[Federal Register Volume 87, Number 71 (Wednesday, April 13, 2022)]
[Notices]
[Pages 22002-22004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07846]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94640; File No. SR-NYSEARCA-2022-21]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Extend the
Current Pilot Program Related to Rule 7.10-E
April 7, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on April 5, 2022, NYSE Arca, Inc. (``NYSE Arca'' 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\ 15 U.S.C. 78a.
\3\ 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
The Exchange proposes to extend the current pilot program related
to Rule 7.10-E (Clearly Erroneous Executions) to the close of business
on July 20, 2022. The proposed rule change is available on the
Exchange's website at www.nyse.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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
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 Rule 7.10-E (Clearly Erroneous Executions) to
the close of business on July 20, 2022. The pilot program is currently
due to expire on April 20, 2022.
On September 10, 2010, the Commission approved, on a pilot basis,
changes to Rule 7.10-E 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.\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
[[Page 22003]]
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\
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\4\ See Securities Exchange Act Release No. 62886 (Sept. 10,
2010), 75 FR 56613 (Sept. 16, 2010) (SR-NYSEArca-2010-58).
\5\ See Securities Exchange Act Release No. 68809 (Feb. 1,
2013), 78 FR 9081 (Feb. 7, 2013) (SR-NYSEArca-2013-12).
\6\ See Securities Exchange Act Release No. 72434 (June 19,
2014), 79 FR 36110 (June 25, 2014) (SR-NYSEArca-2014-48).
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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\ including any extensions to the pilot period for the
LULD Plan.\8\ In April 2019, the Commission approved an amendment to
the LULD Plan for it to operate on a permanent, rather than pilot,
basis.\9\ In light of that change, the Exchange amended Rule 7.10-E 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.\10\ The Exchange later amended Rule 7.10-E to extend the
pilot's effectiveness to the close of business on April 20, 2020,\11\
October 20, 2020,\12\ April 20, 2021,\13\ October 20, 2021,\14\ and
April 20, 2022.\15\
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\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. 71807 (March 26,
2014), 79 FR 18087 (March 31, 2014) (SR-NYSEArca-2014-32).
\9\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (approving Eighteenth Amendment
to LULD Plan).
\10\ See Securities Exchange Act Release No. 85532 (April 5,
2019), 84 FR 14708 (April 11, 2019) (SR-NYSEArca-2019-21).
\11\ See Securities Exchange Act Release No. 87355 (October 18,
2019), 84 FR 57094 (October 24, 2019) (SR-NYSEArca-2019-75).
\12\ See Securities Exchange Act Release No. 88590 (April 8,
2020), 85 FR 20791 (April 14, 2020) (SR-NYSEArca-2020-25).
\13\ See Securities Exchange Act Release No. 90155 (October 13,
2020), 85 FR 66386 (October 19, 2020) (SR-NYSEArca-2020-88).
\14\ See Securities Exchange Act Release No. 91551 (April 14,
2021), 86 FR 20562 (April 20, 2021) (SR-NYSEArca-2021-22).
\15\ See Securities Exchange Act Release No. 93357 (October 15,
2021), 86 FR 58326 (October 21, 2021) (SR-NYSEArca-2021-87).
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The Exchange now proposes to amend Rule 7.10-E to extend the
pilot's effectiveness for a further three months until the close of
business on July 20, 2022. If the pilot period is not either extended,
replaced or approved as permanent, the prior versions of paragraphs
(c), (e)(2), (f), and (g) shall be in effect, and the provisions of
paragraphs (i) through (k) shall be null and void.\16\ In such an
event, the remaining sections of Rule 7.10-E 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 7.10-E.
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\16\ See supra notes 4-6. The prior versions of paragraphs (c),
(e)(2), (f), and (g) generally provided greater discretion to the
Exchange with respect to breaking erroneous trades.
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The Exchange does not propose any additional changes to Rule 7.10-
E. Extending the effectiveness of Rule 7.10-E for an additional three
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,\17\ in general, and
Section 6(b)(5) of the Act,\18\ 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. 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 Rule 7.10-E for
an additional three 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.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
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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 solicited or received with respect to the
proposed rule change.
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 \19\ and Rule 19b-4(f)(6) thereunder.\20\
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.\21\
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\19\ 15 U.S.C. 78s(b)(3)(A)(iii).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ 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 Commission has waived the five-day prefiling requirement in this
case.
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[[Page 22004]]
A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange asked
that the Commission waive the 30 day operative delay so that the
proposal may become operative immediately upon filing. Waiver of the
30-day operative delay would extend the protections provided by the
current pilot program, without any changes, while the Exchange and
other self-regulatory organizations consider whether further amendments
to these rules are appropriate. Therefore, the Commission hereby waives
the 30-day operative delay and designates the proposed rule change as
operative upon filing.\24\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ 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 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) \25\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\25\ 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-NYSEARCA-2022-21 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-NYSEARCA-2022-21. 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-NYSEARCA-2022-
21 and should be submitted on or before May 4, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-07846 Filed 4-12-22; 8:45 am]
BILLING CODE 8011-01-P