Friday, September 01, 2017

NYSE seeks delay in important company news releases to prevent market disruption

By R. Jason Howard, J.D.

The NYSE has filed a Notice of Proposed Rule Change with the SEC to amend Section 202.06 of the NYSE Listed Company Manual to limit the issuance of material news by listed companies in the period immediately after the official closing time for the Exchange’s trading session (Release No. 34-81494, August 29, 2017).

Proposal. The proposed rule change seeks to halt the release of material information until the earlier of publication of such company’s official closing price on the Exchange or five minutes after the official closing time.

The Designated Market Maker (DMM) registered in a security facilitates the close of trading after continuous trading ends at the official closing time of 4:00 p.m. The proposal explains that “because there is trading after 4:00 p.m. Eastern Time on other exchange and non-exchange venues, if a listed company releases material news immediately after 4:00 p.m., but before the closing auction on the NYSE is completed, there can be a significant price difference in nearly contemporaneous trades on other markets and the closing price on the Exchange.”

Statutory basis. The proposal addresses the statutory basis for the proposed rule change and suggests that it is consistent with Section 6(b) and Section 6(b)(5) of the Act in that it is “designed to promote just and equitable principles of trade by ensuring that participants in the closing auction at the Exchange do not have their trades executed at a price that is inconsistent with contemporaneous trading prices on other markets that reflect material news that was released after the NYSE’s official closing time.”

The Commission is seeking comments on the proposed rule change from interested persons and within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved.

The release is No. 34-81494.