[Federal Register Volume 86, Number 75 (Wednesday, April 21, 2021)]
[Notices]
[Pages 20774-20776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08151]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91579; File No. SR-Phlx-2021-23]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the 
Current Pilot Program Related to Phlx Equity 4, Rule 3312 to the Close 
of Business on October 20, 2021

April 15, 2021.
    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 April 14, 2021, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 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 Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the current pilot program related 
to Phlx Equity 4, Rule 3312 (Clearly Erroneous Transactions) to the 
close of business on October 20, 2021.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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
    The purpose of the proposed rule change is to extend the current 
pilot program related to Equity 4, Rule 3312, Clearly Erroneous 
Transactions, to the close of business on October 20, 2021. The pilot 
program is currently due to expire on April 20, 2021.
    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to Equity 4, Rule 3312 that, among other things: (i) Provided 
for uniform treatment of clearly erroneous 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.\3\ Following this, on September 30, 2010, the 
Exchange adopted changes to conform its Rule 3312 to Nasdaq's and BX's 
rules 11890.\4\ In 2013, the Exchange adopted a provision designed to 
address the operation of the Plan.\5\ 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 ended according to the primary listing market.\6\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 62886 (September 10, 
2010), 75 FR 56613 (September 16, 2010) (SR-NASDAQ-2010-076).
    \4\ See Securities Exchange Act Release No. 63023 (September 30, 
2010), 75 FR 61802 (October 6, 2010) (SR-Phlx-2010-125).
    \5\ See Securities Exchange Act Release No. 68820 (February 1, 
2013), 78 FR 9436 (February 8, 2013) (SR-Phlx-2013-12).
    \6\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (SR-Phlx-2014-27).
---------------------------------------------------------------------------

    These changes were originally scheduled to operate for a pilot 
period to coincide with the pilot period for the Plan to Address 
Extraordinary Market Volatility (the ``Limit Up-Limit Down Plan'' or 
``LULD Plan'').\7\ In April 2019, the Commission approved an amendment 
to the LULD Plan for it to operate on a permanent, rather than pilot, 
basis.\8\ In light of that change, the Exchange amended Equity 4, Rule 
3312 to untie the pilot program's effectiveness from that of the LULD 
Plan and to extend the pilot's effectiveness to the close of business 
on October 18, 2019.\9\ Subsequently, the Exchange amended Rule 3312 to 
extend the pilot's

[[Page 20775]]

effectiveness to the close of business on April 20, 2021.\10\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \8\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (approving Eighteenth Amendment 
to LULD Plan).
    \9\ See Securities Exchange Act Release No. 85632 (April 11, 
2019), 84 FR 16057 (April 17, 2019) (SR-Phlx-2019-14).
    \10\ See Securities Exchange Act Release No. 90205 (October 15, 
2020), 85 FR 67022 (October 21, 2020) (SR-Phlx-2020-47).
---------------------------------------------------------------------------

    The Exchange now proposes to amend Equity 4, Rule 3312 to extend 
the pilot's effectiveness for a further six months until the close of 
business on October 20, 2021. If the pilot period is not either 
extended, replaced or approved as permanent, the prior versions of 
paragraphs (a)(2)(C), (c)(1), (b)(i), and (b)(ii) shall be in effect, 
and the provisions of paragraphs (g) through (i) shall be null and 
void.\11\ In such an event, the remaining sections of Rule 3312 would 
continue to apply to all transactions executed on the Exchange. 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 Rule 
3312.
---------------------------------------------------------------------------

    \11\ See notes 3--6, supra. The prior versions of paragraphs 
(a)(2)(C), (c)(1), (b)(i), and (b)(ii) generally provided greater 
discretion to the Exchange with respect to breaking erroneous 
trades.
---------------------------------------------------------------------------

    The Exchange does not propose any additional changes to Equity 4, 
Rule 3312. Extending the effectiveness of Rule 3312 for an additional 
six months will provide the Exchange and other self-regulatory 
organizations additional time to consider whether further amendments to 
the clearly erroneous execution rules are appropriate.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act,\12\ in general, and 
Section 6(b)(5) of the Act,\13\ in particular, in that it is designed 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest and not to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 review of transactions as clearly 
erroneous. The Exchange believes that extending the clearly erroneous 
execution pilot under Equity 4, Rule 3312 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 other self-regulatory organizations consider whether 
further amendments to these rules are appropriate.

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. The proposal would ensure 
the continued, uninterrupted operation of harmonized clearly erroneous 
execution rules across the U.S. equities markets while the Exchange and 
other self-regulatory organizations consider whether further amendments 
to these rules are appropriate. The Exchange understands that the other 
national securities exchanges and FINRA 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 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) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to 
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 proposed 
rule change 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, as 
it will allow the current clearly erroneous execution pilot program to 
continue uninterrupted, without any changes, while the Exchange and the 
other national securities exchanges consider a permanent proposal for 
clearly erroneous execution reviews. For this reason, the Commission 
hereby waives the 30-day operative delay and designates the proposed 
rule change as operative upon filing.\18\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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).
---------------------------------------------------------------------------

    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

[[Page 20776]]

     Send an email to [email protected]. Please include 
File Number SR-Phlx-2021-23 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-Phlx-2021-23. 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-Phlx-2021-23 and should be submitted on 
or before May 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.


---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2021-08151 Filed 4-20-21; 8:45 am]
BILLING CODE 8011-01-P