Notice2026-04016
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.35B(g)(2)
Primary source
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Published
March 2, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 40 (Monday, March 2, 2026)</title>
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[Federal Register Volume 91, Number 40 (Monday, March 2, 2026)]
[Notices]
[Pages 10175-10178]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-04016]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104887; File No. SR-NYSE-2026-11]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 7.35B(g)(2)
February 25, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 12, 2026, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7.35B(g)(2) to permit
Designated Market Makers to utilize an Auction Price for a Closing
Auction in a listed ETP outside the parameters set forth in that rule
based on a proprietary calculation of the ETP's end-of-day net asset
value. The proposed rule change is available on the Exchange's website
at <a href="http://www.nyse.com">www.nyse.com</a>, and at the principal office of the Exchange.
II. Self-Regulatory Organization's 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 Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 7.35B(g)(2) to permit
Designated Market Makers (``DMM'') to utilize an Auction Price for a
Closing Auction in a listed ETP outside the parameters set forth in
that rule based on a proprietary calculation of the ETP's end-of-day
net asset value.
Background and Proposed Rule Change
Rule 7.35B sets forth certain responsibilities of DMMs with respect
to Closing Auctions. In particular, Rule 7.35B(g) provides that the DMM
is responsible for determining the Auction Price for a Closing Auction
and mandates that the Auction Price must be at or between the last-
published Imbalance Reference Price, which is the Exchange Last Sale
Price bound by the Exchange BBO,\3\ and the last-published non-zero
Continuous Book Clearing Price, which is the price at which all better-
priced orders eligible to trade in the Closing Auction on the Side of
the Imbalance can be traded.\4\ Rule 7.35B promotes determinism with
respect to the Closing Auction because the Closing Auction Price must
be within the predetermined range of prices that have been disseminated
via the Closing Auction Imbalance Information and that cannot be
changed after the end of Core Trading Hours.
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\3\ See Rule 7.35B(e)(3).
\4\ See Rule 7.35(a)(4)(C). In the case of a buy Imbalance, the
Continuous Book Clearing Price would be the highest potential
Closing Auction Price and in the case of a sell Imbalance, the
Continuous Book Clearing Price would be the lowest potential Closing
Auction Price.
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Unlike operating company securities listed on the Exchange, the
value of ETPs are derived from the underlying assets owned. The end-of-
day net asset value (``NAV'') of an ETP is a daily calculation based
off the most recent closing prices of the underlying assets and an
accounting of the ETP's total cash position at the time of calculation.
The NAV generally is calculated by taking the sum of fund assets,
including any securities and cash, subtracting liabilities, and
dividing by the number of outstanding shares. Additionally, ETPs are
generally subject to a creation and redemption mechanism to ensure that
an ETP's price does not fluctuate too far away from NAV, which
[[Page 10176]]
mechanisms mitigate the potential for exchange trading to impact the
price of an ETP.
ETP pricing is based on an ``arbitrage function'' performed by
market participants that affects the supply of and demand for ETP
shares and, thus, ETP prices. The arbitrage function is effectuated by
creating new ETP shares and redeeming existing ETP shares based on
investor demand; thus, ETP supply is largely open-ended. As the
Commission has acknowledged, the arbitrage function helps to keep an
ETP's price in line with the value of its underlying portfolio, i.e.,
it helps to minimize deviation from NAV.\5\ Indeed, in analyzing the
arbitrage mechanism in the case of ETFs, a type of ETP, the Commission
noted that ``the deviation between the market price of ETFs and NAV per
share has generally been relatively small.'' \6\ Generally, the higher
the liquidity and trading volume of an ETP, the more likely the ETP's
price will not deviate from the value of its underlying portfolio. DMMs
registered in ETPs along with other market participants play a key role
in this arbitrage function for ETPs listed on the Exchange.
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\5\ See Securities Exchange Act Release No. 75165, 80 FR 34729,
34733 (June 17, 2015) (S7-11-15) (arbitrage ``generally helps to
prevent the market price of ETP Securities from diverging
significantly from the value of the ETP's underlying or reference
assets''). See also generally id., 80 FR at 34739 (``In the
Commission's experience, the deviation between the daily closing
price of ETP Securities and their NAV, averaged across broad
categories of ETP investment strategies and over time periods of
several months, has been relatively small[,]'' although it had been
``somewhat higher'' in the case of ETPs based on international
indices.).
\6\ See Release Nos. 33-10695; IC-33646; File No. S7-15-18
(ETFs) (September 25, 2019), 84 FR 57162, 57173 (October 24, 2019)
(the ``Rule 6c-11 Release'').
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At times, heading into the Closing Auction, ETPs with lower
liquidity and trading volumes may see last sale prices that diverge
from NAV as reflected in prices quoted on away markets. In other words,
the official last sale price--which also serves as the reference price
for auctions and is constrained by the Exchange's BBO (the highest bid
and lowest offer available at that moment)--may not align with away-
market prices that more closely track NAV. By contrast, the Continuous
Book Clearing Price, which reflects the price nearest to that last sale
at which all buy and sell interest from both the continuous market and
closing auction orders can be fully matched (i.e., zero imbalance),
provides a real-time indication of a potential closing price that could
be meaningfully away from NAV. For example, assume that ETP A has an
NAV of $25.00, and that away markets are quoting $24.98 x $25.02,
reflecting pricing reasonably aligned with NAV. By contrast, assume
that due to limited displayed liquidity on the Exchange, the Exchange's
BBO is $24.90 x $25.25, and the most recent on-Exchange transaction
occurred at $25.25, which establishes the official NYSE last sale and,
accordingly, the Auction Reference Price. If there is a Buy Imbalance
at $25.25 and the Continuous Book Clearing Price is $25.30, current
Rule 7.35B(g) would require the DMM to close ETP A at a price within
the range of $25.25 to $25.30, which is meaningfully higher than both
ETP A's NAV and the away market quotations.
In order to provide DMMs with flexibility to ensure that ETP
pricing closely tracks the value of the underlying portfolio or
reference assets as expressed by the NAV,\7\ the Exchange proposes a
narrow exception for ETPs to the constraint in Rule 7.35B(g) that a
Closing Auction cannot occur at a price outside the last-published
Imbalance Reference Price and the last-published non-zero Continuous
Book Clearing Price.
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\7\ See Securities Exchange Act Release No. 87056 (September 23,
2019), 84 FR 51205 (September 27, 2019) (SR-NYSE-2019-34).
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As proposed, the Exchange would permit a DMM to price a Closing
Auction in an ETP outside the rule parameters based on a DMM unit's
proprietary calculation of the ETP's end-of-day NAV. DMM units
utilizing this exception would have to establish policies and
procedures reasonably designed to document and supervise the
calculation of the proprietary NAV and the determination to utilize an
Auction Price that is not at or between the last-published Imbalance
Reference Price and the last-published non-zero Continuous Book
Clearing Price based on that calculation. The Exchange expects that the
vast majority of Closing Auctions will continue to be priced at or
between the last-published Imbalance Reference Price and Continuous
Book Clearing Price, and that this narrow exception for ETPs will be
used sparingly and with ample justification by DMM units.
Trading on the Exchange is subject to a comprehensive regulatory
program that includes a suite of surveillances administered by the
Exchange as well as cross-market surveillances administered by the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange,\8\ which are designed to detect potential violations of
Exchange rules and applicable federal securities laws. In addition,
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\8\ FINRA conducts cross-market surveillances and member
examinations on behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for FINRA's
performance under this regulatory services agreement.
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Exchange members, including member organizations operating DMMs,
are also subject to routine examinations by FINRA on behalf of the
Exchange that may review, among other things, trading by DMMs and their
associated persons as well as supervision, including the policies and
procedures in place at a DMM unit. The Exchange believes that,
together, its regulatory program and the proposed supervision
obligations set forth in the proposed rule for DMM units relying on the
exception will provide reasonable safeguards to ensure that use of the
proposed exception is both auditable by the Exchange and appropriately
supervised in real time by the DMM unit, consistent with the prevention
of fraudulent and manipulative acts and practices and the protection of
investors and the public interest.
Finally, the Exchange believes the proposed exception is similar to
the current exception in Rule104(d)(1)(B), which permits certain
``Aggressing Transactions'' during the final ten minutes of trading. An
``Aggressing Transaction'' is a purchase (sale) that reaches across the
market, i.e., when the DMM buys from the NYSE offer or sells to the
NYSE bid, to trade as the contra-side to the Exchange published offer
(bid), and is priced above (below) the last differently-priced trade on
the Exchange and above (below) the last differently-priced published
offer (bid) on the Exchange. Rule 104(d)(1)(B) prohibits Aggressing
Transactions during the last ten minutes prior to the scheduled close
of trading that would result in a new high (low) price for a security
on the Exchange for the day at the time of the DMM's transaction unless
such transaction meets one of the three specified exceptions. In
particular, Rule104(d)(1)(B) provides a critical exception when such
transactions are necessary to align the security's price with an
underlying or related asset, including matching a better bid or offer
elsewhere. This flexibility is designed to prevent stale or inaccurate
prices and to promote market efficiency.
The proposed limited exception to the requirement that Closing
Auctions cannot occur outside specified parameters serves the same
purpose. It would allow DMM units to align an ETP's closing price with
its NAV in rare cases where NAV falls outside the specified range in
Rule7.35B. This targeted flexibility is essential to maintaining price
integrity and investor confidence during one of the most consequential
periods of the trading
[[Page 10177]]
day. By ensuring that closing prices accurately reflect underlying
value, the proposal supports transparency, stability, and the
protection of investors, consistent with the Act's core objectives.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Sections
6(b)(5) of the Act,\10\ in particular, because it is designed 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 mechanisms of,
a free and open market and a national market system and, in general, to
protect investors and the public interest and because it is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that the proposal would promote
just and equitable principles of trade, remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system, and protect investors and the public interest by enabling DMMs
to more accurately price an ETP Closing Auction. As noted, the proposed
exception would permit DMMs to utilize an Auction Price for a Closing
Auction in a listed ETP outside the current rule parameters based on a
proprietary calculation of an ETP's end-of-day NAV. The proposed
exception would thereby permit DMMs to avoid a Closing Auction in an
ETP at a price that satisfies current parameters but deviates from the
value of its underlying portfolio, especially for ETPs that with lower
liquidity and trading volumes, thereby potentially improving the
quality of the Closing Auctions in ETPs on the Exchange. The Exchange
believes that the proposed change would thus remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system.
The Exchange believes that the proposal would not be inconsistent
with the public interest and the protection of investors. As noted, the
proposal would only permit DMMs to rely on the exception where the DMM
establishes and maintains policies and procedures reasonably designed
to document and supervise the calculation of the proprietary NAV and
the determination to utilize an Auction Price that is not at or between
the last-published Imbalance Reference Price and the last-published
non-zero Continuous Book Clearing Price based on that calculation. In
addition, as noted, trading on the Exchange is subject to a
comprehensive regulatory program that includes a suite of surveillances
that review trading by DMMs and other market participants on the Floor,
including surveillances designed to monitor for compliance with the
rules surrounding Closing Auctions, and routine examinations that
includes reviews of the policies and procedures in place at member
organizations operating DMM units. Based on the foregoing, the Exchange
believes that, together, its regulatory program and the proposed
supervision requirements provide reasonable safeguards to ensure that
use of the proposed exception is both auditable by the Exchange and
appropriately supervised in real time by the DMM unit, consistent with
the prevention of fraudulent and manipulative acts and practices and
the protection of investors and the public interest.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not intended to address competitive issues but rather is concerned
solely with enhancing the quality of the Auction Price for Closing
Auctions in ETPs. The proposed rule change does not implicate any
intermarket competition concerns because it relates to how the Exchange
would facilitate auctions in Exchange-listed securities.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\15\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4d3f382128602e2220202823393e0d3e282e632a223b"><span class="__cf_email__" data-cfemail="d9abacb5bcf4bab6b4b4bcb7adaa99aabcbaf7beb6af">[email protected]</span></a>. Please include
file number SR-NYSE-2026-11 on the subject line.
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Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSE-2026-11. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NYSE-2026-11 and should be submitted on
or before March 23, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-04016 Filed 2-27-26; 8:45 am]
BILLING CODE 8011-01-P
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