Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule 11.16 to April 18, 2022, 16805-16808 [2022-06183]

Download as PDF Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices associated with a member’’ and ‘‘associated person’’ as provided within FINRA By-Law Article I(ee), for purposes of statutory disqualification pursuant to Section 3(a)(39) of Act,8 within new Nasdaq General 3, Rule 1002(b)(2)(A) is consistent with the Act. Aligning the terms ‘‘person associated with a member’’ and ‘‘associated person’’ with paragraph (ee) of Article I, Definitions, of FINRA’s By-Laws would avoid potentially different outcomes for members of both FINRA and Nasdaq with respect to ineligibility for membership and association as a result of statutory disqualification. The Exchange believes its proposal will promote just and equitable principles of trade and protect investors and the public interest by ensuring market participants that are members of both FINRA and Nasdaq are held to the same standard with respect to statutory disqualification. B. Self-Regulatory Organization’s Statement on Burden on Competition khammond on DSKJM1Z7X2PROD with NOTICES 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. The Exchange’s proposal to adopt FINRA’s definitions of ‘‘person associated with a member’’ and ‘‘associated person’’ as provided within FINRA By-Law Article I(ee) within General 3, Rule 1002(b)(2)(A), for purposes of statutory disqualification pursuant to Section 3(a)(39) of Act,9 does not impose an undue burden on competition. Aligning the terms ‘‘person associated with a member’’ and ‘‘associated person’’ with paragraph (ee) of Article I, Definitions, of FINRA’s By-Laws would avoid potentially different outcomes for members of both FINRA and Nasdaq with respect to ineligibility for membership and association as a result of statutory disqualification and ensure that all FINRA and Nasdaq members are held to the same standard with respect to statutory disqualification. Today, all Nasdaq members are subject to the General 3 rules. 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. 8 15 U.S.C. 78c(a)(39). 9 15 U.S.C. 78c(a)(39). VerDate Sep<11>2014 17:39 Mar 23, 2022 Jkt 256001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 10 and subparagraph (f)(6) of Rule 19b–4 thereunder.11 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments 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–NASDAQ–2022–022. 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 10 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 11 17 Frm 00102 Fmt 4703 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2022–022 and should be submitted on or before April 14, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–06192 Filed 3–23–22; 8:45 am] BILLING CODE 8011–01–P • 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– NASDAQ–2022–022 on the subject line. PO 00000 16805 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–94462; File No. SR– CboeEDGX–2022–019] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule 11.16 to April 18, 2022 March 18, 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 EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 12 17 CFR 200.30–3(a)(12). 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 E:\FR\FM\24MRN1.SGM 24MRN1 16806 Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (‘‘EDGX’’ or the ‘‘Exchange’’) is filing with the Securities and Exchange Commission (the ‘‘Commission’’) a proposal to extend the pilot related to the marketwide circuit breaker in Rule 11.16 to April 18, 2022. 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/ options/regulation/rule_filings/edgx/), 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. khammond on DSKJM1Z7X2PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose EDGX Rules 11.16(a) through (d), (f) and (g) describe the methodology for determining when to halt trading in all stocks due to extraordinary market volatility, i.e., market-wide circuit breakers. The market-wide circuit breaker (‘‘MWCB’’) mechanism was approved by the Commission to operate on a pilot basis, the term of which was to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS (the ‘‘LULD Plan’’),5 15 U.S.C. 78s(b)(3)(A)(iii). 17 CFR 240.19b–4(f)(6). 5 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a mechanism to address 3 4 VerDate Sep<11>2014 17:39 Mar 23, 2022 Jkt 256001 including any extensions to the pilot period for the LULD Plan. In April 2019, the Commission approved an amendment to the LULD Plan for it to operate on a permanent, rather than pilot, basis.6 In light of the proposal to make the LULD Plan permanent, the Exchange amended Rule 11.16 to untie the pilot’s effectiveness from that of the LULD Plan and to extend the pilot’s effectiveness to the close of business on October 18, 2019.7 The Exchange subsequently amended Rule 11.16 to extend the pilot’s effectiveness to October 18, 2020,8 October 18, 2021,9 and March 18, 2022.10 The Exchange now proposes to amend Rule 11.16 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 11.16. The market-wide circuit breaker under Rule 11.16 provides an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equity exchanges and FINRA adopted uniform rules on a pilot basis relating to market-wide circuit breakers in 2012 (‘‘MWCB Rules’’), which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.11 Market-wide circuit breakers provide for trading halts in all equities and options markets during a severe market decline as measured by a single-day decline in the S&P 500 Index. Pursuant to Rule 11.16, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day’s closing extraordinary market volatility in individual securities. 6 See Securities Exchange Act Release No. 85623 (April 11, 2019), 84 FR 16086 (April 17, 2019). 7 See Securities Exchange Act Release No. 85667 (April 16, 2019), 84 FR 16736 (April 22, 2019) (SR– CboeEDGX–2019–023). 8 See Securities Exchange Act Release No. 87339 (October 17, 2019), 84 FR 56882 (October 23, 2019) (SR–CboeEDGX–2019–061). 9 See Securities Exchange Act Release No. 90147 (October 9, 2020), 85 FR 65453 (October 15, 2020) (SR–CboeEDGX–2020–047). 10 See Securities Exchange Act Release No. 93353 (October 15, 2021), 86 FR 58349 (October 21, 2021) (SR–CboeEDGX–2021–046). 11 See Securities Exchange Act Release No. 67090 (May 31, 2012), 77 FR 33531 (June 6, 2012) (SR– BATS–2011–038; SR–BYX–2011–025; SR–BX– 2011–068; SR–CBOE–2011–087; SR–C2–2011–024; SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX– 2011–30; SR–FINRA–2011–054; SR–ISE–2011–61; SR–NASDAQ–2011–131; SR–NSX–2011–11; SR– NYSE–2011–48; SR–NYSEAmex–2011–73; SR– NYSEArca–2011–68; SR–Phlx–2011–129) (‘‘MWCB Approval Order’’). PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt market-wide trading. A market decline that triggers a Level 3 halt, at any time during the trading day, would halt market-wide trading for the remainder of the trading day. In the Spring of 2020, at the outset of the worldwide COVID–19 pandemic, U.S. equities markets experienced four MWCB Level 1 halts, on March 9, 12, 16, and 18, 2020. In each instance, the markets halted as intended upon a 7% drop in the S&P 500 Index, and resumed as intended 15 minutes later. In response to these events, the previously-convened MWCB Taskforce (‘‘Taskforce’’) reviewed the March 2020 halts and considered whether any immediate changes to the MWCB mechanism should be made. The Taskforce, consisting of representatives from equities exchanges, futures exchanges, FINRA, broker-dealers, and other market participants, had been assembled in early 2020 to consider more generally potential changes to the MWCB mechanism. The Taskforce held ten meetings in the Spring and Summer of 2020 that were attended by Commission staff to consider, among other things: (1) Whether to retain the S&P 500 Index as the standard for measuring market declines; (2) whether halts that occur shortly after the 9:30 a.m. market open cause more harm than good; and (3) what additional testing of the MWCB mechanism should be done. After considering data and anecdotal reports of market participants’ experiences during the March 2020 MWCB events, the Taskforce did not recommend immediate changes be made to the use of the S&P 500 Index as the reference price against which market declines are measured, or to the current MWCB mechanism which permits halts even shortly after the 9:30 a.m. market open. The Taskforce recommended creating a process for a backup reference price in the event that the S&P 500 Index becomes unavailable, and enhancing functional MWCB testing. The Taskforce also asked 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%. On September 17, 2020, the Director of the Division of Trading and Markets requested that the equities exchanges and FINRA prepare a more complete E:\FR\FM\24MRN1.SGM 24MRN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices study of the design and operation of the MWCB mechanism 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’’).12 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.13 The SROs have since worked on a proposed a rule change to make the Pilot Rules permanent, consistent with the Working Group’s recommendations. 12 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_ MarketWide_Circuit_Breaker_Working_Group.pdf. 13 See id. at 46. VerDate Sep<11>2014 17:39 Mar 23, 2022 Jkt 256001 New York Stock Exchange (‘‘NYSE’’) filed such proposed rule change on July 16, 2021.14 On August 27, 2021, the Commission extended its time to consider the proposed rule change to October 20, 2021.15 On September 30, 2021, the Commission initiated proceedings to determine whether to approve or disapprove the proposed rule change.16 On January 7, 2022, the Commission extended its time to approve or disapprove the proposed rule change by an additional 60 days, to March 19, 2022.17 The Exchange now proposes to extend the expiration date of the Pilot 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,18 in general, and furthers the objectives of Section 6(b)(5) of the Act,19 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest. The market-wide circuit breaker mechanism under Rule 11.16 is an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. Extending the market-wide circuit breaker pilot for an additional month 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 work 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 the MWCB under Rule 11.16 should continue on a pilot basis 14 See Securities Exchange Act Release No. 92428 (July 16, 2021), 86 FR 38776 (July 22, 2021) (SR– NYSE–2021–40) (the ‘‘NYSE Proposal’’). 15 See Securities Exchange Act Release No. 92785A (August 27, 2021), 86 FR 50202 (September 7, 2021) (SR–NYSE–2021–40). 16 See Securities Exchange Act Release No. 93212 (September 30, 2021), 86 FR 55066 (October 5, 2021) (SR–NYSE–2021–40). 17 See Securities Exchange Act Release No. 93933 (January 7, 2022), 87 FR 2189 (January 13, 2022) (SR–NYSE–2021–40). 18 15 U.S.C. 78f(b). 19 15 U.S.C. 78f(b)(5). PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 16807 because the MWCB will promote fair and orderly markets, and protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition 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. 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. 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 21 E:\FR\FM\24MRN1.SGM 24MRN1 16808 Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices 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.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. 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: khammond on DSKJM1Z7X2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeEDGX–2022–019 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–CboeEDGX–2022–019. 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 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). VerDate Sep<11>2014 17:39 Mar 23, 2022 Jkt 256001 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–CboeEDGX–2022– 019 and should be submitted on or before April 14, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2022–06183 Filed 3–23–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–94475; File No. SR– NYSEArca–2021–67] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the One River Carbon Neutral Bitcoin Trust Under NYSE Arca Rule 8.201–E March 18, 2022. On September 20, 2021, NYSE Arca, Inc. (‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares of the One River Carbon Neutral Bitcoin Trust under NYSE Arca Rule 8.201–E (Commodity17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 25 1 15 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 Based Trust Shares). The proposed rule change was published for comment in the Federal Register on October 5, 2021.3 On November 10, 2021, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On December 21, 2021, the Commission instituted proceedings under Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change.7 Section 19(b)(2) of the Act 8 provides that, after initiating proceedings, the Commission shall issue an order approving or disapproving the proposed rule change not later than 180 days after the date of publication of notice of filing of the proposed rule change. The Commission may extend the period for issuing an order approving or disapproving the proposed rule change, however, by not more than 60 days if the Commission determines that a longer period is appropriate and publishes the reasons for such determination. The proposed rule change was published for comment in the Federal Register on October 5, 2021.9 The 180th day after publication of the proposed rule change is April 3, 2022. The Commission is extending the time period for approving or disapproving the proposed rule change for an additional 60 days. The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised in the comments that have been submitted in connection therewith. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,10 designates June 2, 2022, as the date by which the Commission shall either approve or disapprove the proposed rule change (File No. SR–NYSEArca–2021–67). 3 See Securities Exchange Act Release No. 93171 (Sept. 29, 2021), 86 FR 55073. Comments on the proposed rule change can be found at: https:// www.sec.gov/comments/sr-nysearca-2021-67/ srnysearca202167.htm. 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 93553, 86 FR 64276 (Nov. 17, 2021). 6 15 U.S.C. 78s(b)(2)(B). 7 See Securities Exchange Act Release No. 93840, 86 FR 73826 (Dec. 28, 2021). 8 15 U.S.C. 78s(b)(2). 9 See supra note 3. 10 15 U.S.C. 78s(b)(2). E:\FR\FM\24MRN1.SGM 24MRN1

Agencies

[Federal Register Volume 87, Number 57 (Thursday, March 24, 2022)]
[Notices]
[Pages 16805-16808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06183]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94462; File No. SR-CboeEDGX-2022-019]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule 
11.16 to April 18, 2022

March 18, 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 EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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

[[Page 16806]]

by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    Cboe EDGX Exchange, Inc. (``EDGX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposal to extend the pilot related to the market-wide circuit breaker 
in Rule 11.16 to April 18, 2022. 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/options/regulation/rule_filings/edgx/), 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
    EDGX Rules 11.16(a) through (d), (f) and (g) describe the 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility, i.e., market-wide circuit breakers. 
The market-wide circuit breaker (``MWCB'') mechanism was approved by 
the Commission to operate on a pilot basis, the term of which was to 
coincide with the pilot period for the Plan to Address Extraordinary 
Market Volatility Pursuant to Rule 608 of Regulation NMS (the ``LULD 
Plan''),\5\ including any extensions to the pilot period for the LULD 
Plan. In April 2019, the Commission approved an amendment to the LULD 
Plan for it to operate on a permanent, rather than pilot, basis.\6\ In 
light of the proposal to make the LULD Plan permanent, the Exchange 
amended Rule 11.16 to untie the pilot's effectiveness from that of the 
LULD Plan and to extend the pilot's effectiveness to the close of 
business on October 18, 2019.\7\ The Exchange subsequently amended Rule 
11.16 to extend the pilot's effectiveness to October 18, 2020,\8\ 
October 18, 2021,\9\ and March 18, 2022.\10\ The Exchange now proposes 
to amend Rule 11.16 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 11.16.
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    \5\ 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.
    \6\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019).
    \7\ See Securities Exchange Act Release No. 85667 (April 16, 
2019), 84 FR 16736 (April 22, 2019) (SR-CboeEDGX-2019-023).
    \8\ See Securities Exchange Act Release No. 87339 (October 17, 
2019), 84 FR 56882 (October 23, 2019) (SR-CboeEDGX-2019-061).
    \9\ See Securities Exchange Act Release No. 90147 (October 9, 
2020), 85 FR 65453 (October 15, 2020) (SR-CboeEDGX-2020-047).
    \10\ See Securities Exchange Act Release No. 93353 (October 15, 
2021), 86 FR 58349 (October 21, 2021) (SR-CboeEDGX-2021-046).
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    The market-wide circuit breaker under Rule 11.16 provides an 
important, automatic mechanism that is invoked to promote stability and 
investor confidence during a period of significant stress when 
securities markets experience extreme broad-based declines. All U.S. 
equity exchanges and FINRA adopted uniform rules on a pilot basis 
relating to market-wide circuit breakers in 2012 (``MWCB Rules''), 
which are designed to slow the effects of extreme price movement 
through coordinated trading halts across securities markets when severe 
price declines reach levels that may exhaust market liquidity.\11\ 
Market-wide circuit breakers provide for trading halts in all equities 
and options markets during a severe market decline as measured by a 
single-day decline in the S&P 500 Index.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-038; SR-BYX-2011-
025; SR-BX-2011-068; SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-
30; SR-EDGA-2011-31; SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-
2011-61; SR-NASDAQ-2011-131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-
NYSEAmex-2011-73; SR-NYSEArca-2011-68; SR-Phlx-2011-129) (``MWCB 
Approval Order'').
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    Pursuant to Rule 11.16, a market-wide trading halt will be 
triggered if the S&P 500 Index declines in price by specified 
percentages from the prior day's closing price of that index. 
Currently, the triggers are set at three circuit breaker thresholds: 7% 
(Level 1), 13% (Level 2), and 20% (Level 3). A market decline that 
triggers a Level 1 or Level 2 halt after 9:30 a.m. ET and before 3:25 
p.m. ET would halt market-wide trading for 15 minutes, while a similar 
market decline at or after 3:25 p.m. ET would not halt market-wide 
trading. A market decline that triggers a Level 3 halt, at any time 
during the trading day, would halt market-wide trading for the 
remainder of the trading day.
    In the Spring of 2020, at the outset of the worldwide COVID-19 
pandemic, U.S. equities markets experienced four MWCB Level 1 halts, on 
March 9, 12, 16, and 18, 2020. In each instance, the markets halted as 
intended upon a 7% drop in the S&P 500 Index, and resumed as intended 
15 minutes later.
    In response to these events, the previously-convened MWCB Taskforce 
(``Taskforce'') reviewed the March 2020 halts and considered whether 
any immediate changes to the MWCB mechanism should be made. The 
Taskforce, consisting of representatives from equities exchanges, 
futures exchanges, FINRA, broker-dealers, and other market 
participants, had been assembled in early 2020 to consider more 
generally potential changes to the MWCB mechanism. The Taskforce held 
ten meetings in the Spring and Summer of 2020 that were attended by 
Commission staff to consider, among other things: (1) Whether to retain 
the S&P 500 Index as the standard for measuring market declines; (2) 
whether halts that occur shortly after the 9:30 a.m. market open cause 
more harm than good; and (3) what additional testing of the MWCB 
mechanism should be done.
    After considering data and anecdotal reports of market 
participants' experiences during the March 2020 MWCB events, the 
Taskforce did not recommend immediate changes be made to the use of the 
S&P 500 Index as the reference price against which market declines are 
measured, or to the current MWCB mechanism which permits halts even 
shortly after the 9:30 a.m. market open. The Taskforce recommended 
creating a process for a backup reference price in the event that the 
S&P 500 Index becomes unavailable, and enhancing functional MWCB 
testing. The Taskforce also asked 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%.
    On September 17, 2020, the Director of the Division of Trading and 
Markets requested that the equities exchanges and FINRA prepare a more 
complete

[[Page 16807]]

study of the design and operation of the MWCB mechanism 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'').\12\ 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.\13\
---------------------------------------------------------------------------

    \12\ 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_MarketWide_Circuit_Breaker_Working_Group.pdf.
    \13\ See id. at 46.
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    The SROs have since worked on a proposed a rule change to make the 
Pilot Rules permanent, consistent with the Working Group's 
recommendations. New York Stock Exchange (``NYSE'') filed such proposed 
rule change on July 16, 2021.\14\ On August 27, 2021, the Commission 
extended its time to consider the proposed rule change to October 20, 
2021.\15\ On September 30, 2021, the Commission initiated proceedings 
to determine whether to approve or disapprove the proposed rule 
change.\16\ On January 7, 2022, the Commission extended its time to 
approve or disapprove the proposed rule change by an additional 60 
days, to March 19, 2022.\17\ The Exchange now proposes to extend the 
expiration date of the Pilot Rules to the end of business on April 18, 
2022.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 92428 (July 16, 
2021), 86 FR 38776 (July 22, 2021) (SR-NYSE-2021-40) (the ``NYSE 
Proposal'').
    \15\ See Securities Exchange Act Release No. 92785A (August 27, 
2021), 86 FR 50202 (September 7, 2021) (SR-NYSE-2021-40).
    \16\ See Securities Exchange Act Release No. 93212 (September 
30, 2021), 86 FR 55066 (October 5, 2021) (SR-NYSE-2021-40).
    \17\ 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,\18\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\19\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest. The market-wide circuit breaker mechanism under Rule 11.16 is 
an important, automatic mechanism that is invoked to promote stability 
and investor confidence during a period of significant stress when 
securities markets experience extreme broad-based declines. Extending 
the market-wide circuit breaker pilot for an additional month 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 work to make the Pilot Rules permanent.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed rule change promotes 
just and equitable principles of trade in that it promotes transparency 
and uniformity across markets concerning when and how to halt trading 
in all stocks as a result of extraordinary market volatility. Based on 
the foregoing, the Exchange believes the benefits to market 
participants from the MWCB under Rule 11.16 should continue on a pilot 
basis because the MWCB will promote fair and orderly markets, and 
protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    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.

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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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.

[[Page 16808]]

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.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \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).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

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-CboeEDGX-2022-019 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-CboeEDGX-2022-019. 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-CboeEDGX-2022-
019 and should be submitted on or before April 14, 2022.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06183 Filed 3-23-22; 8:45 am]
BILLING CODE 8011-01-P
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