On August 29, 2017, the Securities and Exchange Commission (SEC) published a New York Stock Exchange (NYSE) proposal that would bar companies from issuing material news at the end of the trading day until after designated market makers finish their closing auctions, usually around 4:05 p.m.1
The proposal is aimed at preventing the release of material information before designated market makers are able to settle end-of-day trading order imbalances via closing auctions from causing any price differences between such transactions and nearly contemporaneous trades on other markets. The NYSE believes that designated market makers are able to complete closing auctions within five minutes after the close of regular trading, and has thus requested that the SEC approve a five-minute waiting period on end-of-day releases. The practical implication is that NYSE listed issuers will be required to wait at least until 4:05 p.m. Eastern Time before releasing any material information, such as the announcement of a securities offering. The NYSE had previously added an advisory note to Rule 202.6, which provided that:
Advisory: The Exchange asks companies that intend to issue material news after the closing of trading on the Exchange to delay doing so until the earlier of publication of such company's official closing price on the Exchange or fifteen minutes after the close of trading on the Exchange in order to facilitate an orderly closing process to trading on the Exchange. Trading on the Exchange typically closes at 4:00 P.M. Eastern Time, except for certain days on which trading closes early at 1:00 P.M. Eastern Time.2
Despite this advisory, the proposal stated that listed companies continued to release information after the official closing time but before closing auctions were complete. The agency is accepting comments, which must be submitted with 21 days after the proposal is published in the Federal Register.
This proposal comes on the heels of an earlier change to the NYSE’s rules regarding dividend announcements. On August 14, 2017, the SEC approved a proposed NYSE rule to require NYSE listed companies to provide notice to the Exchange at least 10 minutes before any public announcement of a dividend or stock distribution, including when the notice is outside of Exchange trading hours.3 Previously, NYSE listed companies were required to provide the Exchange with a 10-minute prior notice of public announcements of distributions within the hours of 7:00 a.m. and 4:00 p.m. Eastern Time. Effective as of August 14, NYSE listed companies must provide the Exchange with the same notice, regardless of the time the public announcement is made.
NYSE listed company rules require that “prompt notice” must be given to the NYSE of any dividend or distribution that any company listed on the NYSE announces.4 Specifically, Section 204.00 of the NYSE rules requires registrants to provide prompt notice to the NYSE of certain events. NYSE listed companies must announce their distributions on NYSE’s disclosure website, listingmanager.nyse.com, which the NYSE took live in October 2016. In emergency situations, however, a company may inform the NYSE directly of a dividend via telephone or facsimile. NYSE listed companies must give at least 10 days’ notice of all record dates set for any purpose. Record dates should not be set on weekends or a national holiday. Since the NYSE has no authority to waive its record date notifications, it is especially important for NYSE listed companies to report their dividends on listingmanager.com in a timely manner.5
The NYSE rule approved by the SEC on August 14 requires that NYSE listed companies call the NYSE’s Market Watch team at least 10 minutes prior to making any public announcement and e-mail a copy of the proposed announcement to Market Watch.6 Listed companies providing this advance notification to the Market Watch team are not required to wait for NYSE approval before issuing their announcements.7
On August 29, 2017, however, the NYSE filed an additional proposal with the SEC to delay the effectiveness of the dividend announcement rule until the earlier of February 1, 2018, or such time as the NYSE notifies listed companies that the rule will take effect. The NYSE stated that the delay would provide listed companies with additional time to prepare for the new requirements and for the NYSE’s systems to provide the necessary support to its staff in reviewing notifications. NYSE listed companies should likely continue to operate under the notice standards prior to the August 14h rule change, particularly given the NYSE’s stated need to update its systems.
Earlier this year, the SEC adopted an amendment to shorten by one business day the standard settlement cycle for most broker-dealer securities transactions. The T+2 settlement cycle will take effect on September 5, 2017. The revised settlement schedule will not change the carve out from the settlement schedule rule for firm commitment underwritten offerings priced after 4:30 p.m. Eastern Time, though it may be the underwriters’ or their customers’ preference to settle in line with a T+2 schedule. Other securities offerings, such as at-the-market offerings, will be subject to the T+2 settlement cycle.
In connection with the SEC’s adoption of a shortened settlement cycle for most securities transactions, both the NYSE and Nasdaq have amended their rules so that the ex-dividend date for distributions with record dates after September 5, 2017, will be one business day prior to the record date instead of two.8 Listed companies are reminded to use the revised schedule when determining the announcement of the ex-dividend date for their distributions.