[Federal Register Volume 85, Number 64 (Thursday, April 2, 2020)]
[Notices]
[Pages 18602-18604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06855]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88497; File No. SR-CboeBZX-2020-026]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Extend the Current Pilot Program Related to BZX Rule 11.17, Clearly 
Erroneous Executions, to the Close of Business on October 20, 2020

March 27, 2020.
    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 March 18, 2020, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``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 current pilot program related to BZX 
Rule 11.17, Clearly Erroneous Executions, to the close of business on 
October 20, 2020. The text of the proposed rule change is provided in 
Exhibit 5.
    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
    The purpose of this filing is to extend the effectiveness of the 
Exchange's current rule applicable to Clearly Erroneous Executions to 
the close of business on October 20, 2020. Portions of Rule 11.17, 
explained in further detail below, are currently operating as a pilot 
program set to expire on April 20, 2020.\5\
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    \5\ See Securities Exchange Act Release No. 87365 (October 21, 
2019), 84 FR 57540 (October 25, 2019) (SR-CboeBZX-2019-089).
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    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to BZX Rule 11.17 that, among other things: (i) Provided for 
uniform treatment of clearly erroneous[thinsp]execution reviews in 
multi-stock events involving twenty or more securities; and (ii) 
reduced the ability of the Exchange to deviate from the objective 
standards set forth in the rule.\6\ In 2013, the Exchange adopted a 
provision designed to address the operation of the Plan.\7\ Finally, in 
2014, the Exchange adopted two additional provisions providing that: 
(i) A series of transactions in a particular security on one or more 
trading days may be viewed as one event if all such transactions were 
effected based on the same fundamentally incorrect or grossly 
misinterpreted issuance information resulting in a severe valuation 
error for all such transactions; and (ii) in the event of any 
disruption or malfunction in the operation of the electronic 
communications and trading facilities of an Exchange, another SRO, or 
responsible single plan processor in connection with the transmittal or 
receipt of a trading halt, an Officer, acting on his or her own motion, 
shall nullify any transaction that occurs after a trading halt has been 
declared by the primary listing market for a security and before such 
trading halt has officially

[[Page 18603]]

ended according to the primary listing market.\8\
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    \6\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-BATS-2010-016).
    \7\ See Securities Exchange Act Release No. 68797 (January 31, 
2013), 78 FR 8635 (February 6, 2013) (SR-BATS-2013-008).
    \8\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-BATS-2014-014).
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    On December 26, 2018, the Commission published the proposed 
Eighteenth Amendment \9\ to the Plan to Address Extraordinary Market 
Volatility Pursuant to Rule 608 of Regulation NMS under the Act (the 
``Limit Up-Limit Down Plan'' or the ``Plan'') \10\ to allow the Plan to 
operate on a permanent, rather than pilot, basis. On April 8, 2019, the 
Exchange amended BZX Rule 11.17 to untie the pilot program's 
effectiveness from that of the Plan and to extend the pilot's 
effectiveness to the close of business on October 18, 2019 in order 
allow the Exchange and other national securities exchanges additional 
time to consider further amendments, if any, to the clearly erroneous 
execution rules in light of the proposed Eighteenth Amendment to the 
Plan.\11\ On April 17, 2019, the Commission published an approval of 
the Eighteenth Amendment to allow the Plan to operate on a permanent, 
rather than pilot, basis.\12\ Finally, on October 21, 2019, the 
Exchange amended BZX Rule 11.17 to extend the pilot's effectiveness to 
the close of business on April 20, 2020.\13\
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    \9\ See Securities Exchange Act Release No. 84843 (December 18, 
2018), 83 FR 66464 (December 26, 2018) (File No. 4-631) 
(``Eighteenth Amendment'').
    \10\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \11\ See Securities Exchange Act Release No. 85543 (April 8, 
2019), 84 FR 15018 (April 12, 2019) (SR-CboeBZX-2019-022).
    \12\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (File No. 4-631).
    \13\ See supra note 5.
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    The Exchange now proposes to amend BZX Rule 11.17 to extend the 
pilot's effectiveness to the close of business on October 20, 2020. The 
Exchange understands that the other national securities exchanges and 
Financial Industry Regulatory Authority (``FINRA'') will also file 
similar proposals to extend their respective clearly erroneous 
execution pilot programs, the substance of which are identical to BZX 
Rule 11.17.
    The Exchange does not propose any additional changes to BZX Rule 
11.17. The Exchange believes the benefits to market participants from 
the more objective clearly erroneous executions rule should continue on 
a limited six month pilot basis. As the Plan was approved by the 
Commission to operate on a permanent, rather than pilot, basis the 
Exchange intends to assess whether additional changes should also be 
made to the operation of the clearly erroneous execution rules. 
Extending the effectiveness of BZX Rule 11.17 for an additional six 
months should provide the Exchange and other national securities 
exchanges additional time to consider further amendments, if any, to 
the clearly erroneous execution rules.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\14\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \15\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and 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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \16\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
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    In particular, the Exchange believes that extending the clearly 
erroneous execution pilot under BZX Rule 11.17 for an additional six 
months would help assure that the determination of whether a clearly 
erroneous trade has occurred will be based on clear and objective 
criteria, and that the resolution of the incident will occur promptly 
through a transparent process. The proposed rule change would also help 
assure consistent results in handling erroneous trades across the U.S. 
equities markets, thus furthering fair and orderly markets, the 
protection of investors and the public interest. Based on the 
foregoing, the Exchange believes the amended clearly erroneous 
executions rule should continue to be in effect on a pilot basis while 
the Exchange and the other national securities exchanges consider and 
develop a permanent proposal for clearly erroneous execution reviews.

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. To the contrary, the 
Exchange understands that FINRA and other national securities exchanges 
will also file similar proposals to extend their respective clearly 
erroneous execution pilot programs. 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 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)(iii) of the Act \17\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization 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 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.

[[Page 18604]]

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-2020-026 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-2020-026. 
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-2020-026 and should 
be submitted on or before April 23, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06855 Filed 4-1-20; 8:45 am]
BILLING CODE 8011-01-P