[Federal Register Volume 84, Number 72 (Monday, April 15, 2019)]
[Notices]
[Pages 15271-15273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07362]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85578; File No. SR-NASDAQ-2019-027]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Extend the Pilot Related to Rule 4121, Trading Halts Due to
Extraordinary Market Volatility
April 9, 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 8, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
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.
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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 pilot related to Rule 4121,
Trading Halts Due to Extraordinary Market Volatility, to the close of
business on October 18, 2019.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.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 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
Rule 4121 provides a 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 mechanism
under Rule 4121 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''),\3\ including any extensions to the
pilot period for the LULD Plan.\4\ The Commission published an
amendment to the LULD
[[Page 15272]]
Plan for it to operate on a permanent, rather than pilot, basis.\5\
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\3\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
\4\ See Securities Exchange Act Release Nos. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-NASDAQ-2011-131) (Approval
Order); and 68786 (January 31, 2013), 78 FR 8666 (February 6, 2013)
(SR-NASDAQ-2013-021) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change to Delay the Operative Date of a Rule Change
to Nasdaq Rule 4121).
\5\ See Securities Exchange Act Release Nos. 84843 (December 18,
2018), 83 FR 66464 (December 26, 2018) (Amendment No. 18 Proposing
Release).
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The Exchange proposes to amend Rule 4121 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. The
Exchange does not propose any additional changes to Rule 4121.
Market-wide circuit breakers under Rule 4121 provide 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 have rules relating to market-wide circuit breakers, 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. 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 4121, 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 circuit breaker 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 circuit breaker, at any time during the
trading day, would halt market-wide trading for the remainder of the
trading day.
The Exchange intends to file a separate proposed rule change to
operate Rule 4121 on a permanent, rather than pilot, basis. Extending
the effectiveness of Rule 4121 to the close of business on October 18,
2019 should provide the Commission adequate time to consider whether to
approve the Exchange's separate proposal to operate the market-wide
circuit breaker mechanism under Rule 4121 on a permanent basis.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\7\ 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 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. Extending
the market-wide circuit breaker pilot under Rule 4121 an additional six
months would ensure the continued, uninterrupted operation of a
consistent mechanism to halt trading across the U.S. markets while the
Commission considers whether to approve the pilot on a permanent basis.
The proposed rule change would thus promote fair and orderly markets
and the protection of investors and the public interest. Based on the
foregoing, the Exchange believes the benefits to market participants
from the market-wide circuit breaker mechanism under Rule 4121 should
continue on a pilot basis while the Commission considers whether to
permanently approve Rule 4121.
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\6\ 15 U.S.C. 78f(b).
\7\ 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
implicates any competitive issues because the proposal would ensure the
continued, uninterrupted operation of a consistent mechanism to halt
trading across the U.S. markets while the Commission considers whether
to permanently approve the market-wide circuit breaker mechanism under
Rule 4121. 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 so that the market-wide
circuit breaker mechanism may continue uninterrupted while the
Commission considers whether to approve its operation on a permanent
basis.
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.
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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission may
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 proposal
may become operative upon filing. Extending the pilot for an additional
six months will allow the uninterrupted operation of the existing pilot
to halt trading across the U.S. markets while the Commission considers
whether to approve the pilot on a permanent basis. The extension simply
maintains the status quo. Therefore, the Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest. The Commission hereby designates the
proposed rule change to be operative upon filing.\12\
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\10\ Id.
\11\ 17 CFR 240.19b-4(f)(g)(iii).
\12\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission 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.
[[Page 15273]]
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-NASDAQ-2019-027 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-NASDAQ-2019-027. 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-NASDAQ-2019-027, and should be submitted
on or before May 6, 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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07362 Filed 4-12-19; 8:45 am]
BILLING CODE 8011-01-P