Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Halt Auction Process, 67768-67772 [2018-28397]

Download as PDF 67768 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were not and are not intended to be solicited with respect to the proposed rule change and none have been received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self- regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– OCC–2018–015 on the subject line. khammond on DSK30JT082PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–OCC–2018–015. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than VerDate Sep<11>2014 16:24 Dec 28, 2018 Jkt 247001 those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of OCC and on OCC’s website at https://www.theocc.com/about/ publications/bylaws.jsp. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–OCC–2018–015 and should be submitted on or before January 22, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.41 Brent J. Fields, Secretary. [FR Doc. 2018–28385 Filed 12–28–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84927; File No. SR– CboeBZX–2018–090] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Halt Auction Process December 21, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 18, 2018, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to 41 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe BZX Exchange, Inc. (‘‘BZX’’ or the ‘‘Exchange’’) is filing with the Securities and Exchange Commission (the ‘‘Commission’’) a proposed rule change to amend the Halt Auction process. The text of the proposed rule change is attached as Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://www.cboe.com/ AboutCBOE/CBOELegalRegulatory Home.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Halt Auction process used to re-open BZX listed securities following certain Regulatory Halts. In 2017, the Exchange amended its Halt Auction process for re-opening a security following a Trading Pause initiated pursuant to the Plan to Address Extraordinary Market Volatility—i.e., the ‘‘Limit Up-Limit Down’’ or ‘‘LULD’’ Plan.5 Specifically, the Exchange modified its rules such that initial Halt Auction Collars following a Trading Pause would be calculated using a new methodology based on the Price Band that triggered the Trading Pause, and instituted a process for extending the auction and further widening the collars if necessary to accommodate buy or sell pressure 5 See Securities Exchange Act Release Nos. 79162 (October 26, 2016), 81 FR 75875 (November 1, 2016) (Notice); 79884 (January 26, 2017), 82 FR 8968 (February 2, 2017) (Approval Order) (SR–BatsBZX– 2016–61). E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices outside of the collars then in effect.6 The Exchange believes that these changes have been effective in facilitating a fair and orderly market following Trading Pauses initiated pursuant to the Limit Up-Limit Down Plan, and has decided to implement similar functionality for all other Regulatory Halts, such as material news halts or trading halts following the initiation of the market wide circuit breaker mechanism (‘‘NonLULD Regulatory Halts’’).7 The Exchange believes that the proposed changes would promote price formation by providing a consistent and orderly Halt Auction process for members and investors following all Regulatory Halts, similar to the current implementation on NYSE Arca, Inc. (‘‘Arca’’).8 Currently, BZX Rule 11.23(d)(2)(B) describes the process for extending the Quote-Only Period for IPO and Halt Auctions, other than Halt Auctions following a Trading Pause, which are described in the recently added BZX Rule 11.23(d)(2)(C).9 As provided in BZX Rule 11.23(d)(2)(B), the QuoteOnly Period may be extended where: (i) There are unmatched market orders on the Auction Book associated with the auction; (ii) in an IPO Auction, the underwriter requests an extension; (iii) where the Indicative Price moves the greater of 10% or fifty cents in the fifteen seconds prior to the auction; or (iv) in the event of a technical or systems issue at the Exchange that may impair the ability of Users to participate in the IPO Auction or of the Exchange to complete the IPO Auction. The Exchange proposes to amend this rule such that this process would continue to be followed solely for IPO Auctions or Halt Auctions following a NonRegulatory Halt. For Halt Auctions following a Non-LULD Regulatory Halt, the Exchange proposes to follow a process similar to that currently applied for Halt Auctions following a Trading khammond on DSK30JT082PROD with NOTICES 6 The Exchange also modified its clearly erroneous rules to provide that executions as a result of a Halt Auction under Rule 11.23, which encompasses all Halt Auctions, including but not limited to those following a Trading Pause, are not eligible to for a request to review as clearly erroneous under Rule 11.23(d). 7 A marketwide circuit breaker is triggered if the price of the S&P 500 Index declines by a specified amount compared to the closing price for the immediately preceding trading day. See BZX Rule 11.18(a). 8 See Securities Exchange Act Release Nos. 79107 (October 18, 2016), 81 FR 73159 (October 24, 2016) (Notice); 79846 (January 19, 2017), 82 FR 8548 (January 26, 2017) (Approval Order) (SR– NYSEArca–2016–130). 9 The term ‘‘Quote-Only Period’’ means a designated period of time prior to a Halt Auction, a Volatility Closing Auction, or an IPO Auction during which Users may submit orders to the Exchange for participation in the auction. See BZX Rule 11.23(a)(17). VerDate Sep<11>2014 16:24 Dec 28, 2018 Jkt 247001 Pause, as described in BZX Rule 11.23(d)(2)(C). BZX Rule 11.23(d)(2)(C), which describes the current process for incremental quote period extensions for Halt Auctions following a Trading Pause, provides that the Quote-Only Period commences five minutes prior to such Halt Auction, and is extended for an additional five minutes (‘‘Initial Extension Period’’) should a Halt Auction be unable to be performed due to a market order imbalance under BZX Rule 11.23(d)(2)(B)(i),10 or where the Indicative Price,11 before being adjusted for Halt Auction Collars, is outside the applicable Halt Auction Collars set forth in BZX Rule 11.23(d)(2)(C)(i) and (ii) (either, an ‘‘Impermissible Price’’). After the Initial Extension Period, the QuoteOnly Period is extended for additional five minute periods should a Halt Auction be unable to be performed due to an Impermissible Price until a Halt Auction occurs (‘‘Additional Extension Period’’).12 The Exchange attempts to conduct a Halt Auction during the course of each Additional Extension Period. Furthermore, the Halt Auction is cancelled at 3:50 p.m., at which time the auction for the security is conducted pursuant to the Volatility Closing Auction process under BZX Rule 11.23(e). The Exchange now proposes to amend BZX Rule 11.23(d)(2)(C) to implement this process for Halt Auctions following a Non-LULD Regulatory Halt as well. The proposed process for re-opening a BZX listed security after a Non-LULD Regulatory Halt would be identical to the process employed today for Halt Auctions following a Trading Pause, with only two differences that relate to the calculation of initial Halt Auction Collars. First, today the Halt Auction Reference Price for Halt Auctions following a Trading Pause is equal the 10 A market order imbalance exists when there are unmatched market orders on the Auction Book associated with the auction. See BZX Rule 11.23(d)(2)(B)(i). Since Rule 11.23(d)(2)(B), as amended, would apply solely to IPO Auctions to Halt Auctions following a Non-Regulatory Halt, the Exchange proposes to replace the reference to a market order imbalance under Rule 11.23(d)(2)(B)(i) with the text of the language included therein. 11 The term ‘‘Indicative Price’’ means the price at which the most shares from the Auction Book and the Continuous Book would match. In the event of a volume based tie at multiple price levels, the Indicative Price will be the price which results in the minimum total imbalance. In the event of a volume based tie and a tie in minimum total imbalance at multiple price levels, the Indicative Price will be the price closest to the Volume Based Tie Breaker. See BZX Rule 11.23(a)(10). 12 In the event of any extension to the Quote-Only Period as set forth in Rule 11.23(d)(2)(B) or (C), the Exchange notifies market participants regarding the circumstances and length of the extension. See BZX Rule 11.23(d)(2)(D). PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 67769 price of the Upper or Lower Price Band that triggered the halt. Similar to the current implementation on Arca,13 the Exchange proposes that the initial Halt Auction Collar following a Non-LULD Regulatory Halt would instead be based on a Halt Auction Reference Price equal to the price of the Final Last Sale Eligible Trade (‘‘FLSET’’).14 Second, today for Halt Auctions following a Trading Pause, if the Halt Auction Reference Price is the Lower (Upper) Price Band: (1) The initial upper (lower) Halt Auction Collar is the Upper (Lower) Price Band, and (2) the lower (upper) Halt Auction Collar is five percent less (greater) than the Halt Auction Reference Price, or $0.15 less (greater) than the Halt Auction Reference Price for securities with a Halt Auction Reference Price of $3.00 or less, in each case rounded to the nearest minimum price variation. Similar to the current implementation on Arca,15 the Exchange proposes that Halt Auction Collars following a Non-LULD Regulatory Halt, would be calculated as described in (2) above, with this calculation applied to both the lower and upper collar. For example, if the FLSET for a security subject to a Non13 Arca’s halt auction collars are based on an auction reference price equal to the last consolidated round-lot price of that trading day and, if none, the prior trading day’s official closing price (except as provided for in Arca Rule 7.35– E(e)(7)(A)) for trading halt auctions other than auctions following a Trading Pause. See Arca Rule 7.35E(a)(8)(A), (e)(7)(A). 14 The term ‘‘Final Last Sale Eligible Trade’’ or ‘‘FLSET’’ means the last trade occurring during Regular Trading Hours on the Exchange if the trade was executed within the last one second prior to either the Closing Auction or, for Halt Auctions, trading in the security being halted. Where the trade was not executed within the last one second, the last trade reported to the consolidated tape received by BZX Exchange during Regular Trading Hours and, where applicable, prior to trading in the security being halted will be used. If there is no qualifying trade for the current day, the BZX Official Closing Price from the previous trading day will be used. See BZX Rule 11.23(a)(9). The FLSET is the Commission approved last sale formulation designed for use in BZX auctions, including the Halt Auction. See Securities Exchange Act Release Nos. 65266 (September 6, 2011), 76 FR 56249 (September 12, 2011) (Notice); 65619 (October 25, 2011), 76 FR 67238 (October 31, 2011) (Approval Order) (SR–BATS–2011–032). The FLSET as defined in BZX Rule 11.23(a)(9) is equivalent to Arca’s reference price in substance, except that the most recent trade executed on BZX during Regular Trading Hours is used if such a trade is executed within the last one second prior to the halt. The Exchange believes that is appropriate to use the price of a trade on the primary listing market, i.e., BZX, to set the reference price for auctions in BZX-listed securities when such a trade has been executed recently. Using the FLSET as currently formulated and approved would therefore ensure that the reference price selected provides a familiar and desirable experience for member and investors participating in BZX auctions. 15 See Arca Rule 7.35E(e)(7)(B)(ii). E:\FR\FM\31DEN1.SGM 31DEN1 khammond on DSK30JT082PROD with NOTICES 67770 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices LULD Regulatory Halt is $100.00, then the initial Halt Auction Collars would be $95.00 × $105.00—i.e., five percent below and above the FLSET. All other logic currently in place for Halt Auctions Collars following a Trading Pause would be used for Halt Auctions following a Non-LULD Regulatory Halt, including the process for initiating extensions. Specifically, as is the case for Halt Auctions following a Trading Pause today, at the beginning of the Initial Extension Period the upper (lower) Halt Auction Collar would be increased (decreased) by five percent in the direction of the Impermissible Price, rounded to the nearest minimum price variation. For securities with a Halt Auction Reference Price of $3.00 or less, the Halt Auction Collar would be increased (decreased) in $0.15 increments in the direction of the Impermissible Price. At the beginning of each Additional Extension Period, the Halt Auction Collar would be widened in accordance with BZX Rule 11.23(d)(2)(C)(ii) by the same amount as the Initial Extension Period. The Exchange also proposes to amend BZX Rule 11.23(d)(2)(E) to reflect the proposed changes to the Halt Auction Collars described above, and make other technical corrections to that rule. Currently, BZX Rule 11.23(d)(2)(E) provides that IPO Auctions for ETPs are executed within the Collar Price Range, and Halt Auctions for ETPs are executed within the Halt Auction Collars. Although the Exchange has traditionally been a listing venue for ETPs, the Exchange now lists one corporate security—i.e., the stock of its parent company, Cboe Global Markets, Inc. The Exchange therefore proposes to eliminate the outdated reference to ETPs in this section. Furthermore, as described in more detail in the prior paragraphs, the Halt Auction Collars provided in BZX Rule 11.23(d)(2)(C) would apply to Halt Auctions following a Regulatory Halt, including both Trading Pauses and Non-LULD Regulatory Halts. The Collar Price Range, meanwhile, is used for Halt Auctions following either an IPO Auction or a Non-Regulatory Halt. The Exchange therefore proposes to amend the rule to state that the applicable Collar Price Range will be used for IPO Auctions and Halt Auctions following a Non-Regulatory Halt, while the applicable Halt Auction Collar will be used for Halt Auctions following a Regulatory Halt. Finally, the Exchange proposes to amend its Volatility Closing Auction to account for the widened Halt Auction Collars following a Regulatory Halt, VerDate Sep<11>2014 16:24 Dec 28, 2018 Jkt 247001 similar to handling on Arca.16 The Exchange conducts a Volatility Closing Auction for a halted security instead of the normal Closing Auction or Halt Auction, if the security halted between 3:50 p.m. and 4:00 p.m. pursuant to BZX Rule 11.18, or the Quote-Only Period of a Halt Auction for a security halted before 3:50 p.m. pursuant to BZX Rule 11.18 would otherwise be extended by the Exchange after 3:50 p.m. Currently, orders are executed in the Volatility Closing Auction at the price level within the Collar Price Range that maximizes the number of shares executed in the auction, with certain tiebreakers in the event that there is a volume based tie at multiple price levels. Instead of using the Collar Price Range, the Exchange proposes to preserve the widened collars discussed in this filing for Halt Auctions following either a Trading Pause or Non-LULD Regulatory Halt.17 As proposed, orders would be executed at the price level within the most recently widened Halt Auction Collar calculated pursuant to BZX Rule 11.23(d)(1)(C) that maximizes the number of shares executed in the auction.18 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the requirements of Section 6(b) of the Act,19 in general, and Section 6(b)(5) of the Act,20 in particular, in that it is designed to remove impediments to and perfect the mechanism of a free and open market and a national market system, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest and not to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that the proposed rule change is consistent with the protection of investors and the public interest because it would amend the Halt Auction process following a Non-LULD Regulatory Halt to be more closely aligned with behavior currently implemented for Halt Auctions following a Trading Pause. The 16 See infra note 18. most recently widened Halt Auction Collars calculated pursuant to Rule 11.23(d)(1)(C) would be used in all instances, including where the security goes directly into the Volatility Closing Auction without first being processed in a Halt Auction. 18 Arca also uses auction collars based on the most recently widened collars for the halt auction that did not occur when transitioning to a closing auction instead of the regular halt auction at the end of core trading hours. See Arca Rule 7.35– E(e)(10)(B). 19 15 U.S.C. 78f(b). 20 15 U.S.C. 78f(b)(5). 17 The PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 Exchange recently amended its reopening process following a Trading Pause to better account for buy or sell pressure by changing the manner in which initial Halt Auction Collars are established, and widening the collars as appropriate to accommodate trading interest submitted to participate in the auction. The Exchange believes that these changes have been generally successful in facilitating a fair and orderly process for re-opening securities following a Trading Pause. The Exchange has therefore decided to use a similar process for Halt Auctions following a Non-LULD Regulatory Halt. The Exchange believes that extending the current process for setting and widening Halt Auction Collars following a Trading Pause to Halt Auctions following a Non-LULD Regulatory Halt would benefit investors by facilitating price discovery and promoting consistency in how the Exchange conducts Halt Auctions following a Regulatory Halt. While the proposed process for Halt Auctions following a Non-LULD Regulatory Halt would largely follow the process in place today for Halt Auctions following a Trading Pause, there would be two notable differences. Both of these differences are designed to ensure that suitable Halt Auction Collars are utilized for Halt Auctions following Non-LULD Regulatory Halts. For instance, while an Auction Reference Price based on the Price Band that triggered the Trading Pause continues to be appropriate in the context of Halt Auctions following Trading Pauses, the Exchange believes that a different reference is necessary for Halt Auctions following Regulatory Halts that are unrelated to the LULD mechanism. The Exchange has chosen to use the FLSET as the Halt Auction Reference Price in these circumstances as this price is reflective of the current market for the halted security. Similarly, the Exchange believes that it is appropriate to calculate both upper and lower collars that are a specified percentage or dollar amount from this reference price because Non-LULD Regulatory Halts do not involve security specific buy or sell pressure. Both of these differences mirror the application of Halt Auction Collars on Arca today,21 and would therefore provide both a fair and familiar experience for members 21 Although there are minor differences between the FLSET and the reference price used by Arca, the Exchange believes that it is appropriate to use the FLSET as the reference price as this price represents the last sale calculation used for auctions in BZX listed securities pursuant to Rule 11.23. See supra note 14. E:\FR\FM\31DEN1.SGM 31DEN1 khammond on DSK30JT082PROD with NOTICES Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices and investors trading BZX listed securities. Similar to Halt Auctions following a Trading Pause, the Exchange believes that the proposed changes are consistent with the protection of investors and the public interest because they are designed to facilitate price discovery by ensuring that all market order interest could be satisfied in Halt Auctions following a Non-LULD Regulatory Halt. Furthermore, the Exchange believes that the standardized procedures to extend Halt Auctions an additional five minutes are appropriate because this would provide additional time to attract offsetting liquidity. If at the end of such extension, market orders still cannot be satisfied within the applicable Halt Auction Collar, or if the re-opening auction would be priced outside of the applicable collars, the Exchange would extend the Halt Auction an additional five minutes. The Exchange believes that extending the auction in these circumstances would protect investors and the public interest by reducing the potential for significant price disparity in post-auction trading. With each such extension, the Exchange believes that it is appropriate to widen the Halt Auction Collar on the side of the market on which there is buying or selling pressure as market conditions may prevent an imbalance from being resolved within the prior auction collars. The Exchange also believes that it is appropriate to amend its rules to properly indicate when the Collar Price Range and Halt Auction Collars are used. As discussed elsewhere in this proposed rule change, the applicable Collar Price Range would be used for IPO Auctions and Halt Auctions following a Non-Regulatory Halt, and the applicable Halt Auction Collar described in Rule 11.23(d)(2)(C) would be used for all Halt Auctions following a Regulatory Halt, including both Trading Pauses and Non-LULD Regulatory Halts. The proposed rule changes would remove unnecessary and outdated references to ETPs and make other changes consistent with the framework discussed in this proposed rule change for the calculation of auction collars. The Exchange therefore believes that the amended rule would increase transparency around the operation of the Exchange’s auctions, and is therefore consistent with the public interest and the protection of investors. Finally, the Exchange believes that it is consistent with the protection of investors and the public interest to preserve the widened Halt Auction Collars following a Regulatory Halt VerDate Sep<11>2014 16:24 Dec 28, 2018 Jkt 247001 when no Halt Auction has occurred prior to 3:50 p.m. and the Exchange therefore performs a Volatility Closing Auction. Using the most recently widened Halt Auction Collars in these circumstances ensures that buy or sell pricing pressure that resulted in the Exchange widening the Halt Auction Collars is appropriately accounted for when the Exchange transitions to a Volatility Closing Auction. The Exchange believes that the process for setting Halt Auction Collars following a Regulatory Halt facilitates price discovery and the maintenance of a fair and orderly market. Allowing these collars to persist, similar to Arca, would further ensure that the collars used for the Volatility Closing Auction would appropriately reflect the market for the security in a manner that facilitates price discovery when the Exchange transitions to a closing process instead of re-opening the security pursuant to the Halt Auction process. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to provide for a measured and transparent process for re-opening BZX listed securities after a Non-LULD Regulatory Halt that mirrors the current Halt Auction process following a Trading Pause initiated pursuant to the Limit Up-Limit Down Plan. A similar process is already used by Arca across all Regulatory Halts, and the Exchange believes that this handling would be beneficial for market participants that trade BZX listed securities. Rather than burden competition, the Exchange believes that the proposed rule change is evidence of the robust competition between equities markets that benefits members and investors. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No comments were solicited or received on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: A. Significantly affect the protection of investors or the public interest; B. impose any significant burden on competition; and PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 67771 C. become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 22 and Rule 19b–4(f)(6) thereunder.23 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2018–090 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CboeBZX–2018–090.This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the 22 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 23 17 E:\FR\FM\31DEN1.SGM 31DEN1 67772 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeBZX–2018–090 and should be submitted on or before January 22, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Brent J. Fields, Secretary. [FR Doc. 2018–28397 Filed 12–28–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84926; File No. SR–MSRB– 2018–10] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of the Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination khammond on DSK30JT082PROD with NOTICES December 21, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 20, 2018 the Municipal Securities Rulemaking Board (the ‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the MSRB. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 24 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 16:24 Dec 28, 2018 Jkt 247001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The MSRB filed with the Commission the content outline for the Municipal Advisor Principal Qualification Examination (‘‘Series 54 examination’’) and its associated selection specifications for the examination (‘‘selection specifications’’) (collectively, the ‘‘proposed rule change’’).3 The MSRB is not proposing any textual changes to its rules. The proposed rule change has been filed for immediate effectiveness pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b–4(f)(6) thereunder.5 The text of the proposed rule change is available on the MSRB’s website at www.msrb.org/Rules-andInterpretations/SEC-Filings/2018Filings.aspx, at the MSRB’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Section 15B of the Act authorizes the MSRB to prescribe ‘‘standards of training, experience, competence, and such other qualifications as the Board finds necessary or appropriate in the public interest or for the protection of investors and municipal entities or obligated persons’’ 6 and requires persons in any such class to pass tests prescribed by the Board.7 Section 3 The MSRB is also proposing the question bank for the Series 54 examination, but based upon instructions from the Commission staff, the MSRB is not filing the question bank for Commission review. See letter to Diane G. Klinke, General Counsel, MSRB, from Belinda Blaine, Associate Director, Division of Market Regulation, SEC, dated July 24, 2000, attached as Exhibit 3b. The question bank is available for Commission review. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b–4(f)(6). 6 15 U.S.C. 78o–4(b)(2)(A). 7 15 U.S.C. 78o–4(b)(2)(A)(iii). PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 15B(b)(2)(L)(iii) of the Act further requires the MSRB to establish professional standards for municipal advisors.8 A professional qualification examination is intended to determine whether an individual meets the MSRB’s required qualification standards. The MSRB believes that professional qualification examinations, such as the Municipal Advisor Representative Qualification Examination (‘‘Series 50 examination’’) and the Series 54 examination, are means for determining the competency of individuals in particular qualification classifications. On November 20, 2018, the Commission approved amendments 9 to MSRB Rule G–3, on professional qualification requirements, to require, among other things, that municipal advisor principals—those who engage in the management, direction or supervision of the municipal advisory activities of the municipal advisor and its associated persons (‘‘principal-level activity’’)—pass the Series 54 examination, in addition to the Series 50 examination, to become appropriately qualified as a municipal advisor principal. The Series 50 examination is designed to establish that persons associated with a municipal advisor who engage in municipal advisory activities and persons who engage in principal-level activity demonstrate a baseline knowledge of the municipal market, municipal advisory activities, as well as the regulatory requirements. Conversely, the Series 54 examination is designed to establish that persons who engage in principal-level activity demonstrate a specified level of knowledge of the application of federal securities laws, including MSRB rules to the municipal advisory activities of a municipal advisor and that of its associated persons. The MSRB believes the establishment of qualification requirements for municipal advisor principals would assist in ensuring that such persons have a specified level of competency necessary with respect to the supervision of the municipal advisory activities of the municipal advisor that is appropriate in the public interest and for the protection of investors, and municipal entities and obligated persons. The MSRB has, in consultation with the MSRB’s Professional Qualification Advisory Committee (PQAC), and in 8 15 U.S.C. 78o–4(b)(2)(L)(iii). Exchange Act Release No. 84630 (November 20, 2018), 83 FR 60927 (November 27, 2018) (File No. SR–MSRB–2018–07). 9 See E:\FR\FM\31DEN1.SGM 31DEN1

Agencies

[Federal Register Volume 83, Number 249 (Monday, December 31, 2018)]
[Notices]
[Pages 67768-67772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28397]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84927; File No. SR-CboeBZX-2018-090]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Halt Auction Process

December 21, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 18, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the Halt Auction process. The text of the 
proposed rule change is attached as Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend the Halt 
Auction process used to re-open BZX listed securities following certain 
Regulatory Halts. In 2017, the Exchange amended its Halt Auction 
process for re-opening a security following a Trading Pause initiated 
pursuant to the Plan to Address Extraordinary Market Volatility--i.e., 
the ``Limit Up-Limit Down'' or ``LULD'' Plan.\5\ Specifically, the 
Exchange modified its rules such that initial Halt Auction Collars 
following a Trading Pause would be calculated using a new methodology 
based on the Price Band that triggered the Trading Pause, and 
instituted a process for extending the auction and further widening the 
collars if necessary to accommodate buy or sell pressure

[[Page 67769]]

outside of the collars then in effect.\6\ The Exchange believes that 
these changes have been effective in facilitating a fair and orderly 
market following Trading Pauses initiated pursuant to the Limit Up-
Limit Down Plan, and has decided to implement similar functionality for 
all other Regulatory Halts, such as material news halts or trading 
halts following the initiation of the market wide circuit breaker 
mechanism (``Non-LULD Regulatory Halts'').\7\ The Exchange believes 
that the proposed changes would promote price formation by providing a 
consistent and orderly Halt Auction process for members and investors 
following all Regulatory Halts, similar to the current implementation 
on NYSE Arca, Inc. (``Arca'').\8\
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    \5\ See Securities Exchange Act Release Nos. 79162 (October 26, 
2016), 81 FR 75875 (November 1, 2016) (Notice); 79884 (January 26, 
2017), 82 FR 8968 (February 2, 2017) (Approval Order) (SR-BatsBZX-
2016-61).
    \6\ The Exchange also modified its clearly erroneous rules to 
provide that executions as a result of a Halt Auction under Rule 
11.23, which encompasses all Halt Auctions, including but not 
limited to those following a Trading Pause, are not eligible to for 
a request to review as clearly erroneous under Rule 11.23(d).
    \7\ A marketwide circuit breaker is triggered if the price of 
the S&P 500 Index declines by a specified amount compared to the 
closing price for the immediately preceding trading day. See BZX 
Rule 11.18(a).
    \8\ See Securities Exchange Act Release Nos. 79107 (October 18, 
2016), 81 FR 73159 (October 24, 2016) (Notice); 79846 (January 19, 
2017), 82 FR 8548 (January 26, 2017) (Approval Order) (SR-NYSEArca-
2016-130).
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    Currently, BZX Rule 11.23(d)(2)(B) describes the process for 
extending the Quote-Only Period for IPO and Halt Auctions, other than 
Halt Auctions following a Trading Pause, which are described in the 
recently added BZX Rule 11.23(d)(2)(C).\9\ As provided in BZX Rule 
11.23(d)(2)(B), the Quote-Only Period may be extended where: (i) There 
are unmatched market orders on the Auction Book associated with the 
auction; (ii) in an IPO Auction, the underwriter requests an extension; 
(iii) where the Indicative Price moves the greater of 10% or fifty 
cents in the fifteen seconds prior to the auction; or (iv) in the event 
of a technical or systems issue at the Exchange that may impair the 
ability of Users to participate in the IPO Auction or of the Exchange 
to complete the IPO Auction. The Exchange proposes to amend this rule 
such that this process would continue to be followed solely for IPO 
Auctions or Halt Auctions following a Non-Regulatory Halt. For Halt 
Auctions following a Non-LULD Regulatory Halt, the Exchange proposes to 
follow a process similar to that currently applied for Halt Auctions 
following a Trading Pause, as described in BZX Rule 11.23(d)(2)(C).
---------------------------------------------------------------------------

    \9\ The term ``Quote-Only Period'' means a designated period of 
time prior to a Halt Auction, a Volatility Closing Auction, or an 
IPO Auction during which Users may submit orders to the Exchange for 
participation in the auction. See BZX Rule 11.23(a)(17).
---------------------------------------------------------------------------

    BZX Rule 11.23(d)(2)(C), which describes the current process for 
incremental quote period extensions for Halt Auctions following a 
Trading Pause, provides that the Quote-Only Period commences five 
minutes prior to such Halt Auction, and is extended for an additional 
five minutes (``Initial Extension Period'') should a Halt Auction be 
unable to be performed due to a market order imbalance under BZX Rule 
11.23(d)(2)(B)(i),\10\ or where the Indicative Price,\11\ before being 
adjusted for Halt Auction Collars, is outside the applicable Halt 
Auction Collars set forth in BZX Rule 11.23(d)(2)(C)(i) and (ii) 
(either, an ``Impermissible Price''). After the Initial Extension 
Period, the Quote-Only Period is extended for additional five minute 
periods should a Halt Auction be unable to be performed due to an 
Impermissible Price until a Halt Auction occurs (``Additional Extension 
Period'').\12\ The Exchange attempts to conduct a Halt Auction during 
the course of each Additional Extension Period. Furthermore, the Halt 
Auction is cancelled at 3:50 p.m., at which time the auction for the 
security is conducted pursuant to the Volatility Closing Auction 
process under BZX Rule 11.23(e).
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    \10\ A market order imbalance exists when there are unmatched 
market orders on the Auction Book associated with the auction. See 
BZX Rule 11.23(d)(2)(B)(i). Since Rule 11.23(d)(2)(B), as amended, 
would apply solely to IPO Auctions to Halt Auctions following a Non-
Regulatory Halt, the Exchange proposes to replace the reference to a 
market order imbalance under Rule 11.23(d)(2)(B)(i) with the text of 
the language included therein.
    \11\ The term ``Indicative Price'' means the price at which the 
most shares from the Auction Book and the Continuous Book would 
match. In the event of a volume based tie at multiple price levels, 
the Indicative Price will be the price which results in the minimum 
total imbalance. In the event of a volume based tie and a tie in 
minimum total imbalance at multiple price levels, the Indicative 
Price will be the price closest to the Volume Based Tie Breaker. See 
BZX Rule 11.23(a)(10).
    \12\ In the event of any extension to the Quote-Only Period as 
set forth in Rule 11.23(d)(2)(B) or (C), the Exchange notifies 
market participants regarding the circumstances and length of the 
extension. See BZX Rule 11.23(d)(2)(D).
---------------------------------------------------------------------------

    The Exchange now proposes to amend BZX Rule 11.23(d)(2)(C) to 
implement this process for Halt Auctions following a Non-LULD 
Regulatory Halt as well. The proposed process for re-opening a BZX 
listed security after a Non-LULD Regulatory Halt would be identical to 
the process employed today for Halt Auctions following a Trading Pause, 
with only two differences that relate to the calculation of initial 
Halt Auction Collars. First, today the Halt Auction Reference Price for 
Halt Auctions following a Trading Pause is equal the price of the Upper 
or Lower Price Band that triggered the halt. Similar to the current 
implementation on Arca,\13\ the Exchange proposes that the initial Halt 
Auction Collar following a Non-LULD Regulatory Halt would instead be 
based on a Halt Auction Reference Price equal to the price of the Final 
Last Sale Eligible Trade (``FLSET'').\14\ Second, today for Halt 
Auctions following a Trading Pause, if the Halt Auction Reference Price 
is the Lower (Upper) Price Band: (1) The initial upper (lower) Halt 
Auction Collar is the Upper (Lower) Price Band, and (2) the lower 
(upper) Halt Auction Collar is five percent less (greater) than the 
Halt Auction Reference Price, or $0.15 less (greater) than the Halt 
Auction Reference Price for securities with a Halt Auction Reference 
Price of $3.00 or less, in each case rounded to the nearest minimum 
price variation. Similar to the current implementation on Arca,\15\ the 
Exchange proposes that Halt Auction Collars following a Non-LULD 
Regulatory Halt, would be calculated as described in (2) above, with 
this calculation applied to both the lower and upper collar. For 
example, if the FLSET for a security subject to a Non-

[[Page 67770]]

LULD Regulatory Halt is $100.00, then the initial Halt Auction Collars 
would be $95.00 x $105.00--i.e., five percent below and above the 
FLSET.
---------------------------------------------------------------------------

    \13\ Arca's halt auction collars are based on an auction 
reference price equal to the last consolidated round-lot price of 
that trading day and, if none, the prior trading day's official 
closing price (except as provided for in Arca Rule 7.35- E(e)(7)(A)) 
for trading halt auctions other than auctions following a Trading 
Pause. See Arca Rule 7.35E(a)(8)(A), (e)(7)(A).
    \14\ The term ``Final Last Sale Eligible Trade'' or ``FLSET'' 
means the last trade occurring during Regular Trading Hours on the 
Exchange if the trade was executed within the last one second prior 
to either the Closing Auction or, for Halt Auctions, trading in the 
security being halted. Where the trade was not executed within the 
last one second, the last trade reported to the consolidated tape 
received by BZX Exchange during Regular Trading Hours and, where 
applicable, prior to trading in the security being halted will be 
used. If there is no qualifying trade for the current day, the BZX 
Official Closing Price from the previous trading day will be used. 
See BZX Rule 11.23(a)(9).
    The FLSET is the Commission approved last sale formulation 
designed for use in BZX auctions, including the Halt Auction. See 
Securities Exchange Act Release Nos. 65266 (September 6, 2011), 76 
FR 56249 (September 12, 2011) (Notice); 65619 (October 25, 2011), 76 
FR 67238 (October 31, 2011) (Approval Order) (SR-BATS-2011-032). The 
FLSET as defined in BZX Rule 11.23(a)(9) is equivalent to Arca's 
reference price in substance, except that the most recent trade 
executed on BZX during Regular Trading Hours is used if such a trade 
is executed within the last one second prior to the halt. The 
Exchange believes that is appropriate to use the price of a trade on 
the primary listing market, i.e., BZX, to set the reference price 
for auctions in BZX-listed securities when such a trade has been 
executed recently. Using the FLSET as currently formulated and 
approved would therefore ensure that the reference price selected 
provides a familiar and desirable experience for member and 
investors participating in BZX auctions.
    \15\ See Arca Rule 7.35E(e)(7)(B)(ii).
---------------------------------------------------------------------------

    All other logic currently in place for Halt Auctions Collars 
following a Trading Pause would be used for Halt Auctions following a 
Non-LULD Regulatory Halt, including the process for initiating 
extensions. Specifically, as is the case for Halt Auctions following a 
Trading Pause today, at the beginning of the Initial Extension Period 
the upper (lower) Halt Auction Collar would be increased (decreased) by 
five percent in the direction of the Impermissible Price, rounded to 
the nearest minimum price variation. For securities with a Halt Auction 
Reference Price of $3.00 or less, the Halt Auction Collar would be 
increased (decreased) in $0.15 increments in the direction of the 
Impermissible Price. At the beginning of each Additional Extension 
Period, the Halt Auction Collar would be widened in accordance with BZX 
Rule 11.23(d)(2)(C)(ii) by the same amount as the Initial Extension 
Period.
    The Exchange also proposes to amend BZX Rule 11.23(d)(2)(E) to 
reflect the proposed changes to the Halt Auction Collars described 
above, and make other technical corrections to that rule. Currently, 
BZX Rule 11.23(d)(2)(E) provides that IPO Auctions for ETPs are 
executed within the Collar Price Range, and Halt Auctions for ETPs are 
executed within the Halt Auction Collars. Although the Exchange has 
traditionally been a listing venue for ETPs, the Exchange now lists one 
corporate security--i.e., the stock of its parent company, Cboe Global 
Markets, Inc. The Exchange therefore proposes to eliminate the outdated 
reference to ETPs in this section. Furthermore, as described in more 
detail in the prior paragraphs, the Halt Auction Collars provided in 
BZX Rule 11.23(d)(2)(C) would apply to Halt Auctions following a 
Regulatory Halt, including both Trading Pauses and Non-LULD Regulatory 
Halts. The Collar Price Range, meanwhile, is used for Halt Auctions 
following either an IPO Auction or a Non-Regulatory Halt. The Exchange 
therefore proposes to amend the rule to state that the applicable 
Collar Price Range will be used for IPO Auctions and Halt Auctions 
following a Non-Regulatory Halt, while the applicable Halt Auction 
Collar will be used for Halt Auctions following a Regulatory Halt.
    Finally, the Exchange proposes to amend its Volatility Closing 
Auction to account for the widened Halt Auction Collars following a 
Regulatory Halt, similar to handling on Arca.\16\ The Exchange conducts 
a Volatility Closing Auction for a halted security instead of the 
normal Closing Auction or Halt Auction, if the security halted between 
3:50 p.m. and 4:00 p.m. pursuant to BZX Rule 11.18, or the Quote-Only 
Period of a Halt Auction for a security halted before 3:50 p.m. 
pursuant to BZX Rule 11.18 would otherwise be extended by the Exchange 
after 3:50 p.m. Currently, orders are executed in the Volatility 
Closing Auction at the price level within the Collar Price Range that 
maximizes the number of shares executed in the auction, with certain 
tie-breakers in the event that there is a volume based tie at multiple 
price levels. Instead of using the Collar Price Range, the Exchange 
proposes to preserve the widened collars discussed in this filing for 
Halt Auctions following either a Trading Pause or Non-LULD Regulatory 
Halt.\17\ As proposed, orders would be executed at the price level 
within the most recently widened Halt Auction Collar calculated 
pursuant to BZX Rule 11.23(d)(1)(C) that maximizes the number of shares 
executed in the auction.\18\
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    \16\ See infra note 18.
    \17\ The most recently widened Halt Auction Collars calculated 
pursuant to Rule 11.23(d)(1)(C) would be used in all instances, 
including where the security goes directly into the Volatility 
Closing Auction without first being processed in a Halt Auction.
    \18\ Arca also uses auction collars based on the most recently 
widened collars for the halt auction that did not occur when 
transitioning to a closing auction instead of the regular halt 
auction at the end of core trading hours. See Arca Rule 7.35-
E(e)(10)(B).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\19\ in general, and 
Section 6(b)(5) of the Act,\20\ in particular, in that it is designed 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest and not to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent 
with the protection of investors and the public interest because it 
would amend the Halt Auction process following a Non-LULD Regulatory 
Halt to be more closely aligned with behavior currently implemented for 
Halt Auctions following a Trading Pause. The Exchange recently amended 
its re-opening process following a Trading Pause to better account for 
buy or sell pressure by changing the manner in which initial Halt 
Auction Collars are established, and widening the collars as 
appropriate to accommodate trading interest submitted to participate in 
the auction. The Exchange believes that these changes have been 
generally successful in facilitating a fair and orderly process for re-
opening securities following a Trading Pause. The Exchange has 
therefore decided to use a similar process for Halt Auctions following 
a Non-LULD Regulatory Halt. The Exchange believes that extending the 
current process for setting and widening Halt Auction Collars following 
a Trading Pause to Halt Auctions following a Non-LULD Regulatory Halt 
would benefit investors by facilitating price discovery and promoting 
consistency in how the Exchange conducts Halt Auctions following a 
Regulatory Halt.
    While the proposed process for Halt Auctions following a Non-LULD 
Regulatory Halt would largely follow the process in place today for 
Halt Auctions following a Trading Pause, there would be two notable 
differences. Both of these differences are designed to ensure that 
suitable Halt Auction Collars are utilized for Halt Auctions following 
Non-LULD Regulatory Halts. For instance, while an Auction Reference 
Price based on the Price Band that triggered the Trading Pause 
continues to be appropriate in the context of Halt Auctions following 
Trading Pauses, the Exchange believes that a different reference is 
necessary for Halt Auctions following Regulatory Halts that are 
unrelated to the LULD mechanism. The Exchange has chosen to use the 
FLSET as the Halt Auction Reference Price in these circumstances as 
this price is reflective of the current market for the halted security. 
Similarly, the Exchange believes that it is appropriate to calculate 
both upper and lower collars that are a specified percentage or dollar 
amount from this reference price because Non-LULD Regulatory Halts do 
not involve security specific buy or sell pressure. Both of these 
differences mirror the application of Halt Auction Collars on Arca 
today,\21\ and would therefore provide both a fair and familiar 
experience for members

[[Page 67771]]

and investors trading BZX listed securities.
---------------------------------------------------------------------------

    \21\ Although there are minor differences between the FLSET and 
the reference price used by Arca, the Exchange believes that it is 
appropriate to use the FLSET as the reference price as this price 
represents the last sale calculation used for auctions in BZX listed 
securities pursuant to Rule 11.23. See supra note 14.
---------------------------------------------------------------------------

    Similar to Halt Auctions following a Trading Pause, the Exchange 
believes that the proposed changes are consistent with the protection 
of investors and the public interest because they are designed to 
facilitate price discovery by ensuring that all market order interest 
could be satisfied in Halt Auctions following a Non-LULD Regulatory 
Halt. Furthermore, the Exchange believes that the standardized 
procedures to extend Halt Auctions an additional five minutes are 
appropriate because this would provide additional time to attract 
offsetting liquidity. If at the end of such extension, market orders 
still cannot be satisfied within the applicable Halt Auction Collar, or 
if the re-opening auction would be priced outside of the applicable 
collars, the Exchange would extend the Halt Auction an additional five 
minutes. The Exchange believes that extending the auction in these 
circumstances would protect investors and the public interest by 
reducing the potential for significant price disparity in post-auction 
trading. With each such extension, the Exchange believes that it is 
appropriate to widen the Halt Auction Collar on the side of the market 
on which there is buying or selling pressure as market conditions may 
prevent an imbalance from being resolved within the prior auction 
collars.
    The Exchange also believes that it is appropriate to amend its 
rules to properly indicate when the Collar Price Range and Halt Auction 
Collars are used. As discussed elsewhere in this proposed rule change, 
the applicable Collar Price Range would be used for IPO Auctions and 
Halt Auctions following a Non-Regulatory Halt, and the applicable Halt 
Auction Collar described in Rule 11.23(d)(2)(C) would be used for all 
Halt Auctions following a Regulatory Halt, including both Trading 
Pauses and Non-LULD Regulatory Halts. The proposed rule changes would 
remove unnecessary and outdated references to ETPs and make other 
changes consistent with the framework discussed in this proposed rule 
change for the calculation of auction collars. The Exchange therefore 
believes that the amended rule would increase transparency around the 
operation of the Exchange's auctions, and is therefore consistent with 
the public interest and the protection of investors.
    Finally, the Exchange believes that it is consistent with the 
protection of investors and the public interest to preserve the widened 
Halt Auction Collars following a Regulatory Halt when no Halt Auction 
has occurred prior to 3:50 p.m. and the Exchange therefore performs a 
Volatility Closing Auction. Using the most recently widened Halt 
Auction Collars in these circumstances ensures that buy or sell pricing 
pressure that resulted in the Exchange widening the Halt Auction 
Collars is appropriately accounted for when the Exchange transitions to 
a Volatility Closing Auction. The Exchange believes that the process 
for setting Halt Auction Collars following a Regulatory Halt 
facilitates price discovery and the maintenance of a fair and orderly 
market. Allowing these collars to persist, similar to Arca, would 
further ensure that the collars used for the Volatility Closing Auction 
would appropriately reflect the market for the security in a manner 
that facilitates price discovery when the Exchange transitions to a 
closing process instead of re-opening the security pursuant to the Halt 
Auction process.

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

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
designed to provide for a measured and transparent process for re-
opening BZX listed securities after a Non-LULD Regulatory Halt that 
mirrors the current Halt Auction process following a Trading Pause 
initiated pursuant to the Limit Up-Limit Down Plan. A similar process 
is already used by Arca across all Regulatory Halts, and the Exchange 
believes that this handling would be beneficial for market participants 
that trade BZX listed securities. Rather than burden competition, the 
Exchange believes that the proposed rule change is evidence of the 
robust competition between equities markets that benefits members and 
investors.

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

    No comments were solicited or received on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \22\ and 
Rule 19b-4(f)(6) thereunder.\23\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2018-090 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBZX-2018-090.This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the

[[Page 67772]]

proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2018-090 and should 
be submitted on or before January 22, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28397 Filed 12-28-18; 8:45 am]
 BILLING CODE 8011-01-P
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