[Federal Register Volume 90, Number 126 (Thursday, July 3, 2025)]
[Notices]
[Pages 29600-29609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-12426]
[[Page 29600]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103356; File No. SR-NYSE-2025-21]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 7.18 To Effectuate Amendments to Second Restatement of the
CTA Plan and the Restated CQ Plan
June 30, 2025.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on June 17, 2025, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III 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 amend Rule 7.18 (``Halts'') to effectuate
amendments to Second Restatement of the CTA Plan and the Restated CQ
Plan (together, the ``Amended CTA Plan''). The Exchange proposes to
merge current Rule 123D (Halts in Trading) into the proposed revised
Rule 7.18. In addition, the Exchange proposes to make conforming
changes to Rules 1.1 and 7.11. 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
New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') proposes
to amend Rule 7.18 (``Halts'') to effectuate amendments to Second
Restatement of the CTA Plan and the Restated CQ Plan (together, the
``Amended CTA Plan'').\4\ The proposed changes would amend the rule's
categories of regulatory and operational halts, improve the rule's
clarity, and adopt defined terms from the Amended CTA Plan.\5\ The
Exchange proposes to merge current Rule 123D (Halts in Trading) into
the proposed revised Rule 7.18. In addition, the Exchange proposes to
make conforming changes to Rules 1.1 and 7.11.
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\4\ On February 3, 2021, the CTA/CQ Plan participants
(``Participants'') filed Amendment 36 to the Second Restatement of
the CTA Plan and Amendment 27 to the Restated CQ Plan, to revise
provisions governing regulatory and operational halts. See Letter
from Robert Books, Chair, CTA/CQ Operating Committee, to Vanessa
Countryman, Secretary, Securities and Exchange Commission, dated
February 3, 2021. The SEC approved the amendments on May 28, 2021
(the ``Amended CTA Plan''). See Securities Exchange Act Release No.
92070 (May 28, 2021), 86 FR 29849 (June 3, 2021) (SR-CTA/CQ-2021-
01). The SEC also approved similar amendments to the Nasdaq UTP
Plan. See Securities Exchange Act Release No. 92071 (May 28, 2021),
86 FR 29846 (June 3, 2021) (S7-24-89) (the ``Amended Nasdaq UTP
Plan''). The Amended CTA Plan and the Amended Nasdaq UTP Plan
include provisions requiring Participant self-regulatory
organizations (``SROs'') to honor a Regulatory Halt declared by the
Primary Listing Market. The provisions in the Amended CTA Plan and
the Amended Nasdaq UTP Plan include provisions similar to the
changes proposed by the Exchange in this filing.
\5\ The Exchange notes that this proposed rule change is based
on a similar rule change filed by the Nasdaq Stock Market LLC
(``Nasdaq'') that was approved by the SEC in 2022. See Securities
Exchange Act Release No. 95069 (June 8, 2022), 87 FR 36018 (June 14,
2022) (SR-NASDAQ-2022-017). In addition, the Exchange's affiliate
exchange, NYSE American LLC (``NYSE American''), has filed a similar
rule change. See Securities Exchange Act Release No. 102810 (April
10, 2025), 90 FR 16041 (April 16, 2025) (SR-NYSEAMER-2025-19).
Several exchanges that do not operate Primary Listing Markets have
also filed similar rule changes. See Securities Exchange Act Release
Nos. 96574 (December 22, 2022), 87 FR 80213 (December 29, 2022) (SR-
Phlx-2022-49); 97093 (March 9, 2023), 88 FR 16045 (March 15, 2023)
(SR-PEARL-2023-11); and 97824 (June 29, 2023), 88 FR 43159 (July 6,
2023) (SR-MEMX-2023-11).
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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 that 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 (its ``Primary Listing Market'') \6\ that is
responsible for a number of regulatory functions. These 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 and fair and orderly market. 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 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,\7\ 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 proposes to incorporate into Rule 7.18 the same
definition of ``Primary Listing Market'' as appears in Section
XI(a)(i)(H) of the Amended CTA Plan: ```Primary Listing Market'
means the 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\ See proposed Rule 7.18(a)(11).
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All SROs have rules that require them to honor a Regulatory Halt.
The Exchange, as a Primary Listing Market, also has rules outlining the
circumstances in which it will halt trading in its listed securities,
including situations in which such halts are for regulatory purposes--
and therefore are applicable to all markets trading the security--or
for operational purposes, which would not halt trading in other
markets.\8\ However, the trading halt rules are not consistent across
SROs.
[[Page 29601]]
Consequently, events that might constitute a Regulatory Halt for
securities listed on one Primary Listing Market theoretically might not
be grounds for a Regulatory Halt in securities listed on another
Primary Listing Market. Such inconsistency among exchange rules could
lead to confusion in circumstances such as a cross-market event,
including, for example, ``Extraordinary Market Activity.'' \9\
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\8\ See generally current Rules 7.13, 7.18, and 123D.
\9\ The proposed definition of Extraordinary Market Activity
encompasses a market event that affects multiple markets. See
Amended CTA Plan, Section XI(a)(i)(A), which defines ``Extraordinary
Market Activity.'' Proposed Rule 7.18(a)(1) would incorporate this
definition by reference.
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While the Exchange's existing rules generally have worked as
intended to afford the Exchange authority to initiate a Regulatory Halt
in appropriate cases, the Exchange proposes to amend its rules to
conform to the Amended CTA Plan.
The complex and interconnected market structure of the United
States relies on consolidated market data processed and disseminated by
the SIPs. In certain circumstances, the loss of this information or
issues with the accuracy or timeliness of the information might cause a
Primary Listing Market to determine that a trading halt is appropriate.
The Exchange believes that providing further details in its rules will
assist market participants in better understanding how various
scenarios could be handled.
As noted above, the proposed changes that would be uniformly
applied across SROs are those that relate to cross-market events as set
forth in the Amended CTA Plan. However, there will still be situations
where personnel at the Primary Listing Market will need to determine
the impact of the cross-market event on the securities listed on its
market and use discretion in deciding whether to halt trading in some
or all securities during a cross-market event that affects securities
listed on different markets. In making a determination as to whether to
declare a Regulatory Halt, the Primary Listing Market will consider the
totality of information available concerning the severity of the issue,
its likely duration, and its potential impact on Member Firms \10\ and
other market participants, and it will make a good-faith determination
that the criteria for declaring a Regulatory Halt have been satisfied
and that a Regulatory Halt is appropriate. Moreover, the Primary
Listing Market will consult, if feasible, with the affected Trading
Center(s), other Plan Participants, or the Processor, as applicable,
regarding the scope of the issue and what steps are being taken to
address the issue. Once a Regulatory Halt has been declared, the
Primary Listing Market would continue to evaluate the circumstances to
determine when trading may resume in accordance with its rules.
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\10\ ``Member Firm'' means a member as that term is defined in
Section 3(a)(3) of the Securities Exchange Act. See Amended CTA
Plan, Section XI(a)(1)(F) and proposed Rule 7.18(a)(6).
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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 and the unique relationship of the Primary Listing Market to its
listed companies. It is anticipated that these unique rules would most
likely be invoked in cases where the Primary Listing Market's decision
on whether to institute a Regulatory Halt turns on specific information
related to an individual security or issuer, such as the dissemination
of news and the issuer's ability to meet listing standards, rather than
broader market issue stemming from Extraordinary Market Activity or the
loss of consolidated market data from a SIP.
The Exchange will implement the changes proposed herein in
conjunction with other SROs implementing the necessary rule changes.
The Exchange will publish a trader notice at least 30 business days
before implementing the proposed changes.
Proposed Exchange Rule Changes
The Exchange proposes to amend Rule 7.18 to add new definitions and
proposed categories of regulatory and operational halts that are
designed to address the type of market-wide events described in the
Amended CTA Plan. Amended Rule 7.18 would also cross-reference the
Exchange's current halt authority, which is located in current Rules
7.18 and 123D and in the Listed Company Manual. The Exchange also
proposes to rename Rule 7.18 from ``Halts'' to ``Trading Halts.''
Definitions
Amended Rule 7.18(a) would set forth definitions, many of which
cross-reference definitions in the Amended CTA Plan.\11\ The proposed
definitions would apply to both the proposed new halt authority as well
as the Exchange's halt authority under its current rules.
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\11\ The Exchange notes that these terms are defined identically
in the Amended CTA Plan and the Amended Nasdaq UTP Plan, such that
there will be uniformity in the meaning of the terms among such
plans as well as among the rules of the SROs. The Exchange proposes
to adopt in Rule 7.18(a) all of the definitions in the Amended CTA
Plan Section XI(a)(i) except for definition of ``Regular Trading
Hours'' at Section XI(a)(i)(I), because the Exchange uses different
terminology for its trading sessions and those terms are already
defined in the Exchange's rules. See Rule 7.34(a) defining ``Early
Trading Session'' and ``Core Trading Session.''
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First, the Exchange proposes to add the definition of ``Primary
Listing Market'' \12\ to Rule 7.18, which will have the same meaning as
in the Amended CTA Plan, Section XI(a)(i)(H). As is currently the case
under the Exchange's rules and under the Amended CTA 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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\12\ See proposed Rule 7.18(a)(9).
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Second, the Exchange proposes to add a definition for the term
``Extraordinary Market Activity,'' \13\ which would be a new definition
for the Exchange. The Exchange proposes that this term would have the
same meaning as in the Amended CTA Plan:
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\13\ See proposed Rule 7.18(a)(1).
``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, transaction
[[Page 29602]]
information, or regulatory messages for a sustained period.\14\
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\14\ See Amended CTA Plan, Section XI(a)(i)(H).
The Exchange notes that the three scenarios included in the
proposed new definition would not be exhaustive. This enables the
Primary Listing Market to act in the best interests of the market when
confronted with unexpected events. However, the Exchange believes that
the three scenarios included in the rule cover many of the events that
are most likely to occur.
Third, the Exchange proposes to add a set of new definitions that
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 CTA Plan, the Exchange believes that the critical role of the
SIPs in market infrastructure weighs in favor having the Exchange's
rules specify how such events would be handled. The definitions of
``SIP Outage,'' \15\ ``Material SIP Latency,'' \16\ ``SIP Halt,'' \17\
and ``SIP Halt Resume Time'' \18\ are intended to provide specificity
to address this subset of potential market issues. In addition, the
Exchange is proposing to define terms related to SIP governance needed
in order to understand these definitions:
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\15\ See proposed Rule 7.18(a)(14).
\16\ See proposed Rule 7.18(a)(5).
\17\ See proposed Rule 7.18(a)(12).
\18\ See proposed Rule 7.18(a)(13).
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``Processor'' or ``SIP'' \19\ would have the same meaning
as the term ``Processor'' in the Nasdaq UTP Plan or the CTA Plan, as
applicable.\20\
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\19\ See proposed Rule 7.18(a)(10).
\20\ See, e.g., Amended CTA Plan, Section I(x), which provides:
`` `Processor' means the organization designated as recipient and
processor of last sale price information furnished by Participants
pursuant to this CTA Plan, as Section V describes.''
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``SIP Plan'' \21\ would be defined as ``the national
market system plan governing the SIP, as applicable.''
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\21\ See proposed Rule 7.18(a)(15).
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``Operating Committee'' \22\ would be defined as having
the same meaning as in the CTA Plan, namely the committee charged with
administering the CTA Plan.
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\22\ See proposed Rule 7.18(a)(7).
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``Trading Center'' \23\ would have the same meaning as in
Rule 600(b)(95) of Regulation NMS.
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\23\ See proposed Rule 7.18(a)(16).
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The Exchange proposes to adopt a category of Regulatory Halt,
called a ``SIP Halt,'' \24\ that would have the same meaning as that
term is defined in the Amended CTA 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.'' \25\
This new category of Regulatory Halt would address situations where the
Primary Listing Market declares a Regulatory Halt in one or more
securities as a result of a SIP Outage \26\ or a Material SIP
Latency.\27\
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\24\ See proposed Rule 7.18(a)(12).
\25\ See Amended CTA Plan, Section XI(a)(1)(K).
\26\ ``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 CTA Plan, Section XI(a)(1)(M).
\27\ ``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 high speed line or over the ``high
speed line'' under the CQ Plan, 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 CTA Plan, Section XI(a)(1)(E).
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Fourth, the Exchange proposes to add a definition of ``Regulatory
Halt,'' \28\ which would be a new defined term that incorporates the
Exchange's existing regulatory halt authority as well as the proposed
new regulatory halt authority. The Exchange proposes that the term
would have the same meaning as in the Amended CTA Plan,\29\ as follows:
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\28\ See proposed Rule 7.18(a)(11).
\29\ See Amended CTA Plan, Section XI(a)(1)(J).
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,\30\ a halt based on Extraordinary Market
Activity, a trading halt triggered by a Market-Wide Circuit
Breaker,\31\ and a SIP Halt.
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\30\ The Exchange proposes to incorporate the Amended CTA Plan's
definition of ``Limit Up Limit Down.'' See proposed Rule 7.18(a)(2).
\31\ The Exchange proposes to incorporate the Amended CTA Plan's
definition of ``Market-Wide Circuit Breaker.'' See proposed Rule
7.18(a)(4).
The term ``Regulatory Halt'' would include the various existing
reasons for a Regulatory Halt that are currently enumerated in the
Exchange's rules and Company Guide, as well as the proposed new
categories of Regulatory Halt from the Amended CTA Plan: (1) a SIP Halt
(due to a SIP Outage or Material SIP Latency), (2) a halt based on
Extraordinary Market Activity, and (3) a halt in the event of a
national, regional, or localized disruption that necessitates a
Regulatory Halt to maintain a fair and orderly market.
Fifth, the Exchange proposes to add a definition of ``Operational
Halt,'' \32\ which would be a new definition for the Exchange. The
Exchange proposes that this term would have the same meaning as in the
Amended CTA Plan, which is: ``a halt in trading in one or more
securities only on a Market declared by such Participant and is not a
Regulatory Halt.'' \33\ An Operational Halt is effective only on the
Exchange; other markets are not required to halt trading in the
affected securities. In practice, the Exchange has always had the
capacity to implement operational halts and local trading suspensions
in specified circumstances, but such halts are not currently referred
to as ``operational halts'' in the Exchange's rules.\34\ 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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\32\ See proposed Rule 7.18(a)(8).
\33\ See Amended CTA Plan, Section XI(a)(1)(G).
\34\ See Rule 7.13 (Trading Suspensions).
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Regulatory Halts
Proposed Rule 7.18(b) would set forth requirements relating to
Regulatory Halts.
Authority to Initiate a Regulatory Halt
Proposed Rule 7.18(b)(1) would describe the Exchange's authority to
initiate a Regulatory Halt. In this subsection, the Exchange would
identify all of the bases for its Regulatory Halt authority, including
cross-referencing to current rules describing existing halt authority
and by adding the new Regulatory Halt authority consistent with the
Amended CTA Plan.
Proposed Rule 7.18(b)(1)(A) would describe ``Mandatory Halts,''
where the Exchange must issue a Regulatory Halt. The proposed rule
would identify five categories of mandatory Regulatory Halts:
Pursuant to Rule 7.11 concerning Limit Up Limit Down.\35\
(Proposed Rule 7.18(b)(1)(A)(i)). This proposed rule would effectuate
the definition of Regulatory Halt in proposed Rule 7.18(a)(11), which
cross-references Section XI(a)(1)(J) of the Amended CTA Plan.
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\35\ Rule 7.11 is the Exchange's rule governing Limit Up Limit
Down.
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[[Page 29603]]
Pursuant to Rule 7.12 concerning Market-Wide Circuit
Breaker.\36\ (Proposed Rule 7.18(b)(1)(A)(ii)). This proposed rule
would effectuate the definition of Regulatory Halt in proposed Rule
7.18(a)(11), which cross-references Section XI(a)(1)(J) of the Amended
CTA Plan.
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\36\ Rule 7.12 is the Exchange's rule governing Market-Wide
Circuit Breaker.
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For a security for which the Exchange is the Primary
Listing Market before the end of the Late Trading Session on the day
immediately before the market effective date of a reverse stock split
(``Reverse Stock Split Halt''). (Proposed Rule 7.18(b)(1)(A)(iii)).
This proposed rule is based on current Rule 123D(f) and would
effectuate Section XI(a)(iii)(1) of the Amended CTA Plan, which
provides that a Primary Listing Exchange may declare a Regulatory Halt
``as provided for in the rules of the Primary Listing Market.'' The
Exchange proposes to delete current Rule 123D(f) as duplicative of the
proposed rule text.
If the Exchange becomes aware that, with respect to
Derivative Securities Products listed on the Exchange for which a Net
Asset Value (``NAV'') (and in the case of Managed Fund Shares under
Rule 8.600 and Managed Trust Securities under Rule 8.700, a Disclosed
Portfolio) is disseminated, such NAV or Disclosed Portfolio is not
being disseminated to all market participants at the same time
(``Dissemination Halt''). (Proposed Rule 7.18(b)(1)(A)(iv)). This
proposed rule is based on current Rule 7.18(d)(2) and would effectuate
Section XI(a)(iii)(1) of the Amended CTA Plan, which provides that a
Primary Listing Exchange may declare a Regulatory Halt ``as provided
for in the rules of the Primary Listing Market.'' The Exchange proposes
to delete current Rule 7.18(d)(2) as duplicative of the proposed rule
text.
As provided for elsewhere in the Rules of the Exchange,
including but not limited to Rules 5.1, 5.2, 5.5, 8.3, 8.12, 8.100,
8.200, 8.202, 8.204, 8.400, 8.500, 8.600, 8.601, 8.700, and 8.900
concerning requirements for listing, delisting, and maintaining
listings of certain types of securities, and in Sections 202.06 and
202.07 of the Exchange's Listed Company Manual regarding the public
dissemination of material information. (Proposed Rule
7.18(b)(1)(A)(v)). This proposed rule would effectuate Section
XI(a)(iii)(1) of the Amended CTA Plan, which provides that a Primary
Listing Exchange may declare a Regulatory Halt ``as provided for in the
rules of the Primary Listing Market.''
Proposed Rule 7.18(b)(1)(B) would describe ``Discretionary Halts,''
where ``the Exchange may declare a Regulatory Halt in trading for any
security for which it is the Primary Listing Market.'' The proposed
rule would list four bases for the Exchange to declare a discretionary
Regulatory Halt:
For a security that is the subject of an initial pricing
on the Exchange and that has not been listed on a national securities
exchange immediately prior to initial pricing (an ``Initial Listing
Regulatory Halt''). (Proposed Rule 7.18(b)(1)(B)(i)). This proposed
rule is based on current Rule 123D(d) and would effectuate Section
XI(a)(iii)(1) of the Amended CTA Plan, which provides that a Primary
Listing Exchange may declare a Regulatory Halt ``as provided for in the
rules of the Primary Listing Market.'' The Exchange proposes to delete
current Rule 123D(d) as duplicative of the proposed rule text.
If the Exchange determines that there is a SIP Outage,
Material SIP Latency, or Extraordinary Market Activity. (Proposed Rule
7.18(b)(1)(B)(ii)). This proposed rule would effectuate Section
XI(a)(iii)(2) of the Amended CTA Plan, which provides this authority.
In the event of national, regional, or localized
disruption that necessitates a Regulatory Halt to maintain a fair and
orderly market. (Proposed Rule 7.18(b)(1)(B)(iii)). This proposed rule
would effectuate Section XI(a)(iii)(3) of the Amended CTA Plan, which
provides this authority.
As provided for elsewhere in the Rules of the Exchange,
including but not limited to Rules 5.1, 5.2, 5.5, 8.3, 8.12, 8.100,
8.200, 8.202, 8.204, 8.400, 8.500, 8.600, 8.601, 8.700, and 8.900
concerning requirements for listing, delisting, and maintaining
listings of certain types of securities, and in Sections 202.06 and
202.07 of the Exchange's Listed Company Manual regarding the public
dissemination of material information. (Proposed Rule
7.18(b)(1)(B)(iv)). This proposed rule would effectuate Section
XI(a)(iii)(1) of the Amended CTA Plan, which provides that a Primary
Listing Exchange may declare a Regulatory Halt ``as provided for in the
rules of the Primary Listing Market.''
Communications
Proposed Rule 7.18(b)(2) would describe communications, consistent
with Section XI(a)(viii) of the Amended CTA Plan. The proposed rule
would provide that whenever, in the exercise of its regulatory
functions, the Exchange as Primary Listing Market for an Eligible
Security determines it is appropriate to initiate a Regulatory Halt, it
will notify all other Participants and the Processor of such Regulatory
Halt as well as provide notice that a Regulatory Halt has been lifted
using such protocols and other emergency procedures as may be mutually
agreed to between the Operating Committee and the Exchange. The
Processor shall disseminate to Participants notice of the Regulatory
Halt (as well as notice of the lifting of a Regulatory Halt) through
the high speed line or through the ``high speed line'' under the CQ
Plan, and any other means the Processor, in its sole discretion,
considers appropriate. Each Participant shall be required to
continuously monitor these communication protocols established by the
Operating Committee and the Processor during market hours, and the
failure of a Participant to do so shall not prevent the Exchange from
initiating a Regulatory Halt in accordance with the SIP Plan and the
procedures specified in these rules.
Initiating a Regulatory Halt
Proposed Rule 7.18(b)(3) would specify how the Exchange, as a
Primary Listing Market, would initiate a Regulatory Halt. The proposed
rule is consistent with the procedures for initiating a Regulatory Halt
as set forth in the Section XI(a)(iv) of the Amended CTA Plan.
Proposed Rule 7.18(b)(3)(A) would provide, consistent with Section
XI(a)(iv)(A) of the Amended CTA Plan, that the start time of a
Regulatory Halt would be when the Primary Listing Market declares the
halt, regardless of whether an issue with communications impacts the
dissemination of the notice. 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
start time will allow SROs to revisit trades after the fact and
determine in a consistent manner whether specific trades should stand.
Second, proposed Rule 7.18(b)(3)(B) would provide, consistent with
Section XI(a)(iv)(B) of the Amended CTA Plan, that if the SIP is unable
to disseminate
[[Page 29604]]
notice of a Regulatory Halt or the Exchange is not open for trading,
the Exchange would take reasonable steps to provide notice of a
Regulatory Halt in the manner set forth in the Amended CTA Plan.
Currently, after receiving notice from the Primary Listing Market, the
SIP disseminates an automated, machine-readable trade halt messages to
notify Trading Centers to automatically halt their order matching and
order dissemination systems. Many Trading Centers rely solely on such
SIP dissemination of a Regulatory Halt. Proposed Rule 7.18(b)(3)(B)
would provide that the Exchange would take additional, reasonable steps
to notify Trading Centers of a Regulatory Halt. The Amended CTA Plan
provides that if the SIP is unable to disseminate notice of a
Regulatory Halt, the other available means of dissemination that a
Primary Listing Market could use would include:
Proprietary data feeds that contain the same quote and
trade information that the Exchange also sends to the applicable SIP;
Posting on a publicly available Exchange website; or
System status messages that are disseminated to market
participants who sign up to receive such messages.\37\
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\37\ See Amended CTA Plan, Section XI(a)(iv)(B)(1)-(3).
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These additional sources for notice of a Regulatory Halt would
provide redundancy if either the SIP or the Exchange is unable to
communicate via the existing automated procedures. Although it may take
longer for market participants to react to messages received in less
automated formats, the use of multiple forms of dissemination will
increase the likelihood that participants receive this important
information. It will also assist participants that do not subscribe to
the Exchange's proprietary feeds in getting regulatory notices. As
noted above, in situations where communication is interrupted, the
Exchange and other SROs would retain the ability to break trades that
occurred after the start of the Regulatory Halt in appropriate
circumstances, thereby lessening the potential impact on participants
that were delayed in halting trading.
Proposed Rule 7.18(b)(3)(C) would provide, consistent with Section
XI(a)(iv)(C) of the Amended CTA Plan, that except in exigent
circumstances, the Exchange would not declare a Regulatory Halt
retroactive to a time earlier than the notice of such halt. Feedback
from market participants has been that it is very disruptive to trading
when the Primary Listing Market sets the start of a trading halt for a
time earlier than the notice of the halt.\38\ Therefore, in almost all
situations the trading halt will start at the time of the notice or at
a point in time thereafter. However, the Exchange would retain the
authority to implement a retroactive halt to deal with unexpected and
significant situations that represent exigent circumstances. While it
is difficult in advance to provide an exhaustive list of when
retroactive application of a trading halt would be in the public
interest, one situation where a halt was applied retroactively was when
the Primary Listing Market erroneously lifted a Regulatory Halt. In
that case, the Primary Listing Market instituted a Regulatory Halt
retroactively so that it coincided with the time the original halt was
lifted in error.
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\38\ As noted previously, this is measured as the point in time
when the Primary Listing Market declares the halt, regardless of
whether there is a delay in dissemination of the notice or in
receipt of the notice by participants.
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Proposed Rule 7.18(b)(3)(D) would provide, consistent with Section
XI(a)(iii)(B) of the Amended CTA Plan, that in making a determination
to declare a Regulatory Halt in trading any security for which the
Exchange is the Primary Listing Market, the Exchange will consider the
totality of information available concerning the severity of the issue,
its likely duration, and potential impact on Member Firms and other
market participants and will make a good-faith determination that the
criteria for declaring the Regulatory Halt have been satisfied and that
a Regulatory Halt is appropriate. The Exchange will consult, if
feasible, with the affected Trading Center(s), other SIP Plan
Participants, or the Processor, as applicable, regarding the scope of
the issue and what steps are being taken to address the issue. Once a
Regulatory Halt has been declared, the Exchange will continue to
evaluate the circumstances to determine when trading may resume in
accordance with its Rules.
UTP Regulatory Halt
Proposed Rule 7.18(b)(4) would specify how the Exchange would
respond to Regulatory Halts declared by other Primary Listing Markets,
referred to by the Exchange as a ``UTP Regulatory Halt.'' \39\
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\39\ The term ``UTP Listing Market'' is defined in Rule 1.1(aa)
to mean the primary listing market for a UTP Security. The term
``UTP Security'' is defined in Rule 1.1(cc) to mean a security that
is listed on a UTP Listing Market and that trades on the Exchange
pursuant to unlisted trading privileges. The term ``UTP Regulatory
Halt'' is defined in Rule 1.1(bb). The Exchange proposes a non-
substantive amendment to this definition to cross-reference the
definition of ``Regulatory Halt'' in proposed Rule 7.18 and delete
the clause ``that requires all market centers to halt trading in
that security'' as duplicative of the proposed new definition of
Regulatory Halt, described above.
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Proposed Rule 7.18(b)(4)(A) would provide that the Exchange would
halt trading in a UTP Security when the Primary Listing Market declares
a Regulatory Halt for any such securities. This proposed rule text is
based on Section XI(a)(iii) of the Amended CTA Plan, as well as the
first sentence of current Rule 7.18(a),\40\ which provides in part that
if the UTP Listing Market declares a UTP Regulatory Halt, the Exchange
will halt trading in that security.
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\40\ As discussed below, the Exchange proposes to delete current
Rule 7.18(a) in its entirety as no longer applicable.
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Proposed Rule 7.18(b)(4)(B)(i), (ii), and (iii) would set forth
rules for trading halts in UTP Exchange Traded Products.\41\ This
proposed rule text is based on current Rule 7.18(d)(1)(A) and (B) with
non-substantive differences to replace the term ``UTP Derivative
Securities Product'' with the term ``UTP Exchange Traded Product,'' the
term ``Exchange's Normal Trading Hours'' with the term ``Core Trading
Session,'' \42\ and the term ``primary listing market'' with the term
``Primary Listing Market'' in proposed Rule 7.18(b)(4)(B)(ii) and
(iii)(a) and (b). The Exchange proposes to delete current Rule 7.18(d)
and its sub-paragraphs as duplicative of the proposed rule text.
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\41\ The term ``UTP Exchange Traded Product'' is defined in Rule
1.1E(l) to mean a security that meets the definition of ``derivative
securities product'' in Rule 19b-4(e) under the Securities Exchange
Act of 1934 and that trades on the Exchange pursuant to unlisted
trading privileges.
\42\ The term ``Core Trading Hours'' is defined in Rule 1.1(d)
to mean the hours of 9:30 a.m. Eastern Time through 4:00 p.m.
Eastern Time or such other hours as may be determined by the
Exchange from time to time.
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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 (for
example, trading in Exchange-listed securities resumes on the Exchange
in most cases pursuant to Rule 7.35), 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
resume trading in good faith, and
[[Page 29605]]
certain parts of the complex process for 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
Core 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.
Proposed Rule 7.18(b)(5) provides the process for resuming trading
upon the conclusion of Regulatory Halts other than SIP Halts. This new
rule would effectuate Section XI(a)(v) of the Amended CTA Plan.
Proposed Rule 7.18(b)(5)(A) would make clear that the Exchange, as
the Primary Listing Market, is responsible for declaring a resumption
of trading when it makes a good-faith determination that trading may
resume in a fair and orderly manner in accordance with its rules.
Proposed Rule 7.18(b)(5)(B) would provide that the Exchange would
resume trading after a Regulatory Halt other than a SIP Halt with a
Trading Halt Auction pursuant to Rule 7.35, except in the situations
enumerated in sub-paragraphs (i) through (v).
Sub-paragraph (i) would specify that the Exchange would resume
trading after a Limit Up Limit Down trading pause as specified in Rule
7.11.
Sub-paragraph (ii) would specify that the Exchange would resume
trading after a Market-Wide Circuit Breaker halt as specified in Rule
7.12.
Sub-paragraph (iii) would specify that the Exchange would resume
trading after a Reverse Stock Split Halt with a Trading Halt Auction no
earlier than 9:30 a.m., at the start of the Exchange's Core Trading
Session, on the effective date of the reverse stock split. This
language is identical to current Rule 123D(f), except that the Exchange
proposes to change the current rule's provision that it would resume
trading with a Trading Halt Auction ``at 9:30 a.m.'' to ``no earlier
than 9:30 a.m.'' This reflects the fact that the Trading Halt Auction
would be a DMM-facilitated auction and that the DMM would commence the
auction process no earlier than 9:30 a.m.
Sub-paragraph (iv) would specify that the Exchange would resume
trading after a Dissemination Halt with a Trading Halt Auction when the
NAV or Disclosed Portfolio is available to all market participants.
Sub-paragraph (v) would specify that the Exchange would resume
trading after an Initial Listing Regulatory Halt when the DMM opens the
security.
Sub-paragraph (vi) would provide that the Exchange would resume
trading after a UTP Regulatory Halt other than a SIP Halt by starting
to accept orders after the Exchange receives notification \43\ from the
UTP Listing Market that the Regulatory Halt has been terminated,
provided that during Core Trading Hours, the Exchange will not resume
trading in any security that is subject to the Limit Up Limit Down Plan
until the Exchange receives the first Price Band in that security. This
proposed rule text is based on the first sentence of current Rule
7.18(a), and the Exchange proposes to delete the first sentence of
current Rule 7.18 as duplicative of this new rule text.\44\ Sub-
paragraph (vi) would further provide that the Exchange would not
conduct a Trading Halt Auction to resume trading after a Regulatory
Halt in a UTP Security.
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\43\ The manner and timing of such notice would be determined by
the UTP Listing Market.
\44\ The Exchange does not propose to include the second
sentence of current Rule 7.18(a) in the proposed rule, as that
sentence is inconsistent with the first sentence (upon which
proposed Rule 7.18(b)(5)(B)(v) is based), and would permit the
Exchange to resume trading in a security affected by a UTP
Regulatory Halt other than a SIP Halt before the UTP Listing Market
has provided notification that the halt has ended and before the
Exchange receives the first LULD Price Bands in that security. The
Exchange accordingly proposes to delete the second sentence of
current Rule 7.18(a).
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Proposed Rule 7.18(b)(6) would address resumption of trading after
a SIP Halt. This new rule would effectuate Section XI(a)(vi) of the
Amended CTA Plan.
Proposed Rule 7.18(b)(6)(A) would establish rules for the
resumption of trading following a SIP Halt initiated by the Exchange.
Proposed Rule 7.18(b)(6)(A)(i), which is based on Section XI(a)(vi)(A)
of the Amended CTA Plan, would provide that the Exchange would
determine when a SIP Halt would end, which would be defined as the
``SIP Halt Resume Time,'' which is also defined in the Proposed Amended
CTA Plan.\45\ As further proposed, in making this determination, the
Exchange would make a good-faith determination and consider the
totality of information to determine whether resuming trading would
promote a fair and orderly market.
---------------------------------------------------------------------------
\45\ See Amended CTA Plan, Section XI(a)(i)(L).
---------------------------------------------------------------------------
The SROs' experience with such events is that communication among
SROs, SIPs, and market participants is the best way to ensure that the
Primary Listing Market has access to available information and to
coordinate the reopening of trading in an orderly manner. In addition,
the SROs anticipate that market participants and other affected
entities will have access to information about the issue causing the
SIP Halt, the duration of the halt, and the resumption process through
updated communications from the SIP processor, Operating Committee, and
Primary Listing Market. Accordingly, the proposed Rule 7.18(b)(6)(A)(i)
would further provide that when determining whether to resume trading,
the Exchange would include input from the SIP processor, the Operating
Committee, or the operator of the system in question (as well as any
Trading Center(s) to which such system is linked), regarding
operational readiness to resume trading. The rule would further provide
that the Exchange would retain discretion to delay the SIP Halt Resume
Time if it believes trading would not resume in a fair and orderly
manner.
Under proposed Rule 7.18(b)(6)(A)(ii), before terminating a SIP
Halt, the Exchange would issue a notification that specifies the SIP
Halt Resume Time. Section XI(a)(vi)(B) of the Amended CTA Plan directs
the Primary Listing Market to specify in its rules (a) the minimum
notice it will provide of a SIP Halt Resume Time, during which period
market participants may enter quotes in the affected securities, and
(b) the last SIP Halt Resume Time before the end of regular trading
hours. In accordance with that direction, Proposed Rule
7.18(b)(6)(A)(ii) would state that the Exchange would provide for a
minimum five-minute notice of a SIP Halt Resume Time, which is
sufficiently in advance of resumption to permit market participants to
prepare their systems for trading.
In addition, proposed Rule 7.18(b)(6)(A)(ii) would establish that
during Core Trading Hours, the last SIP Halt Resume Time would be 15
minutes before the end of Core Trading Hours, e.g., 3:45 p.m. ET. The
Exchange believes that a SIP Halt Resume Time after 3:45 p.m. ET would
interrupt a fair and orderly closing process. Accordingly, in such
case, the Exchange would not run a Closing Auction and would establish
Official Closing Prices for securities affected by the SIP Halt
pursuant to Rule 1.1(u)(2) and (3), which set forth how the Exchange
will determine the Official Closing Price if the Exchange is unable to
conduct a closing transaction in one or more securities due to a
systems or technical issue. In such case, the Exchange would
[[Page 29606]]
disseminate a SIP Halt Resume Time after Core Trading Hours.
Proposed Rule 7.18(b)(6)(A)(ii) would further provide the Exchange,
as the Primary Listing Market, with discretion to stagger the SIP Halt
Resume Times for multiple securities in order to reopen in a fair and
orderly manner. For example, this discretion could be used to open
trading in a small number of symbols to ensure that systems are
operating normally before resuming trading in the remaining symbols.
Proposed Rule 7.18(b)(6)(A)(iii) would provide that the Exchange
would reopen trading after a SIP Halt in Exchange-listed securities
with Exchange-facilitated Trading Halt Auctions pursuant to Rule 7.35C.
The Exchange notes that Rule 7.35C(a) generally provides that the
Exchange will conduct an Auction ``[i]f a DMM cannot facilitate an
Auction for one or more securities in which the DMM is registered under
Rules 7.35A or 7.35B,'' but in the case of resuming trading after a SIP
Halt, the Exchange will facilitate all such Trading Halt Auctions in
the first instance, without waiting for DMMs to attempt to reopen the
securities. A SIP Halt would affect all securities in a similar manner,
unlike other halt events that can reflect varying levels of volatility
in different securities. Given the uniformity of the impact of a SIP
Halt, the Exchange believes that the Exchange-facilitated Trading Halt
Auction is a reasonable way to resume trading after a SIP Halt.
Proposed Rule 7.18(b)(6)(B) would address resumption of trading
after a SIP Halt initiated by a UTP Listing Market. The proposed rule
would provide that for UTP Securities affected by a SIP Halt, during
Core Trading Hours, the Exchange may resume trading in the affected
security after trading in the affected security has resumed on the UTP
Listing Market or notice has been received from the UTP Listing Market
that such trading may resume. The proposed rule would further provide
that during Core Trading Hours, if the UTP Listing Market does not open
a security within the amount of time listed by the rules of the Primary
Listing Market, the Exchange may resume trading in that security,
provided that the Exchange will not resume trading in any security that
is subject to the Limit Up Limit Down Plan until it receives the first
Price Band in that security.\46\ Outside of Core Trading Hours, the
Exchange may resume trading in an affected UTP Security after the SIP
Halt Resume Time.
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\46\ The Exchange's proposal to wait for the first Limit Up
Limit Down Price Band in the affected UTP Security before resuming
trading after a SIP Halt initiated by a UTP Listing Market is
consistent with the Exchange's practice for resuming trading in
affected UTP Securities after other types of Regulatory Halts. See
proposed Rule 7.18(b)(5)(B)(v) and current Rule 7.18(a).
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Order Processing During a Regulatory Halt, Including SIP Halts
Proposed Rule 7.18(b)(7) would describe how the Exchange would
process new and existing orders during a Regulatory Halt. This proposed
rule text is based on current Rule 7.18(b) and (c), with differences
described below. The Exchange proposes to delete current Rule 7.18(b)
and (c) and their sub-paragraphs as duplicative of the proposed rule
text.
Proposed Rule 7.18(b)(7)(A) would address how the Exchange would
process new and existing orders during a Regulatory Halt that will
reopen with a Trading Halt Auction. This proposed rule is based on
current Rule 7.18(c) with differences to use new terminology relating
to Regulatory Halts instead of referring to ``securities listed on the
Exchange during a halt, suspension or pause.'' The Exchange also
proposes to specify that the order processing described in this rule
would only be applicable for Regulatory Halts if the Exchange reopens
with a Trading Halt Auction. Proposed Rules 7.18(b)(7)(A)(i)-(vi) are
based on current Rule 7.18(c)(1)-(6) without any substantive
differences.
Proposed Rule 7.18(b)(7)(B) would address how the Exchange would
process new and existing orders in a UTP Security during a UTP
Regulatory Halt (including a SIP Halt initiated by a UTP Listing
Market). This proposed rule text is based on current Rule 7.18(b) with
non-substantive differences to use new terminology. Proposed Rule
7.18(b)(7)(B)(i)-(vi) are based on current Rule 7.18(b)(1)-(6) without
any substantive differences.
Operational Halts
The Exchange proposes to address Operational Halts in proposed Rule
7.18(c). As noted above, an Operational Halt is non-regulatory in
nature and applies only to the exchange that calls the halt. As
described above, the Exchange has always had the capacity to implement
operational halts and local trading suspensions in specified
circumstances, but such halts are not currently referred to as
``operational halts'' in the Exchange's rules.\47\ As part of the
Exchange's assessment with 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.
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 CTA 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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\47\ See Rule 7.13E (Trading Suspensions) and Rule 123D(e)
regarding ``Equipment Changeover'' halts. The Exchange also notes
that its proposed Rule 7.18(c) regarding Operational Halts is
substantially identical to the revised NYSE American, Nasdaq, Phlx,
MIAX Pearl, and MEMX rules cited in note 4 above, and is therefore
not novel.
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Proposed Rule 7.18(c)(1) would specify the Exchange's authority to
initiate an Operational Halt, which is discretionary, and provide that
the Exchange may declare an Operational Halt for any security trading
on the Exchange if it is experiencing Extraordinary Market Activity on
the Exchange (Proposed Rule 7.18(c)(1)(A)) or when otherwise necessary
to maintain a fair and orderly market or in the public interest
(Proposed Rule 7.18(c)(1)(B)).\48\
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\48\ The Exchange proposes to delete current Rule 123D(e)
(Equipment Changeover), an antiquated provision establishing an
Exchange-only halt for the purpose of physically replacing faulty
equipment. That rule predates the Pillar trading system and is no
longer used. Additionally, in light of the fact that the Exchange
proposes to incorporate the remainder of current Rule 123D (i.e.,
paragraphs (d) and (f)) into the proposed Rule 7.18 (see proposed
Rule 7.18(b)(1)(A)(iv) and (b)(1)(B)(ii)), the Exchange proposes to
delete the entirety of current Rule 123D.
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Under proposed Rule 7.18(c)(2), the Exchange would notify the
Processor if it has concerns about its ability to collect and transmit
quotes, orders, or last sale prices, or where it has declared an
Operational Halt or suspension of trading in one or more Eligible
Securities (as that term is defined in the CTA Plan), pursuant to the
procedures adopted by the Operating Committee.
Proposed Rule 7.18(c)(3) would set out rules for order processing
during an Operational Halt. In such case, proposed Rule 7.18(c)(3)(A)
would provide that the Exchange would cancel all unexecuted orders
resting on the Exchange Book, including Auction-Only
[[Page 29607]]
Orders, and proposed Rule 7.18(c)(3)(B) would provide that the Exchange
would reject all other incoming order instructions until the Exchange
resumes trading. The Exchange currently processes new and existing
orders in this manner when it suspends trading.\49\ The Exchange
proposes to include this processing in Rule 7.18 to specify that this
processing would also be applicable to when the Exchange resumes
trading following an Operational Halt in an Exchange-listed security.
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\49\ See current Rule 7.18(c).
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Proposed Rule 7.18(c)(4) would specify how the Exchange resumes
trading after an Operational Halt. Proposed Rule 7.18(c)(4)(A) would
provide that the Exchange would resume trading following an Operational
Halt when it determines that trading may resume in a fair and orderly
manner consistent with the Exchange's rules. Proposed Rule
7.18(c)(4)(B) would address ``Communications,'' and provide that
trading in a halted security shall resume at the time specified by the
Exchange in a notice. It would further specify that Exchange will
notify all other Plan participants and the SIP of such Operational Halt
as well as provide notice that an Operational Halt has been lifted
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 would 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.
Conforming Changes to Other Rules
The Exchange also proposes non-substantive amendments of two other
rules.
First, as noted above, the Exchange proposes a non-substantive
amendment to the definition of ``UTP Regulatory Halt'' in Rule 1.1E(bb)
to cross-reference the definition of ``Regulatory Halt'' in proposed
Rule 7.18 and delete the clauses ``trade, suspension, halt, or pause''
and ``that requires all market centers to halt trading in that
security'' as duplicative of the proposed new definition of Regulatory
Halt.
Second, the Exchange proposes to amend Rule 7.11 (Limit Up-Limit
Down Plan and Trading Pauses in Individual Securities Due to
Extraordinary Market Volatility). Current Rule 7.11(b)(2) provides that
if a primary listing market other than the Exchange issues a Trading
Pause, the Exchange will resume trading as provided for in Rule 7.18(a)
regarding UTP Regulatory Halts. The Exchange proposes to replace the
term ``primary listing market'' with ``UTP Listing Market'' for
clarity, and proposes to change the current cross-reference to Rule
7.18(b) to refer instead to amended Rule 7.18(b)(5)(B)(vi), which would
encompass the provisions of current Rule 7.18(a).
Implementation
The Exchange will implement the changes proposed herein in
conjunction with the Processors and the other SROs implementing the
necessary rule changes and related technology and procedural changes.
The Exchange will publish a trader notice at least 30 business days
before implementing the proposed changes.
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.\50\ Specifically, the
proposal is consistent with Section 6(b)(5) of the Act \51\ 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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\50\ 15 U.S.C. 78f(b).
\51\ 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 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 and in the over-the-counter market 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 \52\ because they will foster cooperation and coordination with
persons engaged in regulating and facilitating transactions in
securities.
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\52\ 15 U.S.C. 78f(b)(5).
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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 affected 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 rule's 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 or in
the over-the-counter market, regulated by FINRA. These other venues are
responsible for monitoring activity on their own markets, but also have
agreed to 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
[[Page 29608]]
Halt declared by the Primary Listing Market. The changes are consistent
with and implement the Amended CTA Plan. While the proposed rules
recognize one Primary Listing Market for each security, the rules do
not prevent an issuer from switching its listing to another national
securities exchange that would thereafter assume the responsibilities
of Primary Listing Market for that security. Similarly, the proposed
rules set forth a fair and objective standard to determine which
exchange will be the Primary Listing Market in the case of dually-
listed securities: the exchange on which the security has been listed
the longest.
The Exchange believes that the other definitions in the proposed
rules are also consistent with the Act. For example, the proposed rules
would define what constitutes Extraordinary Market Activity, consistent
with the definition of that term in the Amended CTA Plan, thereby
furthering the Act's goal of promoting fair and orderly markets. The
Exchange is also proposing to adopt definitions for ``SIP Outage,''
``Material SIP Latency'' and ``SIP Halt,'' to explicitly address
situations that may disrupt the markets, and these definitions are
identical to the definitions in the Amended CTA Plan. The proposed
rules specify when the Exchange should seek information from the
Operating Committee, other SROs, and market participants as well as
means for dissemination of important information to the market,
consistent with the Amended CTA Plan. The Exchange believes these
provisions strike the right balance in outlining a process to address
unforeseen events without preventing SROs from taking action needed to
protect the market.
The Exchange believes that the proposed rules, which make halts
consistent across exchange rules, is consistent with the Act in that it
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 affected 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 rule 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. To that end, the Exchange has retained some existing elements
of Rule 7.18 that focus on its unique products and the processes it has
developed over time to interact with its issuers.
Also consistent with the Act, and with the Amended CTA Plan, is the
Exchange's proposal in Rule 7.18(c) to address Operational Halts, which
are non-regulatory in nature and apply only to the exchange that
declares the halt. As noted earlier, the Exchange has always had the
capacity to implement operational halts and local trading suspensions,
but such halts are not currently referred to as ``operational halts''
in the Exchange's rules.\53\ The Exchange also notes that its proposed
Rule 7.18(c) regarding Operational Halts is substantially identical to
the revised NYSE American, Nasdaq, Phlx, MIAX Pearl, and MEMX rules
cited above,\54\ and is therefore not novel.
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\53\ See Rule 7.13 (Trading Suspensions) and Rule 123D(e)
regarding ``Equipment Changeover'' halts.
\54\ See supra note 5.
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The Exchange believes that the markets would benefit from greater
clarity regarding when an Operational Halt may be appropriate. 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 if it
affects multiple markets, so could a disruption at the Exchange, such
as a technical issue affecting trading in one or more securities,
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.
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 \55\ 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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\55\ 15 U.S.C. 78f(b)(8).
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Importantly, the Exchange believes the proposal would not impose a
burden on intermarket competition but rather would 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. 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 Primary Listing Markets intend to file proposals that are
substantially similar to this proposed rule change.
The Exchange does not believe that its proposals concerning
Operational Halts impose and undue burden on competition. Under its
existing rules, the Exchange already possesses discretionary authority
to impose halts and trading suspensions for various reasons. The
proposed rule change clarifies and broadens the circumstances in which
the Exchange may impose such Operational Halts, and specifies
procedures for both imposing and lifting then. 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 proposed rule would
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 proposed rule change includes several provisions
related to the declaration and timing of trading halts and the
resumption of trading designed to avoid any advantage to those who can
react more quickly than other participants. The proposed rules gives
the Exchanges the ability to declare the timing of a Regulatory Halt
immediately. The SROs retain the discretion to cancel trades that occur
after the time of the Regulatory Halt. The proposed rule change also
allows for the staggered resumption of trading to assist firms in
reentering the market after a SIP Halt affecting multiple securities,
in order to reopen in a fair
[[Page 29609]]
and orderly manner. In addition, the proposed rule change encourages
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
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 \56\ and Rule 19b-4(f)(6) thereunder.\57\
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.
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\56\ 15 U.S.C. 78s(b)(3)(A)(iii).
\57\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \58\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\59\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\58\ 17 CFR 240.19b-4(f)(6).
\59\ 17 CFR 240.19b-4(f)(6)(iii).
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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) \60\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\60\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSE-2025-21 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-NYSE-2025-21. 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 (https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSE-2025-21 and should be
submitted on or before July 24, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\61\
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\61\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-12426 Filed 7-2-25; 8:45 am]
BILLING CODE 8011-01-P