Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend IEX Rule 11.280 To Extend the Pilot Period for the Market-Wide Circuit Breaker to the Close of Business on October 18, 2021, 65127-65129 [2020-22711]
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Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 17 and paragraph (f) of Rule
19b–4 18 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
jbell on DSKJLSW7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2020–073 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeBZX–2020–073. 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
17 15
18 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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20:17 Oct 13, 2020
Jkt 253001
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeBZX–2020–073 and
should be submitted on or before
November 4, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22706 Filed 10–13–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90128; File No. SR–IEX–
2020–17]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend IEX
Rule 11.280 To Extend the Pilot Period
for the Market-Wide Circuit Breaker to
the Close of Business on October 18,
2021
October 8, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
5, 2020, the Investors Exchange LLC
(‘‘IEX’’ or the ‘‘Exchange’’) 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 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
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(1).
19
1 15
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65127
4 thereunder,5 IEX is filing with the
Commission a proposed rule change to
amend IEX Rule 11.280 to extend the
pilot period for the market-wide circuit
breaker to the close of business on
October 18, 2021. IEX has designated
this rule change as ‘‘non-controversial’’
under Section 19(b)(3)(A) of the Act 6
and provided the Commission with the
notice required by Rule 19b–4(f)(6)
thereunder.7
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.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 the
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 these statement may be examined at
the places specified in Item IV below.
The self-regulatory organization 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Paragraphs (a) through (d) and (f) of
Rule 11.280 describe the 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 (‘‘MWCB’’) mechanism under
Rule 11.280 was approved by the
Commission to operate on a pilot basis,
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’’),8 including any
extensions to the pilot period for the
LULD Plan. In April 2019, the
Commission approved an amendment to
the LULD Plan for it to operate on a
5 17
CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
7 17 CFR 240.19b–4.
8 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012). An
amendment to the LULD Plan adding IEX as a
Participant was filed with the Commission on
August 11, 2016, and became effective upon filing
pursuant to Rule 608(b)(3)(iii) of the Act. See
Securities Exchange Act Release No. 78703 (August
26, 2016), 81 FR 60397 (September 1, 2016) (File
No. 4–631).
6 15
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Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
permanent, rather than pilot, basis.9 In
light of the proposal to make the LULD
Plan permanent, the Exchange amended
Rule 11.280 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,
2019.10 The Exchange subsequently
amended Rule 11.280 to extend the
pilot’s effectiveness for an additional
year to the close of business on October
18, 2020.11
The purpose of this proposed rule
change is to amend Rule 11.280(a) to
extend the pilot period for the MWCB,
set forth in paragraphs (a) through (d)
and (f),12 to the close of business on
October 18, 2021. This filing does not
propose any substantive or additional
changes to Rule 11.280.
MWCBs under Rule 11.280 provide an
important, automatic mechanism that is
invoked to promote stability and
investor confidence during periods of
significant stress when securities
markets experience extreme broad-based
declines. All SROs have rules relating to
MWCBs, 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.13 MWCBs 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 11.280(a) through (d)
and (f), 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: A 7% market decline (Level
1), a 13% market decline (Level 2), and
a 20% market decline (Level 3). A
market decline that triggers a Level 1 or
Level 2 circuit breaker after 9:30 a.m. ET
and before 3:25 p.m. ET would halt
9 See Securities Exchange Act Release No. 85623
(April 11, 2019), 84 FR 16086 (April 17, 2019)
(‘‘LULD Plan Amendment 18 Approval Order’’).
10 See Securities Exchange Act Release No. 85576
(April 9, 2019), 84 FR 15237 (April 15, 2019) (SR–
IEX–2019–04).
11 See Securities Exchange Act Release No. 87298
(October 15, 2019), 84 FR 56255 (October 21, 2019)
(SR–IEX–2019–11).
12 Rule 11.280(f) also relates to the MWCB
because it specifies the time zone for all times
referenced in Rule 11.280(a) and (b).
13 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).
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19:15 Oct 13, 2020
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market-wide trading for 15 minutes,
while a similar market decline at or after
3:25 p.m. ET would not halt marketwide trading. A market decline that
triggers a Level 3 circuit breaker, at any
time during the trading day, would halt
market-wide trading for the remainder
of the trading day.
Since the MWCB pilot was last
extended in October 2019, the MWCB
mechanism has proven itself to be an
effective tool for protecting markets
through turbulent times. In the Spring of
2020, at the outset of the worldwide
COVID–19 pandemic, U.S. equities
markets experienced four MWCB Level
1 halts, on March 9, 12, 16, and 18,
2020. In each instance, the markets
halted as intended upon a 7% drop in
the S&P 500 Index, and resumed as
intended 15 minutes later.
In response to these events, the
previously-convened MWCB Taskforce
(‘‘Taskforce’’) reviewed the March 2020
halts and considered whether any
immediate changes to the MWCB
mechanism should be made. The
Taskforce, consisting of representatives
from equities exchanges, futures
exchanges, FINRA, broker-dealers, and
other market participants, had been
assembled in early 2020 to consider
more generally potential changes to the
MWCB mechanism. The Taskforce held
ten meetings in the Spring and Summer
of 2020 that were attended by
Commission staff to consider, among
other things: (1) Whether to retain the
S&P 500 Index as the standard for
measuring market declines; (2) whether
halts that occur shortly after the 9:30
a.m. market open cause more harm than
good; and (3) what additional testing of
the MWCB mechanism should be done.
After considering data and anecdotal
reports of market participants’
experiences during the March 2020
MWCB events, the Taskforce did not
recommend immediate changes be made
to the use of the S&P 500 Index as the
reference price against which market
declines are measured, or to the current
MWCB mechanism which permits halts
even shortly after the 9:30 a.m. market
open. The Taskforce recommended
creating a process for a backup reference
price in the event that the S&P 500
Index becomes unavailable, and
enhancing functional MWCB testing.
The Taskforce also asked the Chicago
Mercantile Exchange, Inc. to consider
modifying its rules to enter into a limitdown state in the futures pre-market
after a 7% decline instead of 5%.
On September 17, 2020, the Director
of the Commission’s Division of Trading
and Markets requested that the equities
exchanges and FINRA prepare a more
complete study of the design and
PO 00000
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Fmt 4703
Sfmt 4703
operation of the MWCB mechanism and
the LULD Plan during the period of
volatility in the Spring of 2020. Based
on the results of that study, the
Exchange expects to work with the
Commission, FINRA, the other
exchanges, and market participants to
determine if any additional changes to
the MWCB mechanism should be made,
including consideration of rules and
procedures for the periodic testing of
the MWCB mechanism with industry
participants.
In addition to the work of the
Taskforce, the equities exchanges also
moved forward in 2019 and 2020 with
a plan to normalize their Day 2 opening
procedures after a Level 3 MWCB halt,
such that all exchanges would reopen
on Day 2 with a standard opening
auction. The Exchange filed a rule
change to that effect in March 2020,14
and successfully tested the
implementation of those changes on
September 12, 2020.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of Sections 6(b) 15 and
6(b)(5) of the Act,16 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 MWCB mechanism
under Rule 11.280 is an important,
automatic mechanism that is invoked to
promote stability and investor
confidence during periods of significant
stress when securities markets
experience extreme broad-based
declines. Extending the MWCB pilot for
an additional year would ensure the
continued, uninterrupted operation of a
consistent mechanism to halt trading
across the U.S. equity markets while the
Exchange, with the other SROs, studies
the design and operation of the MWCB
mechanism and the LULD Plan during
the period of volatility in the Spring of
2020. Based on the results of that study,
the Exchange expects to work with the
Commission, FINRA, the other
exchanges, and market participants to
determine if any additional changes to
the MWCB mechanism should be made,
including consideration of rules and
procedures for the periodic testing of
the MWCB mechanism with industry
participants.
14 See Securities Exchange Act Release No. 88421
(March 18, 2020), 85 FR 16720 (March 24, 2020)
(SR–IEX–2020–04).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 85, No. 199 / Wednesday, October 14, 2020 / Notices
The Exchange also 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.
Based on the foregoing, the Exchange
believes the benefits to market
participants from the MWCB under Rule
11.280(a) through (d) and (f) should
continue on a pilot basis because the
MWCB will promote fair and orderly
markets, and protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX does not believe that the
proposed rule change implicates any
competitive issues because the proposal
would ensure the continued,
uninterrupted operation of a consistent
mechanism to halt trading across the
U.S. markets while the Exchange, in
conjunction with the other SROs,
studies the design and operation of the
MWCB mechanism and the LULD Plan
during the period of volatility in the
Spring of 2020.
Further, IEX understands that the
other SROs will file proposals to extend
their rules regarding the MWCB pilot.
Thus, the proposed rule change will
help to ensure consistency across
market centers without implicating any
competitive issues.
jbell on DSKJLSW7X2PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) 17 of the Act and
Rule 19b–4(f)(6) 18 thereunder. 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
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.19
17 15
U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(6).
19 In addition, Rule 19b–4(f)(6)(iii) requires the
Exchange 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
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19:15 Oct 13, 2020
Jkt 253001
A proposed rule change filed under
Rule 19b–4(f)(6) 20 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),21 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
upon filing. Extending the pilot for an
additional year will allow the
uninterrupted operation of the existing
pilot, while FINRA, and the other
exchanges conduct a study of the
MWCB mechanism in consultation with
market participants and determine if
any additional changes to the MWCB
mechanism should be made, including
consideration of rules and procedures
for the periodic testing of the MWCB
mechanism with industry participants.
Therefore, the Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. The
Commission hereby designates the
proposed rule change to be operative
upon filing.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 23 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
rule change, at least five business days prior to the
filing of the proposed rule change, or such shorter
time as designated by the Commission. The
Commission has waived this requirement.
20 Id.
21 17 CFR 240.19b–4(f)(6)(iii).
22 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).
PO 00000
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Fmt 4703
Sfmt 9990
65129
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
IEX–2020–17 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–IEX–2020–17. This file
number should be included in 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 Section, 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 will also be available for
inspection and copying at the IEX’s
principal office and on its internet
website at www.iextrading.com. All
comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly.
All submissions should refer to File
Number SR–IEX–2020–17 and should
be submitted on or before November 4,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22711 Filed 10–13–20; 8:45 am]
BILLING CODE 8011–01–P
24 17
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14OCN1
]]>Agencies
[Federal Register Volume 85, Number 199 (Wednesday, October 14, 2020)]
[Notices]
[Pages 65127-65129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22711]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90128; File No. SR-IEX-2020-17]
Self-Regulatory Organizations; Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend IEX
Rule 11.280 To Extend the Pilot Period for the Market-Wide Circuit
Breaker to the Close of Business on October 18, 2021
October 8, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on October 5, 2020, the Investors Exchange LLC (``IEX'' or
the ``Exchange'') 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 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
Pursuant to the provisions of Section 19(b)(1) under the Act,\4\
and Rule 19b-4 thereunder,\5\ IEX is filing with the Commission a
proposed rule change to amend IEX Rule 11.280 to extend the pilot
period for the market-wide circuit breaker to the close of business on
October 18, 2021. IEX has designated this rule change as ``non-
controversial'' under Section 19(b)(3)(A) of the Act \6\ and provided
the Commission with the notice required by Rule 19b-4(f)(6)
thereunder.\7\
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(1).
\5\ 17 CFR 240.19b-4.
\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Exchange's
website at www.iextrading.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 the
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 these statement may be examined at
the places specified in Item IV below. The self-regulatory organization
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Paragraphs (a) through (d) and (f) of Rule 11.280 describe the
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 (``MWCB'') mechanism under Rule 11.280
was approved by the Commission to operate on a pilot basis, 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''),\8\ including any extensions to the pilot period
for the LULD Plan. In April 2019, the Commission approved an amendment
to the LULD Plan for it to operate on a
[[Page 65128]]
permanent, rather than pilot, basis.\9\ In light of the proposal to
make the LULD Plan permanent, the Exchange amended Rule 11.280 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.\10\
The Exchange subsequently amended Rule 11.280 to extend the pilot's
effectiveness for an additional year to the close of business on
October 18, 2020.\11\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012). An amendment to the LULD Plan
adding IEX as a Participant was filed with the Commission on August
11, 2016, and became effective upon filing pursuant to Rule
608(b)(3)(iii) of the Act. See Securities Exchange Act Release No.
78703 (August 26, 2016), 81 FR 60397 (September 1, 2016) (File No.
4-631).
\9\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (``LULD Plan Amendment 18
Approval Order'').
\10\ See Securities Exchange Act Release No. 85576 (April 9,
2019), 84 FR 15237 (April 15, 2019) (SR-IEX-2019-04).
\11\ See Securities Exchange Act Release No. 87298 (October 15,
2019), 84 FR 56255 (October 21, 2019) (SR-IEX-2019-11).
---------------------------------------------------------------------------
The purpose of this proposed rule change is to amend Rule 11.280(a)
to extend the pilot period for the MWCB, set forth in paragraphs (a)
through (d) and (f),\12\ to the close of business on October 18, 2021.
This filing does not propose any substantive or additional changes to
Rule 11.280.
---------------------------------------------------------------------------
\12\ Rule 11.280(f) also relates to the MWCB because it
specifies the time zone for all times referenced in Rule 11.280(a)
and (b).
---------------------------------------------------------------------------
MWCBs under Rule 11.280 provide an important, automatic mechanism
that is invoked to promote stability and investor confidence during
periods of significant stress when securities markets experience
extreme broad-based declines. All SROs have rules relating to MWCBs,
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.\13\
MWCBs 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.
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\13\ 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).
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Pursuant to Rule 11.280(a) through (d) and (f), 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: A 7% market decline (Level 1), a 13% market decline (Level
2), and a 20% market decline (Level 3). A market decline that triggers
a Level 1 or Level 2 circuit breaker after 9:30 a.m. ET and before 3:25
p.m. ET would halt market-wide trading for 15 minutes, while a similar
market decline at or after 3:25 p.m. ET would not halt market-wide
trading. A market decline that triggers a Level 3 circuit breaker, at
any time during the trading day, would halt market-wide trading for the
remainder of the trading day.
Since the MWCB pilot was last extended in October 2019, the MWCB
mechanism has proven itself to be an effective tool for protecting
markets through turbulent times. In the Spring of 2020, at the outset
of the worldwide COVID-19 pandemic, U.S. equities markets experienced
four MWCB Level 1 halts, on March 9, 12, 16, and 18, 2020. In each
instance, the markets halted as intended upon a 7% drop in the S&P 500
Index, and resumed as intended 15 minutes later.
In response to these events, the previously-convened MWCB Taskforce
(``Taskforce'') reviewed the March 2020 halts and considered whether
any immediate changes to the MWCB mechanism should be made. The
Taskforce, consisting of representatives from equities exchanges,
futures exchanges, FINRA, broker-dealers, and other market
participants, had been assembled in early 2020 to consider more
generally potential changes to the MWCB mechanism. The Taskforce held
ten meetings in the Spring and Summer of 2020 that were attended by
Commission staff to consider, among other things: (1) Whether to retain
the S&P 500 Index as the standard for measuring market declines; (2)
whether halts that occur shortly after the 9:30 a.m. market open cause
more harm than good; and (3) what additional testing of the MWCB
mechanism should be done.
After considering data and anecdotal reports of market
participants' experiences during the March 2020 MWCB events, the
Taskforce did not recommend immediate changes be made to the use of the
S&P 500 Index as the reference price against which market declines are
measured, or to the current MWCB mechanism which permits halts even
shortly after the 9:30 a.m. market open. The Taskforce recommended
creating a process for a backup reference price in the event that the
S&P 500 Index becomes unavailable, and enhancing functional MWCB
testing. The Taskforce also asked the Chicago Mercantile Exchange, Inc.
to consider modifying its rules to enter into a limit-down state in the
futures pre-market after a 7% decline instead of 5%.
On September 17, 2020, the Director of the Commission's Division of
Trading and Markets requested that the equities exchanges and FINRA
prepare a more complete study of the design and operation of the MWCB
mechanism and the LULD Plan during the period of volatility in the
Spring of 2020. Based on the results of that study, the Exchange
expects to work with the Commission, FINRA, the other exchanges, and
market participants to determine if any additional changes to the MWCB
mechanism should be made, including consideration of rules and
procedures for the periodic testing of the MWCB mechanism with industry
participants.
In addition to the work of the Taskforce, the equities exchanges
also moved forward in 2019 and 2020 with a plan to normalize their Day
2 opening procedures after a Level 3 MWCB halt, such that all exchanges
would reopen on Day 2 with a standard opening auction. The Exchange
filed a rule change to that effect in March 2020,\14\ and successfully
tested the implementation of those changes on September 12, 2020.
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\14\ See Securities Exchange Act Release No. 88421 (March 18,
2020), 85 FR 16720 (March 24, 2020) (SR-IEX-2020-04).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of Sections 6(b) \15\ and 6(b)(5) of the Act,\16\ 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 MWCB mechanism under
Rule 11.280 is an important, automatic mechanism that is invoked to
promote stability and investor confidence during periods of significant
stress when securities markets experience extreme broad-based declines.
Extending the MWCB pilot for an additional year would ensure the
continued, uninterrupted operation of a consistent mechanism to halt
trading across the U.S. equity markets while the Exchange, with the
other SROs, studies the design and operation of the MWCB mechanism and
the LULD Plan during the period of volatility in the Spring of 2020.
Based on the results of that study, the Exchange expects to work with
the Commission, FINRA, the other exchanges, and market participants to
determine if any additional changes to the MWCB mechanism should be
made, including consideration of rules and procedures for the periodic
testing of the MWCB mechanism with industry participants.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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[[Page 65129]]
The Exchange also 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. Based on
the foregoing, the Exchange believes the benefits to market
participants from the MWCB under Rule 11.280(a) through (d) and (f)
should continue on a pilot basis because the MWCB will promote fair and
orderly markets, and protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
IEX does not believe that the proposed rule change implicates any
competitive issues because the proposal would ensure the continued,
uninterrupted operation of a consistent mechanism to halt trading
across the U.S. markets while the Exchange, in conjunction with the
other SROs, studies the design and operation of the MWCB mechanism and
the LULD Plan during the period of volatility in the Spring of 2020.
Further, IEX understands that the other SROs will file proposals to
extend their rules regarding the MWCB pilot. 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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \17\ of the Act and Rule 19b-4(f)(6) \18\
thereunder. 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\19\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
\19\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange 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
filing of the proposed rule change, or such shorter time as
designated by the Commission. The Commission has waived this
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\21\ 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 upon filing. Extending the pilot for an additional
year will allow the uninterrupted operation of the existing pilot,
while FINRA, and the other exchanges conduct a study of the MWCB
mechanism in consultation with market participants and determine if any
additional changes to the MWCB mechanism should be made, including
consideration of rules and procedures for the periodic testing of the
MWCB mechanism with industry participants. Therefore, the Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission hereby
designates the proposed rule change to be operative upon filing.\22\
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\20\ Id.
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ 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).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \23\ 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 [email protected]. Please include
File Number SR-IEX-2020-17 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-IEX-2020-17. This
file number should be included in 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 Section, 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 will also be available for inspection
and copying at the IEX's principal office and on its internet website
at www.iextrading.com. All comments received will be posted without
change. Persons submitting comments are cautioned that we do not redact
or edit personal identifying information from comment submissions. You
should submit only information that you wish to make available
publicly.
All submissions should refer to File Number SR-IEX-2020-17 and
should be submitted on or before November 4, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22711 Filed 10-13-20; 8:45 am]
BILLING CODE 8011-01-P
