[Federal Register Volume 87, Number 54 (Monday, March 21, 2022)]
[Notices]
[Pages 16043-16046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05844]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94418; File No. SR-NYSENAT-2022-02]


Self-Regulatory Organizations; NYSE National, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Pilot Related to the Market-Wide Circuit Breaker in Rule 7.12

March 15, 2022.
    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 8, 2022, 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 extend the pilot related to the market-
wide circuit breaker in Rule 7.12 to the close of business on April 18, 
2022. 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

[[Page 16044]]

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 extend the pilot related to the market-
wide circuit breaker in Rule 7.12 to the close of business on April 18, 
2022.
Background
    The Market-Wide Circuit Breaker (``MWCB'') rules, including the 
Exchange's Rule 7.12, provide an important, automatic mechanism that is 
invoked to promote stability and investor confidence during periods of 
significant stress when cash equities securities experience extreme 
market-wide declines. The MWCB rules are designed to slow the effects 
of extreme price declines through coordinated trading halts across both 
cash equity and equity options securities markets.
    The cash equities rules governing MWCBs were first adopted in 1988 
and, in 2012, all U.S. cash equity exchanges and FINRA amended their 
cash equities uniform rules on a pilot basis (the ``Pilot Rules,'' 
i.e., Rule 7.12 (a)-(d)).\4\ The Pilot Rules currently provide for 
trading halts in all cash equity securities during a severe market 
decline as measured by a single-day decline in the S&P 500 Index 
(``SPX'').\5\ Under the Pilot Rules, a market-wide trading halt will be 
triggered if SPX declines in price by specified percentages from the 
prior day's closing price of that index. 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. and before 3:25 p.m. would halt market-wide trading for 15 
minutes, while a similar market decline at or after 3:25 p.m. would not 
halt market-wide trading. (Level 1 and Level 2 halts may occur only 
once a day.) A market decline that triggers a Level 3 halt at any time 
during the trading day would halt market-wide trading for the remainder 
of the trading day.
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    \4\ 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) (``Pilot 
Rules Approval Order'').
    \5\ The rules of the equity options exchanges similarly provide 
for a halt in trading if the cash equity exchanges invoke a MWCB 
Halt. See, e.g., NYSE Arca Rule 6.65-O(d)(4).
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    The Commission approved the Pilot Rules, 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\ In April 2019, the Commission 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 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.\9\ The Exchange then filed to extend 
the pilot to the close of business on October 18, 2020,\10\ October 18, 
2021 \11\ and March 18, 2022.\12\
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    \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-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 to Delay the Operative Date of Rule 11.20A).
    \8\ See Securities Exchange Act Release No. 85623 (April 11, 
2019), 84 FR 16086 (April 17, 2019).
    \9\ See Securities Exchange Act Release No. 85572 (April 9, 
2019), 84 FR 15257 (April 15, 2019) (SR-NYSENAT-2019-08).
    \10\ See Securities Exchange Act Release No. 87077 (September 
24, 2019), 84 FR 51671 (September 30, 2019) (SR-NYSENAT-2019-21).
    \11\ See Securities Exchange Act Release No. 90133 (October 8, 
2020), 85 FR 65121 (October 14, 2020) (SR-NYSENAT-2020-33).
    \12\ See Securities Exchange Act Release No. 93232 (October 1, 
2021), 86 FR 55669 (October 6, 2021) (SR-NYSENAT-2021-19).
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    The Exchange now proposes to amend Rule 7.12 to extend the pilot to 
the close of business on March 18, 2022. This filing does not propose 
any substantive or additional changes to Rule 7.12.
The MWCB Task Force and the March 2020 MWCB Events
    In late 2019, Commission staff requested the formation of a MWCB 
Task Force (``Task Force'') to evaluate the operation and design of the 
MWCB mechanism. The Task Force included representatives from the SROs, 
the Commission, CME, the Commodity Futures Trading Commission 
(``CFTC''), and the securities industry and conducted several 
organizational meetings in December 2019 and January 2020.
    In Spring 2020, the MWCB mechanism proved itself to be an effective 
tool for protecting markets through turbulent times. In March 2020, at 
the outset of the worldwide COVID-19 pandemic, U.S. equities markets 
experienced four MWCB Level 1 halts, on March 9, 12, 16, and 18, 2020. 
In each instance, the markets halted as intended upon a 7% drop in the 
S&P 500 Index, and resumed as intended 15 minutes later.
    In response to these events, in the Spring and Summer of 2020, the 
Task Force held ten meetings that were attended by Commission staff, 
with the goal of performing an expedited review of the March 2020 halts 
and identifying any areas where the MWCB mechanism had not worked 
properly. Given the risk of unintended consequences, the Task Force did 
not recommend changes that were not rooted in a noted deficiency. The 
Task Force recommended creating a process for a backup reference price 
in the event that SPX were to become unavailable, and enhancing 
functional MWCB testing. The Task Force also asked CME to consider 
modifying its rules to enter into a limit-down state in the futures 
pre-market after a 7% decline instead of 5%. CME made the requested 
change, which became effective on October 12, 2020.\13\
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    \13\ See https://www.cmegroup.com/content/dam/cmegroup/market-regulation/rule-filings/2020/9/20-392_1.pdf; https://
www.cmegroup.com/content/dam/cmegroup/market-regulation/rule-filings/2020/9/20-392_2.pdf
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The MWCB Working Group's Study
    On September 17, 2020, the Director of the Commission's Division of 
Trading and Markets asked the SROs to conduct a more complete study of 
the design and operation of the Pilot Rules and the LULD Plan during 
the period of volatility in the Spring of 2020.
    In response to the request, the SROs created a MWCB ``Working 
Group'' composed of SRO representatives and industry advisers that 
included members of the advisory committees to both the LULD Plan and 
the NMS Plans governing the collection, consolidation, and 
dissemination of last-sale transaction reports and quotations in NMS 
Stocks. The Working Group met regularly from September 2020 through 
March 2021 to consider the Commission's request, review data, and 
compile its study. The Working Group's efforts in this respect 
incorporated and built on the work of an MWCB Task Force.

[[Page 16045]]

    The Working Group submitted its study to the Commission on March 
31, 2021 (the ``Study'').\14\ In addition to a timeline of the MWCB 
events in March 2020, the Study includes a summary of the analysis and 
recommendations of the MWCB Task Force; an evaluation of the operation 
of the Pilot Rules during the March 2020 events; an evaluation of the 
design of the current MWCB system; and the Working Group's conclusions 
and recommendations.
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    \14\ See Report of the Market-Wide Circuit Breaker (``MWCB'') 
Working Group Regarding the March 2020 MWCB Events, submitted March 
31, 2021 (the ``Study''), available at https://www.nyse.com/publicdocs/nyse/markets/nyse/Report_of_the_Market-Wide_Circuit_Breaker_Working_Group.pdf.
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    In the Study, the Working Group concluded: (1) The MWCB mechanism 
set out in the Pilot Rules worked as intended during the March 2020 
events; (2) the MWCB halts triggered in March 2020 appear to have had 
the intended effect of calming volatility in the market, without 
causing harm; (3) the design of the MWCB mechanism with respect to 
reference value (SPX), trigger levels (7%/13%/20%), and halt times (15 
minutes) is appropriate; (4) the change implemented in Amendment 10 to 
the Plan to Address Extraordinary Market Volatility (the ``Limit Up/
Limit Down Plan'' or ``LULD Plan'') did not likely have any negative 
impact on MWCB functionality; and (5) no changes should be made to the 
mechanism to prevent the market from halting shortly after the opening 
of regular trading hours at 9:30 a.m.
    In light of the foregoing conclusions, the Working Group also made 
several recommendations, including that the Pilot Rules should be 
permanent without any changes.\15\
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    \15\ See id. at 46.
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Proposal To Extend the Operation of the Pilot Rules Pending the 
Commission's Consideration of the New York Stock Exchange LLC's Filing 
To Make the Pilot Rules Permanent
    On July 16, 2021, the Exchange's affiliate, the New York Stock 
Exchange (``NYSE''), proposed a rule change to make the Pilot Rules 
permanent, consistent with the Working Group's recommendations.\16\ On 
August 27, 2021, the Commission extended its time to consider the 
proposed rule change to October 20, 2021.\17\ On September 30, 2021, 
the Commission initiated proceedings to determine whether to approve or 
disapprove the proposed rule change.\18\ On January 7, 2022, the 
Commission extended its time to approve or disapprove the proposed rule 
change by an additional 60 days, to March 19, 2022.\19\ The Exchange 
now proposes to extend the expiration date of the Pilot Rules to the 
end of business on April 18, 2022.
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    \16\ See Securities Exchange Act Release No. 92428 (July 16, 
2021), 86 FR 38776 (July 22, 2021) (SR-NYSE-2021-40).
    \17\ See Securities Exchange Act Release No. 92785A (August 27, 
2021), 86 FR 50202 (September 7, 2021) (SR-NYSE-2021-40).
    \18\ See Securities Exchange Act Release No. 93212 (September 
30, 2021), 86 FR 55066 (October 5, 2021) (SR-NYSE-2021-40).
    \19\ See Securities Exchange Act Release No. 93933 (January 7, 
2022), 87 FR 2189 (January 13, 2022) (SR-NYSE-2021-40).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\20\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\21\ 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 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. Extending 
the market-wide circuit breaker pilot for an additional month would 
ensure the continued, uninterrupted operation of a consistent mechanism 
to halt trading across the U.S. markets while the Commission reviews 
the Exchange's proposed rule change to make the Pilot Rules permanent.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
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    The Exchange also 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. Based on 
the foregoing, the Exchange believes the benefits to market 
participants from Pilot Rules should continue on a pilot basis because 
they 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 proposal would 
ensure the continued, uninterrupted operation of a consistent mechanism 
to halt trading across the U.S. markets while the Commission reviews 
the Exchange's proposed rule change to make the Pilot Rules permanent.
    Further, the Exchange understands that FINRA and other national 
securities exchanges will file proposals to extend their rules 
regarding the market-wide circuit breaker pilot. 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

    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 \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 \24\ and Rule 19b-
4(f)(6)(iii) thereunder.\25\
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    \22\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \23\ 17 CFR 240.19b-4(f)(6).
    \24\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4 requires a 
self-regulatory organization to give the Commission written notice 
of its intent to file a proposed rule change under that subsection 
at least five business days prior to the date of filing, or such 
shorter time as designated by the Commission. The Exchange has 
fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \26\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange asked 
that the Commission waive the 30 day operative delay so that the 
proposal may become operative immediately upon filing. Extending the 
Pilot Rules' effectiveness to the close of business on April 18,

[[Page 16046]]

2022 will extend the protections provided by the Pilot Rules, which 
would otherwise expire in less than 30 days. Waiver of the operative 
delay would therefore permit uninterrupted continuation of the MWCB 
pilot while the Commission reviews the NYSE's proposed rule change to 
make the Pilot Rules permanent. Therefore, the Commission hereby waives 
the 30-day operative delay and designates the proposed rule change as 
operative upon filing.\28\
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    \26\ 17 CFR 240.19b-4(f)(6).
    \27\ 17 CFR 240.19b-4(f)(6)(iii).
    \28\ 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 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 protected]. Please include 
File Number SR-NYSENAT-2022-02 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-2022-02. 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-NYSENAT-2022-02 and should be submitted 
on or before April 11, 2022.

    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. 2022-05844 Filed 3-18-22; 8:45 am]
BILLING CODE 8011-01-P


