Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.16(b)(2) Concerning the Resumption of Trading Following a Level 3 Market-Wide Circuit Breaker Halt and Make Corresponding Changes to Rule 11.7(e), 16716-16719 [2020-06117]

Download as PDF 16716 Federal Register / Vol. 85, No. 57 / Tuesday, March 24, 2020 / Notices 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. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88419; File No. SR– CboeEDGA–2020–008] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.16(b)(2) Concerning the Resumption of Trading Following a Level 3 MarketWide Circuit Breaker Halt and Make Corresponding Changes to Rule 11.7(e) March 18, 2020. 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 March 17, 2020, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes a rule change to amend Rule 11.16(b)(2) concerning the resumption of trading following a Level 3 market-wide circuit breaker halt and to amend Rule 11.7(e) to make corresponding changes to the re-opening process after a halt. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. lotter on DSKBCFDHB2PROD 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 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 VerDate Sep<11>2014 17:34 Mar 23, 2020 Jkt 250001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 11.16(b)(2) concerning the resumption of trading following a Level 3 market-wide circuit breaker halt and to amend Rule 11.7(e) to make corresponding changes to the re-opening process after a halt. The Exchange is proposing this rule change in conjunction with other national securities exchanges and the Financial Industry Regulatory Authority (‘‘FINRA’’). Rule 11.16 provides a methodology for determining when to halt trading in all stocks due to extraordinary market volatility (i.e., market-wide circuit breakers). The market-wide circuit breaker mechanism (‘‘MWCB’’) under Rule 11.16 was approved by the Commission to operate on a pilot basis,5 the term of which was to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS (the ‘‘LULD Plan’’),6 including any extensions to the pilot period for the LULD Plan.7 The Commission recently approved an amendment to the LULD Plan for it to operate on a permanent, rather than pilot, basis.8 In light of the proposal to make the LULD Plan permanent, the Exchange amended Rule 11.16 to untie the pilot’s effectiveness from that of the LULD Plan and to extend the pilot’s effectiveness to the close of business on October 18, 2019.9 The Exchange then filed to extend the pilot for an additional year to the close 5 See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– EDGA–2011–31). 6 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a mechanism to address extraordinary market volatility in individual securities. 7 See Securities Exchange Act Release Nos. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– EDGA–2011–31) (Approval Order); and 68813 (February 1, 2013), 78 FR 9073 (February 7, 2013) (SR–EDGA–2013–06) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot Program Related to Trading Pauses Due to Extraordinary Market Volatility). 8 See Securities Exchange Act Release No. 85623 (April 11, 2019), 84 FR 16086 (April 17, 2019). 9 See Securities Exchange Act Release No. 85668 (April 16, 2019), 84 FR 16743 (April 22, 2019) (SR– CboeEDGA–2019–006). PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 of business on October 18, 2020.10 The market-wide circuit breaker under Rule 11.16 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equity exchanges and FINRA adopted uniform rules on a pilot basis relating to marketwide circuit breakers in 2012 (‘‘MWCB Rules’’), which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.11 Market-wide circuit breakers provide for trading halts in all equities and options markets during a severe market decline as measured by a single-day decline in the S&P 500 Index. Pursuant to Rule 11.18, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day’s closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. Eastern Time and before 3:25 p.m. Eastern Time would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. Eastern Time would not halt market-wide trading. A market decline that triggers a Level 3 halt at any time during the trading day would halt market-wide trading until the primary listing market opens the next trading day. Today, in the event that a Level 3 Market Decline occurs, the Exchange would halt trading for the remainder of the trading day, and would not resume until the primary listing market opens the next trading day, which time may currently vary depending on the primary listing market. For example, if the primary listing market is the New York Stock Exchange (‘‘NYSE’’), NYSE would resume trading in its listed securities at 9:30 a.m. Eastern Time on the next trading day, and the Exchange would not be able to resume trading during the Exchange’s Early Trading 10 See Securities Exchange Act Release No. 87335 (October 17, 2019), 84 FR 56858 (October 23, 2019) (SR–CboeEDGA–2019–016). 11 See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– BATS–2011–038; SR–BYX–2011–025; SR–BX– 2011–068; SR–CBOE–2011–087; SR–C2–2011–024; SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX– 2011–30; SR–FINRA–2011–054; SR–ISE–2011–61; SR–NASDAQ–2011–131; SR–NSX–2011–11; SR– NYSE–2011–48; SR–NYSEAmex–2011–73; SR– NYSEArca–2011–68; SR–Phlx–2011–129) (‘‘MWCB Approval Order’’). E:\FR\FM\24MRN1.SGM 24MRN1 Federal Register / Vol. 85, No. 57 / Tuesday, March 24, 2020 / Notices Session 12 or Pre-Opening Session.13 Alternatively, if the primary listing market is the Nasdaq Stock Market LLC (‘‘Nasdaq’’), Nasdaq would resume trading in its listed securities at 4:00 a.m. Eastern Time on the next trading day, and therefore, the Exchange would resume trading at the commencement of the Early Trading Session. Upon feedback from industry participants, the Exchange has been working with other national securities exchanges and FINRA to establish a standardized approach for resuming trading in all NMS Stocks following a Level 3 halt. The proposed approach would allow for the opening of all securities the next trading day after a Level 3 halt as a regular trading day, and is designed to ensure that Level 3 MWCB events are handled in a more consistent manner that is transparent for market participants.14 As proposed, a Level 3 halt would end at the end of the trading day on which it is declared. This proposed change would allow for nextday trading to resume in all NMS Stocks no differently from any other trading day. In other words, an exchange could resume trading in any security when it first begins trading under its rules and would not need to wait for the primary listing market to re-open trading in a security before it could start trading such security.15 Accordingly, under the proposal, the Exchange could begin trading all securities at the beginning of the Exchange’s Early Trading Session. To effect this change, the Exchange proposes to delete the language in Rule 11.16(b)(2) requiring the Exchange to wait until the primary listing exchange opens the next trading day following a Level 3 Market Decline, and specify that the Exchange will halt trading for the remainder of the trading day.16 The proposed rule change would therefore allow each exchange to resume trading in all securities the next trading day 12 See Exchange Rule 1.5(ii). Exchange Rule 1.5(s). 14 Of note, the U.S. futures markets, which have similar rules for coordinated MWCB halts, normally begin their ‘‘next day’’ trading session at 6:00 p.m. Eastern Time (for CFE and CME) or at 8:00 p.m. Eastern Time (for ICE). If the U.S. futures markets amend their MWCB rules, as needed, to allow for normal course trading following a Level 3 halt, the futures markets would resume trading in their normal course at 6:00 p.m. Eastern Time (CFE and CME) or 8:00 p.m. Eastern Time (ICE) the same day as the Level 3 halt. 15 The Exchange notes that Nasdaq has recently filed a similar proposal to amend its MWCB rules on the resumption of trading following Level 3 halts, and amend their rules, where required, to have their Level 3 next-day openings happen normally. Further, the Exchange anticipates that other national securities exchanges and FINRA will also file similar proposals. 16 Presently, the Exchange’s equities trading day ends at 8:00 p.m. ET. See Exchange Rule 1.5(r). lotter on DSKBCFDHB2PROD with NOTICES 13 See VerDate Sep<11>2014 17:34 Mar 23, 2020 Jkt 250001 following a Level 3 halt at whatever time such exchange normally begins trading under its rules, which for the Exchange would be at the beginning of the Early Trading Session at 7:00 a.m. Eastern Time under its current rules. The Exchange also expects that the primary listing exchanges will facilitate this change by sending resume messages to the applicable securities information processor (‘‘SIP’’) to lift the Level 3 trading halt message in all securities. The resumption messages will be disseminated after the SIP has started on the next trading day and before the start of the earliest pre-market trading session of all exchanges. If a security is separately subject to a regulatory halt that has not ended, the primary listing exchange would replace the Level 3 halt message with the applicable regulatory halt message. As discussed above, the Exchange’s proposed rule change to Rule 11.16 would allow each exchange to resume trading in all securities on the day following the Level 3 Market Decline pursuant to its regular process for trading on any other trading day. Currently, the Exchange would re-open trading following a Level 3 Market Decline using a halt re-opening process for securities listed on other national securities exchanges.17 With the proposed changes to the MWCB mechanism, it would no longer be necessary for the Exchange to have special procedures in place to resume trading after a Level 3 Market Decline, as the proposed changes are designed to allow trading to commence using normal operating procedures. Accordingly, the Exchange proposes to make corresponding changes to Exchange Rule 11.7(e), which sets forth the re-opening process after a halt. Specifically, the Exchange proposes to clarify that no halt re-opening process will be conducted by the Exchange following a Level 3 Market Decline. With these changes, trading would be allowed to commence normally on the trading day following a Level 3 Market Decline, similar to the resumption of trading on certain other national securities exchanges that would currently open with continuous trading.18 Having a consistent approach for all securities will make the opening process the day after a Level 3 halt more uniform and reduce complexity, which the Exchange believes is important after 17 See Exchange Rule 11.7(e); See also SIP Market-Wide Circuit Breaker Overview, available at https://www.utpplan.com/DOC/MWCB_SIP_ Overview.pdf. 18 See Nasdaq Rule 4121(c)(i). See also Id. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 16717 a significant market event. Based on industry feedback, the Exchange believes that opening in the normal course in all equity securities will be beneficial to the marketplace. By allowing trading to resume after a Level 3 halt in all securities no differently from any normal trading day under the respective rules of each exchange, the proposed rule change would provide greater certainty to the marketplace by ensuring a familiar experience for all market participants that trade NMS Stocks and balances out potential concerns around volatility. While the Exchange recognizes that the impact of this proposal is to permit all securities to be traded in the Early Trading Session, which does not have certain price protections for volatility such as LULD Bands or MWCB protections, the Exchange nonetheless believes that this outcome is outweighed by the benefits provided by opening in the Early Trading Session in a manner that is more familiar to the marketplace. Moreover, allowing the resumption of trading to occur on the Exchange at the beginning of the Early Trading Session in all NMS Stocks will allow for price formation to occur earlier in the trading day, which in turn allows market participants to react to news that has developed. As such, trading at the beginning of regular hours may be more orderly. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,19 in general, and furthers the objectives of Section 6(b)(5) of the Act,20 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The market-wide circuit breaker mechanism under Rule 11.16 is an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. 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 when and how to halt trading in all stocks as a result of extraordinary market volatility, and how the markets will resume trading following a Level 3 Market Decline. As described above, the 19 15 20 15 E:\FR\FM\24MRN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 24MRN1 16718 Federal Register / Vol. 85, No. 57 / Tuesday, March 24, 2020 / Notices Exchange, together with other national securities exchanges and FINRA, is seeking to adopt a standardized approach related to resuming trading in NMS Stocks after a Level 3 MWCB halt. In this regard, the Exchange believes that the proposal to resume trading in all securities following a Level 3 halt in the same manner that securities would open trading on a regular trading day (i.e., with continuous trading on the Exchange at the beginning of the Early Trading Session at 7 a.m. Eastern Time) will benefit investors, the national market system, Exchange members, and the Exchange market by promoting a fair and orderly market and reducing confusion during a significant crossmarket event. By allowing trading to resume after a Level 3 halt in all securities no differently from any normal trading day under the respective rules of each exchange, the proposed rule changes would provide greater certainty to the marketplace by ensuring a familiar experience for all market participants that trade NMS Stocks. Based on the foregoing, the Exchange believes the benefits to market participants from the MWCB under Rule 11.16 with the proposed standardized process for resuming trading in all securities following a Level 3 halt will promote fair and orderly markets, and protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act because the proposed Level 3 rule change described above would standardize the opening process for all securities on the Exchange, which would make the opening process the day after a Level 3 halt more uniform and reduce complexity. Further, the Exchange understands that FINRA and other national securities exchanges will file similar proposals to adopt the proposed Level 3 rule change.21 lotter on DSKBCFDHB2PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. 21 See, e.g., Securities Exchange Act Release No. 88342 (March 6, 2020), 85 FR 14513 (March 12, 2020) (SR–NASDAQ–2020–003). VerDate Sep<11>2014 17:34 Mar 23, 2020 Jkt 250001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 22 and Rule 19b–4(f)(6) thereunder.23 Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6)(iii) thereunder.24 A proposed rule change filed under Rule 19b–4(f)(6) 25 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),26 the Commission may 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 proposal may become 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. The Commission notes that it approved a substantively similarly proposed rule change submitted by Nasdaq.27 Waiver of the operative delay will ensure consistency across the market centers and the timely implementation of the proposed rule change. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.28 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if 22 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 24 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file 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 Commission has waived the prefiling requirement. 25 17 CFR 240.19b–4(f)(6). 26 17 CFR 240.19b–4(f)(6)(iii). 27 See Securities Exchange Act Release No. 88360 (March 11, 2020) (SR–NASDAQ–2020–003). 28 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 23 17 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 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 under Section 19(b)(2)(B) 29 of the Act 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– CboeEDGA–2020–008 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–CboeEDGA–2020–008. 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 29 15 E:\FR\FM\24MRN1.SGM U.S.C. 78s(b)(2)(B). 24MRN1 Federal Register / Vol. 85, No. 57 / Tuesday, March 24, 2020 / Notices 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–CboeEDGA–2020–008 and should be submitted on or before April 14, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–06117 Filed 3–23–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–195; OMB Control No. 3235–0198] Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 lotter on DSKBCFDHB2PROD with NOTICES Extension: Rule 15c2–5. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Rule 15c2–5 (17 CFR 240.15c2–5) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Exchange Act’’). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 15c2–5 prohibits a broker-dealer from arranging or extending certain loans to persons in connection with the offer or sale of securities unless, before any element of the transaction is entered into, the broker-dealer: (1) Delivers to the person a written statement containing the exact nature and extent of the person’s obligations under the loan arrangement; the risks and disadvantages of the loan arrangement; and all commissions, discounts, and other remuneration received and to be received in connection with the transaction by the broker-dealer or certain related persons (unless the person receives certain materials from the lender or broker-dealer which contain the required information); and 30 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:34 Mar 23, 2020 Jkt 250001 (2) obtains from the person information on the person’s financial situation and needs, reasonably determines that the transaction is suitable for the person, and retains on file and makes available to the person on request a written statement setting forth the brokerdealer’s basis for determining that the transaction was suitable. The collection of information required by Rule 15c2–5 is necessary to execute the Commission’s mandate under the Exchange Act to prevent fraudulent, manipulative, and deceptive acts and practices by broker-dealers. The Commission estimates that there are approximately 50 respondents that require an aggregate total of 600 hours to comply with Rule 15c2–5.1 Each of these approximately 50 registered broker-dealers makes an estimated six annual responses, for an aggregate total of 300 responses per year.2 Each response takes approximately two hours to complete. Thus, the total compliance burden per year is 600 burden hours.3 The approximate internal compliance cost per hour is $63.00 for clerical labor,4 resulting in a total internal compliance cost of $37,800.5 These reflect internal labor costs; there are no external labor, capital, or start-up costs. Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information 1 50 respondents × 6 responses per year × 2 hours per response = 600 hours per year. 2 50 respondents × 6 responses per year = 300 responses per year. 3 300 responses per year × 2 hours per response = 600 hours per year. 4 Cost per hour for a clerk is from SIFMA’s Office Salaries in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour work-year, multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead, and adjusted by a factor of 1.0965 to account for inflation. 5 600 hours per year × $63.00 per hour = $37,800 per year. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 16719 under the PRA unless it displays a currently valid OMB control number. Please direct your written comments to: David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549, or send an email to: PRA_ Mailbox@sec.gov. Dated: March 18, 2020. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–06109 Filed 3–23–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–455, OMB Control No. 3235–0514] Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Rule 8c–1. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Rule 8c–1 (17 CFR 240.8c–1), under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) (15 U.S.C. 78a et seq.). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 8c–1 generally prohibits a broker-dealer from using its customers’ securities as collateral to finance its own trading, speculating, or underwriting transactions. More specifically, Rule 8c– 1 states three main principles: (1) A broker-dealer is prohibited from commingling the securities of different customers as collateral for a loan without the consent of each customer; (2) a broker-dealer cannot commingle customers’ securities with its own securities under the same pledge; and (3) a broker-dealer can only pledge its customers’ securities to the extent that customers are in debt to the brokerdealer. Additionally, Rule 8c–1 requires broker-dealers to make certain written notifications to pledgees in connection E:\FR\FM\24MRN1.SGM 24MRN1

Agencies

[Federal Register Volume 85, Number 57 (Tuesday, March 24, 2020)]
[Notices]
[Pages 16716-16719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06117]



[[Page 16716]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88419; File No. SR-CboeEDGA-2020-008]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Rule 11.16(b)(2) Concerning the Resumption of Trading Following a 
Level 3 Market-Wide Circuit Breaker Halt and Make Corresponding Changes 
to Rule 11.7(e)

March 18, 2020.
    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 March 17, 2020, Cboe EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes a rule change to amend Rule 11.16(b)(2) 
concerning the resumption of trading following a Level 3 market-wide 
circuit breaker halt and to amend Rule 11.7(e) to make corresponding 
changes to the re-opening process after a halt.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/edga/), 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 Exchange proposes to amend Rule 11.16(b)(2) concerning the 
resumption of trading following a Level 3 market-wide circuit breaker 
halt and to amend Rule 11.7(e) to make corresponding changes to the re-
opening process after a halt. The Exchange is proposing this rule 
change in conjunction with other national securities exchanges and the 
Financial Industry Regulatory Authority (``FINRA'').
    Rule 11.16 provides a methodology for determining when to halt 
trading in all stocks due to extraordinary market volatility (i.e., 
market-wide circuit breakers). The market-wide circuit breaker 
mechanism (``MWCB'') under Rule 11.16 was approved by the Commission to 
operate on a pilot basis,\5\ the term of which was to coincide with the 
pilot period for the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS (the ``LULD Plan''),\6\ 
including any extensions to the pilot period for the LULD Plan.\7\ The 
Commission recently approved an amendment to the LULD Plan for it to 
operate on a permanent, rather than pilot, basis.\8\ In light of the 
proposal to make the LULD Plan permanent, the Exchange amended Rule 
11.16 to untie the pilot's effectiveness from that of the LULD Plan and 
to extend the pilot's effectiveness to the close of business on October 
18, 2019.\9\ The Exchange then filed to extend the pilot for an 
additional year to the close of business on October 18, 2020.\10\ The 
market-wide circuit breaker under Rule 11.16 provides an important, 
automatic mechanism that is invoked to promote stability and investor 
confidence during a period of significant stress when securities 
markets experience extreme broad-based declines. All U.S. equity 
exchanges and FINRA adopted uniform rules on a pilot basis relating to 
market-wide circuit breakers in 2012 (``MWCB Rules''), which are 
designed to slow the effects of extreme price movement through 
coordinated trading halts across securities markets when severe price 
declines reach levels that may exhaust market liquidity.\11\ Market-
wide circuit breakers provide for trading halts in all equities and 
options markets during a severe market decline as measured by a single-
day decline in the S&P 500 Index. Pursuant to Rule 11.18, a market-wide 
trading halt will be triggered if the S&P 500 Index declines in price 
by specified percentages from the prior day's closing price of that 
index. Currently, the triggers are set at three circuit breaker 
thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market 
decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. Eastern 
Time and before 3:25 p.m. Eastern Time would halt market-wide trading 
for 15 minutes, while a similar market decline at or after 3:25 p.m. 
Eastern Time would not halt market-wide trading. A market decline that 
triggers a Level 3 halt at any time during the trading day would halt 
market-wide trading until the primary listing market opens the next 
trading day.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-EDGA-2011-31).
    \6\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a 
mechanism to address extraordinary market volatility in individual 
securities.
    \7\ See Securities Exchange Act Release Nos. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-EDGA-2011-31) (Approval 
Order); and 68813 (February 1, 2013), 78 FR 9073 (February 7, 2013) 
(SR-EDGA-2013-06) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Extend the Pilot Program Related to Trading 
Pauses Due to Extraordinary Market Volatility).
    \8\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019).
    \9\ See Securities Exchange Act Release No. 85668 (April 16, 
2019), 84 FR 16743 (April 22, 2019) (SR-CboeEDGA-2019-006).
    \10\ See Securities Exchange Act Release No. 87335 (October 17, 
2019), 84 FR 56858 (October 23, 2019) (SR-CboeEDGA-2019-016).
    \11\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-038; SR-BYX-2011-
025; SR-BX-2011-068; SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-
30; SR-EDGA-2011-31; SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-
2011-61; SR-NASDAQ-2011-131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-
NYSEAmex-2011-73; SR-NYSEArca-2011-68; SR-Phlx-2011-129) (``MWCB 
Approval Order'').
---------------------------------------------------------------------------

    Today, in the event that a Level 3 Market Decline occurs, the 
Exchange would halt trading for the remainder of the trading day, and 
would not resume until the primary listing market opens the next 
trading day, which time may currently vary depending on the primary 
listing market. For example, if the primary listing market is the New 
York Stock Exchange (``NYSE''), NYSE would resume trading in its listed 
securities at 9:30 a.m. Eastern Time on the next trading day, and the 
Exchange would not be able to resume trading during the Exchange's 
Early Trading

[[Page 16717]]

Session \12\ or Pre-Opening Session.\13\ Alternatively, if the primary 
listing market is the Nasdaq Stock Market LLC (``Nasdaq''), Nasdaq 
would resume trading in its listed securities at 4:00 a.m. Eastern Time 
on the next trading day, and therefore, the Exchange would resume 
trading at the commencement of the Early Trading Session.
---------------------------------------------------------------------------

    \12\ See Exchange Rule 1.5(ii).
    \13\ See Exchange Rule 1.5(s).
---------------------------------------------------------------------------

    Upon feedback from industry participants, the Exchange has been 
working with other national securities exchanges and FINRA to establish 
a standardized approach for resuming trading in all NMS Stocks 
following a Level 3 halt. The proposed approach would allow for the 
opening of all securities the next trading day after a Level 3 halt as 
a regular trading day, and is designed to ensure that Level 3 MWCB 
events are handled in a more consistent manner that is transparent for 
market participants.\14\ As proposed, a Level 3 halt would end at the 
end of the trading day on which it is declared. This proposed change 
would allow for next-day trading to resume in all NMS Stocks no 
differently from any other trading day. In other words, an exchange 
could resume trading in any security when it first begins trading under 
its rules and would not need to wait for the primary listing market to 
re-open trading in a security before it could start trading such 
security.\15\ Accordingly, under the proposal, the Exchange could begin 
trading all securities at the beginning of the Exchange's Early Trading 
Session.
---------------------------------------------------------------------------

    \14\ Of note, the U.S. futures markets, which have similar rules 
for coordinated MWCB halts, normally begin their ``next day'' 
trading session at 6:00 p.m. Eastern Time (for CFE and CME) or at 
8:00 p.m. Eastern Time (for ICE). If the U.S. futures markets amend 
their MWCB rules, as needed, to allow for normal course trading 
following a Level 3 halt, the futures markets would resume trading 
in their normal course at 6:00 p.m. Eastern Time (CFE and CME) or 
8:00 p.m. Eastern Time (ICE) the same day as the Level 3 halt.
    \15\ The Exchange notes that Nasdaq has recently filed a similar 
proposal to amend its MWCB rules on the resumption of trading 
following Level 3 halts, and amend their rules, where required, to 
have their Level 3 next-day openings happen normally. Further, the 
Exchange anticipates that other national securities exchanges and 
FINRA will also file similar proposals.
---------------------------------------------------------------------------

    To effect this change, the Exchange proposes to delete the language 
in Rule 11.16(b)(2) requiring the Exchange to wait until the primary 
listing exchange opens the next trading day following a Level 3 Market 
Decline, and specify that the Exchange will halt trading for the 
remainder of the trading day.\16\ The proposed rule change would 
therefore allow each exchange to resume trading in all securities the 
next trading day following a Level 3 halt at whatever time such 
exchange normally begins trading under its rules, which for the 
Exchange would be at the beginning of the Early Trading Session at 7:00 
a.m. Eastern Time under its current rules. The Exchange also expects 
that the primary listing exchanges will facilitate this change by 
sending resume messages to the applicable securities information 
processor (``SIP'') to lift the Level 3 trading halt message in all 
securities. The resumption messages will be disseminated after the SIP 
has started on the next trading day and before the start of the 
earliest pre-market trading session of all exchanges. If a security is 
separately subject to a regulatory halt that has not ended, the primary 
listing exchange would replace the Level 3 halt message with the 
applicable regulatory halt message.
---------------------------------------------------------------------------

    \16\ Presently, the Exchange's equities trading day ends at 8:00 
p.m. ET. See Exchange Rule 1.5(r).
---------------------------------------------------------------------------

    As discussed above, the Exchange's proposed rule change to Rule 
11.16 would allow each exchange to resume trading in all securities on 
the day following the Level 3 Market Decline pursuant to its regular 
process for trading on any other trading day. Currently, the Exchange 
would re-open trading following a Level 3 Market Decline using a halt 
re-opening process for securities listed on other national securities 
exchanges.\17\ With the proposed changes to the MWCB mechanism, it 
would no longer be necessary for the Exchange to have special 
procedures in place to resume trading after a Level 3 Market Decline, 
as the proposed changes are designed to allow trading to commence using 
normal operating procedures. Accordingly, the Exchange proposes to make 
corresponding changes to Exchange Rule 11.7(e), which sets forth the 
re-opening process after a halt. Specifically, the Exchange proposes to 
clarify that no halt re-opening process will be conducted by the 
Exchange following a Level 3 Market Decline. With these changes, 
trading would be allowed to commence normally on the trading day 
following a Level 3 Market Decline, similar to the resumption of 
trading on certain other national securities exchanges that would 
currently open with continuous trading.\18\
---------------------------------------------------------------------------

    \17\ See Exchange Rule 11.7(e); See also SIP Market-Wide Circuit 
Breaker Overview, available at https://www.utpplan.com/DOC/MWCB_SIP_Overview.pdf.
    \18\ See Nasdaq Rule 4121(c)(i). See also Id.
---------------------------------------------------------------------------

    Having a consistent approach for all securities will make the 
opening process the day after a Level 3 halt more uniform and reduce 
complexity, which the Exchange believes is important after a 
significant market event. Based on industry feedback, the Exchange 
believes that opening in the normal course in all equity securities 
will be beneficial to the marketplace. By allowing trading to resume 
after a Level 3 halt in all securities no differently from any normal 
trading day under the respective rules of each exchange, the proposed 
rule change would provide greater certainty to the marketplace by 
ensuring a familiar experience for all market participants that trade 
NMS Stocks and balances out potential concerns around volatility. While 
the Exchange recognizes that the impact of this proposal is to permit 
all securities to be traded in the Early Trading Session, which does 
not have certain price protections for volatility such as LULD Bands or 
MWCB protections, the Exchange nonetheless believes that this outcome 
is outweighed by the benefits provided by opening in the Early Trading 
Session in a manner that is more familiar to the marketplace. Moreover, 
allowing the resumption of trading to occur on the Exchange at the 
beginning of the Early Trading Session in all NMS Stocks will allow for 
price formation to occur earlier in the trading day, which in turn 
allows market participants to react to news that has developed. As 
such, trading at the beginning of regular hours may be more orderly.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\20\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. The market-wide circuit breaker mechanism under Rule 11.16 is 
an important, automatic mechanism that is invoked to promote stability 
and investor confidence during a period of significant stress when 
securities markets experience extreme broad-based declines. 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 when and how to halt trading in 
all stocks as a result of extraordinary market volatility, and how the 
markets will resume trading following a Level 3 Market Decline. As 
described above, the

[[Page 16718]]

Exchange, together with other national securities exchanges and FINRA, 
is seeking to adopt a standardized approach related to resuming trading 
in NMS Stocks after a Level 3 MWCB halt. In this regard, the Exchange 
believes that the proposal to resume trading in all securities 
following a Level 3 halt in the same manner that securities would open 
trading on a regular trading day (i.e., with continuous trading on the 
Exchange at the beginning of the Early Trading Session at 7 a.m. 
Eastern Time) will benefit investors, the national market system, 
Exchange members, and the Exchange market by promoting a fair and 
orderly market and reducing confusion during a significant cross-market 
event. By allowing trading to resume after a Level 3 halt in all 
securities no differently from any normal trading day under the 
respective rules of each exchange, the proposed rule changes would 
provide greater certainty to the marketplace by ensuring a familiar 
experience for all market participants that trade NMS Stocks. Based on 
the foregoing, the Exchange believes the benefits to market 
participants from the MWCB under Rule 11.16 with the proposed 
standardized process for resuming trading in all securities following a 
Level 3 halt will promote fair and orderly markets, and protect 
investors and the public interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 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 will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed Level 3 
rule change described above would standardize the opening process for 
all securities on the Exchange, which would make the opening process 
the day after a Level 3 halt more uniform and reduce complexity. 
Further, the Exchange understands that FINRA and other national 
securities exchanges will file similar proposals to adopt the proposed 
Level 3 rule change.\21\
---------------------------------------------------------------------------

    \21\ See, e.g., Securities Exchange Act Release No. 88342 (March 
6, 2020), 85 FR 14513 (March 12, 2020) (SR-NASDAQ-2020-003).
---------------------------------------------------------------------------

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\24\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6).
    \24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 Commission has waived the pre-filing requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission 
may 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 proposal 
may become 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. The Commission notes 
that it approved a substantively similarly proposed rule change 
submitted by Nasdaq.\27\ Waiver of the operative delay will ensure 
consistency across the market centers and the timely implementation of 
the proposed rule change. Accordingly, the Commission waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\28\
---------------------------------------------------------------------------

    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ 17 CFR 240.19b-4(f)(6)(iii).
    \27\ See Securities Exchange Act Release No. 88360 (March 11, 
2020) (SR-NASDAQ-2020-003).
    \28\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 such 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 under 
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-CboeEDGA-2020-008 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-CboeEDGA-2020-008. 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

[[Page 16719]]

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-CboeEDGA-2020-008 
and should be submitted on or before April 14, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06117 Filed 3-23-20; 8:45 am]
BILLING CODE 8011-01-P
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