by Cydney Posner

The NYSE has filed with the SEC a proposal to amend Section 202.06 of the NYSE Listed Company Manual related to material news and trading halts.

The proposal would make the following changes:

  • expand the pre-market hours during which listed companies are required to notify the NYSE prior to disseminating material news; and
  • provide the NYSE with authority to halt trading
    • during pre-market hours at the request of a listed company,
    • when the NYSE believes it is necessary to request certain information from listed companies, and
    • when an NYSE-listed security is also listed on another national or foreign securities exchange and the other exchange halts trading in the security for regulatory reasons.

The amendment would also provide guidance related to the release of material news after the close of trading.

Trading Halts

Currently, trading halts may be imposed when a listed company announces material news (that is, news that is reasonably likely to have a material impact on the price or trading volume of a listed security) during the trading session (currently 9:30 a.m. to 4:00 p.m.) or shortly before opening. In that event, the NYSE halts trading on all market centers to ensure full dissemination of the news. In addition, listed companies are currently required to notify the NYSE at least 10 minutes in advance of a material news release that will occur shortly before the opening of trading on the NYSE or during NYSE market hours.

The NYSE proposes to advance the time for notification and compliance with the material news policy to 7:00 a.m. (continuing until 4:00 p.m.) because most companies issue material news releases between 7:00 a.m. and 9:30 a.m. Those pre-market releases have the potential to cause volatility in trading in other market centers as well as once trading opens on the NYSE. However, given the light volume of trading, the NYSE believes that companies are in the best position to determine whether a trading halt is appropriate. Accordingly, as proposed, between 7:00 a.m. and the opening of trading on the NYSE, a regulatory halt may be implemented when the listed company notifies the NYSE of the intended release and requests that trading be halted pending dissemination of the public announcement. Other national securities exchanges that trade NYSE-listed securities will also halt trading in that security until the NYSE lifts the halt.  (However, if the news is not fully disseminated prior to the opening of trading on the NYSE at 9:30 a.m., the NYSE may impose a halt in its own discretion.)

To address other scenarios when it may be advisable to halt trading for the protection of investors, the proposal would enable the NYSE to institute a regulatory halt while it awaits information requested from a listed company relating to the following:

  • material news;
  • the listed company’s compliance with NYSE continued listing requirements; or
  • any other information necessary to protect investors and the public interest.

These changes make the NYSE rules comparable to the Nasdaq rules.

Similarly, because trading continues after 4:00 p.m. on other exchanges, the NYSE proposes to include advisory text in Section 202.06 requesting that listed companies intending to release material news after the NYSE market close wait until the earlier of the publication of their security’s official closing price on the NYSE or 15 minutes after the scheduled closing time on the NYSE.

In addition, the NYSE may halt trading in an ADR or other listed security when the NYSE-listed security (or the security underlying the ADR) is listed on another exchange and that exchange halts trading in that security for regulatory reasons.

Material News

The proposal would also update the Manual’s advisory text on the best way to release material news to ensure immediate and widespread coverage. While the fastest method of release may vary, typically, “this requires that issuers either (i) include the news in a Form 8-K or other SEC filing, or (ii) 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.”

The proposal has been declared effective by the SEC and will become operative 30 days after its filing date of August 27.

Posted by Cydney Posner