[Federal Register Volume 85, Number 68 (Wednesday, April 8, 2020)]
[Notices]
[Pages 19782-19785]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07335]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88546; File No. SR-NYSE-2020-28]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Add Commentary .03 to Rule 7.35A To Provide That, for a Temporary 
Period, the Exchange Would Permit a DMM Limited Entry To the Trading 
Floor To Effect Manually a Core Open Auction in Connection With a 
Listed Company's Post-IPO Public Offering

April 2, 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 April 2, 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 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 add Commentary .03 to Rule 7.35A to 
provide that, for a temporary period that begins April 2, 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 would permit a 
DMM limited entry to the Trading Floor to effect manually a Core Open 
Auction in connection with a listed company's post-IPO public offering. 
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 to add Commentary .03 to Rule 7.35A to 
provide that, for a temporary period that begins April 2, 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 would permit a 
DMM limited entry to the Trading Floor to effect manually a Core Open 
Auction in connection with a listed company's post-IPO public offering.
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.
    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.\4\ Pursuant to Rule 7.1(e), the CEO notified the Board of 
Directors of the Exchange of this determination.
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    \4\ 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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    On March 26, 2020, the Exchange amended Rule 7.35A to add 
Commentary .02,\5\ which provides:
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    \5\ See Securities Exchange Act Release No. 88488 (March 26, 
2020) (SR-NYSE-2020-23), 85 FR 18286 (April 1, 2020) (Notice of 
filing and immediate effectiveness of proposed rule change) (``Rule 
7.35A Filing'').

    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.

    As described in the Rule 7.35A Filing, the Exchange added this 
Commentary because, while the Trading Floor is temporarily closed, 
Designated Market Makers (``DMMs'') 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. 
Commentary .02 to Rule 7.35A permits 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, and specifies the information that would be 
included in a Trader Update in advance of such IPO Auction.
    On March 27, 2020, the Exchange effected an IPO Auction pursuant to 
Commentary .02 to Rule 7.35A.

[[Page 19783]]

Proposed Rule Change
    The Exchange proposes to add Commentary .03 to Rule 7.35A to permit 
a DMM limited entry to the Trading Floor to effect manually a Core Open 
Auction in connection with a listed company's post-IPO public offering, 
for a temporary period that begins April 2, 2020, and ends on the 
earlier of the reopening of the Trading Floor facilities or after the 
Exchange closes on May 15, 2020.
    As proposed, during this temporary period, the Exchange would 
permit a DMM limited entry to the Trading Floor to effect manually a 
Core Open Auction in connection with a listed company's post-IPO public 
offering. Such Core Open Auction would be effected in a manner similar 
to how an IPO Auction would be conducted under Commentary .02 to Rule 
7.35A: A Floor Governor would be present on the Trading Floor to 
approve the publication of pre-opening indications \6\ and Exchange 
staff would be in communication with the lead underwriter and would 
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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    \6\ 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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    Unlike an IPO Auction, this type of Core Open Auction is eligible 
to be effected electronically by a DMM. In addition, the Exchange 
publishes Auction Imbalance Information in advance of a Core Open 
Auction for a post-IPO public offering. However, similar to IPO 
Auctions, when the Trading Floor is open, DMMs generally facilitate a 
post-IPO public offering manually so that information about the pricing 
of an Auction can be communicated from an underwriter to the DMM via a 
Floor broker. This information is helpful for the DMM to determine when 
to facilitate such Core Open Auction and at what price. By contrast, if 
a DMM were to facilitate such Core Open Auctions electronically, the 
DMM would not be able to take this information into account when 
pricing the Auction, and the DMM would not have any flexibility with 
respect to the timing of such Core Open Auctions. Accordingly, for 
reasons similar to those set forth in the Rule 7.35A Filing regarding 
providing limited access to the Trading Floor for IPO Auctions to be 
effected manually, the Exchange believes it would promote fair and 
orderly markets to provide a DMM limited entry to the Trading Floor to 
effect manually a Core Open Auction in connection with a listed 
company's post-IPO public offering for the temporary period during 
which the Trading Floor is closed.
    To effect these changes, the Exchange proposes to add Commentary 
.03 to Rule 7.35A, which would provide as follows:

    For a temporary period that begins on April 2, 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 manually a Core 
Open Auction in connection with a listed company's post-IPO public 
offering.

    On April 1, 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 a 
Core Open Auction is scheduled in connection with a listed company's 
post-IPO public offering, to allow a DMM on the Trading Floor for the 
limited purpose of effecting such Core Open Auctions 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 Core Open Auction manually. Pursuant to Rule 7.1(e), the CEO 
notified the Board of Directors of the Exchange of this determination.
    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,\7\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 Core 
Open Auctions in connection with a listed company's post-IPO public 
offering. The Exchange believes that it would promote fair and orderly 
markets to provide the DMM with mechanisms to facilitate such Core Open 
Auctions manually because it would provide flexibility for the DMM to 
consider information from the underwriter when determining when to 
conduct the Core Open Auction and at what price.
    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 advance notice that a Core Open Auction in 
connection with a post-IPO public offering may be effected manually by 
the DMM during this period, and therefore may not be conducted at 9:30 
a.m.

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 Core Open Auctions in connection with a 
post-IPO public offering by providing a DMM with limited entry to the 
Trading Floor to effect such Core Open Auction manually 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.

[[Page 19784]]

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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    During the temporary period when the Exchange's Trading Floor has 
been closed in response to social-distancing measures designed to 
reduce the spread of the COVID-19 virus time, the Exchange has proposed 
to provide a DMM with limited entry to the Trading Floor to effect 
manually a Core Open Auction in connection with a listed company's 
post-IPO public offering. The Exchange contends that this proposed rule 
change would promote fair and orderly markets because it would provide 
flexibility for the DMM to consider information from the underwriter 
when determining when to conduct the Core Open Auction and at what 
price. The Exchange also asserts 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 advance notice that a Core Open Auction 
in connection with a post-IPO public offering may be effected manually 
by the DMM during this period, and therefore may not be conducted at 
9:30 a.m. In addition, the Exchange represents that a post-IPO public 
offering in an Exchange-listed security has been priced to proceed for 
the Core Open Auction on April 2, 2020, and that the Exchange is able 
to implement this proposed rule change immediately. The Commission 
notes that the proposed rule change provides the DMM with limited entry 
to effect manually Core Open Auctions in connection with post-IPO 
public offerings, which is similar to what is currently provided for 
DMMs effecting IPO Auctions under Commentary .02 of NYSE Rule 7.35A. 
The Commission also notes that the proposed rule change would provide 
DMMs the ability to consider information from the underwriter when 
determining when to conduct the Core Open Auction and at what price, 
and would inform market participants on how and when a Core Open 
Auction in connection with a post-IPO public offering may be effected 
manually by the DMM during this period. Moreover, the Commission 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 would allow the Exchange to implement 
the proposed rule change immediately, and thereby enable it to enact 
the proposed procedures for the post-IPO public offering in an 
Exchange-listed security that has been priced to proceed for the Core 
Open Auction on April 2, 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.\15\
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    \15\ 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-2020-28 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-2020-28. 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-2020-28, and should be submitted on 
or before April 29, 2020.


[[Page 19785]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07335 Filed 4-7-20; 8:45 am]
BILLING CODE 8011-01-P


