[Federal Register Volume 85, Number 231 (Tuesday, December 1, 2020)]
[Notices]
[Pages 77304-77310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26399]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90495; File No. SR-NYSE-2020-95]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Make Permanent Commentaries 
to Rule 7.35A and Commentaries to Rule 7.35B and Make Related Changes 
to Rules 7.32, 7.35C, 46B, and 47

November 24, 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 November 13, 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 self-regulatory 
organization. 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 make permanent Commentaries .01(a) and (b) 
and .06 to Rule 7.35A and Commentaries .01 and .03 to Rule 7.35B and 
make related changes to Rules 7.32, 7.35C, 46B, and 47. 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.

[[Page 77305]]

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 make permanent Commentaries .01(a) and (b) 
and .06 to Rule 7.35A (DMM-Facilitated Core Open and Trading Halt 
Auctions) and Commentaries .01 and .03 to Rule 7.35B (DMM-Facilitated 
Closing Auctions) and make related changes to Rules 7.32 (Order Entry), 
7.35C (Exchange-Facilitated Closing Auctions), 46B (Regulatory Trading 
Official), and 47 (Floor Officials--Unusual Situations).
Background
    In connection with the closing of the Trading Floor facilities 
located at 11 Wall Street in New York City as of March 23, 2020 and 
moving the Exchange, on a temporary basis, to fully electronic 
trading,\4\ and subsequent reopening of the Trading Floor on a limited 
basis first to Floor Brokers on May 26, 2020 \5\ and then to DMMs on 
June 15, 2020,\6\ the Exchange added Commentaries .01 and .06 to Rule 
7.35A and Commentaries .01 and .03 to 7.35B.\7\ Currently, these 
Commentaries are in effect until the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on 
December 31, 2020.\8\
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    \4\ Pursuant to Rule 7.1(e), the CEO notified the Board of 
Directors of the Exchange of her determination under Rule 7.1(c)(3). 
The Exchange's rules establish how the Exchange will function fully-
electronically. See Press Release, dated March 18, 2020, available 
here: https://ir.theice.com/press/press-releases/all-categories/2020/03-18-2020-204202110.
    \5\ See Securities Exchange Act Release No. 88933 (May 22, 
2020), 85 FR 32059 (May 28, 2020) (SR-NYSE-2020-47) (Notice of 
filing and immediate effectiveness of proposed rule change).
    \6\ See Securities Exchange Act Release No. 89086 (June 17, 
2020) (SR-NYSE-2020-52) (Notice of filing and immediate 
effectiveness of proposed rule change).
    \7\ See Securities Exchange Act Release Nos. 88444 (March 20, 
2020), 85 FR 17141 (March 26, 2020) (SR-NYSE-2020-22) (amending 
Rules 7.35A to add Commentary .01, 7.35B to add Commentary .01, and 
7.35C to add Commentary .02) and 89086 (June 17, 2020), 85 FR 37712 
(SR-NYSE-2020-52) (amending Rules 7.35A to add Commentary .06, 7.35B 
to add Commentary .03, 76 to add Supplementary Material 20, and 
Supplementary Material .30 to Rule 36).
    \8\ See Securities Exchange Act Release No. 90005 (September 25, 
2020), 85 FR 61999 (October 1, 2020) (SR-NYSE-2020-78) (Notice of 
filing and immediate effectiveness of proposed rule change to extend 
the temporary period for Commentaries to Rules 7.35, 7.35A, 7.35B, 
and 7.35C; and temporary rule relief in Rule 36.30 to end on the 
earlier of a full reopening of the Trading Floor facilities to DMMs 
or after the Exchange closes on December 31, 2020).
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    Specifically, Commentary .01 to Rule 7.35A provides:
    For a temporary period that begins March 23, 2020, when the Trading 
Floor facilities have been closed pursuant to Rule 7.1(c)(3), and ends 
on the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on December 31, 2020:
    (a) The percentage price parameters in paragraph (c)(1)(G) and 
(c)(2) of this Rule are suspended and a DMM may not effect a Core Open 
or Trading Halt Auction electronically if the Core Open or Trading Halt 
Auction Price will be more than 10% away from the Consolidated Last 
Sale Price.
    (b) The volume parameters in paragraph (c)(1)(H) of this Rule are 
suspended.
    (c) The requirement to publish a pre-opening indication pursuant to 
paragraph (d) of this Rule before either a Core Open or Trading Halt 
Auction is suspended.
    Commentary .06 to Rule 7.35A provides:
    For a temporary period that begins on June 17, 2020 and ends on the 
earlier of a full reopening of the Trading Floor facilities to DMMs or 
after the Exchange closes on December 31, 2020, the Applicable Price 
Range specified in paragraphs (d)(3)(A) and (B) of this Rule is 
suspended and the Applicable Price Range will be 10% for securities 
with an Indication Reference Price higher than $3.00 and $0.30 for 
securities with an Indication Reference Price equal to or lower than 
$3.00.
    Commentary .01 to Rule 7.35B provides:
    For a temporary period that begins March 23, 2020, when the Trading 
Floor facilities have been closed pursuant to Rule 7.1(c)(3), and ends 
on the earlier of a full reopening of the Trading Floor facilities to 
DMMs or after the Exchange closes on December 31, 2020:
    (a) The percentage price parameters in paragraph (c)(1)(G) of this 
Rule are suspended and a DMM may not effect a Closing Auction 
electronically if the Closing Auction Price will be more than 10% away 
from the Exchange Last Sale Price.
    (b) The volume parameters in paragraph (c)(1)(H) of this Rule are 
suspended.
    Finally, Commentary .03 to Rule 7.35B provides:
    For a temporary period that begins on June 17, 2020 and ends on the 
earlier of a full reopening of the Trading Floor facilities to DMMs or 
after the Exchange closes on December 31, 2020, Floor Broker Interest 
will not be eligible to participate in the Closing Auction.
Proposed Rule Changes
Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions
    The Exchange proposes to make permanent the parameters for DMM-
facilitated electronic auctions that are currently in effect on a 
temporary basis as set forth in Commentaries .01(a) and (b) to Rule 
7.35A and Commentary .01 to Rule 7.35B.
    Current Rules 7.35A(c)(1)(G) and (H) provide that a DMM may not 
effect a Core Open or Trading Halt Auction electronically if (i) the 
Auction Price will be more than 4% away from the Consolidated Last Sale 
Price,\9\ or (ii) the paired volume for the Auction will be more than 
1,500 round lots for securities with an average opening volume of 1,000 
round lots or fewer in the previous calendar quarter, or 5,000 round 
lots for securities with an average opening volume of over 1,000 round 
lots in the previous calendar quarter. Rule 7.35A(c)(2) further 
provides that if as of 9:00 a.m., the E-mini S&P 500 Futures are +/-2% 
from the prior day's closing price of the E-mini S&P 500 Futures, or if 
the Exchange determines that it is necessary or appropriate for the 
maintenance of a fair and orderly market, a DMM may effect an opening 
or reopening electronically if the Auction Price will be up to 8% away 
from Consolidated Last Sale Price, without any volume limitations.
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    \9\ The term ``Consolidated Last Sale Price'' is defined in Rule 
7.35 to mean the most recent consolidated last-sale eligible trade 
in a security on any market during Core Trading Hours on that 
trading day, and if none, the Official Closing Price from the prior 
trading day for that security.
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    Current Rule 7.35B(c)(1)(G) and (H) provide that a DMM may not 
effect a Closing Auction electronically if (i) the Auction Price will 
be more than a designated percentage away from the Exchange Last Sale 
Price,\10\ or (ii) the paired volume for the Closing Auction will be 
more than 1,000 round lots for such security. The designated 
percentages are currently as follows:
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    \10\ The term ``Exchange Last Sale Price'' is defined in Rule 
7.35 to mean the most recent trade on the Exchange of a round lot or 
more in a security during Core Trading Hours on that trading day, 
and if none, the Official Closing Price from the prior trading day 
for that security.

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                                                            Designated
                Exchange last sale price                    percentage
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$25.00 and below........................................              5%
$25.01 to $50.00........................................              4%
Above $50.00............................................              2%
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    The Exchange proposes to make the price percentage parameter 10% 
and eliminate the volume restrictions for all DMM-facilitated Auctions. 
These

[[Page 77306]]

parameters are currently in effect on a temporary basis pursuant to 
Commentaries .01(a) and (b) to Rule 7.35A and Commentary .01 to Rule 
7.35B. The Exchange believes that making these temporary Commentaries 
permanent would promote fair and orderly DMM-facilitated Auctions.
    In particular, DMMs have been operating with the temporary 
parameters for Core Open, Trading Halt Auctions, and Closing Auctions 
since March 23, 2020. Accordingly, these temporary parameters have been 
in effect not only during the period when the Trading Floor was closed 
in full, but also for the period when the Trading Floor has partially 
reopened to reduced staff of DMM and Floor brokers firms. In addition, 
these temporary parameters have been in effect during periods of both 
extreme volatility and high trading volumes. Accordingly, DMMs have had 
over six months' of experience of electronically facilitating Auctions 
within these temporary parameters and apply them during varying market 
conditions.
    The Exchange has observed that during the period when these 
temporary parameters have been in effect, DMMs have facilitated more 
Core Open Auctions electronically, resulting in a higher percentage of 
Core Open Auctions occurring within two seconds of 9:30 a.m. Eastern 
Time. For example, in February 2020, which was before the Trading Floor 
closed, DMMs effected electronically 85.9% of all Core Open Auctions 
and 75.9% of Core Open Auctions in S&P 500 securities. By contrast, for 
the period July 2020 through October 2020, after when DMMs had returned 
to the Trading Floor, DMMs effected electronically 96% of all Core Open 
Auctions and 89.6% of Core Open Auctions in S&P 500 securities. The 
increased number of DMM electronically-facilitated Core Open Auctions 
has resulted in more Core Open Auctions occurring close to the 
beginning of Core Trading Hours. For example, in February 2020, 85.9% 
of all Core Open Auctions, and 75.9% of Core Open Auctions in S&P 500 
securities, occurred within two seconds of 9:30 a.m. Eastern Time. By 
contrast, for the period July 2020 through October 2020, 95.9% of all 
Core Open Auctions, and 89.6% of Core Open Auctions in S&P 500 
securities, occurred within two seconds of 9:30 a.m. Eastern Time.
    The Exchange has observed similar trends for Closing Auctions, with 
DMMs facilitating more Closing Auctions electronically, which means 
more Closing Auctions occurring closer to 4:00 p.m. Eastern Time. In 
February 2020, DMMs effected electronically 57% of all Closing Auctions 
and 5.5% of Closing Auctions in S&P 500 securities. By contrast, for 
the period July 2020 through October 2020, DMMs effected electronically 
90.9% of all Closing Auctions, and 53.6% of Closing Auctions in S&P 500 
securities. Currently, DMM electronically-facilitated Closing Auctions 
occur shortly after 4:00 p.m. Eastern Time.\11\ Accordingly, the 
increased number of DMM electronically-facilitated Closing Auctions 
translates to an increase in the number of Closing Auctions that occur 
close to 4:00 p.m. Eastern Time. Because the temporary wider percentage 
parameters and eliminated volume parameters have resulted in more Core 
Open Auctions and Closing Auctions occurring at 9:30 a.m. Eastern Time 
or 4:00 p.m. Eastern Time, respectively, the Exchange believes that 
making these temporary parameters permanent would support the continued 
fair and orderly operation of Auctions on the Exchange.
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    \11\ When Floor Broker Interest was eligible to participate in 
the Closing Auction, DMM electronically-facilitated Closing Auctions 
occurred at 4:02 p.m. Eastern Time. Because there has been no Floor 
Broker Interest for the Closing Auction during the period while the 
Trading Floor has been temporarily closed, the Exchange moved the 
time for DMM electronically-facilitated Closing Auctions to closer 
to 4:00 p.m. With the proposed change, described below, to 
permanently eliminate Floor Broker Interest for the Closing Auction, 
the Exchange would continue to conduct DMM electronically-
facilitated Closing Auctions shortly after 4:00 p.m., rather than 
revert to the 4:02 p.m. time for such auctions.
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    The Exchange also notes that during the period when the temporary 
parameters have been in place, the Exchange has not observed greater 
auction price dislocation compared to the period immediately preceding 
implementation of these temporary parameters, and has even observed 
modest improvement. The Exchange defines auction price dislocation as 
the difference between the Core Open Auction price and the consolidated 
volume-weighted average price (``VWAP'') over the subsequent five-
minute period, or the difference between the Closing Auction price and 
the consolidated VWAP over the two minutes preceding the Closing 
Auction; the lower the difference, the lower the auction price 
dislocation. In February 2020, the Exchange's average Core Open Auction 
dislocation was 3.27x a security's average spread; for the period July 
2020 through October 2020 the average was 3.22x a security's average 
spread.\12\ Similarly, the median Core Open Auction dislocation fell 
from 1.84x a security's average spread to 1.78x a security's average 
spread.
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    \12\ Market volatility was, on average, lower in February 2020 
as compared to July 2020-October 2020. Calculating the price 
dislocation metric in terms of a security's average spread 
incorporates the wider spreads in the latter period and allows for a 
better comparison between the two periods.
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    The Exchange also observed similar trends in the Closing Auction 
price dislocation statistics. In February 2020, the Exchange's average 
Closing Auction Price Dislocation was 0.82x a security's average 
spread; for the period July 2020 through October 2020, the average was 
0.69x a security's average spread.\13\ Median Closing Auction 
dislocation also dropped from 0.5x to 0.43x a security's average spread 
in the respective periods. Because the temporary wider percentage 
parameters have not resulted in greater auction price dislocation, the 
Exchange believes that making these parameters permanent would continue 
to support fair and orderly Auctions on the Exchange.
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    \13\ Closing Auction price dislocation is generally lower than 
Core Open Auction price dislocation, due to the relatively lower 
levels of volatility around the Closing Auction compared to the Core 
Open Auction.
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    To effect these changes, the Exchange proposes to:
     Amend Rule 7.35A(c)(1)(G) to replace the current 4% price 
parameter for Core Open and Trading Halt Auctions with a 10% price 
parameter. Because the proposed price parameter would be 10%, the 
Exchange believes that the need for the double-wide parameters set 
forth in Rule 7.35A(c)(2) for Core Open and Trading Halt Auctions would 
no longer be necessary and the Exchange proposes to delete that text.
     Delete Rule 7.35A(c)(1)(H).
     Amend Rule 7.35A(j)(1)(A) to delete reference to volume 
parameters and Rule 7.35A(c)(1)(H).
     Amend Rule 7.35B(c)(1)(G) to replace the reference to 
``designated percentage'' parameter for the Closing Auction with a 10% 
price parameter. The Exchange further proposes to delete the chart 
specifying the designated percentages for the Closing Auction.
     Delete Rule 7.35B(c)(1)(H).
     Delete Commentaries .01(a) and (b) to Rule 7.35A.
     Delete the entirety of Commentary .01 to Rule 7.35B.
    The Exchange proposes to maintain Commentary .01(c) to Rule 7.35A, 
which provides that for a temporary period that begins March 23, 2020, 
when the Trading Floor facilities have been closed pursuant to Rule 
7.1(c)(3), and ends on the earlier of a full reopening of the Trading 
Floor facilities to DMMs or after the Exchange closes on December 31, 
2020, the requirement to publish a pre-opening indication pursuant to 
Rule 7.35A(d) before either a Core Open Auction or Trading Halt

[[Page 77307]]

Auction is suspended. The Exchange proposes non-substantive amendments 
to delete subparagraph (c) numbering and move the text of that 
subparagraph into the body of Commentary .01.\14\
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    \14\ The Exchange notes that even though the requirement for 
pre-opening indications has been suspended, since June 17, 2020, 
when DMMs returned staff to the Trading Floor, DMMs have published 
pre-opening indications for IPO Auctions and the two Direct Listing 
Auctions on September 30, 2020.
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Proposed Changes to Applicable Price Range for Pre-Opening Indications
    The Exchange proposes to make permanent that the Applicable Price 
Range for determining whether to publish a pre-opening indication would 
be 10% for securities with an Indication Reference Price higher than 
$3.00 and $0.30 for securities with an Indication Reference Price equal 
to or lower than $3.00, which are currently in effect on a temporary 
basis, as set forth in Commentary .06 to Rule 7.35A.
    Rule 7.35A(d)(1)(A) currently provides that a DMM will publish a 
pre-opening indication before a security opens or reopens if the Core 
Open or Trading Halt Auction is anticipated to be a change of more than 
the ``Applicable Price Range,'' as specified in Rule 7.35A(d)(3), from 
a specified ``Indication Reference Price,'' as specified in Rule 
7.35A(d)(2).
    Rule 7.35A(d)(3)(A) provides that the Applicable Price Range will 
be 5% for securities with an Indication Reference Price over $3.00 and 
$0.15 for securities with an Indication Reference Price equal to or 
lower than $3.00. Rule 7.35A(d)(3)(B) further provides that,
    If as of 9:00 a.m., the E-mini S&P 500 Futures are +/-2% from the 
prior day's closing price of the E-mini S&P 500 Futures, when reopening 
trading following a market-wide trading halt under Rule 7.12, or if the 
Exchange determines that it is necessary or appropriate for the 
maintenance of a fair and order market, the Applicable Price Range for 
determining whether to publish a pre-opening indication will be 10% for 
securities with an Indication Reference Price over $3.00 and $0.30 for 
securities with an Indication Reference Price equal to or lower than 
$3.00.
    Current Rule 7.35A(1)(A) further provides that a DMM may not effect 
a Core Open or Trading Halt Auction electronically if a pre-opening 
indication has been published for the Core Open Auction. Accordingly, 
Exchange Rules already provide for a correlation between pre-opening 
indications and whether a DMM may effect a Core Open or Trading Halt 
Auction electronically. Currently, that is achieved through similar, 
though not identical, percentage parameters: The price parameter for 
DMM-facilitated electronic Core Open and Trading Halt Auctions is 4% 
and the Applicable Price Range for pre-opening indications is 5%. When 
there is market-wide volatility, both are doubled.
    The Exchange believes that because of this existing correlation, in 
connection with permanently widening the price parameters for DMM-
facilitated electronic Core Open and Trading Halt Auctions to 10%, the 
Applicable Price Range for determining whether to publish a pre-opening 
indication should similarly not only be widened, but also be aligned to 
10%. With this proposed change, if there is a significant enough price 
movement to require a DMM to effect a Core Open or Trading Halt Auction 
manually, the DMM would be required to publish a pre-opening indication 
for such Core Open or Trading Halt Auction. The Exchange notes that if 
a DMM chooses to facilitate a Core Open Auction or Trading Halt Auction 
manually (i.e., if there is less than a 10% price movement), a DMM 
could still choose to publish a pre-opening indication in connection 
with such Auction, even if the Applicable Price Range has not been 
triggered. For example, DMMs generally publish pre-opening indications 
for IPO Auctions and Direct Listing Auctions regardless of whether the 
Applicable Price Range has been triggered.
    The Exchange does not believe that permanently widening the 
Applicable Price Range for when a DMM is required to publish a pre-
opening indication would reduce transparency in connection with Core 
Open and Trading Halt Auctions. The Exchange currently disseminates 
Auction Imbalance Information for all Core Open Auctions and Trading 
Halt Auctions.\15\ Since August 2019, when the Exchange transitioned 
Exchange-listed securities to the Pillar trading platform, all Floor 
broker orders for the Core Open and Trading Halt Auctions must be 
entered electronically. Accordingly, all such interest is reflected in 
the Auction Imbalance Information, which was not the case before the 
Exchange transitioned to Pillar. Accordingly, the Auction Imbalance 
Information includes information about all buy and sell orders entered 
in advance of such Auctions.\16\
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    \15\ Pursuant to Commentaries .01 and .02 to Rule 7.35, for the 
temporary period that ends on the earlier of a full reopening of the 
Trading Floor facilities to DMMs or after the Exchange closes on 
December 31, 2020, the Exchange includes IPOs and Direct Listings in 
the Auction Imbalance Information. The Exchange has filed a separate 
proposed rule change to include IPOs and Direct Listings in the 
Auction Imbalance Information on a permanent basis. See Securities 
Exchange Act Release No. 90387 (November 10, 2020) (SR-NYSE-2020-93) 
(Notice of Filing).
    \16\ Rule 7.35(a)(4) provides that DMM Auction Liquidity is 
never included in Auction Imbalance Information. By its terms, DMM 
Auction Liquidity, as defined in Rule 7.35(d)(8)(A), is entered by 
the DMM either manually or electronically as part of the DMM unit's 
electronic message to conduct an Auction. For an Auction effected 
electronically by the DMM, DMM Auction Liquidity is entered 
simultaneously with the DMM facilitating the Auction, which is why 
it is not included in the Auction Imbalance Information leading up 
to such Auction. For an Auction effected manually by the DMM, the 
DMM can factor such interest into the pre-opening indication price 
range. DMM Orders, as defined in Rule 7.35(d)(8)(B), that may be 
entered by the DMM in advance of such Auctions would be included in 
the Auction Imbalance Information.
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    To effect this change, the Exchange proposes to amend Rule 
7.35A(d)(3)(A) and (B) to make it a single subparagraph (A) that would 
provide that the Applicable Price Range for determining whether to 
publish a pre-opening indication would be 10% for securities with an 
Indication Reference Price over $3.00 and $0.30 for securities with an 
Indication Reference Price equal to or lower than $3.00. The Exchange 
further proposes to delete the introductory text to Rule 7.35A(d)(3)(B) 
regarding circumstances when the Exchange could widen the Applicable 
Price Range under the current Rule. The Exchange further proposes to 
delete Commentary .06 to Rule 7.35A.
Proposed Changes to Floor Broker Interest for the Closing Auction
    The Exchange proposes to make permanent that Floor Broker Interest 
would not be eligible to participate in the Closing Auction, as set 
forth in Commentary .03 to Rule 7.35B. The term ``Floor Broker 
Interest'' is defined in Rule 7.35(a)(9) to mean orders represented 
orally by a Floor broker at the point of sale.
    Rule 7.35B(a)(1) currently provides that Floor Broker Interest is 
eligible to participate in the Closing Auction provided that the Floor 
broker has electronically entered such interest before the Auction 
Processing Period for the Closing Auction begins. The Rule further 
provides that for such interest to be eligible to participate in the 
Closing Auction, a Floor broker must first, by the end of, but not 
after, Core Trading Hours, orally represent Floor Broker Interest at 
the point of sale, including symbol, side, size, and limit price, and 
then second, electronically enter such interest after the end of Core 
Trading Hours. Current Rules 7.35B(a)(1)(B) and (C) set forth 
additional requirements relating to electronic acceptance of such

[[Page 77308]]

interest by the DMM and circumstances when such interest can be 
cancelled.
    On June 17, 2020, when the Exchange reopened the Trading Floor to 
limited numbers of DMMs, the Exchange added Commentary .03 to Rule 
7.35B. Accordingly, from June 17, 2020 to the present, even though 
reduced numbers of DMMs and Floor brokers are present on the Trading 
Floor, Floor Broker Interest has not been eligible to participate in 
the Closing Auction.
    During this period, the Exchange has observed that even in the 
absence of Floor Broker Interest, Floor broker participation in Closing 
Auctions has returned to similar levels of Floor broker participation 
in the Closing Auction for the period before March 23, 2020. For 
example, in February 2020, 34.5% of Auction-Only Orders for the Closing 
Auction were entered as Closing D Orders, which are available only to 
Floor brokers.\17\ In October 2020, 38.8% of the Auction-Only Orders 
for the Closing Auction were Closing D Orders, which demonstrates that 
Floor broker participation in the Closing Auction has not only returned 
since the Trading Floor reopened, but has actually increased as 
compared to February 2020. Moreover, in February 2020, only 0.1% of 
total Floor broker orders for the Closing Auction was represented as 
Floor Broker Interest, and that Floor Broker Interest represented less 
than 0.01% of the total interest that participated in the Closing 
Auction. Based on both the relatively small levels of Floor Broker 
Interest that was participating in the Closing Auction before the 
Trading Floor closed and the ongoing availability of Closing D Orders 
for Floor brokers, the Exchange does not believe that eliminating Floor 
Broker Interest for the Closing Auction would materially impact the 
ability of Floor brokers to represent customer orders for the Closing 
Auction.
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    \17\ For Exchange-listed securities, Auction-Only Orders are 
defined in Rule 7.31 to mean a Limit or Market Order that is to be 
traded only in an auction pursuant to the Rule 7.35 Series. The 
Exchange accepts the following Auction-Only Orders for the Closing 
Auction: Limit-on-Close Order (``LOC Order''), Market-on-Close Order 
(``MOC Order''), Closing D Order, and Closing Imbalance Offset 
Orders. All four types of Auction-Only Orders are available to Floor 
brokers.
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    Based on this experience, the Exchange proposes to make permanent 
Commentary .03 to Rule 7.35B. To effect this change, the Exchange 
proposes to amend Rule 7.35B(a)(1) to provide that Floor Broker 
Interest would not be eligible to participate in the Closing Auction. 
To provide clarity that a Floor broker would not be permitted to 
represent verbal interest intended for the Closing Auction, the 
Exchange further proposes to provide that Floor brokers must enter any 
orders for the Closing Auction, as defined in Rule 7.31, electronically 
during Core Trading Hours. The Exchange believes that the cross-
reference to Rule 7.31 in the Rule would provide notice to Floor 
brokers and their customers of which order types are available for 
electronic entry by Floor brokers for the Closing Auction, which 
include both Auction-Only Orders described in Rule 7.31(c) and other 
orders that may be resting on the Exchange Book that are eligible to 
participate in the Closing Auction. The Exchange also proposes to 
delete Commentary .03 to Rule 7.35B.
    The Exchange proposes to make related changes by deleting the 
clause ``and Floor Broker Interest intended for the Closing Auction as 
defined in Rule 7.35B(a)(1)'' from Rule 7.32. Similarly, the Exchange 
proposes to delete the text set forth in Rule 7.35C(a)(2) relating to 
Floor Broker Interest that provides that ``Floor Broker Interest that 
has been electronically accepted by the DMM and that has not been 
cancelled as provided for in Rule 7.35B(a)(1)(C) will be eligible to 
participate in an Exchange-facilitated Closing Auction.'' The Exchange 
proposes to designate that sub-paragraph as ``Reserved.'' \18\
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    \18\ The Exchange has a pending proposed rule change to amend 
Rule 7.35C(a). See (SR-NYSE-2020-89).
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    In addition, the Exchange proposes to delete Rule 46B and amend 
Rule 47(b). Under Rule 47, Floor Officials have the authority to 
``supervise and regulate active openings and unusual situations that 
may arise in connection with the making of bids, offers or transactions 
on the Floor.'' The Exchange recently amended its rules to add 
Regulatory Trading Officials (``RTO''), which are defined in Rule 
46B.\19\ As described in the RTO Approval Order, unusual situations 
that may arise in connection with Floor Broker Interest for the Closing 
Auction could be ``if the Floor broker hand-held device malfunctions or 
ceases to work or if a Floor broker is physically impeded, as a result 
of a crowd condition beyond that of normal traffic flow on the 
Exchange's trading Floor or some other circumstance beyond the Floor 
broker's control, in his or her ability to be present at a post before 
the DMM closes the security.'' \20\ The Exchange amended Rule 47 to add 
subparagraph (b), which provides that RTOs, instead of Floor Officials, 
would be responsible for supervising and regulating situations 
regarding whether a verbal bid or verbal offer is eligible for 
inclusion in the Closing Auction by the DMM.
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    \19\ See Securities Exchange Act Release No. 88765 (April 29, 
2020), 85 FR 26771 (May 5, 2020) (SR-NYSE-2020-03) (``RTO Approval 
Order'').
    \20\ Id. at 26772.
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    Because the Exchange proposes to eliminate verbal bids or verbal 
offers for the Closing Auction, the Exchange proposes to delete the 
last clause of Rule 47(a) and subparagraph (b) to Rule 47.\21\ As 
proposed, Rule 47 would revert to the rule text in effect prior to the 
RTO Approval Order and would provide that ``Floor Officials shall have 
power to supervise and regulate active openings and unusual situations 
that may arise in connection with the making of bids, offers or 
transactions on the Floor.'' With this proposed change, RTOs would no 
longer have a role under Exchange rules. Therefore, the Exchange 
proposes to delete Rule 46B.
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    \21\ RTOs were approved when the Trading Floor was temporarily 
closed. Id. Because Commentary .03 to Rule 7.35B was implemented 
when DMMs returned to the Trading Floor, there has not been any 
Floor Broker Interest for Closing Auctions since RTOs were created 
and therefore RTOs have not had to perform the functions as 
described in Rule 46(b).
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    The Exchange also proposes to delete Commentary .02 to Rule 7.35B. 
This Commentary is obsolete because it has not been in effect since May 
22, 2020.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\22\ in general, and furthers the objectives of 
Sections 6(b)(5) of the Act,\23\ 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 regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to, and perfect the mechanisms of, 
a free and open market and a national market system and, in general, to 
protect investors and the public interest and because it is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
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Proposed Changes to Parameters for DMM-Facilitated Electronic Auctions
    The Exchange believes that the proposed change to make permanent 
the parameters for DMM-facilitated electronic auctions that are 
currently in effect on a temporary basis as set forth in Commentaries 
.01(a) and (b) to Rule 7.35A and Commentary .01 to Rule 7.35B would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market

[[Page 77309]]

system because the Exchange believes that these updated parameters 
would promote fair and orderly Auctions on the Exchange. These 
temporary parameters have been in effect not only during the period 
when the Trading Floor was closed in full, but also for the period when 
the Trading Floor has partially reopened to reduced staff of DMM and 
Floor brokers firms. In addition, these temporary parameters have been 
in effect during periods of both extreme volatility and high trading 
volumes. Accordingly, DMMs have had over six months' of experience of 
electronically facilitating Auctions within these temporary parameters 
and applying them during varying market conditions.
    During this period, the Exchange has observed that with these 
temporary parameters, a higher number of Core Open Auctions and Closing 
Auctions have been electronically facilitated by the DMM, which has 
resulted in a greater number of Core Open Auctions and Closing Auctions 
occurring shortly after 9:30 a.m. or 4:00 p.m., respectively. The 
Exchange has further observed that there have been modest improvements 
in auction price dislocation during the period when these temporary 
parameters have been in place. Accordingly, the Exchange believes that 
making these parameters permanent would promote the continued fair and 
orderly operation of Auctions for Exchange-listed securities.
Proposed Changes to Applicable Price Range for Pre-Opening Indications
    The Exchange believes that the proposed change to make permanent 
that the Applicable Price Range for determining whether to publish a 
pre-opening indication would be 10% for securities with an Indication 
Reference Price higher than $3.00 and $0.30 for securities with an 
Indication Reference Price equal to or lower than $3.00, which are 
currently in effect on a temporary basis, would remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system because the Exchange believes that this updated 
Applicable Price Range would promote fair and orderly Auctions on the 
Exchange.
    Exchange rules already provide for a correlation between the 
parameters for when a DMM may facilitate an Auction electronically and 
the Applicable Price Range for determining whether to disseminate a 
pre-opening indication. The Exchange believes that the proposed 
Applicable Price Range should be aligned with the Exchange's proposed 
parameters for when a DMM may facilitate an Auction electronically. 
Specifically, with this proposed change, if there is a significant 
enough price movement to require a DMM to effect a Core Open or Trading 
Halt Auction manually, the DMM would be required to publish a pre-
opening indication for such Core Open or Trading Halt Auction. The 
Exchange notes that if a DMM chooses to facilitate a Core Open Auction 
or Trading Halt Auction manually (i.e., if there is less than a 10% 
price movement), a DMM could still choose to publish a pre-opening 
indication in connection with such Auction, even if the Applicable 
Price Range has not been triggered.
    The Exchange does not believe that permanently widening the 
Applicable Price Range for when a DMM is required to publish a pre-
opening indication would reduce transparency in connection with Core 
Open and Trading Halt Auctions. The Exchange currently disseminates 
Auction Imbalance Information for Core Open Auctions and Trading Halt 
Auctions. Since August 2019, when the Exchange transitioned Exchange-
listed securities to the Pillar trading platform, all Floor broker 
orders for the Core Open and Trading Halt Auctions must be entered 
electronically. Accordingly, all such interest is reflected in the 
Auction Imbalance Information, which was not the case before the 
Exchange transitioned to Pillar. Accordingly, the Auction Imbalance 
Information includes information about all buy and sell orders entered 
in advance of such Auctions.
Proposed Changes to Floor Broker Interest for the Closing Auction
    The Exchange believes that the proposed change to make permanent 
that Floor Broker Interest would not be eligible to participate in the 
Closing Auction, which is currently in effect on a temporary basis as 
set forth in Commentary .03 to Rule 7.35B, would remove impediments to 
and perfect the mechanism of a free and open market because it would 
promote fair and orderly Closing Auctions on the Exchange.
    The Exchange has observed that even in the absence of Floor Broker 
Interest, Floor broker participation in the Closing Auction has 
returned, and indeed increased, as compared to the level of Floor 
broker participation in the Closing Auction for February 2020. 
Moreover, even when Floor Broker Interest was available to participate 
in Closing Auctions, such interest represented only 0.1% of total Floor 
broker orders that participated in Closing Auctions. Accordingly, the 
Exchange does not believe that the proposed change would materially 
alter Floor brokers' ability to meaningfully participate in the Closing 
Auction. Moreover, in the absence of Floor Broker Interest, the 
Exchange was able to move the time for DMM-facilitated electronic 
Closing Auctions from 4:02 p.m. to shortly after 4:00. By making this 
change permanent, DMM-facilitated electronic Closing Auctions would 
continue to occur shortly after 4:00.
    The Exchange further believes that the proposed amendments to Rules 
7.32, 7.35, 46B, and 47(b) would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because such rules would no longer be necessary in the absence of Floor 
Broker Interest for the Closing Auction. Accordingly, these proposed 
rule changes would promote transparency and clarity by removing 
references that would be obsolete.

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

    In accordance with Section 6(b)(8) of the Act,\24\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed change is not designed to address any 
competitive issues. Instead, the proposed rule changes are designed to 
make permanent changes that have been implemented on a temporary basis 
relating to the functions of Auctions on the Exchange and that have 
contributed to the fair and orderly Auction process during the period 
that they have been in effect. The proposed rule change does not have 
any effect on intermarket competition because these proposed changes 
relate to Auctions in Exchange-listed securities for which the Exchange 
is the primary listing exchange.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its

[[Page 77310]]

reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2020-95 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-2020-95. 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-2020-95 and should be submitted on 
or before December 22, 2020.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-26399 Filed 11-30-20; 8:45 am]
BILLING CODE 8011-01-P


