Monday, March 23. 2020
SEC Enables Immediate Effectiveness of Changes to Facilitate NYSE Electronic Auctions in Light of Trading Floor Closure
Because the trading floor will be closed, floor brokers will not be able to enter orders on the trading floor itself. Therefore, there will not be any floor broker participants in allocations and there will not be any order types unique to floor brokers. In addition, because DMMs will not be on the trading floor, DMMs will not engage in any manual actions, such as facilitating an auction manually or publishing pre-opening indications before a core open or trading halt auction. As they currently can, DMMs will be able to participate electronically both intraday and for auctions. These electronic approaches will be enhanced by the modifications.
As they currently stand, NYSE rules set price and volume parameters beyond which DMMs may not electronically facilitate an auction. NYSE rules also allow the exchange to waive these parameters on a conditional, day-by-day basis. The rule filing describes temporary modifications that will be applicable for a prolonged period. These modifications are designed to facilitate fair and orderly auctions on the exchange by clarifying when DMMs can electronically facilitate auctions and by aligning these parameters with the price collars that would apply during an auction facilitated by the exchange’s own systems.
There are four modifications, which specifically:
- Suspend the existing price and volume parameters restricting DMMs from effecting a core open auction, trading halt auction, or closing auction.
- Widen the percentage price parameters for when a DMM may electronically effect a core open auction, trading halt auction, or closing auction to ten percent. Under current NYSE rules, these price parameters are (unless suspended by the exchange for a given trading day) four percent for opening auctions under normal market conditions (eight percent under volatile conditions) and from two to five percent for closing auctions, depending on a security’s price.
- Suspend the requirement for DMMs to publish pre-opening indications before a core open or trading halt auction, which is a floor-based manual action.
- Establish the auction collars for an exchange-facilitated trading halt auction following a Level 1 or Level 2 market-wide circuit breaker halt at the greater of ten percent or $0.15.
In addition to these modifications, NYSE is providing additional information on its regulatory and surveillance procedures associated with these changes. A full test of these modifications was performed on Saturday, March 21. The SEC will continue to work with NYSE as these changes are implemented. The rule filing states that the modifications are temporary until May 15, 2020 (or sooner if the trading floor reopens).
The NYSE has published a set of FAQs for market participants as it transitions to operations without the availability of its trading floor and floor-broker order types. This FAQ is available at on the NYSE’s website.
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