[Federal Register Volume 87, Number 138 (Wednesday, July 20, 2022)]
[Notices]
[Pages 43341-43343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15452]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95287; File No. SR-CboeEDGA-2022-010]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Extend the Current Pilot Program Related to EDGA Rule 11.15, Clearly
Erroneous Executions, to the Close of Business on October 20, 2022
July 14, 2022.
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 July 13, 2022, Cboe EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') 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 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 EDGA Exchange, Inc. (``EDGA'' 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
EDGA Rule 11.15, Clearly Erroneous Executions, to the close of business
on October 20, 2022. 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/edga/), 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, 2022. Portions of Rule 11.15,
explained in further detail below, are currently operating as a pilot
program set to expire on July 20, 2022.\5\
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\5\ See Securities Exchange Act Release No. 94748 (April 19,
2022), 87 FR 24354 (April 25, 2022) (SR-CboeEDGA-2022-09).
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On September 10, 2010, the Commission approved, on a pilot basis,
changes to EDGA Rule 11.15 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.\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 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-EDGA-2010-03).
\7\ See Securities Exchange Act Release No. 68806 (February 1,
2013), 78 FR 8670 (February 6, 2013) (SR-EDGA-2013-05).
\8\ See Securities Exchange Act Release No. 72434 (June 19,
2014), 79 FR 36110 (June 25, 2014) (SR-EDGA-2014-11).
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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 EDGA Rule 11.15 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\ On October 21, 2019, the Exchange amended
EDGA Rule 11.15 to extend the pilot's effectiveness to the close of
business on April 20, 2020.\13\ On March 18, 2020, the Exchange amended
EDGA Rule 11.15 to extend the pilot's effectiveness to the close of
business on October 20, 2020.\14\ On October 20, 2020, the Exchange
amended EDGA Rule 11.15 to extend the pilot's effectiveness to the
close of business on April 20, 2021.\15\ On April 14, 2021 the Exchange
amended EDGA Rule 11.15 to extend the pilot's effectiveness to the
close of business on October 20, 2021.\16\ On October 15, 2021 the
Exchange amended EDGA Rule 11.15 to extend the pilot's effectiveness to
the close of
[[Page 43342]]
business on April 20, 2022.\17\ Finally, on April 19, 2022, the
Exchanged amended EDGA Rule 11.15 to extend the pilot's effectiveness
to the close of business on July 20, 2022.\18\
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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. 85544 (April 8,
2019), 84 FR 15011 (April 12, 2019) (SR-CboeEDGA-2019-005).
\12\ See Securities Exchange Act Release No. 85623 (Apr. 11,
2019), 84 FR 16086 (Apr. 17, 2019) (File No. 4-631).
\13\ See Securities Exchange Act Release No. 87366 (October 21,
2019), 84 FR 57538 (October 25, 2019) (SR-CboeEDGA-2019-017).
\14\ See Securities Exchange Act Release No. 88499 (March 27,
2020), 85 FR 18604 (April 2, 2020) (SR-CboeEDGA-2020-009).
\15\ See Securities Exchange Act Release No. 90235 (October 21,
2021), 85 FR 68097 (October 27, 2020) (SR-CboeEDGA-2020-027).
\16\ See Securities Exchange Act Release No. 91556 (April 14,
2021), 86 FR 20550 (April 20, 2021) (SR-CboeEDGA-2021-008).
\17\ See Securities Exchange Act Release No. 93344 (October 15,
2021), 86 FR 58352 (October 21, 2021) (SR-CboeEDGA-2021-022).
\18\ Supra note 5.
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Other self-regulatory organizations (``SROs''), including the
Exchange, have worked on a proposed rule change to make the pilot rules
permanent. Cboe BZX Exchange, Inc., (``BZX'') filed such a proposed
rule change on March 7, 2022.\19\ On June 8, 2022, BZX withdrew the
proposed rule change.\20\ The Exchange now proposes to amend EDGA Rule
11.15 to extend the pilot's effectiveness an additional three months to
the close of business on October 20, 2022 while the Commission
considers the BZX proposal. The Exchange understands that the other
national securities exchanges and Financial Industry Regulatory
Authority (``FINRA'') have filed or plan to file similar proposals to
extend their respective clearly erroneous execution pilot programs, the
substance of which are identical to EDGA Rule 11.15. The Exchange does
not propose any additional changes to EDGA Rule 11.15. The Exchange
believes the benefits to market participants from the more objective
clearly erroneous executions rule should continue on a limited three
month pilot basis.
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\19\ See Securities Exchange Act Release No. 94374 (March 7,
2022), 87 FR 14062 (March 11, 2022) (SR-CboeBZX-2022-017).
\20\ On June 8, 2022 BZX withdrew SR-CboeBZX-2022-017. See
Securities Exchange Act Release No. 95074 (June 9, 2022), 87 FR
36197 (June 15, 2022) (SR-CboeBZX-2022-017). Subsequently, on July
8, 2022, BZX submitted a new rule proposal. See SR-CboeBZX-2022-037,
available at: https://cdn.cboe.com/resources//rule_filings/pending//SR-CboeBZX-2022-037.pdf. Once approved, the Exchange will submit a
copycat filing for EDGA.
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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.\21\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \22\ 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) \23\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
\23\ Id.
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In particular, the Exchange believes that extending the clearly
erroneous execution pilot under EDGA Rule 11.15 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 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
have or 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:
A. significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. 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 \24\ and
Rule 19b-4(f)(6) \25\ thereunder.
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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \27\ 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 a permanent proposal
for clearly erroneous execution reviews is being considered.\28\ For
this reason, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change as operative upon filing.\29\
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\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ See SR-CboeBZX-2022-37 (July 8, 2022).
\29\ 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 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.
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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-CboeEDGA-2022-010 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-CboeEDGA-2022-010. 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-CboeEDGA-2022-010 and should
be submitted on or before August 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15452 Filed 7-19-22; 8:45 am]
BILLING CODE 8011-01-P