[Federal Register Volume 85, Number 63 (Wednesday, April 1, 2020)]
[Notices]
[Pages 18286-18289]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06720]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88488; File No. SR-NYSE-2020-23]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7.35A To Allow the Exchange, for a Temporary Period, To 
Publish Trader Updates With Auction Imbalance Information for IPO 
Auctions

March 26, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on March 26, 2020, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit

[[Page 18287]]

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 7.35A relating to IPO Auctions 
for a temporary period that begins March 26, 2020, and ends on the 
earlier of the reopening of the Trading Floor facilities or after the 
Exchange closes on May 15, 2020. The proposed rule change is available 
on the Exchange's website at www.nyse.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes, for a temporary period that begins on the 
effective date of this filing and ends on the earlier of the reopening 
of the Trading Floor facilities or after the Exchange closes on May 15, 
2020, that the Exchange would publish Trader Updates with Auction 
Imbalance Information \4\ for IPO Auctions.\5\
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    \4\ The term ``Auction Imbalance Information'' is defined in 
Rule 7.35(4) to mean the information that is disseminated by the 
Exchange for an Auction via a proprietary data feed during the times 
specified in the Rule 7.35 Series. See Rule 7.35(c).
    \5\ An ``IPO Auction'' is defined in Rule 7.35(a)(1)(D) to mean 
the Core Open Auction for the first day of trading on the Exchange 
of a security that is an IPO.
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    Current rules provide that the Exchange does not disseminate 
Auction Imbalance Information if a security is an IPO and has not had 
its IPO Auction.\6\ The Exchange is proposing to publish specified 
Auction Imbalance Information via Trader Update email for such auctions 
for the period when the NYSE Trading Floor has temporarily closed as a 
precautionary measure to reduce the spread of COVID-19.
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    \6\ See Rule 7.35(c)(3).
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Background
    Since March 9, 2020, markets worldwide have been experiencing 
unprecedented market-wide declines and volatility because of the 
ongoing spread of COVID-19. Beginning on March 16, 2020, to slow the 
spread of COVID-19 through social-distancing measures, significant 
limitations were placed on large gatherings throughout the country. For 
example, in New York City, which is where the NYSE Trading Floor is 
located, public and private schools, universities, churches, 
restaurants, bars, movie theaters, and other commercial establishments 
where large crowds can gather have been closed.
    On March 18, 2020, the CEO of the Exchange made a determination 
under Rule 7.1(c)(3) that beginning March 23, 2020, the Trading Floor 
facilities located at 11 Wall Street in New York City would close and 
the Exchange would move, on a temporary basis, to fully electronic 
trading.\7\ Pursuant to Rule 7.1(e), the CEO notified the Board of 
Directors of the Exchange of this determination.
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    \7\ The Exchange's current rules establish how the Exchange will 
function fully-electronically. The CEO also closed the NYSE American 
Options Trading Floor, which is located at the same 11 Wall Street 
facilities, and the NYSE Arca Options Trading Floor, which is 
located in San Francisco, CA. See Press Release, dated March 18, 
2020, available here: https://ir.theice.com/press/press-releases/all-categories/2020/03-18-2020-204202110.
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    Because the Trading Floor facilities are now temporarily closed, 
Designated Market Makers (``DMMs'') are not on the Trading Floor and 
therefore cannot engage in any manual actions, such as facilitating an 
Auction manually or publishing pre-opening indications before a Core 
Open or Trading Halt Auction.\8\ The auction process for IPO Auctions 
is manual; DMMs are not permitted to effect an IPO Auction 
electronically.\9\
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    \8\ While the Trading Floor is temporarily closed, DMMs 
participate electronically both intraday and for Auctions.
    \9\ See Rule 7.35A(c)(1)(C).
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    On March 25, 2020, the CEO of the Exchange determined pursuant to 
Rule 7.1(c) that, for the period while the Trading Floor is temporarily 
closed as a precautionary measure to prevent the spread of COVID-19, 
the Trading Floor will be partially reopened on trading days when an 
IPO Auction is scheduled, to allow a DMM on the Trading Floor for the 
limited purpose of effecting such IPO Auction manually. During this 
temporary reopening, the Trading Floor will not be open to Floor 
brokers or for the DMM to perform any functions other than effecting 
the IPO Auction manually. Pursuant to Rule 7.1(e), the CEO notified the 
Board of Directors of the Exchange of this determination.
    If the Trading Floor is partially reopened for an IPO Auction, the 
Exchange would permit entry to the Trading Floor to a single employee 
from the DMM member organization assigned to such security so that this 
DMM can access the Floor-based systems used to effect an Auction 
manually. When effecting an IPO Auction, the DMM would be expected to 
publish pre-opening indications consistent with the requirements 
specified in Rule 7.35A(d). The Exchange will arrange for a Floor 
Governor to be present for such Auctions to approve the publication of 
any pre-opening indications.\10\ In addition, Exchange staff on the 
Trading Floor will be in communication with the lead underwriter or 
financial advisor, as applicable, for such IPO Auction and will convey 
to the DMM information that the underwriter would normally convey to 
the DMM via a Floor broker, such as when the underwriter has entered 
all interest for such auction.
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    \10\ See Rule 7.35A(d)(4)(A) (``Publication of a pre-opening 
indication requires the supervision and approval of a Floor 
Governor.'') The Exchange will arrange for a qualified ICE employee 
that has been designated as a Floor Governor to perform this 
function. See Rule 46(b)(v).
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Proposed Rule Change
    During normal operations, Floor brokers perform a vital role during 
IPO Auctions to convey information that is available on the Trading 
Floor about such auctions to their customers. Information available at 
the point of sale includes imbalance and paired quantity information 
that the Exchange systems and DMM calculate based on the buy and sell 
interest in the Book at a given point in time. During any temporary 
reopening of the Trading Floor to permit a DMM to effect an IPO Auction 
manually, Floor brokers will not be present and therefore unable to 
convey this information to their customers.
    In the absence of Floor brokers, the Exchange proposes that for the 
temporary period while the Trading Floor has been closed and a DMM is 
permitted limited entry to facilitate an IPO Auction, the Exchange 
would disseminate specified Auction Imbalance Information via Trader 
Update.
    The Exchange recently amended Rule 7.35A to add Commentary .01 that 
describes changes related to DMM electronically-facilitated Auctions 
that are in effect beginning March 23, 2020 and ending on the earlier 
of the

[[Page 18288]]

reopening of the Trading Floor facilities or after the Exchange closes 
on May 15, 2020.\11\ The Exchange proposes to amend Rule 7.35A to add 
new Commentary .02 to specify the Auction Imbalance Information that 
the Exchange would disseminate relating to an IPO Auction during the 
period when the Trading Floor is closed, as follows:
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    \11\ See Securities Exchange Act Release No. 88444 (March 20, 
2020) (SR-NYSE-2020-22) (Notice of filing and immediate 
effectiveness of proposed rule change).

    For a temporary period that begins on March 26, 2020 and ends on 
the earlier of the reopening of the Trading Floor facilities or 
after the Exchange closes on May 15, 2020, the Exchange will permit 
a DMM limited entry to the Trading Floor to effect an IPO Auction 
manually. For such an IPO Auction, the Exchange will disseminate the 
following Auction Imbalance Information provided by the DMM via 
Trader Update: the Imbalance Reference Price; the Paired Quantity; 
the Unpaired Quantity; and the Side of the Unpaired Quantity. The 
Exchange will publish such Trader Update(s) promptly after each 
publication by the DMM of a pre-opening indication for such 
security. The Trader Update will also include the pre-opening 
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indication range.

    Because publishing such Trader Updates would be a manual process, 
the Exchange proposes to disseminate a Trader Update following each 
publication of a pre-opening indication by the DMM.\12\ The Exchange 
proposes to include in the Trader Update information that a DMM would 
convey on the Trading Floor during normal operations:
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    \12\ Pre-opening indications are disseminated on both 
proprietary and SIP data feeds. See Rule 7.35A(d).
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     The Imbalance Reference Price, which is the reference 
price that is used for the applicable Auction to determine the Auction 
Imbalance Information.\13\ However, unlike the Imbalance Reference 
Price used for the Core Open Auction, which is a static number, the 
Imbalance Reference Price that would be included in a Trader Update for 
an IPO Auction would be a prospective opening price manually selected 
by the DMM based on the interest in the Book at that time. The 
Imbalance Reference Price would be updated by the DMM as buy and sell 
interest in the Book updates.
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    \13\ See Rule 7.35(a)(10).
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     The Paired Quantity, which is the volume of better-priced 
and at-priced buy shares that can be paired with better-priced and at-
priced sell shares at the Imbalance Reference Price.\14\
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    \14\ See Rule 7.35(a)(4)(B).
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     The Unpaired Quantity, which is the volume of at-priced 
buy or sell shares that cannot be paired at the Imbalance Reference 
Price.
     The Side of the Unpaired Quantity, which is the side (buy 
or sell) that cannot be paired at the Imbalance Reference Price.
    The Exchange believes that, in the absence of Floor brokers, this 
proposed rule change would promote transparency in advance of an IPO 
Auction that would be manually effected by the DMM while the Trading 
Floor is closed.
    The Exchange would be able to implement the proposed rule change 
immediately upon effectiveness of this proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\15\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\16\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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    As a result of uncertainty related to the ongoing spread of COVID-
19, the U.S. equities markets are experiencing unprecedented market 
volatility. In addition, social-distancing measures have been 
implemented throughout the country, including in New York City, to 
reduce the spread of COVID-19. Directly related to such social-
distancing measures, the CEO of the Exchange made a determination under 
Rule 7.1(c)(3) that beginning March 23, 2020, the Trading Floor 
facilities located at 11 Wall Street in New York City would close and 
the Exchange would move, on a temporary basis, to fully electronic 
trading.
    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system because it would promote fair and orderly IPO 
Auctions on the Exchange by allowing the Exchange to disseminate 
specified Auction Imbalance Information in advance of such auctions. 
The proposed rule change would therefore promote transparency in 
advance of an IPO Auction that would be manually effected by a DMM 
while the Trading Floor is closed.
    The Exchange believes that, by clearly stating that this relief 
will be in effect through the earlier of the reopening of the Trading 
Floor facilities or the close of the Exchange on May 15, 2020, market 
participants will have more certainty regarding what information would 
be available about IPO Auctions that are conducted during the temporary 
period while the Trading Floor is closed.

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

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues but rather is designed 
to ensure fair and orderly IPO Auctions on the Exchange by allowing the 
Exchange to disseminate specified Auction Imbalance Information in 
advance of such auctions during a temporary period when the Exchange 
Trading Floor has been closed in response to social-distancing measures 
designed to reduce the spread of the COVID-19 virus.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission has waived that requirement for this proposed rule 
change.

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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately.
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange represents that the proposed rule change is designed 
to facilitate fair and orderly IPO Auctions on the Exchange during a 
temporary period when the Exchange Trading Floor has been closed in 
response to social-distancing measures designed to reduce the spread of 
the COVID-19 virus. The Exchange proposes to permit a DMM limited entry 
to the Trading Floor to facilitate an IPO manually, and, in the absence 
of Floor brokers, to have the Exchange disseminate specified Auction 
Imbalance Information via Trader Updates. The Exchange represents that 
the information it would include in Trader Updates is the same 
information that a DMM would normally convey on the Trading Floor 
during regular operations. The Exchange believes that the proposed rule 
change would promote transparency in advance of an IPO Auction that 
would be manually effected by a DMM while the Trading Floor is 
partially reopened for the limited purpose of facilitating an IPO 
Auction, that could not otherwise be conducted when the Trading Floor 
is closed. The Exchange also represents that it is able to implement 
this proposed rule change immediately, that an IPO Auction is currently 
scheduled for March 27, 2020, and that waiver of the 30-day operative 
delay would allow the Exchange to disseminate Trader Updates in 
connection with this planned IPO Auction. The Commission notes that by 
disclosing that the Exchange will permit a DMM limited entry to the 
Trading Floor to effect an IPO Auction manually, and by enabling the 
Exchange to disseminate the information as discussed above, the 
proposed rule change would promote transparency in advance of an IPO 
Auction that would be manually effected by a DMM while the Trading 
Floor is partially reopened for this limited purpose. Further, the 
Commission notes that by clearly stating that this relief will be in 
effect through the earlier of the reopening of the Trading Floor 
facilities or the close of the Exchange on May 15, 2020, market 
participants will have more certainty regarding what information would 
be available about IPO Auctions that are conducted during the temporary 
period while the Trading Floor is partially reopened for the limited 
purpose of facilitating an IPO Auction. The Commission also notes that 
the proposal is a temporary measure designed to respond to current, 
unprecedented market conditions. Finally, the Commission notes that 
waiving the 30-day operative delay would allow the Exchange to 
implement the proposed rule change immediately and thereby enable it to 
enact the proposed procedures for its IPO Auction scheduled on March 
27, 2020. For these reasons, the Commission believes that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Accordingly, the Commission hereby waives the 
30-day operative delay and designates the proposal operative upon 
filing.\23\
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    \23\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2020-23 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2020-23. 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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2020-23, and should be submitted on 
or before April 22, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06720 Filed 3-31-20; 8:45 am]
 BILLING CODE 8011-01-P


