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SECURITIES AND EXCHANGE COMMISSION
Page 1 of * 30 File No.* SR - 2015 - * 38 WASHINGTON, D.C. 20549 Amendment No. (req. for Amendments *) Form 19b-4 Filing by New York Stock Exchange Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 Initial * Amendment * Withdrawal Section 19(b)(2) * Section 19(b)(3)(A) * Section 19(b)(3)(B) * Rule 19b-4(f)(1) 19b-4(f)(4) Extension of Time Period Pilot Date Expires * for Commission Action * 19b-4(f)(2) 19b-4(f)(5) 19b-4(f)(3) 19b-4(f)(6) Notice of proposed change pursuant to the Payment, Clearing, and Settlement Act of 2010 Security-Based Swap Submission pursuant to the Securities Exchange Act of 1934 Section 806(e)(1) * Section 806(e)(2) * Section 3C(b)(2) * Exhibit 2 Sent As Paper Document Exhibit 3 Sent As Paper Document Description Provide a brief description of the action (limit 250 characters, required when Initial is checked *).
Proposed Rule Change Amending Section 202.06 of the NYSE Listed Company Manual Contact Information Provide the name, telephone number, and e-mail address of the person on the staff of the self-regulatory organization prepared to respond to questions and comments on the action.
1. Text of the Proposed Rule Change (a) Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),1 and Rule 19b-4 thereunder,2 New York Stock Exchange LLC (“NYSE” or the “Exchange”) proposes to amend Section
202.06 of the NYSE Listed Company Manual (the “Manual”) to expand the pre-market hours during which listed companies are required to notify the Exchange prior to disseminating material news, to permit the Exchange to halt trading in certain additional circumstances, including when it needs to obtain more information about a listed company news release, and to provide guidance related to the release of material news after the close of trading on the Exchange.
(b) The Exchange does not believe that the proposed rule change will have any direct effect, or any significant indirect effect, on any other Exchange rule in effect at the time of this filing.
2. Procedures of the Self-Regulatory Organization Senior management has approved the proposed rule change pursuant to authority delegated to it by the Board of Directors of the Exchange. No further action is required under the Exchange’s governing documents. Therefore, the Exchange’s internal procedures with respect to the proposed rule change are complete.
The person on the Exchange staff prepared to respond to questions and comments
on the proposed rule change is:
The NYSE proposes to amend Section 202.06 of the Manual to (i) expand the premarket hours during which listed companies are required to notify the Exchange prior to disseminating material news, and (ii) provide the Exchange with authority to halt trading (a) during pre-market hours at the request of a listed company, (b) when the Exchange believes it is necessary to request certain information from listed companies, and (c) when an Exchange-listed security is also listed on another national or foreign securities exchange and such other exchange halts trading in such security for regulatory reasons. The Exchange also proposes to amend Section 202.06 of the Manual to provide guidance related to the release of material news after the close of trading on the Exchange.
Section 202.06 of the Manual gives the Exchange authority to halt trading in a listed company’s security under certain circumstances. Currently, the Exchange may impose a regulatory trading halt when a listed company announces material news3 shortly before the opening of trading on the Exchange or during the Exchange trading session (currently 9:30 a.m. to 4:00 p.m.). When that happens, the Exchange will typically institute a regulatory halt in trading, which halts trading on all market centers, to ensure full dissemination of the news to investors. The Exchange proposes to expand the hours and circumstances under which it can declare a regulatory trading halt.
Regulatory Trading Halts:
Currently, Section 202.06 of the Manual requires listed companies to notify the Exchange at least ten minutes in advance of releasing material news if such release will take place shortly before the opening of trading on the Exchange or during Exchange market hours (the “Material News Policy”)4. The Exchange proposes to amend Section 202.06 to require companies to comply with the Material News Policy between 7:00 a.m. and 4:00 p.m. Eastern Time. In the Exchange’s experience, most companies release news related to corporate actions and other material events between 7:00 a.m. and 9:30 a.m. Although trading on the Exchange does not begin until 9:30 a.m., the Exchange believes that material news released between 7:00 a.m. and 9:30 a.m. has the potential to cause volatility in both price and volume during pre-market trading that occurs on other market centers as well as once trading opens on the Exchange. However, because there is a lower volume of trading in such pre-market hours, the Exchange The Exchange considers material news to be any news that is reasonably likely to have a material impact on the price or trading volume of a listed security.
At the time Section 202.06 of the Manual was last amended, the Exchange had an off-hours trading session in which securities could be traded at Exchange closing prices after the Exchange’s 4:00 p.m. close until 5:00 p.m. As such off-hour trading session no longer exists, the Exchange proposes to amend Section 202.06 of the Manual to specify that the Exchange’s market hours end at 4:00 p.m.
5 of 30 believes that a listed company is most well positioned to determine whether a trading halt is appropriate given the news it intends to release. Therefore, to facilitate an orderly opening and ensure thorough dissemination of material news, the Exchange believes it is beneficial to require companies to comply with the Material News Policy and advise whether a trading halt is appropriate during premarket hours.
As discussed above, when a listed company releases material news during the course of the trading day, the Exchange will typically halt trading temporarily to ensure full dissemination of the news. Under the proposed rules, between 7:00 a.m. and the opening of trading on the Exchange, the Exchange may implement a regulatory halt in circumstances where (i) the listed company has informed Exchange staff that it intends to make a public announcement of material news and (ii) the listed company requests that trading in its listed securities be halted pending dissemination of the public announcement (a “Pre-Market Halt”).5 While trading on the Exchange does not begin until 9:30 a.m. Eastern Time, trading (including trading in Exchange-listed securities) begins on NYSE Arca Equities, Inc., the Nasdaq Stock Market and other national securities exchanges at 4:00 a.m. Eastern Time. When the Exchange implements a regulatory trading halt to allow for the release of material news, other national securities exchanges that trade Exchange-listed securities also halt trading in such security until the Exchange lifts the halt.6 The Exchange notes that the volume of trading in the hours before trading begins on the Exchange is generally lighter and conducted predominantly by professional investors. Because of this reduced trading volume and the fact that the Exchange itself is not yet open for trading during these hours, the Exchange believes it is appropriate to institute a Pre-Market Halt only at the request of a listed company.
The Exchange notes that the Nasdaq Stock Market (“Nasdaq”) has adopted a comparable rule with respect to trading halts between the hours of 7:00 a.m. and 9:30 a.m.7 Lastly, when a trading halt is implemented during Exchange market hours, NYSE Rule 123D specifies that a Floor Governor or two Floor Officials must approve the halt in trading. However, because a Pre-Market Halt will only be instituted at the request of a listed company and because Floor Governors and However, the proposed rule will state that if it appears that dissemination of material news will not be complete prior to the opening of trading on the Exchange at 9:30 a.m., the Exchange may temporarily halt trading solely in its own discretion in order to facilitate an orderly opening process. This is consistent with the Exchange’s current practice.
See, for example, NYSE Arca Equities Rule 7.18 and Nasdaq Stock Market Rule 4120(a)(2) for the authority to initiate a trading halt.
See, for example, Nasdaq Stock Market Rule 4120(a)(1) which applies between the hours of 4:00 a.m. and 9:30 a.m.
6 of 30 Floor Officials are not typically on the trading floor during pre-market hours, the Exchange proposes to include a statement that, notwithstanding anything to the contrary in NYSE Rule 123D(1), the approval of the Floor Governors or Floor Officials is not required for a Pre-Market Halt.
The Exchange proposes to further amend Section 202.06 of the Manual to set forth circumstances in which it may institute a regulatory halt while it awaits information requested from a listed company. Section 202.06 of the Manual currently limits the Exchange’s authority to halt trading to situations when a listed company intends to release material news during market hours. However, in the Exchange’s experience there are other scenarios when it may be advisable to halt trading for the protection of investors. For example, if there is uncertainty surrounding material news issued by a listed company or a company’s compliance with the Exchange’s continued listing standards, the Exchange believes it may be appropriate to halt trading while it gathers information to resolve such ambiguity.
Accordingly, the Exchange proposes to amend Section 202.06 of the Manual to state that if it is necessary to request information from a listed company relating to (i) material news, (ii) the listed company’s compliance with Exchange continued listing requirements, or (iii) any other information which is necessary to protect investors and the public interest, the Exchange may halt trading in such listed company’s security until it has received and evaluated the requested information.
The proposed change in this regard mirrors Nasdaq Stock Market Rule 4120(a)(5).
As discussed above, the Exchange believes that the release of material news immediately prior to the commencement of trading on the Exchange has the potential to cause significant volatility to the opening process. Similarly, material news released immediately after 4:00 p.m. Eastern Time can interfere with the closing process. Although trading on the Exchange stops at 4:00 p.m. Eastern Time, the order book for each listed security is manually closed by the security’s Designated Market Maker (“DMM”), a process that can take several minutes before the closing auction is completed. Because trading continues after 4:00 p.m. Eastern Time on other exchanges, if a listed company releases material news immediately after 4:00 p.m. Eastern Time there can be significant price movement on other markets when compared to the last sale price on the Exchange. The result, therefore, is that a DMM can be executing trades at the Exchange closing price while the same security is simultaneously trading on other exchanges at a very different price. As this discrepancy can cause confusion to investors, the Exchange proposes to include advisory text in Section 202.06 of the Manual requesting that listed companies intending to release material news after the close of trading on the Exchange wait until the earlier of the publication of their security’s official closing price on the Exchange or 15 minutes after the scheduled closing time on the Exchange.8 The Exchange proposes to specify that Although the Exchange typically closes at 4:00 p.m. Eastern Time, there are certain days each year when it closes at 1:00 p.m. Eastern Time. The phrase “15 7 of 30 trading on the Exchange typically closes at 4:00 p.m. Eastern Time, except that on certain days trading closes early at 1:00 p.m. Eastern Time. As discussed in Footnote 4, above, the Exchange no longer has an off-hours trading session.
Therefore, the Exchange proposes to delete obsolete text (marked with an asterisk) related to such session.
Lastly, the Exchange proposes to amend Section 202.06 of the Manual to state that it may halt trading in an American Depositary Receipt (“ADR”) or other security listed on the Exchange, when the Exchange-listed security (or the security underlying the ADR) is listed on or registered with another national securities exchange or foreign exchange or market and such other exchange (or regulatory authority overseeing such exchange) halts trading in such security for regulatory reasons. The Exchange notes that Nasdaq has also adopted this practice under Nasdaq Stock Market Rule 4120(a)(4).
Additional Proposed Changes:
Section 202.06(C) of the Manual requires companies to release material news by the fastest available means. Pursuant to Section 202.06(A) of the Manual, listed companies can disclose such material news via any Regulation FD compliant method, including by filing a Form 8-K with the Securities and Exchange Commission (the “Commission”). Currently, Section 202.06(C) includes advisory text on the best way to release material news to ensure immediate and widespread coverage. The Exchange believes that much of this advisory text is outdated as it refers to, among other things, the release of news by telephone, facsimile or hand delivery. Instead, the Exchange proposes to include a concise statement that listed companies releasing material news should either (i) include the news in a Form 8-K or other Commission filing, or (ii) issue the news in a press release to the major news wire services, including, at a minimum, Dow Jones & Company, Inc., Reuters Economic Services and Bloomberg Business News. The Exchange believes that distribution by either of these methods is consistent with current disclosure practices and ensures adequate dissemination.