SEC invites comments on NYSE American proposals about reference prices for trading halt auction after regulatory halt

Maria Nikolova

The proposed rule changes will permit the Exchange to designate a different Auction Reference Price for a Trading Halt Auction following a regulatory halt.

The United States Securities and Exchange Commission (SEC) has published a notice inviting comments on a proposed rule change concerning NYSE American LLC. Specifically, the Exchange proposes to amend Rule 7.35E (Auctions) relating to the Auction Reference Price for a Trading Halt Auction following a regulatory halt.

Under the rule in question, Auction Reference Prices are used for several purposes, including determining Auction Collars. For the Trading Halt Auction, the Reference Price is the last consolidated round-lot price of that trading day, and if none, the prior day’s Official Closing Price.

The Exchange proposes to amend Rule 7.35E(a)(8)(A) to permit the Exchange to designate a different Auction Reference Price for a Trading Halt Auction following a regulatory halt.

The Exchange believes that if the price of a security changes during a regulatory halt, for instance, due to a news event, an Auction Reference Price based on the last consolidated round-lot price of that trading day, or if none, the prior day’s Official Closing Price, may no longer reflect the value of the security. In such case, using that price for purposes of calculating Auction Collars for the Trading Halt Auction may unnecessarily constrict the price at which such auction would initially be permitted and potentially lead to an unnecessary number of extensions before the security resumes trading, thereby delaying the Trading Halt Auction. The Exchange considers that in such cases it would be appropriate to designate a different Auction Reference Price.

Under the proposed amendments, if the Auction Reference Price would impact a fair and orderly Trading Halt Auction following a regulatory halt, the CEO of the Exchange, or his or her designee, may designate a different Auction Reference Price.

The Exchange, however, does not want to specify in the rule what the alternate Auction Reference Price should be. The reasons why an Auction Reference Price for a Trading Halt Auction following a regulatory halt may no longer be appropriate are numerous, the Exchange says, such as external reasons specific to a security (for example, news relating to an issuer or a corporate action). The Exchange therefore believes that the facts and circumstances for individual securities should inform the Exchange of an Auction Reference Price to designate under the proposed rule.

NYSE American believes that the change would promote the protection of investors and the public interest.

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