[Federal Register Volume 88, Number 50 (Wednesday, March 15, 2023)]
[Notices]
[Pages 16045-16050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05269]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97093; File No. SR-PEARL-2023-11]


Self-Regulatory Organizations: Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend Exchange Rule 2622, 
Limit Up-Limit Down Plan and Trading Halts

March 9, 2023.
    Pursuant to the provisions of 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 February 28, 2023, MIAX PEARL, LLC (``MIAX 
Pearl'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I, II, and III 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 amend Exchange Rule 2622 to establish common criteria 
and procedures for halting and resuming trading in equity securities on 
the Exchange's equity trading platform (referred to herein as ``MIAX 
Pearl Equities'') in the event of regulatory or operational issues, and 
reorganize the text of the rule.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
Pearl's principal office, 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
    In conjunction with adoption of an amended Nasdaq UTP Plan proposed 
by its participants (``Amended Nasdaq UTP Plan''),\3\ the Exchange is 
amending Rule 2622 to integrate several definitions and concepts from 
the Amended Nasdaq UTP Plan and to reorganize the rule in light of the 
Exchange's experience with applying the rule over many years as a 
national securities exchange.\4\ The Exchange proposes to reorganize 
and amend Rule 2622, entitled Limit Up-Limit Down Plan and Trading 
Halts, on MIAX Pearl Equities. The rule sets forth the Exchange's 
authority to halt trading under various circumstances. The Exchange is 
a participant of the transaction reporting plan governing Tape C 
Securities (``Nasdaq UTP Plan'').\5\ As part of these changes, the 
Exchange will amend categories of regulatory and operational halts, 
improve the rule's clarity, adopt defined terms from the Amended Nasdaq 
UTP Plan, and relocate certain existing provisions within Exchange Rule 
2622.
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    \3\ On February 11, 2021, the Nasdaq UTP Plan participants filed 
Amendment 50 to the Plan, to revise provisions governing regulatory 
and operational halts. See Letter from Robert Brooks, Chairman, UTP 
Operating Committee, Nasdaq UTP Plan, to Vanessa Countryman, 
Secretary, Securities and Exchange Commission, dated February 11, 
2021. The Nasdaq UTP Plan subsequently filed two partial amendments 
to the 50th Amendment, on March 31, 2021 and on April 7, 2021. The 
SEC approved the amendments on May 28, 2021. See Securities Exchange 
Act Release No. 34-92071 (May 28, 2021), 86 FR 29846 (June 3, 2021) 
(S7-24-89). The Amended Nasdaq UTP Plan includes provisions 
requiring participant self-regulatory organizations (``SROs'') to 
honor a Regulatory Halt declared by the Primary Listing Market. The 
provisions in the Nasdaq UTP Plan, and the plan for consolidation of 
data for non-Nasdaq-listed securities, the Consolidated Tape System 
and Consolidated Quotations System (collectively, the ``CTA/CQS 
Plan''), include provisions similar to the changes proposed by the 
Exchange in this filing.
    \4\ The Exchange notes that this proposed rule change is based 
on a similar proposed rule change recently filed by Nasdaq PHLX LLC 
(``Phlx''). See Securities Exchange Act Release No. 96574 (December 
22, 2022), 87 FR 80213 (December 29, 2022) (SR-Phlx-2022-49). The 
Exchange also notes The Nasdaq Stock Market, LLC (``Nasdaq'') filed 
a similar proposed rule change with the Commission. See Securities 
Exchange Act Release No. 94370 (March 7, 2022), 87 FR 14071 (March 
11, 2022); Securities Exchange Act Release No. 94838 (May 3, 2022), 
87 FR 27683 (May 9, 2022). The Commission approved the proposed rule 
change on June 8, 2022. See Securities Exchange Act Release No. 
95069 (June 8, 2022), 87 FR 36018 (June 14, 2022). The Exchange's 
proposal provides the Exchange with less authority to declare halts 
in the event of regulatory or operational issues than under Nasdaq's 
proposal because the Exchange, unlike Nasdaq, is not a Primary 
Listing Market. Given the Exchange's status as a non-Primary Listing 
Market, certain definitions and concepts from the Amended Nasdaq UTP 
Plan, integrated in Nasdaq's proposal, are not included herein.
    \5\ Each transaction reporting plan has a securities information 
processor (``SIP'') responsible for consolidation of information for 
the plan's securities, pursuant to Rule 603 of Regulation NMS. The 
transaction reporting plan for Nasdaq-listed securities is known as 
The Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis or the ``Nasdaq UTP 
Plan.'' Pursuant to the Nasdaq UTP Plan, the UTP SIP, which is 
Nasdaq, consolidates order and trade data from all markets trading 
Nasdaq-listed securities. The Exchange uses the term ``UTP SIP'' 
herein when referring specifically to the SIP responsible for 
consolidation of information in Nasdaq-listed securities.
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Background
    The Exchange has been working with other SROs to establish common 
criteria and procedures for halting and resuming trading in equity 
securities in the event of regulatory or operational issues. These 
common standards are designed to ensure that events which might impact 
multiple exchanges are handled in a consistent manner that is 
transparent. The Exchange believes that implementation of these common 
standards will assist the SROs in maintaining fair and orderly markets. 
Notwithstanding the development of these common standards, the Exchange 
will retain discretion in certain instances as to whether and how to 
handle halts, as is discussed below.
    Every U.S.-listed equity security has its primary listing on a 
specific stock exchange that is responsible for a number of regulatory 
functions.\6\ These

[[Page 16046]]

include confirming that the security continues to meet the exchange's 
listing standards, monitoring trading in that security and taking 
action to halt trading in the security when necessary to protect 
investors and to ensure a fair and orderly market. While these core 
responsibilities remain with the primary listing venue, trading in the 
security can occur on multiple exchanges that have unlisted trading 
privileges for the security \7\ or in the over- the-counter market, 
regulated by the Financial Industry Regulatory Authority, Inc. 
(``FINRA''). The exchanges and FINRA are responsible for monitoring 
activity on the markets over which they have oversight, but also must 
abide by the regulatory decisions made by the Primary Listing Market. 
For example, a venue trading a security pursuant to unlisted trading 
privileges must halt trading in that security during a Regulatory Halt, 
which is a defined term under the proposed rules,\8\ and may only trade 
the security once the Primary Listing Market has cleared the security 
to resume trading.
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    \6\ The Exchange is proposing to adopt Primary Listing Market as 
a new term, defined in Nasdaq UTP Plan, Section X.A.8, as follows: 
``[T]he national securities exchange on which an Eligible Security 
is listed. If an Eligible Security is listed on more than one 
national securities exchange, Primary Listing Market means the 
exchange on which the security has been listed the longest.''
    \7\ In addition, securities may be listed on The Nasdaq Global 
Market or The Nasdaq Global Select Market, and also listed on the 
New York Stock Exchange (``dually-listed''). See Nasdaq Rules 
5005(a)(11), 5220 and IM-5220.
    \8\ See proposed Rule 2622(h)(1)(I).
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    While the Exchange and the other SROs intend to harmonize certain 
aspects of their trading halt rules, other elements of the rules will 
continue to be unique to each market. The Exchange believes that this 
is appropriate to reflect different products listed or traded on each 
market. The Exchange also proposed to relocate paragraphs (h)(2)-(5) of 
Exchange Rule 2622 to paragraphs (h)(2)(A)(i)(b)-(e).
    The Exchange will implement all of the changes proposed herein in 
conjunction with other SROs implementing the necessary rule changes. 
The Exchange will publish a Trading Alert at least 30 business days 
prior to implementing the proposed changes.
Definitions
    The Exchange proposes adding definitions to Rule 2622(h)(1) to 
consolidate the various definitions that will be used in the Rule, some 
of which are taken from the Amended Nasdaq UTP Plan. The Exchange is 
adopting the following terms from the Amended Nasdaq UTP Plan: 
``Operating Committee,'' ``Operational Halt,'' ``Primary Listing 
Market,'' ``Processor,'' \9\ ``Regulatory Halt,'' ``Regular Trading 
Hours,'' \10\ ``SIP Halt,'' and ``SIP Halt Resume Time.'' The Exchange 
is adopting a modified form of the term ``Extraordinary Market 
Activity'' from the Amended Nasdaq UTP Plan, as described below. The 
definition of ``UTP Exchange Traded Product'' has been moved into the 
definitions section from elsewhere in the current Rules without 
change.\11\ The definitions of ``Trust Shares,'' ``Index Fund Shares,'' 
``Managed Fund Shares,'' and ``Trust Issues Receipts'' have been added 
as subcategories to the defined term ``UTP Exchange Traded Product.'' 
\12\
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    \9\ The Exchange proposes to also define the term ``SIP'' to 
have the same meaning as the term ``Processor'' as set forth in the 
Amended Nasdaq UTP Plan. Because the terms ``Processor'' and ``SIP'' 
are also used throughout the Rules, at times, to apply to processors 
of information furnished pursuant to the Consolidated Tape 
Association Plan (``CTA Plan''), the term ``Processor'' may, in 
those applicable circumstances, refer to the processor of 
transactions in Tape A and B securities, as set forth in the CTA 
Plan.
    \10\ The Exchange notes that pursuant to existing Rule 1901, the 
Regular Trading Session occurs until 4:00 p.m.
    \11\ ``UTP Exchange Traded Product'' is currently defined in 
Rule 1901.
    \12\ As noted above, the Exchange is adopting several new terms 
that have the same meaning as those terms are defined in the Amended 
Nasdaq UTP Plan. Each of the national market system plans governing 
the single plan processors has identical definitions of these terms, 
thus there will be uniformity in the meaning of the terms among such 
plans as well as among the rules of the SROs. The definitions of 
these terms are also identical to those recently adopted by Phlx. 
See supra note 4.
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    First, the Exchange proposes to add the definition of ``Primary 
Listing Market'' \13\ to Rule 2622, which will have the same meaning as 
in the Amended Nasdaq UTP Plan, Section X.A.8. As is currently the case 
under the Nasdaq UTP Plan, all Regulatory Halt decisions are made by 
the market on which the security has its primary listing. This reflects 
the regulatory responsibility that the Primary Listing Market has for 
fair and orderly trading in the securities that list on its market and 
its direct access to its listed companies, which are required to advise 
it of certain events and maintain lines of communication with the 
Primary Listing Market. The proposed definition makes clear that if a 
security is listed on more than one market (a dually-listed security), 
the Primary Listing Market means the exchange on which the security has 
been listed the longest. This provision matches language used in the 
definition of ``Primary Listing Exchange'' in the Limit-Up Limit-Down 
Plan and will avoid conflict in the event of dually-listed securities.
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    \13\ See proposed Rule 2622(h)(1)(G).
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    Second, the Exchange proposes to add the definition of 
``Extraordinary Market Activity'' to Rule 2622,\14\ which would 
represent a modified version of the term defined in the Amended Nasdaq 
UTP Plan, Section X.A.1.\15\ Specifically, the Exchange proposes to 
remove the concept of a ``market-wide basis'' from the Amended Nasdaq 
UTP Plan's definition of Extraordinary Market Activity for purposes of 
the Exchange's Rules because the term ``Extraordinary Market Activity'' 
would only be used in the Exchange's Rules as a basis for the Exchange 
to initiate an Operational Halt, which would only occur on the market 
declaring the halt (i.e., the Exchange).\16\ The current rule does not 
include a definition for Extraordinary Market Activity.
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    \14\ See proposed Rule 2622(h)(1)(B).
    \15\ In the Amended Nasdaq UTP Plan, ``Extraordinary Market 
Activity'' means a disruption or malfunction of any electronic 
quotation, communication, reporting, or execution system operated 
by, or linked to, the Processor or a Trading Center or a member of 
such Trading Center that has a severe and continuing negative 
impact, on a market-wide basis, on quoting, order, or trading 
activity or on the availability of market information necessary to 
maintain a fair and orderly market. For purposes of this definition, 
a severe and continuing negative impact on quoting, order, or 
trading activity includes (i) a series of quotes, orders, or 
transactions at prices substantially unrelated to the current market 
for the security or securities; (ii) duplicative or erroneous 
quoting, order, trade reporting, or other related message traffic 
between one or more Trading Centers or their members; or (iii) the 
unavailability of quoting, order, or transaction information for a 
sustained period.
    \16\ The Exchange proposes to define ``Extraordinary Market 
Activity'' to mean a disruption or malfunction of any electronic 
quotation, communication, reporting, or execution system operated 
by, or linked to, the Processor or a Trading Center or a member of 
such Trading Center that has a severe and continuing negative impact 
on quoting, order, or trading activity or on the availability of 
market information necessary to maintain a fair and orderly market. 
For purposes of this definition, a severe and continuing negative 
impact on quoting, order, or trading activity includes (i) a series 
of quotes, orders, or transactions at prices substantially unrelated 
to the current market for the security or securities; (ii) 
duplicative or erroneous quoting, order, trade reporting, or other 
related message traffic between one or more Trading Centers or their 
members; or (iii) the unavailability of quoting, order, or 
transaction information for a sustained period.
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    The third set of new proposed definitions would be specific to 
events involving the SIP. While the Exchange recognizes that many 
events involving the SIP would also meet the definition of 
``Extraordinary Market Activity'' (as defined in the Amended Nasdaq UTP 
Plan), the Exchange believes that the critical role of the SIPs in 
market infrastructure factors in favor of additional guidance on how 
such events will be handled. The definitions of ``SIP Halt Resume 
Time'' and ``SIP Halt'' are intended to provide additional guidance

[[Page 16047]]

to address this subset of potential market issues.\17\ In addition, the 
Exchange is proposing to define terms related to SIP governance needed 
in order to understand these definitions:
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    \17\ The Exchange proposes to define the terms ``SIP Halt Resume 
Time'' and ``SIP Halt'' to have the same meaning as in the Amended 
Nasdaq UTP Plan.
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     ``Processor'' or ``SIP'' \18\ have the same meaning as the 
term ``Processor'' set forth in the Nasdaq UTP Plan, namely the entity 
selected by the Participants to perform the processing functions set 
forth in the Plan. Because the terms ``Processor'' and ``SIP'' are also 
used throughout the Rules, at times, to apply to processors of 
information furnished pursuant to the CTA Plan, the term ``Processor'' 
and ``SIP'' may, in those applicable circumstances, refer to the 
processor of transactions in Tape A and B securities, as set forth in 
the CTA Plan.
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    \18\ See proposed Rule 2622(h)(1)(H).
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     ``SIP Plan'' \19\ is defined as the national market system 
plan governing the SIP.
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    \19\ See proposed Rule 2622(h)(1)(M).
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     ``Operating Committee'' \20\ is defined as having the same 
meaning as in the Nasdaq UTP Plan, namely the committee charged with 
administering the Nasdaq UTP Plan.
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    \20\ See proposed Rule 2622(h)(1)(C).
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    The Exchange is proposing to adopt a category of Regulatory Halt, 
called a ``SIP Halt,'' \21\ which will have the same meaning as that 
term is defined in Section X.A.11. of the Nasdaq UTP Plan, namely ``a 
Regulatory Halt to trading in one or more securities that a Primary 
Listing Market declares in the event of a SIP Outage or Material SIP 
Latency.'' This new category of Regulatory Halt will address situations 
where the Primary Listing Market declares a Regulatory Halt in one or 
more securities as a result of a SIP outage \22\ or material SIP 
latency.\23\
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    \21\ See proposed Rule 2622(h)(1)(K).
    \22\ SIP outage means a situation in which the Processor has 
ceased, or anticipates being unable, to provide updated and/or 
accurate quotation or last sale price information in one or more 
securities for a material period that exceeds the time thresholds 
for an orderly failover to backup facilities established by mutual 
agreement among the Processor, the Primary Listing Market for the 
affected securities, and the Operating Committee unless the Primary 
Listing Market, in consultation with the Processor and the Operating 
Committee, determines that resumption of accurate data is expected 
in the near future. See Amended Nasdaq UTP Plan, Section X.A.13.
    \23\ Material SIP latency means a delay of quotation or last 
sale price information in one or more securities between the time 
data is received by the Processor and the time the Processor 
disseminates the data over the Processor's vendor lines, which delay 
the Primary Listing Market determines, in consultation with, and in 
accordance with, publicly disclosed guidelines established by the 
Operating Committee, to be (a) material and (b) unlikely to be 
resolved in the near future. See Amended Nasdaq UTP Plan, Section 
X.A.5.
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    The Exchange proposes to add a definition of ``Regulatory Halt'' 
\24\ as having the same meaning as in Section X.A.10 of the Amended 
Nasdaq UTP Plan. Specifically, the Exchange has proposed to define 
Regulatory Halt to mean a halt declared by the Primary Listing Market 
in trading in one or more securities on all Trading Centers for 
regulatory purposes, including for the dissemination of material news, 
news pending, suspensions, or where otherwise necessary to maintain a 
fair and orderly market. A Regulatory Halt includes a trading pause 
triggered by Limit Up Limit Down, a halt based on Extraordinary Market 
Activity (as defined in the Amended Nasdaq UTP Plan), a trading halt 
triggered by a Market-Wide Circuit Breaker, and a SIP Halt.
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    \24\ See proposed 2622(h)(1)(I).
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    The Exchange proposes to add a definition of ``Operational Halt,'' 
\25\ which is defined as having the same meaning as in Section X.A.7 of 
the Amended Nasdaq UTP Plan. Specifically, the Exchange is proposing to 
define Operational Halt to mean a halt in trading in one or more 
securities only on the market declaring the halt and is not a 
Regulatory Halt. An Operational Halt is effective only on the Exchange; 
other markets are not required to halt trading in the impacted 
securities. In practice, the Exchange has always had the capacity to 
implement operational halts in specified circumstances.\26\ The 
proposed change would provide greater clarity on when an Operational 
Halt may be implemented and the process for halting and resuming 
trading in the event of an Operational Halt. An Operational Halt is not 
a Regulatory Halt.
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    \25\ See proposed Rule 2622(h)(1)(D).
    \26\ See Exchange Rule 2600(b).
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Regulatory Halt
    Proposed Rule 2622(h)(2)(A)(i)-(ii) includes two situations in 
which the Exchange must halt trading pursuant to a Regulatory Halt: 
under the Limit Up-Limit Down Plan or pursuant to extraordinary market 
volatility (market-wide circuit breakers). Proposed Rule 
2622(h)(2)(A)(i) retains without substantive modification the existing 
rule with respect to the Limit Up-Limit Down Plan (current Rule 
2622(h)(1)-(5)). The Exchange, as a non-Primary Listing Market, does 
not itself declare trading pauses pursuant to the Limit Up-Limit Down 
Plan, but rather implements such pauses declared by Primary Listing 
Markets. The Exchange proposes to make clear in Rule 2622(h)(2)(A)(ii) 
that a trading halt pursuant to extraordinary market volatility 
(market-wide circuit breakers), as is described in Rule 2622(a), 
constitutes a Regulatory Halt.
    The Exchange proposes to add proposed Rule 2622(h)(2)(A)(iii), 
which makes clear that the start time of a Regulatory Halt is the time 
the Primary Listing Market declares the Regulatory Halt, regardless of 
whether communications issues impact the dissemination of notice of the 
Halt.\27\ This proposal would provide market participants with 
certainty on the official start time of the Regulatory Halt. Under the 
proposed rule, the start time is fixed by the Primary Listing Market; 
it is not dependent on whether notice is disseminated immediately. This 
will avoid possible disagreement if the Regulatory Halt time were tied 
to dissemination or receipt of notification, which may occur at 
different times. The Exchange recognizes that in situations where 
communication is interrupted, trades may continue to occur until news 
of the Regulatory Halt reaches all trading centers. However, a fixed 
``official'' Regulatory Halt time will allow SROs to revisit trades 
after the fact and determine in a consistent manner whether specific 
trades should stand.
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    \27\ This is consistent with the Amended Nasdaq UTP Plan. See 
Amended Nasdaq UTP Plan, Section X.D.1.
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    Current Rule 2622(c), states, in part, that if the primary listing 
market declares a halt, the Exchange will halt trading in that 
security. This would be reiterated in proposed Rule 2622(h)(2)(A)(iii) 
[sic]. Consistent with Section X.G of the Nasdaq UTP Plan, the proposed 
Rule will more broadly require the Exchange to halt trading of a UTP 
security if the Primary Listing Market declares a Regulatory Halt in 
that security.
Resumption of Trading After a Regulatory Halt
    The SROs have jointly developed processes to govern the resumption 
of trading in the event of a Regulatory Halt. While the actual process 
of re-launching trading will remain unique to each exchange, the 
proposed rule would harmonize certain common elements of the reopening 
process that would benefit from consistency across markets. These 
common elements include the primacy of the Primary Listing Market in 
resumption decisions, the requirement that the Primary Listing Market 
make its determination to

[[Page 16048]]

resume trading in good faith,\28\ and certain parts of the complex 
process of reopening trading after a SIP Halt. With respect to a SIP 
Halt, common elements of the reopening process include the interaction 
among SROs (including the Primary Listing Market with the SIP), the 
requirement that the Primary Listing Market terminate a SIP Halt with a 
notification that specifies a SIP Halt Resume Time, the minimum quoting 
times before resumption of trading, the cutoff time after which trading 
would not resume during Regular Trading Hours, and the time when 
trading may resume if the Primary Listing Market does not open a 
security within the amount of time specified in its rules after the SIP 
Halt Resume Time.
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    \28\ See Partial Amendment No. 1 of Trading Halt Amendments to 
the UTP Plan, dated March 31, 2021.
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    Proposed Rule 2622(h)(2)(B) provides the process to be followed 
when resuming trading upon the conclusion of a Regulatory Halt. The new 
rule, which incorporates Section X.E.1 and X.F.3 of the Amended Nasdaq 
UTP Plan, is divided into the following two subsections concerning 
resumption of trading: (A) after a Regulatory Halt other than a SIP 
Halt; and (B) after a SIP Halt. Proposed Rule 2622(h)(2)(B)(i)(a) 
provides that, for a Regulatory Halt other than a SIP Halt, the 
Exchange may resume trading subject to the Regulatory Halt after the 
Exchange receives notification from the Primary Listing Market that the 
Regulatory Halt has been terminated. The Exchange does not conduct halt 
crosses and, therefore, the resumption of trading in these securities 
will occur once notice from the Primary Listing Market is received.
    Proposed Rule 2622(h)(2)(B)(ii)(a) provides that, for securities 
subject to a SIP Halt initiated by another exchange that is the Primary 
Listing Market, during Regular Trading Hours, the Exchange may resume 
trading after trading has resumed on the Primary Listing Market or 
notice has been received from the Primary Listing Market that trading 
may resume. During Regular Trading Hours, if the Primary Listing Market 
does not open a security within the amount of time specified by the 
rules of the Primary Listing Market after the SIP Halt Resume Time, the 
Exchange may resume trading in that security.
    Proposed Rule 2622(h)(2)(B)(iii) retains without substantive 
modification existing Rule 2622(h)(6). Proposed Rule 2622(h)(2)(B)(iii) 
states that the Exchange the Exchange shall re-open the security 
pursuant to the procedures set forth in Exchange Rule 2615, which 
describes the Exchange's re-opening process and provide, in sum, that 
the Exchange will re-open trading in following a halt by matching buy 
and sell orders at the midpoint of the national best bid and offer 
(``NBBO'').
Operational Halt
    The Exchange proposes in Rule 2622(h)(3) to address Operational 
Halts, which are non-regulatory in nature and apply only to the 
exchange that calls the halt. The ability to call an Operational Halt 
has existed for a long time, although in the Exchange's experience, 
such halts have rarely been initiated. As part of the Exchange's 
assessment with the other SROs of the halting and resumption of 
trading, the Exchange believes that the markets would benefit from 
greater clarity regarding when an Operational Halt may be 
appropriate.\29\ In part, the proposed change is designed to cover 
situations similar to those that might constitute a Regulatory Halt, 
but where the impact is limited to a single market. For example, just 
as a market disruption might trigger a Regulatory Halt for 
Extraordinary Market Activity (as defined in the Amended Nasdaq UTP 
Plan) if it affects multiple markets, a disruption at the Exchange, 
such as a technical issue affecting trading in one or more securities, 
could impact trading on the Exchange so significantly that an 
Operational Halt is appropriate in one or more securities. In such an 
instance, it would be in the public interest to institute an 
Operational Halt to minimize the impact of a disruption that, if 
trading were allowed to continue, might negatively affect a greater 
number of market participants. An Operational Halt does not implicate 
other trading centers.
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    \29\ Differences between Nasdaq and the Exchange's proposals as 
it relates to Operational Halts stem from Nasdaq's status as a 
Primary Listing Market, unlike the Exchange.
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    Proposed Rule 2622(h)(3) would authorize the Exchange to implement 
an Operational Halt for any security trading on the Exchange: if it is 
experiencing Extraordinary Market Activity \30\ on the Exchange; or 
when otherwise necessary to maintain a fair and orderly market or in 
the public interest.
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    \30\ ``Extraordinary Market Activity'' in proposed Rule 
2622(h)(1)(B) would have the meaning proposed by the Exchange, which 
is a modified form of the term from the Amended Nasdaq UTP Plan, as 
described above.
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    Proposed Rule 2622(h)(3)(B) provides the process for initiating an 
Operational Halt. Under the proposed rule, the Exchange must notify the 
SIP if it has concerns about its ability to collect and transmit 
Quotation Information or Transaction Reports, or if it has declared an 
Operational Halt or suspension of trading in one or more Eligible 
Securities, pursuant to the procedures adopted by the Operating 
Committee.
    Proposed Rule 2622(h)(3)(C) will clarify how the Exchange resumes 
trading after an Operational Halt. Proposed Rule 2622(h)(3)(C)(i) 
provides that the Exchange would resume trading when it determines that 
trading may resume in a fair and orderly manner consistent with the 
Exchange's rules. Proposed Rule 2622(h)(3)(C)(ii) provides that orders 
entered during the Operational Halt will not be accepted, unless 
subject to instructions that the order will be directed to another 
Trading Center. Proposed Rule 2622(h)(3)(C)(iii) provides that trading 
in a halted security shall resume at the time specified by the Exchange 
in a notice. Proposed Rule 2622(h)(3)(C)(iii) also specifies that 
Exchange will notify all other Plan participants and the SIP using such 
protocols and other emergency procedures as may be mutually agreed to 
between the Operating Committee and the Exchange. If the SIP is unable 
to disseminate notice of an Operational Halt or the Exchange is not 
open for trading, the Exchange will take reasonable steps to provide 
notice of an Operational Halt, which shall include both the type and 
start time of the Operational Halt. Each Plan participant shall 
continuously monitor communication protocols established by the 
Operating Committee and the Processor during market hours to 
disseminate notice of an Operational Halt, and the failure of a 
participant to do so shall not prevent the Exchange from initiating an 
Operational Halt.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\31\ Specifically, the 
proposal is consistent with Section 6(b)(5) of the Act \32\ because it 
would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system, and, in general, protect investors and 
the public interest.
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    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
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    As described above, the Exchange and other SROs are seeking to 
adopt harmonized rules related to halting and resuming trading in U.S.-
listed equity securities. The Exchange believes that

[[Page 16049]]

the proposed rules will provide greater transparency and clarity with 
respect to the situations in which trading will be halted and the 
process through which that halt will be implemented and terminated. 
Particularly, the proposed changes seek to achieve consistent results 
for participants across U.S. equities exchanges while maintaining a 
fair and orderly market, protecting investors and protecting the public 
interest. Based on the foregoing, the Exchange believes that the 
proposed rules are consistent with Section 6(b)(5) of the Act \33\ 
because they will foster cooperation and coordination with persons 
engaged in regulating and facilitating transactions in securities.
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    \33\ Id.
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    As discussed previously, the Exchange believes that the various 
provisions of the proposed rules that will apply to all SROs are 
focused on the type of cross-market event where a consistent approach 
will assist market participants and reduce confusion during a crisis. 
Because market participants often trade the same security across 
multiple venues and trade securities listed on different exchanges as 
part of a common strategy, the Exchange believes that the proposed 
rules will lessen the risk that market participants holding a basket of 
securities will have to deal with divergent outcomes depending on where 
the securities are listed or traded. Conversely, the proposed rules 
would still allow individual SROs to react differently to events that 
impact various securities or markets in different ways. This avoids the 
``brittle market'' risk where an isolated event at a single market 
forces all markets trading equities securities to halt or halts trading 
in all securities where the issue impacted only a subset of securities. 
By addressing both concerns, the Exchange believes that the proposed 
rules further the Act's goal of maintaining fair and orderly markets.
    The Exchange believes that the proposed rules' focus of 
responsibility on the Primary Listing Market for decisions related to a 
Regulatory Halt and the resumption of trading is consistent with the 
Act, which itself imposes obligations on exchanges with respect to 
issuers that are listed. As is currently the case, the Primary Listing 
Market would be responsible for the many regulatory functions related 
to its listings, including the determination of when to declare a 
Regulatory Halt. While these core responsibilities remain with the 
Primary Listing Market, trading in the security can occur on multiple 
exchanges that have unlisted trading privileges for the security, such 
as on the Exchange, or in the over-the-counter market, regulated by 
FINRA. The Exchange is responsible for monitoring activity on its own 
markets, but also must honor a Regulatory Halt.
    The proposed changes relating to Regulatory Halts would ensure that 
all SROs handle the situations covered therein in a consistent manner 
that would prevent conflicting outcomes in cross-market events and 
ensure that all trading centers recognize a Regulatory Halt declared by 
the Primary Listing Market. The changes are consistent with and 
implement the Amended Nasdaq UTP Plan.
    The Exchange believes that the definitions in the proposed rules 
are also consistent with the Act. The Exchange proposes adding 
definitions to Rule 2622(h)(1) to consolidate the various definitions 
that will be used in the Rule, some of which are taken from the Amended 
Nasdaq UTP Plan. The Exchange is adopting a modified form of the term 
``Extraordinary Market Activity'' from the Amended Nasdaq UTP Plan, as 
described above. In addition, several other definitions have been moved 
into the definitions section from elsewhere in the current rule without 
changes in the definitions. As noted, certain definitions are 
consistent with the definitions in the Amended Nasdaq UTP Plan, 
furthering the Act's goal of promoting fair and orderly markets. For 
example, the Exchange is proposing to adopt a definition of ``SIP 
Halt,'' to explicitly address a situation that may disrupt the markets, 
and this definition is identical to the definition in the Amended 
Nasdaq UTP Plan. In addition to ``SIP Halt,'' the Exchange is adopting 
the following terms from the Amended Nasdaq UTP Plan: ``Operating 
Committee,'' ``Operational Halt,'' ``Primary Listing Market,'' 
``Processor,'' ``Regulatory Halt,'' ``Regular Trading Hours,'' and 
``SIP Halt Resume Time,'' as discussed above.
    The Exchange believes that the proposed rules, which make halts 
more consistent across exchange rules, are consistent with the Act in 
that they will foster cooperation and coordination with persons engaged 
in regulating the equities markets. In particular, the Exchange 
believes it is important for SROs to coordinate when there is a 
widespread and significant event, as multiple trading centers are 
impacted in such an event. Further, while the Exchange recognizes that 
the proposed rule will not guarantee a consistent result on every 
market in all situations, the Exchange does believe that it will assist 
in that outcome. While the proposed rules relating to Regulatory Halts 
focuses primarily on the kinds of cross-market events that would likely 
impact multiple markets, individual SROs will still retain flexibility 
to deal with unique products or smaller situations confined to a 
particular market.
    Also consistent with the Act, and with the Amended Nasdaq UTP Plan, 
is the Exchange's proposal in Rule 2622(h)(3) to address Operational 
Halts, which are non-regulatory in nature and apply only to the 
exchange that calls the halt. As noted earlier, the Exchange presently 
has the ability to call an Operational Halt, but does so rarely. The 
Exchange believes that the markets would benefit from greater clarity 
regarding when an Operational Halt may be appropriate. The proposed 
change is designed to cover situations where the impact is limited to a 
single market. For example, a disruption at the Exchange, such as a 
technical issue affecting trading in one or more securities, could 
impact trading on the Exchange so significantly that an Operational 
Halt is appropriate in one or more securities. In such an instance, it 
would be in the public interest to institute an Operational Halt to 
minimize the impact of a disruption that, if trading were allowed to 
continue, might negatively affect a greater number of market 
participants. An Operational Halt does not implicate other trading 
centers.
    Proposed Rule 2622(h)(3) would authorize the Exchange to implement 
an Operational Halt for any security trading on the Exchange: (i) if it 
is experiencing Extraordinary Market Activity on the Exchange; or (ii) 
when otherwise necessary to maintain a fair and orderly market or in 
the public interest. Lastly, the proposed relocation of paragraphs 
(h)(2)-(5) of Exchange Rule 2622 to paragraphs (h)(2)(A)(i)(b)-(e) 
removes impediments to, and perfects the mechanism of, a free and open 
market and a national market system because it makes the rule easier to 
understand, thereby avoiding potential investor confusion.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposal is consistent with Section 
6(b)(8) of the Act \34\ in that it does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act as explained below.
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    \34\ 15 U.S.C. 78f(b)(8).
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    Importantly, the Exchange believes the proposal will not impose a 
burden on intermarket competition but will

[[Page 16050]]

rather alleviate any burden on competition because it is the result of 
a collaborative effort by all SROs to harmonize and improve the process 
related to the halting and resumption of trading in U.S.-listed equity 
securities, consistent with the Amended Nasdaq UTP Plan. In this area, 
the Exchange believes that all SROs should have consistent rules to the 
extent possible in order to provide additional transparency and 
certainty to market participants and to avoid inconsistent outcomes 
that could cause confusion and erode market confidence. The proposed 
changes would ensure that all SROs handle the situations covered 
therein in a consistent manner and ensure that all trading centers 
handle a Regulatory Halt consistently. The Exchange understands that 
all other non-Primary Listing Markets intend to file proposals that are 
substantially similar to this proposal.
    The Exchange does not believe that its proposals concerning 
Operational Halts impose an undue burden on competition. Under the 
existing Rules, the Exchange already possesses discretionary authority 
to impose Operational Halts for various reasons, including because of 
an order imbalance or influx that causes another national securities 
exchange to impose a trading halt in a security. As described earlier, 
the proposed Rule change clarifies and broadens the circumstances in 
which the Exchange may impose such Halts, and specifies procedures for 
both imposing and lifting them. The Exchange does not intend for these 
proposals to have any competitive impact whatsoever. Indeed, the 
Exchange expects that other exchanges will adopt similar rules and 
procedures to govern operational halts, to the extent that they have 
not done so already.
    The Exchange does not believe that the proposed rule change imposes 
a burden on intramarket competition because the provisions apply to all 
market participants equally. In addition, information regarding the 
halting and resumption of trading will be disseminated using several 
freely accessible sources to ensure broad availability of information 
in addition to the SIP data and proprietary data feeds offered by the 
Exchange and other SROs that are available to subscribers. In addition, 
the declaration and timing of trading halts and the resumption of 
trading is designed to avoid any advantage to those who can react more 
quickly than other participants. The proposals encourage early and 
frequent communication among the SROs, SIPs and market participants to 
enable the dissemination of timely and accurate information concerning 
the market to market participants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor 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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \35\ and Rule 19b-4(f)(6) \36\ 
thereunder.
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    \35\ 15 U.S.C. 78s(b)(3)(A).
    \36\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 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-PEARL-2023-11 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-PEARL-2023-11. 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 such 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-PEARL-2023-11 and should be 
submitted on or before April 5, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05269 Filed 3-14-23; 8:45 am]
BILLING CODE 8011-01-P