[Federal Register Volume 85, Number 57 (Tuesday, March 24, 2020)]
[Notices]
[Pages 16716-16719]
[FR Doc No: 2020-06117]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88419; File No. SR-CboeEDGA-2020-008]

Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 11.16(b)(2) Concerning the Resumption of Trading Following a
Level 3 Market-Wide Circuit Breaker Halt and Make Corresponding Changes
to Rule 11.7(e)

March 18, 2020.
    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 March 17, 2020, Cboe EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') 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 Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes a rule change to amend Rule 11.16(b)(2)
concerning the resumption of trading following a Level 3 market-wide
circuit breaker halt and to amend Rule 11.7(e) to make corresponding
changes to the re-opening process after a halt.
    The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/edga/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 11.16(b)(2) concerning the
resumption of trading following a Level 3 market-wide circuit breaker
halt and to amend Rule 11.7(e) to make corresponding changes to the re-
opening process after a halt. The Exchange is proposing this rule
change in conjunction with other national securities exchanges and the
Financial Industry Regulatory Authority (``FINRA'').
    Rule 11.16 provides a methodology for determining when to halt
trading in all stocks due to extraordinary market volatility (i.e.,
market-wide circuit breakers). The market-wide circuit breaker
mechanism (``MWCB'') under Rule 11.16 was approved by the Commission to
operate on a pilot basis,\5\ the term of which was to coincide with the
pilot period for the Plan to Address Extraordinary Market Volatility
Pursuant to Rule 608 of Regulation NMS (the ``LULD Plan''),\6\
including any extensions to the pilot period for the LULD Plan.\7\ The
Commission recently approved an amendment to the LULD Plan for it to
operate on a permanent, rather than pilot, basis.\8\ In light of the
proposal to make the LULD Plan permanent, the Exchange amended Rule
11.16 to untie the pilot's effectiveness from that of the LULD Plan and
to extend the pilot's effectiveness to the close of business on October
18, 2019.\9\ The Exchange then filed to extend the pilot for an
additional year to the close of business on October 18, 2020.\10\ The
market-wide circuit breaker under Rule 11.16 provides an important,
automatic mechanism that is invoked to promote stability and investor
confidence during a period of significant stress when securities
markets experience extreme broad-based declines. All U.S. equity
exchanges and FINRA adopted uniform rules on a pilot basis relating to
market-wide circuit breakers in 2012 (``MWCB Rules''), which are
designed to slow the effects of extreme price movement through
coordinated trading halts across securities markets when severe price
declines reach levels that may exhaust market liquidity.\11\ Market-
wide circuit breakers provide for trading halts in all equities and
options markets during a severe market decline as measured by a single-
day decline in the S&P 500 Index. Pursuant to Rule 11.18, a market-wide
trading halt will be triggered if the S&P 500 Index declines in price
by specified percentages from the prior day's closing price of that
index. Currently, the triggers are set at three circuit breaker
thresholds: 7% (Level 1), 13% (Level 2), and 20% (Level 3). A market
decline that triggers a Level 1 or Level 2 halt after 9:30 a.m. Eastern
Time and before 3:25 p.m. Eastern Time would halt market-wide trading
for 15 minutes, while a similar market decline at or after 3:25 p.m.
Eastern Time would not halt market-wide trading. A market decline that
triggers a Level 3 halt at any time during the trading day would halt
market-wide trading until the primary listing market opens the next
trading day.
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    \5\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-EDGA-2011-31).
    \6\ See Securities Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012). The LULD Plan provides a
mechanism to address extraordinary market volatility in individual
securities.
    \7\ See Securities Exchange Act Release Nos. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-EDGA-2011-31) (Approval
Order); and 68813 (February 1, 2013), 78 FR 9073 (February 7, 2013)
(SR-EDGA-2013-06) (Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Extend the Pilot Program Related to Trading
Pauses Due to Extraordinary Market Volatility).
    \8\ See Securities Exchange Act Release No. 85623 (April 11,
2019), 84 FR 16086 (April 17, 2019).
    \9\ See Securities Exchange Act Release No. 85668 (April 16,
2019), 84 FR 16743 (April 22, 2019) (SR-CboeEDGA-2019-006).
    \10\ See Securities Exchange Act Release No. 87335 (October 17,
2019), 84 FR 56858 (October 23, 2019) (SR-CboeEDGA-2019-016).
    \11\ See Securities Exchange Act Release No. 67090 (May 31,
2012), 77 FR 33531 (June 6, 2012) (SR-BATS-2011-038; SR-BYX-2011-
025; SR-BX-2011-068; SR-CBOE-2011-087; SR-C2-2011-024; SR-CHX-2011-
30; SR-EDGA-2011-31; SR-EDGX-2011-30; SR-FINRA-2011-054; SR-ISE-
2011-61; SR-NASDAQ-2011-131; SR-NSX-2011-11; SR-NYSE-2011-48; SR-
NYSEAmex-2011-73; SR-NYSEArca-2011-68; SR-Phlx-2011-129) (``MWCB
Approval Order'').
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    Today, in the event that a Level 3 Market Decline occurs, the
Exchange would halt trading for the remainder of the trading day, and
would not resume until the primary listing market opens the next
trading day, which time may currently vary depending on the primary
listing market. For example, if the primary listing market is the New
York Stock Exchange (``NYSE''), NYSE would resume trading in its listed
securities at 9:30 a.m. Eastern Time on the next trading day, and the
Exchange would not be able to resume trading during the Exchange's
Early Trading

Session \12\ or Pre-Opening Session.\13\ Alternatively, if the primary
listing market is the Nasdaq Stock Market LLC (``Nasdaq''), Nasdaq
would resume trading in its listed securities at 4:00 a.m. Eastern Time
on the next trading day, and therefore, the Exchange would resume
trading at the commencement of the Early Trading Session.
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    \12\ See Exchange Rule 1.5(ii).
    \13\ See Exchange Rule 1.5(s).
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    Upon feedback from industry participants, the Exchange has been
working with other national securities exchanges and FINRA to establish
a standardized approach for resuming trading in all NMS Stocks
following a Level 3 halt. The proposed approach would allow for the
opening of all securities the next trading day after a Level 3 halt as
a regular trading day, and is designed to ensure that Level 3 MWCB
events are handled in a more consistent manner that is transparent for
market participants.\14\ As proposed, a Level 3 halt would end at the
end of the trading day on which it is declared. This proposed change
would allow for next-day trading to resume in all NMS Stocks no
differently from any other trading day. In other words, an exchange
could resume trading in any security when it first begins trading under
its rules and would not need to wait for the primary listing market to
re-open trading in a security before it could start trading such
security.\15\ Accordingly, under the proposal, the Exchange could begin
trading all securities at the beginning of the Exchange's Early Trading
Session.
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    \14\ Of note, the U.S. futures markets, which have similar rules
for coordinated MWCB halts, normally begin their ``next day''
trading session at 6:00 p.m. Eastern Time (for CFE and CME) or at
8:00 p.m. Eastern Time (for ICE). If the U.S. futures markets amend
their MWCB rules, as needed, to allow for normal course trading
following a Level 3 halt, the futures markets would resume trading
in their normal course at 6:00 p.m. Eastern Time (CFE and CME) or
8:00 p.m. Eastern Time (ICE) the same day as the Level 3 halt.
    \15\ The Exchange notes that Nasdaq has recently filed a similar
proposal to amend its MWCB rules on the resumption of trading
following Level 3 halts, and amend their rules, where required, to
have their Level 3 next-day openings happen normally. Further, the
Exchange anticipates that other national securities exchanges and
FINRA will also file similar proposals.
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    To effect this change, the Exchange proposes to delete the language
in Rule 11.16(b)(2) requiring the Exchange to wait until the primary
listing exchange opens the next trading day following a Level 3 Market
Decline, and specify that the Exchange will halt trading for the
remainder of the trading day.\16\ The proposed rule change would
therefore allow each exchange to resume trading in all securities the
next trading day following a Level 3 halt at whatever time such
exchange normally begins trading under its rules, which for the
Exchange would be at the beginning of the Early Trading Session at 7:00
a.m. Eastern Time under its current rules. The Exchange also expects
that the primary listing exchanges will facilitate this change by
sending resume messages to the applicable securities information
processor (``SIP'') to lift the Level 3 trading halt message in all
securities. The resumption messages will be disseminated after the SIP
has started on the next trading day and before the start of the
earliest pre-market trading session of all exchanges. If a security is
separately subject to a regulatory halt that has not ended, the primary
listing exchange would replace the Level 3 halt message with the
applicable regulatory halt message.
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    \16\ Presently, the Exchange's equities trading day ends at 8:00
p.m. ET. See Exchange Rule 1.5(r).
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    As discussed above, the Exchange's proposed rule change to Rule
11.16 would allow each exchange to resume trading in all securities on
the day following the Level 3 Market Decline pursuant to its regular
process for trading on any other trading day. Currently, the Exchange
would re-open trading following a Level 3 Market Decline using a halt
re-opening process for securities listed on other national securities
exchanges.\17\ With the proposed changes to the MWCB mechanism, it
would no longer be necessary for the Exchange to have special
procedures in place to resume trading after a Level 3 Market Decline,
as the proposed changes are designed to allow trading to commence using
normal operating procedures. Accordingly, the Exchange proposes to make
corresponding changes to Exchange Rule 11.7(e), which sets forth the
re-opening process after a halt. Specifically, the Exchange proposes to
clarify that no halt re-opening process will be conducted by the
Exchange following a Level 3 Market Decline. With these changes,
trading would be allowed to commence normally on the trading day
following a Level 3 Market Decline, similar to the resumption of
trading on certain other national securities exchanges that would
currently open with continuous trading.\18\
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    \17\ See Exchange Rule 11.7(e); See also SIP Market-Wide Circuit
Breaker Overview, available at http://www.utpplan.com/DOC/MWCB_SIP_Overview.pdf.
    \18\ See Nasdaq Rule 4121(c)(i). See also Id.
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    Having a consistent approach for all securities will make the
opening process the day after a Level 3 halt more uniform and reduce
complexity, which the Exchange believes is important after a
significant market event. Based on industry feedback, the Exchange
believes that opening in the normal course in all equity securities
will be beneficial to the marketplace. By allowing trading to resume
after a Level 3 halt in all securities no differently from any normal
trading day under the respective rules of each exchange, the proposed
rule change would provide greater certainty to the marketplace by
ensuring a familiar experience for all market participants that trade
NMS Stocks and balances out potential concerns around volatility. While
the Exchange recognizes that the impact of this proposal is to permit
all securities to be traded in the Early Trading Session, which does
not have certain price protections for volatility such as LULD Bands or
MWCB protections, the Exchange nonetheless believes that this outcome
is outweighed by the benefits provided by opening in the Early Trading
Session in a manner that is more familiar to the marketplace. Moreover,
allowing the resumption of trading to occur on the Exchange at the
beginning of the Early Trading Session in all NMS Stocks will allow for
price formation to occur earlier in the trading day, which in turn
allows market participants to react to news that has developed. As
such, trading at the beginning of regular hours may be more orderly.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\20\ 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. The market-wide circuit breaker mechanism under Rule 11.16 is
an important, automatic mechanism that is invoked to promote stability
and investor confidence during a period of significant stress when
securities markets experience extreme broad-based declines. The
Exchange believes that the proposed rule change promotes just and
equitable principles of trade in that it promotes transparency and
uniformity across markets concerning when and how to halt trading in
all stocks as a result of extraordinary market volatility, and how the
markets will resume trading following a Level 3 Market Decline. As
described above, the

Exchange, together with other national securities exchanges and FINRA,
is seeking to adopt a standardized approach related to resuming trading
in NMS Stocks after a Level 3 MWCB halt. In this regard, the Exchange
believes that the proposal to resume trading in all securities
following a Level 3 halt in the same manner that securities would open
trading on a regular trading day (i.e., with continuous trading on the
Exchange at the beginning of the Early Trading Session at 7 a.m.
Eastern Time) will benefit investors, the national market system,
Exchange members, and the Exchange market by promoting a fair and
orderly market and reducing confusion during a significant cross-market
event. By allowing trading to resume after a Level 3 halt in all
securities no differently from any normal trading day under the
respective rules of each exchange, the proposed rule changes would
provide greater certainty to the marketplace by ensuring a familiar
experience for all market participants that trade NMS Stocks. Based on
the foregoing, the Exchange believes the benefits to market
participants from the MWCB under Rule 11.16 with the proposed
standardized process for resuming trading in all securities following a
Level 3 halt will promote fair and orderly markets, and protect
investors and the public interest.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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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 because the proposed Level 3
rule change described above would standardize the opening process for
all securities on the Exchange, which would make the opening process
the day after a Level 3 halt more uniform and reduce complexity.
Further, the Exchange understands that FINRA and other national
securities exchanges will file similar proposals to adopt the proposed
Level 3 rule change.\21\
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    \21\ See, e.g., Securities Exchange Act Release No. 88342 (March
6, 2020), 85 FR 14513 (March 12, 2020) (SR-NASDAQ-2020-003).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\
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 prior to
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 and Rule 19b-
4(f)(6)(iii) thereunder.\24\
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    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6).
    \24\ 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 Commission has waived the pre-filing requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission
may designate a shorter time if such 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 immediately upon filing. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission notes
that it approved a substantively similarly proposed rule change
submitted by Nasdaq.\27\ Waiver of the operative delay will ensure
consistency across the market centers and the timely implementation of
the proposed rule change. Accordingly, the Commission waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\28\
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    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ 17 CFR 240.19b-4(f)(6)(iii).
    \27\ See Securities Exchange Act Release No. 88360 (March 11,
2020) (SR-NASDAQ-2020-003).
    \28\ For purposes only of waiving the 30-day operative delay,
the Commission has 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 such 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) \29\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \29\ 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 proposed rule
change 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_ADDRESS>Please include
File Number SR-CboeEDGA-2020-008 on the subject line.

Paper Comments

     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-CboeEDGA-2020-008. 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 (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 change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are

cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly.
    All submissions should refer to File Number SR-CboeEDGA-2020-008
and should be submitted on or before April 14, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06117 Filed 3-23-20; 8:45 am]
BILLING CODE 8011-01-P