[Federal Register Volume 85, Number 57 (Tuesday, March 24, 2020)]
[Notices]
[Pages 16713-16715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06104]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88413; File No. SR-NYSE-2020-19]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 7.35C To Provide Temporarily, Until May 15, 2020, the 
Exchange With Discretion To Facilitate a Trading Halt Auction Following 
a Market-Wide Circuit Breaker Halt if a Security Has Not Reopened by 
3:30 p.m. Eastern Time

March 18, 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 March 17, 2020, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes amend Rule 7.35C to provide the Exchange with 
discretion to facilitate a Trading Halt Auction following a market-wide 
circuit breaker halt if a security has not reopened by 3:30 p.m. 
Eastern Time. The proposed rule change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 7.35C to provide the Exchange 
with discretion to facilitate a Trading Halt Auction following a Level 
1 or Level 2 trading halt due to extraordinary market volatility under 
Rule 7.12 (``MWCB Halt'') if a security has not reopened by 3:30 p.m. 
Eastern Time.\4\
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    \4\ Under Rule 7.12, a ``Level 1 Market Decline'' means a 
decline in the price of the S&P 500 Index of 7% from the closing 
price of that index, and a ``Level 2 Market Decline'' means a 
decline in the price of the S&P 500 Index of 13% from the closing 
price of that index.
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    Under Rule 7.12, if there is a Level 1 or Level 2 Market Decline, 
the Exchange halts trading in all stocks for 15 minutes. At the end of 
that 15-minute MWCB Halt, the reopening of trading follows the 
procedures set forth in the Rule 7.35 Series, which provide for 
Designated Market Makers (``DMMs'') to facilitate such Trading Halt 
Auctions pursuant to Rule 7.35A. Under Rule 7.35A, a DMM can facilitate 
a Trading Halt Auction following a MWCB Halt either electronically or 
manually. Trading Halt Auctions facilitated manually by the DMM may not 
be completed until some period after the end of the 15-minute MWCB 
Halt. If a security has not been reopened for trading by 3:50 p.m., 
that security will remain halted and will be eligible for a Closing 
Auction, as provided for in the Rule 7.35 Series, instead of a Trading 
Halt Auction.\5\
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    \5\ In such case, MOO Orders, LOO Orders, Opening D Orders, and 
Primary Pegged Orders will be cancelled (Rule 7.35(d)(2)) and the 
Exchange will begin disseminating Closing Auction Imbalance 
Information (Rule 7.35(d)(3)).
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    Rule 7.35C sets forth the procedures for Exchange-facilitated 
auctions. Currently, the Exchange will facilitate an Auction only if a 
DMM cannot facilitate an Auction for one or more securities.
    To facilitate the fair and orderly reopening of securities 
following a MWCB Halt, the Exchange proposes that it have discretion to 
facilitate a Trading Halt Auction in one or more securities under the 
procedures described in Rule 7.35C if a security is not reopened by 
3:30 p.m. The Exchange continues to believe that DMM-facilitated 
Trading Halt Auctions following a MWCB Halt provide the greatest 
opportunity for fair and orderly reopenings of securities, and would 
therefore continue to provide DMMs an opportunity to reopen securities 
before effectuating an Exchange-facilitated Trading Halt Auction. The 
proposal would provide the Exchange with another tool during volatile 
markets to reopen securities before 3:50 p.m., for continuous trading 
to resume leading into the close. This proposed rule change would 
therefore provide the CEO of the Exchange or his or her designee the 
authority to determine that the Exchange would facilitate a Trading 
Halt Auction so that a security in one or more securities [sic] under 
the procedures set forth in Rule 7.35C if a security has not reopened 
by 3:30 p.m., and therefore have continuous trading resume before 
leading into the close.
    The Exchange believes that specifying a time in the Rule at which 
the Exchange could exercise such discretion would put DMMs on notice of 
the time that the Exchange could begin facilitating such auctions. The 
Exchange further believes that it is not appropriate to provide that 
the Exchange would automatically facilitate reopening auctions at 3:30 
p.m. There may be facts and circumstances where DMMs would be able to 
reopen all securities before 3:50 p.m., but that the DMM-facilitated 
process may not have completed by 3:30 p.m. The Exchange would take 
those facts and circumstances into account before invoking the proposed 
relief. Exchange staff would communicate with the impacted DMMs 
verbally on the Floor during such times, and therefore the DMMs would 
be on notice of whether the Exchange would invoke this relief, and for 
which securities.

[[Page 16714]]

    For any Exchange-facilitated Trading Halt Auction, the Exchange 
proposes to widen the Auction Collars. Currently, the Auction Collar 
for an Exchange-facilitated Trading Halt Auction would be based on a 
price that is greater than $0.15 or 5% away from the Auction Reference 
Price for the Trading Halt Auction.\6\ The Exchange proposes that, if 
it facilitates a Trading Halt Auction following a MWCB Halt pursuant to 
proposed Commentary .01, the Auction Collars would be the greater of 
$0.15 or 10% away from the Auction Reference Price.
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    \6\ The Auction Reference Price for an Exchange-facilitated 
Trading Halt Auction is the Imbalance Reference Price as determined 
under Rule 7.35A(e)(3), and is therefore the Consolidated Last Sale 
Price. As defined in Rule 7.35(a)(11)(A), the Consolidated Last Sale 
Price means 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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    The proposed rule change is designed to provide the Exchange with 
more flexibility to respond to the unprecedented market-wide declines 
that have resulted from both the ongoing spread of the novel COVID-19 
virus and an over 30% decline in oil prices before the beginning of 
trading on March 9, 2020. On Monday, March 9, 2020, the U.S. equities 
markets triggered the first-ever Level 1 MWCB Halt under the current 
rules, and only the second MWCB Halt since market-wide circuit breaker 
rules were adopted after the October 29, 1987 crash.\7\ In advance of 
the opening on March 9, 2020, the E-mini S&P Futures had triggered a 
limit down state on the futures market and SPDR S&P 500 ETF (SPY) was 
trading down over 7% from the prior day's close. Shortly after the 
opening of trading at 9:30 a.m., the market continued its steep decline 
and a Level 1 MWCB Halt was triggered at 9:34:13 a.m., with the 
reopening of trading to begin at 9:49:13 a.m.
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    \7\ The prior MWCB Halt was triggered under former Rule 80B on 
Monday, October 27, 1997. The trigger for the MWCB Halts on that day 
were based on point declines in the Dow Jones Industrial Average 
(200 point decline to halt trading for 30 minutes and a 400 point 
decline to halt trading for one hour).
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    Following continued market declines on March 10 and 11, 2020, on 
Thursday, March 12, 2020, as a result of continued uncertainty about 
COVID-19, in advance of the opening, the E-mini S&P 500 Futures reached 
a limit down state on the futures market and SPY was trading down 
nearly 7% from the prior day's close. With continued declines after the 
open of trading, a Level 1 MWCB Halt was triggered at 9:35:44 a.m., 
with the reopening of trading to begin at 9:50:44. All NYSE-listed 
securities were reopened by 10:23 a.m.\8\ And on Monday, March 16, 
2020, following several announcements over the preceding weekend of 
school closures nationwide, additional guidance on social distancing, 
including limitations on social gatherings of 50 people or more, and a 
Federal Reserve announcement that interest rates were being reduced to 
zero percent, at 9:30:01, a Level 1 MWCB Halt was triggered after the 
S&P 500 Index declined over 9% in that one second of trading.
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    \8\ Because of the extension logic applicable to Trading Halt 
Auctions following MWCB Halt for securities listed on NYSE Arca, 
Inc. (``NYSE Arca'') (see NYSE Arca Rule 7.35-E(e), NYSE Arca-listed 
securities did not all resume trading at 9:50:44. Similar to NYSE, 
all NYSE Arca-listed securities were also reopened by 10:23 a.m.
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    Because the reasons for these market declines and related triggers 
of MWCB Halts are related to the extraordinary ongoing uncertainty 
regarding how COVID-19 will impact the global economy and daily life, 
the Exchange proposes to adopt these proposed rule changes on a 
temporary basis, until May 15, 2020. If uncertainty continues and the 
Exchange believes that the period for this proposed rule change should 
be extended, it will file a separate proposed rule change.
    The proposed Commentary .01 to Rule 7.35C would provide as follows:

    .01 Until May 15, 2020, to facilitate the fair and orderly 
reopening of securities following either a Level 1 or Level 2 
trading halt due to extraordinary market volatility under Rule 7.12 
(``MWCB Halt''), the CEO of the Exchange or his or her designee may 
determine that the Exchange will facilitate a Trading Halt Auction 
in one or more securities under this Rule if a security has not 
reopened by 3:30 p.m. If the Exchange facilitates a Trading Halt 
Auction following a MWCB Halt pursuant to this Commentary, the 
Auction Collars will be the greater of $0.15 or 10% away from the 
Auction Reference Price.

    The Exchange would be able to implement the proposed rule change 
immediately upon effectiveness of this proposed rule change.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\10\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    As a result of uncertainty related to the ongoing spread of the 
COVID-19 virus and declines in the oil market, the U.S. equities 
markets are experiencing unprecedented market declines. Level 1 MWCB 
Halts were triggered on March 9, March 12, and March 16, 2020, and 
these were the first-ever MWCB Halts under the current rules. The last 
time there was a MWCB Halt was in 1997. The Exchange believes that the 
proposed rule change would remove impediments to and perfect the 
mechanism of a free and open market and a national market system 
because it would provide discretion for the Exchange to reopen 
securities if a security has not reopened following a MWCB Halt by 3:30 
p.m., which would allow continuous trading to resume leading into the 
close. As noted, the first-ever MWCB Halts occurred during the week of 
March 9, 2020, and there have now been three. Based on our experience 
in the reopening process for these MWCB Halts, the Exchange believes 
that this proposed rule change would provide the Exchange with the 
flexibility to use the Rule 7.35C Exchange-facilitated auction 
procedures to reopen securities more quickly, if needed, near the close 
of trading.

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

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issues but rather is designed 
to ensure a fair and orderly reopening of securities following a MWCB 
Halt by provided for a temporary period during which the Exchange would 
have the flexibility to facilitate a Trading Halt Auction following a 
MWCB Halt if a security has not reopened by 3:30 p.m. so that the 
security can resume continuous trading leading into the close.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section

[[Page 16715]]

19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission has waived that requirement for this proposed rule 
change.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately. The Exchange states that 
the proposed rule change is designed to respond to the unprecedented 
uncertainty and market declines resulting from the ongoing spread of 
the COVID-19 virus and the over 30% decline in oil prices before the 
beginning of trading on March 9, 2020. The Exchange notes that these 
market declines have already triggered an unprecedented three Level 1 
MWCB Halts in one week. The proposal would provide the Exchange on a 
temporary basis, until May 15, 2020, with discretion to facilitate a 
Trading Halt Auction following a MWCB Halt, if a security has not 
reopened by 3:30 p.m. Eastern Time. The proposal would not provide that 
the Exchange would automatically facilitate reopening auctions at 3:30 
p.m. The Exchange notes that there may be facts and circumstances where 
DMMs would be able to reopen all securities before 3:30 p.m., but that 
the DMM-facilitated process may not be completed by 3:30 p.m. The 
Exchange represents that it would take those facts and circumstances 
into account before invoking the proposed relief, and that Exchange 
staff would communicate with the impacted DMMs verbally on the Floor 
during such times, and that therefore the DMMs would be on notice of 
whether the Exchange would invoke this relief and for which securities. 
The Exchange asserts that the proposal would provide the Exchange with 
another tool during volatile markets to reopen securities before 3:50 
p.m., for continuous trading to resume leading into the close. 
According to the Exchange, this measure is designed to ensure a fair 
and orderly reopening of securities following a MWCB Halt. The Exchange 
represents that it is able to implement these proposed rule changes 
immediately, and that waiver of the 30-day operative delay would 
provide the Exchange with additional means by which to ensure the 
resumption of continuous trading on its market leading into the close 
in the event that a security is not reopened by 3:30 p.m. Eastern Time 
following a MWCB Halt. For these reasons, the Commission believes that 
waiver of the 30-day operative delay is consistent with the protection 
of investors and the public interest. Accordingly, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2020-19 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-2020-19. 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-2020-19, and should be submitted on 
or before April 14, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06104 Filed 3-23-20; 8:45 am]
BILLING CODE 8011-01-P