Notice2022-15774
Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Current Pilot Program Related to FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
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 44160-44162]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15774]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95322; File No. SR-FINRA-2022-020]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Extend the Current Pilot Program Related to
FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed
Securities)
July 19, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 19, 2022, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to extend the current pilot program related to
FINRA
[[Page 44161]]
Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed
Securities) (``Clearly Erroneous Transaction Pilot'' or ``Pilot'')
until October 20, 2022.
The text of the proposed rule change is available on FINRA's
website at <a href="http://www.finra.org">http://www.finra.org</a>, at the principal office of FINRA 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, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
FINRA is proposing a rule change to extend the current pilot
program related to FINRA Rule 11892 governing clearly erroneous
transactions in exchange-listed securities until the close of business
on October 20, 2022. Extending the Pilot would provide FINRA and the
national securities exchanges additional time to consider a permanent
proposal for clearly erroneous transaction reviews.\4\
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\4\ FINRA notes that Cboe BZX Exchange, Inc. has filed a
proposed rule change with the Commission to amend its clearly
erroneous executions rule to, among other things, make the clearly
erroneous pilot program permanent. See Securities Exchange Act
Release No. 95259 (July 12, 2022), 87 FR 42760 (July 18, 2022)
(Notice of Filing of File No. SR-CboeBZX-2022-037).
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On September 10, 2010, the Commission approved, on a pilot basis,
changes to FINRA Rule 11892 that, among other things: (i) provided for
uniform treatment of clearly erroneous transaction reviews in multi-
stock events involving twenty or more securities; and (ii) reduced the
ability of FINRA to deviate from the objective standards set forth in
the rule.\5\ In 2013, FINRA adopted a provision designed to address the
operation of the Plan to Address Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS (``Plan'').\6\ Finally, in 2014,
FINRA adopted two additional provisions addressing (i) erroneous
transactions that occur over one or more trading days that were based
on the same fundamentally incorrect or grossly misinterpreted
information resulting in a severe valuation error; and (ii) a
disruption or malfunction in the operation of the facilities of a self-
regulatory organization or responsible single plan processor in
connection with the transmittal or receipt of a trading halt.\7\
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\5\ See Securities Exchange Act Release No. 62885 (September 10,
2010), 75 FR 56641 (September 16, 2010) (Order Approving File No.
SR-FINRA-2010-032).
\6\ See Securities Exchange Act Release No. 68808 (February 1,
2013), 78 FR 9083 (February 7, 2013) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2013-012).
\7\ See Securities Exchange Act Release No. 72434 (June 19,
2014), 79 FR 36110 (June 25, 2014) (Order Approving File No. SR-
FINRA-2014-021).
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On April 9, 2019, FINRA filed a proposed rule change to untie the
effectiveness of the Clearly Erroneous Transaction Pilot from the
effectiveness of the Plan, and to extend the Pilot's effectiveness to
the close of business on October 18, 2019.\8\ On October 10, 2019,
FINRA filed a proposed rule change to extend the Pilot's effectiveness
until April 20, 2020.\9\ On March 18, 2020, FINRA filed a proposed rule
change to extend the pilot's effectiveness until October 20, 2020.\10\
On October 16, 2020, FINRA filed a proposed rule change to extend the
Pilot's effectiveness until April 20, 2021.\11\ On March 15, 2021,
FINRA filed a proposed rule change to extend the Pilot's effectiveness
until October 20, 2021.\12\ On October 5, 2021, FINRA filed a proposed
rule change to extend the Pilot's effectiveness until April 20,
2022.\13\ On April 6, 2022, FINRA filed a proposed rule change to
extend the Pilot's effectiveness until July 20, 2022.\14\ FINRA now is
proposing to further extend the Pilot until October 20, 2022, so that
market participants can continue to benefit from the more objective
clearly erroneous transaction standards under the Pilot.\15\ Extending
the Pilot also would provide more time to permit FINRA and the other
self-regulatory organizations to consider what changes, if any, to the
clearly erroneous transaction rules are appropriate.\16\
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\8\ See Securities Exchange Act Release No. 85612 (April 11,
2019), 84 FR 16107 (April 17, 2019) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2019-011).
\9\ See Securities Exchange Act Release No. 87344 (October 18,
2019), 84 FR 57076 (October 24, 2019) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2019-025).
\10\ See Securities Exchange Act Release No. 88495 (March 27,
2020), 85 FR 18608 (April 2, 2020) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2020-008).
\11\ See Securities Exchange Act Release No. 90219 (October 19,
2020), 85 FR 67574 (October 23, 2020) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2020-036).
\12\ See Securities Exchange Act Release No. 91373 (March 19,
2021), 86 FR 16003 (March 25, 2021) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2021-004).
\13\ See Securities Exchange Act Release No. 93355 (October 15,
2021), 86 FR 58374 (October 21, 2021) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2021-026).
\14\ See Securities Exchange Act Release No. 94673 (April 11,
2022), 87 FR 22559 (April 15, 2022) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2022-008).
\15\ If the pilot period is not either extended or approved as
permanent, the version of Rule 11892 prior to SR-FINRA-2010-032
shall be in effect, and the amendments set forth in SR-FINRA-2014-
021 and the provisions of Supplementary Material .03 of the rule
shall be null and void.
\16\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (Order Approving the Eighteenth
Amendment to the National Market System Plan to Address
Extraordinary Market Volatility).
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FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change
immediately.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\17\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change promotes
just and equitable principles of trade in that it promotes transparency
and uniformity across markets concerning the review of transactions as
clearly erroneous. FINRA believes that extending the Pilot under FINRA
Rule 11892, until October 20, 2022, would 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, FINRA believes the
Clearly Erroneous Transaction Pilot should continue to be in effect
while FINRA and the national securities exchanges consider a permanent
proposal for clearly erroneous transaction reviews.
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\17\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not
[[Page 44162]]
necessary or appropriate in furtherance of the purposes of the Act. The
proposal would ensure the continued, uninterrupted operation of
harmonized clearly erroneous transaction rules across the U.S. equities
markets while FINRA and the national securities exchanges consider
further amendments to these rules. FINRA understands that the national
securities exchanges also will file similar proposals to extend their
clearly erroneous execution pilot programs, as applicable. 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
Written comments were neither solicited nor received.
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 \18\ and Rule 19b-4(f)(6) thereunder.\19\
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 \20\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\21\
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6).
\20\ 15 U.S.C. 78s(b)(3)(A)(iii).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
FINRA has satisfied the five-day prefiling requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. FINRA 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.\24\ Therefore,
the Commission hereby waives the 30-day operative delay and designates
the proposed rule change as operative upon filing.\25\
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\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ See Securities Exchange Act Release No. 95259 (July 12,
2022), 87 FR 42760 (July 18, 2022) (Notice of Filing of File No. SR-
CboeBZX-2022-037).
\25\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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#7a080f161f57191517171f140e093a091f19541d150c"><span class="__cf_email__" data-cfemail="89fbfce5eca4eae6e4e4ece7fdfac9faeceaa7eee6ff">[email protected]</span></a>. Please include
File Number SR-FINRA-2022-020 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-FINRA-2022-020. 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 FINRA. 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-FINRA-2022-020 and should be submitted
on or before August 15, 2022.
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\26\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15774 Filed 7-22-22; 8:45 am]
BILLING CODE 8011-01-P
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