[Federal Register Volume 84, Number 206 (Thursday, October 24, 2019)]
[Notices]
[Pages 57070-57072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23160]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87357; File No. SR-LTSE-2019-03]


Self-Regulatory Organizations; Long-Term Stock Exchange; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Set 
the Date of the Pilot Related to the Market-Wide Circuit Breaker in 
Rule 11.280 and To Move the Limit Up-Limit Down Mechanism, Authority To 
Initiate Trading Halts, and Procedure for Initiating and Terminating a 
Trading Halt Into Separate Rules for Clarity

October 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 October 18, 2019, Long-Term Stock Exchange (``LTSE'' or the 
``Exchange'') 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 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\ 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

    LTSE proposes to untie the effectiveness of the market-wide circuit 
breaker (``MWCB'') mechanism in Rule 11.280 from that of the Plan to 
Address Extraordinary Market Volatility Pursuant to Rule 608 of 
Regulation NMS (the ``LULD Plan'') and to extend the MWCB pilot's 
effectiveness to the close of business on October 18, 2020. LTSE has 
designated this rule change as ``non-controversial'' under Section 
19(b)(3)(A) of the Act \3\ and provided the Commission with the notice 
required by Rule 19b-4(f)(6) thereunder.\4\
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    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4.
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    The text of the proposed rule change is available at the Exchange's 
website at https://longtermstockexchange.com/, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included

[[Page 57071]]

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 self-regulatory organization 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 on the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Paragraphs (a) through (d) and (f) of Rule 11.280 describe the 
methodology for determining when to halt trading in all stocks due to 
extraordinary market volatility (i.e., market-wide circuit breakers). 
The MWCB mechanism under Rule 11.280 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''),\5\ 
including any extensions to the pilot period for the LULD Plan. The 
Commission recently approved an amendment to the LULD Plan for it to 
operate on a permanent, rather than pilot, basis.\6\ The Exchange 
proposes to amend Rule 11.280 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, 2020. The Exchange does not propose 
any additional changes to Rule 11.280, other than to move the LULD 
provisions and regulatory trading halt provisions in paragraph (e), and 
paragraphs (g) and (h), of Rule 11.280, respectively, to separate rules 
for clarity.
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    \5\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012).
    \6\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (``LULD Plan Amendment 18 
Approval Order'').
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    Specifically, the Exchange proposes to move Rule 11.280(e) (``Limit 
Up-Limit Down Mechanism'') to new Rule 11.281, keep Rule 11.280(f) 
within Rule 11.280 by renumbering it as Rule 11.280(e), and move Rule 
11.280(g) (``Authority to Initiate Trading Halts'') and Rule 11.280(h) 
(``Procedure for Initiating and Terminating a Trading Halt'') to new 
Rule 11.282. Cross-references to these provisions in the LTSE 
rulebook--contained in Rules 11.230, 11.350, 14.001, and 14.210, and 
the supplementary material to Rule 14.207--would be updated 
accordingly.
    MWCBs under Rule 11.280 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 
MWCBs, 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. MWCBs 
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 11.280, 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 will use the MWCB pilot extension period to develop 
with the other self-regulatory organizations (``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 SROs to consider 
enhancements to the MWCB processes such as modifications to the Level 3 
process.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The MWCB mechanism under Rule 11.280 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 declines. Extending the MWCB pilot for 
an additional year, to expire on October 18, 2020, 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 would also permit the SROs to consider enhancements to the 
MWCB processes such as modifications to the Level 3 process.
    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 11.280 should continue on a pilot 
basis because the MWCB will promote fair and orderly markets, and 
protect investors and the public interest.
    Additionally, the Exchange believes that it is consistent with the 
public interest and the protection of investors to move to separate 
rules for clarity the LULD provisions and regulatory trading halt 
provisions in Rule 11.280. Furthermore, the Exchange believes it is 
consistent with the public interest and the protection of investors to 
clarify that these provisions, found in paragraphs (e), (g) and (h) are 
not subject to any pilot period. These clarifying changes are designed 
to ensure continued compliance by the Exchange and its Members with the 
requirements of the LULD Plan and to remove any ambiguity on the 
ongoing applicability of the LULD Plan or other trading halt 
provisions.

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 that is not necessary or appropriate 
in the 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 pilot proposed 
to be scheduled to expire on October 18, 2020, will permit the 
exchanges to

[[Page 57072]]

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 have filed or will file proposals to extend their 
rules regarding the MWCB pilot. Thus, the proposed rule change will 
help to ensure consistency across market centers without implicating 
any competitive issues.
    Additionally, the clarity to be provided by re-designating 
paragraph (e) as a separate rule implementing the LULD provisions, and 
paragraphs (g) and (h) as a separate rule providing the authority under 
which the Exchange can initiate a trading halt ``in circumstances in 
which LTSE deems it necessary to protect investors and the public 
interest,'' and the procedures by which LTSE can both initiate and 
terminate a trading halt, would not have an impact on competition.

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

    Written comments were neither solicited nor received.

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

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) \9\ of the Act and Rule 19b-4(f)(6) \10\ 
thereunder. Because the 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 and Rule 19b-
4(f)(6) thereunder.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange 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 
filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Commission has waived this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\13\ 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 
year will allow the uninterrupted operation of the existing pilot to 
halt trading across the U.S. markets. 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.\14\
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    \12\ Id.
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ 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 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-LTSE-2019-03 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-LTSE-2019-03. 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-LTSE-2019-03 and 
should be submitted on or before November 14, 2019.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-23160 Filed 10-23-19; 8:45 am]
 BILLING CODE 8011-01-P