The New York Stock Exchange recently amended its rule that governs a listed company’s obligation to notify the exchange before it releases material news and that addresses the NYSE’s authority to halt trading in listed company securities. The amended rule expands the pre-market hours in which a listed company must notify the NYSE before disseminating material news and broadens the exchange’s authority to halt trading in different circumstances, including when the NYSE requests information about a listed company’s news release. The NYSE also clarified other aspects of its material news policy.
These amendments to Section 202.06 of the NYSE Listed Company Manual, which became effective on September 28, are described in Release No. 34-75809.
The NYSE said it made changes to its material news policy to facilitate orderly trading in listed company securities by expanding the hours and circumstances in which the exchange may declare a regulatory trading halt in affected securities. Section 202.06 of the Listed Company Manual, now titled “Procedure for Public Release of Information; Trading Halts,” gives the NYSE the authority to institute a trading halt in a listed company’s securities in specified circumstances before the opening of trading or during the trading day. A trading halt by the NYSE in connection with a listed company’s release of material news halts trading on all market centers to provide time for full dissemination of the news to investors. The NYSE considers material news to be any news that is reasonably likely to have a material impact on the price or trading volume of a listed security.
Changes to material news policy
Notification before market opening. Listed companies often publicly announce news about business combinations and other significant corporate developments during the period between 7:00 a.m. and 9:30 a.m., when trading opens on the NYSE. The NYSE indicates that the release of material information during this period frequently results in price and volume volatility in pre-market trading that occurs on other market centers and at the opening of trading on the exchange.
Before it was amended, Section 202.06 of the Listed Company Manual had required listed companies to notify the exchange at least ten minutes before they released material news if the release was scheduled to occur either (a) shortly before the opening of trading on the exchange or (b) during the exchange trading session, which currently is conducted on most days from 9:30 a.m. to 4:00 p.m. Eastern Time. The NYSE has expanded the pre-market notification requirement to extend it to a listed company’s release of material news made at any time between 7:00 a.m. and 9:30 a.m. The purpose of the change is to facilitate an orderly opening of trading in the company’s securities and to ensure “thorough dissemination” of the material news. Under amended Section 202.06(B), companies now have to notify the NYSE at least ten minutes in advance of any release of material news intended to occur between 7:00 a.m. and the close of trading at 4:00 p.m.
Release of material news after market closing. The NYSE has provided new guidance related to the release of material news after the close of trading on the exchange. The NYSE added an “Advisory” note to Section 202.06 requesting (but not mandating) that listed companies intending to release material news after the close of trading wait to do so until the earlier of (a) the publication of the company’s official closing price on the exchange or (b) 15 minutes after the scheduled closing time on the exchange. (Although the NYSE typically closes at 4:00 p.m. Eastern Time, there are certain days each year when it closes at 1:00 p.m. Eastern Time.) The NYSE believes that the release of material news in this manner will facilitate the orderly closing of trading on the NYSE and reduce the possibility of confusing discrepancies between the NYSE closing price and the trading prices for the same security on other exchanges that can interfere with the closing process.
Methods of releasing material news. Section 202.06(C) of the Listing Company Manual requires companies to release material news by the “fastest available means.” The NYSE has replaced the previous advisory text in Section 202.06 on the preferred dissemination methods with a statement that release by the fastest available means “typically” will require the company either to (a) include the news in a Form 8-K report or other SEC filing or (b) 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.”
Expanded authority to halt trading in listed securities
The NYSE has expanded its authority under Section 202.06 to permit it to halt trading (a) during pre-market hours at the request of a listed company, (b) when the exchange believes it is necessary to request certain information from a listed company and (c) when a NYSE-listed security, such as an American Depositary Receipt (ADR) or similar security, is also listed on another national or foreign securities exchange and the other exchange (or the regulatory authority overseeing the exchange) halts trading in the security for regulatory reasons. When the NYSE halts trading in a listed company’s securities, other national securities exchanges on which the securities are traded also will halt trading until the NYSE allows trading to resume.
Trading halts during pre-market hours. During the 7:00 a.m. to 9:30 a.m. period now covered by the pre-market notification requirement, the NYSE will halt trading in a listed company’s securities when the company (a) notifies the exchange of its intention to make a public announcement of material news and (b) requests that the exchange halt trading in its securities while the information is disseminated. The NYSE believes that trading halts during pre-market hours are appropriate at the request of the listed company, because the company is in the best position to determine whether the information it intends to release is likely to affect trading before the market opens. In the one exception to company-initiated trading halts, the exchange will continue its current practice of temporarily halting trading in a company’s securities to facilitate an orderly opening process if it appears that the dissemination of the material news released by the company will not be complete before the opening of trading.
Trading halts while a request for information is pending. The NYSE also has expanded its trading halt authority to cover situations in which the exchange believes it is necessary to obtain information from listed companies to determine whether a trading halt is necessary for the protection of investors. Section 202.06 previously had limited the NYSE’s authority to institute a regulatory halt to situations in which a listed company intended to release material news during market hours. The NYSE now may halt trading at any time when the exchange determines it is necessary to request information from a listed company concerning any of the following:
- Material news
- Compliance by the company with the exchange’s continued listing requirements
- Other information necessary to protect investors and the public interest
If the NYSE imposes a trading halt in any of these circumstances, trading will not resume until the exchange has received and evaluated the information.
Trading halts in ADRs and similar securities listed on other exchanges. The third change relating to trading halts confirms the NYSE’s longstanding policy that it may halt trading in an ADR or other security listed on the exchange when the NYSE-listed security (or the security underlying the ADR) is listed on or registered with another national or foreign securities exchange, and the other exchange (or the regulatory authority overseeing the exchange) halts trading in the security for regulatory reasons.
Compliance with the new requirements
NYSE-listed companies should update their communications procedures to make sure they line up with the revised requirements. In addition to changing procedures to ensure notification of the planned release of material news between 7:00 a.m. and 9:30 a.m., a listed company also will need to have in place an orderly process to assess whether a public announcement of information during pre-market hours will warrant a request for a trading halt in the company’s securities. Further, company personnel should be prepared to respond promptly to a request for information from the NYSE staff about material news, compliance with listing requirements or other matters if the exchange halts trading in the company’s securities pending its receipt and evaluation of the information.