Recently, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed a proposed rule change with the Securities and Exchange Commission to amend the NYSE Listed Company Manual (the “Manual”), effective September 28, 2015.1 The proposed amendments (i) expand the pre-market hours during which companies with listed securities are required to notify the Exchange prior to disseminating material news, (ii) provide guidance related to the release of material news after the close of trading on the Exchange and (iii) permit the Exchange to halt trading in certain additional circumstances, including when it needs to obtain more information about a listed company’s news release.
Companies with securities listed on the NYSE will need to be mindful of these amendments when releasing material news, both prior to the opening and after the close of trading on the NYSE and during trading hours. The proposed amendments will require listed companies to properly plan for all releases of material news, including all pre-market announcements, so that the information will be disseminated as efficiently and timely as possible. In addition, listed companies planning a transaction may need to provide preliminary information to the Exchange regarding such transactions despite the fact that they may not occur. Given the proposed amendments, failure to properly plan for such releases and announcements could potentially result in a trading halt.
Material News Released During Pre-Market Hours and After the Close of Trading
The NYSE currently requires a listed company to notify the NYSE at least ten minutes before releasing material news shortly before the opening of trading on the Exchange or during Exchange market hours (“Material News Policy”). The Exchange has proposed to amend the Manual to require listed companies to comply with the Material News Policy between 7:00 a.m. and 4:00 p.m. Eastern Time. This is a significant change in policy as many transactions are not certain at 7:00 a.m. Eastern Time.
While trading on the Exchange does not begin until 9:30 a.m., the Exchange stated that it believes that material news released between 7:00 a.m. and 9:30 a.m. has the potential to cause volatility in both price and volume during pre-market trading that occurs on other market centers, as well as once trading opens on the Exchange. Therefore, to facilitate an orderly opening and ensure thorough dissemination of material news, the Exchange believes it would be beneficial to require companies to comply with the Material News Policy during pre-market hours.
The Exchange also believes that material news released immediately after 4:00 p.m. Eastern Time can interfere with the closing process. Therefore, the Exchange proposes to include advisory text in the Manual requesting that listed companies intending to release material news after the close of trading on the Exchange wait until the earlier of (i) the publication of their security’s official closing price on the Exchange or (ii) 15 minutes after the scheduled closing time2 of the Exchange.
Regulatory Trading Halts
Currently, the Manual limits the Exchange’s authority to halt trading to situations when a listed company intends to release material news during market hours. The NYSE has proposed to amend the Manual so that the Exchange will have additional authority to halt trading:
- during pre-market hours at the request of a listed company;
- when the Exchange believes it is necessary to request certain information from listed companies; and
- when an American Depositary Receipt (“ADR”) or other security listed on the Exchange (or the security underlying the ADR) is also listed on another national or foreign securities exchange and such other exchange halts trading in such security for regulatory reasons.3
Under the proposed rules, between 7:00 a.m. and the opening of trading on the Exchange, the Exchange may implement a regulatory halt in circumstances where:
- the listed company has informed the Exchange staff that it intends to make a public announcement of material news; and
- the listed company requests that trading in its listed securities be halted pending dissemination of the public announcement (“Pre-Market Halt”).
Due to reduced trading volume prior to the opening of trading on the Exchange and the fact that the Exchange itself is not open for trading prior to 9:30 a.m., the Exchange believes it is appropriate for a PreMarket Halt to be instituted only at the request of a listed company. However, the proposed rule will also state that if it appears that dissemination of material news will not be complete prior to the opening of trading on the Exchange at 9:30 a.m., the Exchange may temporarily halt trading solely in its own discretion in order to facilitate an orderly opening process, which is consistent with the Exchange’s current practice.
In addition, the Exchange has also proposed to amend the Manual to state that if the Exchange needs to request information from a listed company relating to:
- material news;
- the listed company’s compliance with the Exchange’s continued listing requirements; or
- any other information which is necessary to protect investors and the public interest,
the Exchange may halt trading in such listed company’s security until it has received the requested information.4 Therefore, listed companies may want to pre-clear information with the Exchange even when the impact is uncertain.
Additional Proposed Changes
The Manual states that companies can disclose material news via any Regulation FD compliant method and currently includes advisory text on the best way to release material news to ensure immediate and widespread coverage. However, due to the outdated nature of this text, the Exchange proposes to state that listed companies releasing material news should:
- include the news in a Form 8-K or other Securities and Exchange Commission filing; or
- issue the news in a press release to the major news wire services, including, at a minimum, Dow Jones & Company, Inc., Reuters Economic Services and Bloomberg Business News.