[Federal Register Volume 85, Number 57 (Tuesday, March 24, 2020)]
[Notices]
[Pages 16710-16713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06103]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88411; File No. SR-NYSENAT-2020-11]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Amending 
Rule 7.12 Concerning the Resumption of Trading Following a Level 3 
Market-Wide Circuit Breaker Halt

March 18, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on March 16, 2020, NYSE National, Inc. (``NYSE National'' or 
the ``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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes to amend Rule 7.12 concerning the resumption 
of trading following a Level 3 market-wide circuit breaker halt. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to amend Rule 7.12 concerning the resumption 
of trading following a Level 3 market-wide circuit breaker halt. The 
Exchange is proposing this rule change in conjunction with other 
national securities exchanges and the Financial Industry Regulatory 
Authority (``FINRA'').
    Rule 7.12 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 7.12 was approved by the Commission to 
operate on a pilot basis,\4\ 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''),\5\ 
including any extensions to the pilot period for the LULD Plan.\6\ In 
April 2019, the Commission approved an amendment to the LULD Plan for 
it to operate on a permanent, rather than pilot, basis.\7\ In light of 
the proposal to make the LULD Plan permanent, the Exchange amended Rule 
7.12 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.\8\ The Exchange then filed to extend the pilot for an 
additional year to the close of business on October 18, 2020.\9\
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    \4\ See Securities Exchange Act Release No. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-NSX-2011-11) (approving 
amendments to Rule 11.20A). Rule 7.12 replaced Rule 11.20A without 
any substantive differences. See Securities Exchange Act Release No. 
83289 (May 17, 2018), 83 FR 23968 (May 23, 2018) (SR-NYSENAT-2018-
02).
    \5\ 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.
    \6\ See Securities Exchange Act Release Nos. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (SR-NSX-2011-11) (Approval Order); 
and 68779 (January 31, 2013), 78 FR 8638 (February 6, 2013) (SR-NSX-
2013-04) (Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Delaying the Operative Date of a Rule Change to Rule 
11.20A).
    \7\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019).
    \8\ See Securities Exchange Act Release No. 85572 (April 9, 
2019), 84 FR 15257 (April 15, 2019) (SR-NYSENAT-2019-08).
    \9\ See Securities Exchange Act Release No. 87077 (September 24, 
2019), 84 FR 51671 (September 30, 2019) (SR-NYSENAT-2019-21).
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    The market-wide circuit breaker under Rule 7.12 provides an 
important, automatic mechanism that is invoked to

[[Page 16711]]

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.\10\ 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.
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    \10\ 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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    Pursuant to Rule 7.12, 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. ET and before 3:25 p.m. ET would halt 
market-wide trading for 15 minutes, while a similar market decline at 
or after 3:25 p.m. ET 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.
    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. On the next trading day, all NYSE Group exchanges (i.e., 
the Exchange, New York Stock Exchange (``NYSE''), NYSE American, Inc. 
(``NYSE American''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE Chicago, 
Inc.) would remain closed for all symbols until 9:30 a.m. ET, at which 
time NYSE, NYSE American, and NYSE Arca would begin their Core Open 
Auction processes for their primary-listed securities.
    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.\11\
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    \11\ 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. ET (for CFE and CME) or at 8:00 p.m. ET 
(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. ET (CFE and CME) or 8:00 p.m. ET (ICE) the same day as the 
Level 3 halt.
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    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.\12\ Accordingly, 
under the proposal, the Exchange could begin trading all securities at 
the beginning of the Exchange's Early Trading Session at 7:00 a.m. 
ET,\13\ regardless of whether the primary listing markets for those 
securities have actually opened.
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    \12\ The Exchange anticipates that the other national securities 
exchanges and FINRA will also file similar proposals to amend their 
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.
    \13\ Early Trading Session means the trading session that begins 
at 7:00 a.m. ET and continues until 9:30 a.m. ET. See Rule 
7.34(a)(1).
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    To effect this change, the Exchange proposes to delete the language 
in Rule 7.12(b)(ii) 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. 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. ET 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.
    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 resuming trading in the normal course in all equity 
securities will be more 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 various 
exchanges' early trading sessions, which do 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 resuming trading in the early trading sessions in 
a manner that is more familiar to the marketplace. Moreover, allowing 
the resumption of trading to occur on the various exchanges at the 
beginning of their early trading sessions 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.
    The Exchange will announce the implementation date of the amendment 
to Rule 7.12(b)(ii) by Trader Update.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\15\ 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

[[Page 16712]]

system, and, in general to protect investors and the public interest. 
The market-wide circuit breaker mechanism under Rule 7.12 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 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 change would provide greater certainty to the marketplace 
by ensuring a familiar experience for all market participants that 
trade NMS Stocks.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    Based on the foregoing, the Exchange believes the benefits to 
market participants from the MWCB under Rule 7.12 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.

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.

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

    No written comments were solicited or received with respect to 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 \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
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.\18\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 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) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ 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 notes that 
it approved a substantively similarly proposed rule change submitted by 
The Nasdaq Stock Market LLC.\21\ 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.\22\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See Securities Exchange Act Release No. 88360 (March 11, 
2020) (SR-NASDAQ-2020-03).
    \22\ 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) \23\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \23\ 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 rule-comments@sec.gov. Please include 
File Number SR-NYSENAT-2020-11 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-NYSENAT-2020-11. 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,

[[Page 16713]]

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-NYSENAT-2020-11 and should 
be submitted on or before April 14, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06103 Filed 3-23-20; 8:45 am]
BILLING CODE 8011-01-P


