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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Notices I. Self-Regulatory Organizations 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 Exchanges website at www.nyse.com, at the principal office of the Exchange, and at the Commissions Public Reference Room.
II. Self-Regulatory Organizations 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 Organizations 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 7.35Cb1 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 7.35Ae3.5 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.
On June 4, 2020, the Exchange added Commentary .04 to Rule 7.35C to 4 See
Rule 7.35Cb2.
Rule 7.35Cb3Ai. Pursuant to Rule 7.35Ae3, 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 7.35a11A, 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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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 4June 16
period, when the price of the SPDR S&P
500 ETF Trust SPY 8 moved over 1%
from the prior days 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 days close.
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 Exchangefacilitated 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 6 See Securities Exchange Act Release No. 89059
June 12, 2020, 85 FR 36911 June 18, 2020 SR
NYSE202050 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 SPYs price as compared to its prior days closing price is indicative of the scope of market-wide volatility leading into the open of the Core Trading Session.

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Reference Price for Exchange-facilitated Core Open Auctions would be determined. Specifically, the Exchange proposes to determine Auction Reference Prices for Exchangefacilitated Core Open Auctions in the same manner that the Exchanges 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 7.35Ea8A and NYSE American Rule 7.35Ea8A
both provide that the Auction Reference Price for Core Open Auctions on those exchanges is, the midpoint of the Auction NBBO or, if the Auction NBBO
is locked, the locked price. If there is no Auction NBBO, the prior days 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

The Exchange proposes to amend Rule 7.35Cb1 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 7.35Ea8A and NYSE American Rule 7.35Ea8A without any differences.
The Exchange further proposes to amend Rule 7.35a 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.
9 See NYSE Arca Rule 7.35Ea5 and NYSE
American Rule 7.35Ea5.

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