[Federal Register Volume 86, Number 34 (Tuesday, February 23, 2021)]
[Notices]
[Pages 11024-11027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03545]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91143; File No. SR-NYSE-2021-13]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 7.35C To Change the Auction Reference Price for Exchange-
Facilitated Core Open Auctions

February 17, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on February 8, 2021, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. 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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[[Page 11025]]

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

    The Exchange proposes to amend Rule 7.35C (Exchange-Facilitated 
Auctions) to change the Auction Reference Price for Exchange-
facilitated Core Open Auctions. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 7.35C (Exchange-Facilitated 
Auctions) to change the Auction Reference Price for Exchange-
facilitated Core Open Auctions.
    For Exchange-facilitated Auctions, the Exchange determines an 
Auction Price based on the Indicative Match Price for a security, which 
is bound by Auction Collars.\4\ Rule 7.35C(b)(1) specifies the Auction 
Reference Price that is used for determining Auction Collars for 
Exchange-facilitated Core Open Auctions, which is the Imbalance 
Reference Price, as determined under Rule 7.35A(e)(3).\5\ Currently, 
the Auction Collars for the Core Open Auction are at a price that is 
the greater of $0.15 or 10% away from the Auction Reference Price.
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    \4\ See Rule 7.35C(b)(2).
    \5\ See Rule 7.35C(b)(3)(A)(i). Pursuant to Rule 7.35A(e)(3), 
the Imbalance Reference Price for a Core Open Auction is the 
Consolidated Last Sale Price, unless a pre-opening indication has 
been published. Pursuant to Rule 7.35(a)(11)(A), the term 
``Consolidated Last Sale Price'' means the most recent consolidated 
last-sale eligible trade in a security 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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    On June 4, 2020, the Exchange added Commentary .04 to Rule 7.35C to 
provide that the Auction Collars for Exchange-facilitated Core Open 
Auctions would be the greater of $1.00 or 10% away from the Auction 
Reference Price.\6\ The Exchange added this Commentary to reduce the 
number of securities subject to a collared Exchange-facilitated Core 
Open Auction.\7\ The Exchange observed that from June 4, 2020 up to 
June 17, 2020, when DMMs returned staff to the Trading Floor, even with 
the widened Auction Collars, if there were significant overnight 
market-wide volatility, Exchange-facilitated Core Open Auctions had a 
greater likelihood of being subject to an Auction Collar. For example, 
for that same June 4-June 16 period, when the price of the SPDR S&P 500 
ETF Trust (``SPY'') \8\ moved over 1% from the prior day's close, 1.4% 
of the Exchange-facilitated Core Open Auctions were subject to an 
Auction Collar, as compared to only .5% of the Exchange-facilitated 
Core Open Auctions being subject to an Auction Collar when SPY moved 
less than 1% from the prior day's close.
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    \6\ See Securities Exchange Act Release No. 89059 (June 12, 
2020), 85 FR 36911 (June 18, 2020) (SR-NYSE-2020-50) (amending Rule 
7.35C to add Commentary .04) (``Rule 7.35C Filing''). Commentary .04 
is in effect for a temporary period that began on June 4, 2020 and 
ends on the earlier of a full reopening of the Trading Floor 
facilities to DMMs or after the Exchange closes on April 30, 2021.
    \7\ In the Rule 7.35C Filing, id., the Exchange explained that 
for the period while the Trading Floor had been temporarily closed 
preceding that filing, the Exchange had facilitated 2.35% of the 
Core Open Auctions and that approximately 30% of the Exchange-
facilitated Core Open Auctions had an Indicative Match Price that 
was subject to an Auction Collar, and approximately 50% of these 
collared Exchange-facilitated Core Open Auctions were in securities 
trading at prices under $10.00. The Exchange further noted that if 
Auction Collars had not been applied to these securities priced 
under $10.00, they would have opened at a price between $0.15 and 
$1.00 away from the Auction Reference Price.
    \8\ Because SPY is priced based on the securities included in 
the S&P 500 Index, the Exchange believes that SPY's price as 
compared to its prior day's closing price is indicative of the scope 
of market-wide volatility leading into the open of the Core Trading 
Session.
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    The Exchange believes that adjusting the Auction Reference Price to 
align more closely with the anticipated price of the Core Open Auction, 
rather than widening the Auction Collars, would reduce the potential 
for an Exchange-facilitated Core Open Auction to be subject to an 
Auction Collar on all trading days, including when there is significant 
overnight market-wide volatility. Accordingly, rather than providing 
for a wider Auction Collar, as set forth in Commentary .04 to Rule 
7.35C, the Exchange proposes to amend Rule 7.35C to update how the 
Auction Reference Price for Exchange-facilitated Core Open Auctions 
would be determined. Specifically, the Exchange proposes to determine 
Auction Reference Prices for Exchange-facilitated Core Open Auctions in 
the same manner that the Exchange's affiliates, NYSE Arca, Inc. (``NYSE 
Arca'') and NYSE American LLC (``NYSE American''), determine the 
Auction Reference Price for their electronic Core Open Auctions.
    NYSE Arca Rule 7.35-E(a)(8)(A) and NYSE American Rule 
7.35E(a)(8)(A) both provide that the Auction Reference Price for Core 
Open Auctions on those exchanges is, ``[t]he midpoint of the Auction 
NBBO or, if the Auction NBBO is locked, the locked price. If there is 
no Auction NBBO, the prior day's Official Closing Price.'' The NYSE 
Arca and NYSE American rules define the term ``Auction NBBO'' to mean:

    An NBBO that is used for purposes of pricing an auction. An NBBO 
is an Auction NBBO when (i) there is an NBB above zero and NBO for 
the security and (ii) the NBBO is not crossed. In addition, for the 
Core Open Auction, an NBBO is an Auction NBBO when the midpoint of 
the NBBO when multiplied by a designated percentage, is greater than 
or equal to the spread of that NBBO. The designated percentage will 
be determined by the Exchange from time to time upon prior notice to 
ETP Holders.\9\
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    \9\ See NYSE Arca Rule 7.35-E(a)(5) and NYSE American Rule 
7.35E(a)(5).

    The Exchange proposes to amend Rule 7.35C(b)(1) to provide that the 
Auction Reference Price for an Exchange-facilitated Core Open Auction 
would be: ``The midpoint of the Auction NBBO or, if the Auction NBBO is 
locked, the locked price. If there is no Auction NBBO, the Official 
Closing Price from the prior trading day.'' This rule text is based on 
NYSE Arca Rule 7.35-E(a)(8)(A) and NYSE American Rule 7.35E(a)(8)(A) 
without any differences.
    The Exchange further proposes to amend Rule 7.35(a) to add a 
definition for the term ``Auction NBBO,'' which would similarly be 
based on the definition of that term in the NYSE Arca and NYSE American 
rules without any substantive differences, as follows:

    ``Auction NBBO'' means an NBBO that is used for purposes of 
pricing an auction. An NBBO is an Auction NBBO when (i) there is an 
NBB above zero and NBO for the security and (ii) the NBBO is not 
crossed. In addition, for the Core Open Auction, an NBBO is an 
Auction NBBO when the midpoint of the NBBO when multiplied by a 
designated percentage, is greater than or equal to the spread of 
that NBBO. The designated percentage will be determined by the 
Exchange from time to time upon prior notice to member 
organizations.


[[Page 11026]]


    The Exchange proposes to add the term ``Auction NBBO'' as Rule 
7.35(a)(5) and make non-substantive changes to renumber the definitions 
currently set forth in Rules 7.35(a)(5)-(12) as Rules 7.35(a)(6)-(13).
    Because there are technology changes associated with this proposed 
rule change, the Exchange proposes to announce the implementation date 
of this change by Trader Update. The Exchange anticipates that the 
Exchange will implement this technology change in the first quarter of 
2021.
    To provide continuity, the Exchange further proposes to amend 
Commentary .04 to Rule 7.35C to provide that such Commentary would end 
on the earlier of when the Exchange implements its technology change to 
use the midpoint of the Auction NBBO as the Auction Reference Price for 
the Core Open Auction or after the Exchange closes on April 30, 2020. 
With this proposed rule change, the widened Auction Collars specified 
in that Commentary would continue to be operative until such time that 
the proposed changes to the Auction Reference Price for Exchange-
facilitated Core Open Auctions are operative and implemented.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\10\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\11\ 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal to change the Auction 
Reference Price for Exchange-facilitated Core Open Auctions would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system because it would reduce the 
potential number of securities that would be subject to a collared 
Exchange-facilitated Core Open Auction, including when there is 
significant overnight market-wide volatility. Commentary .04 to Rule 
7.35C sought to achieve this goal by widening the Auction Collars, but 
as noted above, these temporary widened Auction Collars would not 
prevent an Exchange-facilitated Core Open Auction from being subject to 
an Auction Collar when there has been significant overnight market-wide 
volatility. The Exchange believes that aligning the Auction Reference 
Price more closely with the anticipated opening price by using the 
midpoint of the Auction NBBO as the Auction Reference Price (or 
Official Closing Price of the prior Trading Day if no Auction NBBO) 
would reduce the potential for an Exchange-facilitated Core Open Action 
to be subject to an Auction Collar on all trading days, including when 
there is significant overnight market-wide volatility. The Exchange 
further believes that this proposed rule change would reduce the 
potential number of securities that would open at a price that may not 
represent the current value of the security due to unfilled marketable 
auction interest, while still preserving investor protections by 
preventing significantly dislocated openings. This proposed rule change 
would therefore promote the fair and orderly operation of Exchange-
facilitated Core Open Auctions by allowing such securities to open at a 
price that is consistent with the buy and sell interest in the 
security, which would also allow more buy and sell interest to 
participate in such Auction.
    The Exchange notes that this proposed change is not novel and is 
based on how NYSE Arca and NYSE American determine the Auction 
Reference Price for their respective electronic Core Open Auctions. 
Accordingly, this proposed change would align how Auction Reference 
Prices are determined for electronic Exchange-facilitated Auctions 
across NYSE, NYSE Arca, and NYSE American.

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 provide the Exchange with additional tools for when it facilitates 
an Auction, including by aligning the Auction Reference Price for an 
Exchange-facilitated Core Open Auction with the Auction Reference Price 
used for NYSE Arca and NYSE American electronic Core Open Auctions. The 
proposed rule change does not implicate any intermarket competition 
concerns because it relates to how the Exchange would facilitate 
Auctions in Exchange-listed securities.

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 
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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; or (iii) become operative prior to 
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)(iii) of the Act \14\ and Rule 
19b-4(f)(6)(iii) thereunder.\15\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its 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 Exchange has complied with this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\17\ 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 proposal 
may become operative immediately upon filing. The Exchange has 
represented that the technology to implement this proposed rule change 
will be available in less than 30 days from filing and that a waiver of 
the operative delay would allow the Exchange to implement this proposed 
rule change as soon as the technology is available. The Commission 
notes that the proposal was previously included in another filing and 
afforded a public comment period under that filing of greater than 30 
days.\18\ The Commission

[[Page 11027]]

believes that a waiver of the operative delay is consistent with the 
protection of investors and the public interest because the proposal 
was published previously for a substantial period time for public 
comment and no comments were received on the proposal, and because a 
waiver will allow the proposed rules to become effective in time for 
the Exchange to implement its related technological changes. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposal operative upon filing.\19\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ The proposal was originally included in SR-NYSE-2020-89, 
and published for public notice and comment on November 5, 2020. See 
Securities Exchange Act Release No. 90363 (Nov. 5, 2020), 85 FR 
71964 (Nov. 12, 2020). The comment period for SR-NYSE-2020-89 was 
extended to February 10, 2021. See Securities Exchange Act Release 
No. 90726 (Dec. 18, 2020), 85 FR 84431 (Dec. 28, 2020). The Exchange 
amended SR-NYSE-2020-89 on February 5, 2021 to remove the proposal 
from that filing, see Securities Exchange Act Release No. 91095 
(Feb. 10, 2021), 86 FR 9978 (Feb. 17, 2021), and then subsequently 
filed the proposal as SR-NYSE-2021-13 on February 13, 2021. The 
Commission notes that it received no comments on the proposal under 
SR-NYSE-2020-89.
    \19\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \20\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \20\ 15 U.S.C. 78s(b)(2)(B).
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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-2021-13 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-2021-13. 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-2021-13 and should be submitted on 
or before March 16, 2021.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03545 Filed 2-22-21; 8:45 am]
BILLING CODE 8011-01-P