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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices that it is not appropriate to provide that the Exchange would automatically facilitate reopening auctions at 3:30
p.m. There may be facts and circumstances where DMMs would be able to reopen all securities before 3:50
p.m., but that the DMM-facilitated process may not have completed by 3:30
p.m. The Exchange would take those facts and circumstances into account before invoking the proposed relief.

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Wider Auction Collars for a Trading Halt Auction Following a MWCB Halt The Exchange believes that it would remove impediments to and perfect the mechanism of a free and open market and a national market system to widen the Auction Collars for an Exchangefacilitated Trading Halt Auction following a MWCB Halt. Such widened Auction Collars would provide the Exchange with more flexibility to respond to any market-wide declines that may continue following a MWCB
Halt if the Exchange were to facilitate a Trading Halt Auction following such halt. The Exchange cannot predict if and when the U.S. equities market will experience market-wide declines that would trigger a MWCB Halt again.
However, if such market-wide volatility were to occur, the Exchange believes that the widened Auction Collars would promote fair and orderly reopenings following a MWCB Halt by providing a wider price range at which the Exchange could facilitate such a reopening, thereby allowing more buy and sell interest to participate in such Auction.
DMM Interest and Exchange-Facilitated Auctions As noted above, beginning March 19, 2020, the Exchange began facilitating auctions as provided for under Rule 7.35C for the first time, and then, beginning March 23, 2020, when the Trading Floor was temporarily closed to reduce the spread of COVID19, began facilitating Auctions on behalf of all DMM firms. Based on that experience, the Exchange added Commentary .03 to Rule 7.35C, which is in effect only for a temporary period while the Trading Floor is closed. The Exchange believes that it would remove impediments to and perfect the mechanism of a free and open market and a national market system to make the changes described in Commentary .03 to Rule 7.35C
permanent because it would allow DMMs to maintain continuity with reasonable depth in their assigned securities immediately following an Exchange-facilitated Auction.
As described above, the Exchange is proposing that DMM Interest would
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continue to not participate in an Exchange-facilitated Auction that results in a trade. As noted above, under both the current Rule and temporary Commentary .03, DMM Interest does not participate in an Exchange-facilitated Auction that results in a trade in part to prevent wash-trade sales of previouslyentered DMM buy and sell interest and therefore reduces DMM units risk. It also protects the fair and orderly operation of such Auctions because such DMM Interest may be at stale prices, and therefore could impact pricing of the Auction in a manner that does not reflect up-to-date trading interest. For this reason, the Exchange believes it would continue to promote fair and orderly Auctions for DMM
Interest not to participate in an Exchange-facilitated Auction that results in a trade.
By contrast, the Exchange believes that the proposed change that DMM
Interest would be included in an Exchange-facilitated Auction that results in a quote would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would promote fair and orderly resumption of trading by allowing DMM
Interest to be considered as part of the opening quote. A security only opens on a quote when there are no buy and sell orders that can be crossed at a single price. Accordingly, when a security opens on a quote, the DMM has an immediate obligation to maintain a twosided quote and to provide continuity and depth. Including DMM interest in an Exchange-facilitated Auction that results in a quote would assist DMMs in meeting those obligations.
The Exchange believes it would remove impediments to and perfect the mechanism of a free and open market and a national market system not to automatically cancel DMM Interest following an Exchange-facilitated Auction because it would provide DMMs with the opportunity to provide passive liquidity immediately following an Exchange-facilitated Auction, thereby reducing volatility while still limiting DMM risk. Similarly, the Exchange believes that because DMM
Interest would not be participating in an Exchange-facilitated Auction that results in a trade, it would remove impediments to and perfect the mechanism of a free and open market and a national market system to cancel DMM Interest that would be marketable against unexecuted orders because, if not cancelled, such interest could trade at a price that would not be consistent with the Auction Price or opening or reopening quote determined in the
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Exchange-facilitated Auction. The proposed changes would also remove impediments to and perfect the mechanism of a free and open market because DMM Interest that, following an Exchange-facilitated Auction, would be priced through the Auction Price or Auction Collars, as applicable, would be cancelled in the same manner that other unexecuted orders would be cancelled.
The Exchange further believes that the proposed changes to Rules 7.35Ca and g would remove impediments to and perfect the mechanism of a free and open market and a national market system because the Exchange observed improved performance following Exchange-facilitated Auctions after the Exchange implemented Commentary .03
to Rule 7.35C. Accordingly, should circumstances ever arise again that would require the Exchange to facilitate any Auctions, which, based on prepandemic experience, would likely be rare, the Exchange believes that these proposed changes would improve the performance of Exchange-facilitated Auctions by enabling better engagement by the DMMs in both the Auction and the immediate after-market while still limiting DMM risk.
III. Proceedings To Determine Whether To Disapprove SRNYSE202089 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19b2B of the Act to determine whether the proposal, as modified by Amendment No. 1, should be approved or disapproved.24 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.
Pursuant to Section 19b2B of the 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 changes consistency with the Act 25 and, in particular, with Section 6b5 of the 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 24 15
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U.S.C. 78sb2B.
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