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08 Dec 2017
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Five More Minutes for the NYSE

In August, the New York Stock Exchange (NYSE) requested the U.S. Securities and Exchange Commission (SEC) to postpone what time public companies disclose their end-of-day news. The NYSE proposed that companies should only release this information at 4:05 p.m. Eastern Time, instead of the official closing at 4:00 p.m., in an effort to limit “price discrepancies and market confusion.”[1] How will five extra minutes realistically impact the market and reduce confusion amongst investors?

The proposal sets out to amend Section 202.6 of the NYSE Listed Company Manual. The purpose of the amendment is to ensure that the Designated Market Maker (DMM), which facilitates closing at 4:00 p.m., is more accurate. Order Imbalance Information is published by the NYSE until 4:00 p.m.; this overlap in time creates price discrepancies. Order Imbalance Information establishes “real-time order imbalance information and information indicating the price at which closing interest may be executed in full and the price at which Exchange Book and closing-only interest may be executed in full.”[2] Because this process is up until 4:00 p.m., the DMM closing process can only take information that is published before 4:00 p.m. The extra five minutes gives companies the time to publish more accurate information within the time it takes for the closing auction, which will make a significant impact on other exchanges that are still open after the NYSE closing auction. Without the five minutes, there are clear pricing discrepancies between the NYSE closing price and the trading price on other markets.

Why five minutes? Other times were previously proposed by the NYSE, such as ten and fifteen, but five minutes is typically the time it take to complete closing auctions at the end of the day. The NYSE’s proposal explains that the five minute “prohibition would mitigate the risk of market disruption and investor confusion associated with the occurrence of significant news-related price volatility on other markets during the brief period between the NYSE’s official closing time and the completion of the closing auction”.[3] In effect, this modification will create a fairer market for investors and market actors.

The SEC on December 4, 2017 approved the NYSE’s proposal and declared it complied with the standards of the Securities and Exchange Act. Public companies must now either wait until 4:05 p.m. to publish their end-of-day news or until closing auctions are finished, depending on which ends first. Are there any exceptions? Yes, if it is a “non-intentional disclosure in order to comply with Regulation [Fair Disclosure]”,[4] which stipulates that public companies publish material information to all investors at the same time.[5]

[1] Zanki, Tom. (Dec. 5, 2017) “SEC Approves NYSE Plan to Delay End-of-Day Material News.” Law360. Available at: https://www.law360.com/securities/articles/991538/sec-approves-nyse-plan-to-delay-end-of-day-material-news. Accessed on Dec. 8, 2017.

[2] Securities and Exchange Commission. (Aug. 29, 2017) Release No.34-81494; File No.SR-NYSE-2017-32. Available at: https://www.sec.gov/rules/sro/nyse/2017/34-81494.pdf. Accessed Dec. 8, 2017. p.6

[3] Rhodes, Adam. (Aug. 30, 2017) “NYSE Wants Cos. To Delay End-of-Day Material News.” Law360. Available at: https://www.law360.com/articles/959173/nyse-wants-cos-to-delay-end-of-day-material-news. Accessed on Dec. 8, 2017.

[4] Op. Cit. n1.

[5] Regulation FD. Available at: https://www.sec.gov/fast-answers/answers-regfdhtm.html.

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