[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Pages 15409-15410]
[FR Doc No: 2023-05066]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2023-N-0655]

Gastrointestinal Drugs Advisory Committee; Notice of Meeting;
Establishment of a Public Docket; Request for Comments

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice; establishment of a public docket; request for comments.

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SUMMARY: The Food and Drug Administration (FDA) announces a forthcoming
public advisory committee meeting of the Gastrointestinal Drugs
Advisory Committee. The general function of the committee is to provide
advice and recommendations to FDA on regulatory issues. The meeting
will be open to the public. FDA is establishing a docket for public
comment on this document.

DATES: The meeting will be held virtually on May 19, 2023, from 9 a.m.
to 5 p.m. Eastern Time.

ADDRESSES: Please note that due to the impact of the COVID-19 pandemic,
all meeting participants will be joining this advisory committee
meeting via an online teleconferencing platform. Answers to commonly
asked questions about FDA advisory committee meetings, including
information regarding special accommodations due to a disability, may
be accessed at: https://www.fda.gov/AdvisoryCommittees/AboutAdvisoryCommittees/ucm408555.htm.
    FDA is establishing a docket for public comment on this meeting.
The docket number is FDA-2023-N-0655. Please note that late, untimely
filed comments will not be considered. The docket will close on May 18,
2023. The https://www.regulations.gov electronic filing system will
accept comments until 11:59 p.m. Eastern Time at the end of May 18,
2023. Comments received by mail/hand delivery/courier (for written/
paper submissions) will be considered timely if they are received on or
before that date.
    Comments received on or before May 5, 2023, will be provided to the
committee. Comments received after that date will be taken into
consideration by FDA. In the event that the meeting is canceled, FDA
will continue to evaluate any relevant applications or information, and
consider any comments submitted to the docket, as appropriate.
    You may submit comments as follows:

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to https://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on https://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand Delivery/Courier (for written/paper
submissions): Dockets Management Staff (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Dockets
Management Staff, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket FDA-
2023-N-0655 for ``Gastrointestinal Drugs Advisory Committee; Notice of
Meeting; Establishment of a Public Docket; Request for Comments.''
Received comments, those filed in a timely manner (see ADDRESSES), will
be placed in the docket and, except for those submitted as
``Confidential Submissions,'' publicly viewable at https://www.regulations.gov or at the Dockets Management Staff between 9

a.m. and 4 p.m., Monday through Friday,<PHONE_NUMBER>.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.'' FDA will review
this copy, including the claimed confidential information, in its
consideration of comments. The second copy, which will have the claimed
confidential information redacted/blacked out, will be available for
public viewing and posted on https://www.regulations.gov. Submit both
copies to the Dockets Management Staff. If you do not wish your name
and contact information be made publicly available, you can provide
this information on the cover sheet and not in the body of your
comments and you must identify the information as ``confidential.'' Any
information marked as ``confidential'' will not be disclosed except in
accordance with 21 CFR 10.20 and other applicable disclosure law. For
more information about FDA's posting of comments to public dockets, see
80 FR 56469, September 18, 2015, or access the information at: https://www.govinfo.gov/content/pkg/FR-2015-09-18/pdf/2015-23389.pdf.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to https://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Dockets Management Staff, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852,<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: Jessica Seo, Center for Drug
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 31, Rm. 2417, Silver Spring, MD 20993-0002, 301-
796-7699, email: [email protected], or FDA Advisory Committee
Information Line, 1-800-741-8138<PHONE_NUMBER> in the Washington, DC
area). A notice in the Federal Register about last-minute modifications
that impact a previously announced advisory committee meeting cannot
always be published quickly enough to provide timely notice. Therefore,
you should always check FDA's website at https://www.fda.gov/AdvisoryCommittees/default.htm and scroll down to the appropriate
advisory committee meeting link, or call the advisory committee
information line to learn about possible modifications before the
meeting.

SUPPLEMENTARY INFORMATION:
    Agenda: The meeting presentations will be heard, viewed, captioned,
and recorded through an online teleconferencing platform. The committee
will discuss new drug application (NDA) 212833, obeticholic acid (OCA)
25 mg oral tablets, submitted by Intercept Pharmaceuticals, Inc., for
the treatment of pre-cirrhotic liver fibrosis due to nonalcoholic
steatohepatitis.
    FDA intends to make background material available to the public no
later than 2 business days before the meeting. If FDA is unable to post
the background material on its website prior to the meeting, the
background material will be made publicly available on FDA's website at
the time of the advisory committee meeting. Background material and the
link to the online teleconference meeting room will be available at
https://www.fda.gov/AdvisoryCommittees/Calendar/default.htm. Scroll
down to the appropriate advisory committee meeting link. The meeting
will include slide presentations with audio components to allow the
presentation of materials in a manner that most closely resembles an
in-person advisory committee meeting.
    Procedure: Interested persons may present data, information, or
views, orally or in writing, on issues pending before the committee.
All electronic and written submissions submitted to the Docket (see
ADDRESSES) on or before May 5, 2023, will be provided to the committee.
Oral presentations from the public will be scheduled between
approximately 1:30 p.m. to 2:30 p.m. Eastern Time. Those individuals
interested in making formal oral presentations should notify the
contact person and submit a brief statement of the general nature of
the evidence or arguments they wish to present, the names and addresses
of proposed participants, and an indication of the approximate time
requested to make their presentation on or before April 27, 2023. Time
allotted for each presentation may be limited. If the number of
registrants requesting to speak is greater than can be reasonably
accommodated during the scheduled open public hearing session, FDA may
conduct a lottery to determine the speakers for the scheduled open
public hearing session. The contact person will notify interested
persons regarding their request to speak by April 28, 2023.
    For press inquiries, please contact the Office of Media Affairs at
[email protected] or<PHONE_NUMBER>.
    FDA welcomes the attendance of the public at its advisory committee
meetings and will make every effort to accommodate persons with
disabilities. If you require accommodations due to a disability, please
contact Jessica Seo (see FOR FURTHER INFORMATION CONTACT) at least 7
days in advance of the meeting.
    FDA is committed to the orderly conduct of its advisory committee
meetings. Please visit our website at https://www.fda.gov/AdvisoryCommittees/AboutAdvisoryCommittees/ucm111462.htm for procedures
on public conduct during advisory committee meetings.
    Notice of this meeting is given under the Federal Advisory
Committee Act (5 U.S.C. app. 2).

    Dated: March 7, 2023.
Lauren K. Roth,
Associate Commissioner for Policy.
[FR Doc. 2023-05066 Filed 3-10-23; 8:45 am]
BILLING CODE 4164-01-P


[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Notices]
[Pages 54749-54751]
[FR Doc No: 2022-19234]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2021-0079; Notice 2]

Maserati North America, Inc., Grant of Petition for Decision of
Inconsequential Noncompliance

AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).

ACTION: Grant of petition.

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SUMMARY: Maserati North America, Inc., (MNA), has determined that
certain model year (MY) 2014-2021 Maserati Ghibli, Quattroporte, and
Levante motor vehicles do not fully comply with Federal Motor Vehicle
Safety Standard (FMVSS) No. 208, Occupant Crash Protection. MNA filed a
noncompliance report dated August 5, 2021. MNA subsequently petitioned
NHTSA on August 30, 2021, and amended its petition on January 13, 2022,
for a decision that the subject noncompliance is inconsequential as it
relates to motor vehicle safety. This document announces the grant of
MNA's petition.

FOR FURTHER INFORMATION CONTACT: Syed Rahaman, Office of Vehicle Safety
Compliance, the National Highway Traffic Safety Administration (NHTSA),
(202) 306-7018, [email protected].

SUPPLEMENTARY INFORMATION:

I. Overview

    MNA has determined that certain MY 2014-2021 Maserati Levante,
Ghibli, and Quattroporte motor vehicles do not fully comply with
paragraph S4.5.1(b)(3) of FMVSS No. 208, Occupant Crash Protection (49
CFR 571.208).
    MNA filed a noncompliance report dated August 5, 2021, pursuant to
49 CFR part 573, Defect and Noncompliance Responsibility and Reports.
MNA subsequently petitioned NHTSA on August 30, 2021, and amended its
petition on January 13, 2022, for an exemption from the notification
and remedy requirements of 49 U.S.C. Chapter 301 on the basis that this
noncompliance is inconsequential as it relates to motor vehicle safety,
pursuant to 49 U.S.C. 30118(d) and 30120(h) and 49 CFR part 556,
Exemption for Inconsequential Defect or Noncompliance.
    Notice of receipt of MNA's petition was published with a 30-day
public comment period, on January 31, 2022, in the Federal Register (87
FR 4991). No comments were received. To view the

petition and all supporting documents log onto the Federal Docket
Management System (FDMS) website at https://www.regulations.gov/. Then
follow the online search instructions to locate docket number ``NHTSA-
2021-0079.''

II. Vehicles Involved

    Approximately 78,588 MY 2014-2021 Maserati Levante, Ghibli, and
Quattroporte motor vehicles, manufactured between April 30, 2013, and
July 13, 2021, are potentially involved.

III. Noncompliance

    MNA explains that the subject vehicles are equipped with air bag
warning labels that are affixed to the headliner, rather than either
side of the sun visor, as required by S4.5.1(b)(3) of FMVSS No. 208.

IV. Rule Requirements

    Paragraph S4.5.1(b)(3) of FMVSS No. 208, includes the requirements
relevant to this petition. Vehicles certified to meet the requirements
specified in S19, S21, or S23 on or after September 1, 2003, shall have
a label permanently affixed to either side of the sun visor, at the
manufacturer's option, at each front outboard seating position that is
equipped with an inflatable restraint.

V. Summary of MNA's Petition

    The following views and arguments presented in this section, ``V.
Summary of MNA's Petition,'' are the views and arguments provided by
MNA. They do not reflect the views of the Agency. MNA describes the
subject noncompliance and contends that the noncompliance is
inconsequential as it relates to motor vehicle safety.
    MNA says that the sun visor is affixed with an air bag alert label
that informs ``passengers to flip the sun visor to the down position''
to view the warning label. MNA also says that although the air bag
warning label is affixed to the headliner, the label is clearly visible
when the sun visor is in the down position. In its petition, MNA
provides computer-aided design (CAD) illustrations of the air bag alert
label and noncompliant air bag warning label.
    MNA states its belief that although the air bag warning label is
not positioned on the sun visor, the combination with the air bag alert
label on the sun visor with the warning label on the headliner provides
a prominent display as intended by FMVSS No. 208. In support of this
argument, MNA cites a 2016 Notice of Proposed Rulemaking (NPRM) on
Vehicle Defect Reporting Requirements \1\ in which MNA says NHTSA
assessed ``the suitability of the headliner for safety warning labels
in Section IV, Alternatives Considered and Proposed for the Label, and
finds the headliner to be an effective location for a safety warning
label.'' MNA cites NHTSA as stating that it recognizes ``the headliner
as an effective location for safety warning labels.'' MNA further
states that NHTSA has found the headliner to be of similar benefit as
the sun visor for the placement of the air bag warning label. Id.
---------------------------------------------------------------------------

    \1\ See 81 FR 85478 (November 28, 2016)
---------------------------------------------------------------------------

    MNA says it ``is not aware of any crashes, injuries, or customer
complaints associated with this condition'' and that production is
being updated to correct the noncompliance in future vehicles.
    MNA concludes that the subject noncompliance is inconsequential as
it relates to motor vehicle safety and its petition to be exempted from
providing notification of the noncompliance, as required by 49 U.S.C.
30118, and a remedy for the noncompliance, as required by 49 U.S.C.
30120, should be granted.

VI. NHTSA's Analysis

    In determining inconsequentiality of a noncompliance, NHTSA focuses
on the safety risk to individuals who experience the type of event
against which a recall would otherwise protect.\2\ In general, NHTSA
does not consider the absence of complaints or injuries when
determining if a noncompliance is inconsequential to safety. The
absence of complaints does not mean vehicle occupants have not
experienced a safety issue, nor does it mean that there will not be
safety issues in the future.\3\
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    \2\ See Gen. Motors, LLC; Grant of Petition for Decision of
Inconsequential Noncompliance, 78 FR 35355 (June 12, 2013) (finding
noncompliance had no effect on occupant safety because it had no
effect on the proper operation of the occupant classification system
and the correct deployment of an air bag); Osram Sylvania Prods.
Inc.; Grant of Petition for Decision of Inconsequential
Noncompliance, 78 FR 46000 (July 30, 2013) (finding occupant using
noncompliant light source would not be exposed to significantly
greater risk than occupant using similar compliant light source).
    \3\ See Morgan 3 Wheeler Limited; Denial of Petition for
Decision of Inconsequential Noncompliance, 81 FR 21663, 21666 (Apr.
12, 2016); see also United States v. Gen. Motors Corp., 565 F.2d
754, 759 (D.C. Cir. 1977) (finding defect poses an unreasonable risk
when it ``results in hazards as potentially dangerous as sudden
engine fire, and where there is no dispute that at least some such
hazards, in this case fires, can definitely be expected to occur in
the future'').
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    NHTSA focuses on the consequence to an occupant who is exposed to
the consequence of that noncompliance.\4\ The Safety Act is preventive,
and manufacturers cannot and should not wait for deaths or injuries to
occur in their vehicles before they carry out a recall.\5\ Indeed, the
very purpose of a recall is to protect individuals from risk. Id.
---------------------------------------------------------------------------

    \4\ See Gen. Motors Corp.; Ruling on Petition for Determination
of Inconsequential Noncompliance, 69 FR 19897, 19900 (Apr. 14,
2004); Cosco Inc.; Denial of Application for Decision of
Inconsequential Noncompliance, 64 FR 29408, 29409 (June 1, 1999).
    \5\ See, e.g., United States v. Gen. Motors Corp., 565 F.2d 754,
759 (D.C. Cir. 1977).
---------------------------------------------------------------------------

    FMVSS No. 208 S4.5.1(b)(3) requires air bag warning labels to be
affixed to either side of the sun visor. The purpose of FMVSS No. 208
is to reduce the adverse effects of air bags by attracting the
attention of vehicle occupants to look for the air bag warning label on
the sun visor. In its petition, MNA explains that the subject vehicles
are equipped with air bag warning labels that are affixed to the
headliner, rather than either side of the sun visor
    FMVSS No. 208 S4.5.1(c) requires an air bag alert label to be
permanently affixed to the sun visor so that the label is visible when
the visor is in the stowed position if the air bag warning label
required by S4.5.1(b) is not visible when the sun visor is in the
stowed position. The alert label must contain the content of the sun
visor label as shown in Figure 6(c) of FMVSS No. 208. This requirement
specifies that manufacturers, who place the label required by
S4.5.1(b)(3) on the side of the visor that is hidden from the occupant
when stowed, must place an air bag alert label on the visible part of
the sun visor. MNA has done this and used the correct Figure 6(c)
label. NHTSA believes this to be adequate notice to the occupant
instructing them to ``flip visor over'' and view the full air bag
warning label. In the case of the subject vehicles, the occupant would
clearly see the required warning label on the headliner directly above
the sun visor.
    NHTSA has evaluated the merits of the inconsequential noncompliance
petition submitted by MNA and has determined that this particular
noncompliance is inconsequential to motor vehicle safety. NHTSA agrees
with MNA that the noncompliant placement of the air bag warning label
in the subject vehicles is inconsequential. Paragraph S4.5.1(b)(3)
allows for placement of the air bag warning label on either side of the
sun visor, including the side that is hidden from the driver when
stowed. Paragraph S4.5.1(c) requires an instructional alert

label informing the occupant to flip the visor over, placing the visor
in the down position, for more information. MNA explained that the
label is clearly visible when the sun visor is in the down position and
is displayed as intended by FMVSS No. 208.

VII. NHTSA's Decision

    In consideration of the foregoing, NHTSA finds that MNA has met its
burden of persuasion that the subject FMVSS No. 208 noncompliance in
the affected vehicles is inconsequential to motor vehicle safety.
Accordingly, MNA's petition is hereby granted and MNA is consequently
exempted from the obligation of providing notification of, and a free
remedy for, that noncompliance under 49 U.S.C. 30118 and 30120.
    NHTSA notes that the statutory provisions (49 U.S.C. 30118(d) and
30120(h)) that permit manufacturers to file petitions for a
determination of inconsequentiality allow NHTSA to exempt manufacturers
only from the duties found in sections 30118 and 30120, respectively,
to notify owners, purchasers, and dealers of a defect or noncompliance
and to remedy the defect or noncompliance. Therefore, this decision
only applies to the subject vehicles that MNA no longer controlled at
the time it determined that the noncompliance existed. However, the
granting of this petition does not relieve vehicle distributors and
dealers of the prohibitions on the sale, offer for sale, or
introduction or delivery for introduction into interstate commerce of
the noncompliant vehicles under their control after MNA notified them
that the subject noncompliance existed.

(Authority: 49 U.S.C. 30118, 30120: delegations of authority at 49
CFR 1.95 and 501.8)

Otto G. Matheke III,
Director, Office of Vehicle Safety Compliance.
[FR Doc. 2022-19234 Filed 9-6-22; 8:45 am]
BILLING CODE 4910-59-P


[Federal Register Volume 87, Number 235 (Thursday, December 8, 2022)]
[Notices]
[Pages 75241-75242]
[FR Doc No: 2022-26682]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RD22-4-000]

Notice of Staff Attendance at the ReliabilityFirst Annual Meeting
of the Members and the ReliabilityFirst Board of Directors Meeting

    The Federal Energy Regulatory Commission hereby gives notice that
members of the Commission staff may attend the following meetings:

The ReliabilityFirst Annual Meeting of the Members, The Ritz-Carlton,
Pentagon City, 1250 South Hayes Street, Arlington, VA 22202, December
8, 2022 (9 a.m.-10:30 a.m. eastern time), and
The ReliabilityFirst Board of Directors Meeting, The Ritz-Carlton,
Pentagon City, 1250 South Hayes Street, Arlington, VA 22202, December
8, 2022 (10:30 a.m.-1 p.m. eastern time).

    Further information regarding these meetings may be found at:
https://rfirst.org/about/Pages/Upcoming-Events.aspx.
    The discussions at the meetings, which are open to the public, may
address matters at issue in the following Commission proceeding:

Docket No. RD22-4-000--Registration of Inverter-Based Resources

    For further information, please contact Jonathan First, 202-502-
8529, or [email protected].

    Dated: December 2, 2022.
Kimberly D. Bose,
Secretary.
[FR Doc. 2022-26682 Filed 12-7-22; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 85, Number 170 (Tuesday, September 1, 2020)]
[Notices]
[Pages 54454-54461]
[FR Doc No: 2020-19203]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89684; File No. SR-NYSE-2019-67]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order
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

August 26, 2020.

I. Introduction

    On December 11, 2019, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Chapter One of the
Listed Company Manual (``Manual'') to modify the provisions relating to
direct listings. On December 13, 2019, the Exchange filed Amendment No.
1 to the proposed rule change, which amended and replaced the proposed
rule change in its entirety. The proposed rule change, as modified by
Amendment No. 1, was published for comment in the Federal Register on
December 30, 2019.\3\ On February 13, 2020, pursuant to Section
19(b)(2) of the Exchange Act,\4\ the Commission designated a longer
period within which to either approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether to disapprove the proposed rule change.\5\ On March
26, 2020, the Commission instituted proceedings to determine whether to
approve or disapprove the

proposed rule change, as modified by Amendment No. 1.\6\ On June 22,
2020, the Exchange filed Amendment No. 2 to the proposed rule change,
which superseded the proposed rule change as modified by Amendment No.
1.\7\ On June 24, 2020, the Commission extended the time period for
approving or disapproving the proposal to August 26, 2020.\8\ The
proposed rule change, as modified by Amendment No. 2, was published for
comment in the Federal Register on June 30, 2020.\9\ The Commission is
approving the proposed rule change, as modified by Amendment No. 2.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 87821 (December 20,
2019), 84 FR 72065 (December 30, 2019) (``Original Notice'').
Comments received on the proposal are available on the Commission's
website at: https://www.sec.gov/comments/sr-nyse-2019-67/srnyse2019-67.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 88190 (February 13,
2020), 85 FR 9891 (February 20, 2020). The Commission designated
March 29, 2020, as the date by which it should approve, disapprove,
or institute proceedings to determine whether to disapprove the
proposed rule change.
    \6\ See Securities Exchange Act Release No. 88485 (March 26,
2020), 85 FR 18292 (April 1, 2020) (``OIP'').
    \7\ Amendment No. 2 to the proposed rule change revised the
proposal to, among other things, (1) delete the proposed changes to
Section 102.01A of the Manual that would have provided additional
time under certain circumstances for companies listing in connection
with a direct listing to meet the initial listing distribution
standards; (2) add provisions specifying how companies listing in
connection with a direct listing would qualify for listing if it
includes both sales of securities by the company and possible sales
by selling shareholders; (3) add a new order type for companies to
use when selling securities in a direct listing and describe how
such companies would participate in a direct listing auction; and
(4) remove references to direct listing auctions from Rule 7.35C,
Exchange-Facilitated Auctions. Amendment No. 2 to the proposed rule
change is available on the Commission's website at https://www.sec.gov/comments/sr-nyse-2019-67/srnyse201967-7332320-218590.pdf.
    \8\ See Securities Exchange Act Release No. 89147 (June 24,
2020), 85 FR 39226 (June 30, 2020). The Commission designated August
26, 2020, as the date by which it should either approve or
disapprove the proposed rule change.
    \9\ See Securities Exchange Act Release No. 89148 (June 24,
2020), 85 FR 39246 (June 30, 2020) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal, as Modified by Amendment No. 2

    Section 102.01B, Footnote (E) of the Manual states that the
Exchange generally expects to list companies in connection with a firm
commitment underwritten initial public offering (``IPO''), upon
transfer from another market, or pursuant to a spin-off, but also
allows for the possibility of using a direct listing, as described
below.\10\ Currently, Footnote (E) states that the Exchange recognizes
that companies that have not previously had their common equity
securities registered under the Exchange Act, but that have sold common
equity securities in a private placement, may wish to list their common
equity securities on the Exchange at the time of effectiveness of a
registration statement \11\ filed solely for the purpose of allowing
existing shareholders to sell their shares.\12\ The Exchange has
proposed to define this type of direct listing already permitted by the
Exchange's rules as a ``Selling Shareholder Direct Floor Listing.''
\13\ In addition, the Exchange has proposed to recognize an additional
type of direct listing in which a company that has not previously had
its common equity securities registered under the Exchange Act would
list its common equity securities on the Exchange at the time of
effectiveness of a registration statement pursuant to which the company
would sell shares itself in the opening auction on the first day of
trading on the Exchange in addition to, or instead of, facilitating
sales by selling shareholders (a ``Primary Direct Floor Listing'').\14\
Under the proposal, the Exchange would, on a case-by-case basis,
exercise discretion to list companies that are listing in connection
with a Selling Shareholder Direct Floor Listing or a Primary Direct
Floor Listing.\15\
---------------------------------------------------------------------------

    \10\ See Section 102.01B, Footnote (E) of the Manual.
    \11\ The reference to a registration statement refers to a
registration statement effective under the Securities Act of 1933
(``Securities Act'').
    \12\ See Section 102.01B, Footnote (E) of the Manual. See also
Securities Exchange Act Release No. 82627 (February 2, 2018), 3 FR
5650 (February 8, 2018) (SR-NYSE-2017-30) (``NYSE 2018 Order'')
(approving proposed rule change to amend Section 102.01B of the
Manual to modify the provisions relating to the qualifications of
companies listing without a prior Exchange Act registration in
connection with an underwritten IPO and amend the Exchange's rules
to address the opening procedures on the first day of trading for
such securities).
    \13\ See proposed Section 102.01B, Footnote (E) of the Manual.
Under the proposal, the Exchange would specify that such company may
have previously sold common equity securities in ``one or more''
private placements. The Exchange also has proposed to move the
description of this type of direct listing as involving a company
``where such company is listing without a related underwritten
offering upon effectiveness of a registration statement registering
only the resale of shares sold by the company in earlier private
placements'' so that this description appears in conjunction with
the definition of ``Selling Shareholder Direct Floor Listing.'' See
id.
    \14\ See proposed Section 102.01B, Footnote (E) of the Manual. A
Primary Direct Floor Listing would include 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. See id.
    \15\ See proposed Section 102.01B, Footnote (E) of the Manual.
---------------------------------------------------------------------------

    With respect to a Selling Shareholder Direct Floor Listing, the
Exchange proposal retains the existing standards regarding how the
Exchange will determine whether a company has met its market value of
publicly-held shares listing requirement. The Exchange will continue to
determine that such company has met the $100 million aggregate market
value of publicly-held shares requirement based on a combination of
both (i) an independent third-party valuation (``Valuation'') of the
company; and (ii) the most recent trading price for the company's
common stock in a trading system for unregistered securities operated
by a national securities exchange or a registered broker-dealer
(``Private Placement Market'').\16\ Alternatively, in the absence of
any recent trading in a Private Placement Market, the Exchange will
determine that such company has met its market value of publicly-held
shares requirement if the company provides a Valuation evidencing a
market value of publicly-held shares of at least $250 million.\17\
---------------------------------------------------------------------------

    \16\ See proposed Section 102.01B, Footnote (E) of the Manual.
The Exchange will attribute a market value of publicly-held shares
to the company equal to the lesser of: (i) The value calculable
based on the Valuation; and (ii) the value calculable based on the
most recent trading price in a Private Placement Market. See Section
102.01B, Footnote (E) of the Manual. For specific requirements
regarding the Valuation and the independence of the valuation agent
conducting such Valuation, see Section 102.01B, Footnote (E) of the
Manual. Section 102.01B, Footnote (E) of the Manual also sets forth
specific factors for relying on a Private Placement Market price.
Generally, the Exchange will only rely on a Private Placement Market
price if it is consistent with a sustained history over a several
month period prior to listing evidencing a market value in excess of
the Exchange's market value requirement.
    \17\ See Section 102.01B, Footnote (E) of the Manual. Shares
held by directors, officers, or their immediate families and other
concentrated holdings of 10 percent or more are excluded in
calculating the number of publicly-held shares. See Section 102.01A,
Footnote (B) of the Manual.
---------------------------------------------------------------------------

    With respect to a Primary Direct Floor Listing, the Exchange has
proposed that it 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 million in market value of the shares
in the Exchange's opening auction on the first day of trading on the
Exchange.\18\ Alternatively, 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 million, 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 million, 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.\19\
---------------------------------------------------------------------------

    \18\ See proposed Section 102.01B, Footnote (E) of the Manual.
    \19\ See proposed Section 102.01B, Footnote (E) of the Manual.
The Exchange states that, for example, if the company is selling
five million shares in the opening auction, there are 45 million
publicly-held shares issued and outstanding immediately prior to
listing, and the lowest price of the price range disclosed in the
company's registration statement is $10 per share, then the Exchange
will attribute to the company a market value of publicly-held shares
of $500 million. See Notice, supra note 9, 85 FR at 39247.

---------------------------------------------------------------------------

    According to the Exchange, a company may list on the Exchange in
connection with an IPO with a market value of publicly-held shares of
$40 million and, in the Exchange's experience in listing IPOs, a liquid
trading market develops after listing for issuers with a much smaller
value of publicly-held shares than the Exchange anticipates would exist
after the opening auction in a Primary Direct Floor Listing under the
proposed market value of publicly-held shares requirements.\20\
Consequently, the Exchange believes that these requirements would
provide that any company conducting a Primary Direct Floor Listing
would be of a suitable size for Exchange listing and that there would
be sufficient liquidity for the security to be suitable for auction
market trading.\21\ The Exchange also states that, with the exception
of the proposed requirement for Primary Direct Floor Listings, shares
held by officers, directors, or owners of more than 10% of the company
stock are not included in calculations of publicly-held shares for
purposes of Exchange listing rules.\22\ The Exchange states that such
investors may acquire in secondary market trades shares sold by the
issuer in a Primary Direct Floor Listing that were included when
calculating whether the issuer meets the market value of publicly-held
shares initial listing requirement.\23\ The Exchange further states
that it believes that because of the enhanced publicly-held shares
requirement for listing in connection with a Primary Direct Floor
Listing, which is much higher than the Exchange's $40 million
requirement for a traditional underwritten IPO, and the neutral nature
of the opening auction process, companies using a Primary Direct Floor
Listing would have an adequate public float and liquid trading market
after completion of the opening auction.\24\
---------------------------------------------------------------------------

    \20\ See Notice, supra note 9, 85 FR at 39250.
    \21\ See Notice, supra note 9, 85 FR at 39250.
    \22\ See Notice, supra note 9, 85 FR at 39247. The Exchange
states that these types of inside investors may purchase shares sold
by the company in the opening auction, and purchase shares sold by
other shareholders or sell their own shares in the opening auction
and in trading after the opening auction, to the extent not
inconsistent with general anti-manipulation provisions, Regulation
M, and other applicable securities laws. See id.
    \23\ See Notice, supra note 9, 85 FR at 39247.
    \24\ See Notice, supra note 9, 85 FR at 39247.
---------------------------------------------------------------------------

    The Exchange states that any company listing in connection with a
Primary Direct Floor Listing or a Selling Shareholder Direct Floor
Listing would continue to be subject to and need to meet all other
applicable initial listing requirements. According to the Exchange,
this would include the requirements of Section 102.01A of the Manual to
have 400 shareholders of round lots and 1.1 million publicly-held
shares outstanding at the time of initial listing, and the requirement
of Section 102.01B of the Manual to have a price per share of at least
$4.00 at the time of initial listing.\25\
---------------------------------------------------------------------------

    \25\ See Notice, supra note 9, 85 FR at 39247.
---------------------------------------------------------------------------

    The Exchange has proposed a new order type to be used by the issuer
in a Primary Direct Floor Listing and has proposed rules regarding how
that new order type would participate in a Direct Listing Auction.\26\
Specifically, the Exchange has proposed to introduce an Issuer Direct
Offering Order (``IDO Order''), which would be a Limit Order to sell
that is to be traded only in a Direct Listing Auction for a Primary
Direct Floor Listing.\27\ The IDO Order would have the following
requirements: (1) Only one IDO Order may be entered on behalf of the
issuer and only by one member organization; (2) the limit price of the
IDO Order must be equal to the lowest price of the price range
established by the issuer in its effective registration statement (the
price range is defined as the ``Primary Direct Floor Listing Auction
Price Range''); (3) the IDO Order must be for the quantity of shares
offered by the issuer, as disclosed in the prospectus in the effective
registration statement; (4) an IDO Order may not be cancelled or
modified; and (5) an IDO Order must be executed in full in the Direct
Listing Auction.\28\ Consistent with current rules, a Designated Market
Maker (``DMM'') would effectuate a Direct Listing Auction manually, and
the DMM would be responsible for determining the Auction Price.\29\
Under the proposal, the DMM would not conduct a Direct Listing Auction
for a Primary Direct Floor Listing if (1) the Auction Price would be
below the lowest price or above the highest price of the Primary Direct
Floor Listing Auction Price Range; or (2) there is insufficient buy
interest to satisfy both the IDO Order and all better-priced sell
orders in full.\30\ The Exchange states that if there is insufficient
buy interest and the DMM cannot price the Auction and satisfy the IDO
Order as required, the Direct Auction would not proceed and such
security would not begin trading.\31\ The Exchange represents that, if
a Direct Listing Auction cannot be conducted, the Exchange would notify
market participants via a Trader Update that the Primary Direct Floor
Listing has been cancelled and any orders for that security that had
been entered on the Exchange, including the IDO Order, would be
cancelled back to the entering firms.\32\
---------------------------------------------------------------------------

    \26\ Under current Rule 1.1(f), the term ``Direct Listing''
means ``a security that is listed under Footnote (E) to Section
102.01B of the Listed Company Manual.'' The Exchange has proposed to
modify this definition to specify that the term ``Direct Listing''
may refer to either a Selling Shareholder Direct Floor Listing or a
Primary Direct Floor Listing. See proposed Rule 1.1(f). See also
Rule 7.35(a)(1) for the definition of ``Auction'' and Rule
7.35(a)(1)(E) for the definition of ``Direct Listing Auction.''
    \27\ See proposed Rule 7.31(c)(1)(D). See also Rule 7.31(a)(2)
for the definition of ``Limit Order.''
    \28\ See proposed Rule 7.31(c)(1)(D)(i)-(v).
    \29\ ``Auction Price'' is defined as the price at which an
Auction is conducted. See Rule 7.35(a)(5). The Exchange states that
because an IDO Order would not be entered by the DMM, the Exchange
has proposed to include IDO Orders among the types of Auction-Only
Orders that are not available to DMMs. See Notice, supra note 9, 85
FR at 39248, n.21. See also proposed Rule 7.31(c). An ``Auction-Only
Order'' is a Limit or Market Order that is to be traded only in an
auction pursuant to the Rule 7.35 Series (for Auction-Eligible
Securities) or routed pursuant to Rule 7.34 (for UTP Securities).
See Rule 7.31(c). See also Rule 7.31(a)(1) for the definition of
``Market Order.''
    \30\ See proposed Rule 7.35A(g)(2). A buy (sell) order is
``better-priced'' if it is priced higher (lower) than the Auction
Price, and this includes all sell Market Orders and Market-on-Open
Orders. See Rule 7.35(a)(5)(A). See also Rule 7.31(c)(1)(B) for the
definition of ``Market-on-Open Order.'' A buy (sell) order is ``at-
priced'' if it is priced equal to the Auction Price. See Rule
7.35(a)(5)(B).
    \31\ See Notice, supra note 9, 85 FR at 39249.
    \32\ See Notice, supra note 9, 85 FR at 39249.
---------------------------------------------------------------------------

    Currently, Rule 7.35A(h) generally provides that, once an Auction
Price has been determined, better-priced orders are guaranteed to
participate in the Auction at the Auction Price, whereas at-priced
orders are not guaranteed to participate and will be allocated
according to specified priority rules.\33\ The Exchange has proposed
that an IDO Order would be guaranteed to participate in the Direct
Listing Auction at the Auction Price.\34\ If the limit price of the IDO
Order is equal to the Auction Price, the IDO Order would have priority
at that price.\35\ The Exchange states that providing priority to an
at-priced IDO Order would increase the potential for the IDO Order to
be executed in full, and therefore for the Primary Direct Floor Listing
to proceed.\36\
---------------------------------------------------------------------------

    \33\ See Rule 7.35A(h)(1) and (2).
    \34\ See proposed Rule 7.35A(h)(4).
    \35\ See proposed Rule 7.35A(h)(4).
    \36\ See Notice, supra note 9, 85 FR at 39249.

---------------------------------------------------------------------------

    In addition, the Exchange has proposed to specify that two existing
provisions would apply in the case of a Selling Shareholder Direct
Floor Listing only. Currently, a DMM will publish a pre-opening
indication before a security opens if the Auction Price is anticipated
to be a change of more than the Applicable Price Range \37\ from a
specified Indication Reference Price.\38\ Under the proposal, the
Indication Reference Price for a security that is a Selling Shareholder
Direct Floor Listing that has had recent sustained trading in a Private
Placement Market prior to listing would be the most recent transaction
price in that market or, if none, would be a price determined by the
Exchange in consultation with a financial advisor to the issuer of such
security.\39\ Further, when facilitating the opening on the first day
of trading of a Selling Shareholder Direct Floor Listing that has not
had a recent sustained history of trading in a Private Placement Market
prior to listing, the DMM would consult with a financial advisor to the
issuer of such security in order to effect a fair and orderly opening
of such security.\40\ The Exchange states that these provisions are not
applicable to a Primary Direct Floor Listing because, unlike for a
Selling Shareholder Direct Floor Listing, the registration statement
for a Primary Direct Floor Listing would include a price range within
which the company anticipates selling the shares it is offering.\41\
---------------------------------------------------------------------------

    \37\ The ``Applicable Price Range'' for determining whether to
publish a pre-opening indication, with limited exception, is 5% for
securities with an Indication Reference Price over $3.00 and $0.15
for securities with an Indication Reference Price equal to or lower
than $3.00. See Rule 7.35A(d)(3)(A).
    \38\ See Rule 7.35A(d)(1)(A).
    \39\ See proposed Rule 7.35A(d)(2)(A)(iv).
    \40\ See proposed Rule 7.35A(g)(1). The Exchange has proposed a
non-substantive change to this provision to modify a reference to
``Private Placement'' to utilize the defined term ``Private
Placement Market.'' See id.
    \41\ See Notice, supra note 9, 85 FR at 39249.
---------------------------------------------------------------------------

    In the case of a Primary Direct Floor Listing, the Exchange has
proposed a new measure of the Indication Reference Price. Specifically,
for a security that is offered in a Primary Direct Floor Listing, the
Indication Reference Price would be the lowest price of the Primary
Direct Floor Listing Auction Price Range.\42\
---------------------------------------------------------------------------

    \42\ See proposed Rule 7.35A(d)(2)(A)(v). The Exchange states
that, for example, if the Primary Direct Floor Listing Auction Price
Range is $10.00 to $20.00, then the Indication Reference Price would
be $10.00. See Notice, supra note 9, 85 FR at 39248, n.22.
---------------------------------------------------------------------------

    The Exchange states that any services provided by a financial
advisor to the issuer of a security listing in connection with a
Selling Shareholder Direct Floor Listing or a Primary Direct Floor
Listing (the ``financial advisor'') and the DMM assigned to that
security must provide such services in a manner that is consistent with
all federal securities laws, including Regulation M and other anti-
manipulation requirements.\43\ The Exchange states that, for example,
when a financial advisor provides a consultation to the Exchange as
required by Rule 7.35A(d)(2)(a)(iv), when the DMM consults with a
financial advisor in connection with Rule 7.35A(g)(1), or when a
financial advisor otherwise assists or consults with the DMM as to
pricing or opening of trading in a Selling Shareholder Direct Floor
Listing or Primary Direct Floor Listing, the financial advisor and DMM
will not act inconsistent with Regulation M and other anti-manipulation
provisions of the federal securities laws, or Exchange Rule 2020.\44\
The Exchange represents that it has retained the Financial Industry
Regulatory Authority (``FINRA'') pursuant to a regulatory services
agreement to monitor such compliance with Regulation M and other anti-
manipulation provisions of the federal securities laws, and Rule
2020.\45\ The Exchange has proposed a new commentary that states that,
in connection with a Selling Shareholder Direct Floor Listing, the
financial advisor to the issuer of the security being listed and the
DMM assigned to such security are reminded that any consultation that
the financial advisor provides to the Exchange as required by Rule
7.35A(d)(2)(A)(iv) and any consultation between the DMM and financial
advisor as required by Rule 7.35A(g)(1) is to be conducted in a manner
that is consistent with the federal securities laws, including
Regulation M and other anti-manipulation requirements.\46\
---------------------------------------------------------------------------

    \43\ See Notice, supra note 9, 85 FR at 39249.
    \44\ See Notice, supra note 9, 85 FR at 39249 (citing Rule 2020,
which provides that ``No member or member organization shall effect
any transaction in, or induce the purchase or sale of, any security
by means of any manipulative, deceptive or other fraudulent
contrivance'').
    \45\ See Notice, supra note 9, 85 FR at 39249. The Exchange
further represents that it expects to issue regulatory guidance in
connection with a company conducting a Primary Direct Floor Listing,
and that such regulatory guidance would include a reminder to member
organizations that activities in connection with a Primary Direct
Floor Listing, like activities in connection with other listings,
must be conducted in a manner not inconsistent with Regulation M and
other anti-manipulation provisions of the federal securities laws
and Rule 2020. See id. at 39249, n.28.
    \46\ See proposed Rule 7.35A, Commentary .10.
---------------------------------------------------------------------------

    Finally, the Exchange has proposed to remove references to Direct
Listing Auctions from Rule 7.35C, which concerns Exchange-facilitated
auctions.\47\ The Exchange states that, because of the importance of
the DMM to the Direct Listing Auction, if a DMM is unable to manually
facilitate a Direct Listing Auction, the Exchange would not proceed
with a Selling Shareholder Direct Floor Listing or a Primary Direct
Floor Listing.\48\
---------------------------------------------------------------------------

    \47\ See proposed Rule 7.35C(a), (a)(3), (b)(1), and (b)(3).
    \48\ See Notice, supra note 9, 85 FR at 39249.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 2, is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange.\49\ In
particular, the Commission finds that the proposed rule change, as
modified by Amendment No. 2, is consistent with Section 6(b)(5) of the
Exchange Act,\50\ which requires, among other things, that the rules of
a national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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 are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \50\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission has consistently recognized the importance of
exchange listing standards. Among other things, such listing standards
help ensure that exchange listed companies will have sufficient public
float, investor base, and trading interest to provide the depth and
liquidity necessary to promote fair and orderly markets.\51\
---------------------------------------------------------------------------

    \51\ The Commission has stated in approving exchange listing
requirements that the development and enforcement of adequate
standards governing the listing of securities on an exchange is an
activity of critical importance to the financial markets and the
investing public. In addition, once a security has been approved for
initial listing, maintenance criteria allow an exchange to monitor
the status and trading characteristics of that issue to ensure that
it continues to meet the exchange's standards for market depth and
liquidity so that fair and orderly markets can be maintained. See,
e.g., NYSE 2018 Order, supra note 12, 83 FR at 5653, n.53;
Securities Exchange Act Release Nos. 81856 (October 11, 2017), 82 FR
48296, 48298 (October 17, 2017) (SR-NYSE-2017-31); 81079 (July 5,
2017), 82 FR 32022, 32023 (July 11, 2017) (SR-NYSE-2017-11). The
Commission has stated that adequate listing standards, by promoting
fair and orderly markets, are consistent with Section 6(b)(5) of the
Exchange Act, in that they are, among other things, designed to
prevent fraudulent and manipulative acts and practices, promote just
and equitable principles of trade, and protect investors and the
public interest. See, e.g., NYSE 2018 Order, supra note 12, 83 FR at
5653, n.53; Securities Exchange Act Release Nos. 87648 (December 3,
2019), 84 FR 67308, 67314, n.42 (December 9, 2019) (SR-NASDAQ-2019-
059); 88716 (April 21, 2020), 85 FR 23393, 23395, n.22 (April 27,
2020) (SR-NASDAQ-2020-001).

---------------------------------------------------------------------------

    The Exchange's listing standards currently provide the Exchange
with discretion to list a company whose stock has not been previously
registered under the Exchange Act, where such company is listing in
connection with a Selling Shareholder Direct Floor Listing.\52\ The
Exchange has proposed to allow companies to list in connection with a
Primary Direct Floor Listing, which would for the first time provide a
company the option, without a firm commitment underwritten offering, of
selling shares to raise capital in the opening auction upon initial
listing on the Exchange.\53\
---------------------------------------------------------------------------

    \52\ See Section 102.01B, Footnote (E) of the Manual. See also
NYSE 2018 Order, supra note 12, 83 FR at 5654.
    \53\ See NYSE Listed Company Manual Section 102.01B, Footnote
(E) of the Manual which states in part that the Exchange expects to
list companies in connection with a firm commitment underwritten
IPO, upon transfer from another market, or pursuant to a spin-off.
---------------------------------------------------------------------------

    Several commenters expressed support for the proposed expansion of
direct listings to permit a primary offering.\54\ One commenter, for
example, stated that it supports alternative formats for IPOs,
including direct listing proposals like the one proposed by the
Exchange, and expressed the view that issuers should be offered choices
that match their objectives so long as they protect the integrity of
the markets and are fair and clear to investors, using transparent
processes.\55\ Another commenter believed that allowing for multiple
pathways for private companies to achieve exchange listing would
encourage more companies to participate in public equity markets and
provide investors a broader array of attractive investment
opportunities.\56\
---------------------------------------------------------------------------

    \54\ See Letter from Stephen John Berger, Managing Director,
Global Head of Government & Regulatory Policy, Citadel Securities
(February 18, 2020) (``Citadel Letter''), at 1; Letter from Paul
Abrahimzadeh and Russell Chong, Co-Heads, U.S. Equity Capital
Markets, Citigroup Capital Markets Inc. (February 26, 2020)
(``Citigroup Letter''); Letter from Matthew B. Venturi, Founder &
CEO, ClearingBid, Inc. (January 21, 2020) (``ClearingBid Letter''),
at 5; Letter from David Ludwig, Head of Americas Equity Capital
Markets, Goldman Sachs Group, Inc. (February 7, 2020) (``Goldman
Sachs Letter''); Letter from Burke Dempsey, Executive Vice President
Head of Investment Banking, Wedbush Securities (April 20, 2020)
(``Wedbush Letter'').
    \55\ See Citigroup Letter, supra note 54. This commenter also
stated its belief that the direct listing format would afford broad
participation in the capital formation process and help establish a
shareholder base that has a long-term interest in partnering with
management teams. See id.
    \56\ See Goldman Sachs Letter, supra note 54. This commenter
also referenced the recent direct listings by Spotify Technology
S.A. and Slack Technologies, Inc., and expressed the view that the
development of a direct listing approach to becoming a public
company has been a significant step forward in providing companies
greater choice in their path to going public, and that the ability
to include a primary capital raise in a direct listing will further
enhance this flexibility. See id. See also Citadel Letter, supra
note 54, at 1; Wedbush Letter, supra note 54.
---------------------------------------------------------------------------

    The Commission believes that a number of the changes set forth in
Amendment No. 2 support a finding that the proposal is consistent with
the Act. More specifically, the Commission believes that the following
aspects result in a proposal for a Primary Direct Floor Listing that is
reasonably designed to be consistent with the protection of investors
and the maintenance of fair and orderly markets, as well as the
facilitation of capital formation: (i) Addition of the IDO Order type
and other requirements which address how the issuer will participate in
the opening auction; (ii) discussion of the role of financial advisors;
(iii) addition of the Commentary that provides that specified
activities are to be conducted in a manner that is consistent with the
federal securities laws, including Regulation M and other anti-
manipulation requirements; (iv) retaining of FINRA to monitor
compliance with Regulation M and other anti-manipulation provisions of
the federal securities laws and NYSE Rule 2020; (v) clarification of
how market value will be determined for qualifying the company's
securities for listing; and (vi) elimination of the grace period for
meeting certain listing requirements.
    With respect to the aggregate market value of publicly-held shares
requirement, the Exchange proposes to require that it will deem a
company to have met such requirement if the company will sell at least
$100 million in market value of shares in the Exchange's opening
auction on the first day of trading. Alternatively, where a company
will sell shares in the opening auction with a market value of less
than $100 million, the Exchange will deem the company to have met such
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 listing is at least
$250 million. According to the Exchange, a company may list in
connection with an IPO with a market value of publicly-held shares of
$40 million and, ``in the Exchange's experience in listing IPOs, a
liquid trading market develops after listing for issuers with a much
smaller value of publicly-held shares than the Exchange anticipates
would exist after the opening auction in a Primary Direct Floor
Listing.'' \57\ In Amendment No. 2, the Exchange clarified that market
value would be calculated using a price per share equal to the lowest
price of the price range multiplied by the number of shares being
offered, as set forth by the issuer in its registration statement.\58\
One commenter expressed the view that the proposal, as originally
noticed for comment, appropriately updated the publicly-held shares and
distribution requirements associated with direct listings in order to
ensure the development of a liquid trading market.\59\
---------------------------------------------------------------------------

    \57\ Notice, supra note 9, 85 FR at 39250. As described above,
in determining that a company has met the market value of publicly-
held shares standards the Exchange will consider the market value of
all shares sold by the company in the opening auction, rather than
excluding shares that may be purchased by officers, directors, or
owners of more than 10% of the company's common stock,
notwithstanding that generally the Exchange's listing standards
exclude shares held by such insiders from its calculations of
publicly-held shares. The Exchange asserts that the Primary Direct
Floor Listing will have an adequate public float and liquid trading
market after completion of the opening auction given the higher
market value requirement than that required for listing an
underwritten IPO. See Notice, supra note 9, 85 FR at 39247.
    \58\ See Notice, supra note 9, 85 FR at 39247 and note 19,
supra, and accompanying text.
    \59\ See Citadel Letter, supra note 54, at 1.
---------------------------------------------------------------------------

    The Exchange's proposed aggregate market value of publicly-held
shares requirement provides the Exchange with a reasonable level of
assurance that the company's market value supports listing on the
Exchange and the maintenance of fair and orderly markets. The proposed
requirements are comparable to or higher than the aggregate market
value of publicly-held shares required by the Exchange for initial
listing in other contexts.\60\ Specifically, the Exchange's proposed
minimum market value requirements, which are designed in part to ensure
sufficient liquidity, of $100 million and $250 million for Primary
Direct Floor Listings are higher than the $40 million minimum market
value requirement for IPOs \61\ and comparable to the $100 million and
$250 million minimum market value requirements for Selling Shareholder

Direct Floor Listings.\62\ The Commission further believes that using
the lowest price in the price range established by the issuer in its
registration statement to determine the minimum market value is a
reasonable and conservative approach given that, as described below,
the Primary Direct Floor Listing will not proceed at a lower price.
---------------------------------------------------------------------------

    \60\ See Section 102.01B of the Manual.
    \61\ In addition to the $40 Million standard, the Exchange's
current listing standards require an aggregate market value of
publicly held shares of $100 million for companies that list other
than at the time of an IPO, spin-off, or initial firm commitment
underwritten public offering. See Section 102.01B of the Manual.
    \62\ One commenter raised a concern that the Exchange does not
provide any data to support its conclusion that there would be
adequate liquidity for a security listing in connection with a
Primary Direct Floor Listing. See Letter from Jeffrey P. Mahoney,
General Counsel, Council of Institutional Investors (July 16, 2020)
(``CII Letter III''), at 5. While the Exchange did not provide the
data specifically referenced by the commenter, as noted above, the
proposed minimum market value requirements are comparable to or
higher than those applied by the Exchange in other contexts. See
supra notes 16-17 and accompanying text. The existing $40 million
and $100 million market value requirements in Section 102.01B of the
Manual are longstanding requirements that have supported the listing
of companies on the Exchange that are suitable for listing over many
years. The Commission also previously approved the standards for
Selling Shareholder Direct Floor Listings as supporting listing on
the Exchange and the maintenance of fair and orderly markets thereby
protecting investors and the public interest in accordance with
Section 6(b)(5) of the Exchange Act (see NYSE 2018 Order, supra note
12, 83 FR at 5654).
---------------------------------------------------------------------------

    In the Order Instituting Proceedings, the Commission expressed
concern that, with a Primary Direct Floor Listing, the company could be
the only seller (or a dominant seller) participating in the opening
auction and thus could be in a position to uniquely influence the price
discovery process, and stated that the Exchange had not explained how
its opening auction rules would apply in a Primary Direct Floor
Listing.\63\
---------------------------------------------------------------------------

    \63\ One commenter expressed general support for the proposal
and offered a variety of observations beyond the scope of the
proposal, including with respect to the importance of opening
auction information. See ClearingBid Letter, supra note 54, at 1.
---------------------------------------------------------------------------

    In Amendment No. 2, the Exchange proposed to add the IDO Order as a
new order type to be used by the issuer in a Primary Direct Floor
Listing, and to clarify in its rules how the DMM would conduct the
opening auction for such listings. As discussed above, the issuer would
be required to submit an IDO Order in the opening auction with a limit
price equal to the low end of the Primary Direct Floor Listing Auction
Price Range, and for the full quantity, as reflected in the
registration statement. The IDO Order cannot be modified or canceled by
the issuer once entered. Further, the DMM would conduct the opening
auction only if the auction price is within the Primary Direct Floor
Listing Auction Price Range disclosed in the registration statement,
and the IDO Order and all better priced sell orders can be satisfied in
full. If the auction price is equal to the limit price of the IDO Order
(i.e., the low end of the Primary Direct Floor Listing Auction Price
Range), the IDO Order would have priority over other sell orders at
that price.\64\ The Commission believes that the IDO Order and related
clarifications proposed by the Exchange assure that the method by which
the issuer participates in the opening auction is clearly defined, that
the issuer is not in a position to improperly influence the price
discovery process, and that the auction is otherwise consistent with
the disclosures in the registration statement. The Commission further
believes it is appropriate for the IDO Order to have priority over
other sell orders at the same price if the auction price is at the
limit price of the IDO Order, because the auction will not occur at all
unless the IDO Order is satisfied in full, and this would assure that
both the issuer and better priced sell orders are able to sell
securities in the auction.\65\ The Commission believes that the IDO
Order requirements described above help to mitigate concerns about the
price discovery process in the opening auction and would provide some
reasonable assurance that the opening auction and subsequent trading
promote fair and orderly markets and that the proposed rules are
designed to prevent manipulative acts and practices, and protect
investors and the public interest in accordance with Section 6(b)(5) of
the Exchange Act.
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    \64\ In addition, as discussed above, the Exchange proposes that
the DMM will publish a pre-opening indication in a Primary Direct
Floor Listing if the auction price is expected to be outside a price
range around an ``Indication Reference Price'' equal to the low end
of the price range reflected in the registration statement. The
Commission believes this is a reasonable and conservative reference
price because the auction cannot occur at a lower price, and if the
auction occurs at a higher price the proposal errs on the side of
requiring opening indication information to be disseminated to
market participants.
    \65\ In addition, the Commission believes that the proposed
changes to Rule 7.35C to remove the references to Direct Listing
Auction would assure that all direct listings occur with a DMM that
will facilitate the opening auction manually, and should help
promote fair and orderly markets in connection with direct listings,
because of the role of the DMM in ensuring that the conditions
described above to conduct the auction have been met. The Commission
also believes that the proposed changes to (i) Section 102.01B of
the Manual, Footnote (E) to clarify the description of a Selling
Shareholder Direct Floor Listing, (ii) Rule 1.1(f) to amend the
definition of ``Direct Listing,'' and (iii) Rule 7.35A(g)(1) to use
the defined term ``Private Placement Market'' will provide clarity
to the Exchange's rules, consistent with the protection of investors
and the public interest under Section 6(b)(5) of the Exchange Act.
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    In Amendment No. 2, the Exchange added language to its proposal,
discussed above, reminding a financial adviser to an issuer and the DMM
that any consultations with the financial adviser must be conducted in
a manner consistent with the federal securities laws, including
Regulation M and other anti-manipulation requirements.\66\ The Exchange
also represents that it has retained FINRA to monitor such compliance
and that it plans to issue regulatory guidance in this area. The
Commission believes that these are reasonable steps to help assure
compliance by participants in the direct listing process with these
important provisions of the federal securities laws and that the
proposed changes are consistent with preventing manipulative acts and
practices, and protecting investors and the public interest in
accordance with Section 6(b)(5) of the Exchange Act.
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    \66\ See Notice, supra note 9, 85 FR at 39249, and proposed Rule
7.35A, Commentary .10. See also supra note 45 and accompanying text
noting that the Exchange will be issuing a regulatory circular to
remind member organizations that activities in connection with a
Primary Direct Floor Listing, like activities in connection with
other listings, must be conducted in a manner not inconsistent with
Regulation M and other anti-manipulation provisions of the federal
securities laws and NYSE Rule 2020.
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    Finally, several commenters expressed concerns that the lack of
traditional underwriter involvement in direct listings generally would
increase risks for investors, suggesting that direct listings
circumvent the traditional due diligence process and traditional
underwriter liability.\67\ One commenter believed that approval of the
proposal would likely increase the number of companies that forego the
traditional IPO process,\68\ and significantly increase the risks for
retail investors, including by circumventing the due diligence
process.\69\ This commenter expressed

concern that direct listings could weaken certain shareholder investor
protections, and recommended that the Commission make clear that
financial advisors, exchanges, control shareholders, and directors
involved in a direct listing automatically incur statutory underwriter
liability under the Securities Act and are required to hold the
regulatory capital necessary to act as a de facto underwriter.\70\
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    \67\ See, e.g., Letter from Christopher A. Iacovella, Chief
Executive Officer, ASA (December 12, 2019) (``ASA Letter I''), at 1.
    \68\ The Commission acknowledges the possibility that some
companies may pursue a Primary Direct Floor Listing instead of a
traditional IPO. The Commission also believes that some companies
may pursue a Primary Direct Floor Listing that would not otherwise
go public, or that would wait to pursue a traditional IPO until a
later stage of development, both of which would potentially reduce
opportunities for public shareholders to share in growth
opportunities. Thus, the Commission believes that the proposed rule
change may result in additional investment opportunities while
providing companies more flexible options for becoming publicly
traded.
    \69\ See ASA Letter I, supra note 67, at 1-2. This commenter
believed that allowing companies to raise primary capital through a
direct listing ``would be a complete end run around the traditional
underwriting process and . . . create a massive loophole in the
regulatory regime that governs the offerings of securities to the
public.'' Id. at 1. In this commenter's view, two recent high-
profile direct listings--Spotify and Slack--did not work out
particularly well for retail investors, and a robust underwriting
process would have uncovered more of these companies'
vulnerabilities before these securities were offered to the public.
See id. at 2. Another commenter stated that these direct listings
may have been successes for private investors, but the retail and
public investors that purchased stock in Spotify and Slack were
under water for years, and one company is facing a lawsuit because
of how direct listings are modeled. See Letter from Anonymous (June
30, 2020).
    \70\ See ASA Letter I, supra note 67, at 2; Letter from
Christopher A. Iacovella, Chief Executive Officer, American
Securities Association (March 5, 2020) (``ASA Letter II''), at 2-3.
Several additional commenters raised a variety of concerns with the
use of a direct listing to conduct a primary offering. For example,
one commenter expressed the view that ``bailing out'' private market
investors with reduced offering requirements would incent companies
to remain private longer, reduce transparency, and impair price
discovery. See Letter from Anonymous (December 4, 2019). Another
commenter took the position that direct listings are a method for
insiders to ``rip-off'' IPO investors. See Letter from Allan
Rosenbalm (December 4, 2019). Yet another commenter was critical of
direct listings for a variety of reasons, and expressed the view,
among other things, that they are ``an attempt to bypass the
independent skilled investment banking and investment management
professionals when establishing the initial market value of the
company.'' Letter from Anonymous (January 3, 2020). And another
commenter stated that a primary capital raise would have many red
flags, questioned how to trust a private company's accounting
methods that are not consistent with the public markets, and stated
that a direct listing is ``fraudulent with no liability.'' See
Letter from Anonymous (July 1, 2020). The Commission acknowledges
these concerns, but believes the proposed rule change is consistent
with investor protection in light of the fact that Primary Direct
Floor Listings will be registered under the Securities Act, and that
such registration statements will require both bona fide price
ranges and audited financial statements prepared in accordance with
either U.S. GAAP or International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board.
---------------------------------------------------------------------------

    Another commenter recommended that the Commission disapprove the
proposal and expressed concern that shareholder legal rights under
Section 11 of the Securities Act may be particularly vulnerable in the
case of direct listings, and that investors in direct listing companies
may have fewer legal protections than investors in IPOs.\71\ The
commenter stated that it could not support direct listings as an
alternative to IPOs if public companies could limit their liability for
damages caused by untrue statements of fact or material omissions of
fact within registration statements associated with direct
listings.\72\
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    \71\ See Letter from Jeffrey P. Mahoney, General Counsel,
Council of Institutional Investors (January 16, 2020) (``CII Letter
I''), at 2; Letter from Jeffrey P. Mahoney, General Counsel, Council
of Institutional Investors (April 16, 2020) (``CII Letter II''), at
2; CII Letter III, supra note 60, at 3-4, 6.
    \72\ See CII Letter I, supra note 71, at 2-3; CII Letter II,
supra note 71, at 3. This commenter was particularly concerned about
positions taken by the issuer in a recent lawsuit relating to the
direct listing of Slack, and expressed the view that the issuer
``relies on (1) attacking the right of secondary market purchasers
to bring a Section 11 claim; and (2) the inability to determine what
shares were `covered' by Slack's registration statement.'' CII
Letter I, supra note 71, at 2. Among other things, the commenter
urged the Commission to explore establishing a system of traceable
shares before approving a direct listing regime. See id. at 2-3; CII
Letter III, supra note 62, at 4.
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    On the other hand, one commenter supported direct listings as a
suitable option for certain issuers, and took the position that ``[d]ue
diligence is already ably done by the legions of experienced
accountants, lawyers, consultants, rating agencies, etc.'' \73\
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    \73\ Wedbush Letter, supra note 54.
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    In response, the Exchange stated that it disagrees that the absence
of underwriters creates a loophole in the regulatory regime that
governs offerings of securities to the public.\74\ According to the
Exchange, while involvement of a traditional underwriter is often
necessary to the success of an IPO or other public offering,
underwriter participation in the public capital-raising process is not
required by the Securities Act, and companies regularly access the
public markets for capital raising and other purposes without using
traditional underwriters.\75\ In the Exchange's view, the due diligence
process in Primary Direct Floor Listings is the responsibility of the
gatekeepers who participate in the transaction, such as the company's
board of directors, its senior management, and its independent
accountants.\76\ The Exchange further stated that a company pursuing a
Primary Direct Floor Listing would go through the same process of
publicly filing a registration statement as an underwritten offering,
and if a company's business model exhibits weaknesses, they will be
exposed to the public prior to listing.\77\
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    \74\ See Letter from Elizabeth K. King, Chief Regulatory
Officer, ICE, General Counsel & Corporate Secretary, NYSE (March 16,
2020) (``NYSE Response Letter''), at 2.
    \75\ See NYSE Response Letter, supra note 74, at 2-3.
    \76\ See NYSE Response Letter, supra note 74, at 2-3. The
Exchange took the position that IPOs carry a certain amount of risk
for investors, that an underwritten IPO does not insulate investors
from that risk, and that there is no reason to believe that
companies with direct listings will perform any better or worse than
companies with underwritten IPOs. See id. at 3.
    \77\ See NYSE Response Letter, supra note 74, at 4. The Exchange
also took the position that the absence of lock-up agreements with
pre-IPO shareholders in Primary Direct Floor Listings does not
create short-term price instability, and that at most it shifts the
timing of such instability from six months after the offering to
closer to the time of listing. See id.
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    As to the comments concerning underwriter liability and due
diligence, the Commission agrees, as noted by the Exchange, that the
Securities Act does not require the involvement of an underwriter in
registered offerings. Moreover, given the broad definition of
``underwriter'' \78\ in the Securities Act, a financial advisor to an
issuer engaged in a Primary Direct Floor Listing may, depending on the
nature and extent of the financial advisor's activities and on the
facts and circumstances, be deemed a statutory ``underwriter'' with
respect to the securities offering, with attendant underwriter
liabilities.\79\ In addition, given the broad definition of
underwriter, required involvement of financial advisors, and the
financial advisors' reputational interests and potential liability,
including as statutory underwriters, the Commission believes that the
financial advisors to issuers in Primary Direct Floor Listings will be
incentivized to engage in robust due diligence, notwithstanding the
lack of a firm commitment underwriting agreement. Even absent the
involvement of a statutory underwriter, investors would not be
precluded from pursuing any claims they may have under the Securities
Act for false or misleading offering documents, nor would the absence
of a statutory underwriter affect the amount of damages investors may
be entitled to recover.
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    \78\ Section 2(a)(11) of the Securities Act defines
``underwriter'' to mean ``any person who has purchased from an
issuer with a view to, or offers or sells for an issuer in
connection with, the distribution of any security, or participates,
or has a direct or indirect participation in the direct or indirect
underwriting of any such undertaking.''
    \79\ The Commission does not agree, as asserted by one
commenter, that financial advisors, exchanges, control shareholders,
and directors involved in a direct listing will automatically incur
statutory underwriter liability under the Securities Act. See ASA
Letter I, supra note 67, at 2; ASA Letter II, supra note 70, at 2-3.
Whether or not any person would be considered a statutory
underwriter would be evaluated based on the particular facts and
circumstances, in light of the definition of underwriter contained
in Section 2(a)(11).
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    In addition, issuers and other gatekeepers, with their attendant
liability, play important roles in assuring that disclosures provided
to investors are materially accurate and complete. The Commission
therefore does not view a firm commitment underwriting as necessary to
provide adequate investor protection in the context of a registered
offering. Indeed, exchange-listed companies often engage in offerings
that do not involve a firm commitment underwriting. Given that

the proposed rule change will require all Primary Direct Floor Listings
to be registered under the Securities Act, and in light of the fact
that the existing liability framework under the Securities Act for
registered offerings will apply to all such Primary Direct Floor
Listings, the Commission concludes the proposed rule change is
consistent with investor protection.
    The Commission further believes that Primary Direct Floor Listings
may provide benefits to existing and potential investors, relative to
firm commitment underwritten offerings. First, because the securities
to be issued by the company in connection with a Primary Direct Floor
Listing would be allocated based on matching buy and sell orders, in
accordance with the proposed rules, some investors may be able to
purchase securities in a Primary Direct Floor Listing who might not
otherwise receive an initial allocation in a firm commitment
underwritten offering. The proposed rule change therefore has the
potential to broaden the scope of investors that are able to purchase
securities in an initial public offering, at the initial public
offering price, rather than in aftermarket trading. Second, because the
price of securities issued by the company in a Primary Direct Floor
Listing will be determined based on market interest and the matching of
buy and sell orders, some believe that Primary Direct Floor Listings
may be a more accurate way to price securities offerings.\80\ In a firm
commitment underwritten offering, the offering price is decided through
negotiations between the issuer and the underwriters for the offering.
The opening auction in a Primary Direct Floor Listing provides for a
different price discovery method for initial public offerings which
some believe may result in more appropriate pricing for the offered
shares, a potential benefit to existing and potential investors. The
Commission believes that the proposed rule change, by providing an
opening process in which buy and sell orders are matched, in accordance
with the proposed rules, to determine the offering price, may allow for
efficiencies in the way IPOs are priced and allocated without
sacrificing investor protection.
---------------------------------------------------------------------------

    \80\ See Matt Levine, Soon Direct Listings Will Raise Money,
Bloomberg, available at https://www.bloomberg.com/opinion/articles/2019-11-27/soon-direct-listings-will-raise-money.
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    Commenters also raised concerns about shareholder claims pursuant
to Section 11 of the Securities Act. The Commission notes that this
issue is not exclusive to Primary Direct Floor Listings but rather is a
recurring issue, particularly in the context of aftermarket securities
purchases. Purchasers in a registered offering may face difficulty
tracing their shares back to the registration statement whenever a
company conducts a registered offering for less than all of its shares.
Thus, even in the context of traditional firm commitment offerings, the
ability of existing shareholders who meet the conditions of Rule 144 to
sell shares on an unregistered basis may result in concurrent
registered and unregistered sales of the same class of security at the
time of an exchange listing, leading to difficulties tracing purchases
back to the registered offering.\81\ Although judicial precedent on
this topic may continue to evolve, the Commission is aware of only one
court that has considered this issue in the direct listing context to
date, and that court ruled in favor of allowing the plaintiffs to
pursue Section 11 claims.\82\ The Commission does not believe that the
proposed rule change to permit Primary Direct Floor Listings poses a
heightened risk to investors, and finds that the proposed rule change
is consistent with investor protection.
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    \81\ In a Primary Direct Floor Listing, all company shares will
be sold in the opening auction, making it potentially easier to
trace those shares back to the registration statement than in other
contexts.
    \82\ See Pirani v. Slack Techs., Inc., 2020 U.S. Dist. LEXIS
70177 (N.D. Cal., April 21, 2020).
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    For the reasons discussed above, the Commission finds that the
proposed rule change, as modified by Amendment No. 2, is consistent
with the Exchange Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\83\ that the proposed rule change (SR-NYSE-2019-67), as
modified by Amendment No. 2 thereto, be, and it hereby is, approved.
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    \83\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\84\
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    \84\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-19203 Filed 8-31-20; 8:45 am]
BILLING CODE 8011-01-P