[Federal Register Volume 85, Number 58 (Wednesday, March 25, 2020)]
[Notices]
[Pages 16985-16987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06191]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88427; File No. SR-LTSE-2020-07]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Amending Rule 11.280 Concerning the Resumption of Trading Following a
Level 3 Market-Wide Circuit Breaker Halt
March 19, 2020.
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 March 19, 2020, 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 a rule change to amend Rule 11.280 concerning the
resumption of trading following a Level 3 market-wide circuit breaker
halt.
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 of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 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 of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 11.280 concerning the
resumption of trading following a Level 3 market-wide circuit breaker
halt. The Exchange is proposing this rule change in conjunction with
other national securities exchanges and the Financial Industry
Regulatory Authority (``FINRA'').
Rule 11.280 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 under
Rule 11.280 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
(``MWCB'') 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.\3\ 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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\3\ 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 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 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.
[[Page 16986]]
Today, in the event that a Level 3 market decline occurs, the
Exchange would halt trading for the remainder of the trading day, and
would not resume until the primary listing market opens the next
trading day. On the next trading day, the Exchange would remain closed
for all symbols until the primary listing market opens the next trading
day.\4\
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\4\ See LTSE Rule 11.280(b)(2).
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Upon feedback from industry participants, the Exchange has been
working with other national securities exchanges and FINRA to establish
a standardized approach for resuming trading in all NMS Stocks
following a Level 3 halt. The proposed approach would allow for the
opening of all securities the next trading day after a Level 3 halt as
a regular trading day, and is designed to ensure that Level 3 MWCB
events are handled in a more consistent manner that is transparent for
market participants.\5\
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\5\ Of note, the U.S. futures markets, which have similar rules
for coordinated MWCB halts, normally begin their ``next day''
trading session at 6:00 p.m. ET (for CFE and CME) or at 8:00 p.m. ET
(for ICE). If the U.S. futures markets amend their MWCB rules, as
needed, to allow for normal course trading following a Level 3 halt,
the futures markets would resume trading in their normal course at
6:00 p.m. ET (CFE and CME) or 8:00 p.m. ET (ICE) the same day as the
Level 3 halt.
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As proposed, a Level 3 halt would end at the end of the trading day
on which it is declared. This proposed change would allow for next-day
trading to resume in all NMS Stocks no differently from any other
trading day. In other words, an exchange could resume trading in any
security when it first begins trading under its rules and would not
need to wait for the primary listing market to re-open trading in a
security before it could start trading such security.\6\ Accordingly,
under the proposal, the Exchange could begin trading all securities at
the beginning of the Exchange's Pre-Market Session at 8:00 a.m. ET,\7\
regardless of whether the primary listing markets for those securities
have actually opened.
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\6\ The Exchange anticipates that the other national securities
exchanges and FINRA will also file similar proposals to amend their
MWCB rules on the resumption of trading following Level 3 halts, and
amend their rules, where required, to have their Level 3 next-day
openings happen normally.
\7\ The term ``Pre-Market Session'' refers to the time between
8:00 a.m. and 9:30 a.m. Eastern Time. See LTSE Rule 1.160(dd).
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To effect this change, the Exchange proposes to delete the language
in Rule 11.280(b)(2) requiring the Exchange to wait until the primary
listing exchange opens the next trading day following a Level 3 market
decline, and specify that the Exchange will halt trading for the
remainder of the trading day. The proposed rule change would therefore
allow each exchange to resume trading in all securities the next
trading day following a Level 3 halt at whatever time such exchange
normally begins trading under its rules, which for the Exchange would
be at the beginning of the Pre-Market Session at 8:00 a.m. ET under its
current rules. The Exchange also expects that the primary listing
exchanges will facilitate this change by sending resume messages to the
applicable securities information processor (``SIP'') to lift the Level
3 trading halt message in all securities. The resumption messages will
be disseminated after the SIP has started on the next trading day and
before the start of the earliest pre-market trading session of all
exchanges. If a security is separately subject to a regulatory halt
that has not ended, the primary listing exchange would replace the
Level 3 halt message with the applicable regulatory halt message.
Having a consistent approach for all securities will make the
opening process the day after a Level 3 halt more uniform and reduce
complexity, which the Exchange believes is important after a
significant market event. Based on industry feedback, the Exchange
believes that resuming trading in the normal course in all equity
securities will be more beneficial to the marketplace. By allowing
trading to resume after a Level 3 halt in all securities no differently
from any normal trading day under the respective rules of each
exchange, the proposed rule change would provide greater certainty to
the marketplace by ensuring a familiar experience for all market
participants that trade NMS Stocks and balances out potential concerns
around volatility. While the Exchange recognizes that the impact of
this proposal is to permit all securities to be traded in the various
exchanges' early trading sessions, which do not have certain price
protections for volatility such as LULD Bands or MWCB protections, the
Exchange nonetheless believes that this outcome is outweighed by the
benefits provided by resuming trading in the early trading sessions in
a manner that is more familiar to the marketplace. Moreover, allowing
the resumption of trading to occur on the various exchanges at the
beginning of their early trading sessions in all NMS Stocks will allow
for price formation to occur earlier in the trading day, which in turn
allows market participants to react to news that has developed. As
such, trading at the beginning of regular hours may be more orderly.
The Exchange will announce the implementation date of the amendment
to Rule 11.280(b)(2) by information circular.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\8\ in general, and
furthers the objectives of Section 6(b)(5) of the Act,\9\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, to foster cooperation and coordination with persons engaged
in facilitating transactions in securities, 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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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(5).
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The market-wide circuit breaker 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. 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, and how the
markets will resume trading following a Level 3 market decline. As
described above, the Exchange, together with other national securities
exchanges and FINRA, is seeking to adopt a standardized approach
related to resuming trading in NMS Stocks after a Level 3 MWCB halt. In
this regard, the Exchange believes that the proposal to resume trading
in all securities following a Level 3 halt in the same manner that
securities would open trading on a regular trading day will benefit
investors, the national market system, Exchange members, and the
Exchange market by promoting a fair and orderly market and reducing
confusion during a significant cross-market event. By allowing trading
to resume after a Level 3 halt in all securities no differently from
any normal trading day under the respective rules of each exchange, the
proposed rule change would provide greater certainty to the marketplace
by ensuring a familiar experience for all market participants that
trade NMS Stocks.
Based on the foregoing, the Exchange believes the benefits to
market participants from the MWCB under Rule
[[Page 16987]]
11.280 with the proposed standardized process for resuming trading in
all securities following a Level 3 halt 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 that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed Level 3 rule change described above would standardize the
opening process for all securities on the Exchange, which would make
the opening process the day after a Level 3 halt more uniform and
reduce complexity. Further, the Exchange understands that FINRA and
other national securities exchanges will file similar proposals to
adopt the proposed Level 3 rule change.
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 filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\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 Commission has waived the pre-filing requirement.
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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 19b4(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 proposal
may become 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. The Commission notes
that it approved a substantively similarly proposed rule change
submitted by The Nasdaq Stock Market LLC.\15\ Waiver of the operative
delay will ensure consistency across the market centers and the timely
implementation of the proposed rule change. Accordingly, the Commission
waives the 30-day operative delay and designates the proposed rule
change operative upon filing.\16\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ See Securities Exchange Act Release No. 88360 (March 11,
2020) (SR-NASDAQ-2020-003).
\16\ For purposes only of waiving the 30-day operative delay,
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 such 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 under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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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-2020-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File Number SR-LTSE-2020-07. 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 LTSE and on its internet website
at https://longtermstockexchange.com/. 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-2020-07 and
should be submitted on or before April 15, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06191 Filed 3-24-20; 8:45 am]
BILLING CODE 8011-01-P