Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Equity 4, Rule 3312 (Clearly Erroneous Transactions)

Issuing agencies

Full Text

<html>
<head>
<title>Federal Register, Volume 91 Issue 196 (Tuesday, October 13, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 196 (Tuesday, October 13, 2026)]
[Notices]
[Pages 64975-64978]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-20805]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106630; File No. SR-Phlx-2026-60]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Equity 4, 
Rule 3312 (Clearly Erroneous Transactions)

October 7, 2026.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 28, 2026, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Equity 4, Rule 3312 (Clearly 
Erroneous Transactions) in light of the Commission's approval of 
Overnight Protected Bands for 23/5 Trading.
    The text of the proposed rule change is available on the Exchange's 
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings">https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings</a>, 
and at the principal office of the Exchange.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Equity 4, Rule 3312 (Clearly 
Erroneous Transactions) in light of the Commission's approval of 
Overnight Protected Bands under the LULD Plan for 23/5 Trading.
Background
    In conjunction with the industry's plans for the introduction of 
trading 23 hours a day, 5 days a week (``23/5 Trading''), the Operating 
Committee of the Plan to Address Extraordinary Market Volatility 
(``LULD Plan'') filed proposed Amendment 27 to the LULD Plan, which 
proposed to establish price band protections during overnight trading 
hours (``Overnight Price Bands'').\3\ The Operating Committee proposed 
that the Overnight Price Bands would initially be temporary static 
bands 20% above and below two reference points, and that after 
implementation, the Operating Committee would evaluate the performance 
of such Overnight Price Bands and propose appropriate changes in a new 
plan amendment.\4\ On August 5, 2026, the Commission approved the 
proposal.\5\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 105596 (June 1, 
2026), 91 FR 33774 (June 4, 2026) (File No. 4-631) (Notice of Filing 
of 27th Amendment to the National Market System Plan).
    \4\ See id.
    \5\ See Securities Exchange Act Release No. 106042 (August 5, 
2026), 91 FR 51515 (August 10, 2026) (File No. 4-631) (Order 
Granting Approval of the 27th Amendment to the National Market 
System Plan to Address Extraordinary Market Volatility to Establish 
Temporary Price Band Protections in Overnight Trading).
---------------------------------------------------------------------------

    In light of the Commission's approval of these changes to the LULD 
Plan, the Exchange now proposes several amendments to Rule 3312 
regarding Clearly Erroneous Transactions. In general, the rule 
describes the process a market participant may use to request 
cancellation of a transaction that was ``clearly erroneous.'' The 
current rule's central premise is that if LULD Price Bands under the 
LULD Plan were available and correct at the time the transaction was 
executed, the transaction is not eligible for clearly erroneous review. 
Specifically, Rule 3312(a)(2)(C)(1) currently provides that ``[i]f the 
execution time of the transaction(s) under review is during Market 
Hours, the transaction will not

[[Page 64976]]

be reviewable as clearly erroneous'' except in certain limited 
circumstances, including when (A) the transaction is in an NMS stock 
that is not subject to the LULD Plan (e.g., rights and warrants), (B) 
the transaction was executed at a time when LULD Price Bands were 
unavailable or trading should have been prevented due to a regulatory 
halt or other halt, or (C) several other limited circumstances.\6\ In 
approving the existing version of the rule, the Commission noted that 
restricting clearly erroneous review in this way during times when LULD 
Price Bands were in effect was ``consistent with the Act and will 
further the goal of providing greater certainty to market participants 
that trades executed within the Price Bands will stand and not be 
broken. . . . Thus, the proposal is designed to limit the potential 
discordance between the LULD mechanism and CEE review process.'' \7\
---------------------------------------------------------------------------

    \6\ See Rule 3312(a)(2)(C)(1)(i), (ii), and (iii).
    \7\ See Securities Exchange Act Release No. 95658 (September 1, 
2022), 87 FR 55060 at 55063 (September 8, 2022) (SR-CboeBZX-2022-
037) (Order Approving a Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 2, to Amend BZX Rule 11.17, Clearly Erroneous 
Executions).
---------------------------------------------------------------------------

    Currently, LULD Price Bands are available only during Market Hours, 
meaning that the restrictions on clearly erroneous review described 
above apply only during Market Hours. With the introduction of 
Overnight Price Bands, the Exchange now proposes to extend the existing 
restrictions on clearly erroneous review to the period when Overnight 
Price Bands are in place. This proposed change would be consistent with 
the Commission's rationale in approving the current version of the rule 
because it would limit any potential discordance between the LULD 
mechanism and CEE review in the overnight trading session, providing 
greater certainty to market participants that trades executed with the 
Overnight Price Bands will stand and not be broken.
Proposed Changes to Rule 3312(a)(2)(C)(1)
    To implement this change, the Exchange proposes to add several 
definitions to Rule 3312(a)(2)(C)(1). First, the Exchange would add 
that the term ``LULD Protected Hours'' includes Market Hours and 
``Overnight Protected Hours'' defined in Section VIII of the LULD Plan. 
Second, the Exchange would define ``LULD Price Bands'' or ``Price 
Bands'' to mean the Price Bands defined in Section V of the LULD Plan 
(i.e., the Price Bands that apply during Market Hours) and ``Overnight 
Price Bands'' as defined in Section VIII of the LULD Plan (i.e., the 
Price Bands that apply to the Overnight Protected Hours from 9:00 p.m. 
ET through 4:00 a.m. ET).
    The Exchange proposes to amend the current first sentence of Rule 
3312(a)(2)(C)(1) to replace the phrase ``Market Hours'' with ``LULD 
Protected Hours,'' to provide that ``[i]f the execution time of the 
transaction(s) under review is during LULD Protected Hours, the 
transaction will not be reviewable as clearly erroneous . . . .'' This 
change would extend the LULD-based restrictions on clearly erroneous 
review currently in place during Market Hours to the Overnight 
Protected Hours.
    The Exchange also proposes to amend Rule 3312(a)(2)(C)(1)(ii)'s 
reference to ``Percentage Parameter'' to incorporate the Percentage 
Parameter that applies to Overnight Protected Hours. The amended 
provision would provide for the applicability of clearly erroneous 
review if the price of the transaction to buy (sell) that is the 
subject of the clearly erroneous complaint is greater than (less than) 
the Reference Price by an amount that equals or exceeds the applicable 
Percentage Parameter defined in Appendix A to the LULD Plan (with 
respect to the Price Bands that apply during Market Hours) or the 
``Overnight Percentage Parameter defined in Section VIII of the LULD 
Plan'' (with respect to Overnight Protected Hours).
    In addition to these changes, the Exchange also proposes to make a 
non-substantive change to Rule 3312(a)(2)(C)(1)(i), substituting the 
term ``LULD Plan'' for the current text ``the Plan to Address 
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS 
under the Act (the `Limit Up-Limit Down Plan' or `LULD Plan,')'' as the 
``LULD Plan'' would be defined in the proposed revision to Rule 
3312(a)(2)(C)(1).
Proposed Changes to 3312(a)(2)(A)(iii), (a)(2)(C)(2), (a)(2)(D)(3), and 
(b)(i)
    As noted above, current Rule 3312(a)(2)(C)(1) permits clearly 
erroneous review even during Market Hours when the transaction in 
question is in an NMS Stock that is not subject to the LULD Plan, i.e., 
rights and warrants. Such transactions are reviewed for clearly 
erroneous status using the procedures set out in Rule 3312(a)(2)(C)(2), 
including the Numerical Guidelines set out in the table accompanying 
Rule 3312(a)(2)(C)(2)(i). The Exchange now proposes to introduce a 
similar provision regarding transactions in NMS Stocks not subject to 
the LULD Plan that are executed during the Overnight Protected Hours; 
such transactions would be subject to the same Numerical Guidelines as 
transactions occurring in Pre-Market Hours and Post-Market Hours.
    The Exchange first proposes to amend the heading of Rule 
3312(a)(2)(C)(2) from ``Numerical Guidelines'' to ``Review of 
transactions occurring during Pre-Market Hours or Post-Market Hours or 
during LULD Protected Hours in NMS Stocks Not Subject to the LULD 
Plan.'' Next, the Exchange proposes replace the phrase ``eligible for 
review pursuant to paragraph (c)(1)(i)'' (which, in the current rule, 
means transactions executed during Market Hours in NMS Stocks not 
subject to the LULD Plan) with ``during LULD Protected Hours in NMS 
Stocks not subject to the LULD Plan.'' This proposed language would 
cover transactions in NMS Stocks not subject to the LULD Plan in Market 
Hours and expand the same treatment to transactions executed in NMS 
Stocks not subject to the LULD Plan during Overnight Protected Hours. 
As such, the proposed change is not novel. The Exchange proposes to 
make this change everywhere such language appears in the rule--namely, 
in the text of paragraphs (a)(2)(A)(iii), (a)(2)(C)(2)(i), 
(a)(2)(C)(2)(ii), (a)(2)(C)(2)(iii), (a)(2)(D)(3), and (b)(i).\8\ In 
each case, the Exchange proposes to replace the phrase ``transactions 
occurring during Pre-Market Hours or Post-Market Hours or eligible for 
review'' pursuant to subparagraph (C)(1)(i) with ``transactions 
occurring during Pre-Market Hours or Post-Market Hours or during LULD 
Protected Hours in NMS Stocks not subject to the LULD Plan.''
---------------------------------------------------------------------------

    \8\ Paragraphs (a)(2)(A)(iii), (a)(2)(C)(2)(i), 
(a)(2)(C)(2)(ii), and (a)(2)(C)(2)(iii) specify general rules for 
applying clearly erroneous review to transactions where such review 
is not precluded by paragraph (a)(2)(C)(1). Paragraph (a)(2)(D)(3) 
specifies conditions where the Exchange may use a revised Reference 
Price for the purpose of clearly erroneous review in certain 
transactions where such review is not precluded by paragraph 
(a)(2)(C)(1). Paragraph (b)(i) specifies that for transactions where 
clearly erroneous review is not precluded by paragraph (a)(2)(C)(1), 
a senior officer may initiate clearly erroneous review on his or her 
own motion.
---------------------------------------------------------------------------

    The Exchange also proposes to make corresponding changes to the 
headings of the table accompanying Rule 3312(a)(2)(C)(2)(i). The 
Exchange proposes to change the heading of the second column from 
``Market Hours Numerical Guidelines for transactions eligible for 
review pursuant to subparagraph (C)(1)(i)'' to ``Numerical Guidelines 
for Transactions Executed During Market Hours in NMS Stocks Not Subject 
to the LULD Plan.'' This change would simply replace the shorthand 
``eligible for review pursuant to subparagraph (C)(1)(i)'' with the 
fuller

[[Page 64977]]

description that such transactions are ``executed during Market Hours 
in NMS Stocks not subject to the LULD Plan,'' and is not a substantive 
change.
    Similarly, the Exchange proposes to change the heading of the third 
column from ``Pre-Market Hours and Post-Market Hours Numerical 
Guidelines'' to ``Numerical Guidelines for Transactions Executed During 
Pre-Market Hours and Post-Market Hours or During Overnight Protected 
Hours in NMS Stocks Not Subject to the LULD Plan.'' The proposed change 
addresses the fact that transactions executed during Overnight 
Protected Hours in NMS Stocks not subject to the LULD Plan are eligible 
for clearly erroneous review--just as are transactions in NMS Stocks 
not subject to the LULD Plan executed during Market Hours--but at the 
Numerical Guidelines that apply outside of Market Hours.
    Together, these proposed changes would extend the eligibility of 
clearly erroneous review for transactions in NMS Stocks not subject to 
the LULD Plan that is currently in place during Market Hours to the 
Overnight Protected Hours, and would apply the Commission's recent 
approval of Overnight Price Bands to the clearly erroneous executions 
rule.
Implementation
    The Exchange understands that the other national securities 
exchanges and FINRA will also file similar proposals, the substance of 
which are identical to this proposal. The Exchange proposes that this 
rule change would become operative at the commencement of 23/5 Trading, 
which is scheduled to commence industry-wide on December 6, 2026.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed change is consistent with 
just and equitable principles of trade because it extends the basic 
premise of the current rule that clearly erroneous review should be 
generally unavailable any time a transaction is executed within LULD 
Price Bands at a time the Price Bands were available and correct. 
Currently, LULD Price Bands are available only during Market Hours, 
meaning that the restrictions on clearly erroneous review described 
above apply only during Market Hours. With the introduction of 
Overnight Price Bands, the Exchange believes that extending such 
restrictions on clearly erroneous review to the period when Overnight 
Price Bands are in place would remove impediments to and perfect the 
mechanism of a free and open market and a national market system by 
enhancing the transparency and consistency of the rule.
    The resulting rule would thus extend the LULD-related limits on 
clearly erroneous review that are applicable in Market Hours to the 
overnight period. The proposed change would also be consistent with the 
Commission's rationale in approving the current version of the rule 
because it would limit any potential discordance between the LULD 
mechanism and CEE review in the overnight trading session, providing 
greater certainty to market participants that trades executed with the 
Overnight Price Bands will stand and not be broken.\11\
---------------------------------------------------------------------------

    \11\ See 87 FR 55060 at 55063, supra note 7.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather than impacting 
competition, the proposed change would simply extend the basic premise 
of the current rule that clearly erroneous review should be generally 
unavailable any time a transaction is executed within LULD Price Bands 
at a time the Price Bands were available and correct. The Exchange 
understands that the other national securities exchanges and FINRA will 
also file similar proposals, the substance of which are identical to 
this proposal. Thus, the proposed rule change will help to ensure 
consistency across SROs without implicating any competitive issues.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (<a href="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#0270776e672f616d6f6f676c7671427167612c656d74"><span class="__cf_email__" data-cfemail="0270776e672f616d6f6f676c7671427167612c656d74">[email&#160;protected]</span></a>. Please include 
file number SR-Phlx-2026-60 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-Phlx-2026-60. 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 filing will be available for inspection and 
copying at the principal office of the Exchange. Do not include 
personal identifiable information in submissions; you should

[[Page 64978]]

submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-Phlx-2026-60 and should be 
submitted on or before November 3, 2026.

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

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-20805 Filed 10-9-26; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>