[Federal Register Volume 84, Number 71 (Friday, April 12, 2019)]
[Notices]
[Pages 15009-15011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07239]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85542; File No. SR-CboeBYX-2019-003]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Current Pilot Program Related to BYX Rule 11.17, Clearly Erroneous 
Executions

April 8, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 2, 2019, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'') 
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 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 BYX Exchange, Inc. (``BYX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to extend the current pilot program related to BYX 
Rule 11.17, Clearly Erroneous Executions, to the close of business on 
October 18, 2019 The text of the proposed rule change is attached as 
Exhibit 5. [sic]
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/byx/), 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 extend the current 
pilot program related to BYX Rule 11.17, 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.\5\
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    \5\ 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 October 4, 2010, the Exchange filed an immediately effective 
filing to make a number of changes to BYX rules to bring those rules up 
to date with the changes that had been made to the rules of the 
Exchange's affiliate, BATS Exchange, Inc. (n/k/a Cboe BZX Exchange, 
Inc.), while BYX's Form 1 application to register as a national 
security exchange was pending approval. Such changes included changes 
made, on a pilot basis, to BYX Rule 11.17, that, among other things: 
(i) Provided for uniform treatment of clearly 
erroneous[thinsp]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.\6\ In 
2013, the Exchange adopted a provision designed to address the 
operation of the Plan.\7\ 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 ended according to 
the primary listing market.\8\ These changes are currently scheduled to 
operate for a pilot period that coincides with the pilot period for the 
Limit Up-Limit Down Plan,\9\ including any extensions to the pilot 
period for the Plan.\10\
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    \6\ See Securities Exchange Act Release No. 63097 (Oct. 13, 
2010), 75 FR 64767 (Oct. 20, 2010) (SR-BYX-2010-002).
    \7\ See Securities Exchange Act Release No. 68798 (Jan. 31, 
2013), 78 FR 8628 (Feb. 6, 2013) (SR-BYX-2013-005).
    \8\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-BYX-2014-007).
    \9\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \10\ See Securities Exchange Act Release No. 71796 (March 25, 
2014), 79 FR 18099 (March 31, 2014) (SR-BYX-2014-003).
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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 BYX Rule 11.17 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.\11\ In such an event, the remaining 
sections of BYX Rule 11.17 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 BYX Rule 11.17.
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    \11\ See supra notes 6-8. The prior versions of paragraphs (c), 
(e)(2), (f), and (g) in effect before the 2010 changes to the rule 
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 BYX Rule 
11.17. 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

[[Page 15010]]

additional changes should also be made to the operation of the clearly 
erroneous execution rules. Extending the effectiveness of BYX Rule 
11.17 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,\12\ in general, and 
Section 6(b)(5) of the Act,\13\ 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 BYX Rule 11.17 
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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    \12\ 15 U.S.C. 78f(b).
    \13\ 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 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 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 \14\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-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 under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \17\ 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 and designates the 
proposed rule change as operative upon filing.\18\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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

     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-CboeBYX-2019-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBYX-2019-003. 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

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available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
CboeBYX-2019-003 and should be submitted on or before May 3, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07239 Filed 4-11-19; 8:45 am]
 BILLING CODE 8011-01-P