[Federal Register Volume 86, Number 32 (Friday, February 19, 2021)]
[Notices]
[Pages 10386-10388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03338]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91121; File No. SR-NYSE-2020-93]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Amend Rules 7.35 and 7.35A

February 12, 2021.

I. Introduction

    On November 3, 2020, New York Stock Exchange LLC (``Exchange'' or 
``NYSE'') 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 7.35 regarding dissemination of 
Auction Imbalance Information if a security is an IPO or Direct Listing 
and has not had its IPO Auction or Direct Listing Auction, and Rule 
7.35A regarding DMM consultations in connection with an IPO or Direct 
Listing. The proposed rule change was published for comment in the 
Federal Register on November 17, 2020.\3\
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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. 90387 (Nov. 10, 
2020), 85 FR 73322 (Nov. 17, 2020) (``Notice'').
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    On December 18, 2020, the Commission extended to February 15, 2020, 
the time period in which to approve the proposal, disapprove the 
proposal, or institute proceedings to determine whether to approve or 
disapprove the proposal.\4\ The Commission has received no comments on 
the proposal. This order institutes proceedings under Section 
19(b)(2)(B) of the Act to determine whether to approve or disapprove 
the proposal.
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    \4\ See Securities Exchange Act Release No. 90723 (Dec. 18, 
2020), 85 FR 84446 (Dec. 28, 2020).
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II. Description of the Proposal

Rule 7.35--Auction Imbalance Information

    The Exchange proposes to amend Rule 7.35 to eliminate, on a 
permanent basis, the restriction on the Exchange disseminating Auction 
Imbalance Information if a security is an IPO or Direct Listing and has 
not had its IPO Auction or Direct Listing Auction.\5\ The Exchange 
asserts that disseminating Auction Imbalance Information in advance of 
an IPO Auction or Direct Listing Auction would promote transparency in 
advance of these Auctions, which would benefit investors and other 
market participants.\6\
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    \5\ See Notice, supra note 3, at 73323. Commentaries .01 and .02 
to Rule 7.35, currently in effect on a temporary basis through April 
30, 2021, provide for the dissemination of Auction Imbalance 
Information if a security is an IPO or Direct Listing and has not 
had its IPO Auction or Direct Listing Auction. See Securities 
Exchange Act Release No. 90795 (Dec. 23, 2020), 85 FR 86608 (Dec. 
30, 2020).
    \6\ See id.
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    As part of the proposed change, the Exchange proposes that the 
Imbalance Reference Price for determining the Auction Imbalance 
Information for either an IPO Auction or a Direct Listing Auction would 
be determined in the same manner as currently provided for under the 
temporary Commentaries .01 and .02 to Rule 7.35, respectively.\7\ 
Specifically, the Imbalance Reference Price for determining the Auction 
Imbalance Information for a Core Open Auction under Rule 7.35A(e)(3) is 
the Consolidated Last Sale Price, bound by the bid and offer of any 
published pre-opening indication.\8\ Because this definition of 
Imbalance Reference Price does not currently specify what the 
Consolidated Last Sale Price would be for an IPO Auction or Direct 
Listing Auction (which does not exist because the security has not been 
previously listed on an exchange), the Exchange proposes to amend the 
definition of Consolidated Last Sale Price in Rule 7.35(a)(11)(A) to 
provide that: (i) For an IPO that has not had its IPO Auction, the 
Consolidated Last Sale Price would mean the security's offering price; 
and (ii) for a Direct Listing that has not had its Direct Listing 
Auction, the Consolidated Last Sale Price would mean the Indication 
Reference Price for such security.\9\
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    \7\ See id.
    \8\ See id.
    \9\ See id.
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Rule 7.35A--DMM Consultations

    The Exchange proposes to amend Rule 7.35A(g)(1) to provide for DMM 
consultations with an underwriter or financial advisor for initial 
listings and follow-on offerings.\10\ The Exchange represents that the 
proposed rule text reflects long-standing practice relating to the type 
of consultations that a DMM

[[Page 10387]]

may have with an underwriter or financial advisor.\11\ The Exchange 
further proposes to specify that any such consultations may be conveyed 
to the DMM via either a Floor broker or Exchange staff. The Exchange 
represents that, as with current practice, the only consultations that 
would be required in Exchange rules would be in connection with a 
Direct Listing that has not had recent sustained history of trading in 
a Private Placement Market prior to listing.\12\ The Exchange states 
that it believes that this proposed rule text would promote 
transparency and clarity in Exchange rules by specifying the existing 
process whereby a DMM may consult with an underwriter or financial 
advisor in connection with a security having its initial listing on the 
Exchange or for a follow-on offering.\13\
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    \10\ See Notice, supra note 3, 85 FR at 73324.
    \11\ See id.
    \12\ See id.
    \13\ See id.
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III. Proceedings To Determine Whether To Disapprove SR-NYSE-2020-93 and 
Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \14\ to determine whether the proposal should be 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposal, as 
discussed below. Institution of disapproval proceedings does not 
indicate that the Commission has reached any conclusions with respect 
to any of the issues involved. Rather, as described in greater detail 
below, the Commission seeks and encourages interested persons to 
provide additional comment on the proposal.
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    \14\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act, 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 Section 6(b)(5) 
of the Act,\15\ which requires that the rules of an exchange be 
designed, among other things, 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. In addition, Section 6(b)(5) of the 
Act prohibits the rules of an exchange from being designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \15\ 15 U.S.C. 78f(b)(5).
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    Under the proposal, the Exchange seeks to amend Rule 7.35A with 
respect to the consultations a DMM may have with an underwriter or 
financial advisor. The Exchange further proposes to specify that any 
such consultations may be conveyed to the DMM via either a Floor broker 
or Exchange staff. Accordingly, the Commission seeks public comment on 
the nature of the communications permitted between the DMM and the 
underwriter or financial advisor. Specifically, the Commission seeks 
public comment on the following topics:
    (1) Should the proposed rule specify what is a permitted 
consultation provided for in the proposed amendments to NYSE Rule 
7.35A--that is, specify what is a permitted consultation ``to effect a 
fair and orderly opening on the first day of trading of a security 
having its initial listing on the Exchange or for a follow-on 
offering'' \16\--so that the permitted consultations are limited to 
conveying only such information?
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    \16\ Notice, supra note 3, 85 FR at 73324.
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    (2) Are there any types of information that the underwriter or 
financial advisor should be prohibited from conveying to the DMM in 
these consultations? Would any other types of limitations be 
appropriate with respect to the consultations between DMMs and 
underwriters or financial advisors?
    (3) Should a DMM be permitted to communicate directly with the 
underwriter or financial advisor with respect to these consultations, 
rather than through a Floor broker or a member of the Exchange's staff? 
If so, what, if any, different restrictions should apply to such 
consultations?
    (4) Should the Exchange's rules distinguish between DMM 
consultations with underwriters or financial advisors with respect to 
follow-on offerings for securities that have a market value reflected 
in trading prices as opposed to initial offerings? If so, why and in 
what way? What types of consultations, if any, would be appropriate for 
a follow-on offering and why? Would the types of appropriate 
consultations differ between a follow-on offering conducted through a 
firm-commitment underwriting and a follow-on offering conducted through 
a direct offering?

IV. 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 Section 6(b)(5) \17\ of the Act or any other provision 
of the Act, or the rules and regulations thereunder. 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 under 
the Act,\18\ any request for an opportunity to make an oral 
presentation.\19\
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    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 17 CFR 240.19b-4.
    \19\ 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 disapproved by March 
12, 2021. Any person who wishes to file a rebuttal to any other 
person's submission must file that rebuttal by March 26, 2021.
    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-2020-93 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 Numbers SR-NYSE-2020-93. The 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 proposal that are filed with the 
Commission, and all written communications relating to the proposal 
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

[[Page 10388]]

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 such filings also will be available 
for inspection and copying at the principal office of the Exchanges. 
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-2020-93 and 
should be submitted on or before March 12, 2021. Rebuttal comments 
should be submitted by March 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-03338 Filed 2-18-21; 8:45 am]
BILLING CODE 8011-01-P