[Federal Register Volume 87, Number 219 (Tuesday, November 15, 2022)]
[Notices]
[Pages 68558-68567]
[FR Doc No: 2022-24767]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96272; File No. SR-NYSE-2022-14]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
2, To Modify Certain Pricing Limitations for Securities Listed on the
Exchange Pursuant to a Primary Direct Floor Listing

November 8, 2022.
    On April 7, 2022, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to allow companies to modify certain pricing
limitations for securities listed on the Exchange pursuant to a Primary
Direct Floor Listing. The proposed rule change was published for
comment in the Federal Register on April 19, 2022.\3\ On May 26, 2022,
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a
longer period within which to either approve or disapprove the proposed
rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On July 18, 2022, the
Commission instituted proceedings under Section 19(b)(2)(B) of the Act
\6\ to determine whether to approve or disapprove the proposed rule
change.\7\ On October 11, 2022, the Commission designated a longer
period for Commission action on proceedings to determine whether to
approve or disapprove the proposed rule change.\8\
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 94708 (April 13,
2022), 87 FR 23300 (April 19, 2022). Comments received on the
proposal are available on the Commission's website at: https://www.sec.gov/comments/sr-nyse-2022-14/srnyse202214.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94991 (May 26,
2022), 87 FR 33518 (June 2, 2022). The Commission designated July
18, 2022, as the date by which it should approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 95312 (July 18,
2022), 87 FR 43914 (July 22, 2022).
    \8\ See Securities Exchange Act Release No. 96023 (October 11,
2022), 87 FR 62902 (October 17, 2022).
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    On November 4, 2022, the Exchange filed Amendment No. 1 to the
proposed rule change, which superseded the proposed rule change as
originally filed.\9\ On November 8, 2022, the Exchange filed Amendment
No. 2 to the proposed rule change. Amendment No. 2 to the proposed rule
change is described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 2, from interested persons.
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    \9\ On November 8, 2022, the Exchange withdrew Amendment No. 1.
See infra note 10.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to modify certain pricing limitations for
securities listed on the Exchange pursuant to a Primary Direct Floor
Listing. This Amendment No. 2 to SR-NYSE-2022-14 replaces SR-NYSE-2022-
14 and Amendment No 1 thereto as originally filed and supersedes such
filings in their entirety.\10\ The proposed rule change is available on
the Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
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    \10\ The Exchange filed Amendment No. 1 to SR-NYSE-2022-14 on
November 4, 4022 and withdrew such filing on November 8, 2022.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange recently amended Chapter One of the Listed Company
Manual (the ``Manual'') to modify the provisions relating to direct
listings to

permit a primary offering in connection with a direct listing and to
specify how a direct listing qualifies for initial listing if it
includes both sales of securities by the company and possible sales by
selling shareholders (a ``Primary Direct Floor Listing'').\11\ The
Exchange also adopted Rule 7.31(c)(1)(D) defining the Issuer Direct
Offering (``IDO'') Order for use by a company that wishes to sell its
shares through a Primary Direct Floor Listing and modified Rule 7.35A
to describe how the IDO Order would participate in a Direct Listing
Auction, establish additional requirements for a DMM conducting a
Direct Listing Auction for a Primary Direct Floor Listing, and specify
how the Indication Reference Price would be determined for a security
to be opened in a Direct Listing.\12\ Currently, under Rule
7.35A(g)(2), the DMM will not conduct a Direct Listing Auction for a
Primary Direct Floor Listing if (i) the Auction Price \13\ would be
outside of the price range specified by the company in its effective
registration statement (the ``Price Range Limitation'') \14\ and (ii)
if there is insufficient interest to satisfy both the IDO Order and all
better-priced sell orders in full.
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    \11\ See Securities Exchange Act Release No. 90768 (December 22,
2020), 85 FR 85807 (December 29, 2020) (SR-NYSE-2019-67) (Order
Setting Aside Action by Delegated Authority and Approving a Proposed
Rule Change, as Modified by Amendment No. 2, to Amend Chapter One of
the Listed Company Manual to Modify the Provisions Relating to
Direct Listings) (the ``Approval Order'').
    \12\ Id.
    \13\ See Rule 7.35(a)(6) (defining Auction Price as the price at
which an Auction is conducted); Rule 7.35A (setting forth
requirements relating to the determination of the Auction Price by
the DMM). For purposes of this filing, ``Auction Price'' refers to
the price at which trading would commence in a security to be opened
in a Direct Listing Auction for a Primary Direct Floor Listing.
    \14\ The Exchange notes that references in this rule filing to
the price range established by the issuer in its effective
registration statement are to the price range disclosed in the
prospectus in such registration statement.
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    In this Amendment No. 1 [sic] and as discussed further below, the
Exchange proposes to modify the Price Range Limitation to provide that
a Direct Listing Auction for a Primary Direct Floor Listing may be
conducted if the Auction Price is outside of the price range
established by the issuer in its effective registration statement (the
``Issuer Price Range''), but is at or above the price that is 20% below
the lowest price of the Issuer Price Range \15\ and at or below the
price that is 80% above the highest price of the Issuer Price
Range.\16\ The Exchange proposes that a Direct Listing Auction for a
Primary Direct Floor Listing could proceed in these circumstances at a
price outside of the Issuer Price Range (whether lower or higher),
provided that the issuer has specified the quantity of shares
registered in its registration statement, as permitted by Securities
Act Rule 457, and certified to the Exchange and publicly disclosed
that: (i) it does not expect that the Auction Price would materially
change the issuer's previous disclosure in its effective registration
statement; (ii) the price range in the preliminary prospectus included
in the effective registration statement is a bona fide price range in
accordance with Item 501(b)(3) of Regulation S-K; and (iii) such
registration statement contains a sensitivity analysis explaining how
the issuer's plans would change if the actual proceeds from the
offering differ from the amount assumed in the price range established
by the issuer in its effective registration statement. In addition, if
the issuer certifies to the Exchange a price limit that is below the
price that is 80% above the highest price of the Issuer Price Range,
the Exchange proposes that the Direct Listing Auction for a Primary
Direct Floor Listing may not proceed if the Auction Price determined by
the DMM exceeds such price limit. The Exchange also proposes to require
that a company offering securities for sale in a Primary Direct Floor
Listing must retain an underwriter with respect to the primary sales of
shares by the company and identify the underwriter in its effective
registration statement. This Amendment No. 1 [sic] supersedes the
original filing in its entirety.\17\
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    \15\ As discussed further below, the Exchange proposes to define
the ``Primary Direct Floor Listing Auction Price Range'' in Rule
7.31(c)(1)(D)(ii) as the price range that includes 20% below the
lowest price and 80% above the highest price of the Issuer Price
Range.
    \16\ As provided in proposed Rule 7.31(c)(1)(D)(ii) (discussed
in further detail below), the Exchange proposes to calculate the 20%
and 80% thresholds to determine the Primary Direct Floor Listing
Price Range based on the highest price of the Issuer Price Range.
For example, if the Issuer Price Range is $28.00 to $30.00, the
Primary Direct Floor Listing Price Range would be $22.00 to $54.00.
    \17\ The Exchange believes that this Amendment No. 1 [sic]
addresses the issues raised by the Commission in its Order
Instituting Proceedings to Determine Whether to Approve or
Disapprove a Proposed Rule Change to Modify Certain Pricing
Limitations for Securities Listed on the Exchange Pursuant to a
Primary Direct Floor Listing. See Securities Exchange Act Release
No. 95312 (July 18, 2022), 87 FR 43914 (July 22, 2022) (the
``OIP''). Specifically, the Exchange believes that its proposal
addresses the potential lack of a named underwriter in a Primary
Direct Floor Listing and the usefulness and reliability of the price
range disclosure provided to investors, as further discussed below.
The Exchange also believes that this Amendment No. 1 [sic] addresses
the concerns raised in the comment letter submitted by the Council
of Institutional Investors, which the Exchange believes raised
concerns substantively similar to those raised by the Commission in
the OIP. See Letter from Jeffrey P. Mahoney, General Counsel,
Council of Institutional Investors, dated July 28, 2022, available
at: https://www.sec.gov/comments/sr-nyse-2022-14/srnyse202214-20135103-306084.pdf.
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Background
    The Exchange believes that, while many companies are interested in
alternatives to the traditional initial public offering (``IPO''),
companies and their advisors may be reluctant to use the Primary Direct
Floor Listing under current Exchange rules because of concerns about
the Price Range Limitation.
    One potential benefit of a Primary Direct Floor Listing as an
alternative to a traditional IPO is that it could maximize the chances
of more efficient price discovery of the initial public sale of
securities for issuers and investors. Unlike an IPO, where the offering
price is informed by underwriter engagement with potential investors to
gauge interest in the offering, but ultimately decided through
negotiations between the issuer and the underwriters for the offering,
the initial sale price in a Primary Direct Floor Listing is determined
based on market interest and the matching of buy and sell orders in an
auction open to all market participants.
    In that regard, the Commission noted in the Approval Order that:

    [B]ecause the price of securities issued by a company in a
Primary Direct Floor Listing will be determined based on market
interest and the matching of buy and sell orders, Primary Direct
Floor Listings will provide an alternative way to price securities
offerings that may better reflect prices in the aftermarket, and
thus may allow for efficiencies in IPO pricing and allocation. . . .
The opening auction in a Primary Direct Floor Listing provides for a
different price discovery method for IPOs which may reduce the
spread between IPO price and subsequent market trades, a potential
benefit to existing and potential investors.\18\
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    \18\ See Approval Order, 85 FR at 85816-17 (footnote omitted).
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    A successful IPO of shares requires sufficient investor interest.
If an offering cannot be completed due to lack of investor interest, a
company is likely to receive negative publicity, and the offering may
be delayed or cancelled. The Price Range Limitation--which is imposed
on a Primary Direct Floor Listing but not on an IPO--increases the
probability of a failed offering because it contemplates there also
being too much investor interest. In other words, if investor interest
is greater than the company and other advisors anticipated, an offering
would need to be delayed or cancelled.
    As the Commission has noted with respect to traditional firm
commitment

underwritten offerings, the IPO price, which is established through
negotiation between the underwriters and the issuer, is often lower
than the price that the issuer could have obtained for the securities,
based on a comparison of the IPO price to the closing price on the
first day of trading.\19\ The Exchange believes that the price range in
a company's effective registration statement for a Primary Direct Floor
Listing is similarly determined by the company and other advisors and,
therefore, there may be instances of offerings where the price
determined by the Direct Listing Auction would exceed the highest price
of the price range in the company's effective registration statement.
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    \19\ See, e.g., Approval Order, 85 FR at 85816, n. 113.
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    As described above, under current Exchange Rules, the DMM would not
conduct a Direct Listing Auction for a security subject to a Primary
Direct Floor Listing if the Auction Price determined is above the
highest price of the price range established by the issuer in its
effective registration statement. In this case, the offering would be
cancelled or postponed until the company amends its effective
registration statement. At a minimum, such a delay could expose the
company to risks associated with changing investor sentiment in the
event of an adverse market event. As a result, the Exchange believes
that companies may be reluctant to use this alternative method of going
public despite its expected potential benefits because of the
restrictions of the Price Range Limitation.
Proposed Rule Change
    In light of the above, the Exchange proposes to modify the Price
Range Limitation such that a Direct Listing Auction for a Primary
Direct Floor Listing could proceed if the Auction Price is at or above
the price that is 20% below the lowest price of the Issuer Price Range
and at or below the price that is 80% above the highest price of such
price range. In other words, the Exchange proposes that the DMM could
conduct the Direct Listing Auction, provided all other necessary
conditions are satisfied, even if the Auction Price is outside of the
Issuer Price Range, if the Auction Price would not be more than 20%
below the lowest price or more than 80% above the highest price of such
range. In such cases (whether the Auction Price is lower or higher than
the Issuer Price Range), the Exchange proposes that the company must
have, in its effective registration statement, specified the quantity
of shares registered, as permitted by Securities Act Rule 457.\20\
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    \20\ Securities Act Rule 457 permits issuers to register
securities either by specifying the quantity of shares registered,
pursuant to Rule 457(a), or the proposed maximum aggregate offering
amount. The Exchange proposes to require that companies selling
shares through a Primary Direct Floor Listing will register
securities by specifying the quantity of shares registered and not a
maximum offering amount.
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    The Exchange further proposes that, when the Auction Price is
outside of the Issuer Price Range but not more than 20% below such
price range and not more than 80% above the highest price of such price
range, the Direct Listing Auction would not proceed unless the company
has publicly disclosed and certified to the Exchange that (i) the
company does not expect that such offering price would materially
change the company's previous disclosure in its effective registration
statement; (ii) the price range in the preliminary prospectus included
in the effective registration statement is a bona fide price range in
accordance with Item 501(b)(3) of Regulation S-K; and (iii) the
company's registration statement contains a sensitivity analysis
explaining how the company's plans would change if the actual proceeds
from the offering differ from the amount assumed in the price range
established by the issuer in its effective registration statement.\21\
In addition, if the company's certification submitted to the Exchange
includes a price limit that is below the price that is 80% above the
highest price of the Issuer Price Range, the Direct Listing Auction
would not take place if the Auction Price is determined by the DMM to
be above such limit. When the Auction Price is outside of the Issuer
Price Range (whether it is lower or higher than such price range), the
Exchange also proposes to provide the issuer with the opportunity to
provide any necessary additional disclosures that are dependent on the
price of the offering so that any such disclosures would be available
to investors prior to the completion of the offering. Thus, the
Exchange proposes that a Direct Listing Auction for a Primary Direct
Floor Listing would not take place until the issuer confirms to the
Exchange that no additional disclosures are required under federal
securities laws based on the Auction Price determined by the DMM.
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    \21\ Sensitivity analysis disclosure may include, but is not
limited to, use of proceeds; balance sheet and capitalization; and
the company's liquidity position after the offering. A company could
state, for example: ``We will apply the net proceeds from this
offering first to repay all borrowings under our credit facility and
then, to the extent of any proceeds remaining, to general corporate
purposes.''
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    The Exchange believes that the additional requirements to permit a
Direct Listing Auction to take place at an Auction Price that is
outside of the Issuer Price Range (whether it is lower or higher than
such price range), as proposed, would provide sufficient disclosures to
allow investors to evaluate whether to participate in the Direct
Listing Auction for a Primary Direct Floor Listing, including the
opportunity to see how changes in share price may impact the company's
disclosures.
    The Exchange believes that its proposal with respect to the Price
Range Limitation for a Primary Direct Floor Listing can be analogized
to SEC Rule 430A and question 227.03 of the SEC Staff's Compliance and
Disclosure Interpretations, which generally allow a company to price a
public offering 20% outside of the disclosed price range without regard
to the materiality of the changes to the disclosure contained in the
company's registration statement.\22\ The Exchange believes such
guidance would also allow for deviation of greater than 20% above the
highest price of the price range in a company's registration, provided
that such change would not materially change the previous disclosure.
Accordingly, the Exchange believes that a company listing in connection
with a Primary Direct Floor Listing could specify the quantity of
shares registered, as permitted by Securities Act Rule 457, and, if the
Direct Listing Auction prices outside of the disclosed price range, use
a Rule 424(b) prospectus, rather than a post-effective amendment, when
either (i) the 20% threshold noted in Rule 430A is not exceeded,
regardless of the materiality or non-materiality of resulting changes
to the registration statement disclosure that would be contained in the
Rule 424(b) prospectus, or (ii) there is a deviation above the price
range beyond the 20% threshold noted in Rule 430A if such deviation
would not materially change the previous disclosures, in each case
assuming the number of shares issued is not increased from the number
of shares disclosed in the prospectus.
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    \22\ See Compliance & Disclosure Interpretation of Securities
Act Rules #227.03 at https://www.sec.gov/corpfin/securities-act-rules.
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    The Exchange notes that the Commission previously stated that while
Securities Act 430A permits companies to omit specified price-related
information from the prospectus included in the registration statement
at the time of effectiveness, and later file

the omitted information with the Commission as specified in the rule,
it neither prohibits a company from conducting a registered offering at
prices beyond those that would permit a company to provide pricing
information through a Securities Act Rule 424(b) prospectus supplement
nor absolves any company relying on the rule from any liability for
potentially misleading disclosure under the federal securities
laws.\23\ Accordingly, the burden of complying with the disclosures
required under federal securities laws, including providing any
disclosure necessary to avoid any material misstatements or omissions,
remains with the issuer. In that regard, the Exchange believes that, in
circumstances where the Auction Price would be outside of the Issuer
Price Range, providing the issuer with the opportunity, prior to the
completion of the offering, to provide any necessary additional
disclosures that are dependent on the price of the offering, if any,
and/or determine and confirm to the Exchange that no additional
disclosures are required under federal securities laws based on the
Auction Price determined by the DMM.
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    \23\ Securities Exchange Act Release No. 93119 (September 24,
2021), 86 FR 54262 (September 30, 2021).
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    The Exchange believes that an underwriter plays an important role
in a traditional IPO and, therefore, proposes to require that a company
listing securities on the Exchange in connection with a Primary Direct
Floor Listing must retain an underwriter with respect to the primary
sales of shares by the company and identify the underwriter in its
registration statement. Describing the roles and responsibilities of an
underwriter, the Commission recently explained that:

    [a]s intermediaries between an issuer and the investing public,
underwriters play a critical role as ``gatekeepers'' to the public
markets. Historically, in initial public offerings, where the
investing public might be unfamiliar with a particular issuer,
financial firms that act as underwriters would lend their well-known
name to support that issuer's offering. Where public investors may
not have been inclined to invest with the company seeking to conduct
a public offering, they could take comfort in the fact that a large,
well-known financial institution, acting as underwriter was
including its name on the first page of the issuer's prospectus . .
.
    An underwriter's participation in an issuer's offering also
exposes the underwriter to potential liability under the Securities
Act. The civil liability provisions of the Securities Act reflect
the unique position underwriters occupy in the chain of distribution
of securities and provide strong incentives for underwriters to take
steps to help ensure the accuracy of disclosure in a registration
statement. Section 11 of the Securities Act imposes on underwriters,
among other parties identified in Section 11(a), civil liability for
any part of the registration statement, at effectiveness, which
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading, to any person acquiring such
security. Similarly, Section 12(a)(2) imposes liability upon anyone,
including underwriters, who offers or sells a security, by means of
a prospectus or oral communication, which includes an untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading, to any
person purchasing such security from them. These provisions provide
significant investor protections to those who acquire securities
sold pursuant to a registration statement by providing tools to hold
companies, underwriters, and other parties accountable for
misstatements and omissions in connection with public offerings of
securities. As a result, anyone who might be named as a potential
defendant in these suits has strong incentives to take the necessary
steps to avoid such liability.
    One defense available to an underwriter in a distribution is the
``due diligence'' defense, which shields an underwriter from
liability if it can establish that, after reasonable investigation,
the underwriter had reasonable ground to believe and did believe, at
the time the registration statement became effective, that the
statements therein were true and that there was no omission to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading.\24\
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    \24\ Special Purpose Acquisition Companies, Shell Companies, and
Projections (Proposed Rule), 87 FR 29458 (May 13, 2022).

    The Exchange believes that these significant investor protection
provisions are necessary in a Primary Direct Floor Listing if an
offering can price outside of the price range established in the
issuer's effective registration statement, subject to the proposed
limitations, because such provisions allow investors to make reasonable
pricing decisions with clarity that the company's underwriter would
face statutory liability, as described above. Accordingly, the Exchange
proposes to require that a company listing securities on the Exchange
through a Primary Direct Floor Listing must retain an underwriter with
respect to the primary sales of shares by the company and identify the
underwriter in its effective registration statement.
    The Exchange also believes that the requirement to retain a named
underwriter, as described above, may mitigate concerns raised by the
Commission in the OIP regarding challenges to bringing claims under
Section 11 of the Securities Act due to the potential assertion of
tracing defenses because an underwriter may choose to impose lock-up
arrangements, as described below.
    As a preliminary matter, the Exchange notes that, in the Approval
Order, the Commission explained that the issue of traceability:

    is potentially implicated anytime securities that are not the
subject of a recently effective registration statement trade in the
same market at those that are so subject. Where a registration
statement, at the time of effectiveness, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, Section 11(a) of the Securities Act provides
a cause of action to ``any person acquiring such security,'' unless
it is proved at the time of the acquisition the person ``knew of
such untruth or omission.'' Courts have interpreted this statutory
provision to permit aftermarket purchases (i.e., those who acquire
their securities in secondary market transactions rather than in the
initial distribution from the issuer or underwriter) to recover
damages under Section 11, but only if they can trace the acquired
shares back to the offering covered by the false or misleading
registration statement. Tracing is not set forth in Section 11 and
is judicially-developed doctrine. As such, the application of this
doctrine and, in particular, the pleading standards and factual
proof that potential claimants must satisfy vary depending on the
particular facts of the distribution and judicial district.\25\
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    \25\ See Approval Order, 85 FR at 85815-16 (internal citations
omitted).

    The Commission then reaffirmed its position that ``concerns
regarding shareholders' ability to pursue claims pursuant to Section 11
of the Securities Act due to traceability issues are not exclusive to
nor necessarily inherent in Primary Direct Floor Listings'' and further
stated that it ``is not aware of . . . any precedent to date in the
direct listing context which prohibits plaintiffs from pursuing Section
11 claims.'' \26\ The Exchange believes that no such precedent exists
as of the date of this Amendment and that the modifications to the
Price Range Limitation in this proposal do not, in any way, exacerbate
the tracing issues.
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    \26\ See id. at 85816.
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    However, as stated above, the Exchange believes that the
requirement to retain a named underwriter may mitigate traceability
concerns that could arise in the context of a Primary Direct Floor
Listing. As in a traditional firm commitment underwritten IPO, in which
lock-up arrangements are often imposed, an underwriter in connection
with a Primary Direct Floor Listing, as

required by the Amendment, would be able to impose lock-up agreements
for the same reasons that make lock-up agreements common in an IPO.
    The Exchange also believes that the requirement to retain a named
underwriter, as described above, mitigates concerns raised by the
Commission in the OIP regarding the usefulness of price range
disclosure provided to investors in a Securities Act registration
statement filed in connection with a Primary Direct Floor Listing. The
Exchange believes that an underwriter retained in connection with a
Primary Direct Floor Listing would perform substantially similar
functions, including those related to establishing and adjusting the
price range, to those performed by an underwriter in a typical IPO
because the underwriter would be subject to similar liability and
reputational risk.
    To further mitigate concerns regarding the usefulness of price
range disclosure provided to investors, the Exchange proposes to
require that the securities of a company listing in connection with a
Primary Direct Floor Listing cannot price above an ``Upper Limit,''
which would not be higher than 80% above the highest price of the
Issuer Price Range. The Upper Limit would incentivize the company and
its underwriter to set the disclosed price range to avoid the failed
offering consequences described above. The Upper Limit would also
encourage an issuer to adjust the price range disclosed in their
registration statement prior to effectiveness in response to pricing
feedback received from market analysts and potential investors.
    To determine an appropriate Upper Limit, the Exchange analyzed
operation companies' IPOs on the NYSE and the Nasdaq Global Select
Market for 2020 and 2021.\27\ This analysis indicated that the vast
majority of IPOs opened at a price above the highest price of the
issuer's disclosed price range and, moreover, that 90% of these IPOs
opened at a price that was no more than the Upper Limit. Based on this
data, the Exchange believes that, on balance, capital formation and
investor protection goals would be best served by a pricing limitation
equal to the Upper Limit.
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    \27\ This data set included approximately 600 records and
includes IPOs that took place between January 2020 and December
2021.
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    Given that, as proposed, there may be a Primary Direct Floor
Listing that could price outside of the price range of the company's
effective registration statement, subject to the Upper Limit above
which the Direct Listing Auction could not proceed,\28\ the Exchange
proposes to support price discovery transparency by providing readily
available, real time pricing information to investors. Specifically,
the DMM's pre-opening indications for a security to be opened in a
Direct Listing Auction for a Primary Direct Floor Listing would
continue to be published via the securities information processor
(``SIP'') and proprietary data feeds.\29\ In addition, the Exchange
would make the Indication Reference Price available, free of charge, on
a public website (such as www.nyse.com) on the day such Auction is
anticipated to take place.\30\
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    \28\ In addition, if the company's certification to the Exchange
includes a price limit that is lower than the Upper Limit and the
Auction Price determined by the DMM exceeds such lower price limit,
the Exchange would not conduct the Direct Listing Auction.
    \29\ The Exchange notes that its dissemination of pre-opening
indications for a security to be opened in a Direct Listing Auction
for a Primary Direct Floor Listing via the SIP and proprietary data
feeds is consistent with the availability of the same for securities
opened in IPOs and believes that interested investors have found
pre-opening indications to be readily accessible and to provide
useful real time pricing information to inform their participation
in such auctions. The Exchange thus believes that its proposal
addresses the concerns raised in the OIP regarding the sufficiency
of price discovery transparency for investors.
    \30\ The Indication Reference Price for a security to be opened
in a Primary Direct Floor Listing is the lowest price of the Primary
Direct Floor Listing Price Range. See Rule 7.35A(d)(2)(A)(v).
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    In addition, to protect investors and enhance disclosure in
connection with a Primary Direct Floor Listing, the Exchange proposes
to adopt certain requirements for member organizations with respect to
Primary Direct Floor Listings. Specifically, the Exchange proposes to
require member organizations to provide to a customer, before that
customer places an order to participate in the Direct Listing Auction
for a Primary Direct Floor Listing, a notice describing the mechanics
of pricing a security subject to a Direct Listing Auction for a Primary
Direct Floor Listing, including information regarding the availability
of pre-opening indications via the SIP and proprietary data feeds and
the location of the public website where the Exchange will disseminate
information relating to the Indication Reference Price.
    The Exchange further proposes to distribute, at least one business
day prior to the commencement of trading of a security listing in
connection with a Primary Direct Floor Listing, a regulatory bulletin
that describes any special characteristics of the offering and the
Exchange rules that apply to the pricing of a Primary Direct Floor
Listing. The regulatory bulletin would also include information about
the notice that member organizations would be required to provide
customers, as proposed, and remind member organizations of their
obligations pursuant to the Exchange rules that:
     Require member organizations to use reasonable diligence
in regard to the opening and maintenance of every account, to know (and
retain) the essential facts concerning every customer and concerning
the authority of each person acting on behalf of such customer (Rule
2090); and
     Require member organizations in recommending transactions
for a security subject to a Direct Listing Auction for a Primary Direct
Floor Listing to have a reasonable basis to believe that: (i) the
recommendation is suitable for a customer given reasonable inquiry
concerning the customer's investment objectives, financial situation,
needs, and any other information known by such member organizations,
and (ii) the customer can evaluate the special characteristics, and is
able to bear the financial risks, of an investment in such security
(Rule 2111).
    These member organization requirements are intended to remind
members of their obligations to ``know their customers'' and would also
serve to increase transparency regarding the pricing mechanisms
applicable to a Primary Direct Floor Listing and help provide investors
with sufficient price discovery information.
    For each Primary Direct Floor Listing, the Exchange proposes that
its regulatory bulletin would also inform market participants that the
Auction Price could be up to 20% below the lowest price of the price
range in the company's effective registration statement and specify
what that price is. The Exchange's regulatory bulletin would also
indicate the price above which the Direct Listing Auction for the
Primary Direct Floor Listing could not proceed (i.e., the Upper Limit
or other lower price based on the company's certification as described
above).
Amendments to the Manual
    Section 102.01B(E) of the Manual provides that companies may be
listed on the Exchange through a Primary Direct Floor Listing. More
specifically, a company that has not previously had its common equity
securities registered under the Act may list its common equity
securities on the Exchange at the time of effectiveness of a
registration statement pursuant to which the company itself will sell
shares in the opening auction on the first day of trading on the
Exchange. A Primary Direct Floor Listing is any such listing in which
either (i) only the company

itself is selling shares in the opening auction on the first day of
trading or (ii) the company is selling shares and selling shareholders
may also sell shares in such opening auction.
    Section 102.01B(E) of the Manual also provides that, with respect
to a Primary Direct Floor Listing, the Exchange will deem a company to
have met the applicable aggregate market value of publicly-held shares
requirement if the company will sell at least $100,000,000 in market
value of shares in the Exchange's opening auction on the first day of
trading on the Exchange. The Manual further provides that, where a
company is conducting a Primary Direct Floor Listing and will sell
shares in the opening auction with a market value of less than
$100,000,000, the Exchange will determine that such company has met its
market-value of publicly-held shares requirement if the aggregate
market value of the shares the company will sell in the opening auction
on the first day of trading and the shares that are publicly held
immediately prior to the listing is at least $250,000,000 with such
market value calculated using a price per share equal to the lowest
price of the price range established by the issuer in its registration
statement.
    To effect the changes to the Price Range Limitation described above
and facilitate the possibility of a Direct Listing Auction for a
Primary Direct Floor Listing pricing up to 20% below the price range
disclosed in an issuer's effective registration statement, the Exchange
proposes to modify Section 102.01B(E) of the Manual to provide that the
Exchange would calculate the market value of such company's shares
using a price per share equal to the lowest price of the price range
established by the issuer in its effective registration statement,
minus an amount equal to 20% of the highest price included in such
price range, which will be referred to as the ``Primary Direct Floor
Listing Minimum Price.'' As noted above, the Exchange proposes that a
company listing its securities on the Exchange pursuant to a Primary
Direct Floor Listing must have (1) specified the quantity of shares
registered, as permitted by Securities Act Rule 457, in its effective
registration statement, and (2) retained an underwriter with respect to
the primary sales of shares by the company and identified the
underwriter in its effective registration statement. Accordingly, the
Exchange further proposes to amend Section 102.01B(E) to include this
requirement.
Amendments to Exchange Rules
    To implement the changes to the Price Range Limitation described
above, the Exchange also proposes the following changes to Rules 7.31
and 7.35A.
Proposed Changes to Rule 7.31
    The Exchange proposes to modify Rule 7.31(c)(1)(D), which defines
the IDO Order. Rule 7.31(c)(1)(D) currently provides that an IDO Order
is a Limit Order to sell that is to be traded only in a Direct Listing
Auction for a Primary Direct Floor Listing, and Rule 7.31(c)(1)(D)(ii)
currently provides that the limit price of an IDO Order must be equal
to the lowest price of the price range established by the issuer in its
effective registration statement. The Exchange proposes to modify Rule
7.31(c)(1)(D)(ii) to provide that the limit price of an IDO Order would
be equal to the lowest price of the ``Primary Direct Floor Listing
Auction Price Range'' and to redefine the ``Primary Direct Floor
Listing Auction Price Range'' as 20% below the lowest price and 80%
above the highest price of the price range established by the issuer in
its effective registration statement. The Exchange also proposes to
define ``Issuer Price Range'' as the price range established by the
issuer in its effective registration statement. Thus, Rule
7.31(c)(1)(D)(ii), as modified, would facilitate the proposed changes
to the Price Range Limitation by providing that the limit price of an
IDO Order would be equal to the price that is 20% below the lowest
price of the Issuer Price Range.
    The Exchange further proposes to specify in Rule 7.31(c)(D)(ii)
that, for purposes of determining the Primary Direct Floor Listing
Price Range, the 20% and 80% thresholds would be calculated based on
the highest price of the Issuer Price Range.
Proposed Changes to Rule 7.35A
    Rule 7.35A sets forth rules pertaining to Core Open Auctions and
Trading Halt Auctions facilitated by a DMM. Rule 7.35A(d) sets forth
Exchange rules relating to pre-opening indications published by a DMM
in connection with a DMM-facilitated auction. This Rule currently
provides that a pre-opening indication will include the security and
the price range within which the Auction Price is anticipated to occur
and that a pre-opening indication--including for a Direct Listing
Auction for a Primary Direct Floor Listing--will be published via the
securities information processor and proprietary data feeds.
    Rule 7.35A(d)(2)(A) and the subparagraphs thereunder describe the
Indication Reference Price for a security to be opened in a DMM-
facilitated auction. The Exchange proposes to amend Rule
7.35A(d)(2)(A)(v), which currently provides that, for a security that
is a Primary Direct Floor Listing, the Indication Reference Price will
be the lowest price of the Primary Direct Floor Listing Auction Price
Range. To effect the proposed requirement described above that the
Exchange disseminate the Indication Reference Price on a public
website, the Exchange proposes to add this requirement to Rule
7.35A(d)(2)(A)(v). The Exchange also notes that, based on the proposed
revision to the definition of Primary Direct Floor Listing Auction
Price Range in Rule 7.31(c)(1)(D)(ii), the Indication Reference Price
for a Primary Direct Floor Listing would be the price that is 20% below
the lowest price of the Issuer Price Range, consistent with the
proposed changes to the Price Range Limitation described above.
    Next, the Exchange proposes to modify Rule 7.35A(g)(2), which
specifies the circumstances under which a DMM may not conduct a Direct
Listing Auction for a Primary Direct Floor Listing. Structurally, the
Exchange proposes to amend Rule 7.35A(g)(2) such that the rule would
specify requirements for a Direct Listing Auction for a Primary Direct
Floor Listing to proceed, rather than specifying circumstances under
which a DMM would not conduct a Direct Listing Auction for a Primary
Direct Floor Listing.
    Rule 7.35A(g)(2)(A) currently provides that the DMM will not
conduct a Direct Listing Auction for a Primary Direct Floor Listing if
the Auction Price would be below the lowest price or above the highest
price of the Primary Direct Floor Listing Auction Price Range. The
Exchange proposes to modify this rule to specify that the Auction Price
for a Direct Listing Auction for a Primary Direct Floor Listing may not
be lower than the price that is 20% below the lowest price of the
Issuer Price Range or higher than the price that is 80% above the
highest price of the Issuer Price Range. In other words, the Auction
Price may not be outside of the Primary Direct Floor Listing Auction
Price Range, as defined in amended Rule 7.31(c)(1)(D)(ii). The Exchange
proposes that Rule 7.35A(g)(2)(A) would further provide that, if an
issuer has certified to the Exchange a maximum Auction Price that is
lower than 80% above the highest price of the Issuer Price Range, the
Auction Price may not exceed such lower price.

    The Exchange proposes to amend Rule 7.35A(g)(2)(B) to provide that
a Direct Listing Auction could proceed when the Auction Price is
outside of the Issuer Price Range but within the Primary Direct Floor
Listing Auction Price Range (as described in proposed Rule
7.35A(g)(2)(A)) if the issuer has previously certified to the Exchange
and publicly disclosed that:
     The issuer does not expect that the Auction Price would
materially change its previous disclosure in its effective registration
statement (proposed Rule 7.35A(g)(2)(B)(i)(a));
     The price range in the preliminary prospectus included in
the effective registration statement is a bona fide price range in
accordance with Item 501(b)(3) of Regulation S-K (proposed Rule
7.35A(g)(2)(B)(i)(b)); and
     The registration statement contains a sensitivity analysis
explaining how the issuer's plans would change if the actual proceeds
from the offering differ from the amount assumed in the price range
established by the issuer in its effective registration statement
(proposed Rule 7.35A(g)(2)(B)(i)(c)).
    Proposed Rule 7.35A(g)(2)(B)(ii) would further provide that, when
the Auction Price determined by the DMM is outside of the Issuer Price
Range (whether lower or higher), the issuer would be required to
confirm to the Exchange that no additional disclosures are required
under the federal securities laws based on such price. This proposed
change would permit issuers to comply with their disclosure obligations
under federal securities laws and provide investors with access to the
requisite disclosures before the offering would proceed, as detailed
above. Upon receiving confirmation from the issuer that any such
obligations have been met, the Exchange would relay that information to
the DMM to proceed with the Direct Listing Auction.
    Finally, the Exchange proposes to add new subparagraph (C) under
Rule 7.35A(g)(2). Proposed Rule 7.35A(g)(2)(C)(i) would reflect the
requirement set forth in current Rule 7.35A(g)(2)(B) that the DMM may
not conduct a Direct Listing Auction for a Primary Direct Floor Listing
if there is insufficient buy interest to satisfy both the IDO Order and
all better-priced sell orders in full. The Exchange does not propose to
change this requirement, other than adding clarifying text to specify
that such orders would be satisfied at the Auction Price.
    Proposed Rule 7.35A(g)(2)(C)(ii) would set forth an additional
requirement that must be satisfied before the DMM could conduct a
Direct Listing Auction for a Primary Direct Floor Listing. This
proposed change would reflect the proposed requirements described above
regarding the regulatory bulletin to be distributed by the Exchange.
Proposed Rule 7.35A(g)(2)(C)(ii) would provide that the DMM would not
proceed with a Direct Listing Auction for a Primary Direct Floor
Listing until it has been notified by the Exchange that the additional
conditions set forth in new Commentary .20 to Rule 7.35A have been
satisfied. Proposed Commentary .20 to Rule 7.35A would provide that the
Direct Listing Auction for a Primary Direct Floor Listing for a
security may not be conducted until the Exchange has notified the DMM
that, at least one business day prior to the commencement of trading in
such security, the Exchange has distributed a regulatory bulletin
describing any special characteristics of the offering and the Exchange
rules that apply to the pricing of the Primary Direct Floor Listing;
the obligations of member organizations pursuant to Exchange Rules 2090
and 2111; and the requirement that a member organization provide its
customers with a notice with information regarding the Direct Listing
Auction for a Primary Direct Floor Listing. This proposed change would
(i) facilitate the requirements described above to provide member
organizations with sufficient information so that they may in turn
inform their customers, (ii) remind member organizations of their
obligations to ``know their customers,'' (iii) increase transparency
around the pricing mechanisms of a Primary Direct Floor Listing, and
(iv) help provide investors with sufficient price discovery
information.
    Proposed Rule 7.35A(g)(2)(C)(iii) would provide that the DMM would
not conduct a Direct Listing Auction for a Primary Direct Floor Listing
if the Auction Price is outside of the Issuer Price Range and the
issuer has not satisfied the conditions set forth in proposed Rules
7.35A(g)(2)(A), 7.35A(g)(2)(B)(i), and 7.35A(g)(2)(B)(ii). The Exchange
proposes this rule to reinforce that a Direct Listing Auction for a
Primary Direct Floor Listing could not proceed in these circumstances
unless the Auction Price meets the requirements of proposed Rule
7.35A(g)(2)(A) and the issuer has made the requisite disclosures
described in proposed Rule 7.35A(g)(2)(B).
1. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\31\ in general, and furthers the
objectives of Section 6(b)(5) of the Exchange Act,\32\ in particular,
in that it is designed to promote just and equitable principles of
trade, to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, to remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed modification of the Price
Range Limitation would promote just and equitable principles of trade,
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and protect investors and the
public interest because the proposed approach is similar to the pricing
of an IPO, where the issuer is permitted to price outside of the price
range disclosed in its effective registration statement in accordance
with the SEC Staff's guidance, as described above.\33\ Specifically,
the Exchange believes that it is reasonable to permit the Direct
Listing Auction for a Primary Direct Floor Listing to proceed if the
Auction Price is as low as 20% below the lowest price of the Issuer
Price Range or as high as 80% above the highest price of such price
range (or as high as the upper price limit set by the issuer in its
certification to the Exchange)--because a company listing in connection
with a Primary Direct Floor Listing could specify the quantity of
shares registered, as permitted by Securities Act Rule 457, and, when
the Auction Price is outside of the disclosed price range, use a Rule
424(b) prospectus, rather than a post-effective amendment, when either
(i) the 20% threshold noted in Rule 430A is not exceeded, regardless of
the materiality or non-materiality of resulting changes to the
registration statement disclosure that would be contained in the Rule
424(b) prospectus, or (ii) there is a deviation above the price range
beyond the 20% noted in Rule 430A if such deviation would not
materially change the previous disclosure, in each case assuming the

number of shares issued is not increased from the number of shares
disclosed in the prospectus.
---------------------------------------------------------------------------

    \33\ See Compliance & Disclosure Interpretation of Securities
Act Rules #227.03, supra note 15. The Exchange also notes that, in a
recent speech, SEC Chair Gary Gensler emphasized that an overarching
principle of regulation is that like activities ought to be treated
alike. See https://www.sec.gov/news/speech/gensler-healthy-markets-associationconference-120921 (``Gensler Speech'').
---------------------------------------------------------------------------

    In addition, in the event that the Auction Price is outside of the
Issuer Price Range, the Exchange proposes that the Direct Listing
Auction for a Primary Direct Floor Listing could still proceed, but
would not be conducted until the issuer has met disclosure requirements
that would help provide investors with additional information regarding
the offering, including a requirement that the issuer's effective
registration statement contain a sensitivity analysis explaining how
the issuer's plans would change if the actual proceeds from the Primary
Direct Floor Listing are lower or higher than the amount assumed by the
price range set forth in the registration statement. The Exchange also
proposes to require that an issuer must have confirmed to the Exchange
that no additional disclosures are required under the federal
securities laws based on the Auction Price determined. The issuer would
thus have the opportunity to provide any necessary additional
disclosures that are dependent on the price of the offering prior to
the completion of the offering. Accordingly, the Exchange believes that
this proposed change is designed to promote just and equitable
principles of trade and to remove impediments to and perfect the
mechanism of a free and open market because it would allow an offering
to proceed under certain circumstances when the Auction Price is
outside of the Issuer Price Range--including where investor interest is
greater than the company and its advisors anticipated (thereby
promoting capital formation)--while protecting investors by requiring
that a company listing shares through a Primary Direct Floor Listing
make applicable disclosures under the federal securities laws. The
Exchange also believes that its proposal to allow a Direct Listing
Auction for a Primary Direct Floor Listing to price above the Issuer
Price Range but below the Upper Limit is designed to promote just and
equitable principles of trade and remove impediments to and perfect the
mechanism of a free and open market because this approach is similar
to, but more stringent than, that of pricing a traditional IPO. The
Exchange also believes that the proposed Upper Limit and requirement
that the securities of a company listing in connection with a Primary
Direct Floor Listing cannot price above such Upper Limit is designed to
protect investors and the public interest because it would incentivize
the company, its underwriter, and other advisors to avoid a failed
offering by taking steps to ensure the accuracy of price range
disclosure in a registration statement, thereby providing the investing
public with a useful and reliable price range in connection with the
planned Primary Direct Floor Listing.
    The Exchange also believes that the proposed requirement that a
company offering securities for sale in connection with a Primary
Direct Floor Listing must retain an underwriter with respect to the
primary sales of shares by the company and identify the underwriter in
its effective registration statement would promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market, and protect investors and the public interest
because the requirement would facilitate holding underwriters
accountable for potential misstatements and omissions in connection
with a Primary Direct Floor Listing. The Exchange also believes that an
underwriter would be incentivized to take necessary steps to support
accurate price range disclosure to avoid exposure to statutory
liability, thereby offering the investing public greater assurances
with respect to the reliability of the price range disclosure for a
Primary Direct Floor Listing.
    The Exchange also believes that the proposed change is designed to
promote investor protection because the Exchange would support price
discovery transparency by providing readily available, real time
pricing information to investors by disseminating pre-opening
indications via the SIP and proprietary data feeds on the day on which
the Direct Listing Auction for a Primary Direct Floor Listing is
anticipated to take place. Market participants would thus have ready
access to up-to-date pricing information leading up to a Direct Listing
Auction for a Primary Direct Floor Listing.
    In particular, the Exchange believes that making pre-opening
indications readily available to market participants would provide
price transparency to the market in connection with Primary Direct
Floor Listings. Pre-opening indications, which are based on the DMM's
assessment of interest eligible to participate in the Direct Listing
Auction for a Primary Direct Floor Listing, would provide notice of
when price volatility has subsided and price equilibrium has been met
with respect to the orders that wish to participate in such Auction. In
addition, Exchange rules establishing pre-opening indication procedures
already include requirements supporting the precision and reliability
of pre-opening indications, such as those set forth in Rule
7.35A(d)(4)(C), which provides that DMMs should aim to publish a pre-
opening indication with a spread of less than $1.00 before opening a
security; Rule 7.35A(d)(4)(D), which provides that the DMM must wait
for certain minimum specified periods after publishing a pre-opening
indication and before opening a security; and Rule 7.35A(d)(4)(G),
which provides that the DMM may not open a security outside of the
last-published pre-opening indication. As the table below shows, the
DMMs in the Selling Shareholder Direct Floor Listings that took place
in 2020 and 2021 indicated very tight and reliable anticipated opening
price ranges irrespective of the amount of time between the last
indication and opening auction:

----------------------------------------------------------------------------------------------------------------
                                                 Last pre-                      Time elapsed between last pre-
Date of direct listing auction     Symbol         opening      Auction price    opening indication and auction
                                                indication                                   open
----------------------------------------------------------------------------------------------------------------
9/30/2020.....................  PLTR              9.95-10.05              10  10 minutes, 19 seconds.
9/30/2020.....................  ASAN                26.75-27              27  2 minutes, 24 seconds.
3/10/2021.....................  RBLX             64.25-64.75            64.5  3 minutes, 2 seconds.
5/19/2021.....................  SQSP                 47.5-48              48  2 minutes, 31 seconds.
5/26/2021.....................  ZIP              19.75-20.25              20  16 minutes, 29 seconds.
9/29/2021.....................  WRBY                 54-54.5           54.05  12 minutes, 31 seconds.
----------------------------------------------------------------------------------------------------------------

    The Exchange thus believes that its existing pre-opening indication
process provides significant investor protection measures based on the
Exchange rules governing the publishing of pre-opening indications and
the judgment applied by the DMM in refining the anticipated price range
of a security to be opened in a Direct Listing Auction as

appropriate and in determining that the price has reached stability,
such that the Direct Listing Auction should proceed.\34\
---------------------------------------------------------------------------

    \34\ The Exchange believes that it would be appropriate to
permit Market Orders and MOO Orders (as defined in Rules 7.31(a)(1)
and 7.31(c)(1)(B)) to participate in a Direct Listing Auction for a
Primary Direct Floor Listing, given the safeguards provided by the
pre-opening indication process. Although Market Orders and MOO
Orders are unpriced orders, the Exchange believes that Market Orders
and MOO Orders that participate in a Direct Listing Auction for a
Primary Direct Listing would not be subject to extreme price
volatility due to the DMM's role in refining pre-opening indications
and determining the Auction Price, as well as the DMM's obligation
under Rule 7.35A(g) to fill all better-priced interest. Moreover,
investors submitting Market Orders and MOO Orders would have the
benefit of readily available, real time pricing information to
inform their decision to participate in the Auction. The Exchange
also notes that data from IPOs (which are not subject to the Price
Range Limitation) that took place in the last six calendar months
indicates that MOOs made up a significant portion of opening auction
volume and thus believes that allowing MOOs to participate in a
Direct Listing Auction for a Primary Direct Floor Listing could
encourage investor participation.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to issue a regulatory
bulletin as outlined above would promote just and equitable principles
of trade, remove impediments to and perfect the mechanism of a free and
open market, and promote investor protection because it would provide
member organizations with the necessary information to share with their
customers regarding the Primary Direct Floor Listing. Specifically, the
proposed regulatory bulletin would be distributed at least one business
day prior to the commencement of trading in a security to be listed in
connection with a Direct Listing Auction for a Primary Direct Floor
Listing and would describe any special characteristics of the offering,
as well as the Exchange Rules that apply to the pricing of a Direct
Listing Auction for a Primary Direct Floor Listing. The regulatory
bulletin would inform prospective participants in the Direct Listing
Auction that the Auction Price could be up to 20% below the lowest
price of the Issuer Price Range (and specify what that price is) and
indicate the price above which the Direct Listing Auction for a Primary
Direct Floor Listing could not proceed, which would be either the Upper
Limit or a lower limit based on the company's certification as
described above. The Exchange also believes that the regulatory
bulletin would further the protection of investors by reminding member
organizations of their obligations pursuant to Exchange Rules 2090 and
2111 to ``know their customers,'' providing member organizations and
their customers with information regarding the pricing mechanism of a
Direct Listing Auction for a Primary Direct Floor Listing, and helping
investors receive sufficient price discovery information.
    The Staff of the Commission in a Compliance and Disclosure
Interpretation has indicated that pricing up to 20% below the lowest
price and at a price above the highest price of the price range set
forth in the company's effective registration statement is appropriate
for a company conducting an IPO, notwithstanding that the price would
be outside of the range stated in the company's effective registration.
The Exchange believes that investors have become familiar with this
approach at least since the Staff last revised Compliance and
Disclosure Interpretation 227.03 in January 2009.\35\ Accordingly, the
Exchange believes that allowing Direct Listing Auctions in connection
with a Primary Direct Floor Listing to similarly price up to 20% below
the lowest price and at a price not more than 80% above the highest
price of the price range in the company's effective registration
statement would be consistent with both Chair Gensler's recent call to
treat ``like cases alike'' \36\ and the protection of investors.
---------------------------------------------------------------------------

    \35\ See Compliance & Disclosure Interpretation of Securities
Act Rules #227.03, supra note 15.
    \36\ See Gensler Speech, supra note 26.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed changes to the Manual
are consistent with the protection of investors. Specifically, the
proposed change to Section 102.01B(E) to specify that a company
offering securities for sale in connection with a Primary Direct Floor
Listing must register securities by specifying the quantity of shares
registered, as permitted by Securities Act Rule 457(a), would promote
investor protection because it would provide certainty regarding the
number of shares available in connection with the Primary Direct Floor
Listing, even if the Auction Price of such shares may be outside of the
price range specified in the issuer's effective registration statement.
The Exchange also believes that the proposed change to Section
102.01B(E) to specify that a company offering securities for sale in
connection with a Primary Direct Floor Listing must retain an
underwriter with respect to the primary sales of shares by the Company
and identify the underwriter in its effective registration statement
would support the protection of investors for the reasons described
above. The Exchange also believes that the proposed change to Section
102.01B(E) to reflect that the market value calculation of a company's
shares would be based on a price per share equal to the lowest price of
the price range established by the issuer in its registration
statement, less an amount equal to 20% of the highest price included in
such price range, is consistent with the protection of investors
because it would not modify any other applicable listing requirements
and would update the Manual to align with the proposed changes to the
Price Range Limitation described herein.
    Finally, the Exchange believes that its proposed changes with
respect to the Price Range Limitation would remove impediments to and
perfect the mechanism of a free and open market and a national market
system because they would not change the existing process for a DMM-
facilitated Direct Listing Auction for a Primary Direct Floor Listing,
but would eliminate a potential impediment to companies considering a
Primary Direct Floor Listing, thereby encouraging capital formation. In
addition, the proposed changes are designed to protect investors and
the public interest because they would provide an expanded opportunity
for a Primary Direct Floor Listing to proceed so that the issuer's
securities can be listed and begin trading on the secondary market.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Rather, the proposed change
would increase competition by continuing to facilitate new pathways for
companies to access the public markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or

     Send an email to [email protected]. Please include
File Number SR-NYSE-2022-14 on the subject line.
Paper Comments
     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2022-14. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2022-14, and should be submitted on
or before December 6, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24767 Filed 11-14-22; 8:45 am]
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[Federal Register Volume 80, Number 91 (Tuesday, May 12, 2015)]
[Rules and Regulations]
[Pages 27072-27074]
[FR Doc No: 2015-10071]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2015-0415; Directorate Identifier 2015-CE-001-AD;
Amendment 39-18152; AD 2015-09-06]
RIN 2120-AA64

Airworthiness Directives; GROB-WERKE Airplanes

AGENCY: Federal Aviation Administration (FAA), Department of
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: We are superseding Airworthiness Directive (AD) 2014-26-04 for
certain GROB-WERKE Models G115EG and G120A airplanes. This AD results
from mandatory continuing airworthiness information (MCAI) issued by an
aviation authority of another country to identify and correct an unsafe
condition on an aviation product. The MCAI describes the unsafe
condition as a defective starter solenoid. We are issuing this AD to
require actions to address the unsafe condition on these products.

DATES: This AD is effective June 16, 2015.
    The Director of the Federal Register approved the incorporation by
reference of certain publications listed in the AD as of June 16, 2015.
    The Director of the Federal Register approved the incorporation by
reference of certain other publications listed in this AD as of
February 9, 2015 (80 FR 155, January 5, 2015).

ADDRESSES: You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-
0415; or in person at the Docket Management Facility, U.S. Department
of Transportation, Docket Operations, M-30, West Building Ground Floor,
Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.
    For service information identified in this AD, contact Grob
Aircraft AG, Customer Service, Lettenbachstrasse 9, D-86874
Tussenhausen-Mattsies, Germany, telephone: + 49 (0) 8268-998-105; fax:
+ 49 (0) 8268-998-200; email<EMAIL_ADDRESS>
Internet: grob-aircraft.com. You may view this referenced service
information at the FAA, Small Airplane Directorate, 901 Locust, Kansas
City, Missouri 64106. For information on the availability of this
material at the FAA, call<PHONE_NUMBER>. It is also available on the
Internet at http://www.regulations.gov by searching for and locating
Docket No. FAA-2015-0415.

FOR FURTHER INFORMATION CONTACT: Karl Schletzbaum, Aerospace Engineer,
FAA, Small Airplane Directorate, 901 Locust, Room 301, Kansas City,
Missouri 64106; telephone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>; email:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 to add an AD that would apply to certain GROB-WERKE Models
G115EG and G120A airplanes. That NPRM was published in the Federal
Register on February 26, 2015 (80 FR 10423), and proposed to supersede
AD 2014-26-04, Amendment 39-18055 (80 FR 155, January 5, 2015).
    The NPRM proposed to correct an unsafe condition for the specified
products and was based on mandatory continuing airworthiness
information (MCAI) originated by an aviation authority of another
country. The MCAI states:

    An operator of a G 115E aeroplane experienced a total loss of
electrical power in flight. The investigation found that a defective
starter solenoid had caused an internal short circuit which resulted
in breakdown of the system voltage.

    This condition, if not detected and corrected, could result in
reduced control of the aeroplane.
    To address this potential unsafe condition, GROB Aircraft AG
issued Mandatory Service Bulletin (MSB) MSB1078-196 for G 115
aeroplanes and MSB 1121-144 for G 120 aeroplanes to provide
instructions for inspection and corrective action. Consequently,
EASA issued AD 2014-0212 to require a one-time inspection of the
starter solenoid and, depending on findings, replacement of the
starter. In addition, for G 115E aeroplanes, installation of a
placard was required.
    More recently, GROB Aircraft AG developed a modification to
avoid loss of electrical power in case of electrical shortage in the
starter solenoid, which was published in revised GROB MSB1078-196/1
and MSB1121-144/1.
    Prompted by this development, EASA issued AD 2015-0010,
retaining the requirements of EASA AD 2014-0212, which was
superseded, and required installation of a starter relay.
    Since that AD was issued, operator comments have indicated the
existence of a logistical problem, resulting in the unnecessary
grounding of aeroplanes.
    For the reason described above, this AD is revised to amend
paragraph (3), extending the compliance time for modification.

    You may examine the MCAI on the Internet at http://www.regulations.gov/#!documentDetail;D=FAA-2015-0415-0002.

Comments

    We gave the public the opportunity to participate in developing
this AD. We received no comments on the NPRM (80 FR 10423, February 26,
2015) or on the determination of the cost to the public.

Conclusion

    We reviewed the relevant data and determined that air safety and
the public interest require adopting the AD as proposed except for
minor editorial changes. We have determined that these minor changes:
     Are consistent with the intent that was proposed in the
NPRM (80 FR 10423, February 26, 2015) for correcting the unsafe
condition; and
     Do not add any additional burden upon the public than was
already proposed in the NPRM (80 FR 10423, February 26, 2015).

Relevant Service Information Under 1 CFR Part 51

    We reviewed GROB Aircraft Service Bulletin No. MSB1078-196, dated
July 14, 2014; GROB Aircraft Service Bulletin No. MSB1078-196/1, dated
December 1, 2014; GROB Aircraft Service Bulletin No. MSB1121-144, dated
July 14, 2014; and GROB Aircraft Service Bulletin No. MSB1121-144/3,
dated February 20, 2015. The service information describes procedures
for inspecting the starter solenoid, replacing damaged starters, and
installing a starter relay. This information is reasonably available at
http://www.regulations.gov by searching for and locating Docket No.
FAA-2015-0415, or you may see ADDRESSES for other ways to access this
service information.

Costs of Compliance

    We estimate that this AD will affect 6 products of U.S. registry.
We also estimate that it will take about 4 work-hours per product to
comply with the basic starter inspection requirement of this AD. The
average labor rate is $85 per work-hour.
    Based on these figures, we estimate the cost of this inspection on
U.S. operators to be $2,040, or $340 per product.
    In addition, we estimate that any necessary starter replacements
will take about 4 work-hours and require parts costing $600, for a cost
of $940 per product. We have no way of determining the number of
products that may need this replacement.
    We also estimate that it will take about 20 work-hours per product
to comply with the starter relay installation requirement of this AD.
The average labor rate is $85 per work-hour. Required parts would cost
about $1,000 per product.
    Based on these figures, we estimate the cost of this proposed
installation on U.S. operators to be $16,200, or $2,700 per product.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
    For the reasons discussed above, I certify this AD:
    (1) Is not a ``significant regulatory action'' under Executive
Order 12866,
    (2) Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979),
    (3) Will not affect intrastate aviation in Alaska, and
    (4) Will not have a significant economic impact, positive or
negative, on a substantial number of small entities under the criteria
of the Regulatory Flexibility Act.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2015-
0415; or in person at the Docket Management Facility between 9 a.m. and
5 p.m., Monday through Friday, except Federal holidays. The AD docket
contains the NPRM, the regulatory evaluation, any comments received,
and other information. The street address for the Docket Office
(telephone<PHONE_NUMBER>) is in the ADDRESSES section. Comments will
be available in the AD docket shortly after receipt.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by removing Amendment 39-18055 (80 FR
155, January 5, 2015) and adding the following new AD:

2015-09-06 GROB-WERKE: Amendment 39-18152; Docket No. FAA-2015-0415;
Directorate Identifier 2015-CE-001-AD.

(a) Effective Date

    This airworthiness directive (AD) becomes effective June 16,
2015.

(b) Affected ADs

    This AD supersedes AD 2014-26-04, Amendment 39-18055 (80 FR 155,
January 5, 2015) (``AD 2014-26-04'').

(c) Applicability

    This AD applies to GROB-WERKE Model G115EG airplanes, all serial
numbers through 82323/E, and Model G120A airplanes, all serial
numbers through 85063, certificated in any category.

(d) Subject

    Air Transport Association of America (ATA) Code 80: Starting.

(e) Reason

    This AD was prompted by mandatory continuing airworthiness
information (MCAI) originated by an aviation authority of another
country to identify and correct an unsafe condition on an aviation
product. The MCAI describes the unsafe condition as a defective
starter solenoid. We are issuing this AD to detect and correct
defective starter solenoids, which could cause an internal short
circuit and could result in reduced control. We are superseding AD
2014-26-04, Amendment 39-18055 (80 FR 155, January 5, 2015),
requiring installation of a starter relay that will prevent loss of
electrical power in case of electrical shortage in the starter
solenoid.

 (f) Actions and Compliance

    Unless already done, do the actions in paragraphs (f)(1) through
(f)(3) of this AD:
    (1) Within the next 30 days after February 9, 2015 (the
effective date retained from AD 2014-26-04), inspect the starter
following Part A of the Accomplishment Instructions in GROB Aircraft
Service Bulletin No. MSB1078-196, dated July 14, 2014; GROB Aircraft
Service Bulletin No. MSB1078-196/1, dated December 1, 2014; GROB
Aircraft Service Bulletin No. MSB1121-144, dated July 14, 2014; or
GROB Aircraft Service Bulletin No. MSB1121-144/3, dated February 20,
2015, as applicable.
    (2) If any damage is found on the starter during the inspection
required in paragraph (f)(1) of this AD, before further flight,
replace the starter with a serviceable part. Do the replacement
following Part A of the Accomplishment Instructions in GROB Aircraft
Service Bulletin No. MSB1078-196, dated July 14, 2014; GROB Aircraft
Service Bulletin No. MSB1078-196/1, dated December 1, 2014; GROB
Aircraft Service Bulletin No. MSB1121-144, dated July 14, 2014; or
GROB Aircraft Service Bulletin No. MSB1121-144/3, dated February 20,
2015, as applicable.
    (3) Within the next 100 hours time-in-service after June 16,
2015 (the effective date of this AD), install a starter relay
following Part B of the Accomplishment Instructions in GROB Aircraft
Service Bulletin No. MSB1078-196/1, dated December 1, 2014, or GROB
Aircraft Service Bulletin No. MSB1121-144/3, dated February 20,
2015, as applicable.

(g) Credit for Actions Done in Accordance With Previous Service
Information

    Actions done before June 16, 2015 (the effective date of this
AD) following the Accomplishment Instructions specified in GROB
Aircraft Service Bulletin No. MSB1121-144/1, dated January 12, 2015;
or GROB Aircraft Service Bulletin No. MSB1121-144/2, dated February
5, 2015, as applicable, are considered acceptable for compliance
with the corresponding actions specified in paragraphs (f)(1)
through (f)(2) of this AD.

(h) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
Standards Office, FAA, has the authority to approve AMOCs for this
AD, if requested using the procedures found in 14 CFR 39.19. Send
information to ATTN: Karl Schletzbaum, Aerospace Engineer, FAA,
Small Airplane Directorate, 901 Locust, Room 301, Kansas City,
Missouri 64106; telephone:<PHONE_NUMBER>; fax:<PHONE_NUMBER>;
email<EMAIL_ADDRESS>Before using any approved AMOC on
any airplane to which the AMOC applies, notify your appropriate
principal inspector (PI) in the FAA Flight Standards District Office
(FSDO), or lacking a PI, your local FSDO.
    (2) Airworthy Product: For any requirement in this AD to obtain
corrective actions from a manufacturer or other source, use these
actions if they are FAA-approved. Corrective actions are considered
FAA-approved if they are approved by the State of Design Authority
(or their delegated agent). You are required to assure the product
is airworthy before it is returned to service.

(i) Related Information

    Refer to MCAI European Aviation Safety Agency (EASA) AD No.
2015-0010R1, dated February 4, 2015, for related information. You
may examine the MCAI on the Internet at http://www.regulations.gov/#!documentDetail;D=FAA-2015-0415-0002.

(j) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless the AD specifies otherwise.
    (3) The following service information was approved for IBR on
June 16, 2015.
    (i) GROB Aircraft Service Bulletin No. MSB1078-196/1, dated
December 1, 2014.
    (ii) GROB Aircraft Service Bulletin No. MSB1121-144/3, dated
February 20, 2015.
    (4) The following service information was approved for IBR on
February 9, 2015 (80 FR 155, January 5, 2015).
    (i) GROB Aircraft Service Bulletin No. MSB1078-196, dated July
14, 2014.
    (ii) GROB Aircraft Service Bulletin No. MSB1121-144, dated July
14, 2014.
    (5) For GROB Aircraft AG service information identified in this
AD, contact Grob Aircraft AG, Customer Service, Lettenbachstrasse 9,
D-86874 Tussenhausen-Mattsies, Germany, telephone: + 49 (0) 8268-
998-105; fax: + 49 (0) 8268-998-200; email<EMAIL_ADDRESS>Internet: grob-aircraft.com.
    (6) You may view this service information at the FAA, Small
Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. For
information on the availability of this material at the FAA, call
816-329-4148. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-
2015-0415.
    (7) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, call<PHONE_NUMBER>, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Kansas City, Missouri, on April 23, 2015.
Earl Lawrence,
Manager, Small Airplane Directorate, Aircraft Certification Service.
[FR Doc. 2015-10071 Filed 5-11-15; 8:45 am]
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