[Federal Register Volume 84, Number 137 (Wednesday, July 17, 2019)]
[Notices]
[Pages 34219-34220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15133]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86351; File No. SR-NYSE-2019-32]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval of a Proposed Rule Change To Amend NYSE Rule 123D
July 11, 2019.
I. Introduction
On May 24, 2019, New York Stock Exchange LLC (``NYSE'' or the
``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 Rule 123D to permit the Exchange to
declare a regulatory halt in a security that traded in the over-the-
counter market prior to the initial pricing on the Exchange. The
proposed rule change was published for comment in the Federal Register
on June 6, 2019.\3\ The Commission has received no comment letters on
the proposal. This order approves the proposed rule change.
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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. 85990 (May 31,
2019), 84 FR 26462 (June 6, 2019) (``Notice'').
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II. Description of the Proposal
The Exchange has proposed to amend Rule 123D(d) to permit the
Exchange to declare a regulatory halt in a security that traded in the
over-the-counter market prior to the initial pricing on the Exchange.
Currently, Rule 123D(d) permits the Exchange to declare a
regulatory halt in a security that is the subject of an initial pricing
on the Exchange of a security and that has not been listed on a
national securities exchange or traded in the over-the-counter market
pursuant to FINRA Form 211 (the ``OTC market'') immediately prior to
the initial pricing. Accordingly, the Exchange has authority to declare
a regulatory halt for any initial listing that is not a transfer from
either another national securities exchange or the OTC market.
Regulatory halts under the rule terminate when the assigned Designated
Market Maker (``DMM'') opens the security.
The Exchange has proposed to delete the clause ``or traded in the
over-the-counter market pursuant to FINRA Form 211'' in NYSE Rule
123D(d). The proposed amendment would thus enable the Exchange to
declare a regulatory halt for a security that is having its initial
listing on the Exchange and that was traded in the OTC market
immediately prior to its initial pricing on the Exchange.
The Exchange notes that, although an OTC market security that will
be listed on a primary listing exchange will be removed from the OTC
trading list on the day before its initial pricing on the exchange, on
the day of its initial listing, that security can trade on an unlisted
trading privileges (``UTP'') basis before the first transaction on the
primary listing exchange. The Exchange states that permitting the
Exchange to declare a regulatory halt in such securities before trading
on the Exchange begins would avoid potential price disparities or
anomalies that may occur during any UTP trading before the first
transaction on the primary listing exchange. The Exchange states that
quoting and trading in the pre-market of an OTC transfer can be erratic
and that investors may be harmed if their securities trade during this
period. The Exchange asserts that the proposed limited authority to
declare a regulatory halt in the hours prior to the OTC transfer's
initial pricing on the Exchange would mitigate any potential price
disparities and contribute to a fair and orderly market once the
security opens on the Exchange and would be consistent with the
protection of investors and the public interest.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\4\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\5\ which requires, among
other things, that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, 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, and that those rules not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\4\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\5\ 15 U.S.C. 78f(b)(5).
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The Commission believes that extending the authority of the
Exchange to declare a regulatory trading halt prior to the initial
pricing on the Exchange of securities that were previously traded in
the OTC market is consistent with the Act because it is reasonably
designed to address any potential price disparities or anomalies that
may occur during UTP trading before the first transaction on the
Exchange. The Commission notes that this regulatory halt would be
terminated when the DMM opens the security, and would be for the
limited purpose of precluding other markets from trading the security
until the
[[Page 34220]]
Exchange has completed the initial pricing process. The Commission
believes this proposed change is reasonably designed to facilitate the
initial opening by the DMM and thereby promote fair and orderly markets
and the protection of investors.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-NYSE-2019-32) be, and it
hereby is, approved.
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\6\ 15 U.S.C. 78s(b)(2).
\7\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15133 Filed 7-16-19; 8:45 am]
BILLING CODE 8011-01-P