[Federal Register Volume 86, Number 56 (Thursday, March 25, 2021)]
[Notices]
[Pages 16003-16005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06124]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91373; File No. SR-FINRA-2021-004]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Pilot Program Related to FINRA Rule 
11892 (Clearly Erroneous Transactions in Exchange-Listed Securities)

March 19, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 15, 2021, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. 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\ 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

    FINRA is proposing to extend the current pilot program related to 
FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed 
Securities) (``Clearly Erroneous Transaction Pilot'' or ``Pilot'') 
until October 20, 2021.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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
    FINRA is proposing a rule change to extend the current pilot 
program related to FINRA Rule 11892 governing clearly erroneous 
transactions in exchange-listed securities until the close of business 
on October 20, 2021. Extending the Pilot would provide FINRA and the 
national securities exchanges additional time to consider a permanent 
proposal for clearly erroneous transaction reviews.
    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to FINRA Rule 11892 that, among other things: (i) Provided for 
uniform treatment of clearly erroneous transaction reviews in multi-
stock events involving twenty or more securities; and (ii) reduced the 
ability of FINRA to deviate from the objective standards set forth in 
the rule.\4\ In 2013, FINRA adopted a provision designed to address the 
operation of the Plan to Address Extraordinary Market Volatility 
Pursuant to Rule 608 of Regulation NMS (``Plan'').\5\ Finally, in 2014, 
FINRA adopted two additional provisions addressing (i) erroneous 
transactions that occur over one or more trading days that were based 
on the same fundamentally incorrect or grossly misinterpreted 
information resulting in a severe valuation error; and (ii) a 
disruption or malfunction in the operation of the facilities of a self-
regulatory organization or responsible single plan processor in 
connection with the transmittal or receipt of a trading halt.\6\
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    \4\ See Securities Exchange Act Release No. 62885 (September 10, 
2010), 75 FR 56641 (September 16, 2010) (Order Approving File No. 
SR-FINRA-2010-032).
    \5\ See Securities Exchange Act Release No. 68808 (February 1, 
2013), 78 FR 9083 (February 7, 2013) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2013-012).
    \6\ See Securities Exchange Act Release No. 72434 (June 19, 
2014), 79 FR 36110 (June 25, 2014) (Order Approving File No. SR-
FINRA-2014-021).
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    On April 9, 2019, FINRA filed a proposed rule change to untie the 
effectiveness of the Clearly Erroneous Transaction Pilot from the 
effectiveness of the Plan, and to extend the Pilot's effectiveness to 
the close of business on October 18, 2019.\7\ On October 18, 2019,

[[Page 16004]]

FINRA filed a proposed rule change to extend the Pilot's effectiveness 
until April 20, 2020.\8\ On March 27, 2020, FINRA filed a proposed rule 
change to extend the pilot's effectiveness until October 20, 2020.\9\ 
On October 16, 2020, FINRA filed a proposed rule change to extend the 
Pilot's effectiveness until April 20, 2021.\10\ FINRA now is proposing 
to further extend the Pilot until October 20, 2021, so that market 
participants can continue to benefit from the more objective clearly 
erroneous transaction standards under the Pilot.\11\ Extending the 
Pilot also would provide more time to permit FINRA and the other self-
regulatory organizations to consider what changes, if any, to the 
clearly erroneous transaction rules are appropriate.\12\
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    \7\ See Securities Exchange Act Release No. 85612 (April 11, 
2019), 84 FR 16107 (April 17, 2019) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2019-011).
    \8\ See Securities Exchange Act Release No. 87344 (October 18, 
2019), 84 FR 57076 (October 24, 2019) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2019-025).
    \9\ See Securities Exchange Act Release No. 88495 (March 27, 
2020), 85 FR 18608 (April 2, 2020) (Notice of Filing and Immediate 
Effectiveness of File No. SR-FINRA-2020-008).
    \10\ See Securities Exchange Act Release No. 90219 (October 19, 
2020), 85 FR 67574 (October 23, 2020) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2020-036).
    \11\ If the pilot period is not either extended or approved as 
permanent, the version of Rule 11892 prior to SR-FINRA-2010-032 
shall be in effect, and the amendments set forth in SR-FINRA-2014-
021 and the provisions of Supplementary Material .03 of the rule 
shall be null and void.
    \12\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019) (Order Approving the Eighteenth 
Amendment to the National Market System Plan to Address 
Extraordinary Market Volatility).
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    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date for the amendments will be 30 days 
from the date of filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\13\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change promotes 
just and equitable principles of trade in that it promotes transparency 
and uniformity across markets concerning the review of transactions as 
clearly erroneous. FINRA believes that extending the Pilot under FINRA 
Rule 11892, until October 20, 2021, would help assure consistent 
results in handling erroneous trades across the U.S. equities markets, 
thus furthering fair and orderly markets, the protection of investors 
and the public interest. Based on the foregoing, FINRA believes the 
Clearly Erroneous Transaction Pilot should continue to be in effect 
while FINRA and the national securities exchanges consider a permanent 
proposal for clearly erroneous transaction reviews.
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    \13\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal would ensure the 
continued, uninterrupted operation of harmonized clearly erroneous 
transaction rules across the U.S. equities markets while FINRA and the 
national securities exchanges consider further amendments to these 
rules. FINRA understands that the national securities exchanges also 
will file similar proposals to extend their clearly erroneous execution 
pilot programs, as applicable. Thus, the proposed rule change will help 
to ensure consistency across market centers without implicating any 
competitive issues.

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

    Written comments were neither solicited nor 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 \14\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its 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. 
FINRA has satisfied this requirement.
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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 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

     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-FINRA-2021-004 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-FINRA-2021-004. 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 such filing also will be available for inspection 
and copying at the principal office of FINRA. 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-FINRA-

[[Page 16005]]

2021-004 and should be submitted on or before April 15, 2021.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-06124 Filed 3-24-21; 8:45 am]
BILLING CODE 8011-01-P


