
[Federal Register Volume 88, Number 147 (Wednesday, August 2, 2023)]
[Notices]
[Pages 50927-50928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16393]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98013; File No. SR-NYSEAMER-2023-27]


Self-Regulatory Organizations; NYSE American LLC; Order Granting 
Approval of a Proposed Rule Change To Amend Rule 915 (Criteria for 
Underlying Securities) To Accelerate the Listing of Options on Certain 
IPOs

July 27, 2023.

I. Introduction

    On April 21, 2023, NYSE American LLC (``NYSE American'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE American Rule 915 (Criteria for 
Underlying Securities) to reduce the time to market for the listing and 
trading of options on certain covered securities following their 
initial public offering (``IPO''). The proposed rule change was 
published for comment in the Federal Register on May 1, 2023.\3\ One 
comment letter was received on the proposed rule change.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 97374 (Apr. 25, 
2023), 88 FR 26634 (``Notice'').
    \4\ See Letter from Ellen Greene, Managing Director, Equities & 
Options Market Structure, SIFMA, to Vanessa Countryman, Secretary, 
Commission (May 16, 2023), available at https://www.sec.gov/comments/sr-nyseamer-2023-27/srnyseamer202327.htm.
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    On June 13, 2023, pursuant to Section 19(b)(2) of the Act,\5\ 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 disapprove the proposed rule 
change.\6\ This order grants approval of the proposed rule change.
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    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 97717, 88 FR 39895 
(June 20, 2023).
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II. Description of the Proposal

    The Exchange proposes to modify Commentary .01(4)(a) of NYSE 
American Rule 915 to reduce the time for it to begin listing and 
trading options on certain covered securities following their IPO.\7\ 
NYSE American Rule 915 establishes requirements that underlying 
securities must meet in order for the Exchange to list and trade option 
contracts on them. Commentary .01 of that rule sets forth certain 
guidelines for the Exchange to consider in evaluating potential 
underlying securities.
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    \7\ See 15 U.S.C. 77r(b)(1)(A) (defining ``covered security'').
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    One such guideline is a minimum market price per share that an 
underlying security must trade at before the Exchange can list options 
on it.\8\ Specifically, Commentary .01(4)(a) to NYSE American Rule 915 
requires the market price per share of an underlying covered security 
to have been at least $3.00 for the previous three consecutive business 
days preceding the date on which the Exchange submits a certificate to 
The Options Clearing Corporation (``OCC'') to list and trade options on 
it (``three-day lookback period'').\9\ Under the current rule, if an 
IPO occurs on a Monday, the earliest date the Exchange could submit its 
listing certificate to OCC would be Thursday, with the market price 
determined by the closing price over the three-day lookback period from 
Monday through Wednesday. An option on the security would then be 
eligible for trading on the Exchange on Friday (i.e., within four 
business days following the IPO inclusive of the day the listing 
certificate is submitted to OCC).
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    \8\ NYSE American Rule 915(a) requires that, for underlying 
securities to be eligible for options listing, such securities must 
be duly registered and be an ``NMS stock,'' as defined in Rule 600 
of Regulation NMS under the Act, and be characterized by having a 
substantial number of outstanding shares which are widely held and 
actively traded. See NYSE American Rules 915(a)(1) and (2).
    \9\ The Exchange states that the Options Listing Procedures Plan 
(``OLPP'') requires that the listing certificate be provided to OCC 
no earlier than 12:01 a.m. and no later than 11:00 a.m. (Chicago 
time) on the trading day prior to the day on which trading is to 
begin. See the OLPP, at p. 3, available at: https://ncuoccblobdev.blob.core.windows.net/media/theocc/media/clearing-services/services/options_listing_procedures_plan.pdf.
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    The Exchange proposes to waive the three-day lookback period in 
Commentary .01(4)(a) for certain covered securities following their IPO 
and accelerate the listing of options on such securities by up to two 
days.\10\ As proposed, the Exchange would permit options to be listed 
and traded on a new IPO with a market capitalization of at least $3 
billion based upon its offering price starting on or after the second 
business day following the covered security's IPO day (i.e., not 
inclusive of the day of the IPO).\11\ For example, under the proposed 
rule, if an IPO for a company with a market capitalization of $3 
billion (based upon its offering price) occurs on a Monday, the 
Exchange could submit a listing certificate to OCC (to allow it to list 
and trade options on the IPO security) on Tuesday if all of the 
requirements for options listing are satisfied. Options on the IPO 
security could then list and begin trading on the Exchange on Wednesday 
(i.e., starting on or after the second business day following the IPO 
day, not inclusive of the IPO day). In this way, the proposal could 
accelerate the listing and trading of options on IPO securities by up 
to two days.
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    \10\ See Notice, supra note 3, 88 FR at 26635.
    \11\ See proposed Commentary .01(4)(a)(ii) to NYSE American Rule 
915. The Exchange also proposes a non-substantive change to number 
the existing and proposed criteria for covered securities as (i) and 
(ii) of paragraph (4)(a). See proposed Commentary .01(4)(a)(i) and 
(ii) to NYSE American Rule 915.
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III. Discussion and Commission's Findings

    After careful review of the proposed rule change, the Commission 
finds that the proposal is consistent with the requirements of the Act 
and the rules and regulations thereunder that are applicable to a 
national securities exchange.\12\ Specifically, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\13\ which requires that the rules of a national securities 
exchange be designed, among other things, 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.
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    \12\ In approving this proposed rule change, the Commission has 
considered the rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    As discussed above, the Exchange proposes to reduce the time to 
market for the listing and trading of options on underlying covered 
securities following their IPO if they have a market capitalization of 
at least $3 billion based upon the offering price. By waiving the 
three-day lookback period for such covered securities in Commentary 
.01(4)(a), the proposed rule change could reduce the time to market of 
options on such securities by up to two days, as options on such 
securities

[[Page 50928]]

would be permitted to be listed and traded starting on or after the 
second business day following the IPO (not including the day of the 
IPO) once all listing criteria are satisfied.
    The proposed rule change would only waive the three-day lookback 
period for covered securities following their IPO if they have a 
substantial market capitalization of at least $3 billion based upon 
their IPO offering price. According to the Exchange, based upon data 
from 2017 to present, all underlying securities with an IPO market 
capitalization of $3 billion would have also met the $3.00 market price 
per share three-day lookback period requirement.\14\
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    \14\ See Notice, supra note 3, 88 FR at 26635.
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    The Commission believes the proposed waiver of the three-day 
lookback period requirement is appropriate for underlying covered 
securities that have a market capitalization of at least $3 billion 
based on the IPO offering price because those securities would likely 
satisfy the lookback requirement, in which case the minimum $3.00 price 
test would be met. Further, the proposed market capitalization 
requirement of $3 billion based on the IPO offering price would ensure 
an objective qualification process for the waiver that would prevent 
market participants from being able to influence whether an IPO 
security qualifies for the waiver through trading in the security, 
which could be a concern if the threshold price were based on the 
market price of the shares following the IPO. In accelerating the time 
to market for options on these types of large, and likely high profile 
IPOs, the proposal does not materially change the listing process for 
options, nor does it propose to change any other listing criteria.
    In addition, the Exchange represents that trading in IPO securities 
is subject to surveillances administered by the Exchange and cross-
market surveillances administered by the Financial Industry Regulatory 
Authority (``FINRA'') on behalf of the Exchange that are designed to 
detect violations of Exchange rules and applicable federal securities 
laws.\15\ The Exchange represents that those surveillances are adequate 
to reasonably monitor Exchange trading of IPO securities.\16\ Vigilant 
surveillance can help deter and detect violations of Exchange rules and 
the federal securities rules and regulations, and in so doing can help 
prevent fraudulent and manipulative acts and practices, and, in 
general, protect investors and the public interest.\17\
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    \15\ See id. According to the Exchange, FINRA conducts cross-
market surveillances on behalf of the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement. See 
id. at 26635, n.9.
    \16\ See id. at 26635.
    \17\ 15 U.S.C. 78f(b)(5).
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    The Commission received one comment letter that recommended 
approval of the proposed rule change. The commenter asserted that the 
proposed rule change would ``benefit both investors and the market by 
allowing for increased efficiency in portfolio and risk management 
while continuing to provide for investor protection.'' \18\
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    \18\ See supra note 4, at 2.
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    The Commission finds that the proposal to accelerate the listing 
and trading of options on certain covered securities following their 
IPO by up to two days if they have a market capitalization of at least 
$3 billion based upon their IPO offering price, without modifying any 
other aspect of the options listing process, should facilitate 
transactions in securities. Accordingly, the Commission finds that the 
proposed rule change is consistent with the requirements of the 
Act.\19\
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    \19\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-NYSEAMER-2023-27), be, and 
it hereby is, approved.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16393 Filed 8-1-23; 8:45 am]
BILLING CODE 8011-01-P


