Self-Regulatory Organizations; Cboe EDGA 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, 16775-16778 [2022-06184]
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Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices
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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–NYSE–2022–13 and should
be submitted on or before April 14,
2022.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.7 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,8 which requires that
the rules of an exchange be designed to
promote just and equitable principles of
trade, to remove impediments and to
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
Commission also believes that the
proposal is consistent with Sections
6(b)(1) and 6(b)(6) of the Act 9 which
require that the rules of an exchange
enforce compliance with, and provide
appropriate discipline for, violations of
Commission and Exchange rules.
Finally, the Commission finds that the
proposal is consistent with the public
interest, the protection of investors, or
otherwise in furtherance of the purposes
of the Act, as required by Rule 19d–
1(c)(2) under the Act,10 which governs
minor rule violation plans.
As stated above, the Exchange
proposes certain amendments to the
preamble of Rule 9217. Specifically, the
Exchange proposes to add two
additional paragraphs to the preamble
based on the preamble of NYSE Arca, its
affiliate exchange, add clarifying
language regarding the maximum fine
amount for violations appropriate for
disposition under Rule 9216(b), and
reorder the paragraphs to the preamble
of Rule 9217. The Commission believes
that Rule 9217 is an effective way to
discipline a member for a minor
violation of a rule. The Commission
finds that the Exchange’s proposal to
amend the preamble is consistent with
7 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
9 15 U.S.C. 78f(b)(1) and 78f(b)(6).
10 17 CFR 240.19d–1(c)(2).
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the Act because it may help the
Exchange’s ability to better carry out its
oversight and enforcement
responsibilities. The Commission also
believes that the Exchange’s proposal to
add clarifying language regarding the
maximum fine amount for violations
appropriate for disposition under Rule
9216(b) and to reorder the paragraphs in
the preamble is consistent with the Act
because such changes will add clarity
and accuracy to the Exchange’s rules.
In approving the propose rule change,
the Commission in no way minimizes
the importance of compliance with the
Exchange’s rules and all other rules
subject to fines under Rule 9217. The
Commission believes that a violation of
any self-regulatory organization’s rules,
as well as Commission rules, is a serious
matter. However, Rules 9216(b) and
9217 provide a reasonable means of
addressing rule violations that may not
rise to the level of requiring formal
disciplinary proceedings, while
providing greater flexibility in handling
certain violations. The Commission
expects that the Exchange will continue
to conduct surveillance with due
diligence and make a determination
based on its findings, on a case-by-case
basis, whether a fine of more or less
than the recommended amount is
appropriate for a violation under Rule
9217 or whether a violation requires
formal disciplinary action.
For the same reasons discussed above,
the Commission finds good cause,
pursuant to Section 19(b)(2) of the
Act,11 for approving the proposed rule
change prior to the thirtieth day after
the date of publication of the notice of
the filing thereof in the Federal
Register. The proposal will assist the
Exchange in preventing fraudulent and
manipulative practices by allowing the
Exchange to adequately enforce
compliance with, and provide
appropriate discipline for, violations of
Exchange rules. Accordingly, the
Commission believes that a full noticeand-comment period is not necessary
before approving the proposal.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 12 and Rule
19d–1(c)(2) thereunder,13 that the
proposed rule change (SR–NYSE–2022–
13) be, and hereby is, approved on an
accelerated basis.
11 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
13 17 CFR 240.19d–1(c)(2).
14 17 CFR 200.30–3(a)(12).
12 15
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16775
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–06188 Filed 3–23–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94463; File No. SR–
CboeEDGA–2022–006]
Self-Regulatory Organizations; Cboe
EDGA 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 EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGA Exchange, Inc. (‘‘EDGA’’
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/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1
2
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Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
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
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1. Purpose
EDGA 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 October 18, 2020,8
October 18, 2021,9 and March 18,
2022.10 The Exchange now proposes to
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. 85668
(April 16, 2019), 84 FR 16743 (April 22, 2019) (SR–
CboeEDGA–2019–006).
8 See Securities Exchange Act Release No. 87335
(October 17, 2019), 84 FR 56858 (October 23, 2019)
(SR–CboeEDGA–2019–016)
9 See Securities Exchange Act Release No. 90127
(October 8, 2020), 85 FR 65085 (October 14, 2020)
(SR–CboeEDGA–2020–026).
10 See Securities Exchange Act Release No. 93366
(October 15, 2021), 86 FR 58330 (October 21, 2021)
(SR–CboeEDGA–2021–023).
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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
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
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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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
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
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.
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Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices
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.
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.
See id. at 46.
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).
13
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14
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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.
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.
18
19
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15 U.S.C. 78f(b).
15 U.S.C. 78f(b)(5).
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16777
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
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
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).
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).
20
21
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Federal Register / Vol. 87, No. 57 / Thursday, March 24, 2022 / Notices
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 rule-comments@
sec.gov. Please include File Number SR–
CboeEDGA–2022–006 on the subject
line.
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Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeEDGA–2022–006. 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–CboeEDGA–2022–
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17:39 Mar 23, 2022
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006 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. 2022–06184 Filed 3–23–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94471; File No. SR–
NASDAQ–2022–015]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of Longer Period for
Commission Action on Proposed Rule
Change To Exempt Non-Convertible
Bonds Listed Under Rule 5702 From
Certain Corporate Governance
Requirements
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates May 24, 2022, as the date by
which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NASDAQ–2022–015).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–06191 Filed 3–23–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94470; File No. SR–
CboeEDGX–2021–052]
March 18, 2022.
On February 4, 2022, The Nasdaq
Stock Market LLC (‘‘Exchange’’) 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 exempt non-convertible bonds
listed under Rule 5702 from certain
corporate governance requirements. The
proposed rule change was published for
comment in the Federal Register on
February 23, 2022.3 The Commission
has received no comments on the
proposal.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is April 9, 2022.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend Rule
25.3, Which Governs the Exchange’s
Minor Rule Violation Plan, in
Connection With Certain Minor Rule
Violations and Applicable Fines
March 18, 2022.
I. Introduction
On December 6, 2021, Cboe EDGX
Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGX’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) 1 of the Securities
Exchange Act of 1934 (‘‘Act’’) 2 and Rule
19b–4 thereunder,3 a proposed rule
change to amend Rule 25.3, which
governs the Exchange’s Minor Rule
Violation Plan (‘‘MRVP’’), in connection
with certain minor rule violations and
applicable fines. The proposed rule
change was published for comment in
the Federal Register on December 23,
2021.4 On February 3, 2022, the
Commission extended the time period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
5 15
17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 94265
(February 16, 2022), 87 FR 10265.
4 15 U.S.C. 78s(b)(2).
25
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 93815
(December 17, 2021), 86 FR 73029.
6 17
E:\FR\FM\24MRN1.SGM
24MRN1
]]>Agencies
[Federal Register Volume 87, Number 57 (Thursday, March 24, 2022)]
[Notices]
[Pages 16775-16778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06184]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94463; File No. SR-CboeEDGA-2022-006]
Self-Regulatory Organizations; Cboe EDGA 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 EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGA Exchange, Inc. (``EDGA'' 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/equities/regulation/rule_filings/edga/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
[[Page 16776]]
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
EDGA 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 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. 85668 (April 16,
2019), 84 FR 16743 (April 22, 2019) (SR-CboeEDGA-2019-006).
\8\ See Securities Exchange Act Release No. 87335 (October 17,
2019), 84 FR 56858 (October 23, 2019) (SR-CboeEDGA-2019-016)
\9\ See Securities Exchange Act Release No. 90127 (October 8,
2020), 85 FR 65085 (October 14, 2020) (SR-CboeEDGA-2020-026).
\10\ See Securities Exchange Act Release No. 93366 (October 15,
2021), 86 FR 58330 (October 21, 2021) (SR-CboeEDGA-2021-023).
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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.
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\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 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
[[Page 16777]]
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\
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\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.
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\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.
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\18\ 15 U.S.C. 78f(b).
\19\ 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 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.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6).
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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 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
[[Page 16778]]
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-CboeEDGA-2022-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGA-2022-006. 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-CboeEDGA-2022-
006 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. 2022-06184 Filed 3-23-22; 8:45 am]
BILLING CODE 8011-01-P
