The NYSE has filed a proposed rule change that is immediately effective. The NYSE proposes to amend Section 202.06 of the Listed Company Manual to:
- expand the pre-market hours during which listed companies are required to notify the Exchange prior to disseminating material news, and
- provide the Exchange with 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 Exchange-listed security is also listed on another national or foreign securities exchange and such other exchange halts trading in such security for regulatory reasons.
The Exchange also proposes to amend Section 202.06 of the Manual to provide guidance related to the release of material news after the close of trading on the Exchange.
Notification of Material News During Pre-Market Hours
The Exchange proposes to amend Section 202.06 to require companies to comply with the Material News Policy between 7:00 a.m. and 4:00 p.m. Eastern Time. In the Exchange’s experience, most companies release news related to corporate actions and other material events between 7:00 a.m. and 9:30 a.m. Although trading on the Exchange does not begin until 9:30 a.m., the Exchange 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. However, because there is a lower volume of trading in such pre-market hours, the Exchange believes that a listed company is most well positioned to determine whether a trading halt is appropriate given the news it intends to release. Therefore, to facilitate an orderly opening and ensure thorough dissemination of material news, the Exchange believes it is beneficial to require companies to comply with the Material News Policy and advise whether a trading halt is appropriate during pre-market hours.
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 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.
Trading Halt Pending Receipt of Requested Information
The Exchange also proposes to amend Section 202.06 of the Manual to set forth circumstances in which it may institute a regulatory halt while it awaits information requested from a listed company. Section 202.06 of the Manual currently limits the Exchange’s authority to halt trading to situations when a listed company intends to release material news during market hours. However, in the Exchange’s experience there are other scenarios when it may be advisable to halt trading for the protection of investors. For example, if there is uncertainty surrounding material news issued by a listed company or a company’s compliance with the Exchange’s continued listing standards, the Exchange believes it may be appropriate to halt trading while it gathers information to resolve such ambiguity. Accordingly, the Exchange proposes to amend Section 202.06 of the Manual to state that if it is necessary to request information from a listed company relating to:
- material news,
- the listed company’s compliance with Exchange continued listing requirements, or
- any other information which is necessary to protect investors and the public interest,
then the Exchange may halt trading in such listed company’s security until it has received and evaluated the requested information. The proposed change in this regard mirrors Nasdaq Stock Market Rule 4120(a)(5).
Release of News After Market Close
The NYSE believes the release of material news immediately after 4:00 p.m. Eastern Time can interfere with the closing process. Although trading on the Exchange stops at 4:00 p.m. Eastern Time, the order book for each listed security is manually closed by the security’s Designated Market Maker, or DMM, a process that can take several minutes before the closing auction is completed. Because trading continues after 4:00 p.m. Eastern Time on other exchanges, if a listed company releases material news immediately after 4:00 p.m. Eastern Time there can be significant price movement on other markets when compared to the last sale price on the Exchange. The result, therefore, is that a DMM can be executing trades at the Exchange closing price while the same security is simultaneously trading on other exchanges at a very different price. As this discrepancy can cause confusion to investors, the Exchange proposes to include advisory text in Section 202.06 of the Manual requesting that listed companies intending to release material news after the close of trading on the Exchange wait until the earlier of the publication of their security’s official closing price on the Exchange or 15 minutes after the scheduled closing time on the Exchange. The Exchange proposes to specify that trading on the Exchange typically closes at 4:00 p.m. Eastern Time, except that on certain days trading closes early at 1:00 p.m. Eastern Time.