On December 4, the SEC approved a New York Stock Exchange rule change that prohibits the issuance of material news by listed companies in the period immediately after the official closing time for the NYSE’s trading session until the earlier of (1) publication of such company’s official closing price on the exchange or (2) five minutes after the official closing time. The NYSE’s official closing time is generally 4:00 p.m. Eastern Time, but on certain days the official closing time occurs at 1:00 p.m. Eastern Time. Before the rule amendment, the NYSE had not restricted the issuance of material news after the close of the market.

The NYSE stated that it adopted this amendment to Section 202.06 of the NYSE Listed Company Manual to alleviate confusion caused by price discrepancies between the NYSE closing price and trading prices on other markets after the NYSE official closing time and before the NYSE closing auction is completed, which can occur after 4:00 p.m. Eastern Time.

The NYSE email alert announcing the rule change can be found here, the SEC’s approval order for the rule amendment can be found here, and the NYSE’s rule filing, including the amended rule text, can be found here. The rule change was effective immediately.

Background

Section 202.06 of the NYSE Listed Company Manual, "Procedure for Public Release of Information; Trading Halts," sets forth rules concerning the release of material news by listed companies. The NYSE considers material news to be any news that is reasonably likely to have a material impact on the price or trading volume of a listed security.

Before the rule change, Section 202.06 focused primarily on the periods (1) shortly before the opening of trading on the exchange (from 7:00 a.m. until 9:30 a.m. Eastern Time) and (2) during the exchange trading session (which currently is conducted on most days from 9:30 a.m. until 4:00 p.m. Eastern Time). During those periods, the rule requires listed companies to notify the NYSE by telephone at least ten minutes before they release material news and to inform the exchange of the substance of the announcement and the method by which the company intends to comply with the exchange’s news release policy.  The advance notification provides the exchange with the information necessary to consider whether trading in the security should be temporarily halted, and to locate the news upon publication.  The rule also requires that, if the announcement is in written form, the company provide the text of the announcement to the NYSE at least ten minutes before release via Internet-based notification methods.

Although there was no rule before this amendment pertaining to announcements occurring after the close of trading on the exchange, in 2015 the NYSE added an "advisory" note to Section 202.06 requesting (but not mandating) that listed companies intending to release material news after the close of trading wait to do so until the earlier of (1) the publication of the company’s official closing price on the exchange or (2) 15 minutes after the scheduled closing time on the exchange.

Rule amendment

Prohibition on material announcements immediately after NYSE closing time. With the rule change, listed companies are prohibited from publishing material news after the official closing time for the NYSE’s trading session until the earlier of publication of such company’s official closing price on the exchange or five minutes after the official closing time. A release from the NYSE indicates that a listed company can refer to NYSE Connect to obtain real-time information about the timing of the completion of the closing auction for its securities or, alternatively, can obtain this information from major market data vendors.

The NYSE justifies this rule change by explaining that, because there is trading after 4:00 p.m. on other exchange and non-exchange venues, if a listed company releases material news immediately after 4:00 p.m. (or any earlier time at which trading closes on the NYSE on a given day), but before the closing auction on the NYSE is completed, there can be a significant price difference in nearly contemporaneous trades on other markets and the closing price on the NYSE, and this can cause confusion to investors. The NYSE also emphasizes that Section 202.06 continues to include the "advisory" note referred to above, recommending (but not requiring) that listed companies not issue material news after the close of the trading session until the earlier of the publication of the company’s official closing price on the exchange or 15 minutes after the scheduled closing time on the exchange.

Exception for issuance under Regulation FD after nonintentional disclosure. It is important to note that the amended rule states that the restriction on releasing material news does not apply in situations where the listed company is releasing the material news after "a nonintentional disclosure in order to comply with Regulation FD."