Notice2023-16393
Self-Regulatory Organizations; NYSE American LLC; Order Granting Approval of a Proposed Rule Change To Amend Rule 915 (Criteria for Underlying Securities) To Accelerate the Listing of Options on Certain IPOs
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 2, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 147 (Wednesday, August 2, 2023)</title>
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[Federal Register Volume 88, Number 147 (Wednesday, August 2, 2023)]
[Notices]
[Pages 50927-50928]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-16393]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98013; File No. SR-NYSEAMER-2023-27]
Self-Regulatory Organizations; NYSE American LLC; Order Granting
Approval of a Proposed Rule Change To Amend Rule 915 (Criteria for
Underlying Securities) To Accelerate the Listing of Options on Certain
IPOs
July 27, 2023.
I. Introduction
On April 21, 2023, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE American Rule 915 (Criteria for
Underlying Securities) to reduce the time to market for the listing and
trading of options on certain covered securities following their
initial public offering (``IPO''). The proposed rule change was
published for comment in the Federal Register on May 1, 2023.\3\ One
comment letter was received on the proposed rule change.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 97374 (Apr. 25,
2023), 88 FR 26634 (``Notice'').
\4\ See Letter from Ellen Greene, Managing Director, Equities &
Options Market Structure, SIFMA, to Vanessa Countryman, Secretary,
Commission (May 16, 2023), available at <a href="https://www.sec.gov/comments/sr-nyseamer-2023-27/srnyseamer202327.htm">https://www.sec.gov/comments/sr-nyseamer-2023-27/srnyseamer202327.htm</a>.
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On June 13, 2023, pursuant to Section 19(b)(2) of the Act,\5\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\6\ This order grants approval of the proposed rule change.
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\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 97717, 88 FR 39895
(June 20, 2023).
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II. Description of the Proposal
The Exchange proposes to modify Commentary .01(4)(a) of NYSE
American Rule 915 to reduce the time for it to begin listing and
trading options on certain covered securities following their IPO.\7\
NYSE American Rule 915 establishes requirements that underlying
securities must meet in order for the Exchange to list and trade option
contracts on them. Commentary .01 of that rule sets forth certain
guidelines for the Exchange to consider in evaluating potential
underlying securities.
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\7\ See 15 U.S.C. 77r(b)(1)(A) (defining ``covered security'').
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One such guideline is a minimum market price per share that an
underlying security must trade at before the Exchange can list options
on it.\8\ Specifically, Commentary .01(4)(a) to NYSE American Rule 915
requires the market price per share of an underlying covered security
to have been at least $3.00 for the previous three consecutive business
days preceding the date on which the Exchange submits a certificate to
The Options Clearing Corporation (``OCC'') to list and trade options on
it (``three-day lookback period'').\9\ Under the current rule, if an
IPO occurs on a Monday, the earliest date the Exchange could submit its
listing certificate to OCC would be Thursday, with the market price
determined by the closing price over the three-day lookback period from
Monday through Wednesday. An option on the security would then be
eligible for trading on the Exchange on Friday (i.e., within four
business days following the IPO inclusive of the day the listing
certificate is submitted to OCC).
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\8\ NYSE American Rule 915(a) requires that, for underlying
securities to be eligible for options listing, such securities must
be duly registered and be an ``NMS stock,'' as defined in Rule 600
of Regulation NMS under the Act, and be characterized by having a
substantial number of outstanding shares which are widely held and
actively traded. See NYSE American Rules 915(a)(1) and (2).
\9\ The Exchange states that the Options Listing Procedures Plan
(``OLPP'') requires that the listing certificate be provided to OCC
no earlier than 12:01 a.m. and no later than 11:00 a.m. (Chicago
time) on the trading day prior to the day on which trading is to
begin. See the OLPP, at p. 3, available at: <a href="https://ncuoccblobdev.blob.core.windows.net/media/theocc/media/clearing-services/services/options_listing_procedures_plan.pdf">https://ncuoccblobdev.blob.core.windows.net/media/theocc/media/clearing-services/services/options_listing_procedures_plan.pdf</a>.
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The Exchange proposes to waive the three-day lookback period in
Commentary .01(4)(a) for certain covered securities following their IPO
and accelerate the listing of options on such securities by up to two
days.\10\ As proposed, the Exchange would permit options to be listed
and traded on a new IPO with a market capitalization of at least $3
billion based upon its offering price starting on or after the second
business day following the covered security's IPO day (i.e., not
inclusive of the day of the IPO).\11\ For example, under the proposed
rule, if an IPO for a company with a market capitalization of $3
billion (based upon its offering price) occurs on a Monday, the
Exchange could submit a listing certificate to OCC (to allow it to list
and trade options on the IPO security) on Tuesday if all of the
requirements for options listing are satisfied. Options on the IPO
security could then list and begin trading on the Exchange on Wednesday
(i.e., starting on or after the second business day following the IPO
day, not inclusive of the IPO day). In this way, the proposal could
accelerate the listing and trading of options on IPO securities by up
to two days.
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\10\ See Notice, supra note 3, 88 FR at 26635.
\11\ See proposed Commentary .01(4)(a)(ii) to NYSE American Rule
915. The Exchange also proposes a non-substantive change to number
the existing and proposed criteria for covered securities as (i) and
(ii) of paragraph (4)(a). See proposed Commentary .01(4)(a)(i) and
(ii) to NYSE American Rule 915.
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III. Discussion and Commission's Findings
After careful review of the proposed rule change, the Commission
finds that the proposal is consistent with the requirements of the Act
and the rules and regulations thereunder that are applicable to a
national securities exchange.\12\ Specifically, the Commission finds
that the proposed rule change is consistent with Section 6(b)(5) of the
Act,\13\ which requires that the rules of a national securities
exchange be designed, among other things, to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
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\12\ In approving this proposed rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78f(b)(5).
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As discussed above, the Exchange proposes to reduce the time to
market for the listing and trading of options on underlying covered
securities following their IPO if they have a market capitalization of
at least $3 billion based upon the offering price. By waiving the
three-day lookback period for such covered securities in Commentary
.01(4)(a), the proposed rule change could reduce the time to market of
options on such securities by up to two days, as options on such
securities
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would be permitted to be listed and traded starting on or after the
second business day following the IPO (not including the day of the
IPO) once all listing criteria are satisfied.
The proposed rule change would only waive the three-day lookback
period for covered securities following their IPO if they have a
substantial market capitalization of at least $3 billion based upon
their IPO offering price. According to the Exchange, based upon data
from 2017 to present, all underlying securities with an IPO market
capitalization of $3 billion would have also met the $3.00 market price
per share three-day lookback period requirement.\14\
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\14\ See Notice, supra note 3, 88 FR at 26635.
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The Commission believes the proposed waiver of the three-day
lookback period requirement is appropriate for underlying covered
securities that have a market capitalization of at least $3 billion
based on the IPO offering price because those securities would likely
satisfy the lookback requirement, in which case the minimum $3.00 price
test would be met. Further, the proposed market capitalization
requirement of $3 billion based on the IPO offering price would ensure
an objective qualification process for the waiver that would prevent
market participants from being able to influence whether an IPO
security qualifies for the waiver through trading in the security,
which could be a concern if the threshold price were based on the
market price of the shares following the IPO. In accelerating the time
to market for options on these types of large, and likely high profile
IPOs, the proposal does not materially change the listing process for
options, nor does it propose to change any other listing criteria.
In addition, the Exchange represents that trading in IPO securities
is subject to surveillances administered by the Exchange and cross-
market surveillances administered by the Financial Industry Regulatory
Authority (``FINRA'') on behalf of the Exchange that are designed to
detect violations of Exchange rules and applicable federal securities
laws.\15\ The Exchange represents that those surveillances are adequate
to reasonably monitor Exchange trading of IPO securities.\16\ Vigilant
surveillance can help deter and detect violations of Exchange rules and
the federal securities rules and regulations, and in so doing can help
prevent fraudulent and manipulative acts and practices, and, in
general, protect investors and the public interest.\17\
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\15\ See id. According to the Exchange, FINRA conducts cross-
market surveillances on behalf of the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement. See
id. at 26635, n.9.
\16\ See id. at 26635.
\17\ 15 U.S.C. 78f(b)(5).
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The Commission received one comment letter that recommended
approval of the proposed rule change. The commenter asserted that the
proposed rule change would ``benefit both investors and the market by
allowing for increased efficiency in portfolio and risk management
while continuing to provide for investor protection.'' \18\
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\18\ See supra note 4, at 2.
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The Commission finds that the proposal to accelerate the listing
and trading of options on certain covered securities following their
IPO by up to two days if they have a market capitalization of at least
$3 billion based upon their IPO offering price, without modifying any
other aspect of the options listing process, should facilitate
transactions in securities. Accordingly, the Commission finds that the
proposed rule change is consistent with the requirements of the
Act.\19\
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\19\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\20\ that the proposed rule change (SR-NYSEAMER-2023-27), be, and
it hereby is, approved.
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\20\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16393 Filed 8-1-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on August 2, 2023.
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