[Federal Register Volume 86, Number 63 (Monday, April 5, 2021)]
[Notices]
[Pages 17658-17664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06885]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91442; File No. SR-NYSE-2020-105]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 and Order Instituting Proceedings 
To Determine Whether To Approve or Disapprove a Proposed Rule Change, 
as Modified by Amendment No. 1, To Revise Rules 46 and 46A and Other 
Related Rules To Permit the Appointment of Trading Officials

March 30, 2021.

I. Introduction

    On December 15, 2020, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend NYSE Rules 46 and 46A, 
and other related rules, to permit the appointment of Trading 
Officials.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on December 30, 2020.\3\ On February 9, 2021, the Commission 
designated a longer period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to approve or disapprove the proposed rule change 
until March 30, 2021.\4\ On March 25, 2021, the Exchange submitted 
Amendment No. 1 to the proposed rule change.\5\ The Commission has 
received no comments on the proposed rule change.
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    \3\ See Securities Exchange Act Release No. 90776 (Dec. 22, 
2020), 85 FR 86625 (Dec. 30, 2020) (``Notice'').
    \4\ See Securities Exchange Act Release No. 91084 (Feb. 9, 
2021), 86 FR 9545 (Feb. 16, 2021).
    \5\ See https://www.sec.gov/comments/sr-nyse-2020-105/srnyse2020105-8545367-230641.pdf.
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    The Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1, from interested 
persons and is instituting proceedings under Section 19(b)(2)(B) of the 
Exchange Act \6\ to determine whether to approve or disapprove the 
proposed rule change, as modified by Amendment No. 1.
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    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes revisions to Rules 46 and 46A to permit the 
appointment of Trading Officials and to make conforming changes to 
certain Exchange rules related to Floor Official duties and 
responsibilities. This Amendment No. 1 to SR-NYSE-2020-105 replaces and 
supersedes the original filing in its entirety. 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.

III. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes revisions to Rules 46 and 46A to permit the 
appointment of Trading Officials and to make conforming changes to 
certain Exchange rules related to Floor Official duties and 
responsibilities. This Amendment No. 1 to SR-NYSE-2020-

[[Page 17659]]

105 replaces and supersedes the original filing in its entirety. 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.

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

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

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

1. Purpose
    The Exchange proposes revisions to Rules 46 and 46A to permit the 
appointment of Trading Officials and to make conforming changes to 
certain Exchange rules related to Floor Official duties and 
responsibilities.
Background
    Rule 46 (Floor Officials--Appointment) and Rule 46A (Executive 
Floor Governors) currently set forth the process for the Exchange to 
appoint active NYSE members \7\ as Floor Officials. In addition, Rule 
46 permits the Exchange to appoint qualified ICE employees to as act as 
Floor Governors, a more senior type of Floor Official.\8\
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    \7\ Rule 2(a) states that the term ``member,'' when referring to 
a natural person, means a natural person associated with a member 
organization who has been approved by the Exchange and designated by 
such member organization to effect transactions on the Exchange 
Trading Floor or any facility thereof. See also note 7, infra.
    \8\ The title ``Floor Official'' includes a broad category of 
titles that include, in order of increasing seniority, Floor 
Officials, Senior Floor Officials, Executive Floor Officials, Floor 
Governors and Executive Floor Governors. See Rules 46 and 46A 
(defining Floor Official, Floor Governor, Executive Floor Official, 
Senior Floor Official and Executive Floor Governors).
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    The role of the Floor Official evolved out of the self-regulatory 
scheme of the Securities Exchange Act of 1934, as amended (the 
``Act'').\9\ Floor Officials are delegated authority from the 
Exchange's Board of Directors (the ``Board'') to supervise and regulate 
active openings and unusual situations that arise in connection with 
the making of bids, offers or transactions on the Trading Floor,\10\ 
and to review and approve certain trading actions. A number of Exchange 
Rules specify involvement in the marketplace by Floor Officials, 
senior-level Floor Officials (i.e., Floor Governors, Executive Floor 
Officials, Senior Floor Officials and Executive Floor Governors), or 
both.
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    \9\ See 15 U.S.C. 78f.
    \10\ The term ``Trading Floor'' is defined in Rule 6A to mean 
the restricted-access physical areas designated by the Exchange for 
the trading of securities, commonly known as the ``Main Room'' and 
the ``Buttonwood Room.''
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    Exchange members appointed as Floor Officials serve in a volunteer 
capacity in addition to their regular obligations as either brokers or 
Designated Market Makers (``DMM''). In 2008, the Exchange amended Rule 
46 to permit qualified ICE employees to be appointed as Floor Governors 
(``Staff Governors'').\11\ Staff Governors are not regulatory employees 
and do not report to the Chief Regulatory Officer (``CRO''). In fact, 
under Rule 46.10, regulatory employees are ineligible to be appointed 
as Staff Governors.\12\ In light of this, and the Staff Governors' role 
in supervising trading operations of the Exchange, Staff Governors 
appointed by the Board pursuant to Rule 46 report to the Head of 
Equities or that person's designee.
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    \11\ See Securities Exchange Act Release No. 57627 (April 4, 
2008), 73 FR 19919 (April 11, 2008) (SR-NYSE-2008-19) (``Release No. 
57627'').
    \12\ The prohibition was designed to avoid potential conflicts 
of interest insofar as the process for qualifying Floor Officials, 
including Floor Governors, was performed by regulatory employees. 
See Securities Exchange Act Release No. 34-57627 (April 4, 2008), 73 
FR 19919 (April 11, 2008) (SR-NYSE-2007-2).
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    At the same time, as a result of the evolution of the equities 
markets away from manual executions and manual enforcement of rules 
toward an electronic market that automates executions and in many cases 
hard codes the rule requirements into the execution logic, many of the 
trading procedures and situations originally requiring Floor Official 
involvement have been automated; in other cases, Floor Official 
approval has become pro forma rather than substantive.\13\ More 
recently, the Exchange introduced Regulatory Trading Officials 
(``RTOs'') to perform the functions performed by Floor Officials 
regarding whether a bid or offer is eligible for inclusion in the 
Closing Auction by the DMM.\14\ As described below, the Exchange has 
now determined to delegate the remaining duties and responsibilities of 
Floor Officials to the proposed Trading Officials.
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    \13\ See, e.g., Securities Exchange Act Release No. 75695 
(August 13, 2015), 80 FR 50365 (August 19, 2015) (SR-NYSE-2015-33) 
(deletion of Rule 79A.20 requiring prior Floor Official approval for 
certain DMM dealer trades more than one or two dollars away from the 
last sale as moot).
    \14\ See Securities Exchange Act Release No. 88765 (April 29, 
2020), 85 FR 26771 (May 5, 2020) (SR-NYSE-2020-03). The Exchange has 
filed a separate proposed rule change to make permanent that Floor 
Broker Interest would not be eligible to participate in the Closing 
Auction and in that filing, has also proposed to delete Rule 46B 
because RTOs would no longer have a role under Exchange rules. See 
Securities Exchange Act Release No. 90495 (November 24, 2020), 85 FR 
77304 (December 1, 2020) (SR-NYSE-2020-95) (Notice) (``NYSE Close 
Proposal'').
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Proposed Rule Change
    The Exchange proposes to eliminate member and non-member employee 
Floor Officials and transition the duties and responsibilities of Floor 
Officials to newly created Trading Officials, who would be Exchange 
employees appointed by the NYSE CEO or his or her designee. The 
Exchange anticipates that the current Staff Governors, who are not 
regulatory employees and report to the Head of Equities, would be 
appointed as Trading Officials and would retain the same reporting 
structure. The Exchange believes that retaining the Staff Governors' 
current reporting structure when they are appointed Trading Officials 
is appropriate given that Trading Officials will continue to have the 
same role in supervising trading on the Exchange and that, as proposed, 
Trading Officials will not have any regulatory role or responsibility. 
As discussed below, Trading Officials will not be involved in 
determinations to reallocate securities under Rules 103.10 and 103B(G).
    As proposed, Trading Officials would be the only persons authorized 
to perform the delegated functions under the Exchange rules on the 
Floor that member Floor Officials and Staff Governors currently 
perform. The various seniority-based gradations of Floor Official 
(Floor Officials, Senior Floor Officials, Executive Floor Officials, 
Floor Governors and Executive Floor Governors) also would be 
eliminated. As a practical matter, the current Staff Governors would 
become the new Trading Officials. Active Exchange members would not be 
eligible for appointment as Trading Officials.
    Under current Rules 46 and 46A, Floor Officials are appointed by 
the Board and re-appointed annually. Floor Officials must also complete 
a mandatory education program and pass a qualifications exam. These 
requirements were developed for

[[Page 17660]]

member Floor Officials, and the Exchange does not propose to retain 
them for Trading Officials. Like the current Staff Governors, Exchange 
staff would be appointed as Trading Officials based on experience and 
necessary business and rule knowledge that would enable them to 
participate in and supervise various trading situations on the Floor. 
Once appointed, Trading Officials would be trained and supervised by 
the Exchange in the same manner as the current Staff Governors.
    In order to effectuate the proposed changes, the Exchange proposes 
to delete current Rules 46 and 46A in their entirety and define a 
Trading Official in new Rule 46 as an Exchange staff person designated 
by the CEO of the Exchange or his or her designee to perform those 
functions specified in Exchange rules.
    In addition, the Exchange proposes certain technical and conforming 
changes to replace references to Floor Officials, Senior Floor 
Officials, Executive Floor Officials, Floor Governors and/or Executive 
Floor Governors with Trading Official in the following rules:
     Rule 7.35A (DMM-Facilitated Core Open and Trading Halt 
Auctions) sets forth the responsibility of DMMs to ensure that 
registered securities open as close to the beginning of Core Trading 
Hours as possible or reopen at the end of the halt or pause.
    [cir] Subsection (a)(4) provides for Floor Official participation 
in the opening and reopening process to provide an impartial 
professional assessment of unusual situations, as well as to provide 
guidance with respect to pricing when a significant disparity in supply 
and demand exists. The rule also contemplates DMMs consultations with 
Floor Officials under certain specific circumstances. References to 
Floor Official in Rule 7.35A(a)(4) and (a)(5) would be replaced with 
Trading Official.
    [cir] Rule 7.35A(d) governs pre-opening indications. Subsection 
(d)(4) describes the procedures for publishing pre-opening indications 
and specifies when publication of a pre-opening indication requires 
supervision and approval of a Floor Governor. References to Floor 
Governor in Rule 7.35A(d)(4)(A) and (F)(i) would be replaced with 
Trading Official.
     Rule 7.35B (DMM-Facilitated Closing Auctions) describes 
the responsibility of each DMM to ensure that registered securities 
close as soon after the end of Core Trading Hours as possible.
    [cir] Rule 7.35B(a)(1)(C) provides that electronically-entered 
Floor Broker Interest cannot be reduced in size or replaced except that 
DMMs can accept a full cancellation of electronically-entered Floor 
Broker Interest to correct a Legitimate Error subject to Floor Official 
approval. Floor Official would be replaced with Trading Official in 
Rule 7.35B(a)(1).\15\
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    \15\ The Exchange has separately proposed to delete Rule 
7.35B(a)(1)(C). See id.
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    [cir] Rule 7.35B(d) governs closing imbalances. Subsection 
(d)(1)(A) describes the circumstances when a DMM may disseminate a 
Regulatory Closing Imbalance with prior Floor Official approval. 
Subsection (d)(2) provides that DMMs may disseminate a Manual Closing 
Imbalance only with prior Floor Official approval beginning one hour 
before the scheduled end of Core Trading Hours up to the Closing 
Auction Imbalance Freeze Time. In both subsections, references to Floor 
Official would be replaced with Trading Official.
    [cir] Rule 7.35B(j) governs temporary rule suspensions. Subsection 
(j)(3) provides that a determination to declare a temporary suspension 
as well as any entry or cancellation of orders or closing of a security 
under subsection (j)(2) must be supervised and approved by an Executive 
Floor Governor and supervised by an Exchange Officer. The Exchange 
proposes that supervision and approval of these determinations must be 
supervised and approved by a Trading Official.
     Rule 18(d) (Compensation in Relation to Exchange System 
Failure) sets forth the process for member organizations to seek 
reimbursement for losses resulting from system failures. Subsection (d) 
establishes a Compensation Review Panel consisting of three Floor 
Governors and three Exchange employees to determine the eligibility of 
a claim for payment. Since the proposed elimination of Floor Governors 
would leave Exchange employees as the sole members of the Compensation 
Review Panel, the Exchange proposes to eliminate the Compensation 
Review Panel. The proposed rule would accordingly provide that the 
Exchange will perform will review claims submitted pursuant to the rule 
and determine eligibility of a claim for payment.
     Rule 37 (Visitors) provides that visitors shall not be 
admitted to the Floor except by permission of Exchange officer, a 
Senior Floor Official, Executive Floor Official, a Floor Governor, or 
an Executive Floor Governor. The Exchange proposes that admission of 
visitors to the Floor be by permission of the Exchange.
     As noted, the text of Rules 46 and 46A would be deleted. 
The heading of Rule 46 would be changed to ``Trading Officials.''
     Under current Rule 47 (Floor Officials--Unusual 
Situations), Floor Officials have the 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. 
References to Floor Official would be changed to Trading Officials and 
the heading would be changed to ``Unusual Situations on the Floor.'' 
Current Rule 49 would become new Rule 48.
     Rule 75 (Disputes as to Bids and Offers) mandates that 
disputes arising on bids or offers that are not settled by agreement 
between the interested members shall be settled by a Floor Official. 
The Exchange proposes that disputes arising on bids or offers be 
settled by a Trading Official and would amend the rule text and 
Supplementary Material .10 accordingly. The rule currently provides 
that, if both parties to a dispute involving either a monetary 
difference of $10,000 or more or a questioned trade, the matter may be 
referred for resolution to a panel of three Floor Governors, Senior 
Floor Officials, or Executive Floor Officials, or any combination 
thereof (``3 Floor Official Panel''), whose decision shall be binding 
on the parties. As an alternative to the 3 Floor Official Panel, 
members may proceed to resolve a dispute through long-standing 
arbitration procedures established under the Exchange's rules. The 
Exchange proposes to eliminate the 3 Floor Official Panel. Disputes 
involving either a monetary difference of $10,000 or more or a 
questioned trade would thus be resolved exclusively through 
arbitration.
    Rule 75 codifies a form of expedited arbitration to timely resolve 
disputes between Floor-based members regarding verbal bids and offers. 
The Exchange believes that having a Trading Official initially resolve 
certain types of minor Floor disputes would continue to efficiently 
resolve those disputes. However, the Exchange does not believe that a 
panel of Exchange employees should be providing binding decisions in 
significant disputes between members (i.e., where the dispute involves 
a monetary difference of $10,000 or more or a questioned trade), which 
would put the Exchange in the position of adjudicating significant 
competing claims among members. Rule 75 contemplates a process for 
members to resolve disputes, and especially significant disputes, 
amongst themselves, not for Exchange employees

[[Page 17661]]

to arbitrate those disputes on the Trading Floor. For these reasons, 
the Exchange proposes that matters involving a dispute involving either 
a monetary difference of $10,000 or more or a questioned trade proceed 
to arbitration.
     Rule 91.50 (Taking or Supplying Securities Named in Order) 
provides that if there is a continued pattern of rejection of a DMM's 
principal transactions, a Floor Official may be called upon and require 
the broker to review his actions. Floor Official would be changed to 
Trading Official in Rule 91.50.
     Rule 93(b) (Trading for Joint Account) provides that no 
member while on the Floor shall initiate the purchase or sale on the 
Exchange of a stock for any account in which the member, the member's 
member organization or any other member or allied member therein is 
directly or indirectly interested with any person other than such 
member organization or any other member or allied member therein, 
without the prior approval of a Floor Official. The reference to Floor 
Official would be changed to Trading Official.
     Rule 103.10 (Registration and Capital Requirements of DMMs 
and DMM Units) governs the temporary reallocation of securities and 
provides that the CRO or his or her designee and two non-DMM Executive 
Floor Governors or, if only one or no non-DMM Executive Floor Governors 
is present on the Floor, the most senior non-DMM Floor Governor or 
Governors based on length of consecutive service as a Floor Governor at 
the time of any action covered by this rule, acting by a majority, 
shall have the power to reallocate temporarily any security on an 
emergency basis whenever such reallocation would be in the public 
interest. The Exchange proposes that only the CRO or his or her 
designee would have the power to reallocate temporarily any security on 
an emergency basis. The rule reflects the current process whereby 
determinations to temporarily reallocate securities in the public 
interest are determined by the CRO and the most senior and experienced 
members of the Floor community. In the absence of such senior Floor 
member representatives, the Exchange believes that determinations 
involving the public interest should be made exclusively by the CRO. 
Given that reallocating securities in the public interest largely raise 
regulatory concerns, the Exchange believes that such determinations are 
best left to regulatory staff without the involvement of Trading 
Officials.
     Rule 103A (Member Education) provides for the Exchange to 
develop procedures and standards for qualification and performance of 
members active on the Floor of the Exchange. The rule currently exempts 
Executive Floor Governors from the requirement to complete educational 
modules, which the Exchange proposes to eliminate. The Exchange also 
proposes the non-substantive change of deleting the superfluous ``(I)'' 
at the beginning of the rule.
     Rule 103B(G) (Security Allocation and Reallocation) 
describes the allocation freeze policy and provides that, following 
allocation probation, a second six month period will begin during which 
a DMM unit may apply for new listings, provided that the unit 
demonstrates relevant efforts taken to resolve the circumstances that 
triggered the allocation prohibition. Currently, the determination as 
to whether a unit may apply for new listings is made by Exchange 
regulatory staff in consultation with the Executive Floor Governors, 
the most senior and experienced Floor Officials. The Exchange proposes 
that regulatory staff continue to make these determinations under the 
rule in the absence of Executive Floor Governors. The Exchange is not 
proposing that Regulatory staff consult with Trading Officials because 
Regulatory staff do not need the input or involvement of business side 
staff to make these determinations.
     Rule 104 (Dealings and Responsibilities of DMMs) governs 
dealings and responsibilities of DMMs. Subsection (i) provides for 
temporary DMMs and permits a Floor Governor to authorize a member of 
the Exchange who is not registered as a DMM in such stock or stocks, to 
act as a temporary DMM under specific circumstances. The Exchange 
proposes that Trading Officials would perform this function under the 
amended rule.
     Rule 112(a)(i) (Orders initiated ``Off the Floor'') 
provides that all orders in stocks for the account of a member 
organization or any member, principal executive, approved person, 
officer, or employee of such organization or a discretionary account 
serviced by the member or member organization must be sent to the Floor 
through a clearing firm's order room or other facilities regularly used 
for transmission of public customers' orders to the Floor, except for 
orders, among others, when a Floor Official expressly invites a member 
or members to participate in a difficult market situation. The Exchange 
would replace Trading Official for Floor Official in Rule 112(a)(i).
     Rule 124(e) (Midday Auction) provides that, when there is 
a significant imbalance in a Midday Auction Stock at the end of the 
Midday Auction Pause, the Midday Auction Pause may be converted to an 
order imbalance halt with the approval of a Floor Governor or two Floor 
Officials. The Exchange proposes that the approval would be given by a 
Trading Official.
     Rule 128B (Publication of Changes, Corrections, 
Cancellations or Omissions and Verification of Transactions) governs 
changes and corrections to the Consolidated Tape.
    [cir] Rule 128B.10 (Publication on the tape or in the ``sales 
sheet'') provides that publication of a change or a correction in a 
transaction which previously appeared on the tape may be made on the 
tape on the day of the transaction provided that both buying and 
selling members or member organizations agree to the change in the 
transaction(s) and receive approval from a Floor Governor, Executive 
Floor Official, Senior Floor Official or Executive Floor Governor. In 
the event such publication is not made on the tape on the day of the 
transaction, it may be published on the tape at least ten minutes prior 
to the opening of business on the following business day or in the 
sales sheet within three business days of the transaction with the 
approval of both the buying and selling members and a Floor Official, 
provided the price of the transaction does not affect the high, low, 
opening or closing price of the security on the day of the transaction. 
The Exchange proposes that Trading Officials provide the approvals 
required under Rule 128B.10.
    [cir] Rule 128B.13 (Other errors) provides that a correction in the 
amount of a transaction reported erroneously to the tape by a party to 
the transaction, may be published on the tape on the day of the 
transaction, on the tape at least ten minutes prior to the opening on 
the following business day, or on the ``sales sheet'' within three 
business days of the transaction with the approval of a Floor Governor, 
Executive Floor Official, Senior Floor Official or Executive Floor 
Governor. The Exchange proposes that Trading Officials provide the 
approvals required under Rule 128B.13.
     Rule 308(g) (Acceptability Proceedings) provides that any 
person whose application has been disapproved by an Acceptability 
Committee, or any member of the Board, any member of the Committee for 
Review (``CFR''), any Executive Floor Governor, and the Division of the 
Exchange initiating the proceedings may

[[Page 17662]]

require a review by the Board of any determination of an Acceptability 
Committee. The Exchange proposes to delete Executive Floor Governors 
from the rule. The Exchange believes that the proposed change would not 
affect the procedural safeguards of the call for review process since 
there would still be interested parties that could call a matter for 
Board review. Specifically, directors and members of the CFR, including 
the person whose application was disapproved, would continue to be able 
to call disapproved membership applications for review, thereby 
ensuring the independence, integrity and fairness of the membership 
process. The Exchange does not believe that Trading Officials, who are 
not members and have no role in the member application process, should 
not have the ability to call matters involving membership applications 
for review.
     Rule 903(d)(ii) (Off-Hours Transactions) provides that a 
closing price order to buy (sell) a security for the account of the DMM 
registered in such security and approved by a Floor Official, coupled 
with a closing price order to sell (buy) to offset all or part of a 
market-on-close imbalance in the stock prior to the close, shall be 
executed upon entry. The Exchange proposes that a Trading Official 
would provide the required approval under the rule.
     Rule 906 (Impact of Trading Halts on Off-Hours Trading) 
provides that a closing price order to buy (sell) a security for the 
account of the DMM registered in such security and approved by a Floor 
Official coupled with a closing price order to sell (buy) to offset all 
or part of any market-on-close imbalance in the stock prior to the 
close, shall not be so canceled or precluded from entry as result of 
corporate developments during the Off-Hours Trading Session. The 
Exchange proposes that a Trading Official would provide the required 
approval under the rule.
     Finally, NYSE Listed Company Manual Section 202.04 
(Exchange Market Surveillance) provides that a listed issue may be 
placed under special initial margin and capital requirements, which 
indicates a determination by the Exchange's Floor Officials that the 
market in the issue has assumed a speculative tenor and has become 
volatile due to the influence of credit, which, if ignored, may lead to 
unfair and disorderly trading. The reference to Floor Officials would 
be updated to Trading Officials.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\16\ in general, and furthers the objectives of Section 
6(b)(5),\17\ in particular, because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system and, in general, to protect 
investors and the public interest.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that creating a new category 
of Trading Official to replace member Floor Officials would promote 
just and equitable principles of trade and remove impediments to a free 
and open market by streamlining and modernizing the role of a Trading 
Official on the Floor. The volunteer member Floor Official is a self-
regulatory vestige developed for manual trading. As noted, the Exchange 
introduced Staff Governors several years ago to address the shortfall 
in experienced members following the consolidation of trading space on 
the Exchange.\18\ More recently, RTOs were introduced to perform 
certain functions performed by Floor Officials in connection with the 
Closing Auction.\19\ The proposed rule change would complete the 
evolution of member Floor Officials to Trading Officials that are 
Exchange-trained and supervised staff, which is similar to how trading 
officials function on the options markets run by the Exchange's 
affiliates.\20\ By replacing the variety and hierarchy of Floor 
Officials based on seniority with a single Trading Official appointed 
by the NYSE CEO, the Exchange would significantly simplify the 
appointment and retention of individuals with responsibility under the 
Exchange's rules to supervise and review trading on the Floor. Further, 
the proposal would contribute to the protection of investors and the 
public interest by ensuring that qualified Exchange staff continue to 
perform the formal roles prescribed by Exchange rules and provide a 
level of oversight to the marketplace on a day-to-day basis, thereby 
contributing to the maintenance of a fair and orderly marketplace on 
the Exchange. The Exchange believes that the substantive operation of 
those rules where the current Floor Official role would not be assumed 
by a Trading Official would remain unaffected, thereby contributing to 
the protection of investors and the public interest. As described 
above, claims under Rule 18(d) would continue to be validated and 
reviewed by Exchange employees; retention of the current Compensation 
Review Panel is unnecessary given that elimination of Floor Officials, 
which would leave the panels composed solely of Exchange employees. 
Similarly, disputes between members under Rule 75 involving a monetary 
difference of $10,000 or more or a questioned trade would continue to 
be afforded an expedited resolution; as noted, the Exchange believes 
that potentially significant disputes are more appropriate for 
resolution by traditional arbitration rather than an expedited process 
involving a panel of Exchange employees. Further, the primarily 
regulatory determinations under Rules 103.10 and 103B(G) would continue 
to be made by regulatory staff; the Exchange does not believe that 
consultation with a Trading Official is either necessary or appropriate 
in situations involving temporarily reallocation of securities. 
Similarly, the procedural safeguards of the call for review process in 
Rule 308(g) would not be affected by elimination of Executive Floor 
Governors because directors and members of the CFR, including persons 
whose application are disapproved, would continue to be able to call 
disapproved membership applications for Board review under the rule, 
thereby preserving the safeguard of Board review of disputed 
disapprovals.
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    \18\ See Release No. 57627, 73 FR at 19920.
    \19\ As noted above, the Exchange has separately proposed to 
delete Rule 46B because RTOs would no longer have a role under 
Exchange rules. See NYSE Close Proposal, supra note 10.
    \20\ See NYSE American LLC (``NYSE American'') Rule 900.2NY(82) 
and NYSE Arca, Inc. (``NYSE Arca'') Rule 6.1-O(b)(34).
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    Finally, the Exchange believes that the conforming and technical 
changes would remove impediments to and perfect the mechanism of a free 
and open market and a national market system and, in general, protect 
investors and the public interest because the proposed non-substantive 
changes would add clarity, transparency and consistency to the 
Exchange's rules. The Exchange believes that market participants would 
benefit from the increased clarity, thereby reducing potential 
confusion and ensuring that persons subject to the Exchange's 
jurisdiction, regulators, and the investing public can more easily 
navigate and understand the Exchange's rules.

[[Page 17663]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not intended to address competitive issues but is rather concerned with 
transferring Floor Official duties and responsibilities under Exchange 
rules to staff Trading Officials. The Exchange believes the proposed 
rule changes would streamline and modernize the role of the trading 
official on the Floor, thereby contributing to the maintenance of a 
fair and orderly marketplace on the Exchange to the benefit of all 
members and member organizations and the investing public. Moreover, 
since the proposal does not substantively modify system functionality 
or processes on the Exchange, the proposed changes will not impose any 
burden on competition.

III. Proceedings To Determine Whether To Approve or Disapprove SR-NYSE-
2020-105 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act \21\ to determine whether the proposed 
rule change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as stated below, the 
Commission seeks and encourages interested persons to provide comments 
on the proposed rule change.
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    \21\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\22\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis of the proposed rule change's consistency with 
Sections 6(b)(3) and 6(b)(5) of the Exchange Act.\23\ Section 6(b)(3) 
of the Exchange Act requires, among other things, that the rules of an 
exchange assure a fair representation of its members in the 
administration of its affairs.\24\ Section 6(b)(5) of the Exchange Act 
requires that the rules of an exchange be 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 mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.\25\ Section 6(b)(5) of the 
Exchange Act also requires that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.\26\
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    \22\ Id.
    \23\ 15 U.S.C. 78f(b)(3) and (b)(5).
    \24\ 15 U.S.C. 78f(b)(3).
    \25\ 15 U.S.C. 78f(b)(5).
    \26\ Id.
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V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Sections 6(b)(5) of the Exchange Act, any other 
provision of the Exchange Act, or any other rule or regulation under 
the Exchange Act. Although there do not appear to be any issues 
relevant to approval or disapproval that would be facilitated by an 
oral presentation of views, data, and arguments, the Commission will 
consider, pursuant to Rule 19b-4, any request for an opportunity to 
make an oral presentation.\27\
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    \27\ Rule 700(c)(2) of the Commission's Rules of Practice 
provides that ``[t]he Commission, in its sole discretion, may 
determine whether any issues relevant to approval or disapproval 
would be facilitated by the opportunity for an oral presentation of 
views.'' 17 CFR 201.700(c)(2).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by April 26, 2021. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by May 10, 
2021. The Commission asks that commenters address the sufficiency of 
the Exchange's statements in support of the proposal, in addition to 
any other comments they may wish to submit about the proposed rule 
change. The Commission asks that commenters address the sufficiency of 
the Exchange's statements in support of the proposal, in addition to 
any other comments they may wish to submit about the proposed rule 
change. In particular, the Commission seeks comment on the following:
    1. Under this proposed rule change, Floor Officials would be 
eliminated and their duties would be assumed by Trading Officials. 
Further, while current Floor Officials may be employees of member firms 
or of the Exchange, all Trading Officials would be Exchange employees. 
Do commenters have any concerns regarding the inability of employees of 
member firms to serve as Trading Officials? What are commenters' views 
on whether the proposed rule change raises issues related to fair 
representation of member firms in the administration of the Exchange's 
affairs? What are commenters' views on whether permitting only Exchange 
employees to be Trading Officials would create or alter conflicts of 
interest, if any, faced by Trading Officials in performing their 
duties?
    2. Currently, Floor Officials who are member employees must 
complete educational programs prescribed by the Exchange, including 
mandatory continuing education programs. Do commenters believe that 
specified mandatory training should be required of Trading Officials 
under the proposal? Do commenters believe that employees of member 
firms may have relevant experience or knowledge that is important for 
performing the duties of a Trading Official?
    3. Do commenters have any views on any other aspect of the 
Exchange's proposal?
    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-2020-105 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-2020-105. 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

[[Page 17664]]

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 
these filings 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-2020-105 and should be submitted on or before April 26, 2021. 
Rebuttal comments should be submitted by May 10, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06885 Filed 4-2-21; 8:45 am]
BILLING CODE 8011-01-P


