[Federal Register Volume 84, Number 79 (Wednesday, April 24, 2019)]
[Notices]
[Pages 17217-17219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08207]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85689; File No. SR-CboeBZX-2019-028]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Pilot Program Related to BZX Rule 11.18, Trading Halts Due to 
Extraordinary Market Volatility, to the Close of Business on October 
18, 2019

April 18, 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 April 12, 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 extend the pilot program related to BZX Rule 
11.18, Trading Halts Due to Extraordinary Market Volatility, to the 
close of business on October 18, 2019.
    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
    BZX Rules 11.18(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 mechanism was approved by the 
Commission to operate on a pilot basis, the term of which is to 
coincide with the pilot period for the Plan to Address Extraordinary 
Market Volatility Pursuant to Rule 608 of Regulation NMS (the ``LULD 
Plan'' or ``Plan''),\5\ including any extensions to the pilot period 
for the Plan. The Commission published an amendment to the LULD Plan 
for it to operate on a permanent, rather than

[[Page 17218]]

pilot, basis on December 18, 2018,\6\ and the Commission approved that 
amendment on April 11, 2019.\7\
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    \5\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \6\ See Securities Exchange Act Release No. 84843 (December 18, 
2018), 83 FR 66464 (December 26, 2018) (Amendment No. 18 Proposing 
Release).
    \7\ See Securities Exchange Act Release No. 85623 (April 11, 
2018) (Federal Register publication pending) (Amendment No. 18 
Approval Order).
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    Market-wide circuit breakers 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. equities exchanges 
have similar rules related 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 markets 
during a severe market decline as measured by a single-day decline in 
the S&P 500 Index.
    Pursuant to BZX Rule 11.18, 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 proposes to 
amend BZX Rule 11.18 to untie the market-wide circuit breaker pilot 
program's effectiveness from that of the LULD Plan and to extend the 
pilot's effectiveness to the close of business on October 18, 2019.
    In addition, the Exchange proposes to amend BZX Rule 11.18 such 
that the pilot only applies to the provisions of paragraphs (a) through 
(d), (f) and (g) of BZX Rule 11.18--i.e., the provisions related to the 
market-wide circuit breaker mechanism, and not paragraph (e), which 
discusses provisions implementing the LULD Plan.\8\ The Exchange is 
required by the LULD Plan to establish, maintain, and enforce written 
policies and procedures that are reasonably designed to comply with the 
limit up-limit down and trading pause requirements specified in the 
Plan. BZX Rule 11.18(e) states that the Exchange is a Participant in 
the LULD Plan, and requires that members comply with the provisions of 
the Plan. Furthermore, BZX Rule 11.18(e) describes order handling 
performed by the Exchange to maintain compliance with the LULD Plan. 
Specifically, the rule: (1) Provides that the System shall not display 
or execute buy (sell) interest above (below) the Upper (Lower) Price 
Bands, unless such interest is specifically exempted under the Plan; 
(2) describes how the System re-prices and/or cancels buy (sell) 
interest that is priced or could be executed above (below) the Upper 
(Lower) Price Band; (3) confirms that the Exchange may declare a 
Trading Pause during a Straddle State; and (4) addresses how the 
Exchange would re-open a security following a Trading Pause. With the 
approval of the LULD Plan to operate on a permanent basis, the Exchange 
believes that the provisions of BZX Rule 11.18(e) should similarly be 
permanent, thus ensuring continued compliance with the Plan.
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    \8\ Paragraph (e) of BZX Rule 11.18, which is being made 
permanent, is subject to a pilot coterminous with the LULD Plan 
today.
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    The Exchange intends to file a separate proposed rule change with 
the Commission to operate the provisions of paragraphs (a) through (d), 
(f) and (g) of BZX Rule 11.18 on a permanent, rather than pilot, basis. 
Extending the effectiveness of such provisions 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 on a permanent basis.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\9\ in general, and Section 
6(b)(5) of the Act,\10\ 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    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 when and how to halt trading in 
all stocks as a result of extraordinary market volatility. The Exchange 
believes that extending the market-wide circuit breaker pilot program 
for 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 
program 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 should continue on a pilot basis while the Commission 
considers whether to permanently approve those rules.
    The Exchange also believes that it is consistent with the public 
interest and the protection of investors to make permanent the order 
handling provisions of BZX Rule 11.18. Today, like the market-wide 
circuit breaker rules, those rules are operated under a pilot that 
coincides with the pilot period for the LULD Plan. Unlike the market-
wide circuit breaker rules, however, these rules directly implement the 
requirements of the LULD Plan, including by implementing order handling 
that is consistent with the requirements of the Plan. As such, the 
Exchange believes that it is appropriate to make these rules permanent 
now that the Plan is no longer operating on a pilot basis. Making these 
rules permanent would ensure continued compliance by the Exchange and 
its members with the requirements of the LULD Plan as the Plan 
transitions to permanent status.

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 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 BZX Rule 11.18. The 
Exchange believes that FINRA and other national securities exchange 
will also file similar proposals to extend their respective market-wide 
circuit breaker pilot programs with the Commission so that the market-
wide circuit breaker mechanism may continue uninterrupted while the 
Commission considers whether to approve its operation on a

[[Page 17219]]

permanent basis. Furthermore, the proposed rule change would ensure 
continued compliance with the requirements of the LULD Plan as it 
becomes permanent, which the Exchange believes would not have a 
significant impact on competition.

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) of the Act \11\ and Rule 19b-
4(f)(6) \12\ thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 Commission has waived this requirement.
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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 Exchange 
may implement the proposed rule change immediately. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the Commission 
approved making the Plan pilot permanent on April 11, 2019, and 
therefore the Exchange's proposed changes to its rules reflecting that 
the Plan is now permanent should go into effect immediately. Therefore, 
the Commission hereby waives the 30-day operative delay and designates 
the proposed rule change to be operative upon filing with the 
Commission.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the operative delay for this 
proposal, the Commission 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 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-2019-028 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-2019-028. 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-2019-028 and should be submitted 
on or before May 15, 2019.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-08207 Filed 4-23-19; 8:45 am]
BILLING CODE 8011-01-P