The New York Stock Exchange has proposed Rule 48 authorizing it to suspend certain rule requirements relating to the opening of securities on the Exchange in the event of extreme market volatility or market-wide price dislocation that may cause Floor-wide delays in the opening of securities on the Exchange.

Rule 48 permits the Chief Executive Officer of NYSE Euronext Inc. or his designee or the CEO of NYSE Regulation, Inc. or his designee to declare an extreme market volatility condition which would affect certain rules, but remain in effect only for the opening of that trading session.

The factors that would be considered in declaring an extreme market volatility condition include volatility during the previous day’s trading session; trading in foreign markets before the open; substantial activity in the futures market before the open; the volume of pre-opening indications of interest; evidence of significant pre-opening order imbalances across the market; government announcements; news and corporate events; and any such other market conditions that could impact Floor-wide trading conditions.

Three rules would be suspended upon Rule 48 being invoked. Rule 123D(1) provides that a specialist should consult with a Floor Governor in unusual market situations or if it is anticipated that the opening price may be at a significant disparity from the prior close; that in the event of a large pre-opening order imbalance or before a stock opens at a large price change, specialists must publicly disseminate a price indication at least once (and possibly more than once, depending on pre-opening interest) before opening a security; and that delayed openings must be approved by a Floor Official.

Rule 79A.30 requires a specialist to obtain prior Floor Official approval if a security is going to open at one or more dollars away from the closing price at the Exchange when the closing price was under $20 a share, or two dollars or more away from the closing price at the Exchange when the closing price was $20 per share or more. Rule 15 requires a specialist to publish a pre-opening price indication whenever the specialist, in arranging the opening transaction in a subject security, anticipates that the price of the opening transaction will be at a price which is different from the previous day’s consolidated closing price by more than the “applicable price change”.

Despite Rule 48, even when the dissemination and Floor Official approval requirements are suspended, specialists continue to be responsible for the fair and orderly opening of securities.

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