[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