[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)]
[Notices]
[Pages 55696-55699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25227]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82098; File No. SR-CHX-2017-14]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Related to the Plan To Address Extraordinary Market Volatility Pursuant
to Rule 608 of Regulation NMS
November 16, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on November 9, 2017, the Chicago Stock Exchange, Inc. (``CHX'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CHX proposes to amend the Rules of the Exchange (``CHX Rules'')
related to the Plan to Address Extraordinary Market Volatility Pursuant
to Rule 608 of Regulation NMS under the Act (the ``Limit Up-Limit Down
Plan'' or ``Plan'').\3\ The text of this proposed rule change is
available on the Exchange's Web site at (www.chx.com) and in the
Commission's Public Reference Room.
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\3\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down
Release'').
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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 CHX included statements
concerning the purpose of and basis for the proposed rule changes 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 CHX has prepared summaries, set forth in sections A,
B and C below, of the most significant aspects of such statements.
[[Page 55697]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange, together with the Cboe BZX Exchange, Inc.,\4\ Cboe
BYX Exchange, Inc.,\5\ Cboe EDGA Exchange, Inc.,\6\ Cboe EDGX Exchange,
Inc.,\7\ the Financial Industry Regulatory Authority, Inc. (``FINRA''),
Investors' Exchange LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, the Nasdaq
Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC,\8\
NYSE Arca, Inc. and NYSE National, Inc.\9\ (collectively with the
Exchange, the ``Plan Participants'') are parties to the Plan to Address
Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS
under the Exchange Act. The Plan Participants initially filed the Plan
with the Commission on April 5, 2011, which was published for notice
and comment.\10\ On May 24, 2012, the Plan Participants filed an
amendment to the Plan and the Plan, as amended, was approved by the
Commission on May 31, 2012.\11\ The Plan Participants filed a second
amendment to the Plan, which was immediately effective on January 23,
2013.\12\ On February 19, 2013, the Plan Participants filed a third
amendment to the Plan, which the Commission approved on April 3,
2013.\13\ The Plan Participants filed a fourth amendment to the Plan,
which was immediately effective on July 18, 2013.\14\ On July 18, 2013,
the Plan Participants filed a fifth amendment to the Plan, which the
Commission approved on September 26, 2013.\15\ The Plan Participants
filed a sixth amendment to the Plan, which was immediately effective on
December 3, 2013.\16\ On February 24, 2014, the Plan Participants filed
a seventh amendment to the Plan, which the Commission approved on April
3, 2014.\17\ On December 24, 2014, the Plan Participants filed an
eighth amendment to the Plan, which the Commission approved on February
19, 2015.\18\ On July 31, 2015, the Plan Participants filed a ninth
amendment to the Plan to extend the pilot through April 22, 2016, and
remove Chicago Board Options Exchange as a Plan Participant, which the
Commission approved on October 22, 2015.\19\ On February 19, 2016, the
Plan Participants filed a tenth amendment to the Plan to extend the
pilot through April 21, 2017 and make one modification to the Plan,
which the Commission approved on April 21, 2016.\20\ On August 1, 2016,
the Investors Exchange LLC filed an amendment to the Plan to be added
to the roster of Plan Participants.\21\ By letter dated September 19,
2016,\22\ the Plan Participants filed a twelfth amendment to the Plan
(``Amendment 12''), which the Commission approved on January 19,
2017.\23\ On February 13, 2017, the Plan Participants filed a
thirteenth amendment to the Plan, which was approved on April 13,
2017.\24\ The Plan Participants filed a fourteenth amendment to the
Plan, which was immediately effective on April 13, 2017.\25\ The Plan
Participants filed a fifteenth amendment to the Plan, which was
immediately effective on August 31, 2017.\26\
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\4\ Bats BZX Exchange, Inc. has been renamed Cboe BZX Exchange,
Inc. See Exchange Act Release No. 81962 (October 26, 2017), 82 FR
50711 (November 1, 2017) (SR-BatsBZX-2017-70).
\5\ Bats BYX Exchange, Inc. has been renamed Cboe BYX Exchange,
Inc. See Exchange Act Release No. 81952 (October 26, 2017), 82 FR
50725 (November 1, 2017) (SR-BatsBYX-2017-27).
\6\ Bats EDGA Exchange, Inc. has been renamed Cboe EDGA
Exchange, Inc. See Exchange Act Release No. 81957 (October 26,
2017), 82 FR 50716 (November 1, 2017) (SR-BatsEDGA-2017-28).
\7\ Bats EDGX Exchange, Inc. has been renamed Cboe EDGX
Exchange, Inc. See Exchange Act Release No. 81963 (October 26,
2017), 82 FR 50697 (November 1, 2017) (SR-BatsEDGX-2017-41).
\8\ NYSE MKT LLC has been renamed NYSE American LLC. See
Exchange Act Release No. 80283 (March 21, 2017), 82 FR 15244 (March
27, 2017) (SR-NYSEMKT-2017-14).
\9\ National Stock Exchange, Inc. has been renamed NYSE
National, Inc. See Securities Exchange Act Release No. 79902 (Jan.
30, 2017), 82 FR 9258 (Feb. 3, 2017) (SR-NSX-2016-16).
\10\ See Securities Exchange Act Release No. 64547 (May 25,
2011), 76 FR 31647 (June 1, 2011) (File No. 4-631) (``LULD
Proposal'').
\11\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631) (``Approval
Order'').
\12\ See Securities Exchange Act Release No. 68953 (February 20,
2013), 78 FR 13113 (February 26, 2013) (File No. 4-631).
\13\ See Securities Exchange Act Release No. 69287 (April 3,
2013), 78 FR 21483 (April 10, 2013) (File No. 4-631).
\14\ See Securities Exchange Act Release No. 70273 (August 27,
2013), 78 FR 54321 (September 3, 2013) (File No. 4-631).
\15\ See Securities Exchange Act Release No. 70530 (September,
26, 2013), 78 FR 60937 (October 2, 2013) (File No. 4-631).
\16\ See Securities Exchange Act Release No. 71247 (January 7,
2014), 79 FR 2204 (January 13, 2014) (File No. 4-631).
\17\ See Securities Exchange Act Release No. 71851 (April 3,
2014), 79 FR 19687 (April 9, 2014) (File No. 4-631).
\18\ See Securities Exchange Act Release No. 74323 (February 19,
2015), 80 FR 10169 (February 25, 2015) (File No. 4-631).
\19\ See Securities Exchange Act Release No. 76244 (October 22,
2015), 80 FR 66099 (October 28, 2015) (File No. 4-631).
\20\ See Securities Exchange Act Release No. 77679 (April 21,
2016), 81 FR 24908 (April 27, 2016) (File No. 4-631).
\21\ See Securities Exchange Act Release No. 78703 (August 26,
2016), 81 FR 60397 (September 1, 2016) (File No. 4-631).
\22\ See letter from Elizabeth K. King, General Counsel, NYSE,
to Brent J. Fields, Secretary, Commission, dated September 16, 2016
(``Amendment 12 Letter'').
\23\ See Securities Exchange Act Release No. 79845 (January 19,
2017), 82 FR 8551 (January 26, 2017) (File No. 4-631).
\24\ See Exchange Act Release No. 80455 (April 13, 2017), 82 FR
18519 (April 19, 2017) (File No. 4-631).
\25\ See Exchange Act Release No. 80549 (April 28, 2017), 82 FR
20928 (May 4, 2017) (File No. 4-631).
\26\ See Exchange Act Release No. 81720 (September 26, 2017), 82
FR 45922 (October 2, 2017) (File No. 4-631).
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As of the date of this filing, the Amendment 12 implementation date
is November 20, 2017. Amendment 12 provides that a Trading Pause \27\
will continue until the Primary Listing Exchange has reopened trading
using its established reopening procedures, even if such reopening is
more than 10 minutes after the beginning of a Trading Pause, and to
require that trading centers may not resume trading in an NMS Stock
following a Trading Pause without Price Bands in such NMS Stock.\28\
Amendment 12 also provides that a Trading Pause will continue until the
Primary Listing Exchange has reopened trading using its established
reopening procedures and reports a Reopening Price. Furthermore,
Amendment 12 eliminated the current allowance for a trading center to
resume trading in an NMS Stock following a Trading Pause if the Primary
Listing Exchange has not reported a Reopening Price within ten minutes
after the declaration of a Trading Pause and has not declared a
Regulatory Halt. In addition, to preclude potential scenarios when
trading may resume without Price Bands, Amendment 12 provides that a
trading center may not resume trading in an NMS Stock following a
Trading Pause without Price Bands in such NMS Stock. To address
potential scenarios in which there is no Reopening Price from the
Primary Listing Exchange to use to calculate Price Bands, Amendment 12
adopted related provisions to the Plan to address when trading may
resume if the Primary Listing Exchange is unable to reopen due to a
systems or technology issue or if the Primary Listing Exchange reopens
trading on a zero bid or zero quote, or both and how the Reference
Price would be determined in such a scenario.
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\27\ Unless otherwise specified, the terms used herein have the
same meaning as set forth in the Plan.
\28\ See Amendment 12 Letter, supra note 22.
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In conjunction with filing Amendment 12, each Primary Listing
Exchange filed rule changes \29\ with the
[[Page 55698]]
Commission under Section 19(b) of the Exchange Act to amend their
respective trading practice for automated reopenings following a
Trading Pause consistent with a standardized approach agreed to by Plan
Participants that would allow for extensions of a Trading Pause if
equilibrium cannot be met for a Reopening Price within specified
parameters. Accordingly, the Exchange is proposing to adopt changes to
its rules, as described below, to implement the reopening procedures
agreed upon by the Plan Participants that are applicable to the
Exchange.
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\29\ See Securities Exchange Act Release No. 81968 (October 27,
2017), 82 FR 50898 (November 2, 2017) (SR-NYSEAMER-2017-30); see
also Securities Exchange Act Release No. 81880 (October 16, 2017),
82 FR 48870 (October 20, 2017) (SR-NYSE-2017-51); see also
Securities Exchange Act Release No. 79884 (January 26, 2017), 82 FR
8968 (February 1, 2017) (Approval Order for SR-BatsBZX-2016-61); see
also Securities Exchange Act Release No. 79876 (January 25, 2017),
82 FR 8888 (January 31, 2017) (Approval Order for SR-NASDAQ-2016-
131); see also Securities Exchange Act Release No. 79846 (January
19, 2017), 82 FR 8548 (January 26, 2017) (Approval Order for SR-
NYSEArca-2016-130).
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a. Proposal
The Exchange proposes to amend current Article 20, Rule 2A(c)(4) to
adopt a requirement of Amendment 12 to only resume trading after a
Trading Pause initiated by another exchange upon receiving Price Bands
from the Processor. As noted above, Amendment 12 prohibits trading
centers from resuming trading in an NMS Stock following a Trading Pause
without Price Bands in such NMS Stock. The Plan provides that if the
Primary Listing Exchange is unable to reopen trading due to a systems
or technology issue, trading should be permitted to resume in that NMS
Stock upon receiving Price Bands from the processor. The Exchange notes
that amended Article 20, Rule 2A(c)(4) is based, in part, on approved
amendments to Nasdaq Rule 4120(a)(12)(H), which are not yet
operative.\30\
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\30\ See Approval Order for SR-NASDAQ-2016-131, supra note 29,
at 8889-8890.
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The Exchange does not propose to amend CHX Rules to adopt other
requirements of Amendment 12 related to reopening procedures as the
Exchange is not currently a Primary Listing Exchange for any NMS Stocks
and its primary listing program is currently dormant.
b. Operative Date
The Exchange proposes to implement the proposed rule change in
coordination with other Plan Participants on November 20, 2017.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act in general,\31\ and furthers the
objectives of Section 6(b)(5) in particular,\32\ in that it is designed
to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments and perfect the
mechanisms of a free and open market, and, in general, to protect
investors and the public interest. The Exchange believes that the
proposed rule change, together with the approved amendments to the
Plan, are necessary or appropriate in the public interest, for the
protection of investors and the maintenance of fair and orderly
markets, to remove impediments to and perfect the mechanisms of, a
national market system, or otherwise in furtherance of the purposes of
the Act.
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\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change would 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, because they are designed, together with the approved
amendments to the Plan, to address the issues experienced on August 24,
2015 by reducing the number of repeat Trading Pauses in a single NMS
Stock, and to harmonize CHX Rules with the Plan and the rules of other
Plan Participants.\33\
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\33\ See supra note 29.
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The approved Plan amendments are an essential component to Plan
Participants' goal of more standardized processes across Primary
Listing Exchanges in reopening trading following a Trading Pause, and
facilitates the production of an equilibrium Reopening Price by
centralizing the reopening process through the Primary Listing
Exchange, which would also improve the accuracy of the reopening Price
Bands. The approved Plan amendments support this initiative by
requiring trading centers to wait to resume trading following Trading
Pause until there is a Reopening Price. As such, the Exchange's
proposal to amend Article 20, Rule 2A(c)(4) to provide that, if a
Trading Pause was initiated by another exchange, CHX may resume trading
following the Trading Pause upon receipt of the Price Bands from the
Processor would comport CHX Rules with the approved Plan Amendments
and, thereby, harmonize CHX Rules with the rules of other national
securities exchanges.
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. The proposed rule change is not
designed to address any competitive issues, but rather, to achieve the
Plan Participants' goal of more standardized processes across Primary
Listing Exchanges in reopening trading following a Trading Pause, and
facilitates the production of an equilibrium reopening price by
centralizing the reopening process through the Primary Listing
Exchange, which would also improve the accuracy of the reopening Price
Bands. The Exchange believes that the proposed rule change reduces the
burden on competition for market participants because it promotes a
transparent and consistent process for reopening trading following a
Trading Pause regardless of where a security may be listed.
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 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 if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \34\ and Rule 19b-4(f)(6)
thereunder.\35\
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\34\ 15 U.S.C. 78s(b)(3)(A).
\35\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \36\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\37\ the Commission may
designate a shorter time if such
[[Page 55699]]
action is consistent with the protection of investors and the public
interest. The Exchange has asked the Commission to waive the 30-day
operative delay so that the proposal may become operative on November
20, 2017. The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest
because the Exchange's proposal does not raise any new or novel issues,
and the waiver would permit the Exchange to implement the proposed rule
change in coordination with other Plan Participants on the Amendment 12
implementation date of November 20, 2017. Accordingly, the Commission
hereby waives the 30-day operative delay requirement and designates the
proposed rule change as operative on November 20, 2017.\38\
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\36\ 17 CFR 240.19b-4(f)(6).
\37\ 17 CFR 240.19b-4(f)(6)(iii).
\38\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) of the Act \39\ to determine whether the proposed
rule change should be approved or disapproved.
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\39\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposal is
consistent with the Act. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-CHX-2017-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-CHX-2017-14. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 changes 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the CHX. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. SR-CHX-2017-14 and should be
submitted on or before December 13, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25227 Filed 11-21-17; 8:45 am]
BILLING CODE 8011-01-P