Notice2022-15772
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Current Pilot Program Related to Rule 7.10 (Clearly Erroneous Executions)
Primary source
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Published
July 25, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 141 (Monday, July 25, 2022)</title>
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[Federal Register Volume 87, Number 141 (Monday, July 25, 2022)]
[Notices]
[Pages 44165-44167]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15772]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95320; File No. SR-NYSECHX-2022-18]
Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Extend
the Current Pilot Program Related to Rule 7.10 (Clearly Erroneous
Executions)
July 19, 2022
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 July 13, 2022, the NYSE Chicago, Inc. (``NYSE Chicago'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the current pilot program related
to Rule 7.10 (Clearly Erroneous Executions) to the close of business on
October 20, 2022. The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to extend the current
pilot program related to Rule 7.10 (Clearly Erroneous Executions) to
the close of business on October 20, 2022. The pilot program is
currently due to expire on July 20, 2022.
On September 10, 2010, the Commission approved, on a pilot basis,
changes to Article 20, Rule 10 that, among other things: (i) provided
for uniform treatment of clearly erroneous execution reviews in multi-
stock events involving twenty or more securities; and (ii) reduced the
ability of the Exchange to deviate from the objective standards set
forth in the rule.\4\ In 2013, the Exchange adopted a provision
designed to address the operation of the Plan.\5\ Finally, in 2014, the
Exchange adopted two additional provisions providing that: (i) a series
of transactions in a particular security on one or more trading days
may be viewed as one event if all such transactions were effected based
on the same fundamentally incorrect or grossly misinterpreted issuance
information resulting in a severe valuation error for all such
transactions; and (ii) in the event of any disruption or malfunction in
the operation of the electronic communications and trading facilities
of an Exchange, another SRO, or responsible single plan processor in
connection with the transmittal or receipt of a trading halt, an
Officer, acting on his or her own motion, shall nullify any transaction
that occurs after a trading halt has been declared by the primary
listing market for a security and before such trading halt has
officially ended according to the primary listing market.\6\
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\4\ See Securities Exchange Act Release No. 62886 (Sept. 10,
2010), 75 FR 56613 (Sept. 16, 2010) (SR-CHX-2010-13).
\5\ See Securities Exchange Act Release No. 68802 (Feb. 1,
2013), 78 FR 9092 (Feb. 7, 2013) (SR-CHX-2013-04).
\6\ See Securities Exchange Act Release No. 72434 (June 19,
2014), 79 FR 36110 (June 25, 2014) (SR-CHX-2014-06).
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These changes were originally scheduled to operate for a pilot
period to coincide with the pilot period for the Plan to Address
Extraordinary Market Volatility (the ``Limit Up-Limit Down Plan'' or
``LULD Plan''),\7\ including any extensions to the pilot period for the
LULD Plan.\8\ In April 2019, the Commission approved an amendment to
the LULD Plan for it to operate on a permanent, rather than pilot,
basis.\9\ In light of that change, the Exchange amended Article 20,
Rule 10 to untie the pilot program's effectiveness from that of the
LULD Plan and to extend the pilot's effectiveness to the close of
business on October 18, 2019.\10\ After the Commission approved the
Exchange's proposal to transition to trading on Pillar,\11\ the
Exchange amended the corresponding Pillar rule--Rule 7.10--to extend
the pilot's effectiveness to the close of business on April 20,
2020,\12\ October 20, 2020,\13\
[[Page 44166]]
April 20, 2021,\14\ October 20, 2021,\15\ April 20, 2022,\16\ and July
20, 2022.\17\
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\7\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
\8\ See Securities Exchange Act Release No. 71782 (March 24,
2014), 79 FR 17630 (March 28, 2014) (SR-CHX-2014-04).
\9\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (approving Eighteenth Amendment
to LULD Plan).
\10\ See Securities Exchange Act Release No. 85533 (April 5,
2019), 84 FR 14701 (April 11, 2019) (SR-NYSECHX-2019-04).
\11\ See Securities Exchange Act Release No. 87264 (October 9,
2019), 84 FR 55345 (October 16, 2019) (SR-NYSECHX-2019-08). Article
20, Rule 10 is no longer applicable to any securities that trade on
the Exchange.
\12\ See Securities Exchange Act Release No. 87351 (October 18,
2019), 84 FR 57068 (October 24, 2019) (SR-NYSECHX-2019-13).
\13\ See Securities Exchange Act Release No. 88591 (April 8,
2020), 85 FR 20771 (April 14, 2020) (SR-NYSECHX-2020-09).
\14\ See Securities Exchange Act Release No. 90156 (October 13,
2020), 85 FR 66384 (October 19, 2020) (SR-NYSECHX-2020-29).
\15\ See Securities Exchange Act Release No. 91550 (April 14,
2021), 86 FR 20560 (April 20, 2021) (SR-NYSECHX-2021-06).
\16\ See Securities Exchange Act Release No. 93360 (October 15,
2021), 86 FR 58313 (October 21, 2021) (SR-NYSECHX-2021-15).
\17\ See Securities Exchange Act Release No. 94639 (April 7,
2022), 87 FR 21957 (April 13, 2022) (SR-NYSECHX-2022-05).
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The Exchange now proposes to amend Rule 7.10 to extend the pilot's
effectiveness for a further three months until the close of business on
October 20, 2022 while the Commission considers a proposal to make the
pilot program permanent that has been filed by Cboe BZX.\18\ If the
pilot period is not either extended, replaced or approved as permanent,
the prior versions of paragraphs (c), (e)(2), (f), and (g) of Article
20, Rule 10 prior to being amended by SR-CHX-2010-13 shall be in
effect, and the provisions of paragraphs (i) through (k) shall be null
and void.\19\ In such an event, the remaining sections of Article 20,
Rule 10 would continue to apply to all transactions executed on the
Exchange. The Exchange understands that the other national securities
exchanges and Financial Industry Regulatory Authority (``FINRA'') will
also file similar proposals to extend their respective clearly
erroneous execution pilot programs, the substance of which are
identical to Rule 7.10.
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\18\ See SR-CboeBZX-2022-37 (July 8, 2022).
\19\ See supra notes 4-6. The prior versions of paragraphs (c),
(e)(2), (f), and (g) generally provided greater discretion to the
Exchange with respect to breaking erroneous trades.
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The Exchange does not propose any additional changes to Rule 7.10.
Extending the effectiveness of these rules for an additional three
months will provide the Exchange and other self-regulatory
organizations additional time to consider whether further amendments to
the clearly erroneous execution rules are appropriate.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Act,\20\ in general, and
Section 6(b)(5) of the Act,\21\ in particular, in that it is designed
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest and not to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange believes that the
proposed rule change promotes just and equitable principles of trade in
that it promotes transparency and uniformity across markets concerning
review of transactions as clearly erroneous. The Exchange believes that
extending the clearly erroneous execution pilot under Rule 7.10 for an
additional three months would help assure that the determination of
whether a clearly erroneous trade has occurred will be based on clear
and objective criteria, and that the resolution of the incident will
occur promptly through a transparent process. The proposed rule change
would also help assure consistent results in handling erroneous trades
across the U.S. equities markets, thus furthering fair and orderly
markets, the protection of investors and the public interest. Based on
the foregoing, the Exchange believes the amended clearly erroneous
executions rule should continue to be in effect on a pilot basis while
the Exchange and other self-regulatory organizations consider whether
further amendments to these rules are appropriate.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposal would ensure
the continued, uninterrupted operation of harmonized clearly erroneous
execution rules across the U.S. equities markets while the Exchange and
other self-regulatory organizations consider whether further amendments
to these rules are appropriate. The Exchange understands that the other
national securities exchanges and FINRA will also file similar
proposals to extend their respective clearly erroneous execution pilot
programs. Thus, the proposed rule change will help to ensure
consistency across market centers without implicating any competitive
issues.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A)(iii) of the Act \24\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\25\
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\22\ 15 U.S.C. 78s(b)(3)(A)(iii).
\23\ 17 CFR 240.19b-4(f)(6).
\24\ 15 U.S.C. 78s(b)(3)(A)(iii).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange asked
that the Commission waive the 30 day operative delay so that the
proposal may become operative immediately upon filing. Waiver of the
30-day operative delay would extend the protections provided by the
current pilot program, without any changes, while a permanent proposal
for clearly erroneous execution reviews is being considered.\28\ For
this reason, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change as operative upon filing.\29\
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\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ See SR-CboeBZX-2022-37 (July 8, 2022).
\29\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0b797e676e26686466666e657f784b786e68256c647d"><span class="__cf_email__" data-cfemail="a1d3d4cdc48cc2ceccccc4cfd5d2e1d2c4c28fc6ced7">[email protected]</span></a>. Please include
File Number SR-NYSECHX-2022-18 on the subject line.
Paper Comments
<bullet> 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-NYSECHX-2022-18. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-NYSECHX-2022-18 and should be submitted
on or before August 15, 2022.
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\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15772 Filed 7-22-22; 8:45 am]
BILLING CODE 8011-01-P
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