Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule 7.12E, 55656-55659 [2021-21773]

Download as PDF 55656 Federal Register / Vol. 86, No. 191 / Wednesday, October 6, 2021 / Notices (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments jspears on DSK121TN23PROD with NOTICES1 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.80 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–21767 Filed 10–5–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93223; File No. SR– NYSEAMER–2021–40] • 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– FINRA–2021–024 on the subject line. Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule 7.12E Paper Comments September 30, 2021. • 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–FINRA–2021–024. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–FINRA– 2021–024 and should be submitted on or before October 27, 2021. 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 September 30, 2021, NYSE American LLC (‘‘NYSE American’’ 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 The Exchange proposes to extend the pilot related to the market-wide circuit breaker in Rule 7.12E to the close of business on March 18, 2022. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, 15 U.S.C. 78s(b)(1). 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 2 CFR 200.30–3(a)(12). VerDate Sep<11>2014 20:38 Oct 05, 2021 Jkt 256001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Electronic Comments 80 17 of the most significant parts of such statements. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 The Exchange proposes to extend the pilot related to the market-wide circuit breaker in Rule 7.12E to the close of business on March 18, 2022. Background The Market-Wide Circuit Breaker (‘‘MWCB’’) rules, including the Exchange’s Rule 7.12E, provide an important, automatic mechanism that is invoked to promote stability and investor confidence during periods of significant stress when cash equities securities experience extreme marketwide declines. The MWCB rules are designed to slow the effects of extreme price declines through coordinated trading halts across both cash equity and equity options securities markets. The cash equities rules governing MWCBs were first adopted in 1988 and, in 2012, all U.S. cash equity exchanges and FINRA amended their cash equities uniform rules on a pilot basis (the ‘‘Pilot Rules,’’ i.e., Rule 7.12E (a)–(d)).4 The Pilot Rules currently provide for trading halts in all cash equity securities during a severe market decline as measured by a single-day decline in the S&P 500 Index (‘‘SPX’’).5 Under the Pilot Rules, a market-wide trading halt will be triggered if SPX declines in price by specified percentages from the prior day’s closing price of that index. 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. and before 3:25 p.m. would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. would not halt market-wide trading. (Level 1 and Level 2 halts may occur only once a day.) A market decline that triggers a Level 3 halt at any time during the trading day 4 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) (‘‘Pilot Rules Approval Order’’). 5 The rules of the equity options exchanges similarly provide for a halt in trading if the cash equity exchanges invoke a MWCB Halt. See, e.g., NYSE Arca Rule 6.65–O(d)(4). E:\FR\FM\06OCN1.SGM 06OCN1 Federal Register / Vol. 86, No. 191 / Wednesday, October 6, 2021 / Notices would halt market-wide trading for the remainder of the trading day. The Commission approved the Pilot Rules, 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 In April 2019, the Commission 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 7.12E 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 and later, on October 18, 2021.11 The Exchange now proposes to amend Rule 7.12E to extend the pilot to the close of business on March 18, 2022. This filing does not propose any substantive or additional changes to Rule 7.12E. jspears on DSK121TN23PROD with NOTICES1 The MWCB Task Force and the March 2020 MWCB Events In late 2019, Commission staff requested the formation of a MWCB Task Force (‘‘Task Force’’) to evaluate the operation and design of the MWCB mechanism. The Task Force included representatives from the SROs, the Commission, CME, the Commodity Futures Trading Commission (‘‘CFTC’’), and the securities industry and conducted several organizational meetings in December 2019 and January 2020. In Spring 2020, the MWCB mechanism proved itself to be an effective tool for protecting markets 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– NYSEAmex–2011–73) (Approval Order); and 68787 (January 31, 2013), 78 FR 8615 (February 6, 2013) (SR–NYSEMKT–2013–08) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Delaying the Operative Date of a Rule Change to Exchange Rule 80B—Equities). 8 See Securities Exchange Act Release No. 85623 (April 11, 2019), 84 FR 16086 (April 17, 2019). 9 See Securities Exchange Act Release No. 85564 (April 9, 2019), 84 FR 15269 (April 15, 2019) (SR– NYSEAMER–2019–14). 10 See Securities Exchange Act Release No. 87025 (September 19, 2019), 84 FR 50527 (September 25, 2019) (SR–NYSEAMER–2019–37). 11 See Securities Exchange Act Release No. 90135 (October 8, 2020), 85 FR 65100 (October 14, 2020) (SR–NYSEAMER–2020–74). VerDate Sep<11>2014 20:38 Oct 05, 2021 Jkt 256001 through turbulent times. In March 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, in the Spring and Summer of 2020, the Task Force held ten meetings that were attended by Commission staff, with the goal of performing an expedited review of the March 2020 halts and identifying any areas where the MWCB mechanism had not worked properly. Given the risk of unintended consequences, the Task Force did not recommend changes that were not rooted in a noted deficiency. The Task Force recommended creating a process for a backup reference price in the event that SPX were to become unavailable, and enhancing functional MWCB testing. The Task Force also asked CME to consider modifying its rules to enter into a limit-down state in the futures pre-market after a 7% decline instead of 5%. CME made the requested change, which became effective on October 12, 2020.12 The MWCB Working Group’s Study On September 17, 2020, the Director of the Commission’s Division of Trading and Markets asked the SROs to conduct a more complete study of the design and operation of the Pilot Rules and the LULD Plan during the period of volatility in the Spring of 2020. In response to the request, the SROs created a MWCB ‘‘Working Group’’ composed of SRO representatives and industry advisers that included members of the advisory committees to both the LULD Plan and the NMS Plans governing the collection, consolidation, and dissemination of last-sale transaction reports and quotations in NMS Stocks. The Working Group met regularly from September 2020 through March 2021 to consider the Commission’s request, review data, and compile its study. The Working Group’s efforts in this respect incorporated and built on the work of an MWCB Task Force. The Working Group submitted its study to the Commission on March 31, 2021 (the ‘‘Study’’).13 In addition to a See https://www.cmegroup.com/content/dam/ cmegroup/market-regulation/rule-filings/2020/9/20392_1.pdf; https://www.cmegroup.com/content/ dam/cmegroup/market-regulation/rule-filings/2020/ 9/20-392_2.pdf. 13 See Report of the Market-Wide Circuit Breaker (‘‘MWCB’’) Working Group Regarding the March 2020 MWCB Events, submitted March 31, 2021 (the ‘‘Study’’), available at https://www.nyse.com/ 12 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 55657 timeline of the MWCB events in March 2020, the Study includes a summary of the analysis and recommendations of the MWCB Task Force; an evaluation of the operation of the Pilot Rules during the March 2020 events; an evaluation of the design of the current MWCB system; and the Working Group’s conclusions and recommendations. In the Study, the Working Group concluded: (1) The MWCB mechanism set out in the Pilot Rules worked as intended during the March 2020 events; (2) the MWCB halts triggered in March 2020 appear to have had the intended effect of calming volatility in the market, without causing harm; (3) the design of the MWCB mechanism with respect to reference value (SPX), trigger levels (7%/13%/20%), and halt times (15 minutes) is appropriate; (4) the change implemented in Amendment 10 to the Plan to Address Extraordinary Market Volatility (the ‘‘Limit Up/Limit Down Plan’’ or ‘‘LULD Plan’’) did not likely have any negative impact on MWCB functionality; and (5) no changes should be made to the mechanism to prevent the market from halting shortly after the opening of regular trading hours at 9:30 a.m. In light of the foregoing conclusions, the Working Group also made several recommendations, including that the Pilot Rules should be permanent without any changes.14 Proposal To Extend the Operation of the Pilot Rules Pending the Commission’s Consideration of the New York Stock Exchange LLC’s Filing To Make the Pilot Rules Permanent On July 16, 2021, the Exchange’s affiliate, the New York Stock Exchange (‘‘NYSE’’), proposed a rule change to make the Pilot Rules permanent, consistent with the Working Group’s recommendations.15 On August 27, 2021, the Commission extended its time to consider the proposed rule change to October 20, 2021.16 The Exchange now proposes to extend the expiration date of the Pilot Rules to the end of business on March 18, 2022. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,17 in general, and furthers the publicdocs/nyse/markets/nyse/Report_of_the_ Market-Wide_Circuit_Breaker_Working_Group.pdf. 14 See id. at 46. 15 See Securities Exchange Act Release No. 92428 (July 16, 2021), 86 FR 38776 (July 22, 2021) (SR– NYSE–2021–40). 16 See Securities Exchange Act Release No. 92785A (August 27, 2021), 86 FR 50202 (September 7, 2021) (SR–NYSE–2021–40). 17 15 U.S.C. 78f(b). E:\FR\FM\06OCN1.SGM 06OCN1 55658 Federal Register / Vol. 86, No. 191 / Wednesday, October 6, 2021 / Notices objectives of Section 6(b)(5) of the Act,18 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 7.12E 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. Extending the market-wide circuit breaker pilot for an additional five months would ensure the continued, uninterrupted operation of a consistent mechanism to halt trading across the U.S. markets while the Commission reviews the Exchange’s proposed rule change to make the Pilot Rules permanent. 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 Pilot Rules should continue on a pilot basis because they will promote fair and orderly markets and protect investors and the public interest. jspears on DSK121TN23PROD with NOTICES1 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 proposal would ensure the continued, uninterrupted operation of a consistent mechanism to halt trading across the U.S. markets while the Commission reviews the Exchange’s proposed rule change to make the Pilot Rules permanent. Further, the Exchange understands that FINRA and other national securities exchanges will file proposals to extend their rules regarding the market-wide circuit breaker pilot. Thus, the proposed rule change will help to ensure consistency across market centers without implicating any competitive issues. 18 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 20:38 Oct 05, 2021 Jkt 256001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 19 and Rule 19b–4(f)(6) thereunder.20 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. A proposed rule change filed under Rule 19b–4(f)(6) 21 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),22 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange asked that the Commission waive the 30 day operative delay so that the proposal may become operative immediately upon filing. Extending the pilot Rules’ effectiveness to the close of business on March 18, 2022 will extend the protections provided by the Pilot Rules, which would otherwise expire in less than 30 days. Waiver of the operative delay would therefore permit uninterrupted continuation of the MWCB pilot while the Commission reviews the Exchange’s proposed rule change to make the Pilot Rules permanent. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposed rule change as operative upon filing.23 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if 15 U.S.C. 78s(b)(3)(A)(iii). 17 CFR 240.19b–4(f)(6). 21 17 CFR 240.19b–4(f)(6). 22 17 CFR 240.19b–4(f)(6)(iii). 23 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). 19 20 PO 00000 Frm 00092 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) 24 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– NYSEAMER–2021–40 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–NYSEAMER–2021–40. 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 24 15 U.S.C. 78s(b)(2)(B). E:\FR\FM\06OCN1.SGM 06OCN1 Federal Register / Vol. 86, No. 191 / Wednesday, October 6, 2021 / 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–NYSEAMER–2021–40 and should be submitted on or before October 27, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–21773 Filed 10–5–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93218; File No. SR– CboeBZX–2021–059] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Exempt Certain Categories of Investment Companies Registered Under the Investment Company Act of 1940 From the Requirement To Obtain Shareholder Approval Prior to the Issuance of Securities in Connection With Certain Acquisitions of the Stock or Assets of an Affiliated Registered Investment Company jspears on DSK121TN23PROD with NOTICES1 September 30, 2021. 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 September 22, 2021, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ 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. 17 CFR 200.30–3(a)(12). 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). 25 VerDate Sep<11>2014 20:38 Oct 05, 2021 Jkt 256001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to exempt certain categories of investment companies registered under the Investment Company Act of 1940 (the ‘‘1940 Act’’) from the requirement to obtain shareholder approval prior to the issuance of securities in connection with certain acquisitions of the stock or assets of another company. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), 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 Rules 14.10(e)(1)(A) and (E) to exempt certain categories of investment companies registered under the 1940 Act from the requirement to obtain shareholder approval prior to the issuance of securities in connection with certain acquisitions of the stock or assets of another company. The proposal is substantially similar to a recent rule change made by NYSE Arca, Inc. (‘‘Arca’’).5 The Exchange also 5 See Securities Exchange Act No. 91901 (May 14, 2021) 86 FR 27487 (May 20, 2021) (SR–NYSEArca– 2020–54) (Order approving of a proposed rule change, as modified by amendment no. 2, to amend NYSE Arca Rule 5.3E to exempt registered investment companies that list certain categories of securities defined as derivative and special purpose securities under NYSE Arca Rules from having to obtain shareholder approval prior to the issuance of securities in connection with certain acquisitions of PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 55659 proposes to make structural changes to Rules 14.10(e)(1)(A) and (E). By way of background, Exchange Rule 14.10(i)(1) requires issuers to obtain shareholder approval in connection with the acquisition of the stock or assets of another company, in the following circumstances: (A) Where, due to the present or potential issuance of common stock, including shares issued pursuant to an earn-out provision or similar type of provision, or securities convertible into or exercisable for common stock, other than a public offering for cash: (1) The common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock; or (2) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities; or (B) any director, officer or Substantial Shareholder (as defined by Rule 14.10(i)(5)(C)) of the Company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the Company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more. Exchange Rules 14.10(e)(1)(A) and 14.10(e)(1)(E) exempt certain categories of issuers from certain corporate governance requirements. Now, the Exchange proposes to amend Rules 14.10(e)(1)(A) and 14.10(e)(1)(E) to exempt certain categories of investment companies registered under the 1940 Act from the requirement to comply with Rule 14.10(i)(1) in connection with the acquisition of the stock or assets of an affiliated registered investment company in a transaction that complies with Rule 17a–8 6 (Mergers of affiliated companies) (‘‘Rule 17a–8’’) under the 1940 Act and does not otherwise require shareholder approval under the 1940 Act and the rules thereunder or any other Exchange rule.7 Specifically, the the stock or assets of an affiliated registered investment company (the ‘‘Arca Approval Order’’). 6 17 CFR 270.17a–8. 7 The Exchange proposes to exempt both Portfolio Depository Receipts (Rule 14.11(b)) and certain management investment companies that are Index E:\FR\FM\06OCN1.SGM Continued 06OCN1

Agencies

[Federal Register Volume 86, Number 191 (Wednesday, October 6, 2021)]
[Notices]
[Pages 55656-55659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21773]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93223; File No. SR-NYSEAMER-2021-40]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Pilot Related to the Market-Wide Circuit Breaker in Rule 7.12E

September 30, 2021.
    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 September 30, 2021, NYSE American LLC (``NYSE American'' 
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

    The Exchange proposes to extend the pilot related to the market-
wide circuit breaker in Rule 7.12E to the close of business on March 
18, 2022. The proposed rule change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to extend the pilot related to the market-
wide circuit breaker in Rule 7.12E to the close of business on March 
18, 2022.
Background
    The Market-Wide Circuit Breaker (``MWCB'') rules, including the 
Exchange's Rule 7.12E, provide an important, automatic mechanism that 
is invoked to promote stability and investor confidence during periods 
of significant stress when cash equities securities experience extreme 
market-wide declines. The MWCB rules are designed to slow the effects 
of extreme price declines through coordinated trading halts across both 
cash equity and equity options securities markets.
    The cash equities rules governing MWCBs were first adopted in 1988 
and, in 2012, all U.S. cash equity exchanges and FINRA amended their 
cash equities uniform rules on a pilot basis (the ``Pilot Rules,'' 
i.e., Rule 7.12E (a)-(d)).\4\ The Pilot Rules currently provide for 
trading halts in all cash equity securities during a severe market 
decline as measured by a single-day decline in the S&P 500 Index 
(``SPX'').\5\ Under the Pilot Rules, a market-wide trading halt will be 
triggered if SPX declines in price by specified percentages from the 
prior day's closing price of that index. 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. and before 3:25 p.m. would halt market-wide trading for 15 
minutes, while a similar market decline at or after 3:25 p.m. would not 
halt market-wide trading. (Level 1 and Level 2 halts may occur only 
once a day.) A market decline that triggers a Level 3 halt at any time 
during the trading day

[[Page 55657]]

would halt market-wide trading for the remainder of the trading day.
---------------------------------------------------------------------------

    \4\ 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) (``Pilot 
Rules Approval Order'').
    \5\ The rules of the equity options exchanges similarly provide 
for a halt in trading if the cash equity exchanges invoke a MWCB 
Halt. See, e.g., NYSE Arca Rule 6.65-O(d)(4).
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    The Commission approved the Pilot Rules, 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\ In April 2019, the Commission 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 7.12E 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\ and later, on October 18, 2021.\11\
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    \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-NYSEAmex-2011-73) (Approval 
Order); and 68787 (January 31, 2013), 78 FR 8615 (February 6, 2013) 
(SR-NYSEMKT-2013-08) (Notice of Filing and Immediate Effectiveness 
of Proposed Rule Change Delaying the Operative Date of a Rule Change 
to Exchange Rule 80B--Equities).
    \8\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019).
    \9\ See Securities Exchange Act Release No. 85564 (April 9, 
2019), 84 FR 15269 (April 15, 2019) (SR-NYSEAMER-2019-14).
    \10\ See Securities Exchange Act Release No. 87025 (September 
19, 2019), 84 FR 50527 (September 25, 2019) (SR-NYSEAMER-2019-37).
    \11\ See Securities Exchange Act Release No. 90135 (October 8, 
2020), 85 FR 65100 (October 14, 2020) (SR-NYSEAMER-2020-74).
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    The Exchange now proposes to amend Rule 7.12E to extend the pilot 
to the close of business on March 18, 2022. This filing does not 
propose any substantive or additional changes to Rule 7.12E.
The MWCB Task Force and the March 2020 MWCB Events
    In late 2019, Commission staff requested the formation of a MWCB 
Task Force (``Task Force'') to evaluate the operation and design of the 
MWCB mechanism. The Task Force included representatives from the SROs, 
the Commission, CME, the Commodity Futures Trading Commission 
(``CFTC''), and the securities industry and conducted several 
organizational meetings in December 2019 and January 2020.
    In Spring 2020, the MWCB mechanism proved itself to be an effective 
tool for protecting markets through turbulent times. In March 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, in the Spring and Summer of 2020, the 
Task Force held ten meetings that were attended by Commission staff, 
with the goal of performing an expedited review of the March 2020 halts 
and identifying any areas where the MWCB mechanism had not worked 
properly. Given the risk of unintended consequences, the Task Force did 
not recommend changes that were not rooted in a noted deficiency. The 
Task Force recommended creating a process for a backup reference price 
in the event that SPX were to become unavailable, and enhancing 
functional MWCB testing. The Task Force also asked CME to consider 
modifying its rules to enter into a limit-down state in the futures 
pre-market after a 7% decline instead of 5%. CME made the requested 
change, which became effective on October 12, 2020.\12\
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    \12\ See https://www.cmegroup.com/content/dam/cmegroup/market-regulation/rule-filings/2020/9/20-392_1.pdf; https://www.cmegroup.com/content/dam/cmegroup/market-regulation/rule-filings/2020/9/20-392_2.pdf.
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The MWCB Working Group's Study
    On September 17, 2020, the Director of the Commission's Division of 
Trading and Markets asked the SROs to conduct a more complete study of 
the design and operation of the Pilot Rules and the LULD Plan during 
the period of volatility in the Spring of 2020.
    In response to the request, the SROs created a MWCB ``Working 
Group'' composed of SRO representatives and industry advisers that 
included members of the advisory committees to both the LULD Plan and 
the NMS Plans governing the collection, consolidation, and 
dissemination of last-sale transaction reports and quotations in NMS 
Stocks. The Working Group met regularly from September 2020 through 
March 2021 to consider the Commission's request, review data, and 
compile its study. The Working Group's efforts in this respect 
incorporated and built on the work of an MWCB Task Force.
    The Working Group submitted its study to the Commission on March 
31, 2021 (the ``Study'').\13\ In addition to a timeline of the MWCB 
events in March 2020, the Study includes a summary of the analysis and 
recommendations of the MWCB Task Force; an evaluation of the operation 
of the Pilot Rules during the March 2020 events; an evaluation of the 
design of the current MWCB system; and the Working Group's conclusions 
and recommendations.
---------------------------------------------------------------------------

    \13\ See Report of the Market-Wide Circuit Breaker (``MWCB'') 
Working Group Regarding the March 2020 MWCB Events, submitted March 
31, 2021 (the ``Study''), available at https://www.nyse.com/publicdocs/nyse/markets/nyse/Report_of_the_Market-Wide_Circuit_Breaker_Working_Group.pdf.
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    In the Study, the Working Group concluded: (1) The MWCB mechanism 
set out in the Pilot Rules worked as intended during the March 2020 
events; (2) the MWCB halts triggered in March 2020 appear to have had 
the intended effect of calming volatility in the market, without 
causing harm; (3) the design of the MWCB mechanism with respect to 
reference value (SPX), trigger levels (7%/13%/20%), and halt times (15 
minutes) is appropriate; (4) the change implemented in Amendment 10 to 
the Plan to Address Extraordinary Market Volatility (the ``Limit Up/
Limit Down Plan'' or ``LULD Plan'') did not likely have any negative 
impact on MWCB functionality; and (5) no changes should be made to the 
mechanism to prevent the market from halting shortly after the opening 
of regular trading hours at 9:30 a.m.
    In light of the foregoing conclusions, the Working Group also made 
several recommendations, including that the Pilot Rules should be 
permanent without any changes.\14\
---------------------------------------------------------------------------

    \14\ See id. at 46.
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Proposal To Extend the Operation of the Pilot Rules Pending the 
Commission's Consideration of the New York Stock Exchange LLC's Filing 
To Make the Pilot Rules Permanent
    On July 16, 2021, the Exchange's affiliate, the New York Stock 
Exchange (``NYSE''), proposed a rule change to make the Pilot Rules 
permanent, consistent with the Working Group's recommendations.\15\ On 
August 27, 2021, the Commission extended its time to consider the 
proposed rule change to October 20, 2021.\16\ The Exchange now proposes 
to extend the expiration date of the Pilot Rules to the end of business 
on March 18, 2022.
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    \15\ See Securities Exchange Act Release No. 92428 (July 16, 
2021), 86 FR 38776 (July 22, 2021) (SR-NYSE-2021-40).
    \16\ See Securities Exchange Act Release No. 92785A (August 27, 
2021), 86 FR 50202 (September 7, 2021) (SR-NYSE-2021-40).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\17\ in general, and furthers the

[[Page 55658]]

objectives of Section 6(b)(5) of the Act,\18\ 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 7.12E 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. Extending the market-wide circuit breaker pilot for an 
additional five months would ensure the continued, uninterrupted 
operation of a consistent mechanism to halt trading across the U.S. 
markets while the Commission reviews the Exchange's proposed rule 
change to make the Pilot Rules permanent.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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    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 Pilot Rules should continue on a pilot basis because 
they 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 proposal would 
ensure the continued, uninterrupted operation of a consistent mechanism 
to halt trading across the U.S. markets while the Commission reviews 
the Exchange's proposed rule change to make the Pilot Rules permanent.
    Further, the Exchange understands that FINRA and other national 
securities exchanges will file proposals to extend their rules 
regarding the market-wide circuit breaker 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\ 
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.
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    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\22\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange asked 
that the Commission waive the 30 day operative delay so that the 
proposal may become operative immediately upon filing. Extending the 
pilot Rules' effectiveness to the close of business on March 18, 2022 
will extend the protections provided by the Pilot Rules, which would 
otherwise expire in less than 30 days. Waiver of the operative delay 
would therefore permit uninterrupted continuation of the MWCB pilot 
while the Commission reviews the Exchange's proposed rule change to 
make the Pilot Rules permanent. Therefore, the Commission hereby waives 
the 30-day operative delay and designates the proposed rule change as 
operative upon filing.\23\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
    \23\ 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 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) \24\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \24\ 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-NYSEAMER-2021-40 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-NYSEAMER-2021-40. 
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 55659]]

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-NYSEAMER-2021-40 and should be submitted 
on or before October 27, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21773 Filed 10-5-21; 8:45 am]
BILLING CODE 8011-01-P
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