[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23413-23416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08818]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88705; File No. SR-NYSE-2020-35]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Add Commentary .04 to Rule 7.35A To Provide DMMs, for a Temporary 
Period, With Limited Remote Access to Floor-Based Systems

April 21, 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 17, 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 .04 to Rule 7.35A to 
provide that, for a temporary period that begins April 17, 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 provide a 
DMM remote access to Floor-based systems for the sole purpose of 
effecting a manual (1) IPO Auction, or (2) 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 .04 to Rule 7.35A to 
provide that, for a temporary period that begins April 17, 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 provide a 
DMM remote access to Floor-based systems for the sole purpose of 
effecting a manual (1) IPO Auction, or (2) 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

[[Page 23414]]

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.
    On April 2, 2020, the Exchange amended Rule 7.35A to add Commentary 
.03,\6\ which provides:
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    \6\ See Securities Exchange Act Release No. 88546 (April 2, 
2020) (SR-NYSE-2020-28), 85 FR 19782 (April 8, 2020) (Notice of 
filing and immediate effectiveness of proposed rule change).

    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 
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offering.

    Similar to the rationale described in the Rule 7.35A Filing, the 
Exchange added this Commentary because, while the Trading Floor is 
temporarily closed, DMMs cannot engage in a manual Core Open Auction 
for a post-IPO public offering.
    On April 2, 2020, the Exchange effected a post-IPO public offering 
pursuant to Commentary .03 to Rule 7.35A
Proposed Rule Change
    The Exchange proposes to add Commentary .04 to Rule 7.35A to 
provide that, for a temporary period that begins April 17, 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 provide a 
DMM remote access to Floor-based systems for the sole purpose of 
effecting a manual (1) IPO Auction, or (2) Core Open Auction in 
connection with a listed company's post-IPO public offering.
    As noted above, during the temporary period while the Trading Floor 
is closed, the Exchange has permitted limited reentry to the Trading 
Floor for the purposes of effecting an IPO Auction and a post-IPO 
public offering. However, during this period, the business continuity 
plans implemented by different DMM member organizations may not permit 
one of their employees to travel to the Trading Floor for the purpose 
of effecting an IPO or post-IPO public offering pursuant to Commentary 
.02 or .03 to Rule 7.35A.
    Accordingly, the Exchange has developed technology that can be used 
as a stopgap during the period when the Trading Floor is temporarily 
closed to enable a DMM to manually effect an Auction without being 
present on the Trading Floor. This technology is intended to be a 
temporary solution to respond to the unique circumstances during the 
period when the Trading Floor is closed as a precaution to prevent the 
spread of COVID-19.
    This proposed temporary technology solution would provide a DMM 
with remote access to NYSE trading systems that are located on the 
Trading Floor that DMMs use to facilitate auctions manually. This 
interim technology solution requires manual intervention by both the 
DMM and Exchange staff for each Auction, and therefore the Exchange 
does not believe it would be feasible to deploy this remote-access 
technology to all securities. However, for those IPO Auctions and Core 
Open Auctions for post-IPO public offerings that the Exchange believes 
should be effected manually during the temporary period when the 
Trading Floor is closed, this remote-access technology provides an 
alternative to a DMM whose firm may determine that travel to and entry 
to the Trading Floor would not be advisable or possible during this 
temporary period.
    Because this limited scope remote-access technology is now 
available to all DMM firms, the Exchange proposes to add Commentary .04 
to Rule 7.35A to specify that the Exchange would provide a DMM remote 
access to Floor-based systems for the sole purpose of effecting a 
manual (1) IPO Auction, or (2) Core Open Auction for a listed company's 
post-IPO public offering.
    Similar to an IPO Auction that would be effected under current 
Commentary .02 to Rule 7.35A, if a DMM uses this remote-access 
technology to manually effect an IPO Auction or Core Open Auction for a 
post-IPO public offering, the Exchange would arrange for a Floor 
Governor to be available to the DMM via telephone for such Auctions to 
approve the publication of any pre-opening indications.\7\ In addition, 
Exchange staff would be in communication via telephone with the lead 
underwriter for such IPO Auction or Core Open Auction for a post-IPO 
public offering and would separately convey to the DMM via telephone 
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.\8\ The Exchange staff person providing this communication 
link would use separate telephone lines to communicate with the 
underwriter and to communicate with the DMM.\9\ The Exchange will 
arrange for any such calls to be

[[Page 23415]]

conducted via an Exchange-authorized secure teleconferencing service.
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    \7\ 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).
    \8\ Rule 36.30 provides that a DMM unit may maintain a telephone 
line at its stock trading post to the off-Floor offices of the DMM 
unit, the unit's clearing firm, or to persons providing non-trading 
related services. Accordingly, pursuant to this Rule, on the Trading 
Floor, a DMM cannot have a telephone line that connects to an 
underwriter for an IPO. With this proposed remote-access 
functionality, the Exchange proposes that DMMs would similarly not 
communicate directly with the underwriter.
    \9\ Depending on the circumstances of when the relief in this 
proposed rule change would be required, it is likely that the 
Exchange staff person facilitating the remote access for the DMM 
would also be working remotely and not on Exchange premises. In 
addition, the Exchange staff person providing such access may also 
be the Exchange staff person communicating with the underwriter and 
serving as the Floor Governor for this transaction.
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    Similar to an IPO Auction effected pursuant to Commentary .02 to 
Rule 7.35A, if a DMM manually effects an IPO Auction pursuant to 
proposed Commentary .04 to Rule 7.35A, the Exchange would 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 
would publish such Trader Update(s) promptly after each publication by 
the DMM of a pre-opening indication for such security. The Trader 
Update would also include the pre-opening 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.\10\ 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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    \10\ 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.\11\ 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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    \11\ 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.\12\
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    \12\ 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 remotely while the 
Trading Floor is closed.
    The Exchange has tested with each active DMM firm and relevant 
Exchange staff the proposed interim technology to provide DMMs remote 
access to the Floor-based systems that would be used to effect a manual 
(1) IPO Auction; or (2) Core Open Auction in connection with a listed 
company's post-IPO public offering. Accordingly, the Exchange would be 
able to implement the proposed rule change immediately upon 
effectiveness of this filing.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\13\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\14\ 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 or 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 providing DMMs with limited remote 
access to Floor-based trading systems to manually effect an IPO Auction 
or Core Open Auction for a listed company's post-IPO public offering 
would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because it would provide 
flexibility to DMMs who may determine that travel to and entry to the 
Trading Floor would not be advisable or possible during this temporary 
period. The Exchange believes that providing this stopgap would promote 
fair and orderly markets by providing the DMM with a limited-use 
mechanism to facilitate such Auctions manually so the DMM could 
consider information from the underwriter when determining when to 
conduct the IPO Auction or specified Core Open Auction and at what 
price.
    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 
remotely 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 advance notice that an IPO Auction or 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 IPO Auctions or Core Open Auctions in 
connection with a listed company's post-IPO public offering by 
providing a DMM with remote access to Floor-based systems for the sole 
purpose of effecting such Auctions manually during a temporary period 
when the Exchange Trading Floor has been closed

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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 \15\ and Rule 19b-4(f)(6) thereunder.\16\ 
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 \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\20\ 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. The Exchange states that 
the proposed rule change is designed to ensure fair and orderly IPO 
Auctions and Core Open Auctions in connection with a listed company's 
post-IPO public offering during this temporary period. The Exchange 
believes that the proposed rule change would provide greater certainty 
to prospective listed companies that an IPO Auction could be conducted 
by the DMM manually in a company's security either on the Trading Floor 
or remotely, and that, in either case, the DMM would be able to receive 
up-to-date information about the offering from the underwriter and 
manually price the IPO Auction. The Commission believes that the 
proposed rule change would provide flexibility to a DMM who cannot 
travel to the Trading Floor to effect a manual IPO Auction or Core Open 
Auction. The Commission notes that the Exchange represented that it has 
already tested its remote access technology and that the Exchange is 
able to implement the proposed rule change immediately. Further, the 
Commission notes that the Exchange proposes to include in the Trader 
Update information that a DMM would normally convey on the Trading 
Floor during regular operations. Lastly, the Commission notes that the 
proposal is a temporary measure designed to respond to current, 
unprecedented market conditions. 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.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ 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-2020-35 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-2020-35. 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-2020-35, and should be submitted on 
or before May 18, 2020.
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    \22\ 17 CFR 200.30-3(a)(12), (59).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08818 Filed 4-24-20; 8:45 am]
 BILLING CODE 8011-01-P


