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Notice2023-25543

Joint Industry Plan; Notice of Filing of the Twenty-Third Amendment to the National Market System Plan To Address Extraordinary Market Volatility by Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., MEMX LLC, MIAX Pearl, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc.

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Published

November 21, 2023

Issuing agencies

Securities and Exchange Commission

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<title>Federal Register, Volume 88 Issue 223 (Tuesday, November 21, 2023)</title>
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[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81131-81150]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25543]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98928; File No. 4-631]

Joint Industry Plan; Notice of Filing of the Twenty-Third
Amendment to the National Market System Plan To Address Extraordinary
Market Volatility by Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Financial Industry
Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock
Exchange, Inc., MEMX LLC, MIAX Pearl, LLC, NASDAQ BX, Inc., NASDAQ PHLX
LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE
American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National,
Inc.

November 14, 2023.

I. Introduction

On October 24, 2023, NYSE Group, Inc., on behalf of the following
parties to the National Market System Plan to Address Extraordinary
Market Volatility (``the Plan''): \1\ Cboe BZX Exchange, Inc.,

[[Page 81132]]

Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange,
Inc., the Financial Industry Regulatory Authority, Inc. (``FINRA''),
Investors Exchange LLC, Long-Term Stock Exchange, Inc., MEMX LLC, MIAX
Pearl, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market
LLC (``Nasdaq''), New York Stock Exchange LLC (``NYSE''), NYSE American
LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National Inc.
(collectively, the ``Participants'') filed with the Securities and
Exchange Commission (``Commission'') pursuant to section 11A(a)(3) of
the Securities Exchange Act of 1934 (``Exchange Act'') \2\ and Rule 608
thereunder,\3\ a proposal to amend the Plan (``Twenty-Third
Amendment'').\4\ The proposal reflects changes unanimously approved by
the Participants. The Twenty-Third Amendment proposes to amend Appendix
A to the Plan to provide that all exchange-traded products (``ETPs'')
will be assigned to Tier 1 of the Plan, except for single stock ETPs,
which will be assigned to the same tier as their underlying stock, and
in each case adjusted for any leverage factor. A copy of the Plan, as
proposed to be amended, is Exhibit A. The Commission is publishing this
notice to solicit comments from interested persons on the Twenty-Third
Amendment.\5\
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\1\ On May 31, 2012, the Commission approved the Plan, as
modified by Amendment No. 1. See Securities Exchange Act Release No.
67091, 77 FR 33498 (June 6, 2012) (File No. 4-631) (``Approval
Order''). On February 20, 2013, the Commission noticed for immediate
effectiveness the Second Amendment to the Plan. See Securities
Exchange Act Release No. 68953, 78 FR 13113 (February 26, 2013). On
April 3, 2013, the Commission approved the Third Amendment to the
Plan. See Securities Exchange Act Release No. 69287, 78 FR 21483
(April 10, 2013). On August 27, 2013, the Commission noticed for
immediate effectiveness the Fourth Amendment to the Plan. See
Securities Exchange Act Release No. 70273, 78 FR 54321 (September 3,
2013). On September 26, 2013, the Commission approved the Fifth
Amendment to the Plan. See Securities Exchange Act Release No.
70530, 78 FR 60937 (October 2, 2013). On January 7, 2014, the
Commission noticed for immediate effectiveness the Sixth Amendment
to the Plan. See Securities Exchange Act Release No. 71247, 79 FR
2204 (January 13, 2014). On April 3, 2014, the Commission approved
the Seventh Amendment to the Plan. See Securities Exchange Act
Release No. 71851, 79 FR 19687 (April 9, 2014). On February 19,
2015, the Commission approved the Eight Amendment to the Plan. See
Securities Exchange Act Release No. 74323, 80 FR 10169 (February 25,
2015). On October 22, 2015, the Commission approved the Ninth
Amendment to the Plan. See Securities Exchange Act Release No.
76244, 80 FR 66099 (October 28, 2015). On April 21, 2016, the
Commission approved the Tenth Amendment to the Plan. See Securities
Exchange Act Release No. 77679, 81 FR 24908 (April 27, 2016). On
August 26, 2016, the Commission noticed for immediate effectiveness
the Eleventh Amendment to the Plan. See Securities Exchange Act
Release No. 78703, 81 FR 60397 (September 1, 2016). On January 19,
2017, the Commission approved the Twelfth Amendment to the Plan. See
Securities Exchange Act Release No. 79845, 82 FR 8551 (January 26,
2017). On April 13, 2017, the Commission approved the Thirteenth
Amendment to the Plan. See Securities Exchange Act Release No.
80455, 82 FR 18519 (April 19, 2017). On April 28, 2017, the
Commission noticed for immediate effectiveness the Fourteenth
Amendment to the Plan. See Securities Exchange Act Release No.
80549, 82 FR 20928 (May 4, 2017). On September 26, 2017, the
Commission noticed for immediate effectiveness the Fifteenth
Amendment to Plan. See Securities Exchange Act Release No. 81720, 82
FR 45922 (October 2, 2017). On March 15, 2018, the Commission
noticed for immediate effectiveness the Sixteenth Amendment to the
Plan. See Securities Exchange Act Release No. 82887, 83 FR 12414
(March 21, 2018) (File No. 4-631). On April 12, 2018, the Commission
approved the Seventeenth Amendment to the Plan. See Securities
Exchange Act Release No. 83044, 83 FR 17205 (April 18, 2018). On
April 11, 2019, the Commission approved the Eighteenth Amendment to
the Plan. See Securities Exchange Act Release No. 85623, 84 FR 16086
(April 17, 2019). On February 5, 2020, the Commission noticed for
immediate effectiveness the Nineteenth Amendment to the Plan. See
Securities Exchange Act Release No. 88122, 85 FR 7805 (February 11,
2020) (File No. 4-631). On April 21, 2020, the Commission approved
the Twentieth Amendment to the Plan. See Securities Exchange Act
Release No. 88704, 85 FR 23383 (April 27, 2020). On July 29, 2020,
the Commission noticed for immediate effectiveness the Twenty-First
Amendment to the Plan. See Securities Exchange Act Release No.
89420, 85 FR 46762 (August 3, 2020) (File No. 4-631). On October 1,
2020, the Commission noticed for immediate effectiveness the Twenty-
Second Amendment to the Plan. See Securities Exchange Act Release
No. 90068, 85 FR 63322 (October 7, 2020) (File No. 4-631).
\2\ 15 U.S.C. 78k-1(a)(3).
\3\ 17 CFR 242.608.
\4\ See Letter from Elizabeth King, General Counsel and
Corporate Secretary, NYSE, to Brent Fields, Secretary, Commission,
dated November 2, 2018 (``Transmittal Letter'').
\5\ 17 CFR 242.608.
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II. Description of the Plan

Set forth in this Section II is the statement of the purpose and
summary of the Twenty-Third Amendment, along with the information
required by Rule 608(a)(4) and (5) under the Exchange Act,\6\
substantially prepared and submitted by the Participants to the
Commission.\7\
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\6\ See 17 CFR 242.608(a)(4) and (a)(5).
\7\ See Transmittal Letter, supra note 4. The statement of the
purpose and summary of the amendment and the information required by
Rule 608(a)(4) and (5) is reproduced verbatim from the Transmittal
Letter unless otherwise noted; cross-references have been revised to
conform with the footnote sequencing of this notice.
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A. Statement of Purpose and Summary of the Plan Amendment

The Participants filed the Plan with the Commission on April 5,
2011 to create a market-wide limit up-limit down mechanism intended to
address extraordinary market volatility in NMS Stocks, as defined in
Rule 600(b)(47) of Regulation NMS under the Exchange Act.\8\ The Plan
sets forth procedures that provide for market-wide limit up-limit down
requirements to prevent trades in individual NMS Stocks from occurring
outside of the specified Price Bands. These limit up-limit down
requirements are coupled with Trading Pauses, as defined in Section
I(Y) of the Plan, to accommodate more fundamental price moves. In
particular, the Participants adopted this Plan to address extraordinary
volatility in the securities markets, i.e., significant fluctuations in
individual securities' prices over a short period of time, such as
those experienced during the ``Flash Crash'' on the afternoon of May 6,
2010.
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\8\ 17 CFR 242.600(b)(47).
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As set forth in more detail in the Plan, the single plan processor
(``Processors''), which is responsible for consolidation of information
for an NMS Stock pursuant to Rule 603(b) of Regulation NMS under the
Exchange Act, calculates and disseminates a lower Price Band and upper
Price Band for each NMS Stock. As set forth in Section V of the Plan,
the Price Bands are based on a Reference Price for each NMS Stock that
equals the arithmetic mean price of Eligible Reported Transactions for
the NMS Stock over the immediately preceding five-minute period. The
Price Bands for an NMS Stock are calculated by applying the Percentage
Parameters, as set out in Appendix A to the Plan, for such NMS Stock to
the Reference Price, with the lower Price Band being a Percentage
Parameter below the Reference Price, and the upper Price Band being a
Percentage Parameter above the Reference Price.
Appendix A to the Plan sets out the definitions of Tier 1 and Tier
2 NMS Stocks and the Percentage Parameters for each. Appendix A
currently provides that Tier 1 includes all NMS Stocks included in the
S&P 500 Index and the Russell 1000 Index, as well as ``eligible'' ETPs.
Appendix A specifies:

To determine eligibility for an ETP to be included as a Tier 1
NMS Stock, all ETPs across multiple asset classes and issuers,
including domestic equity, international equity, fixed income,
currency, and commodities and futures will be identified. Leveraged
ETPs will be excluded, and the list will be sorted by notional
consolidated average daily volume (``CADV''). The period used to
measure CADV will be from the first day of the previous fiscal half
year up until one week before the beginning of the next fiscal half
year. Daily volumes will be multiplied by closing prices and then
averaged over the period. ETPs, including inverse ETPs, that trade
over $2,000,000 CADV will be eligible to be included as a Tier 1 NMS
Stock.

The eligible ETPs are then listed in Schedule 1 to Appendix A, and
the list is reviewed and updated semi-annually. All ETPs that do not
meet the ``eligibility'' definition are currently assigned to Tier 2.
For Tier 1 NMS Stocks, Appendix A defines the Percentage Parameters
as:

[[Page 81133]]

<bullet> 5% for Tier 1 NMS Stocks with a Reference Price more than
$3.00;
<bullet> 20% for Tier 1 NMS Stocks with a Reference Price equal to
$0.75 and up to and including $3.00; and
<bullet> The lesser of $0.15 or 75% for Tier 1 NMS Stocks with a
Reference Prices less than $0.75.
For Tier 2 NMS Stocks, Appendix A defines the Percentage Parameters
as:
<bullet> 10% for Tier 2 NMS Stocks with a Reference Price of more
than $3.00;
<bullet> 20% for Tier 2 NMS Stocks with a Reference Price equal to
$0.75 and up to and including $3.00; and
<bullet> The lesser of $0.15 or 75% for Tier 2 NMS Stocks with a
Reference Price less than $0.75.
The Percentage Parameter for a Tier 2 NMS Stock that is a leveraged
ETP is the applicable Percentage Parameter set forth above, multiplied
by the leverage ratio of such product.
At the request of market participants, the Participants have
studied the calibration of the parameters set forth in the Plan with
respect to ETPs in Tier 2, and, specifically, whether the ETPs
currently in Tier 2 should be consolidated into Tier 1. The
Participants undertook this study at the request of ETP issuers who are
concerned about protecting investors from the harm caused by sharp
moves in ETP prices when execution prices diverge from their indicative
index value. The purpose of the Participants' study was to assess
whether improving investor protection by narrowing the Percentage
Parameters from 10% to 5% on Tier 2 ETPs with Reference Prices of more
than $3.00 would result in an unreasonable disruption in trading, which
might hamper the price discovery process.
The Participants, in conjunction with the Plan Advisors and ETP
issuers, studied the potential impact of recategorizing all ETPs
currently in Tier 2 into Tier 1, such that they would be subject to
narrower Percentage Parameters, and, in turn, narrower Price Bands. The
Participants presented their initial findings to Commission staff at a
meeting of the LULD Plan Operating Committee on February 25, 2020, and
provided supplemental information as a part of the Operating
Committee's 2019 Annual Report, submitted in March 2020. The
Participants have received and reviewed feedback from Commission staff.
Since that time, the Participants have incorporated additional
analyses bearing on the question of whether any ETPs should remain in
Tier 2, or whether the operation of fair and orderly markets would be
enhanced by moving all ETPs (except for single-stock ETPs whose
underlying stock is in Tier 2) to Tier 1. The results of this expanded
study are presented below.
For the reasons below, the Participants propose to amend Appendix A
of the Plan as follows. The Participants propose to amend Appendix A,
Section I, paragraph (1) to delete the definition of ETPs ``eligible''
for Tier 1 and to specify that all ETPs except for single-stock ETPs
would be assigned to Tier 1:

The Participants also propose to delete Schedule 1 to Appendix A as
obsolete.
Because all leveraged ETPs (except Tier 2 single stock ETPs) would
be assigned to Tier 1, the Participants also propose to add text into
Section I of Appendix A describing how the Percentage Parameters would
be set for leveraged ETPs. The Participants propose to insert the
following as paragraph (5) of Section I, and to renumber the paragraphs
of Section I accordingly:

(5) Notwithstanding the foregoing, the Percentage Parameters for
a Tier 1 NMS Stock that is a leveraged ETP shall be the applicable
Percentage Parameter set forth in clauses (2), (3), or (4) above,
multiplied by the leverage ratio of such product.
Study Data
The Participants reviewed trading and quoting in all ETPs during
the period from Q4 of 2019 through Q2 of 2021. This span included
periods of greatly varying volatility and heterogeneous market
conditions, including the sell-off during the onset of Covid-19
pandemic, the volatile period surrounding the 2020 U.S. presidential
election, and the meme stock episode in early 2021. This time span
afforded the Participants the opportunity to study how the Plan
performed during these particularly stressful periods.
The ETPs studied covered several asset classes, including domestic
equities, international equities, fixed income, currency, commodity,
and digital currency ETPs.
At the time the Participants conducted the study, there were not
yet any single stock ETPs listed in the U.S. markets. However, as
discussed below, the purpose of having different LULD tiers is to
assign price bands that are commensurate with a security's underlying
volatility. Since a single stock ETP should closely track the price
movement and volatility of its underlying security, it should be
assigned to the same LULD tier, adjusted for any leverage factor, to
maintain the uniform and congruous application of LULD controls.
The Participants also excluded Tier 2 ETPs with a Reference Price
of $3.00 or less, since ETPs with a Reference Price of $3.00 or less
are subject to identical Percentage Parameters under Tier 1 and Tier 2.
The Participants also excluded the last 25 minutes of the trading day
from the study, since the Percentage Parameters for Tier 1 and Tier 2
NMS Stocks with Reference Prices more than $3.00 are identical during
that period.
Study Methodology
The Participants' study consists of three parts.
First, the Participants compared the realized volatility and
incidence of Limit States and Trading Halts in Tier 2 ETPs against both
Tier 1 and Tier 2 non-ETPs, to review the reasonableness of assigning
ETPs to Tier 2.
Second, the Participants calculated theoretical Tier 1 (i.e., 5%)
Price Bands for all Tier 2 ETPs in the study. For example, normally a
Tier 2 ETP with a Reference Price of $10.00 would have a lower Price
Band of $9.00 and an upper Price Band of $11.00 (i.e., 10% bands). For
purposes of the study, that same ETP would have a theoretical Tier 1
lower Price Band of $9.50 and an upper Price Band of $10.50 (i.e., 5%
bands). Once the theoretical narrower bands were calculated, the
Participants identified all trades that occurred at prices between the
theoretical narrower bands and the actual Tier 2 bands. The
Participants then calculated the total notional value if all trades
beyond the

[[Page 81134]]

theoretical narrow bands had been prevented, as well as the total
notional value if all such trades had occurred at the price of the new
bands, to determine the range of potential notional value impact of
applying Tier 1 bands to Tier 2 ETPs. The Participants also studied the
price movement following these ``breaches'' of the theoretical narrower
bands and the likelihood of reversion to determine the efficacy of
tightening the bands.
Third, the Participants compared market quality changes and the
frequency of Limit States and Trading Halts for Tier 1 ETPs vs. Tier 2
ETPs by studying the ETPs that shift from one tier to the other as part
of the current semi-annual review process.
Study Results
1. Volatility of Tier 2 ETPs vs. Tier 1 and Tier 2 Non-ETPs
In creating the Plan in 2012, the Participants assigned ETPs with
more than $2 million CADV to Tier 1 and all other ETPs to Tier 2. The
$2 million CADV cutoff for Tier 1 ETPs was based on the classification
under the prior single stock circuit breaker pilot,\9\ which applied to
``more liquid ETPs . . . with a minimum average daily volume of
$2,000,000 . . . that tend to have similar trading characteristics as
securities in the S&P 500 and Russell 1000.'' \10\ However, given the
need for a swift regulatory response to the Flash Crash, the single
stock circuit breaker pilot was adopted without an opportunity for the
Participants to properly study this classification--or the underlying
assumptions it was based upon--and no additional analysis was conducted
in connection with the adoption of the LULD Plan pilot in 2012.
For the first part of the study, the Participants examine the
reasonableness of the assumption that only ``more liquid ETPs . . .
tend to have similar trading characteristics as securities in the S&P
500 and Russell 1000'' by comparing the volatility of Tier 2 ETPs
during the study period to the volatility of non-ETP securities. If the
purpose of Tier 2's wider bands is to address higher expected
volatility in Tier 2 NMS Stocks, but ETPs in Tier 2 are already less
volatile than non-ETPs in Tier 1, that would suggest that ETPs do not
actually need Tier 2's wider bands.
Except for single-stock, commodity, and foreign exchange-based
ETPs, ETPs are, by definition, diversified instruments. According to
modern portfolio theory, one would expect that a portfolio of
securities will exhibit lower volatility than individual securities,
unless those products are perfectly correlated. The results of the
study show that this is in fact the case. Notwithstanding the lower
trading volumes associated with the less liquid ETPs included in Tier
2, Tier 2 ETPs exhibit volatilities that are lower than those observed
for Tier 1 non-ETPs that already trade with narrower Price Bands today.
The Participants calculated quote volatilities \11\ for all
securities that were part of the Plan during 2021. As shown in Table 1
below, non-leveraged Tier 2 ETPs had an average quote volatility of
0.241 basis points with a 90th percentile of 0.275 basis points. Those
figures are lower than for Tier 1 non-ETPs during the same period,
which had an average quote volatility of 0.258 basis points with a 90th
percentile of 0.446 basis points. Tier 2 non-ETPs had more than four
times higher average quote volatility and almost double the average
quote volatility at the 90th percentile compared to Tier 2 non-
leveraged ETPs. Leveraged Tier 2 ETPs were, not surprisingly, somewhat
higher than non-leveraged Tier 2 ETPs, with an average quote volatility
of 0.736 basis points and a 90th percentile of 1.317 basis points. Most
leveraged ETPs represent commodities or volatility index products,
which would be expected to exhibit higher volatility. However, these
products' Price Bands are also multiplied by their leverage factor,
which makes their higher volatility relative to other ETPs acceptable.

Table 1--Quote Volatility of Tier 1 Non-ETPs vs. Tier 2 ETPs and Non-
ETPs During 2021
[basis points]
------------------------------------------------------------------------
Average 90th %ile
------------------------------------------------------------------------
Tier 1 Non-ETPs......................... 0.258 0.446
Tier 2 ETPs (non-leveraged)............. 0.241 0.275
Tier 2 ETPs (leveraged)................. 0.736 1.317
Tier 2 Non-ETPs......................... 1.182 0.502
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Next, in Table 2 below, the Participants compare the incidence of
Trading Pauses and Limit States during 2021 by Tier 1 non-ETPs, Tier 2
ETPs, and Tier 2 non-ETPs priced above $3.00. The data shows that
during 2021, Tier 2 non-leveraged ETPs had fewer Trading Pauses and
Limit States than Tier 1 non-ETPs, even though the Tier 2 non-leveraged
ETPs comprised nearly 50% more securities. In addition, Tier 2 non-ETPs
had roughly four times the number of symbols, but 63 times the number
of Limit States per day compared to Tier 2 non-leveraged ETPs. Tier 2
ETPs at the 90th percentile did not have any Trading Pauses, while
there were 30 Trading Pauses for Tier 2 non-ETPs.
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\9\ See Letter from Janet M. McGinness, Senior Vice President,
Legal and Corporate Secretary, NYSE Euronext on behalf of the NYSE
Exchanges as well as the other parties to the Plan, to Elizabeth M.
Murphy, Secretary, Commission, dated November 2, 2011 (``Including
only certain ETPs in Tier 1 NMS Stocks and including ETPs in the
Plan in phases would treat ETPs in the same manner as they were
treated in the trading pause pilot.'').
\10\ See Securities Exchange Act Release No. 62883 (September
10, 2010), 75 FR 56608 (September 16, 2010) (SR-FINRA-2010-033)
(Order Approving Proposed Rule Change Relating To Expanding the
Pilot Rule for Trading Pauses Due to Extraordinary Market Volatility
to the Russell 1000[supreg] Index and Specified Exchange Traded
Products).
\11\ The Participants measured quote volatility as the average
basis point change of each second's mid-point during core hours
annualized.

[[Page 81135]]

Table 2--Incidence of Limit States and Trading Pauses Among Tier 1 Non-ETPs and Tier 2 ETPs and Non-ETPs During
2021
----------------------------------------------------------------------------------------------------------------
90th %ile 90th %ile
Average symbol Limit states Trading pauses limit states trading pauses
count per day per day per day per day
----------------------------------------------------------------------------------------------------------------
Tier 1 Non-ETPs................. 1023.3 18.2 0.3 17.0 0.0
Tier 2 ETPs (non-leveraged)..... 1520.6 4.5 0.2 2.0 0.0
Tier 2 ETPs (leveraged)......... 169.8 0.0 0.0 0.0 0.0
Tier 2 Non-ETPs................. 5918.9 284.3 14.6 460.0 30.0
----------------------------------------------------------------------------------------------------------------

There was a similar pattern in 2020.\12\ In 2020, non-leveraged
Tier 2 ETPs averaged 19.7 Limit States per day versus 68.8 for Tier 1
non-ETPs. Leveraged ETPs averaged 3.6 Limit States per day, but over
181 symbols, which still comes to fewer Limit States than Tier 1
securities, which average 1,003 securities covered per day. Tier 2
leveraged ETPs averaged 0.4 Trading Pauses per day, versus 2.8 for non-
leveraged Tier 2 ETPs and 6.4 for Tier 1 non-ETPs. The 90th percentile
results also evidenced a far lower incidence of LULD events for non-
leveraged Tier 2 ETPs compared to Tier 1 non-ETPs.
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\12\ The Participants have reviewed 2020 data from February 24,
2020 to December 31, 2020, but such data are not included in this
filing.
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Overall, the comparison between Tier 1 non-ETPs and Tier 2 ETPs
shows that quote volatility of Tier 2 ETPs operating under wider Price
Bands is lower than Tier 1 non-ETPs, and that the incidence of Limit
States and Trading Pauses for Tier 1 non-ETPs is substantially higher
than that of Tier 2 ETPs. By contrast, Tier 2 non-ETPs are considerably
more volatile than Tier 1 non-ETPs, which substantiates the wider Price
Bands applied to these securities, as the higher number of Limit States
and Trading Pauses in Tier 2 non-ETPs are occurring under 10% Price
Bands. The Participants believe that these data indicate that the Price
Bands are not well-calibrated to the realized volatility for Tier 2
ETPs and should not be twice as wide as those for Tier 1 non-ETPs.
2. Analysis of ETP Trades Executing Past Theoretical Tier 1 Bands
For the second part of the study, the Participants sought to
identify the range of potential notional value that would have been
impacted during the study period if trades in Tier 2 ETPs had been
bounded by 5% Price Bands instead of 10% Price Bands. Specifically, the
Participants calculated theoretical Tier 1 (i.e., 5%, adjusted for
leverage factor) Price Bands for all Tier 2 ETPs in the study
(``Theoretical Tier 1 Bands''). Once the theoretical narrower bands
were calculated, the Participants identified 101,956 trades that
occurred at prices between the Theoretical Tier 1 Bands and the actual
Tier 2 bands. The results are shown in Table 3 below.

Table 3--Trade Counts Past Theoretical Tier 1 Bands
----------------------------------------------------------------------------------------------------------------
Avg. daily Median daily Max daily 5th %ile daily 95th %ile
Period trades trades trades trades daily trades
----------------------------------------------------------------------------------------------------------------
2019:Q4......................... 5 3 20 1 15
2020:H1......................... 736 39 17,785 3 2,048
2020:H2......................... 44 23 1,841 6 88
2021:H1......................... 102 33 1,799 4 368
----------------------------------------------------------------------------------------------------------------

Table 3 divides the study period into four different time segments:
Q4 of 2019, the first half of 2020, the second half of 2020, and the
first half of 2021. The number of trades occurring between the narrower
Theoretical Tier 1 Bands and the actual Tier 2 bands varied
substantially between these time segments, reflecting the overall
trading volatility during that timeframe. For instance, the first half
of 2020 shows the greatest numbers of Tier 2 ETP trades occurring
between the narrower Theoretical Tier 1 Bands and the actual Tier 2
bands due to the unprecedented volatility during that period, which
included the onset of the Covid-19 pandemic and four market-wide
circuit breaker events. The next highest number of trades occurred
during the first half of 2021, which did not include a major market-
wide event but was roiled by a limited number of securities tied to the
meme stock episode in Q1 of that year. The second half of 2020 was
impacted by the U.S. presidential election and continued pandemic-
induced volatility, while the fourth quarter of 2019 had lower
volatility and a lower number of trades overall.
The Participants then calculated the upper and lower ranges of the
notional value of the trades that would have been impacted during the
study period if Tier 2 ETPs had been subject to the narrower
Theoretical Tier 1 Bands instead of the actual Tier 2 bands. Panel A of
Table 4 below assumes that all such trades would have been prevented,
and thus represents the upper end of the range. Panel B assumes that
all such trades would have occurred but at the level of the narrower
Theoretical Tier 1 Bands, and thus represents a more conservative
estimate of notional value impacted. The panels show the average, mean,
maximum, 5th percentile, and 95th percentile daily statistics, as well
as the total notional value impacted under each approach.

[[Page 81136]]

Table 4--Notional Value Impact of Narrower Theoretical Tier 1 Bands for Tier 2 ETPs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Avg. daily Median daily Max daily 5th %ile daily 95th %ile
Period total $ total $ total $ total $ daily total $ Total period $
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel A--Notional Value Impact Assuming All Trades Prevented (Upper Bound)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019:Q4................................................. $24,442 $6,994 $308,042 $45 $80,777 $1,442,091
2020:H1................................................. 4,617,039 101,311 147,025,863 3,110 12,830,928 577,129,875
2020:H2................................................. 276,811 34,007 23,711,212 3,128 330,941 35,413,798
2021:H1................................................. 783,202 45,230 46,275,381 3,433 2,025,125 97,117,976
---------------
711,103,740
--------------------------------------------------------------------------------------------------------------------------------------------------------
Panel B--Notional Value Impact Assuming All Trades Occur at New Bands (Lower Bound)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019:Q4................................................. 1,283 399 14,371 2 4,102 75,709
2020:H1................................................. 243,507 5,202 8,049,877 163 588,279 29,956,293
2020:H2................................................. 13,403 1,710 1,121,532 158 15,425 1,715,602
2021:H1................................................. 40,537 2,319 2,505,951 158 95,941 5,026,635
---------------
36,774,239
--------------------------------------------------------------------------------------------------------------------------------------------------------

The Participants believe that the notional value of trades impacted
during the study period would be between these two numbers--at least
$36.8 million on the lower end, with upper end at $711.1 million. This
is because there would likely be more liquidity focused near the
narrower Theoretical Tier 1 Bands, resulting in some of those trades
executing at or near those revised bands, while other trades would have
been prevented by the narrower Theoretical Tier 1 Bands. Given the
lower liquidity typically available in Tier 2 ETPs, it is not likely
that all of the market depth would shift to the narrower theoretical
bands. However, because there could be significant additional volume
executed at prices at or near the narrower bands, it is unlikely that
the dollar value prevented could reach the upper bound of $711.1
million.
Daily Notional Value Prevented and Symbols Impacted by Theoretical Tier
1 Bands
The Participants drilled down into the results discussed above to
determine, on a day-by-day basis, the amount of notional value
prevented and the number of symbols impacted by the narrower
Theoretical Tier 1 Bands. The results are shown in Chart 1 below:
[GRAPHIC] [TIFF OMITTED] TN21NO23.000

As Chart 1 shows, most of the notional value that would have been
prevented by using the narrower Theoretical Tier 1 Bands for Tier 2
ETPs occurred across a handful of trade dates when the markets were
very volatile.

[[Page 81137]]

Together, the 10 days with the highest notional value for trades
prevented account for 59% of the trades prevented and 61% of the total
notional value overall. More than $45 million in trades could have been
prevented during the pandemic-driven volatility in 2020. In contrast,
over the entire study period, the number of Tier 2 ETPs that would have
been impacted by using narrower Theoretical Tier 1 Bands was a median
of nine ETPs per day.
From Chart 1 and the data above in Tables 3 and 4, the Participants
conclude that on most days, tighter Price Bands would have had little
impact on the trading of Tier 2 ETPs. However, during periods of
extreme volatility overall, the narrower bands may prevent unnecessary
volatility in Tier 2 ETPs. Using narrower Tier 1 Bands for these ETPs
could protect investors from executing trades at inferior prices that
may occur due to transitory gaps in liquidity.
Price Movement After the Theoretical Blocked Trades
The Participants recognize that the positive impacts of using
narrower Theoretical Tier 1 Bands would be blunted if the price trend
that triggers a Trading Pause continues in the same direction.
Consider, for example, an ETP with a Tier 2 upper Price Band of $11.00
and a theoretical Tier 1 narrower upper Price Band of $10.50. If prices
continued to move towards or past $11.00, preventing those trades would
likely result in a Trading Pause followed by an auction at a price
higher than the Theoretical Tier 1 Band. In that case, investors would
be negatively affected, since they could have traded at better prices
if the Tier 2 Price Bands were in effect.
To study this issue, the Participants computed several statistics
to measure the impact of blocking these trades at the narrower
Theoretical Tier 1 Bands. The Participants calculated these statistics
as a fraction of simple trade counts, as well as the percentage of
shares that were impacted by the theoretical narrower bands. The
calculations are as follows:
1. Last mid-quote 5 minutes after the blocked trade compared to the
trade execution price.
2. Last mid-quote 10 minutes after the blocked trade compared to
the trade execution price.
3. Same as #1, except cases where the stock paused in the next 5
minutes (because there may not be reliable 5-minute mid-quotes).
4. Same as #2, except cases where the stock paused in the next 10
minutes (because there may not be reliable 10-minute mid-quotes).
5. Same as #1-#4, except measured against the theoretical narrower
bands. This measures the worst-case situation, where none of the trades
would have occurred and the full impact of blocking the trades is
shown.
Table 5 below measures quote movement in the 5 and 10 minutes after
a breach of the narrower Theoretical Tier 1 Bands. The table below
presents several statistics that measure price reversion following a
breach of the Theoretical Tier 1 Bands. The first two rows show the
percentage of trades where the mid-quote reverts following a
theoretical band breach, while the last two rows show the percentage of
shares executed at prices past the new Theoretical Tier 1 Bands when
the mid-quote subsequently reverts. The table shows two different
reversion measures: (1) the first and third columns calculate when the
last mid-quote 5 or 10 minutes after the breach reverts past the trade
price that caused the breach, and (2) the second and fourth columns
show what percentage of trades or share prices move back inside the new
Theoretical Tier 1 Bands.

Table 5--Price Performance Following Theoretical Blocked Trades
----------------------------------------------------------------------------------------------------------------
Includes Includes Excludes Excludes
pauses vs. pauses vs. pauses vs. pauses vs.
trade price revised band trade price revised band
(percent) (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
5-Min % of Trades............................... 70.5 54.5 71.2 55.1
10-Min % of Trades.............................. 75.7 65.2 76.0 65.4
5-Min % of Shares............................... 74.2 60.3 74.9 61.1
10-Min % of Shares.............................. 78.1 71.4 78.3 71.8
----------------------------------------------------------------------------------------------------------------

As Table 5 shows, prices 5 and 10 minutes after a theoretically
prevented trade usually reverted away from the offending trade price
towards prior prices, and less often moved back to levels inside the
new bands. When prices do not revert, the benefit of the tighter bands
is less clear, but the tendency toward reversion is further evidence in
support of narrowing the bands to Tier 1 levels. As shown in the first
column, after 5 minutes, more than 70% of the trades and nearly 75% of
the shares impacted had their last quote return to price levels prior
to the move that caused the breach of the Theoretical Tier 1 Band.
After 10 minutes, reversion rates improved further (i.e., more than 75%
of trades and 78% of shares). When Trading Pauses are excluded (e.g.,
third column), the results appeared even more positive, although the
Participants believe that including Trading Pauses is the superior
measure, as these situations better reflect the general direction of
the market.
It is worth noting that when reversion is measured relative to the
narrower Theoretical Tier 1 Bands (i.e., ``Revised Bands'' in Table 5)
instead of the price of the offending trade, mean reversion decreases.
As shown in the second column, only about 54% of trades revert after 5
minutes with 65% reverting after 10 minutes and, importantly, 60% of
shares revert after 5 minutes and more than 70% of shares revert after
10 minutes. These results offer strong evidence that narrowing the
bands for Tier 2 ETPs will likely both decrease volatility as well as
protect investors.
Likely Impact on Trading Pauses
The Participants note that during the study period, only 7.1% of
the trades that executed beyond the narrower Theoretical Tier 1 Bands
(4.6% of shares executed across the entire study period) ultimately
resulted in a Trading Pause under the LULD bands currently in place.
This further highlights the benefits of tightening the bands. Prices
did ultimately hit a Limit State within 10 minutes in 12.6% of the
trades that moved through the bands, accounting for 10.3% of shares
traded, but as noted above, less than half of these shares resulted in
a Trading Pause.
The Participants note that by narrowing the bands, in all
likelihood, there may be an increase in Trading Pauses, even with
market makers moving liquidity in front of the revised tighter bands.
Because prices may likely

[[Page 81138]]

revert inside the bands after 10 minutes, these Trading Pauses may be
beneficial for investors.
Such Trading Pauses may also be beneficial for investors because
many Tier 2 ETPs do not trade actively. Their initial Price Bands are
often based on the prior day's official closing price, which may not
perfectly reflect current market conditions, but their Reference Prices
and Price Bands are not reset if there are no trades. In such cases, it
may be beneficial to trigger a Trading Pause that will permit a
reopening auction, which can more efficiently aggregate liquidity,
determine equilibrium prices, reset the Price Bands, and further
mitigate volatility.
Consider the hypothetical situation as depicted by Chart 2 below.
The red line represents the Tier 2 10% upper Price Band, while the
purple line represents the theoretical narrower Tier 1 5% upper Price
Band. The aqua and orange lines represent the movement of the NBBO
throughout the day. An ETP's price is typically based on a basket of
products, so the NBBO tracks the underlying value of the securities
comprising the ETP. As the orange NBO moves above the red line at 11:15
a.m., the ETP enters a Straddle State. This means that even though the
ETP's quoted prices had been rising throughout the morning, if a
customer actually wanted to aggressively buy the ETP, they would not be
able to because the NBO is above the upper Price Band--in a Straddle
State.
Note, however, that by 11:00 a.m., the NBB had touched the
theoretical narrower upper Price Band. If the ETP were then to enter a
Trading Pause, the Price Bands would be reset. In this example, there
would be no damage caused by the ETP entering a Trading Pause--it was
not currently trading, and the Price Bands would reset after an auction
at the end of the Trading Pause (or reopening on a quote), permitting
the aggressive buyer to purchase the ETP in the reopening auction or
when the bands are reset and continuous trading resumes.
[GRAPHIC] [TIFF OMITTED] TN21NO23.001

3. Market Quality Changes When ETPs Change Tier Designation
For the third part of the study, the Participants examined ETPs
that have moved between tiers. As background, at launch, each ETP is
assigned to Tier 2. Per Appendix A, tiers are recalculated at the end
of each June and December and any non-leveraged ETPs that trade over
$2,000,000 CADV during the measurement period move from Tier 2 to Tier
1. It is common for an otherwise-illiquid ETP to have one or two very
high-volume days immediately after listing, causing it to be
recategorized into Tier 1, and then ultimately settle back into Tier 2
following its second measurement period.
These tier changes provide the Participants with an opportunity to
evaluate and compare the market quality of ETPs under different price
band regimes. The Participants understand that, in some cases, changes
in the volume of trades are what cause an ETP to change from one tier
to another, and the improvements in market quality may be attributable
to that increased volume, and not the tier change in and of itself. But
as noted above, the Plan initially assigns ETPs into Tier 2
irrespective of their volume of trades, and many are then subsequently
reassigned to Tier 1 due to high notional volume on a few days after
they are first funded, without experiencing any real change in notional
volume overall. As such, the Participants believe that market quality
changes after a tier shift are meaningful because they are often not
due to developments in the character of the market for the ETPs.
The Participants compared quoted spreads and notional liquidity at
the NBBO, comparing changes in these two values from half-year to half-
year for

[[Page 81139]]

ETPs that: stayed in Tier 1; stayed in Tier 2; switched from Tier 1 to
Tier 2; and switched from Tier 2 to Tier 1. Charts 3 and 4 below
summarize the results.
Spread Changes
Chart 3 below summarizes the changes to quoted spreads among ETPs
that shifted tiers vs. stayed in their tiers.
As Chart 3 shows, ETPs that were in Tier 1 in the second half of
2019 and stayed in Tier 1 during the first half of 2020 (see the
section labeled ``2019H2'' in Chart 2) had their consolidated quoted
spread increase by 102.0%, while those that shifted to Tier 2 saw their
consolidated quoted spread widen by 152.3%. Tier 2 ETPs that moved to
Tier 1 in the first half of 2020 had their spreads rise 96.6%--less
than those that stayed in Tier 1 for both periods. ETPs that stayed in
Tier 2 performed the worst, with their spreads increasing by 175.7%.
The pattern is similar regarding ETPs that changed tier in the second
half of 2020 (labeled ``2020H1'' in Chart 3). Chart 3 shows that ETPs
that stayed in Tier 1 had their spreads narrow by 34.2% while those
that moved to Tier 2 performed worse, with their spreads tightening by
26.7%. Tier 2 ETPs that remained in Tier 2 performed similarly to those
that stayed in Tier 1, with their spreads narrowing by 35.7%. The best
performing category was ETPs that moved to Tier 1 from Tier 2, as their
spreads narrowed by 43.6%.
The last period (labeled ``2020H2'' in Chart 3) did not show the
same consistency, but spreads were much less volatile. Chart 3 shows
that spreads fell the most for ETPs that moved from Tier 1 to Tier 2.
However, Tier 2 ETPs that moved to Tier 1 saw a larger drop than Tier 2
ETPs that remained in Tier 2.
[GRAPHIC] [TIFF OMITTED] TN21NO23.002

Notional Liquidity Inside
The Participants note that narrower spreads can lead to less
available liquidity, but the tier changes studied above do not appear
to have caused a negative impact on liquidity. Chart 4 below shows that
for ETPs that changed tiers between the second half of 2019 and the
first half of 2020 (``2019H2''), the amount of available liquidity
dropped a similar amount for Tier 1 ETPs that stayed in Tier 1 or moved
to Tier 2. Tier 2 ETPs in general lost fewer dollars at the inside, but
those Tier 2 ETPs that transferred to Tier 1 did lose slightly more--
12.2% versus 10.1%. Chart 4 shows that for ETPs that changed tiers
between the first half and second half of 2020, Tier 2 ETPs again saw
the largest increase in liquidity, with those that moved to Tier 1
gaining 51.0% versus just 38.0% for those that stayed in Tier 2. Tier 1
ETPs that moved to Tier 2 saw a drop in liquidity inside of 4.2%.
Finally, for those ETPs that changed tiers between the second half
of 2020 and the first half of 2021, Chart 4 shows that Tier 2 ETPs that
moved to Tier 1 saw the smallest gains in liquidity at the inside,
increasing just 32.1% compared to Tier 2 ETPs that remained in Tier 2,
which gained 42.7%. Tier 1 ETPs, whether they stayed in Tier 1 or moved
to Tier 2, garnered larger gains of liquidity at the inside.

[[Page 81140]]

[GRAPHIC] [TIFF OMITTED] TN21NO23.003

In sum, for two of the three half-year changes the Participants
studied, spreads improved and there was a neutral to positive effect on
inside liquidity for ETPs shifting from Tier 2 to Tier 1. The opposite
was true for Tier 2 ETPs that changed tier from the second half of 2020
to the first half of 2021.
These results show that, on balance, market quality statistics
improved for Tier 2 ETPs that moved to Tier 1.
Incidence of Limit States and Trading Pauses for ETPs That Changed LULD
Tiers
The Participants note that even if market quality statistics
improved for Tier 2 ETPs that moved to Tier 1, the efficacy of such a
move might be questioned if the move created notably more Limit States
or Trading Pauses. To study this issue, the Participants examined three
statistics for ETPs that had a tier change in either direction from one
period to the next:
<bullet> the average number of Trading Pauses per symbol during the
next half-year;
<bullet> the average number of Limit States per symbol during the
next half-year; and
<bullet> the average number of seconds in a Limit State per symbol
during the next half-year.
The results are shown in Charts 5, 6, and 7 below.
Regarding Trading Pauses, Chart 5 below shows that ETPs that
switched from Tier 2 to Tier 1 had fewer Trading Pauses than those that
remained in Tier 2. ETPs that moved from Tier 1 to Tier 2 had more
Trading Pauses than those that remained in Tier 1.

[[Page 81141]]

[GRAPHIC] [TIFF OMITTED] TN21NO23.004

Regarding Limit States, Chart 6 below shows similar results. ETPs
that were recategorized from Tier 2 to Tier 1 showed a decrease in the
number Limit States, while ETPs that were moved from Tier 1 to Tier 2
showed an increase in the number of Limit States.
[GRAPHIC] [TIFF OMITTED] TN21NO23.005

Chart 7 below shows the amount of time that ETPs spent in Limit
States for each period. ETPs that moved from Tier 1 to Tier 2 spent
more time in Limit States than those that remained in Tier 1. ETPs that
shifted from Tier 2 to Tier 1 saw a decrease in the amount of time in
Limit States when compared to Tier 2 ETPs that stayed in Tier 2.

[[Page 81142]]

[GRAPHIC] [TIFF OMITTED] TN21NO23.006

As these data show, contrary to expectations, narrowing the Price
Bands for ETPs that moved from Tier 2 into Tier 1 did not increase the
incidence of Trading Pauses, Limit States, or the amount of time spent
in Limit States. This is likely because market participants adjust
their behavior and provide more liquidity to ETPs once their bands are
tightened. The Participants acknowledge that the number of ETPs that
move between Tiers, especially into Tier 1 after being in Tier 2, is
relatively small and may not provide a significant enough population to
offer strong support for that statistic. The Participants note,
however, that Amendment 18 removed double-wide bands at the open for
all stocks and at the close for Tier 2 stocks, market participants
adjusted to the tighter bands without a large increase in LULD Trading
Pauses.
Study Conclusions
In sum, the Participants' study shows the following:
<bullet> Tier 1 non-ETPs are far more likely than Tier 2 ETPs to
enter into Limit States and Trading Pauses due to the underlying
volatility of these securities. This finding suggests that the Price
Band width for Tier 2 ETPs is poorly calibrated relative to their
actual trading behavior.
<bullet> During the study period, the notional value of trades that
would have been prevented if Tier 2 ETPs had used tighter Tier 1 bands
would have been substantial for such thinly traded products, bounded on
the lower end at $36.8 million and the upper end at $711.1 million.
<bullet> In the majority of cases where a trade would have been
prevented by the narrower Theoretical Tier 1 Bands, prices reverted by
the end of the following 5- and 10- minute periods, suggesting that
having these thinly-traded ETPs in Tier 1 would protect investors from
executing trades at inferior prices that may occur due to transitory
gaps in liquidity rather than fundamental valuation changes.
<bullet> In most cases where ETPs have been reclassified from Tier
2 to Tier 1, market quality improved as evidenced by the lower quote
volatility, tighter spreads, and increased liquidity for ETPs that
moved from Tier 2 to Tier 1.
<bullet> Using tighter Tier 1 bands for all ETPs would provide
greater investor protection from temporary liquidity gaps, which are
facilitated by the wider price bands in Tier 2.
<bullet> The number of Limit States and Trading Pauses decreased
when Tier 2 ETPs moved to Tier 1 and increased when Tier 1 ETPs moved
to Tier 2.
From this evidence, the Participants conclude that moving Tier 2
ETPs to Tier 1 would improve market quality, more effectively dampen
volatility, provide greater investor protection, and decrease the
number of unnecessary Limit States and Trading Pauses.
Accordingly, the Participants seek approval of this amendment
because it enhances the public interest, the protection of investors,
and the maintenance of fair and orderly markets, and would remove
impediments to and perfect the mechanisms of a national market system
in conformance with Rule 608.\13\
---------------------------------------------------------------------------

\13\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

B. Governing or Constituent Documents

The governing documents of the Processor, as defined in Section
I(P) of the Plan, will not be affected by the Plan.

C. Implementation of Amendment

After Commission approval of the proposed amendment, the
Participants propose to announce to market participants the future date
on which the change will be implemented.

D. Development and Implementation Phases

The Participants propose to implement the proposed amendment on a
permanent basis upon Commission approval.

E. Analysis of Impact on Competition

The Participants believe that the proposed amendment does not
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The proposed
amendment to the Plan would apply to all market participants equally
and would not impose a competitive burden on one category of market
participants in favor of another category of market participant. The
proposed amendment would apply to trading on all Trading Centers and
all NMS Stocks would be subject to the amended Plan's requirements. The
Participants do not believe that the

[[Page 81143]]

proposed amendment introduces terms that are unreasonably
discriminatory for the purposes of section 11A(c)(1)(D) of the Exchange
Act because it would apply to all market participants equally.

F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plans

The Participants have no written understandings or agreements
relating to interpretation of the Plan. Section II(C) of the Plan sets
forth how any entity registered as a national securities exchange or
national securities association may become a Participant.

G. Approval of Amendment of the Plan

On October 24, 2023, the Operating Committee, duly constituted and
chaired by Mr. Robert Books of Cboe Global Markets, Inc., voted
unanimously to amend the Plan as set forth herein in accordance with
Section III(C) of the Plan. The Plan Advisory Committee was notified in
connection with the Twentieth-Amendment and was in favor. Each of the
Plan's Participants has executed a written amended Plan.

H. Description of Operation of Facility Contemplated by the Proposed
Amendment

Not applicable.

I. Terms and Conditions of Access

Section II(C) of the Plan provides that any entity registered as a
national securities exchange or national securities association under
the Exchange Act may become a Participant by: (1) becoming a
participant in the applicable Market Data Plans, as defined in Section
I(F) of the Plan; (2) executing a copy of the Plan, as then in effect;
(3) providing each then-current Participant with a copy of such
executed Plan; and (4) effecting an amendment to the Plan as specified
in Section III(B) of the Plan.

J. Method of Determination and Imposition, and Amount of, Fees and
Charges

This section is not applicable as the proposed amendment to the
Plan does not involve fees or charges.

K. Method and Frequency of Processor Evaluation

This section is not applicable as the operation of the Plan is
conducted by the Primary Listing Exchange.

L. Dispute Resolution

Section III(C) of the Plan provides that each Participant shall
designate an individual to represent the Participant as a member of an
Operating Committee. No later than the initial date of the Plan, the
Operating Committee shall designate one member of the Operating
Committee to act as the Chair of the Operating Committee. Any
recommendation for an amendment to the Plan from the Operating
Committee that receives an affirmative vote of at least two-thirds of
the Participants, but is less than unanimous, shall be submitted to the
Commission as a request for an amendment to the Plan initiated by the
Commission under Rule 608.

III. Solicitation of Comments

Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the Twenty-Third
Amendment is consistent with the Exchange Act and the rules thereunder.
1. The Participants propose to amend Appendix A of the Plan by
deleting the definition of ETPs ``eligible'' for Tier 1 and to specify
that all ETPs, except for single stock ETPs, would be assigned to Tier
1. What are commenters' views on whether the proposal is consistent
with the Exchange Act?
2. Because all leveraged ETPs (except Tier 2 single stock ETPs)
would be assigned to Tier 1, the Participants also propose to add text
into Section I of Appendix A describing how the Percentage Parameters
would be set for leveraged ETPs. What are commenters' views on whether
this proposal regarding leveraged ETPs to the Plan is consistent with
the Exchange Act?
3. The proposal acknowledges that the ETPs studied covered several
asset classes, including domestic equities, international equities,
fixed income, currency, commodity, and digital currency ETPs. For
example, the Participants' analysis provides aggregate statistical
information with respect to Tier 2 ETPs as a whole. In addition, the
proposal states that, except for single-stock, commodity, and foreign
exchange-based ETPs, ETPs are by definition diversified instruments.
The proposed amendment to the Plan, which would assign all ETPs to Tier
1, only excludes single stock ETPs, but does not propose to exclude
other ETPs based on other single reference assets, such as ETPs based
on single commodities or single digital currency-related assets. Do
commenters agree that the methodology and results of the analysis
support the conclusions drawn by the Participants? Please explain. Does
this aggregated approach to evaluating Tier 2 ETPs as a whole support
the conclusions drawn by the Participants with respect to different
segments of Tier 2 ETPs? For example, what are commenters' views on
whether the proposal's study explains why such other ETPs based on a
single asset (other than stocks) should be assigned to Tier 1?
4. The proposal compares the quote volatility of Tier 2 ETPs to
that of Tier 1 non-ETPs, where quote volatility is measured using the
mid-point at each second. With this measure of volatility, the proposal
concludes that Tier 2 ETPs have lower quote volatility than Tier 1 non-
ETPs, suggesting that Tier 2 ETPs are not too volatile for the Tier 1
price bands. In addition, the proposal acknowledges that Tier 2 ETPs
are often thinly traded, and we request comment on whether being thinly
traded might bias the particular volatility measure used in the
analysis due to infrequent updates of the mid-point. What are
commenters' views on whether the analysis has adequately captured Tier
2 ETP volatility in support of the conclusion that they are not too
volatile for the Tier 1 price bands? If not, what measure of volatility
would be more appropriate? Please explain.
5. The Participants conclude that the proposal would protect
investors from executing trades at inferior prices (Theoretical Blocked
Trades). To support this conclusion, the Participants deduce from an
analysis that if the proposal was in place from 2019-2021, it would
have prevented $45 million in trades during the pandemic-driven
volatility in 2020. Do commenters agree that the analysis supports the
conclusion that preventing Theoretical Blocked Trades would have
protected investors during this volatile period? Please explain.
6. The Participants' analysis finds that trades in Tier 2 ETPs that
executed outside the Tier 1 price bands (Theoretical Blocked Trades)
are generally followed by midpoint prices within the Tier 1 bands.
Based on this finding, the Participants conclude that prices revert
after these Theoretical Blocked Trades, indicating that the Theoretical
Blocked Trades executed during temporary liquidity gaps. Do commenters
agree that the analysis measures price reversion and that the
Theoretical Blocked Trades often executed during temporary liquidity
gaps? If not, how do commenters suggest the analysis could examine the
extent to which Theoretical Blocked Trades executed during temporary
liquidity gaps? Please explain.
7. The Participants state that Plan does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Exchange Act. Do commenters believe that the Plan
imposes any burden on competition that is not necessary or appropriate
in

[[Page 81144]]

furtherance of the purposes of the Exchange Act?
8. Further, would the proposal have a positive, negative, or
neutral impact on competition? Please explain. How would the proposal
impact competition across ETP issuers or ETPs on similar baskets of
securities currently in different tiers? Please explain. How would any
impact on competition from the proposal benefit or harm the national
market system or the various market participants? Please describe and
explain how, if at all, aspects of the national market system or
different market participants would be affected. Please support any
response with data, if possible.
9. More generally, to the extent possible please provide specific
data, analyses, or studies for support regarding any impacts of the
proposal on competition.
Comments may be submitted by any of the following methods:

Electronic Comments

<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#0a787f666f27696567676f647e794a796f69246d657c"><span class="__cf_email__" data-cfemail="2052554c450d434f4d4d454e5453605345430e474f56">[email&#160;protected]</span></a>. Please include
file number 4-631 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 4-631. 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="https://www.sec.gov/rules/sro.shtml">https://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 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 4-631 and should be submitted on or before
December 12, 2023.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

\14\ 17 CFR 200.30-3(a)(85).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.

Exhibit A

Proposed new language is italicized; proposed deletions are in
[brackets]

PLAN TO ADDRESS EXTRAORDINARY MARKET VOLATILITY SUBMITTED TO THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 608 OF REGULATION
NMS UNDER THE SECURITIES EXCHANGE ACT OF 1934

Table of Contents

Section Page
Preamble........................................................ 1
I. Definitions.................................................. 2
II. Parties..................................................... 4
III. Amendments to Plan......................................... 7
IV. Trading Center Policies and Procedures...................... 8
V. Price Bands.................................................. 8
VI. Limit Up-Limit Down Requirements............................ 11
VII. Trading Pauses............................................. 13
VIII. Implementation............................................ 15
IX. Withdrawal from Plan........................................ 15
X. Counterparts and Signatures.................................. 16
Appendix A--Percentage Parameters............................... 18
[Appendix A--Schedule 1......................................... 20]
Appendix B--Data and Reporting.................................. 21

Preamble

The Participants submit to the SEC this Plan establishing
procedures to address extraordinary volatility in NMS Stocks. The
procedures provide for market-wide limit up-limit down requirements
that prevent trades in individual NMS Stocks from occurring outside of
the specified Price Bands. These limit up-limit down requirements are
coupled with Trading Pauses to accommodate more fundamental price
moves. The Plan procedures are designed, among other things, to protect
investors and promote fair and orderly markets. The Participants
developed this Plan pursuant to Rule 608(a)(3) of Regulation NMS under
the Exchange Act, which authorizes the Participants to act jointly in
preparing, filing, and implementing national market system plans.

I. Definitions

(A) ``Eligible Reported Transactions'' shall have the meaning
prescribed by the Operating Committee and shall generally mean
transactions that are eligible to update the last sale price of an NMS
Stock.
(B) ``Exchange Act'' means the Securities Exchange Act of 1934, as
amended.
(C) ``Limit State'' shall have the meaning provided in Section VI
of the Plan.
(D) ``Limit State Quotation'' shall have the meaning provided in
Section VI of the Plan.
(E) ``Lower Price Band'' shall have the meaning provided in Section
V of the Plan.
(F) ``Market Data Plans'' shall mean the effective national market
system plans through which the Participants act jointly to disseminate
consolidated information in compliance with Rule 603(b) of Regulation
NMS under the Exchange Act.
(G) ``National Best Bid'' and ``National Best Offer'' shall have
the meaning provided in Rule 600(b)(42) of Regulation NMS under the
Exchange Act.
(H) ``NMS Stock'' shall have the meaning provided in Rule
600(b)(47) of Regulation NMS under the Exchange Act.
(I) ``Opening Price'' shall mean the price of a transaction that
opens trading on the Primary Listing Exchange. If the Primary Listing
Exchange opens with quotations, the ``Opening Price'' shall mean the
closing price of the NMS Stock on the Primary Listing Exchange on the
previous trading day, or if no such closing price exists, the last sale
on the Primary Listing Exchange.
(J) ``Operating Committee'' shall have the meaning provided in
Section III(C) of the Plan.
(K) ``Participant'' means a party to the Plan.
(L) ``Plan'' means the plan set forth in this instrument, as
amended from time to time in accordance with its provisions.
(M) ``Percentage Parameter'' shall mean the percentages for each
tier of NMS Stocks set forth in Appendix A of the Plan.
(N) ``Price Bands'' shall have the meaning provided in Section V of
the Plan.
(O) ``Primary Listing Exchange'' shall mean the Participant on
which an NMS Stock is listed. If an NMS Stock is listed on more than
one Participant, the Participant on which the NMS Stock has been listed
the longest shall be the Primary Listing Exchange.
(P) ``Processor'' shall mean the single plan processor responsible
for the consolidation of information for an NMS Stock pursuant to Rule
603(b) of Regulation NMS under the Exchange Act.

[[Page 81145]]

(Q) ``Pro-Forma Reference Price'' shall have the meaning provided
in Section V(A)(2) of the Plan.
(R) ``Reference Price'' shall have the meaning provided in Section
V of the Plan.
(S) ``Regular Trading Hours'' shall have the meaning provided in
Rule 600(b)(64) of Regulation NMS under the Exchange Act. For purposes
of the Plan, Regular Trading Hours can end earlier than 4:00 p.m. ET in
the case of an early scheduled close.
(T) ``Regulatory Halt'' shall have the meaning specified in the
Market Data Plans.
(U) ``Reopening Price'' shall mean the price of a transaction that
reopens trading on the Primary Listing Exchange following a Trading
Pause or a Regulatory Halt, or, if the Primary Listing Exchange reopens
with quotations, the midpoint of those quotations.
(V) ``SEC'' shall mean the United States Securities and Exchange
Commission.
(W) ``Straddle State'' shall have the meaning provided in Section
VII(A)(2) of the Plan.
(X) ``Trading center'' shall have the meaning provided in Rule
600(b)(78) of Regulation NMS under the Exchange Act.
(Y) ``Trading Pause'' shall have the meaning provided in Section
VII of the Plan.
(Z) ``Upper Price Band'' shall have the meaning provided in Section
V of the Plan.

II. Parties

(A) List of Parties

The parties to the Plan are as follows:

(1) Cboe BZX Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605
(2) Cboe BYX Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605
(3) Cboe EDGA Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605
(4) Cboe EDGX Exchange, Inc., 400 South LaSalle Street, Chicago,
Illinois 60605
(5) Financial Industry Regulatory Authority, Inc., 1735 K Street NW,
Washington, DC 20006
(6) Investors Exchange LLC, 4 World Trade Center, 44th Floor, New York,
New York 10007
(7) Long-Term Stock Exchange, Inc., 101 Greenwich Street, Suite 11A,
New York, New York 10006
(8) MEMX LLC, 111 Town Square Place, Suite 520, Jersey City, New Jersey
07310
(9) MIAX Pearl, LLC, 7 Roszel Road, Suite 1A, Princeton, New Jersey
08540
(10) NASDAQ BX, Inc., One Liberty Plaza, 165 Broadway, New York, New
York 10006
(11) NASDAQ PHLX LLC, 1900 Market Street, Philadelphia, Pennsylvania
19103
(12) The Nasdaq Stock Market LLC, One Liberty Plaza, 165 Broadway, New
York, NY 10006
(13) NYSE National, Inc., 11 Wall Street, New York, NY 10005
(14) New York Stock Exchange LLC, 11 Wall Street, New York, New York
10005
(15) NYSE American LLC, 11 Wall Street, New York, New York 10005
(16) NYSE Arca, Inc., 11 Wall Street, New York, New York 10005
(17) NYSE Chicago, Inc., 11 Wall Street, New York, New York 10005

(B) Compliance Undertaking

By subscribing to and submitting the Plan for approval by the SEC,
each Participant agrees to comply with and to enforce compliance, as
required by Rule 608(c) of Regulation NMS under the Exchange Act, by
its members with the provisions of the Plan. To this end, each
Participant shall adopt a rule requiring compliance by its members with
the provisions of the Plan, and each Participant shall take such
actions as are necessary and appropriate as a participant of the Market
Data Plans to cause and enable the Processor for each NMS Stock to
fulfill the functions set forth in this Plan.

The Participants agree that any entity registered as a national
securities exchange or national securities association under the
Exchange Act may become a Participant by: (1) becoming a participant in
the applicable Market Data Plans; (2) executing a copy of the Plan, as
then in effect; (3) providing each then-current Participant with a copy
of such executed Plan; and (4) effecting an amendment to the Plan as
specified in Section III (B) of the Plan.

(D) Advisory Committee

(1) Formation. Notwithstanding other provisions of this Plan, an
Advisory Committee to the Plan shall be formed and shall function in
accordance with the provisions set forth in this section.
(2) Composition. Members of the Advisory Committee shall be
selected for two-year terms as follows:
(A) Advisory Committee Selections. By affirmative vote of a
majority of the Participants, the Participants shall select at least
one representatives from each of the following categories to be members
of the Advisory Committee: (1) a broker-dealer with a substantial
retail investor customer base; (2) a broker-dealer with a substantial
institutional investor customer base; (3) an alternative trading
system; (4) a broker-dealer that primarily engages in trading for its
own account; and (5) an investor.
(3) Function. Members of the Advisory Committee shall have the
right to submit their views to the Operating Committee on Plan matters,
prior to a decision by the Operating Committee on such matters. Such
matters shall include, but not be limited to, proposed material
amendments to the Plan.
(4) Meetings and Information. Members of the Advisory Committee
shall have the right to attend meetings of the Operating Committee and
to receive any information concerning Plan matters; provided, however,
that the Operating Committee may meet in executive session if, by
affirmative vote of a majority of the Participants, the Operating
Committee determines that an item of Plan business requires
confidential treatment.

III. Amendments to Plan

(A) General Amendments

Except with respect to the addition of new Participants to the
Plan, any proposed change in, addition to, or deletion from the Plan
shall be effected by means of a written amendment to the Plan that: (1)
sets forth the change, addition, or deletion; (2) is executed on behalf
of each Participant; and, (3) is approved by the SEC pursuant to Rule
608 of Regulation NMS under the Exchange Act, or otherwise becomes
effective under Rule 608 of Regulation NMS under the Exchange Act.

(B) New Participants

With respect to new Participants, an amendment to the Plan may be
effected by the new national securities exchange or national securities
association executing a copy of the Plan, as then in effect (with the
only changes being the addition of the new Participant's name in
Section II(A) of the Plan) and submitting such executed Plan to the SEC
for approval. The amendment shall be effective when it is approved by
the SEC in accordance with Rule 608 of Regulation NMS under the
Exchange Act or otherwise becomes effective pursuant to Rule 608 of
Regulation NMS under the Exchange Act.

(1) Each Participant shall select from its staff one individual to
represent the Participant as a member of an Operating

[[Page 81146]]

Committee, together with a substitute for such individual. The
substitute may participate in deliberations of the Operating Committee
and shall be considered a voting member thereof only in the absence of
the primary representative. Each Participant shall have one vote on all
matters considered by the Operating Committee. No later than the
initial date of Plan operations, the Operating Committee shall
designate one member of the Operating Committee to act as the Chair of
the Operating Committee.
(2) The Operating Committee shall monitor the procedures
established pursuant to this Plan and advise the Participants with
respect to any deficiencies, problems, or recommendations as the
Operating Committee may deem appropriate. The Operating Committee shall
establish specifications and procedures for the implementation and
operation of the Plan that are consistent with the provisions of this
Plan and the Appendixes thereto. With respect to matters in this
paragraph, Operating Committee decisions shall be approved by a simple
majority vote.
(3) Any recommendation for an amendment to the Plan from the
Operating Committee that receives an affirmative vote of at least two-
thirds of the Participants, but is less than unanimous, shall be
submitted to the SEC as a request for an amendment to the Plan
initiated by the Commission under Rule 608 of Regulation NMS.

IV. Trading Center Policies and Procedures

All trading centers in NMS Stocks, including both those operated by
Participants and those operated by members of Participants, shall
establish, maintain, and enforce written policies and procedures that
are reasonably designed to comply with the limit up-limit down
requirements specified in Sections VI of the Plan, and to comply with
the Trading Pauses specified in Section VII of the Plan.

V. Price Bands

(A) Calculation and Dissemination of Price Bands

(1) The Processor for each NMS stock shall calculate and
disseminate to the public a Lower Price Band and an Upper Price Band
during Regular Trading Hours for such NMS Stock. The Price Bands shall
be based on a Reference Price for each NMS Stock that equals the
arithmetic mean price of Eligible Reported Transactions for the NMS
stock over the immediately preceding five-minute period (except for
periods following openings and reopenings, which are addressed below).
If no Eligible Reported Transactions for the NMS Stock have occurred
over the immediately preceding five-minute period, the previous
Reference Price shall remain in effect. The Price Bands for an NMS
Stock shall be calculated by applying the Percentage Parameter for such
NMS Stock to the Reference Price, with the Lower Price Band being a
Percentage Parameter below the Reference Price, and the Upper Price
Band being a Percentage Parameter above the Reference Price. The Price
Bands shall be calculated during Regular Trading Hours. Between 3:35
p.m. and 4:00 p.m. ET, or in the case of an early scheduled close,
during the last 25 minutes of trading before the early scheduled close,
the Price Bands shall be calculated by applying double the Percentage
Parameters set forth in Appendix A for (i) all Tier 1 NMS Stocks and
(ii) Tier 2 NMS Stocks priced equal to or below $3.00. If the Processor
has not yet disseminated Price Bands, but a Reference Price is
available, a trading center may calculate and apply Price Bands based
on the same Reference Price that the Processor would use for
calculating such Price Bands until such trading center receives Price
Bands from the Processor. If, under Section VII(B)(2), the Primary
Listing Exchange notifies the Processor that it is unable to reopen an
NMS Stock due to a systems or technology issue and it has not declared
a Regulatory Halt, the Processor will calculate and disseminate Price
Bands by applying triple the Percentage Parameters set forth in
Appendix A for the first 30 seconds such Price Bands are disseminated.
(2) The Processor shall calculate a Pro-Forma Reference Price on a
continuous basis during Regular Trading Hours, as specified in Section
V(A)(1) of the Plan. If a Pro-Forma Reference Price has not moved by 1%
or more from the Reference Price currently in effect, no new Price
Bands shall be disseminated, and the current Reference Price shall
remain the effective Reference Price. When the Pro-Forma Reference
Price has moved by 1% or more from the Reference Price currently in
effect, the Pro-Forma Reference Price shall become the Reference Price,
and the Processor shall disseminate new Price Bands based on the new
Reference Price; provided, however, that each new Reference Price shall
remain in effect for at least 30 seconds.

(B) Openings

(1) Except when a Regulatory Halt is in effect at the start of
Regular Trading Hours, the first Reference Price for a trading day
shall be the Opening Price on the Primary Listing Exchange in an NMS
Stock if such Opening Price occurs less than five minutes after the
start of Regular Trading Hours. During the period less than five
minutes after the Opening Price, a Pro-Forma Reference Price shall be
updated on a continuous basis to be the arithmetic mean price of
Eligible Reported Transactions for the NMS Stock during the period
following the Opening Price (including the Opening Price), and if it
differs from the current Reference Price by 1% or more shall become the
new Reference Price, except that a new Reference Price shall remain in
effect for at least 30 seconds. Subsequent Reference Prices shall be
calculated as specified in Section V(A) of the Plan.
(2) If the Opening Price on the Primary Listing Exchange in an NMS
Stock does not occur within five minutes after the start of Regular
Trading Hours, the first Reference Price for a trading day shall be the
arithmetic mean price of Eligible Reported Transactions for the NMS
Stock over the preceding five minute time period, and subsequent
Reference Prices shall be calculated as specified in Section V(A) of
the Plan.

(1) Following a Trading Pause in an NMS Stock, and if the Primary
Listing Exchange has not declared a Regulatory Halt, if the Primary
Listing Exchange reopens trading with a transaction or quotation that
does not include a zero bid or zero offer, the next Reference Price
shall be the Reopening Price on the Primary Listing Exchange.
Subsequent Reference Prices shall be determined in the manner
prescribed for normal openings, as specified in Section V(B)(1) of the
Plan. If the Primary Listing Exchange notifies the Processor that it is
unable to reopen an NMS Stock due to a systems or technology issue, or
if the Primary Listing Exchange reopens trading with a quotation that
has a zero bid or zero offer, or both, the next Reference Price shall
be the last effective Price Band that was in a Limit State before the
Trading Pause. Subsequent Reference Prices shall be calculated as
specified in Section V(A) of the Plan.
(2) Following a Regulatory Halt, the next Reference Price shall be
the Opening or Reopening Price on the Primary Listing Exchange if such
Opening or Reopening Price occurs within five minutes after the end of
the Regulatory Halt, and subsequent Reference Prices shall be
determined in the manner prescribed for normal

[[Page 81147]]

openings, as specified in Section V(B)(1) of the Plan. If such Opening
or Reopening Price has not occurred within five minutes after the end
of the Regulatory Halt, the Reference Price shall be equal to the
arithmetic mean price of Eligible Reported Transactions for the NMS
Stock over the preceding five minute time period, and subsequent
Reference Prices shall be calculated as specified in Section V(A) of
the Plan.

VI. Limit Up-Limit Down Requirements

(A) Limitations on Trades and Quotations Outside of Price Bands

(1) All trading centers in NMS Stocks, including both those
operated by Participants and those operated by members of Participants,
shall establish, maintain, and enforce written policies and procedures
that are reasonably designed to prevent trades at prices that are below
the Lower Price Band or above the Upper Price Band for an NMS Stock.
Single-priced opening, reopening, and closing transactions on the
Primary Listing Exchange, however, shall be excluded from this
limitation. In addition, any transaction that both (i) does not update
the last sale price (except if solely because the transaction was
reported late or because the transaction was an odd-lot sized
transaction), and (ii) is excepted or exempt from Rule 611 under
Regulation NMS shall be excluded from this limitation.
(2) When a National Best Bid is below the Lower Price Band or a
National Best Offer is above the Upper Price Band for an NMS Stock, the
Processor shall disseminate such National Best Bid or National Best
Offer with an appropriate flag identifying it as non-executable. When a
National Best Offer is equal to the Lower Price Band or a National Best
Bid is equal to the Upper Price Band for an NMS Stock, the Processor
shall distribute such National Best Bid or National Best Offer with an
appropriate flag identifying it as a ``Limit State Quotation''.
(3) All trading centers in NMS Stocks, including both those
operated by Participants and those operated by members of Participants,
shall establish, maintain, and enforce written policies and procedures
that are reasonably designed to prevent the display of offers below the
Lower Price Band and bids above the Upper Price Band for an NMS Stock.
The Processor shall disseminate an offer below the Lower Price Band or
bid above the Upper Price Band that may be submitted despite such
reasonable policies and procedures, but with an appropriate flag
identifying it as non-executable; provided, however, that any such bid
or offer shall not be included in National Best Bid or National Best
Offer calculations.

(B) Entering and Exiting a Limit State

(1) All trading for an NMS Stock shall immediately enter a Limit
State if the National Best Offer equals the Lower Price Band and does
not cross the National Best Bid, or the National Best Bid equals the
Upper Price Band and does not cross the National Best Offer.
(2) When trading for an NMS Stock enters a Limit State, the
Processor shall disseminate this information by identifying the
relevant quotation (i.e., a National Best Offer that equals the Lower
Price Band or a National Best Bid that equals the Upper Price Band) as
a Limit State Quotation. At this point, the Processor shall cease
calculating and disseminating updated Reference Prices and Price Bands
for the NMS Stock until either trading exits the Limit State or trading
resumes with an opening or re-opening as provided in Section V.
(3) Trading for an NMS Stock shall exit a Limit State if, within 15
seconds of entering the Limit State, the entire size of all Limit State
Quotations are executed or cancelled.
(4) If trading for an NMS Stock exits a Limit State within 15
seconds of entry, the Processor shall immediately calculate and
disseminate updated Price Bands based on a Reference Price that equals
the arithmetic mean price of Eligible Reported Transactions for the NMS
Stock over the immediately preceding five-minute period (including the
period of the Limit State).
(5) If trading for an NMS Stock does not exit a Limit State within
15 seconds of entry, the Limit State will terminate when the Primary
Listing Exchange declares a Trading Pause pursuant to Section VII of
the Plan or at the end of Regular Trading Hours.

VII. Trading Pauses

(A) Declaration of Trading Pauses

(1) If trading for an NMS Stock does not exit a Limit State within
15 seconds of entry during Regular Trading Hours, then the Primary
Listing Exchange shall declare a Trading Pause for such NMS Stock and
shall notify the Processor.
(2) The Primary Listing Exchange may also declare a Trading Pause
for an NMS Stock when an NMS Stock is in a Straddle State, which is
when National Best Bid (Offer) is below (above) the Lower (Upper) Price
Band and the NMS Stock is not in a Limit State, and trading in that NMS
Stock deviates from normal trading characteristics such that declaring
a Trading Pause would support the Plan's goal to address extraordinary
market volatility. The Primary Listing Exchange shall develop policies
and procedures for determining when it would declare a Trading Pause in
such circumstances. If a Trading Pause is declared for an NMS Stock
under this provision, the Primary Listing Exchange shall notify the
Processor.
(3) The Processor shall disseminate Trading Pause information to
the public. No trades in an NMS Stock shall occur during a Trading
Pause, but all bids and offers may be displayed.
(B) Reopening of Trading During Regular Trading Hours
(1) Five minutes after declaring a Trading Pause for an NMS Stock,
and if the Primary Listing Exchange has not declared a Regulatory Halt,
the Primary Listing Exchange shall attempt to reopen trading using its
established reopening procedures. The Processor will publish the
following information that the Primary Listing Exchange provides to the
Processor in connection with such reopening: auction reference price;
auction collars; and number of extensions to the reopening auction. The
Trading Pause shall end when the Primary Listing Exchange reports a
Reopening Price.
(2) The Primary Listing Exchange shall notify the Processor if it
is unable to reopen trading in an NMS Stock due to a systems or
technology issue and if it has not declared a Regulatory Halt. The
Processor shall disseminate this information to the public.
(3) Trading centers may not resume trading in an NMS Stock
following a Trading Pause without Price Bands in such NMS Stock.
(4) The Processor shall update the Price Bands as set forth in
Section V(C)(1)-(2) of the Plan after receiving notification from the
Primary Listing Exchange of a Reopening Price following a Trading Pause
(or a resume message in the case of a reopening quote that has a zero
bid or zero offer, or both) or that it is unable to reopen trading
following a Trading Pause due to a systems or technology issue,
provided that if the Primary Listing Exchange is unable to reopen due
to a systems or technology issue, the update to the Price Bands will be
no earlier than ten minutes after the beginning of the Trading Pause.

(1) If an NMS Stock is in a Trading Pause during the last ten
minutes of trading before the end of Regular Trading Hours, the Primary
Listing Exchange shall not reopen trading and shall attempt to execute
a closing

[[Page 81148]]

transaction using its established closing procedures. All trading
centers may begin trading the NMS Stock when the Primary Listing
Exchange executes a closing transaction.
(2) If the Primary Listing Exchange does not execute a closing
transaction within five minutes after the end of Regular Trading Hours,
all trading centers may begin trading the NMS Stock.

VIII. Implementation

The initial date of Plan operations shall be April 8, 2013.

IX. Withdrawal From Plan

If a Participant obtains SEC approval to withdraw from the Plan,
such Participant may withdraw from the Plan at any time on not less
than 30 days' prior written notice to each of the other Participants.
At such time, the withdrawing Participant shall have no further rights
or obligations under the Plan.

X. Counterparts and Signatures

The Plan may be executed in any number of counterparts, no one of
which need contain all signatures of all Participants, and as many of
such counterparts as shall together contain all such signatures shall
constitute one and the same instrument.
In witness thereof, this Plan has been executed as of the __ day of
______ 2023 by each of the parties hereto.
Cboe BZX EXCHANGE, INC.
BY:--------------------------------------------------------------------
Cboe BYX EXCHANGE, INC.
BY:--------------------------------------------------------------------
Cboe EDGA EXCHANGE, INC.
BY:--------------------------------------------------------------------
Cboe EDGX EXCHANGE, INC.
BY:--------------------------------------------------------------------
FINANCIALINDUSTRY REGULATORY AUTHORITY, INC.
BY:--------------------------------------------------------------------
INVESTORS EXCHANGE LLC
BY:--------------------------------------------------------------------
LONG-TERM STOCK EXCHANGE
BY:--------------------------------------------------------------------
MEMX LLC
BY:--------------------------------------------------------------------
MIAX PEARL, LLC
BY:--------------------------------------------------------------------
NASDAQ BX, Inc.
BY:--------------------------------------------------------------------
NASDAQ PHLX LLC
BY:--------------------------------------------------------------------
THE NASDAQ STOCK MARKET LLC
BY:--------------------------------------------------------------------
NEW YORK STOCK EXCHANGE LLC
BY:--------------------------------------------------------------------
NYSE AMERICAN LLC
BY:--------------------------------------------------------------------
NYSE ARCA, INC.
BY:--------------------------------------------------------------------
NYSE CHICAGO, INC.
BY:--------------------------------------------------------------------
NYSE NATIONAL, INC.
BY:--------------------------------------------------------------------

Appendix A--Percentage Parameters

I. Tier 1 NMS Stocks

(1) Tier 1 NMS Stocks shall include all NMS Stocks included in
the S&P 500 Index and the Russell 1000 Index, and [the] all
exchange-traded products (``ETP''), except for single stock ETPs,
which will be assigned to the same Tier as their underlying stock,
adjusted for any leverage factor, if applicable. [identified as
Schedule 1 to this Appendix. Schedule 1 to the Appendix will be
reviewed and updated semi-annually based on the fiscal year by the
Primary Listing Exchange to add ETPs that meet the criteria, or
delete ETPs that are no longer eligible. To determine eligibility
for an ETP to be included as a Tier 1 NMS Stock, all ETPs across
multiple asset classes and issuers, including domestic equity,
international equity, fixed income, currency, and commodities and
futures will be identified. Leveraged ETPs will be excluded and the
list will be sorted by notional consolidated average daily volume
(``CADV''). The period used to measure CADV will be from the first
day of the previous fiscal half year up until one week before the
beginning of the next fiscal half year. Daily volumes will be
multiplied by closing prices and then averaged over the period.
ETPs, including inverse ETPs, that trade over $2,000,000 CADV will
be eligible to be included as a Tier 1 NMS Stock. The semi-annual
updates to Schedule 1 do not require an amendment to the Plan. The
Primary Listing Exchanges will maintain the updated Schedule 1 on
their respective websites.]
(2) The Percentage Parameters for Tier 1 NMS Stocks with a
Reference Price more than $3.00 shall be 5%.
(3) The Percentage Parameters for Tier 1 NMS Stocks with a
Reference Price equal to $0.75 and up to and including $3.00 shall
be 20%.
(4) The Percentage Parameters for Tier 1 NMS Stocks with a
Reference Price less than $0.75 shall be the lesser of (a) $0.15 or
(b) 75%.
(5) Notwithstanding the foregoing, the Percentage Parameters for
a Tier 1 NMS Stock that is a leveraged ETP shall be the applicable
Percentage Parameter set forth in clauses (2), (3), or (4) above,
multiplied by the leverage ratio of such product.
(6[5]) The Reference Price used for determining which Percentage
Parameter shall be applicable during a trading day shall be based on
the closing price of the NMS Stock on the Primary Listing Exchange
on the previous trading day, or if no closing price exists, the last
sale on the Primary Listing Exchange reported by the Processor.

II. Tier 2 NMS Stocks

(1) Tier 2 NMS Stocks shall include all NMS Stocks other than
those in Tier 1, provided, however, that all rights and warrants are
excluded from the Plan.
(2) The Percentage Parameters for Tier 2 NMS Stocks with a
Reference Price more than $3.00 shall be 10%.
(3) The Percentage Parameters for Tier 2 NMS Stocks with a
Reference Price equal to $0.75 and up to and including $3.00 shall
be 20%.
(4) The Percentage Parameters for Tier 2 NMS Stocks with a
Reference Price less than $0.75 shall be the lesser of (a) $0.15 or
(b) 75%.
(5) Notwithstanding the foregoing, the Percentage Parameters for
a Tier 2 NMS Stock that is a leveraged ETP shall be the applicable
Percentage Parameter set forth in clauses (2), (3), or (4) above,
multiplied by the leverage ratio of such product.
(6) The Reference Price used for determining which Percentage
Parameter shall be applicable during a trading day shall be based on
the closing price of the NMS Stock on the Primary Listing Exchange
on the previous trading day, or if no closing price exists, the last
sale on the Primary Listing Exchange reported by the Processor.

[Appendix A--Schedule 1]

Appendix B--Data and Reporting

I. Data Provision

The Commission may request from the Primary Listing Exchanges
the below data that is not otherwise publicly available. The
requested data shall be collected and transmitted to the Commission
in an agreed-upon format, to be provided 30 calendar days following
the date of the request, or such other date as agreed upon by the
Commission and Primary Listing Exchange. Data collected in
connection with a Commission request shall be transmitted to the
Commission with a request for confidential treatment under the
Freedom of Information Act, 5 U.S.C. 552, and the Commission's rules
and regulations thereunder. This section shall expire at the time
the below data becomes available via the National Market System Plan
Governing the Consolidated Audit Trail or becomes publicly
available.
A. Data set of all orders entered during halts or Trading
Pauses.

1. Normal or Auction Only orders, Arrivals, Changes, Cancels, #
shares, limit/market, side, Limit State side
2. Pipe delimited with field name as first record

B. Data set of order events received during Limit States.
C. Summary data on order flow of arrivals and cancellations for
each 15-second period for discrete time periods and sample stocks to
be determined by the SEC in subsequent data requests. Must indicate
side(s) of Limit State.

1. Market/marketable sell orders arrivals and executions
a. Count
b. Shares
c. Shares executed
2. Market/marketable buy orders arrivals and executions
a. Count
b. Shares
c. Shares executed
3. Count arriving, volume arriving and shares

[[Page 81149]]

executing in limit sell orders above NBO mid-point
4. Count arriving, volume arriving and shares executing in limit
sell orders at or below NBBO mid-point (non-marketable)
5. Count arriving, volume arriving and shares executing in limit buy
orders at or above NBBO mid-point (non-marketable)
6. Count arriving, volume arriving and shares executing in limit buy
orders below NBBO mid-point
7. Count and volume arriving of limit sell orders priced at or above
NBBO midpoint plus $0.05
8. Count and volume arriving of limit buy orders priced at or below
NBBO midpoint minus $0.05
9. Count and volume of (3-8) for cancels
10. Include: ticker, date, time at start, time of Limit State, all
data item fields in 1, last sale prior to 15-second period (null if
no trades today), range during 15-second period, last trade during
15-second period

II. Reporting

A. Annual Report

No later than March 31, 2020 and annually thereafter, the
Operating Committee, in consultation with the Advisory committee,
will provide the Commission and make publicly available a report
containing key information concerning the Plan's performance during
the preceding calendar year which shall include the following items:
(1) an update on the Plan's operations; (2) an analysis of any
amendments to the Plan implemented during the period covered by the
report; and (3) an analysis of potential material emerging issues
that may directly impact the operation of the Plan.
1. Update on the Plan's Operations. This section of the Annual
Report shall analyze the Plan's operations during the covered
period, including a discussion of any areas of the Plan's operation
that require additional analysis. In particular, this section of the
Annual Report shall examine the calibration of the parameters set
forth in the Plan (e.g., Price Bands, duration of Limit States,
impact of Straddle States, duration of Trading Pauses, and the
performance of reopening procedures following a Trading Pause). This
section of the Annual Report also shall consider stock
characteristics and variations in market conditions over time, and
may include tests that differentiate results for different
characteristics, both in isolation and in combination.
2. Analysis of Amendments Implemented. This section of the
Annual Report shall provide an analysis of any amendments
implemented during the covered period. The analysis shall include a
discussion of any such amendment's operation and its impact on the
overall operation of the Plan.
3. Analysis of Emerging Issues. This section of the Annual
Report should vary from year-to-year and will include a discussion
and analysis of the Plan's operation during a significant market
event that may have occurred during the covered period. This section
shall also include any additional analyses performed during the
covered period on issues that were raised in previous Annual
Reports.

B. Quarterly Data

Thirty days following the end of each calendar quarter, the
Operating Committee shall provide the Commission and make publicly
available a report (``Monitoring Report'') including basic
statistics aggregated across primary listing exchanges regarding the
Plan's operation during the preceding calendar quarter, as well as
data aggregated across primary listing exchanges from the previous
12 quarters beginning with the calendar quarter covered by the first
Monitoring Report. The purpose of the Monitoring Report is to
identify trends in the performance and impact of the Plan on market
activity. The Monitoring Report shall include data on the following
events for each month during the preceding calendar quarter:

1. Limit States, Trading Pauses, Straddle States, and Clearly Erroneous
Events

a. Definitions. For the purpose of this Section B.1, the
following definitions apply:
i. ``Category'' means the following categories of securities:

(1) Tier 1 non-ETP securities > $3.00
(2) Tier 1 non-ETP securities >= $0.75 and <= $3.00
(3) Tier 1 non-ETP securities < $0.75
(4) Tier 1 non-leveraged ETPs > $3.00
(5) Tier 1 non-leveraged ETPs >= $0.75 and <= $3.00
(6) Tier 1 non-leveraged ETPs < $0.75
(7) Tier 1 leveraged ETPs > $3.00
(8) Tier 1 leveraged ETPs >= $0.75 and <= $3.00
(9) Tier 1 leveraged ETPs < $0.75
(10) Tier 2 non-ETPs > $3.00
(11) Tier 2 non-ETPs >= $0.75 and <= $3.00
(12) Tier 2 non-ETPs < $0.75
(13) Tier 2 non-leveraged ETPs > $3.00
(14) Tier 2 non-leveraged ETPs >= $0.75 and <= $3.00
(15) Tier 2 non-leveraged ETPs < $0.75
(16) Tier 2 leveraged ETPs > $3.00
(17) Tier 2 leveraged ETPs >= $0.75 and <= $3.00
(18) Tier 2 leveraged ETPs < $0.75

ii. ``Time of Day'' means the following time spans:

(1) Opening (prior to 9:45 a.m. ET)
(2) Regular (between 9:45 a.m. ET and 25 minutes prior to the end of
core trading hours)
(3) Closing (the last 25 minutes of core trading hours)
(4) Within five minutes of a Trading Pause reopen or IPO open

b. Limit States. The Monitoring Report will include:
i. Monthly distribution statistics (mean, median, 25th
percentile, and maximum) on the number of Limit States per day,
broken out by Category and Time of Day.
ii. Monthly distribution statistics (mean, median, 25th
percentile, and maximum) on the number of NMS Stocks that
experienced more than one Limit State on a single day, broken out by
Category.
iii. Monthly distribution statistics (mean, median, 90th
percentile, and 99th percentile) on the number of Limit States
experienced per day by individual NMS Stocks that had more than one
Limit State on a single day, broken out by Category.
iv. Monthly distribution statistics (mean, median, 90th
percentile, and 99th percentile) on the total length of Limit States
experienced per day by individual NMS Stocks that had more than one
Limit State on a single day, broken out by Category.
c. Trading Pauses. The Monitoring Report will include:
i. Monthly distribution statistics (mean, median, 25th
percentile, and maximum) on the number of Trading Pauses per day,
broken out by Category and Time of Day.
ii. Monthly distribution statistics (mean, median, 25th
percentile, and maximum) on the number of NMS Stocks that
experienced more than one Trading Pause on a single day, broken out
by Category.
iii. Monthly distribution statistics (mean, median, 90th
percentile, and maximum) on the number of Trading Pauses per day
experienced by individual NMS Stocks having more than one Trading
Pause on a single day, broken out by Category.
d. Straddle States. The Monitoring Report will include:
i. Monthly distribution statistics (mean, median, 25th
percentile, and maximum) on the number of Straddle States per day,
broken out by Category and Time of Day.
ii. Monthly distribution statistics (mean, median, 25th
percentile, and maximum) on the number of NMS Stocks that
experienced more than one Straddle State on a single day, broken out
by Category.
iii. Monthly distribution statistics (mean, median, 90th
percentile, and 99.9th percentile) on the total time spent in a
Straddle State per day for individual NMS Stocks experiencing one or
more Straddle States on a single day, broken out by Category.
e. The Monitoring Report will include the number of Clearly
Erroneous Events per day for all NMS Stocks that occurred during the
time when Price Bands are disseminated by the Processor, broken out
by Category and Time of Day.

2. Reopening Data

a. Definitions. For the purpose of this Section B.2, the
following definitions apply:
i. ``Type of Reopening'' means either (1) manual or (2)
automated.
ii. ``Category'' means the following categories of securities:
(1) Tier 1 non-ETP securities
(2) Tier 1 non-leveraged ETPs
(3) Tier 1 leveraged ETPs
(4) Tier 2 non-ETP securities
(5) Tier 2 non-leveraged ETPs
(6) Tier 2 leveraged ETPs

iii. ``Length of the Trading Pause'' means the following
durations:

(1) less than 6 minutes (for manual reopenings) or no extensions of
the Trading Pause (for automated reopenings);
(2) 6 to 10 minutes (for manual reopenings) or one extension of the
Trading Pause (for automated reopenings);
(3) more than 10 minutes (for manual reopenings) or more than one
extension of the Trading Pause (for automated reopenings)

b. The Monitoring Report will include the following monthly data
on reopenings:

[[Page 81150]]

i. The number of Trading Pauses per month, broken out by (1)
Type of Reopening, (2) Category, and (3) Length of the Trading
Pause.
ii. Monthly distribution statistics (mean, median, 90th
percentile, and 99th percentile) on the duration of each Trading
Pause, broken out by (1) Type of Reopening and (2) Category.
iii. The number of Trading Pauses ending in a:
(1) trade;
(2) quote; and
(3) potential closing auction, broken out by (a) Type of
Reopening, (b) Category, and (c) Length of Trading Pause.
iv. For Trading Pauses in NMS Stocks preceded by a Limit Up
state, monthly distribution statistics (mean, median, 90th
percentile, and 99th percentile) on the percentage price change from
the Limit Up pricing that triggered the Trading Pause to the
reopening price on exiting the Trading Pause (i.e., the reopening
trade or midpoint price), broken out by (1) Category and (2) whether
the Trading Pause ended in a trade or (3) in a quote (i.e., the
reopening price was a midpoint).
v. For Trading Pauses in NMS Stocks preceded by a Limit Down
state, monthly distribution statistics (mean, median, 90th
percentile, and 99th percentile) on the percentage price change from
the Limit Down pricing that triggered the Trading Pause to the
reopening price on exiting the Trading Pause (i.e., the reopening
trade or midpoint price), broken out by (1) Category and (2) whether
the Trading Pause ended in a trade or (3) in a quote (i.e., the
reopening price was a midpoint).
vi. For Trading Pauses in NMS Stocks where the reopening process
ended in a trade or quote (with resulting reference price equal to
the midpoint of that quote), monthly distribution statistics (mean,
median, 90th percentile, and 99th percentile) on the percentage
price change from the reopening price on exiting the Trading Pause
(i.e., the reopening trade or midpoint price) to
(1) the highest price of all last sale eligible trades;
(2) the lowest price of all last sale eligible trades; and
(3) the trade-weighted average price of all last sale eligible
trades for the five minutes following the conclusion of the Trading
Pause, broken out by (a) Category, (b) whether the Trading Pause was
preceded by a Limit Up state or (c) a Limit Down state, and (d)
whether the Trading Pause ended in a trade or (e) in a quote (i.e.,
the reopening price was a midpoint).

C. Reports on Market Events

At the Commission's request, the Operating Committee shall
provide the Commission and make publicly available a report
analyzing the Plan's operation during a significant market event
that (1) materially impacted the trading of more than one security
across multiple Trading Centers; and (2) is directly related to or
implicating the performance of the Plan. Such report shall be
provided to the Commission no later than 30 days following the
Commission's request, or at a later date as agreed upon between the
Commission and the Operation Committee. The requirement to submit a
report under this section may be satisfied by including the required
analysis within an Annual Report.

[FR Doc. 2023-25543 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P

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