[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5506-5508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02903]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85142; File No. SR-CboeBZX-2019-008]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify
That BZX's Halt Auction Process Is Applicable Only To Halt Auctions
Following a Regulatory Halt
February 14, 2019.
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 February 5, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I 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 BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to clarify that BZX's Halt Auction process is
applicable only to Halt Auctions following a Regulatory Halt. The text
of the proposed rule change is attached [sic] as Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to clarify that BZX's
Halt Auction process is applicable only to Halt Auctions following a
Regulatory Halt such as a material news halt, a trading halt following
the initiation of the market wide circuit breaker mechanism, or a
Trading Pause initiated pursuant to the Plan to Address Extraordinary
Market Volatility--i.e., the ``Limit Up-Limit Down'' or ``LULD'' Plan.
On December 21, 2108, the Exchange filed a proposed rule change to
amend the process for re-opening BZX listed securities following a
Regulatory Halt.\5\ Specifically, the Exchange amended BZX Rule
11.23(d) to provide for a measured and transparent process for re-
opening BZX listed securities after a Non-LULD
[[Page 5507]]
Regulatory Halt that mirrors the Halt Auction process already used by
the Exchange following a Trading Pause initiated pursuant to the LULD
Plan. As part of that rule filing, which became operative on January
20, 2019, the Exchange differentiated for the first time between the
process to be used for Halt Auctions following a Regulatory Halt and
the process that would continue to be used for IPO Auctions and Halt
Auctions following a Non-Regulatory Halt. In practice, however, Halt
Auctions are not conducted in situations where the Exchange has
determined to re-open trading in BZX listed securities following a Non-
Regulatory Halt. In such rare instances where the Exchange suspends
trading for non-regulatory reasons, such as due to a technical or
systems issue that is limited to trading on BZX, the Exchange re-opens
trading without an auction.
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\5\ See Securities Exchange Act Release No. 34-84927 (December
21, 2018), 83 FR 67768 (December 31, 2018) (SR-CboeBZX-2018-090).
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The Exchange therefore proposes to amend its rules to eliminate
mistaken references to Halt Auctions following a Non-Regulatory Halt,
as described herein. First, BZX Rule 11.23(d) provides that the
Exchange will conduct an IPO Auction or Halt Auction for trading in a
BZX listed security in an IPO or following a trading halt in that
security. The Exchange proposes to amend this rule to instead provide
that BZX Rule 11.23(d) applies to trading in a BZX listed security in
an IPO or following a Regulatory Halt in that security. The Exchange
believes that specifying in BZX Rule 11.23(d) that the Halt Auction
process applies specifically to Regulatory Halts, rather than the more
generic trading halt, would reduce potential confusion about when a
Halt Auction is initiated. Second, the Exchange proposes to amend
portions of BZX Rules 11.23(d)(2)(B) and (E) to remove incorrect
references to Halt Auctions following a Non-Regulatory Halt. As
proposed, BZX rule 11.23(d)(2)(B) would be amended to provide that this
paragraph describes the process for extending the Quote-Only Period for
IPO Auctions. In addition, BZX rule 11.23(d)(2)(B)(ii) would be amended
to remove the reference to IPO Auctions in that subsection since all of
BZX Rule 11.23(d)(2)(B) would be limited to such auctions. Furthermore,
BZX Rule 11.23(d)(2)(E) would be amended to provide that, for IPO
Auctions only, rather than IPO Auctions and Halt Auctions following a
Non-Regulatory Halt, orders will be executed at the price level within
the Collar Price Range that maximizes the number of shares executed in
the auction. These changes would properly reflect the current operation
of the Exchange by stating that certain functionality applies
specifically to IPO Auctions, rather than to both IPO Auctions and Halt
Auctions following a Non-Regulatory Halt.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Act,\6\ in general, and Section
6(b)(5) of the Act,\7\ in particular, in that it is designed to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, to promote just and equitable principles of
trade, and, in general, to protect investors and the public interest
and not to permit unfair discrimination between customers, issuers,
brokers, or dealers. Specifically, the Exchange believes that the
proposed rule change is consistent with the protection of investors and
the public interest as it is designed to increase transparency around
the operation of Halt Auctions in BZX listed securities.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange recently filed a proposed rule change to amend its
Halt Auction process used to re-open BZX listed securities following a
Regulatory Halt. The amended rules, which became operative on January
20, 2019, suggest that the Exchange's Halt Auction process is used to
re-open securities following either a Regulatory Halt or a Non-
Regulatory Halt. While the substance of that proposed rule change to
amend the process for re-opening BZX listed securities following a Non-
LULD Regulatory Halt is accurate, the changes that referenced Halt
Auctions following a Non-Regulatory Halt were made in error as the
Exchange only uses the Halt Auction process to re-open trading in BZX
listed securities following a Regulatory Halt. Since a Halt Auction is
unnecessary to pool liquidity following a Non-Regulatory Halt, and
indeed could be disruptive where continuous trading has continued on
other equities markets, the Exchange does not use its auction process
following such halts. Instead, the Exchange immediately transitions
into continuous trading by entering remaining orders into the BZX Book
after the halt is ended and trading can resume. The proposed rule
change would correct BZX Rule 11.23(d) to specify that Halt Auctions
are only initiated after a Regulatory Halt, and make related changes,
such as eliminating incorrect references to Halt Auctions following a
Non-Regulatory Halt. The proposed amendments to the Halt Auction rules
would therefore serve to ensure that the Exchange's rules are clear and
accurate. No changes to the Exchange's systems or procedures are
contemplated by this proposed rule change.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
designed to correct erroneous references in BZX Rule 11.23(d) to Halt
Auctions following a Non-Regulatory Halt, and clarify that BZX's Halt
Auction process is applicable only to Halt Auctions following a
Regulatory Halt. As a result, the Exchange believes that the proposed
rule change will have no impact on competition but will rather serve to
reduce potential confusion about when a Halt Auction is initiated.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No comments were solicited or received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \10\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked
[[Page 5508]]
the Commission to waive the 30-day operative delay so that the proposal
may become operative upon filing. The Exchange states that waiver of
the 30-day operative delay would allow the Exchange to immediately
amend its rules to correct an error, thereby increasing transparency
around the Exchange's use of the Halt Auction and ensuring that members
and investors are appropriately apprised of the fact that this auction
is limited to the resumption of trading following a Regulatory Halt, as
has always been its practice. For these reasons, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\12\
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings 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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2019-008 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBZX-2019-008. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://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-CboeBZX-2019-008 and should be submitted
on or before March 14, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02903 Filed 2-20-19; 8:45 am]
BILLING CODE 8011-01-P