Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Current Pilot Program Related to Rule 7.10, 57087-57089 [2019-23164]
Download as PDF
<![CDATA[
Federal Register / Vol. 84, No. 206 / Thursday, October 24, 2019 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87353; File No. SR–NYSE–
2019–56]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Extend the
Current Pilot Program Related to Rule
7.10
October 18, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on October
16, 2019, New York Stock Exchange
LLC (‘‘NYSE’’ or ‘‘Exchange’’) 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 self-regulatory
organization. The Commission is
publishing this notice to 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
The Exchange proposes to extend the
current pilot program related to Rule
7.10 (Clearly Erroneous Executions) to
the close of business on April 20, 2020.
The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
khammond on DSKJM1Z7X2PROD with NOTICES
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
VerDate Sep<11>2014
17:34 Oct 23, 2019
Jkt 250001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to extend the current pilot
program related to Rule 7.10 (Clearly
Erroneous Executions) to the close of
business on April 20, 2020. The pilot
program is currently due to expire on
October 18, 2019.
On September 10, 2010, the
Commission approved, on a pilot basis,
changes to Rule 128 (Clearly Erroneous
Executions) that, among other things: (i)
Provided for uniform treatment of
clearly erroneous execution reviews in
multi-stock events involving twenty or
more securities; and (ii) reduced the
ability of the Exchange to deviate from
the objective standards set forth in the
rule.4 In 2013, the Exchange adopted a
provision to Rule 128 designed to
address the operation of the Plan.5
Finally, in 2014, the Exchange adopted
two additional provisions to Rule 128
providing that: (i) A series of
transactions in a particular security on
one or more trading days may be viewed
as one event if all such transactions
were effected based on the same
fundamentally incorrect or grossly
misinterpreted issuance information
resulting in a severe valuation error for
all such transactions; and (ii) in the
event of any disruption or malfunction
in the operation of the electronic
communications and trading facilities of
an Exchange, another SRO, or
responsible single plan processor in
connection with the transmittal or
receipt of a trading halt, an Officer,
acting on his or her own motion, shall
nullify any transaction that occurs after
a trading halt has been declared by the
primary listing market for a security and
before such trading halt has officially
ended according to the primary listing
market.6 Rule 128 is no longer
applicable to any securities that trade on
the Exchange and has been replaced
with Rule 7.10, which is substantively
identical to Rule 128.7
4 See
Securities Exchange Act Release No. 62886
(Sept. 10, 2010), 75 FR 56613 (Sept. 16, 2010) (SR–
NYSE–2010–47).
5 See Securities Exchange Act Release No. 68804
(Feb. 1, 2013), 78 FR 8677 (Feb. 6, 2013) (SR–
NYSE–2013–11).
6 See Securities Exchange Act Release No. 72434
(June 19, 2014), 79 FR 36110 (June 25, 2014) (SR–
NYSE–2014–22).
7 See Securities Exchange Act Release Nos. 82945
(March 26, 2019), 83 FR 13553, 13565 (March 29,
2019) (SR–NYSE–2017–36) (Approval Order) and
85962 (May 29, 2019), 84 FR 26188, 26189 n.13
(June 5, 2019) (SR–NYSE–2019–05) (Approval
Order).
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
57087
These changes were originally
scheduled to operate for a pilot period
to coincide with the pilot period for the
Plan to Address Extraordinary Market
Volatility (the ‘‘Limit Up-Limit Down
Plan’’ or ‘‘LULD Plan’’),8 including any
extensions to the pilot period for the
LULD Plan.9 In April 2019, the
Commission approved an amendment to
the LULD Plan for it to operate on a
permanent, rather than pilot, basis.10 In
light of that change, the Exchange
amended Rules 7.10 and 128 to untie
the pilot program’s effectiveness from
that of the LULD Plan and to extend the
pilot’s effectiveness to the close of
business on October 18, 2019.11
The Exchange now proposes to amend
Rule 7.10 to extend the pilot program’s
effectiveness for a further six months
until the close of business on April 20,
2020. If the pilot period is not either
extended, replaced or approved as
permanent, the prior versions of
paragraphs (c), (e)(2), (f), and (g) shall be
in effect, and the provisions of
paragraphs (i) through (k) shall be null
and void.12 In such an event, the
remaining sections of Rules 7.10 would
continue to apply to all transactions
executed on the Exchange. The
Exchange understands that the other
national securities exchanges and
Financial Industry Regulatory Authority
(‘‘FINRA’’) will also file similar
proposals to extend their respective
clearly erroneous execution pilot
programs, the substance of which are
identical to Rule 7.10.
The Exchange does not propose any
additional changes to Rule 7.10.
Extending the effectiveness of Rule 7.10
for an additional six months will
provide the Exchange and other selfregulatory organizations additional time
to consider whether further
amendments to the clearly erroneous
execution rules are appropriate.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
requirements of Section 6(b) of the
8 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012) (the
‘‘Limit Up-Limit Down Release’’).
9 See Securities Exchange Act Release No. 71821
(March 27, 2014), 79 FR 18592 (April 2, 2014) (SR–
NYSE–2014–17).
10 See Securities Exchange Act Release No. 85623
(April 11, 2019), 84 FR 16086 (April 17, 2019)
(approving Eighteenth Amendment to LULD Plan).
11 See Securities Exchange Act Release No. 85523
(April 5, 2019), 84 FR 14706 (April 11, 2019) (SR–
NYSE–2019–17).
12 See supra notes 4–6. The prior versions of
paragraphs (c), (e)(2), (f), and (g) generally provided
greater discretion to the Exchange with respect to
breaking erroneous trades.
E:\FR\FM\24OCN1.SGM
24OCN1
57088
Federal Register / Vol. 84, No. 206 / Thursday, October 24, 2019 / Notices
Act,13 in general, and Section 6(b)(5) of
the Act,14 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 promotes just and
equitable principles of trade in that it
promotes transparency and uniformity
across markets concerning review of
transactions as clearly erroneous. The
Exchange believes that extending the
clearly erroneous execution pilot under
Rule 7.10 for an additional six months
would help assure that the
determination of whether a clearly
erroneous trade has occurred will be
based on clear and objective criteria,
and that the resolution of the incident
will occur promptly through a
transparent process. The proposed rule
change would also help assure
consistent results in handling erroneous
trades across the U.S. equities markets,
thus furthering fair and orderly markets,
the protection of investors and the
public interest. Based on the foregoing,
the Exchange believes the amended
clearly erroneous executions rule
should continue to be in effect on a pilot
basis while the Exchange and other selfregulatory organizations consider
whether further amendments to these
rules are appropriate.
khammond on DSKJM1Z7X2PROD with NOTICES
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 proposal
would ensure the continued,
uninterrupted operation of harmonized
clearly erroneous execution rules across
the U.S. equities markets while the
Exchange and other self-regulatory
organizations consider whether further
amendments to these rules are
appropriate. The Exchange understands
that the other national securities
exchanges and FINRA will also file
similar proposals to extend their
respective clearly erroneous execution
pilot programs. Thus, the proposed rule
change will help to ensure consistency
across market centers without
implicating any competitive issues.
13 15
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
VerDate Sep<11>2014
17:34 Oct 23, 2019
Jkt 250001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) 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)(iii) of the Act 15 and
subparagraph (f)(6) of Rule 19b–4
thereunder.16
A proposed rule change filed under
Rule 19b–4(f)(6) 17 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 18 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may become effective and
operative immediately upon filing. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest, as it will allow the
current clearly erroneous execution
pilot program to continue
uninterrupted, without any changes,
while the Exchange and the other
national securities exchanges consider a
permanent proposal for clearly
erroneous execution reviews. For this
reason, the Commission hereby waives
the 30-day operative delay and
designates the proposed rule change as
operative upon filing.19
At any time within 60 days of the
filing of the proposed rule change, the
15 15
U.S.C. 78s(b)(3)(A)(iii).
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.
17 17 CFR 240.19b–4(f)(6).
18 17 CFR 240.19b–4(f)(6)(iii).
19 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
16 17
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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
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–
NYSE–2019–56 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2019–56. 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
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
E:\FR\FM\24OCN1.SGM
24OCN1
Federal Register / Vol. 84, No. 206 / Thursday, October 24, 2019 / Notices
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2019–56 and should
be submitted on or before November 14,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–23164 Filed 10–23–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87110]
Order Granting a Conditional
Exemption From Exchange Act Section
11(D)(1) and Exchange Act Rules 10B–
10, 15C1–5, 15C1–6, and 14E–5 for
Certain Exchange Traded Funds
Securities and Exchange
Commission.
ACTION: Exemptive order.
AGENCY:
The Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
is issuing an order granting an
exemption from compliance with
certain provisions of the Securities
Exchange Act of 1934 (‘‘Exchange Act’’)
and the rules thereunder to brokerdealers and certain other persons
engaging in certain transactions in
securities of exchange-traded funds
(‘‘ETFs’’) relying on rule 6c–11 under
the Investment Company Act of 1940
(‘‘Investment Company Act’’).
DATES: This exemptive order is effective
December 23, 2019.
FOR FURTHER INFORMATION CONTACT:
Darren Vieira, Special Counsel, Brandon
Hill, Special Counsel, or Joanne
Rutkowski, Assistant Chief Counsel, at
(202) 551–5550; in the Division of
Trading and Markets; Daniel Duchovny,
Special Counsel, Office of Mergers and
Acquisitions, at (202) 551–3440, in the
Division of Corporation Finance;
Securities and Exchange Commission,
100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
SUMMARY:
khammond on DSKJM1Z7X2PROD with NOTICES
I. Introduction
The Commission adopted rule 6c–11
under the Investment Company Act,
which permits ETFs that satisfy certain
conditions to operate without the
expense and delay of obtaining an
exemptive order from the Commission
20 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:34 Oct 23, 2019
Jkt 250001
under the Investment Company Act.1
Rule 6c–11 is designed to create a
consistent, transparent, and efficient
regulatory framework for ETFs and to
facilitate greater competition and
innovation among ETFs.
While the relief under rule 6c–11 is
limited to exemptions under the
Investment Company Act,2 commenters
on proposed rule 6c–11 also
recommended that the Commission
harmonize with rule 6c–11 certain
Exchange Act relief that ETFs currently
rely on in order to operate, including
relief from section 11(d)(l) of the
Exchange Act and Exchange Act rules
10b–10, 15c1–5, 15c1–6, and 14e–5.3
Commenters expressed concern that the
conditions that have been associated
with Exchange Act relief are duplicative
or, in some cases, inconsistent with
other requirements applicable to ETFs.4
The Commission agrees that such
relief could further reduce regulatory
complexity and administrative delay,
and eliminate potential inconsistencies
between rule 6c–11 and the related
Exchange Act relief that ETFs have
obtained to operate.5 The Commission
1 Exchange Traded Funds, Investment Company
Act Release No. 33646 (Sep. 25, 2019) (‘‘Rule 6c–
11 Adopting Release’’).
2 In the Rule 6c–11 Adopting Release, the
Commission also provided an interpretation of
certain other Exchange Act rules containing
exemptions for transactions in redeemable
securities issued by open-end companies and unit
investment trusts as follows:
After considering comments, we believe that it is
appropriate to make all ETFs, including those that
do not rely on rule 6c–11, eligible for the
redeemable securities exceptions in rules 101(c)(4)
and 102(d)(4) of Regulation M and rule 10b–17(c)
under the Exchange Act in connection with
secondary market transactions in ETF shares and
the creation or redemption of creation units and the
exemption in rule 11d1–2 under the Exchange Act
for a registered open-end investment company or
unit investment trust.
3 See Comment Letter of Blackrock, Inc. at 21
(Sept. 26, 2018) (‘‘BlackRock Comment Letter’’);
Comment Letter of the Investment Company
Institute at 32 (Sept. 21, 2018) (‘‘ICI Comment
Letter’’); Comment Letter of Fidelity Management &
Research Company at 12 (Sept. 28, 2018); Comment
Letter of Dechert LLP at 8 (Sept. 28, 2018) (‘‘Dechert
Comment Letter’’); Comment Letter of the Securities
Industry and Financial Markets Association—Asset
Management Group at 22 and 23 (Sept. 28, 2018)
(‘‘SIFMA AMG Comment Letter’’); Comment Letter
of Vanguard at 2 (Sept. 28, 2018); Comment Letter
of WisdomTree Asset Management at 2 (Oct. 1,
2018); Comment Letter of the American Bar
Association at 4 (Oct. 11, 2018); Comment Letter of
John Hancock Investments at 5 (Oct. 1, 2018); and
Comment Letter of Flow Traders US LLP at 2 (Oct.
1, 2018).
4 See, e.g., BlackRock Comment Letter. See also,
e.g., ICI Comment Letter (‘‘Currently, ETFs often
must satisfy multiple and sometimes conflicting
requirements from different divisions within the
SEC.’’). Commenters also expressed concerns about
delays in obtaining such additional relief. See, e.g.,
SIFMA AMG Comment Letter I.
5 Although the exemption granted by this order
applies only to transactions in securities of ETFs
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
57089
has considered the issues raised and
believes that it is appropriate to grant
relief from section 11(d)(1) and rules
10b–10, 15c1–5, 15c1–6, and 14e–5
because broker-dealers and certain other
persons that engage in these
transactions and satisfy the conditions
below, as applicable, would not raise
the issues or concerns that underlie
those provisions. Accordingly, the
Commission finds that it is necessary
and appropriate in the public interest
and consistent with the protection of
investors to grant an exemption from
section 11(d)(1) of the Exchange Act and
Exchange Act rules 10b–10, 15c1–5,
15c1–6, and 14e–5,to broker-dealers and
certain other persons, as applicable, that
engage in certain transactions with ETFs
relying on rule 6c–11, subject to the
conditions below.
II. Background
An ETF issues shares that can be
bought or sold throughout the day in the
secondary market at a marketdetermined price. Like other investment
companies, an ETF pools the assets of
multiple investors and invests those
assets according to its investment
objective and principal investment
strategies. Each share of an ETF
represents an undivided interest in the
underlying assets of the ETF. Similar to
mutual funds, ETFs continuously offer
their shares for sale.
Unlike mutual funds, however, ETFs
do not sell or redeem individual shares.
Instead, ‘‘authorized participants’’ that
have contractual arrangements with the
ETF, or one of its service providers,
purchase and redeem ETF shares
directly from the ETF in blocks called
‘‘creation units.’’ 6 An authorized
participant may act as a principal for its
own account when purchasing or
redeeming creation units from the ETF.
Authorized participants also may act as
agent for others, such as market makers,
proprietary trading firms, hedge funds
or other institutional investors, and
receive fees for processing creation units
that meet certain requirements and conditions, the
beneficiaries of the relief, other than the relief
under Exchange Act rule 14e–5, are broker-dealers
that engage in transactions subject to the relevant
provisions of the Exchange Act and rules
thereunder. The beneficiaries of the relief under
Exchange Act rule 14e–5 are ETFs, the legal entity
of which the ETF is a series, and authorized
participants, as described below.
6 Rule 6c–11(a)(1) defines ‘‘authorized
participant’’ as a member or participant of a
clearing agency registered with the Commission,
which has a written agreement with the ETF or one
of its service providers that allows the authorized
participant to place orders for the purchase and
redemption of creation units. See Rule 6c–11
Adopting Release.
E:\FR\FM\24OCN1.SGM
24OCN1
]]>Agencies
[Federal Register Volume 84, Number 206 (Thursday, October 24, 2019)]
[Notices]
[Pages 57087-57089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23164]
[[Page 57087]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87353; File No. SR-NYSE-2019-56]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Extend the Current Pilot Program Related to Rule 7.10
October 18, 2019.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on October 16, 2019, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the current pilot program related
to Rule 7.10 (Clearly Erroneous Executions) to the close of business on
April 20, 2020. The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to extend the current
pilot program related to Rule 7.10 (Clearly Erroneous Executions) to
the close of business on April 20, 2020. The pilot program is currently
due to expire on October 18, 2019.
On September 10, 2010, the Commission approved, on a pilot basis,
changes to Rule 128 (Clearly Erroneous Executions) that, among other
things: (i) Provided for uniform treatment of clearly
erroneous[thinsp]execution reviews in multi-stock events involving
twenty or more securities; and (ii) reduced the ability of the Exchange
to deviate from the objective standards set forth in the rule.\4\ In
2013, the Exchange adopted a provision to Rule 128 designed to address
the operation of the Plan.\5\ Finally, in 2014, the Exchange adopted
two additional provisions to Rule 128 providing that: (i) A series of
transactions in a particular security on one or more trading days may
be viewed as one event if all such transactions were effected based on
the same fundamentally incorrect or grossly misinterpreted issuance
information resulting in a severe valuation error for all such
transactions; and (ii) in the event of any disruption or malfunction in
the operation of the electronic communications and trading facilities
of an Exchange, another SRO, or responsible single plan processor in
connection with the transmittal or receipt of a trading halt, an
Officer, acting on his or her own motion, shall nullify any transaction
that occurs after a trading halt has been declared by the primary
listing market for a security and before such trading halt has
officially ended according to the primary listing market.\6\ Rule 128
is no longer applicable to any securities that trade on the Exchange
and has been replaced with Rule 7.10, which is substantively identical
to Rule 128.\7\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 62886 (Sept. 10,
2010), 75 FR 56613 (Sept. 16, 2010) (SR-NYSE-2010-47).
\5\ See Securities Exchange Act Release No. 68804 (Feb. 1,
2013), 78 FR 8677 (Feb. 6, 2013) (SR-NYSE-2013-11).
\6\ See Securities Exchange Act Release No. 72434 (June 19,
2014), 79 FR 36110 (June 25, 2014) (SR-NYSE-2014-22).
\7\ See Securities Exchange Act Release Nos. 82945 (March 26,
2019), 83 FR 13553, 13565 (March 29, 2019) (SR-NYSE-2017-36)
(Approval Order) and 85962 (May 29, 2019), 84 FR 26188, 26189 n.13
(June 5, 2019) (SR-NYSE-2019-05) (Approval Order).
---------------------------------------------------------------------------
These changes were originally scheduled to operate for a pilot
period to coincide with the pilot period for the Plan to Address
Extraordinary Market Volatility (the ``Limit Up-Limit Down Plan'' or
``LULD Plan''),\8\ including any extensions to the pilot period for the
LULD Plan.\9\ In April 2019, the Commission approved an amendment to
the LULD Plan for it to operate on a permanent, rather than pilot,
basis.\10\ In light of that change, the Exchange amended Rules 7.10 and
128 to untie the pilot program's effectiveness from that of the LULD
Plan and to extend the pilot's effectiveness to the close of business
on October 18, 2019.\11\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
\9\ See Securities Exchange Act Release No. 71821 (March 27,
2014), 79 FR 18592 (April 2, 2014) (SR-NYSE-2014-17).
\10\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (approving Eighteenth Amendment
to LULD Plan).
\11\ See Securities Exchange Act Release No. 85523 (April 5,
2019), 84 FR 14706 (April 11, 2019) (SR-NYSE-2019-17).
---------------------------------------------------------------------------
The Exchange now proposes to amend Rule 7.10 to extend the pilot
program's effectiveness for a further six months until the close of
business on April 20, 2020. If the pilot period is not either extended,
replaced or approved as permanent, the prior versions of paragraphs
(c), (e)(2), (f), and (g) shall be in effect, and the provisions of
paragraphs (i) through (k) shall be null and void.\12\ In such an
event, the remaining sections of Rules 7.10 would continue to apply to
all transactions executed on the Exchange. The Exchange understands
that the other national securities exchanges and Financial Industry
Regulatory Authority (``FINRA'') will also file similar proposals to
extend their respective clearly erroneous execution pilot programs, the
substance of which are identical to Rule 7.10.
---------------------------------------------------------------------------
\12\ See supra notes 4-6. The prior versions of paragraphs (c),
(e)(2), (f), and (g) generally provided greater discretion to the
Exchange with respect to breaking erroneous trades.
---------------------------------------------------------------------------
The Exchange does not propose any additional changes to Rule 7.10.
Extending the effectiveness of Rule 7.10 for an additional six months
will provide the Exchange and other self-regulatory organizations
additional time to consider whether further amendments to the clearly
erroneous execution rules are appropriate.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the
[[Page 57088]]
Act,\13\ in general, and Section 6(b)(5) of the Act,\14\ 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 promotes just and
equitable principles of trade in that it promotes transparency and
uniformity across markets concerning review of transactions as clearly
erroneous. The Exchange believes that extending the clearly erroneous
execution pilot under Rule 7.10 for an additional six months would help
assure that the determination of whether a clearly erroneous trade has
occurred will be based on clear and objective criteria, and that the
resolution of the incident will occur promptly through a transparent
process. The proposed rule change would also help assure consistent
results in handling erroneous trades across the U.S. equities markets,
thus furthering fair and orderly markets, the protection of investors
and the public interest. Based on the foregoing, the Exchange believes
the amended clearly erroneous executions rule should continue to be in
effect on a pilot basis while the Exchange and other self-regulatory
organizations consider whether further amendments to these rules are
appropriate.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 proposal would ensure
the continued, uninterrupted operation of harmonized clearly erroneous
execution rules across the U.S. equities markets while the Exchange and
other self-regulatory organizations consider whether further amendments
to these rules are appropriate. The Exchange understands that the other
national securities exchanges and FINRA will also file similar
proposals to extend their respective clearly erroneous execution pilot
programs. Thus, the proposed rule change will help to ensure
consistency across market centers without implicating any competitive
issues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
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)(iii) of the Act \15\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\16\
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \18\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become effective and operative immediately upon filing.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it will allow the current clearly erroneous execution pilot program to
continue uninterrupted, without any changes, while the Exchange and the
other national securities exchanges consider a permanent proposal for
clearly erroneous execution reviews. For this reason, the Commission
hereby waives the 30-day operative delay and designates the proposed
rule change as operative upon filing.\19\
---------------------------------------------------------------------------
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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 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 [email protected]. Please include
File Number SR-NYSE-2019-56 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2019-56. 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 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
[[Page 57089]]
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2019-56 and should be
submitted on or before November 14, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-23164 Filed 10-23-19; 8:45 am]
BILLING CODE 8011-01-P
