ``Reference Price,'' as specified in Rule 15(c); or (ii) if a 
security has not opened by 10:00 a.m. Eastern Time. Accordingly, the 
Reference Price operates as a trigger for whether to publish a pre-
opening indication. The pre-opening indication price range that is 
published is based on where the opening price is anticipated to occur; 
the Reference Price is not published as part of the pre-opening 
indication.
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    \5\ Under Rule 15(d)(1), the Applicable Price Range for 
determining whether to publish a pre-opening indication is 5% for 
securities with a Reference Price over $3.00 and $0.15 for 
securities with a Reference Price equal to or lower than $3.00.
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    Rule 15(c)(1)(A) specifies that the Reference Price for a security 
(other than an American Depository Receipt) that is already listed on 
the Exchange will be the security's last reported sale price on the 
Exchange.\6\ The Exchange proposes to amend Rule 15(c)(1)(A) to: (i) 
Use the Official Closing Price rather than the last reported sale price 
as an Exchange-listed security's Reference Price; and (ii) specify that 
the Official Closing Price would be adjusted as applicable based on the 
publicly disclosed terms of a corporate action.
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    \6\ See Rule 15(c)(1). Rule 15(c)(1)(B)-(D) also specifies what 
the Reference Price will be for a security that is the subject of an 
initial public offering, that is transferred from another securities 
market, or that is listed under Footnote (E) to Section 102.01B of 
the Listed Company Manual.
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    Official Closing Price. Currently, the reference in Rule 
15(c)(1)(A) to a security's ``last reported sale price'' means the last 
round-lot sale price on the Exchange that is reported to the 
Consolidated Tape, which includes the closing transaction price of a 
round lot or more in a security, and if there was no closing 
transaction, the last round-lot sale price on the Exchange in that 
security. For example, if there was no closing transaction, and the 
last reported sale price of a round lot or more on the Exchange was 
from 3:30 p.m., the Exchange would use that 3:30 p.m. last reported 
sale price as the Reference Price for Rule 15(c)(1)(A). If there was no 
reported sale price the prior day, the Exchange will use the last 
reported sale price, regardless of how long ago it was published.
    The Exchange proposes to update the terminology used in Rule 
15(c)(1)(A) to reference the term OCP rather than reference a 
security's ``last reported sale price.'' When the OCP is determined 
under Rule 123C(1)(e)(i),\7\ use of such OCP for purposes of Rule 
15(c)(1)(A) would result in the same Reference Price as under the 
current rule using the last reported sale price.\8\ In addition, by

[[Page 64169]]

referencing the OCP, the proposed amendment to Rule 15(c)(1)(A) would 
provide for a new method for determining the Reference Price if the 
Exchange is unable to conduct a closing transaction due to a systems or 
technical issue. In such case, Rules 123C(1)(e)(ii) and (iii) specify 
that the OCP would be determined via one of the contingency procedures 
specified in that rule, the selection of which depends on whether the 
Exchange determines that it cannot conduct a closing auction before or 
after 3:00 p.m. Eastern Time.\9\
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    \7\ In 2015, the Exchange amended Rule 123C to define the term 
OCP and specified how the Exchange would determine the OCP for a 
security. See Securities Exchange Act Release No. 76598 (December 9, 
2015), 80 FR 77688 (December 15, 2015) (SR-NYSE-2015-62) (Notice of 
filing and immediate effectiveness of proposed rule change).
    \8\ Rule 123C(1)(e)(i) provides that ``[t]he Official Closing 
Price is the price established in a closing transaction under 
paragraphs (7) and (8) of [Rule 123C] of one round lot or more. If 
there is no closing transaction in a security or if a closing 
transaction is less than a round lot, the Official Closing Price 
will be the most recent last-sale eligible trade in such security on 
the Exchange on that trading day.'' Rule 123C(7) and (8) specify the 
allocation process for the closing transaction. Rule 
123C(1)(e)(i)(A) provides that ``[i]f there were no last-sale 
eligible trades in a security on the Exchange on a trading day, the 
Official Closing Price of such security will be the prior day's 
Official Closing Price.'' Taken together, these provisions would 
result in the same Reference Price as under the current rule using 
the last reported sale price.
    \9\ In 2016, the Exchange further amended Rule 123C to modify 
how the Exchange would determine an OCP if the Exchange is unable to 
conduct a closing transaction due to a systems or technical issue. 
In general, Rules 123C(1)(e)(ii) or (iii) provide that the OCP would 
be either an official closing price from a designated alternate 
exchange or a volume weighted average price of the consolidated 
last-sale eligible trades of the last five minutes of trading during 
regular trading hours. See Securities Exchange Act Release No. 78015 
(June 8, 2016), 81 FR 38747 (June 14, 2016) (SR-NYSE-2016-18).
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    The Exchange believes that it is appropriate to amend Rule 
15(c)(1)(A) to reference the OCP instead of the last reported sale 
price because using the OCP as determined under Rules 123C(1)(e)(i), 
(ii), or (iii) as the Reference Price would cover all potential 
contingencies and reflect the most recent valuation in a security, 
including situations where the Exchange is unable to conduct a closing 
auction due to a systems or technical issue. For example, if for a 
security the last reported sale price on the Exchange was at 2:00 p.m., 
and then the Exchange uses either Rule 123C(1)(e)(ii) or (iii) to 
determine an OCP, the Exchange believes that the OCP that is determined 
as of the close of trading is more reflective of the value of such 
security as compared to the Exchange's last reported sale price at 2:00 
p.m.
    Corporate Actions. The Exchange also proposes to amend Rule 
15(c)(1)(A) to specify that the OCP used as the Reference Price would 
be adjusted as applicable based on the publicly disclosed terms of a 
corporate action. The Exchange notes that currently, the Reference 
Price under Rule 15(c)(1)(A) for a security that is the subject of a 
corporate action would be adjusted based on the publicly disclosed 
terms of the corporate action before it is used to determine whether to 
publish a pre-opening indication. For example, if an Exchange-listed 
security that closed the previous day with an Official Closing Price of 
$50 per share is subject to a 2-for-1 stock split, the Reference Price 
used for Rule 15(c)(1)(A) would be $25 per share, consistent with 
current practice.\10\
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    \10\ This represents an example of a ``standard'' corporate 
action, such as a stock split, reverse stock split, or dividend 
payment.
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    Similarly, if a security is the subject of a non-standard corporate 
action, such as a merger or recapitalization, currently, the last 
reported sale price would be adjusted based on the publicly disclosed 
terms of the corporate action. For example, assume a listed company is 
being recapitalized in a merger transaction in which the Exchange-
listed security (Class A) is exchanged for a cash dividend of $10 per 
share of Class A stock plus two shares of the common stock of a new 
holding company (New Holdco Common). If the Class A stock is trading at 
a price of $90 prior to the corporate action, the Reference Price under 
Rule 15(c)(1)(A) for each share of New Holdco Common Stock would be $40 
per share (i.e., ($90-$10) / 2). The Exchange believes that this 
process ensures that a Reference Price accurately reflects the value of 
the security after a corporate action. To promote transparency in its 
rules, the Exchange proposes to codify this practice in Rule 
15(c)(1)(A) so that member organizations and market participants are 
appropriately advised of how the Reference Price is determined for 
securities that are subject to a corporate action.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and 
furthers the objectives of Section 6(b)(5),\12\ 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 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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that using the OCP instead of the last 
reported sale price on the Exchange would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because it would align Rule 15(c)(1)(A) with how the Exchange 
determines the OCP for a security and would cover all potential 
contingencies if there is no closing transaction on the Exchange, 
including if the Exchange is unable to conduct a closing transaction 
due to a systems or technical issue. The proposed amendment would 
maintain that the Reference Price is the price of a last sale of at 
least one round lot, and therefore promotes just and equitable 
principles of trade because it is consistent with Rule 123C(1)(e)(i) 
which requires that the OCP be either the price of the closing 
transaction, or the last-sale eligible trade on the Exchange when there 
is no closing transaction or the closing transaction is less than one 
round lot. The proposal would, therefore, continue to ensure that the 
Reference Price is an accurate indicator for determining whether a pre-
opening indication of interest should be published. The proposed 
amendment would also enable the determination of a Reference Price 
under Rule 15(c)(1)(A) to account for when the OCP is determined via 
one of the contingency procedures set forth in Rules 123C(1)(e)(ii) and 
(iii). The Exchange believes that referencing the OCP rather than the 
last reported sale price would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because it would result in a Reference Price that is more reflective of 
the most recent value of the security value because the OCP as 
determined under Rules 123C(1)(e)(ii) or (iii) would be a price 
determined as of the close of trading, rather than the Exchange's last 
reported sale price, which may occur earlier in the trading day.
    The Exchange believes that amending Rule 15(c)(1)(A) to specify 
that the OCP would be adjusted as applicable based on the publicly 
disclosed terms of a corporate action would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system by promoting transparency in Exchange rules of how the Reference 
Price is determined if a security listed on the Exchange is subject to 
a corporate action. The Exchange believes it is consistent with the 
protection of investors and the public interest to adjust the OCP that 
would be used as a Reference Price under Rule 15(c)(1)(A) based on the 
publicly disclosed terms of a corporate action as such adjusted price 
would better reflect the price of the security for purposes of the 
opening auction on the first day that a corporate action is in effect. 
The Exchange notes that the Reference Price is used as a trigger for 
determining whether to publish a pre-opening indication, and

[[Page 64170]]

having a Reference Price more closely aligned to the updated value of 
the security, based on the terms of the corporate action, would promote 
a more efficient opening process.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
designed to promote clarity and transparency in Exchange rules 
regarding how a Reference Price under Rule 15 is determined for an 
Exchange-listed security. The proposed rule change is therefore not 
designed to address any competitive concerns but rather inform member 
organizations that the OCP would be used as the Reference Price for 
listed securities, adjusted as applicable based on the publicly 
disclosed terms of a corporate action.

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) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file 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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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. In its filing with the 
Commission, the Exchange has asked the Commission to waive the 30-day 
operative delay so that the proposal may become operative immediately 
upon filing to provide greater transparency to investors regarding how 
a security's Reference Price would be adjusted if that security is 
subject to a publicly disclosed corporate action and avoid potential 
investor confusion that could arise during the operative delay period. 
According to the Exchange, waiver of the operative delay period would 
also avoid potential investor confusion because the proposal will 
clarify when a pre-opening indication would be published based on the 
security's Reference Price.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because it will provide transparency to investors on the determination 
of the Reference Price for Exchange listed securities, which is used as 
the basis for determining when pre-opening indications will be 
published, as well as provide transparency on the adjustments that will 
be made to the Reference Price as a result of corporate actions. For 
these reasons, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\18\
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    \18\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    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) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2018-60 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-2018-60. 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 (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 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 such 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-2018-60, and should be submitted on 
or before January 3, 2019.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Brent J. Fields,
Secretary.
[FR Doc. 2018-26944 Filed 12-12-18; 8:45 am]
 BILLING CODE 8011-01-P


