SEC, NYSE Urge Open Markets As COVID-19 Spurs Telework

By Dean Seal
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Law360 (March 16, 2020, 7:24 PM EDT) -- U.S. regulators and stock exchanges, while widely transitioning their staffs to remote work during COVID-19's spread, advocated on Monday for financial markets to stay open despite mounting recession fears.

The U.S. Securities and Exchange Commission said in an announcement that it took measures over the weekend to provide relief to market participants affected by the novel coronavirus after a week of transitioning to what the agency called a "full telework posture." The regulator said it has remained fully operational throughout the transition.

The SEC also said it is working in close coordination with other financial regulators and exchanges to keep financial markets operating, with agency Chairman Jay Clayton saying in a phone interview with CNBC on Monday morning that "markets should continue to function through times like this."

Clayton's comments came as U.S. stocks plunged once again Monday morning, triggering an automatic 15-minute trading suspension at 9:30 a.m., despite the U.S. Federal Reserve's move on Sunday evening to cut interest rates to near zero.

New York Stock Exchange President Stacey Cunningham took to Twitter on Monday to dispel speculation of a more permanent trading halt in response to continued nosedives in the stock market, saying in a trio of tweets that market closures would "only further compound the current market anxiety."

"While we are deeply conscious of, and sympathetic to, investors' concerns around price declines, the market is a reflection of the larger uncertainties that everyone is experiencing during these challenging days," Cunningham wrote. "Closing the markets would not change the underlying causes of the market decline, would remove transparency into investor sentiment, and reduce investors' access to their money."

The NYSE published a notice to traders on Friday afternoon that its equity and options trading floors would remain open but that guest access to its Wall Street location is restricted, media access is reduced and exchange employees not required to support floor trading will work from home.

If the trading floor does need to be closed temporarily, it will be immediately sanitized and reopened "as soon as practicable," the NYSE said, while operations would continue on a fully electronic basis.

Nasdaq similarly emphasized continued market operations in an announcement on Sunday, saying that its North American staff started teleworking or working adjusted schedules the previous week. The exchange said all of its electronic equities, options and fixed-income markets will continue to operate and that initial public offerings will continue as scheduled.

Critical operational personnel will continue working on-site in split teams or rotating staff schedules, according to Nasdaq's announcement, although all client events and general public access at its MarketSite and Client Experience Center in Times Square are restricted. The exchange's options trading floor in Philadelphia will temporarily close on Tuesday until further notice.

"For the safety of all market participants, Nasdaq has proactively actioned its business continuity plans and remains committed to maintaining resilient, dynamic markets," Tal Cohen, head of North American market services for the exchange, said in the announcement. "We remain in close dialogue with clients, employees, health officials, industry partners and regulators, and will revise our plans accordingly."

The SEC said Monday that it has been monitoring the real and potential effects of COVID-19 on public companies and the functionality of U.S. and global securities markets. The guidance and targeted assistance it has offered to securities markets thus far largely concerns compliance with regulatory filing and public disclosure requirements, though the agency did immediately approve a measure on Monday that will allow the Chicago Board Options Exchange to shift to all-electronic trading while its trading floor is temporarily suspended.

The agency said it was heartened by its transition to telework last week, which occurred at least partially in response to news, confirmed to Law360 by an agency spokesperson on March 10, that at least one employee at the SEC's Washington, D.C., headquarters had been referred for coronavirus testing. In a letter to a New York federal judge on Friday, an enforcement attorney for the SEC said the agency was now dealing with two suspected COVID-19 cases.

Other financial regulators have likewise turned to telework in response to the coronavirus pandemic, including the U.S. Commodity Futures Trading Commission.

Michael Short, director of public affairs for the CFTC, told Law360 on Monday that the agency had successfully tested its telework capacity last week and is now encouraging its employees to work from home unless they have essential work that must be done at the office. The CFTC has also suspended all nonessential foreign and domestic travel.

"We do not expect this will have any impact on the agency's ability to carry out its mission," Short said.

The Financial Industry Regulatory Authority, the self-regulatory organization for brokers and exchanges, is also having its staff work remotely for the time being, but said Monday that it "remains fully operational" through its remote work capabilities. FINRA has postponed all in-person mediations and arbitrations through May 1, though case deadlines still apply.

"We recognize that this decision may cause inconvenience and we do not make it lightly," FINRA said on its website. "We are taking this preventative action out of an abundance of caution, in the interest of public safety. The well-being of our FINRA employees, arbitrators, stakeholders and communities is of paramount importance."

--Editing by Alanna Weissman.

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