[Federal Register Volume 87, Number 140 (Friday, July 22, 2022)]
[Notices]
[Pages 43914-43921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15656]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95312; File No. SR-NYSE-2022-14]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Modify Certain Pricing Limitations for 
Securities Listed on the Exchange Pursuant to a Primary Direct Floor 
Listing

July 18, 2022.

I. Introduction

    On April 7, 2022, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to modify certain pricing 
limitations for securities listed on the Exchange pursuant to a direct 
listing with a primary offering in which the company will sell shares 
itself in the opening auction on the first day of trading on the 
Exchange. The proposed rule change was published for comment in the 
Federal Register on April 19, 2022.\3\ On May 26, 2022, pursuant to 
Section 19(b)(2) of the Exchange Act,\4\ the Commission designated a 
longer period within which to either approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\5\ The 
Commission has received one comment on the proposal.\6\ This order 
institutes proceedings under Section 19(b)(2)(B) of the Exchange Act 
\7\ to determine whether to approve or disapprove 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. 94708 (April 13, 
2022), 87 FR 23300 (April 19, 2022) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94991 (May 26, 
2022), 87 FR 33518 (June 2, 2022). The Commission designated July 
18, 2022, as the date by which it should approve, disapprove, or 
institute proceedings to determine whether to disapprove the 
proposed rule change.
    \6\ See Letter from Andrew Robison, dated April 22, 2022, 
available at https://www.sec.gov/comments/sr-nyse-2022-14/srnyse202214-20125830-286149.htm. The comments expressed by the 
commenter are not relevant to the proposed rule change.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal

    Section 102.01B, Footnote (E) of the of the Listed Company Manual 
(the ``Manual'') provides that, in certain cases, a company that has 
not previously had its common equity securities registered under the 
Exchange Act may wish to list its common equity securities on the 
Exchange at the time of effectiveness of a registration statement \8\ 
pursuant to which the company will sell shares itself on the first day 
of trading on the Exchange in addition to, or instead of, facilitating 
sales by selling shareholders (any such listing in which either (i) 
only the company itself is selling shares in the opening auction on the 
first day of trading or (ii) the company is selling shares and selling 
shareholders may also sell shares in such opening auction, is referred 
to as a ``Primary Direct Floor Listing'').\9\ In the Exchange's prior 
approved proposal to initially allow for a Primary Direct Floor 
Listing, the Exchange also adopted Rule 7.31(c)(1)(D) defining an 
Issuer Direct Offering Order (``IDO Order'') \10\ for use by a company 
that wishes to sell its shares through a Primary Direct Floor Listing. 
In addition, the Exchange modified Rule 7.35A to describe how the IDO 
Order would participate in a Direct Listing Auction, establish 
additional requirements for a Designated Market Maker (``DMM'') when 
conducting a Direct Listing Auction for a Primary Direct Floor Listing, 
and specify how the Indication Reference Price would be determined for 
a security to be opened in a Direct Listing.\11\ The Exchange states 
that currently, under Rule 7.35A(g)(2), the DMM will not conduct a 
Direct Listing Auction for a Primary Direct Floor Listing if (i) the 
Auction Price \12\ would be outside of the price range specified by the 
company in its effective registration statement (the ``Price Range 
Limitation'') \13\ and (ii) there is insufficient interest to satisfy 
both the IDO Order and all better-priced sell orders in full.\14\
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    \8\ The reference to a registration statement refers to a 
registration statement effective under the Securities Act of 1933 
(``Securities Act'').
    \9\ See Section 102.01B, Footnote (E) of the Manual. See also 
Securities Exchange Act Release No. 90768 (December 22, 2020), 85 FR 
85807 (December 29, 2020) (SR-NYSE-2019-67) (Order Setting Aside 
Action by Delegated Authority and Approving a Proposed Rule Change, 
as Modified by Amendment No. 2, to Amend Chapter One of the Listed 
Company Manual to Modify the Provisions Relating to Direct Listings) 
(``Approval Order'').
    \10\ An IDO Order is a Limit Order to sell that is to be traded 
only in a Direct Listing Auction. See Rule 7.31(c)(1)(D). See also 
Rule 7.31(a)(2) for the definition of ``Limit Order,'' Rule 
7.35(a)(1) for the definition of ``Auction,'' and Rule 7.35(a)(1)(E) 
for the definition of ``Direct Listing Auction.'' The IDO Order has 
the following requirements: (i) only one IDO Order may be entered on 
behalf of the issuer and only by one member organization; (ii) the 
limit price of the IDO Order must be equal to the lowest price of 
the price range established by the issuer in its effective 
registration statement; (iii) the IDO Order must be for the quantity 
of shares offered by the issuer, as disclosed in the prospectus in 
the effective registration statement; (iv) an IDO Order may not be 
cancelled or modified; and (v) an IDO Order must be executed in full 
in the Direct Listing Auction. See Rule 7.31(c)(1)(D)(i)-(v).
    \11\ See Notice, supra note 3, 87 FR at 23300. See Rule 
7.35A(d)(2)(A)(v) for a description about how the ``Indication 
Reference Price'' is determined for a security that is a Primary 
Direct Floor Listing.
    \12\ ``Auction Price'' means the price at which an Auction is 
conducted. See Rule 7.35(a)(6).
    \13\ The Exchange states that references in this rule filing to 
the price range established by the issuer in its effective 
registration statement are to the price range disclosed in the 
prospectus in such registration statement. See Notice, supra note 3, 
87 FR at 23300 n.6. Currently, the Exchange defines the price range 
established by the issuer in its effective registration statement as 
the ``Primary Direct Floor Listing Auction Price Range.'' See Rule 
7.31(c)(1)(D)(ii). As discussed further below, the Exchange proposes 
to redefine the price range established by the issuer in its 
effective registration statement as the ``Issuer Price Range.'' See 
proposed Rule 7.31(c)(1)(D)(ii). Throughout this order, we also 
refer to this ``Issuer Price Range'' as the ``disclosed price 
range.''
    \14\ See Notice, supra note 3, 87 FR at 23300.
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    The Exchange has proposed to modify the Price Range Limitation to 
provide that a Direct Listing Auction for a Primary Direct Floor 
Listing may be conducted if the Auction Price is outside of the price 
range established by the company in its effective registration 
statement (the Issuer Price Range) but is either (i) at or above the 
price that is 20% below the lowest price or at or below the price that 
is 20% above the highest price of the Issuer Price Range \15\ or (ii) 
above the price that is 20% above the highest price of the Issuer Price 
Range.\16\ The Exchange states that, under its proposal, a Direct 
Listing Auction for a Primary Direct Floor Listing could proceed in 
these circumstances provided that the issuer has certified to the 
Exchange and publicly disclosed that: (i) it does not expect that the 
Auction Price would materially change the issuer's previous disclosure 
in its effective registration

[[Page 43915]]

statement; (ii) the price range in the preliminary prospectus included 
in the effective registration statement is a bona fide price range in 
accordance with Item 501(b)(3) of Regulation S-K; and (iii) such 
registration statement contains a sensitivity analysis explaining how 
the issuer's plans would change if the actual proceeds from the 
offering differ from the amount assumed in the price range established 
by the issuer in its effective registration statement.\17\ The Exchange 
proposes that, for purposes of determining the Primary Direct Floor 
Listing Auction Price Range, the 20% threshold will be calculated based 
on the maximum offering price set forth in the registration fee table, 
consistent with the Instruction to paragraph (a) of Securities Act Rule 
430A.\18\
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    \15\ As discussed further below, the Exchange proposes to 
redefine the ``Primary Direct Floor Listing Auction Price Range'' as 
the price range that includes 20% below the lowest price and 20% 
above the highest price of the Issuer Price Range. See proposed Rule 
7.31(c)(1)(D)(ii).
    \16\ See Notice, supra note 3, 87 FR at 23300. See also proposed 
Rule 7.35A(g)(2)(B).
    \17\ See Notice, supra note 3, 87 FR at 23300. See also proposed 
Rule 7.35A(g)(2)(B)(i).
    \18\ See proposed Rule 7.31(c)(1)(D)(ii).
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    The Exchange states its belief that, while many companies are 
interested in alternatives to the traditional initial public offering 
(``IPO''), companies and their advisors may be reluctant to use the 
Primary Direct Floor Listing under current Exchange rules because of 
concerns about the Price Range Limitation.\19\ The Exchange states it 
believes that ``[t]he Price Range Limitation--which is imposed on a 
Primary Direct Floor Listing but not on an IPO--increases the 
probability of a failed offering because it contemplates there also 
being too much investor interest. In other words, if investor interest 
is greater than the company and its advisors anticipated, an offering 
would need to be delayed or cancelled.'' \20\
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    \19\ See Notice, supra note 3, 87 FR at 23300.
    \20\ Id. at 23301.
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    The Exchange states that, under current Exchange Rules, the DMM 
would not conduct a Direct Listing Auction for a security subject to a 
Primary Direct Floor Listing if the Auction Price determined is above 
the highest price of the price range established by the issuer in its 
effective registration statement.\21\ The Exchange further states that, 
in this case, the offering would be cancelled or postponed until the 
company amends its effective registration statement, and at a minimum, 
such a delay could expose the company to risks associated with changing 
investor sentiment in the event of an adverse market event.\22\ The 
Exchange states its belief that, as a result, companies may be 
reluctant to use this alternative method of going public despite its 
expected potential benefits because of the restrictions of the Price 
Range Limitation.\23\
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    \21\ See id.
    \22\ See Notice, supra note 3, 87 FR at 23300.
    \23\ See id.
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    The Exchange has proposed to modify the Price Range Limitation such 
that a Direct Listing Auction for a Primary Direct Floor Listing could 
proceed even if the Auction Price is outside of the Issuer Price Range, 
provided all other necessary conditions are met, if the Auction Price 
would not be more than 20% below the lowest price or more than 20% 
above the highest price of the Issuer Price Range and the company has, 
in its effective registration statement, specified the quantity of 
shares registered, as permitted by Securities Act Rule 457.\24\ The 
Exchange also has proposed that a Direct Listing Auction could proceed 
if the Auction Price is a price that is greater than 20% above the 
highest price of the Issuer Price Range, provided that all other 
necessary conditions are satisfied, and the company has, in its 
effective registration statement, specified the quantity of shares 
registered, as permitted by Securities Act Rule 457.\25\
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    \24\ See id.
    \25\ See id.
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    The Exchange proposes that when the Auction Price is either (i) 
outside of the Issuer Price Range but not more than 20% above or below 
such price range, or (ii) greater than 20% above the highest price of 
the Issuer Price Range, the Direct Listing Auction would not proceed 
unless the company has publicly disclosed and certified to the Exchange 
that (i) the company does not expect that such offering price would 
materially change the company's previous disclosure in its effective 
registration statement; (ii) the price range in the preliminary 
prospectus included in the effective registration statement is a bona 
fide price range in accordance with Item 501(b)(3) of Regulation S-K; 
and (iii) the company's registration statement contains a sensitivity 
analysis explaining how the company's plans would change if the actual 
proceeds from the offering differ from the amount assumed in the price 
range established by the issuer in its effective registration 
statement.\26\ In such cases, the Exchange also proposes to provide the 
issuer with the opportunity to provide any necessary additional 
disclosures that are dependent on the price of the offering so that any 
such disclosures would be available to investors prior to the 
completion of the offering.\27\ The Exchange proposes that a Direct 
Listing Auction for a Primary Direct Floor Listing would not take place 
until the issuer confirms to the Exchange that no additional 
disclosures are required under federal securities laws based on the 
Auction Price determined by the DMM.\28\
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    \26\ See id.
    \27\ See id.
    \28\ See id. See proposed Rule 7.35A(g)(2)(B)(ii).
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    The Exchange states its belief that the additional requirements to 
permit a Direct Listing Auction to take place at an Auction Price that 
is outside of the Issuer Price Range (whether it is at or within the 
Primary Direct Floor Listing Auction Price Range or above the highest 
price of such price range), as proposed, would provide sufficient 
disclosures to allow investors to evaluate whether to participate in 
the Direct Listing Auction for a Primary Direct Floor Listing, 
including the opportunity to see how changes in share price may impact 
the company's disclosures.\29\
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    \29\ See Notice, supra note 3, 87 FR at 23300.
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    The Exchange states that it believes its proposal with respect to 
the Price Range Limitation for a Primary Direct Floor Listing is 
consistent with Securities Act Rule 430A and staff guidance, which, 
according to the Exchange, generally allow a company to price a public 
offering 20% outside of the disclosed price range without regard to the 
materiality of the changes to the disclosure contained in the company's 
registration statement.\30\ According to the Exchange, the Exchange 
believes that such guidance would also allow for deviation of greater 
than 20% above the highest price of the price range in a company's 
registration statement, provided that such change would not materially 
change the previous disclosure.\31\ The Exchange states that, 
accordingly, the Exchange believes that a company listing in connection 
with a Primary Direct Floor Listing could specify the quantity of 
shares registered, as permitted by Securities Act Rule 457, and, if an 
auction prices outside of the disclosed price range, use a Rule 424(b)

[[Page 43916]]

prospectus, rather than a post-effective amendment, when either (i) the 
20% threshold noted in Rule 430A is not exceeded, regardless of the 
materiality or non-materiality of resulting changes to the registration 
statement disclosure that would be contained in the Rule 424(b) 
prospectus, or (ii) there is a deviation above the price range beyond 
the 20% threshold noted in Rule 430A if such deviation would not 
materially change the previous disclosures, in each case assuming the 
number of shares issued is not increased from the number of shares 
disclosed in the prospectus.\32\
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    \30\ See id. The Exchange states that Securities Act Rule 457 
permits issuers to register securities either by specifying the 
quantity of shares registered, pursuant to Rule 457(a), or the 
proposed maximum aggregate offering amount. The Exchange proposes to 
require that companies selling shares through a Primary Direct Floor 
Listing will register securities by specifying the quantity of 
shares registered and not a maximum offering amount. See id. at 
23301 n.10. The Exchange also states that the Exchange believes that 
the proposed modification of the Price Range Limitation would 
promote just and equitable principles of trade, remove impediments 
to and perfect the mechanism of a free and open market and a 
national market system, and protect investors and the public 
interest, because, according to the Exchange, this approach is 
similar to the pricing of an IPO where an issuer is permitted to 
price outside of the disclosed price range in accordance with the 
SEC Staff's guidance. See id. at 23304.
    \31\ See id. at 23301-02.
    \32\ See id. at 23302.
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    The Exchange states that given that, as proposed, there may be a 
Primary Direct Floor Listing that could price outside of the price 
range of the company's effective registration statement and that there 
may be no upper limit above which the Direct Listing Auction could not 
proceed, the Exchange proposes ``to support price discovery 
transparency by providing readily available, real time pricing 
information to investors.'' \33\ Specifically, the Exchange represents 
that the DMM's pre-opening indications for a security to be opened in a 
Direct Listing Auction for a Primary Direct Floor Listing would 
continue to be published via the securities information processor 
(``SIP'') and proprietary data feeds.\34\ The Exchange states that it 
would also make the Indication Reference Price available, free of 
charge, on a public website (such as www.nyse.com) on the day such 
auction is anticipated to take place.\35\ The Exchange also proposes to 
require member organizations to provide to a customer, before that 
customer places an order to participate in a Direct Listing Auction for 
a Primary Direct Floor Listing, a notice describing the mechanics of 
pricing a security subject to a Direct Listing Auction for a Primary 
Direct Floor Listing, including information regarding the availability 
of pre-opening indications via the SIP and proprietary data feeds and 
the location of the public website where the Exchange would disseminate 
information relating to the Indication Reference Price.\36\
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    \33\ See id.
    \34\ See id. See also proposed Rule 7.35A(d)(2)(A)(v).
    \35\ See Notice, supra note 3, 87 FR at 23302. The Commission 
observes that the Indication Reference Price for a security that is 
a Primary Direct Floor Listing is the lowest price of the Primary 
Direct Floor Listing Auction Price Range, which, as proposed, would 
be the price that is 20% below the lowest price of the disclosed 
price range. This price would be known before the opening process 
begins and would not change once established.
    \36\ See id. See also proposed Rule 7.35A, Commentary .20(3).
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    The Exchange further proposes to distribute, at least one business 
day prior to the commencement of trading of a security listing in 
connection with a Primary Direct Floor Listing, a regulatory bulletin 
that describes any special characteristics of the offering and the 
Exchange rules that apply to the pricing of a Primary Direct Floor 
Listing.\37\ The Exchange states that the regulatory bulletin would 
also include information about the notice that member organizations 
would be required to provide customers, as proposed, and remind member 
organizations of their obligations pursuant to the Exchange rules that 
(1) require member organizations to use reasonable diligence in regard 
to the opening and maintenance of every account, to know (and retain) 
the essential facts concerning every customer and concerning the 
authority of each person acting on behalf of such customer (Rule 2090); 
and (2) require member organizations in recommending transactions for a 
security subject to a Direct Listing Auction for a Primary Direct Floor 
Listing to have a reasonable basis to believe that: (i) the 
recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial situation, 
needs, and any other information known by such member organizations, 
and (ii) the customer can evaluate the special characteristics, and is 
able to bear the financial risks, of an investment in such security 
(Rule 2111).\38\
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    \37\ See Notice, supra note 3, 87 FR at 23302. See also proposed 
Rule 7.35A, Commentary .20.
    \38\ See Notice, supra note 3, 87 FR at 23302. See also proposed 
Rule 7.35A, Commentary .20(1) and (2).
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    The Exchange states that these member organization requirements are 
intended to remind members of their obligations to ``know their 
customers'' and would also serve to increase transparency regarding the 
pricing mechanisms applicable to a Primary Direct Floor Listing and 
help provide investors with sufficient price discovery information.\39\ 
The Exchange represents that, for each Primary Direct Floor Listing, 
the Exchange's regulatory bulletin would also inform market 
participants that the Auction Price could be up to 20% below the lowest 
price of the disclosed price range and would specify that price.\40\ 
The Exchange also represents that this regulatory bulletin would 
indicate whether there is a price range outside of which the Direct 
Listing Auction for the Primary Direct Floor Listing could not proceed, 
based on the company's certification.\41\
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    \39\ See Notice, supra note 3, 87 FR at 23302.
    \40\ See id.
    \41\ See id.
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    The Exchange also proposes to amend certain aspects of the Manual. 
Specifically, Section 102.01B, Footnote (E) of the Manual currently 
provides that, with respect to a Primary Direct Floor Listing, the 
Exchange will deem a company to have met the applicable aggregate 
market value of publicly-held shares requirement \42\ if the company 
will sell at least $100,000,000 in market value of shares in the 
Exchange's opening auction on the first day of trading on the Exchange. 
The Manual further provides that, where a company is conducting a 
Primary Direct Floor Listing and will sell shares in the opening 
auction with a market value of less than $100,000,000, the Exchange 
will determine that such company has met its market-value of publicly-
held shares requirement if the aggregate market value of the shares the 
company will sell in the opening auction on the first day of trading 
and the shares that are publicly held immediately prior to the listing 
is at least $250,000,000 with such market value calculated using a 
price per share equal to the lowest price of the price range 
established by the issuer in its registration statement.\43\
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    \42\ See Section 102.01B of the Manual.
    \43\ See Section 102.01B, Footnote (E) of the Manual.
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    The Exchange states that, to effect the changes to the Price Range 
Limitation and facilitate the possibility of a Direct Listing Auction 
for a Primary Direct Floor Listing pricing up to 20% below the 
disclosed price range, the Exchange proposes to modify Section 102.01B, 
Footnote (E) of the Manual to provide that the Exchange would calculate 
the market value of such company's shares using a price per share equal 
to the lowest price of the disclosed price range, minus an amount equal 
to 20% of the highest price included in such price range, which would 
be referred to as the ``Primary Direct Floor Listing Minimum Price.'' 
\44\ The Exchange also proposes to amend Section 102.01B, Footnote (E) 
to include the requirement that a company listing its securities on the 
Exchange pursuant to a Primary Direct Floor Listing must have specified 
the quantity of shares registered, as permitted by Securities Act Rule 
457, in its effective registration statement.\45\
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    \44\ See Notice, supra note 3, 87 FR at 23302.
    \45\ See id.
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    The Exchange states that, to implement the changes to the Price 
Range Limitation described above, the

[[Page 43917]]

Exchange is proposing the following changes to Rules 7.31 and 
7.35A.\46\
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    \46\ See id. at 23303.
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    The Exchange proposes to modify Rule 7.31(c)(1)(D)(ii) to provide 
that the limit price of an IDO Order would be equal to the lowest price 
of the Primary Direct Floor Listing Auction Price Range and to redefine 
the ``Primary Direct Floor Listing Auction Price Range'' as 20% below 
the lowest price and 20% above the highest price of the price range 
established by the issuer in its effective registration statement.\47\ 
The Exchange also proposes to define ``Issuer Price Range'' as the 
price range established by the issuer in its effective registration 
statement.\48\ The Exchange states that Rule 7.31(c)(1)(D)(ii), as 
modified, would facilitate the proposed changes to the Price Range 
Limitation by providing that the limit price of an IDO Order would be 
equal to the price that is 20% below the lowest price of the Issuer 
Price Range.\49\
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    \47\ See id.
    \48\ See id.
    \49\ See id. The Exchange further proposes to specify in Rule 
7.31(c)(D)(ii) that, for purposes of determining the Primary Direct 
Floor Listing Price Range, the 20% threshold would be calculated 
based on the maximum offering price set forth in the registration 
fee table, consistent with the Instruction to paragraph (a) of 
Securities Act Rule 430A. See id.
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    Currently, Rule 7.35A(d)(2)(A)(v) provides that, for a security 
that is a Primary Direct Floor Listing, the Indication Reference Price 
will be the lowest price of the Primary Direct Floor Listing Auction 
Price Range.\50\ The Exchange proposes to add the requirement that the 
Exchange disseminate the Indication Reference Price on a public website 
to Rule 7.35A(d)(2)(A)(v).\51\
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    \50\ See id.
    \51\ See id.
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    Currently, Rule 7.35A(g)(2) specifies the circumstances under which 
a DMM may not conduct a Direct Listing Auction for a Primary Direct 
Floor Listing.\52\ The Exchange proposes to amend Rule 7.35A(g)(2) such 
that the rule would specify requirements for a Direct Listing Auction 
for a Primary Direct Floor Listing to proceed, rather than specifying 
circumstances under which a DMM would not conduct a Direct Listing 
Auction for a Primary Direct Floor Listing.\53\ The Exchange also 
proposes to modify Rule 7.35A(g)(2)(A) to specify that the Auction 
Price for a Direct Listing Auction for a Primary Direct Floor Listing 
may not be lower than the lowest price of the Primary Direct Floor 
Listing Auction Price Range.\54\ The Exchange states that, based on the 
proposed revision to the definition of Primary Direct Floor Listing 
Auction Price Range in Rule 7.31(c)(1)(D)(ii): (i) the Indication 
Reference Price for a Primary Direct Floor Listing would be the price 
that is 20% below the lowest price of the Issuer Price Range; and (ii) 
Rule 7.35A(g)(2)(A) would provide that the Auction Price for a Direct 
Listing Auction for a Primary Direct Listing would not be more than 20% 
below the lowest price of the Issuer Price Range.\55\
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    \52\ See id.
    \53\ See id.
    \54\ See id.
    \55\ See id.
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    The Exchange proposes to amend Rule 7.35A(g)(2)(B) to provide that, 
when the Auction Price is either (i) at or within the Primary Direct 
Floor Listing Price Range but outside of the Issuer Price Range, or 
(ii) above the highest price of the Primary Direct Floor Listing 
Auction Price Range, the Direct Listing Auction could proceed if the 
issuer has previously certified to the Exchange and publicly disclosed 
that: (a) the issuer does not expect that the Auction Price would 
materially change its previous disclosure in its effective registration 
statement (proposed Rule 7.35A(g)(2)(B)(i)(a)); (b) the price range in 
the preliminary prospectus included in the effective registration 
statement is a bona fide price range in accordance with Item 501(b)(3) 
of Regulation S-K (proposed Rule 7.35A(g)(2)(B)(i)(b)); and (c) the 
registration statement contains a sensitivity analysis explaining how 
the issuer's plans would change if the actual proceeds from the 
offering differ from the amount assumed in the price range established 
by the issuer in its effective registration statement (proposed Rule 
7.35A(g)(2)(B)(i)(c)).\56\
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    \56\ See id.
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    The Exchange states that proposed Rule 7.35A(g)(2)(B)(ii) would 
further provide that, when the Auction Price determined by the DMM is 
at or within the Primary Direct Floor Listing Auction Price Range but 
outside of the Issuer Price Range or is above the highest price of the 
Primary Direct Floor Listing Auction Price Range, the issuer would be 
required to confirm to the Exchange that no additional disclosures are 
required under the federal securities laws based on such price.\57\ 
According to the Exchange, this proposed change would permit issuers to 
comply with their disclosure obligations under federal securities laws 
and provide investors with access to the requisite disclosures before 
the offering would proceed.\58\ The Exchange states that, upon 
receiving confirmation from the issuer that any such obligations have 
been met, the Exchange would relay that information to the DMM to 
proceed with the Direct Listing Auction.\59\
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    \57\ See id.
    \58\ See id.
    \59\ See id.
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    The Exchange states that proposed Rule 7.35A(g)(2)(C)(i) would 
reflect the requirement set forth in current Rule 7.35A(g)(2)(B) that 
the DMM may not conduct a Direct Listing Auction for a Primary Direct 
Floor Listing if there is insufficient buy interest to satisfy both the 
IDO Order and all better-priced sell orders in full.\60\ The Exchange 
does not propose to change this requirement, other than adding 
clarifying text to specify that such orders would be satisfied at the 
Auction Price.\61\
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    \60\ See id. at 23303-04.
    \61\ See id. at 23304.
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    The Exchange states that proposed Rule 7.35A(g)(2)(C)(ii) would 
provide that the DMM would not proceed with a Direct Listing Auction 
for a Primary Direct Floor Listing until it has been notified by the 
Exchange that the additional conditions set forth in new Commentary .20 
to Rule 7.35A have been satisfied.\62\ The Exchange also states that 
proposed Commentary .20 to Rule 7.35A would provide that the Direct 
Listing Auction for a Primary Direct Floor Listing for a security may 
not be conducted until the Exchange has notified the DMM that, at least 
one business day prior to the commencement of trading in such security, 
the Exchange has distributed a regulatory bulletin describing: (i) any 
special characteristics of the offering and the Exchange rules that 
apply to the pricing of the Primary Direct Floor Listing; (ii) the 
obligations of member organizations pursuant to Exchange Rules 2090 and 
2111; and (iii) the requirement that a member organization provide its 
customers with a notice with information regarding the Direct Listing 
Auction for a Primary Direct Floor Listing.\63\ The Exchange states 
that this proposed change would: (i) facilitate the requirements 
described above to provide member organizations with sufficient 
information so that they may in turn inform their customers; (ii) 
remind member organizations of their obligations to ``know their 
customers''; (iii) increase transparency around the pricing mechanisms 
of a Primary Direct Floor Listing; and (iv) help provide investors with 
sufficient price discovery information.\64\
---------------------------------------------------------------------------

    \62\ See id.
    \63\ See id. See also supra notes 36-38 and accompanying text.
    \64\ See Notice, supra note 3, 87 FR at 23304.

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[[Page 43918]]

    Finally, the Exchange states that proposed Rule 7.35A(g)(2)(C)(iii) 
would provide that the DMM would not conduct a Direct Listing Auction 
for a Primary Direct Floor Listing if the Auction Price is outside of 
the Issuer Price Range and the issuer has not satisfied the conditions 
set forth in proposed Rules 7.35A(g)(2)(B)(i) and (ii).\65\ The 
Exchange states that it proposes this rule to reinforce that a Direct 
Listing Auction for a Primary Direct Floor Listing could not proceed in 
these circumstances unless the issuer has made the requisite 
disclosures described in proposed Rule 7.35A(g)(2)(B).\66\
---------------------------------------------------------------------------

    \65\ See id.
    \66\ See id.
---------------------------------------------------------------------------

III. Proceedings To Determine Whether To Approve or Disapprove SR-NYSE-
2022-14 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act to determine whether the proposal 
should be approved or disapproved.\67\ Institution of such proceedings 
is appropriate at this time in view of the legal and policy issues 
raised by the proposed rule change, 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.
---------------------------------------------------------------------------

    \67\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Exchange Act, the Commission 
is providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis and input concerning the proposed rule change's consistency 
with the Exchange Act and, in particular, with Section 6(b)(5) \68\ of 
the Exchange Act, 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 are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.\69\
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    \68\ 15 U.S.C. 78f(b)(5).
    \69\ Id.
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    The Commission has consistently recognized the importance of 
national securities exchange listing standards. Among other things, 
such listing standards help ensure that exchange-listed companies will 
have sufficient public float, investor base, and trading interest to 
provide the depth and liquidity necessary to promote fair and orderly 
markets.\70\
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    \70\ The Commission has stated in approving national securities 
exchange listing requirements that the development and enforcement 
of adequate standards governing the listing of securities on an 
exchange is an activity of critical importance to the financial 
markets and the investing public. In addition, once a security has 
been approved for initial listing, maintenance criteria allow an 
exchange to monitor the status and trading characteristics of that 
issue to ensure that it continues to meet the exchange's standards 
for market depth and liquidity so that fair and orderly markets can 
be maintained. See, e.g., Securities Exchange Act Release No. 91947 
(May 19, 2021), 86 FR 28169, 28172 n.47 (May 25, 2021) (SR-NASDAQ-
2020-057) (``Nasdaq 2021 Order''); Approval Order, supra note 9, 85 
FR at 85811 n.55; Securities Exchange Act Release Nos. 82627 
(February 2, 2018), 83 FR 5650, 5653 n.53 (February 8, 2018) (SR-
NYSE-2017-30) (``NYSE 2018 Order''); 81856 (October 11, 2017), 82 FR 
48296, 48298 (October 17, 2017) (SR-NYSE-2017-31); 81079 (July 5, 
2017), 82 FR 32022, 32023 (July 11, 2017) (SR-NYSE-2017-11). The 
Commission has stated that adequate listing standards, by promoting 
fair and orderly markets, are consistent with Section 6(b)(5) of the 
Exchange Act, in that they are, among other things, designed to 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, and protect investors and the 
public interest. See, e.g., Nasdaq 2021 Order, 86 FR at 28172 n.47; 
Approval Order, supra note 9, 85 FR at 85811 n.55; NYSE 2018 Order, 
83 FR at 5653 n.53; Securities Exchange Act Release Nos. 87648 
(December 3, 2019), 84 FR 67308, 67314 n.42 (December 9, 2019) (SR-
NASDAQ-2019-059); 88716 (April 21, 2020), 85 FR 23393, 23395 n.22 
(April 27, 2020) (SR-NASDAQ-2020-001).
---------------------------------------------------------------------------

    The Exchange is proposing to modify the rules concerning the 
opening transaction on the first day of trading for a Primary Direct 
Floor Listing so that the opening transaction is not constrained by the 
Price Range Limitation, which limits the price of the opening 
transaction to the price range disclosed in the issuer's effective 
registration statement. Instead, the proposal would allow the opening 
transaction to proceed, provided other requirements are satisfied, 
either (i) at or above the price that is 20% below the lowest price or 
at or below the price that is 20% above the highest price of the 
disclosed price range or (ii) above the price that is 20% above the 
highest price of the disclosed price range.
    Specifically, under the proposal, to execute at a price outside of 
the disclosed price range, the issuer has to certify to the Exchange 
and publicly disclose that: (i) it does not expect that the Auction 
Price would materially change the issuer's previous disclosure in its 
effective registration statement; (ii) the price range in the 
preliminary prospectus included in the effective registration statement 
is a bona fide price range in accordance with Item 501(b)(3) of 
Regulation S-K; and (iii) such registration statement contains a 
sensitivity analysis explaining how the issuer's plans would change if 
the actual proceeds from the offering differ from the amount assumed in 
the disclosed price range.
    In support of its proposal, the Exchange states that allowing an 
auction to be conducted when the Auction Price is not within the 
disclosed price range would, among other things, protect investors and 
the public interest because the proposed approach ``is similar to the 
pricing of an IPO, where the issuer is permitted to price outside of 
the price range disclosed in its effective registration statement.'' 
\71\ NYSE also states that various aspects of its proposal promote 
investor protection, including, among others, those that require that a 
company listing shares through a Primary Direct Floor Listing make 
applicable disclosures under the federal securities laws, support price 
discovery transparency by providing readily available, real time 
pricing information to investors, and provide member organizations with 
the necessary information to share with their customers regarding the 
Primary Direct Floor Listing.\72\ NYSE also states its belief that 
allowing Direct Listing Auctions in connection with a Primary Direct 
Floor Listing to price up to 20% below the lowest price and at a price 
above the highest price of the disclosed price range would be 
consistent with Chair Gensler's recent call to treat ``like cases 
alike.'' \73\
---------------------------------------------------------------------------

    \71\ See Notice, supra note 3, 87 FR at 23304.
    \72\ See generally id. at 23304-05.
    \73\ See id. at 23305.
---------------------------------------------------------------------------

    We have concerns about whether the Exchange has met its burden to 
demonstrate that its proposal to expand the conditions under which 
Primary Direct Floor Listings are permitted \74\ is consistent with the 
protection of investors and the public interest, and other relevant 
provisions under Section 6(b)(5) of the Exchange Act and the rules and 
regulations thereunder. Under existing NYSE rules that permit Primary 
Direct Floor Listings, such offerings are required to price within the 
price range disclosed in the issuer's effective registration statement. 
When these rules were approved in 2020, the Commission considered that 
required feature and also stated that the related registration

[[Page 43919]]

statements would include, among other disclosures, a bona fide price 
range.\75\ The Exchange has indicated that it believes that some 
companies may be reluctant to use the existing rules for a Primary 
Direct Floor Listing because of concerns about the Price Range 
Limitation.\76\ Permitting Primary Direct Floor Listings to price 
outside of the disclosed price range could increase the frequency of 
such offerings and may raise investor protection concerns.
---------------------------------------------------------------------------

    \74\ Under the NYSE rules for a Primary Direct Floor Listing 
approved by the Commission in December 2020, the DMM would not 
conduct a Direct Listing Auction for a Primary Direct Floor Listing 
if the Auction Price would be below the lowest price or above the 
highest price of the disclosed price range.
    \75\ See Approval Order, supra note 9, 85 FR at 85813, 85815.
    \76\ See Notice, supra note 3, 87 FR at 23300.
---------------------------------------------------------------------------

    While the Exchange has indicated that the proposal is intended to 
treat like cases alike with respect to pricing flexibility, it has not 
addressed certain differences between listings that would occur under 
this proposed rule change and firm commitment underwritten initial 
public offerings on the Exchange that may affect investor protection, 
including the lack of a named underwriter,\77\ any challenges to 
bringing claims under Section 11 of the Securities Act due to the 
potential assertion of tracing defenses,\78\ and how those differences 
could affect the consistency of the proposal with Section 6(b)(5) of 
the Exchange Act.\79\ It is not clear from the proposal what 
consideration, if any, the Exchange has given to addressing these 
issues, or why it believes the proposal is consistent with investor 
protection, as required by Section 6(b)(5) of the Exchange Act, in 
light of the pricing flexibility proposed by the Exchange.
---------------------------------------------------------------------------

    \77\ Section 2(a)(11) of the Securities Act defines 
``underwriter'' to mean ``any person who has purchased from an 
issuer with a view to, or offers or sells for an issuer in 
connection with, the distribution of any security, or participates, 
or has a direct or indirect participation in the direct or indirect 
underwriting of any such undertaking.'' Given this broad definition 
of ``underwriter,'' a financial advisor to an issuer engaged in a 
Primary Direct Floor Listing may, depending on the facts and 
circumstances including the nature and extent of the financial 
advisor's activities, be deemed a statutory ``underwriter'' with 
respect to the securities offering, with attendant underwriter 
liabilities. See Approval Order, supra note 9, 85 FR at 85815. 
Whether or not any person would be considered a statutory 
underwriter would be evaluated based on the particular facts and 
circumstances, in light of the definition of underwriter contained 
in Section 2(a)(11). In the context of a firm commitment 
underwritten initial public offering, Item 508 of Regulation S-K 
requires the underwriters to be named in the registration statement.
    \78\ Where a Securities Act registration statement, at the time 
of effectiveness, contains an untrue statement of a material fact or 
omits to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading, Section 
11(a) of the Securities Act provides a cause of action to ``any 
person acquiring such security,'' unless it is proved that at the 
time of the acquisition the person knew of such untruth or omission. 
Courts have interpreted this statutory provision to permit 
aftermarket purchasers (i.e., those who acquire their securities in 
secondary market transactions rather than in the initial 
distribution from the issuer or underwriter) to recover damages 
under Section 11, but only if they can ``trace'' the acquired shares 
back to the offering covered by the false or misleading registration 
statement. See, e.g., In re Century Aluminum Co. Sec. Litig., 729 
F.3d 1104 (9th Cir. 2013). Tracing is not set forth in Section 11 
and is a judicially-developed doctrine. The Commission has 
previously stated that shareholders' ability to pursue claims 
pursuant to Section 11 of the Securities Act due to traceability 
issues are not exclusive to nor necessarily inherent in direct 
listings with a primary capital-raising component, and that this 
issue is potentially implicated any time securities that are not the 
subject of a recently effective registration statement trade in the 
same market as the shares issued pursuant to the registration 
statement. See Approval Order, supra note 9, 85 FR at 85815-16. The 
Ninth Circuit has held that investors who purchase shares in a 
direct listing may bring claims pursuant to Section 11, even if they 
cannot prove that the shares they acquired were registered shares. 
See Pirani v. Slack Techs., Inc., 13 F.4th 940 (9th Cir. 2021).
    \79\ Tracing concerns may be more prevalent in direct listings 
than traditional underwritten initial public offerings. As compared 
to traditional firm commitment underwritten initial public offerings 
in which lock-up arrangements are routinely imposed, direct listings 
to date typically have not imposed lock-up arrangements. This raises 
a concern that there may be a heightened risk that investors in 
direct listings may face difficulties tracing their shares, 
potentially jeopardizing their ability to pursue Section 11 claims. 
See supra note 78. Given the limited judicial precedent addressing 
tracing requirements in the context of direct listings, and the 
typical absence of lock-up arrangements in connection with direct 
listings to date, we are considering whether the Exchange has met 
its burden of establishing that the proposal to allow a direct 
listing to proceed at a price outside of the disclosed price range 
is consistent with Section 6(b)(5) of the Exchange Act that requires 
the rules of the Exchange be designed to protect investors and the 
public interest.
---------------------------------------------------------------------------

    In a firm commitment underwritten initial public offering, issuers 
often adjust the price range disclosed in their registration statements 
prior to effectiveness in light of pricing feedback received from 
market analysts and potential investors. These revisions to the 
disclosed price range may provide valuable information to potential 
investors as to the issuer's valuation. If, under the proposal, the 
opening auction can proceed at any price above the disclosed price 
range, and up to 20% below the low end of the disclosed price range, it 
is not clear whether issuers pursuing Primary Direct Floor Listings 
would make similar revisions to the disclosed price range based on 
investor or market analyst sentiment, and whether the absence of any 
such corrective price signaling would detrimentally affect investors.
    In the absence of a named underwriter in a direct listing where the 
opening price is executed outside of the disclosed price range, there 
may not be an adequate assurance that a party who may meet the 
definition of underwriter will review the information disclosed in the 
registration statement and take the steps necessary to claim a ``due 
diligence'' defense. To assert such a defense, a party must establish 
that, after reasonable investigation, the party had reasonable ground 
to believe and did believe, at the time the registration statement 
became effective, that the statements therein were true and that there 
was no omission to state a material fact required to be stated therein 
or necessary to make the statements therein not misleading.\80\ 
Underwriters play a critical role in the securities offering process as 
gatekeepers to the public markets.\81\
---------------------------------------------------------------------------

    \80\ See U.S.C. 77k(b)(3).
    \81\ See Securities Act Release No. 7393 (February 20, 1997), 62 
FR 9276 (February 28, 1997) (``The due diligence efforts performed 
by underwriters, accounting professionals and others play a critical 
role in the integrity of our disclosure system.''); Securities Act 
Release No. 6335 (August 6, 1981), 46 FR 42015 (August 18, 1981) 
(``[T]he Securities Act imposes a high standard of conduct on 
specific persons, including underwriters and directors, associated 
with a registered public offering of securities. Under Section 11, 
they must make a reasonable investigation and have reasonable 
grounds to believe the disclosures in the registration statement are 
accurate.'').
---------------------------------------------------------------------------

    The Exchange's proposed expansion of its rules permitting Primary 
Direct Floor Listings could potentially result in increased regulatory 
arbitrage, if and to the extent that issuers and intermediaries, 
including financial advisors, are not subject to equivalent liability 
standards in the direct listings context as they would be in 
traditional firm commitment underwritten initial public offerings. Any 
ability of issuers or intermediaries to minimize potential liability 
through choosing a direct listing over other methods to become listed 
on the Exchange could be inconsistent with Section 6(b)(5) of the 
Exchange Act.
    Although financial advisors may, depending on the facts and 
circumstances, be held liable as statutory underwriters, absent greater 
clarity as to a financial advisor's status as a statutory underwriter 
in listings that would occur under this proposed rule change, investors 
would have no way to know whether financial advisors named as assisting 
with the direct listing would face Section 11 liability for the 
disclosure in the registration statement. Investors also may assume 
that financial advisors would incur equivalent liability, without any 
assurance that such is the case. Some legal observers have raised 
concerns that, without clarity on whether financial advisors would be 
held liable as statutory underwriters, any due diligence may not be as 
robust as that

[[Page 43920]]

performed by named underwriters in traditional initial public 
offerings.\82\ Less robust due diligence could result in reduced 
disclosure quality and lead investors to improperly value the 
securities offered under the proposed rules. As the proposed rules 
would permit direct listings to be conducted at prices outside of the 
disclosed price range, would investors be able to make reasonable 
pricing decisions without greater clarity as to whether financial 
advisors would face liability as statutory underwriters? Without 
increased clarity on this point, would the proposed rule change be 
inconsistent with investor protection and the public interest?
---------------------------------------------------------------------------

    \82\ See Tuch, Andrew F. and Seligman, Joel, The Further Erosion 
of Investor Protection: Expanded Exemptions, SPAC Mergers and Direct 
Listings (December 15, 2021), at 70-71, Washington University in St. 
Louis Legal Studies Research Paper No. 22-01-03, available at SSRN: 
https://ssrn.com/abstract=4020460 (questioning the extent of due 
diligence performed by financial advisors in direct listings); 
Horton, Brent J., Spotify's Direct Listing: Is It a Recipe for 
Gatekeeper Failure?, 72 SMU L.Rev. 177 (2019). In the Approval 
Order, the Commission stated that ``financial advisors to issuers in 
Primary Direct Floor Listings have incentives to engage in robust 
due diligence, given their reputational interests and potential 
liability, including as statutory underwriters under the broad 
definition of that term.'' Approval Order, supra note 9, 85 FR at 
85815.
---------------------------------------------------------------------------

    There are a number of additional questions relating to investor 
protection and Securities Act liability that merit examination in 
connection with our consideration of whether the Exchange has met its 
burden to demonstrate its proposal is consistent with Section 6(b)(5) 
of the Exchange Act. It is not clear what role a financial advisor 
would perform, in relation to price range disclosures, in a direct 
listing where the offering can price outside of the disclosed price 
range. Would additional transparency into the functions performed by 
financial advisors in a direct listing where the offering can price 
outside of the disclosed price range be necessary for investors to 
determine how much reliance to place on issuer disclosures?
    Would any tracing concerns be exacerbated, thus raising investor 
protection concerns, in the context of direct listings where the 
offering can price outside of the disclosed price range? \83\ What are 
the implications if the expansion of Primary Direct Floor Listings, as 
proposed by the Exchange, resulted in fewer investor protections in a 
direct listing? If under the proposal to modify the Price Range 
Limitation there is continued uncertainty as to whether a financial 
advisor would be liable as a statutory underwriter, is the liability of 
any other gatekeepers in the offering sufficient to protect investors?
---------------------------------------------------------------------------

    \83\ See notes 78 and 79, supra, and accompanying text. The 
Commission disapproved a prior proposal of Nasdaq to expand the 
direct listing price range. See Securities Exchange Act Release No. 
94311 (February 24, 2022). 87 FR 11780 (March 2, 2022) (SR-NASDAQ-
2021-045) (``Disapproval Order''). In the Disapproval Order, the 
Commission stated that Nasdaq did not respond to one commenter's 
concerns, among others, that investors in direct listings, including 
direct listings with a capital raise, are likely to continue to have 
fewer legal rights than investors in a traditional public offering 
and concerns relating to ``tracing'' share purchases for purposes of 
Section 11 claims. See Disapproval Order, 87 FR at 11785 n.82.
---------------------------------------------------------------------------

    The Commission also has concerns about the potential effect of the 
proposed rules on the usefulness of price range disclosure provided to 
investors in Securities Act registration statements.\84\ Given the 
possibility under the proposed rules that the offering might price far 
outside the disclosed price range, would issuers be less likely to 
update their disclosed price ranges, compared to firm commitment 
underwritten initial public offerings? \85\ Similarly, would disclosed 
price ranges for direct listings be less reliable as indicators of 
management's perceived valuation of the issuer? How would the ability 
to ultimately conduct the auction up to 20% below or anywhere above the 
disclosed price range affect issuer decisions as to what price range to 
disclose in the registration statement? Would this impact the 
usefulness of price range disclosure to potential investors or market 
analysts? If so, this raises concerns about the consistency of the 
proposal with investor protection and the public interest under Section 
6(b)(5) of the Exchange Act.
---------------------------------------------------------------------------

    \84\ Under the proposed rule change, to execute at a price 
outside of the disclosed price range, the issuer must certify to 
NYSE and publicly disclose that: (a) it does not expect that the 
Auction Price would materially change the issuer's previous 
disclosure in its effective registration statement; (b) the price 
range in the preliminary prospectus included in the effective 
registration statement is a bona fide price range in accordance with 
Item 501(b)(3) of Regulation S-K; and (c) such registration 
statement contains a sensitivity analysis explaining how the 
issuer's plans would change if the actual proceeds from the offering 
differ from the amount assumed in the disclosed price range.
    \85\ The Exchange has stated that its proposal to permit more 
flexibility as to pricing would allow Primary Direct Floor Listings 
to be treated similarly to other initial public offerings. See 
Notice, supra note 3, 87 FR at 23304, 23305.
---------------------------------------------------------------------------

    Additionally, it is not clear whether the proposed changes would 
result in the Exchange using the minimum price at which the opening 
auction could occur as the per share price for purposes of evaluating 
whether the issuer satisfies the applicable market value of publicly-
held shares requirement. The Exchange proposes to amend Section 
102.01B, Footnote (E) of the Manual to provide that the Exchange would 
calculate the market value of publicly-held shares using a price per 
share equal to the lowest price of the price range established by the 
issuer in its registration statement ``minus an amount equal to 20% of 
the highest price included in such price range.'' \86\ The Exchange 
also proposes to specify in Rule 7.31(c)(1)(D)(ii) that, for purposes 
of determining the Primary Direct Floor Listing Auction Price Range, 
``the 20% threshold would be calculated based on the maximum offering 
price set forth in the registration fee table, consistent with the 
Instruction to paragraph (a) of Securities Act Rule 430A.'' \87\ 
Further, the Exchange states its belief that ``the proposed change to 
Section 102.01B [Footnote] (E) to reflect that the market value 
calculation of a company's shares would be based on a price per share 
equal to the lowest price of the price range established by the issuer 
in its registration statement, less an amount equal to 20% of the 
highest price included in such price range . . . would update the 
Manual to align with the proposed changes to the Price Range 
Limitation.'' \88\ Is further clarification needed as to the precise 
manner of computing the 20% threshold under proposed Rule 
7.31(c)(1)(D)(ii) and whether that computation would lead to the same 
minimum price contemplated by the proposed revisions to Section 
102.01B, Footnote (E) of the Manual?
---------------------------------------------------------------------------

    \86\ See Notice, supra note 3, 87 FR at 23302.
    \87\ See id. at 23303.
    \88\ Id. at 23306.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to amend Rule 7.35A(d)(2)(A)(v) to 
provide that the Exchange will disseminate, free of charge, the 
Indication Reference Price on a public website. As proposed, the 
Indication Reference Price for a security that is a Primary Direct 
Floor Listing would be the price that is 20% below the lowest price of 
the disclosed price range, and as such would be fixed during the course 
of the auction process. When certain conditions are met, the DMM 
publishes pre-opening indications that include the price range within 
which the auction price is anticipated to occur. As proposed, the DMM's 
pre-opening indications would continue to be published via the SIP and 
proprietary data feeds, all of which charge subscription fees. Would 
providing pricing information during the course of the auction process 
only through pre-opening indications via data feeds that charge 
subscription fees be consistent with ``providing readily available, 
real time pricing information to investors''? \89\ If not, would the 
Exchange's proposal provide sufficient

[[Page 43921]]

price discovery transparency for investors to be consistent with the 
protection of investors and the public interest pursuant to Section 
6(b)(5) of the Exchange Act?
---------------------------------------------------------------------------

    \89\ Id. at 23302.
---------------------------------------------------------------------------

    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and the rules and regulations issued thereunder . . . is on the 
self-regulatory organization [`SRO'] that proposed the rule change.'' 
\90\ The description of a proposed rule change, its purpose and 
operation, its effect, and a legal analysis of its consistency with 
applicable requirements must all be sufficiently detailed and specific 
to support an affirmative Commission finding,\91\ and any failure of an 
SRO to provide this information may result in the Commission not having 
a sufficient basis to make an affirmative finding that a proposed rule 
change is consistent with the Exchange Act and the applicable rules and 
regulations.\92\
---------------------------------------------------------------------------

    \90\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR 
201.700(b)(3).
    \91\ See id.
    \92\ See id.
---------------------------------------------------------------------------

    For these reasons, the Commission believes it is appropriate to 
institute proceedings pursuant to Section 19(b)(2)(B) of the Exchange 
Act \93\ to determine whether the proposal should be approved or 
disapproved.
---------------------------------------------------------------------------

    \93\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Commission's Solicitation of 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 
view of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Exchange 
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, any request for 
an opportunity to make an oral presentation.\94\
---------------------------------------------------------------------------

    \94\ Section 19(b)(2) of the Exchange Act, as amended by the 
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975), 
grants the Commission flexibility to determine what type of 
proceeding--either oral or notice and opportunity for written 
comments--is appropriate for consideration of a particular proposal 
by a self-regulatory organization. See Securities Act Amendments of 
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 
75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by August 12, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
August 26, 2022.
    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-2022-14 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-2022-14. 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 such 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-2022-14 and should be submitted on 
or before August 12, 2022. Rebuttal comments should be submitted by 
August 26, 2022.
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    \95\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\95\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15656 Filed 7-21-22; 8:45 am]
BILLING CODE 8011-01-P