[Federal Register Volume 84, Number 181 (Wednesday, September 18, 2019)]
[Notices]
[Pages 49141-49142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20150]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86944; File No. SR-NASDAQ-2019-072]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Extend the Pilot Related to the Market-Wide Circuit Breaker in Rule
4121
September 12, 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 September 5, 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, II, and III, 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 the market-
wide circuit breaker in Rule 4121.
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
(``MWCB'') mechanism under Rule 4121 was approved by the Commission to
operate on a pilot basis,\3\ 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''),\4\
including any extensions to the pilot period for the LULD Plan.\5\ The
Commission recently approved an amendment to the LULD Plan for it to
operate on a permanent, rather than pilot, basis.\6\ In light of the
proposal to make the LULD Plan permanent, the Exchange amended 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.\7\
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\3\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-NASDAQ-2011-131).
\4\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a
mechanism to address extraordinary market volatility in individual
securities.
\5\ 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).
\6\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019).
\7\ See Securities Exchange Act Release No. 85578 (April 9,
2019), 84 FR 15271 (April 15, 2019) (SR-NASDAQ-2019-027).
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The Exchange now proposes to amend Rule 4121 to extend the pilot to
the close of business on October 18, 2020. This filing does not propose
any substantive or additional changes to Rule 4121. The Exchange will
use the extension period to develop with the other SROs rules and
procedures that would allow for the periodic testing of the performance
of the MWCB mechanism, with industry member participation in such
testing. The extension will also permit the exchanges to consider
enhancements to the MWCB processes such as modifications to the Level 3
process.
The market-wide circuit breaker under Rule 4121 provides 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 and FINRA adopted uniform rules on a pilot basis
relating to market-wide circuit breakers in 2012 (``MWCB Rules''),
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.\8\
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.
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\8\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-038; SR-BYX-2011-
025; SR-BX-2011-068; SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-
30; SR-EDGA-2011-31; SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-
2011-61; SR-NASDAQ-2011-131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-
NYSEAmex-2011-73; SR-NYSEArca-2011-68; SR-Phlx-2011-129) (``MWCB
Approval Order'').
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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 halt 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 halt, at any time during the trading
day, would halt market-wide trading until the primary listing market
opens the next trading day.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ 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 market-wide circuit breaker mechanism under Rule 4121 is
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
[[Page 49142]]
declines. Extending the market-wide circuit breaker pilot for an
additional year would ensure the continued, uninterrupted operation of
a consistent mechanism to halt trading across the U.S. markets while
the Exchange, with the other SROs, consider and develop rules and
procedures that would allow for the periodic testing of the performance
of the MWCB mechanism, which would include industry member
participation in such testing. The extension will also permit the
exchanges to consider enhancements to the MWCB processes such as
modifications to the Level 3 process.
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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 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. Based on
the foregoing, the Exchange believes the benefits to market
participants from the MWCB under Rule 4121 should continue on a pilot
basis because the MWCB will promote fair and orderly markets, and
protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act because the proposal would
ensure the continued, uninterrupted operation of a consistent mechanism
to halt trading across the U.S. markets while the Exchange, in
conjunction with the other SROs, consider and develop rules and
procedures that would allow for the periodic testing of the performance
of the MWCB mechanism. Furthermore, as noted above, the extension will
permit the exchanges to consider enhancements to the MWCB processes
such as modifications to the Level 3 process.
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. 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 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)(iii) of the Act \11\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6). 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 Exchange has satisfied this requirement.
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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-NASDAQ-2019-072 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-2019-072. 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 public.
All submissions should refer to File Number SR-NASDAQ-2019-072 and
should be submitted on or before October 9, 2019.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20150 Filed 9-17-19; 8:45 am]
BILLING CODE 8011-01-P