[Federal Register Volume 84, Number 70 (Thursday, April 11, 2019)]
[Notices]
[Pages 14701-14703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07149]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85533; File No. SR-NYSECHX-2019-04]


Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Current Pilot Program Related to Article 20, Rule 10, Handling of 
Clearly Erroneous Transactions

April 5, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on April 3, 2019, the NYSE Chicago, Inc. (``NYSE Chicago'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the current pilot program related 
to Article 20, Rule 10, Handling of Clearly Erroneous Executions, to 
the close of business on October 18, 2019. The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to extend the current 
pilot program related to Article 20, Rule 10, Handling of Clearly 
Erroneous Executions, to the close of business on October 18, 2019. 
This change is being proposed in connection with proposed amendments to 
the Plan to Address Extraordinary Market Volatility (the ``Limit Up-
Limit Down Plan'' or the ``Plan'') that would allow the Plan to 
continue to operate on a permanent basis.\4\
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    \4\ See Securities Exchange Act Release No. 84843 (December 18, 
2018), 83 FR 66464 (December 26, 2018) (File No. 4-631) 
(``Eighteenth Amendment'').
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    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to Rule 10 that, among other things: (i) Provided for uniform 
treatment of clearly erroneous execution reviews in multi-stock events 
involving twenty or more securities; and (ii) reduced the ability of 
the Exchange to deviate from the objective standards set forth in the 
rule.\5\ In 2013, the Exchange adopted a provision designed to address 
the operation of the Plan.\6\ Finally, in 2014, the Exchange adopted 
two additional provisions providing that: (i) A series of transactions 
in a particular security on one or more trading days may be viewed as 
one event if all such transactions were effected based on the same 
fundamentally incorrect or grossly misinterpreted issuance information 
resulting in a severe valuation error for all such transactions; and 
(ii) in the event of any disruption or malfunction in the operation of 
the electronic communications and trading facilities of an Exchange, 
another SRO, or responsible single plan processor in connection with 
the transmittal or receipt of a trading halt, an Officer, acting on his 
or her own motion, shall nullify any transaction that occurs after a 
trading halt has been declared by the primary listing market for a 
security and before such trading halt has officially

[[Page 14702]]

ended according to the primary listing market.\7\ These changes are 
currently scheduled to operate for a pilot period that coincides with 
the pilot period for the Limit Up-Limit Down Plan,\8\ including any 
extensions to the pilot period for the Plan.\9\
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    \5\ See Securities Exchange Act Release No. 62886 (Sept. 10, 
2010), 75 FR 56613 (Sept. 16, 2010) (SR-CHX-2010-13).
    \6\ See Securities Exchange Act Release No. 68802 (Feb. 1, 
2013), 78 FR 9092 (Feb. 7, 2013) (SR-CHX-2013-04).
    \7\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-CHX-2014-06).
    \8\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \9\ See Securities Exchange Act Release No. 71782 (March 24, 
2014), 79 FR 17630 (March 28, 2014) (SR-CHX-2014-04).
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    The Commission recently published the proposed Eighteenth Amendment 
to the Plan to allow the Plan to operate on a permanent, rather than 
pilot, basis. The Exchange proposes to amend Rule 10 to untie the pilot 
program's effectiveness from that of the Plan and to extend the pilot's 
effectiveness to the close of business on October 18, 2019--i.e., six 
months after the expiration of the current pilot period for the Plan. 
If the pilot period is not either extended, replaced or approved as 
permanent, the prior versions of paragraphs (c), (e)(2), (f), and (g) 
shall be in effect, and the provisions of paragraphs (i) through (k) 
shall be null and void.\10\ In such an event, the remaining sections of 
Rule 10 would continue to apply to all transactions executed on the 
Exchange. The Exchange understands that the other national securities 
exchanges and Financial Industry Regulatory Authority (``FINRA'') will 
also file similar proposals to extend their respective clearly 
erroneous execution pilot programs, the substance of which are 
identical to Rule 10.
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    \10\ See supra notes 6-8. The prior versions of paragraphs (c), 
(e)(2), (f), and (g) generally provided greater discretion to the 
Exchange with respect to breaking erroneous trades.
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    The Exchange does not propose any additional changes to Rule 10. 
The Exchange believes the benefits to market participants from the more 
objective clearly erroneous executions rule should continue on a 
limited six month pilot basis after Commission approves the Plan to 
operate on a permanent basis. Assuming the Plan is approved by the 
Commission to operate on a permanent, rather than pilot, basis the 
Exchange intends to assess whether additional changes should also be 
made to the operation of the clearly erroneous execution rules. 
Extending the effectiveness of Rule 10 for an additional six months 
should provide the Exchange and other national securities exchanges 
additional time to consider further amendments to the clearly erroneous 
execution rules in light of the proposed Eighteenth Amendment to the 
Plan.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\11\ in general, and 
Section 6(b)(5) of the Act,\12\ 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. The Exchange believes that the 
proposed rule change promotes just and equitable principles of trade in 
that it promotes transparency and uniformity across markets concerning 
review of transactions as clearly erroneous. The Exchange believes that 
extending the clearly erroneous execution pilot under Rule 10 for an 
additional six months would help assure that the determination of 
whether a clearly erroneous trade has occurred will be based on clear 
and objective criteria, and that the resolution of the incident will 
occur promptly through a transparent process. The proposed rule change 
would also help assure consistent results in handling erroneous trades 
across the U.S. equities markets, thus furthering fair and orderly 
markets, the protection of investors and the public interest. Based on 
the foregoing, the Exchange believes the amended clearly erroneous 
executions rule should continue to be in effect on a pilot basis while 
the Exchange and the other national securities exchanges consider and 
develop a permanent proposal for clearly erroneous execution reviews.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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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 proposal would ensure 
the continued, uninterrupted operation of harmonized clearly erroneous 
execution rules across the U.S. equities markets while the Exchange and 
other national securities exchanges consider further amendments to 
these rules in light of the proposed Eighteenth Amendment to the Plan. 
The Exchange understands that the other national securities exchanges 
and FINRA will also file similar proposals to extend their respective 
clearly erroneous execution pilot programs. Thus, the proposed rule 
change will help to ensure consistency across market centers without 
implicating any competitive issues.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    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) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \16\ 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 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become effective and operative immediately upon filing. 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
it will allow the current clearly erroneous execution pilot program to 
continue uninterrupted, without any changes, while the Exchange and the 
other national securities exchanges consider and develop a permanent 
proposal for clearly erroneous execution reviews. For this reason, the 
Commission hereby waives the 30-day operative delay requirement and 
designates the proposed rule change as operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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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[[Page 14703]]

    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-NYSECHX-2019-04 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-NYSECHX-2019-04. 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-NYSECHX-2019-04 and should be submitted 
on or before May 2, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07149 Filed 4-10-19; 8:45 am]
 BILLING CODE 8011-01-P