Notice2022-15923
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Clearly Erroneous Pilot to October 20, 2022
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 26, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 142 (Tuesday, July 26, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 142 (Tuesday, July 26, 2022)]
[Notices]
[Pages 44447-44449]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15923]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95331; File No. SR-Phlx-2022-31]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Extend the
Clearly Erroneous Pilot to October 20, 2022
July 20, 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, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 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 the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 Phlx Equity 4, Rule 3312 (Clearly Erroneous Transactions) to the
close of business on October 20, 2022.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/rules</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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to extend the current
pilot program related to Equity 4, Rule 3312, Clearly Erroneous
Transactions, 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 Equity 4, Rule 3312 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
[[Page 44448]]
objective standards set forth in the rule.\3\ Following this, on
September 30, 2010, the Exchange adopted changes to conform its Rule
3312 to Nasdaq's and BX's rules 11890.\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\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 62886 (September 10,
2010), 75 FR 56613 (September 16, 2010) (SR-NASDAQ-2010-076).
\4\ See Securities Exchange Act Release No. 63023 (September 30,
2010), 75 FR 61802 (October 6, 2010) (SR-Phlx-2010-125).
\5\ See Securities Exchange Act Release No. 68820 (February 1,
2013), 78 FR 9436 (February 8, 2013) (SR-Phlx-2013-12).
\6\ See Securities Exchange Act Release No. 72434 (June 19,
2014), 79 FR 36110 (June 25, 2014) (SR-Phlx-2014-27).
---------------------------------------------------------------------------
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\ In April 2019, the Commission approved an amendment
to the LULD Plan for it to operate on a permanent, rather than pilot,
basis.\8\ In light of that change, the Exchange amended Equity 4, Rule
3312 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.\9\ Subsequently, the Exchange amended Rule 3312 to
extend the pilot's effectiveness to the close of business on July 20,
2022.\10\
---------------------------------------------------------------------------
\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. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019) (approving Eighteenth Amendment
to LULD Plan).
\9\ See Securities Exchange Act Release No. 85632 (April 11,
2019), 84 FR 16057 (April 17, 2019) (SR-Phlx-2019-14).
\10\ See Securities Exchange Act Release No. 94765 (April 20,
2022), 87 FR 24602 (April 26, 2022) (SR-Phlx-2022-19).
---------------------------------------------------------------------------
The Exchange now proposes to amend Equity 4, Rule 3312 to extend
the pilot's effectiveness for a further three months until the close of
business on October 20, 2022. If the pilot period is not either
extended, replaced or approved as permanent, the prior versions of
paragraphs (a)(2)(C), (c)(1), (b)(i), and (b)(ii) shall be in effect,
and the provisions of paragraphs (g) through (i) shall be null and
void.\11\ In such an event, the remaining sections of Rule 3312 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
3312.
---------------------------------------------------------------------------
\11\ See notes 3-6, supra. The prior versions of paragraphs
(a)(2)(C), (c)(1), (b)(i), and (b)(ii) generally provided greater
discretion to the Exchange with respect to breaking erroneous
trades.
---------------------------------------------------------------------------
The Exchange does not propose any additional changes to Equity 4,
Rule 3312. Extending the effectiveness of Rule 3312 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,\12\ in general, and
Section 6(b)(5) of the Act,\13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 Equity 4, Rule 3312 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.
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 either solicited or 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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
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
[[Page 44449]]
become effective pursuant to Section 19(b)(3)(A)(iii) of the Act \16\
and subparagraph (f)(6) of Rule 19b-4 thereunder.\17\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ 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.\20\ For
this reason, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change as operative upon filing.\21\
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ See Securities Exchange Act Release No. 95259 (July 12,
2022), 87 FR 42760 (July 18, 2022) (SR-CboeBZX-2022-037).
\21\ 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).
---------------------------------------------------------------------------
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#1d6f687178307e7270707873696e5d6e787e337a726b"><span class="__cf_email__" data-cfemail="3341465f561e505c5e5e565d4740734056501d545c45">[email protected]</span></a>. Please include
File Number SR-Phlx-2022-31 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-Phlx-2022-31. 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-Phlx-2022-31 and should be submitted on
or before August 16, 2022.
---------------------------------------------------------------------------
\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15923 Filed 7-25-22; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on July 26, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.