Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC To Amend Exchange Rule 2622, Limit Up-Limit Down Plan and Trading Halts, 16509-16512 [2022-06093]
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
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 Exchange and
the other SROs finalize their proposals
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 following
Commission approval of the NYSE
proposal. Thus, the proposed rule
change will help to ensure consistency
across market centers without
implicating any competitive issues.
jspears on DSK121TN23PROD with NOTICES1
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 20 and Rule 19b–4(f)(6) 21
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 22 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),23 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 April 18,
2022 will extend the protections
provided by the Pilot Rules, which
21
20:07 Mar 22, 2022
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–
CboeBYX–2022–008 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–CboeBYX–2022–008. 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
24 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).
15 U.S.C. 78s(b)(3)(A).
17 CFR 240.19b–4(f)(6).
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
20
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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 NYSE’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.24
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.
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16509
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–CboeBYX–2022–008
and should be submitted on or before
April 13, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–06104 Filed 3–22–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94452; File No. SR–
PEARL–2022–08]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change by MIAX PEARL, LLC To
Amend Exchange Rule 2622, Limit UpLimit Down Plan and Trading Halts
March 17, 2022.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on March 9, 2022, MIAX PEARL, LLC
(‘‘MIAX Pearl’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
25
1 15
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposed rule
to extend the pilot related to the marketwide circuit breaker mechanism in Rule
2622 to the close of business on April
18, 2022.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
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 extend the
pilot related to the market-wide circuit
breaker mechanism in Rule 2622 to the
close of business on April 18, 2022.
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Background
The Market-Wide Circuit Breaker
(‘‘MWCB’’) rules, including the
Exchange’s Rule 2622, 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. In
2012 all U.S. cash equity exchanges and
FINRA amended their cash equities
uniform rules on a pilot basis 3 and, in
3 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–
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20:07 Mar 22, 2022
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2020, the Exchange adopted the cash
equities uniform rule under Exchange
Rule 2622(a)–(d) to also operate on a
pilot basis 4 (the ‘‘Pilot Rules’’). 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
would halt market-wide trading for the
remainder of the trading day.
Exchange Rule 2622 was approved by
the Commission to operate on a pilot
basis set to expire on at the close of
business on October 18, 2020.6 The
Exchange subsequently amended Rule
2622 to extend the Pilot Rules’
effectiveness for an additional year to
the close of business on October 18,
2021 7 and March 18, 2022.8
The Exchange now proposes to amend
Rule 2622 to extend the pilot to the
close of business on April 18, 2022. This
filing does not propose any substantive
or additional changes to Rule 2622.
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
NYSE–2011–48; SR–NYSEAmex–2011–73; SR–
NYSEArca–2011–68; SR–Phlx–2011–129) (‘‘Pilot
Rules Approval Order’’). See also Securities
Exchange Act Release No. 89563 (August 14, 2020),
85 FR 51510 (August 20, 2020) (SR–PEARL–2020–
03) (‘‘Equities Approval Order’’) (approving, among
other things, Exchange Rule 2622).
4 See Equities Approval Order, id.
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.,
Exchange Rule 504(a) and NYSE Arca Rule 6.65–
O(d)(4).
6 See Equities Approval Order, supra note 3.
7 See Securities Exchange Act Release No. 90124
(October 8, 2020), 85 FR 65105 (October 14, 2020)
(SR–PEARL–2020–20).
8 See Securities Exchange Act Release No. 93331
(October 14, 2021), 86 FR 58130 (October 20, 2021)
(SR–PEARL–2021–50).
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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, 2020.9
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
9 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.
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
built on the work of an MWCB Task
Force.
The Working Group submitted its
study to the Commission on March 31,
2021 (the ‘‘Study’’).10 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.
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.11
Proposal To Extend the Operation of the
Pilot Rules Pending the Commission’s
Consideration of the Exchange’s Filing
To Make the Pilot Rules Permanent
jspears on DSK121TN23PROD with NOTICES1
On July 16, 2021, the New York Stock
Exchange LLC (‘‘NYSE’’) proposed a
rule change to make the Pilot Rules
permanent, consistent with the Working
Group’s recommendations.12 On
January 7, 2022, the Commission
extended its time to consider the
proposed rule change to March 19,
2022.13 The Exchange now proposes to
extend the expiration date of the Pilot
10 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.
11 See id. at 46.
12 See Securities Exchange Act Release No. 92428
(July 16, 2021), 86 FR 38776 (July 22, 2021) (SR–
NYSE–2021–40).
13 See Securities Exchange Act Release No. 93933
(January 7, 2022), 87 FR 2189 (January 13, 2022)
(SR–NYSE–2021–40).
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Rules to the end of business on April 18,
2022.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,14 in general, and furthers the
objectives of Section 6(b)(5) of the Act,15
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 2622 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 MWCB pilot for
an additional one month 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.
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 NYSE’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 MWCB pilot.
Thus, the proposed rule change will
help to ensure consistency across
market centers without implicating any
competitive issues.
14 15
15 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00059
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16511
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 filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 16 and Rule
19b–4(f)(6) thereunder.17 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 18 and Rule 19b–4(f)(6)(iii)
thereunder.19
A proposed rule change filed under
Rule 19b–4(f)(6) 20 normally does not
become operative prior to 30 days after
the date of the 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 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 April 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 NYSE’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.22
16 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
18 15 U.S.C. 78s(b)(3)(A)(iii).
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4 requires a self-regulatory organization to give the
Commission written notice of its intent to file a
proposed rule change under that subsection at least
five business days prior to the date of filing, or such
shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6)(iii).
22 For purposes only of waiving the 30-day
operative delay, the Commission has also
17 17
Continued
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Federal Register / Vol. 87, No. 56 / Wednesday, March 23, 2022 / Notices
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) 23 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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–PEARL–2022–08 and
should be submitted on or before April
13, 2022.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
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–
PEARL–2022–08 on the subject line.
jspears on DSK121TN23PROD with NOTICES1
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–PEARL–2022–08. 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
[FR Doc. 2022–06093 Filed 3–22–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94454; File No. SR–CBOE–
2022–013]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Pilot
Period Related to the Market-Wide
Circuit Breaker in Rule 5.22 to April 18,
2022
March 17, 2022.
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,
2022, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) 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 ‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to extend
24 17
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
23 15 U.S.C. 78s(b)(2)(B).
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20:07 Mar 22, 2022
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CFR 200.30–3(a)(12).
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).
1
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the pilot period related to the marketwide circuit breaker in Rule 5.22 to
April 18, 2022. The text of the proposed
rule change is provided in Exhibit 5.
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://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange’s Office of
the Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to extend the
pilot related to the market-wide circuit
breaker in Rule 5.22 to the close of
business on April 18, 2022.
Background
The Market-Wide Circuit Breaker
(‘‘MWCB’’) rules, including the
Exchange’s Rule 5.22, 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’’, including Exchange Rule 5.22).5
5 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; SRNYSEAmex–2011–73; SR–
E:\FR\FM\23MRN1.SGM
23MRN1
]]>Agencies
[Federal Register Volume 87, Number 56 (Wednesday, March 23, 2022)]
[Notices]
[Pages 16509-16512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06093]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94452; File No. SR-PEARL-2022-08]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL,
LLC To Amend Exchange Rule 2622, Limit Up-Limit Down Plan and Trading
Halts
March 17, 2022.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 9, 2022, MIAX PEARL, LLC (``MIAX Pearl''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 16510]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposed rule to extend the pilot related
to the market-wide circuit breaker mechanism in Rule 2622 to the close
of business on April 18, 2022.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 extend the pilot related to the market-
wide circuit breaker mechanism in Rule 2622 to the close of business on
April 18, 2022.
Background
The Market-Wide Circuit Breaker (``MWCB'') rules, including the
Exchange's Rule 2622, 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.
In 2012 all U.S. cash equity exchanges and FINRA amended their cash
equities uniform rules on a pilot basis \3\ and, in 2020, the Exchange
adopted the cash equities uniform rule under Exchange Rule 2622(a)-(d)
to also operate on a pilot basis \4\ (the ``Pilot Rules''). 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 would halt market-wide
trading for the remainder of the trading day.
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\3\ 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''). See also Securities Exchange Act Release
No. 89563 (August 14, 2020), 85 FR 51510 (August 20, 2020) (SR-
PEARL-2020-03) (``Equities Approval Order'') (approving, among other
things, Exchange Rule 2622).
\4\ See Equities Approval Order, id.
\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., Exchange Rule 504(a) and NYSE Arca Rule 6.65-
O(d)(4).
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Exchange Rule 2622 was approved by the Commission to operate on a
pilot basis set to expire on at the close of business on October 18,
2020.\6\ The Exchange subsequently amended Rule 2622 to extend the
Pilot Rules' effectiveness for an additional year to the close of
business on October 18, 2021 \7\ and March 18, 2022.\8\
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\6\ See Equities Approval Order, supra note 3.
\7\ See Securities Exchange Act Release No. 90124 (October 8,
2020), 85 FR 65105 (October 14, 2020) (SR-PEARL-2020-20).
\8\ See Securities Exchange Act Release No. 93331 (October 14,
2021), 86 FR 58130 (October 20, 2021) (SR-PEARL-2021-50).
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The Exchange now proposes to amend Rule 2622 to extend the pilot to
the close of business on April 18, 2022. This filing does not propose
any substantive or additional changes to Rule 2622.
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.\9\
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\9\ 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
[[Page 16511]]
built on the work of an MWCB Task Force.
The Working Group submitted its study to the Commission on March
31, 2021 (the ``Study'').\10\ 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.
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\10\ 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.\11\
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\11\ See id. at 46.
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Proposal To Extend the Operation of the Pilot Rules Pending the
Commission's Consideration of the Exchange's Filing To Make the Pilot
Rules Permanent
On July 16, 2021, the New York Stock Exchange LLC (``NYSE'')
proposed a rule change to make the Pilot Rules permanent, consistent
with the Working Group's recommendations.\12\ On January 7, 2022, the
Commission extended its time to consider the proposed rule change to
March 19, 2022.\13\ The Exchange now proposes to extend the expiration
date of the Pilot Rules to the end of business on April 18, 2022.
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\12\ See Securities Exchange Act Release No. 92428 (July 16,
2021), 86 FR 38776 (July 22, 2021) (SR-NYSE-2021-40).
\13\ See Securities Exchange Act Release No. 93933 (January 7,
2022), 87 FR 2189 (January 13, 2022) (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,\14\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\15\ 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 2622 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 MWCB pilot for
an additional one month 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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\14\ 15 U.S.C. 78f(b).
\15\ 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 NYSE'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 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 filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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 \18\ and Rule 19b-
4(f)(6)(iii) thereunder.\19\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4 requires a
self-regulatory organization to give the Commission written notice
of its intent to file a proposed rule change under that subsection
at least five business days prior to the date of filing, or such
shorter time as designated by the Commission. The Exchange has
satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \20\ normally
does not become operative prior to 30 days after the date of the
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 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 April 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 NYSE'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.\22\
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\20\ 17 CFR 240.19b-4(f)(6).
\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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[[Page 16512]]
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) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(2)(B).
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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-PEARL-2022-08 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-PEARL-2022-08. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly.
All submissions should refer to File Number SR-PEARL-2022-08 and
should be submitted on or before April 13, 2022.
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. 2022-06093 Filed 3-22-22; 8:45 am]
BILLING CODE 8011-01-P
