[Federal Register Volume 87, Number 249 (Thursday, December 29, 2022)]
[Notices]
[Pages 80213-80219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28301]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96574; File No. SR-Phlx-2022-49]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Modify Equity 4, 
Rule 3100 to Establish Common Criteria and Procedures for Halting and 
Resuming Trading in Equity Securities in the Event of Regulatory or 
Operational Issues

December 22, 2022.
    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 December 15, 2022, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, 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
    The Exchange proposes to modify Equity 4, Rule 3100 to establish 
common criteria and procedures for halting and resuming trading in 
equity securities in the event of regulatory or operational issues, 
reorganize the text of the rule, and make conforming changes to related 
rules. The text of the proposed rule change is available on the 
Exchange's website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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 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
    In conjunction with adoption of an amended Nasdaq UTP Plan proposed 
by its participants (``Amended Nasdaq UTP Plan''),\3\ the Exchange is 
amending Rule 3100 \4\ to integrate several definitions and concepts 
from the Amended Nasdaq UTP Plan and to reorganize the rule in light of 
the Exchange's experience with applying the rule over many years as a 
national securities exchange.\5\ The Exchange proposes to reorganize 
and amend Rule 3100, entitled Limit Up-Limit Down Plan and Trading 
Halts on PSX. The rule sets forth the Exchange's authority to halt 
trading under various circumstances. The Exchange is a participant of 
the transaction reporting plan governing Tape C Securities (``Nasdaq 
UTP Plan'').\6\ As part of these changes, the Exchange will amend 
categories of regulatory and operational halts, improve the rule's 
clarity, adopt defined terms from the Amended Nasdaq UTP Plan and 
delete parts of the rule that are no longer needed. Last, the Exchange 
is updating cross references in other rules that are affected by the 
proposed changes.
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    \3\ On February 11, 2021, the Nasdaq UTP Plan participants filed 
Amendment 50 to the Plan, to revise provisions governing regulatory 
and operational halts. See Letter from Robert Brooks, Chairman, UTP 
Operating Committee, Nasdaq UTP Plan, to Vanessa Countryman, 
Secretary, Securities and Exchange Commission, dated February 11, 
2021. The Nasdaq UTP Plan subsequently filed two partial amendments 
to the 50th Amendment, on March 31, 2021 and on April 7, 2021. The 
SEC approved the amendments on May 28, 2021. See Securities Exchange 
Act Release No. 34-92071 (May 28, 2021), 86 FR 29846 (June 3, 2021) 
(S7-24-89). The Amended Nasdaq UTP Plan includes provisions 
requiring participant self-regulatory organizations (``SROs'') to 
honor a Regulatory Halt declared by the Primary Listing Market. The 
provisions in the Nasdaq UTP Plan, and the plan for consolidation of 
data for non-Nasdaq-listed securities, the Consolidated Tape System 
and Consolidated Quotations System (collectively, the ``CTA/CQS 
Plan''), include provisions similar to the changes proposed by the 
Exchange in this filing.
    \4\ References herein to Nasdaq PHLX Rules in the 3000 Series 
shall mean Rules in Nasdaq PHLX Equity 4.
    \5\ The Exchange notes that its sister exchange, The Nasdaq 
Stock Market, LLC (``Nasdaq''), filed a similar proposed rule change 
with the Commission. See Securities Exchange Act Release No. 94370 
(March 7, 2022), 87 FR 14071 (March 11, 2022); Securities Exchange 
Act Release No. 94838 (May 3, 2022), 87 FR 27683 (May 9, 2022). The 
Commission approved the proposed rule change on June 8, 2022. See 
Securities Exchange Act Release No. 95069 (June 8, 2022), 87 FR 
36018 (June 14, 2022). Nasdaq BX, Inc. plans to file a similar 
proposed rule change. The Exchange's proposal provides the Exchange 
with less authority to declare halts in the event of regulatory or 
operational issues than under Nasdaq's proposal because the 
Exchange, unlike Nasdaq, is not a Primary Listing Market. Given the 
Exchange's status as a non-Primary Listing Market, certain 
definitions and concepts from the Amended Nasdaq UTP Plan, 
integrated in Nasdaq's proposal, are not included herein.
    \6\ Each transaction reporting plan has a securities information 
processor (``SIP'') responsible for consolidation of information for 
the plan's securities, pursuant to Rule 603 of Regulation NMS. The 
transaction reporting plan for Nasdaq-listed securities is known as 
The Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-Listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis or the ``Nasdaq UTP 
Plan.'' Pursuant to the Nasdaq UTP Plan, the UTP SIP, which is 
Nasdaq, consolidates order and trade data from all markets trading 
Nasdaq-listed securities. The Exchange uses the term ``UTP SIP'' 
herein when referring specifically to the SIP responsible for 
consolidation of information in Nasdaq-listed securities.

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[[Page 80214]]

Background
    The Exchange has been working with other SROs to establish common 
criteria and procedures for halting and resuming trading in equity 
securities in the event of regulatory or operational issues. These 
common standards are designed to ensure that events which might impact 
multiple exchanges are handled in a consistent manner that is 
transparent. The Exchange believes that implementation of these common 
standards will assist the SROs in maintaining fair and orderly markets. 
Notwithstanding the development of these common standards, the Exchange 
will retain discretion in certain instances as to whether and how to 
handle halts, as is discussed below.
    Every U.S.-listed equity security has its primary listing on a 
specific stock exchange that is responsible for a number of regulatory 
functions.\7\ These include confirming that the security continues to 
meet the exchange's listing standards, monitoring trading in that 
security and taking action to halt trading in the security when 
necessary to protect investors and to ensure a fair and orderly market. 
While these core responsibilities remain with the primary listing 
venue, trading in the security can occur on multiple exchanges that 
have unlisted trading privileges for the security \8\ or in the over-
the-counter market, regulated by the Financial Industry Regulatory 
Authority, Inc. (``FINRA''). The exchanges and FINRA are responsible 
for monitoring activity on the markets over which they have oversight, 
but also must abide by the regulatory decisions made by the Primary 
Listing Market. For example, a venue trading a security pursuant to 
unlisted trading privileges must halt trading in that security during a 
Regulatory Halt, which is a defined term under the proposed rules,\9\ 
and may only trade the security once the Primary Listing Market has 
cleared the security to resume trading.
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    \7\ The Exchange is proposing to adopt Primary Listing Market as 
a new term, defined in Nasdaq UTP Plan, Section X.A.8, as follows: 
``[T]he national securities exchange on which an Eligible Security 
is listed. If an Eligible Security is listed on more than one 
national securities exchange, Primary Listing Market means the 
exchange on which the security has been listed the longest.''
    \8\ In addition, securities may be listed on The Nasdaq Global 
Market or The Nasdaq Global Select Market, and also listed on the 
New York Stock Exchange (``dually-listed''). See The Nasdaq Stock 
Market, LLC Rules 5005(a)(11), 5220 and IM-5220.
    \9\ See proposed Rule 3100(a)(9).
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    While the Exchange and the other SROs intend to harmonize certain 
aspects of their trading halt rules, other elements of the rules will 
continue to be unique to each market. The Exchange believes that this 
is appropriate to reflect different products listed or traded on each 
market.
    In addition to establishing common criteria and procedures for 
halting and resuming trading in equity securities in the event of 
regulatory or operational issues, the Exchange is deleting provisions 
that are no longer needed and reorganizing the rule to improve its 
clarity. The Exchange is also making a handful of non-substantive 
changes to rule text to improve its clarity. The Exchange will 
implement all of the changes proposed herein in conjunction with other 
SROs implementing the necessary rule changes. The Exchange will publish 
an Equity Trader alert at least 30 business days prior to implementing 
the proposed changes.
Definitions
    The Exchange proposes adding a definitions section as Rule 3100(a) 
to consolidate the various definitions that will be used in the Rule, 
some of which are taken from the Amended Nasdaq UTP Plan. The Exchange 
is adopting the following terms from the Amended Nasdaq UTP Plan: 
``Operating Committee,'' ``Operational Halt,'' ``Primary Listing 
Market,'' ``Processor,'' \10\ ``Regulatory Halt,'' ``Regular Trading 
Hours,'' \11\ ``SIP Halt,'' and ``SIP Halt Resume Time.'' The Exchange 
is adopting a modified form of the term ``Extraordinary Market 
Activity'' from the Amended Nasdaq UTP Plan, as described below. The 
definitions of ``UTP Exchange Traded Product'' and ``Pre-Market 
Session'' have been moved into the definitions section from elsewhere 
in the current rule without change.\12\ The definitions of ``Trust 
Shares,'' ``Index Fund Shares,'' ``Managed Fund Shares,'' and ``Trust 
Issues Receipts'' have been moved into the definitions section as 
subcategories to the defined term ``UTP Exchange Traded Product'' from 
elsewhere in the current rule without changes in the definitions.\13\ 
The definition of ``Post-Market Session'' has been moved from elsewhere 
in the rule \14\ with a minor change deleting the alternative closing 
time of 4:15 p.m. as all securities traded on the Exchange commence 
their closing cross process at 4:00 p.m.\15\
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    \10\ The Exchange proposes to also define the term ``SIP'' to 
have the same meaning as the term ``Processor'' as set forth in the 
Amended Nasdaq UTP Plan. Because the terms ``Processor'' and ``SIP'' 
are also used throughout the Rules, at times, to apply to processors 
of information furnished pursuant to the Consolidated Tape 
Association Plan (``CTA Plan''), the term ``Processor'' may, in 
those applicable circumstances, refer to the processor of 
transactions in Tape A and B securities, as set forth in the CTA 
Plan.
    \11\ The Exchange notes that pursuant to existing Rule 
3100(b)(3) and 3100(b)(4), the Regular Market Session occurs until 
4:00 p.m. or 4:15 p.m., and the Post-Market Session begins at 4:00 
p.m. or 4:15 p.m.
    \12\ ``UTP Exchange Traded Product'' is currently defined in 
Rule 3100(f). ``Pre-Market Session'' is currently defined in Rule 
3100(b)(2).
    \13\ ``Trust Shares,'' ``Index Fund Shares,'' ``Managed Fund 
Shares,'' and ``Trust Issues Receipts'' are currently defined in 
Rule 3100(b)(1)(A)-(D).
    \14\ ``Post-Market Session'' is currently defined in Rule 
3100(b)(3).
    \15\ As noted above, the Exchange is adopting several new terms 
that have the same meaning as those terms are defined in the Amended 
Nasdaq UTP Plan. Each of the national market system plans governing 
the single plan processors has identical definitions of these terms, 
thus there will be uniformity in the meaning of the terms among such 
plans as well as among the rules of the SROs.
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    First, the Exchange proposes to add the definition of ``Primary 
Listing Market'' \16\ to Rule 3100, which will have the same meaning as 
in the Amended Nasdaq UTP Plan, Section X.A.8. As is currently the case 
under Rule 3100 and under the Nasdaq UTP Plan, all Regulatory Halt 
decisions are made by the market on which the security has its primary 
listing. This reflects the regulatory responsibility that the Primary 
Listing Market has for fair and orderly trading in the securities that 
list on its market and its direct access to its listed companies, which 
are required to advise it of certain events and maintain lines of 
communication with the Primary Listing Market. The proposed definition 
makes clear that if a security is listed on more than one market (a 
dually-listed security), the Primary Listing Market means the exchange 
on which the security has been listed the longest. This provision 
matches language used in the definition of ``Primary Listing Exchange'' 
in the Limit-Up Limit-Down Plan and will avoid conflict in the event of 
dually-listed securities.
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    \16\ See proposed Rule 3100(a)(7).
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    Second, the Exchange proposes to add the definition of 
``Extraordinary Market Activity'' to Rule 3100,\17\ which would 
represent a modified version of the term defined in the Amended Nasdaq 
UTP Plan, Section X.A.1.\18\ Specifically, the

[[Page 80215]]

Exchange proposes to remove the concept of a ``market-wide basis'' from 
the Amended Nasdaq UTP Plan's definition of Extraordinary Market 
Activity for purposes of the Exchange's Rules because the term 
``Extraordinary Market Activity'' would only be used in the Exchange's 
Rules as a basis for the Exchange to initiate an Operational Halt, 
which would only occur on the market declaring the halt (i.e., the 
Exchange).\19\ The current rule does not include a definition for 
Extraordinary Market Activity.
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    \17\ See proposed Rule 3100(a)(2).
    \18\ In the Amended Nasdaq UTP Plan, ``Extraordinary Market 
Activity'' means a disruption or malfunction of any electronic 
quotation, communication, reporting, or execution system operated 
by, or linked to, the Processor or a Trading Center or a member of 
such Trading Center that has a severe and continuing negative 
impact, on a market-wide basis, on quoting, order, or trading 
activity or on the availability of market information necessary to 
maintain a fair and orderly market. For purposes of this definition, 
a severe and continuing negative impact on quoting, order, or 
trading activity includes (i) a series of quotes, orders, or 
transactions at prices substantially unrelated to the current market 
for the security or securities; (ii) duplicative or erroneous 
quoting, order, trade reporting, or other related message traffic 
between one or more Trading Centers or their members; or (iii) the 
unavailability of quoting, order, or transaction information for a 
sustained period.
    \19\ The Exchange proposes to define ``Extraordinary Market 
Activity'' to mean a disruption or malfunction of any electronic 
quotation, communication, reporting, or execution system operated 
by, or linked to, the Processor or a Trading Center or a member of 
such Trading Center that has a severe and continuing negative impact 
on quoting, order, or trading activity or on the availability of 
market information necessary to maintain a fair and orderly market. 
For purposes of this definition, a severe and continuing negative 
impact on quoting, order, or trading activity includes (i) a series 
of quotes, orders, or transactions at prices substantially unrelated 
to the current market for the security or securities; (ii) 
duplicative or erroneous quoting, order, trade reporting, or other 
related message traffic between one or more Trading Centers or their 
members; or (iii) the unavailability of quoting, order, or 
transaction information for a sustained period.
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    The third set of new proposed definitions would be specific to 
events involving the SIP. While the Exchange recognizes that many 
events involving the SIP would also meet the definition of 
``Extraordinary Market Activity'' (as defined in the Amended Nasdaq UTP 
Plan), the Exchange believes that the critical role of the SIPs in 
market infrastructure factors in favor of additional guidance on how 
such events will be handled. The definitions of ``SIP Halt Resume 
Time'' and ``SIP Halt'' are intended to provide additional guidance to 
address this subset of potential market issues.\20\ In addition, the 
Exchange is proposing to define terms related to SIP governance needed 
in order to understand these definitions:
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    \20\ The Exchange proposes to define the terms ``SIP Halt Resume 
Time'' and ``SIP Halt'' to have the same meaning as in the Amended 
Nasdaq UTP Plan.
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     ``Processor'' or ``SIP'' \21\ have the same meaning as the 
term ``Processor'' set forth in the Nasdaq UTP Plan, namely the entity 
selected by the Participants to perform the processing functions set 
forth in the Plan. Because the terms ``Processor'' and ``SIP'' are also 
used throughout the Rules, at times, to apply to processors of 
information furnished pursuant to the CTA Plan, the term ``Processor'' 
and ``SIP'' may, in those applicable circumstances, refer to the 
processor of transactions in Tape A and B securities, as set forth in 
the CTA Plan.
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    \21\ See proposed Rule 3100(a)(8).
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     ``SIP Plan'' \22\ is defined as the national market system 
plan governing the SIP.
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    \22\ See proposed Rule 3100(a)(14).
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     ``Operating Committee'' \23\ is defined as having the same 
meaning as in the Nasdaq UTP Plan, namely the committee charged with 
administering the Nasdaq UTP Plan.
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    \23\ See proposed Rule 3100(a)(3).
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    The Exchange is proposing to adopt a category of Regulatory Halt, 
called a ``SIP Halt,'' \24\ which will have the same meaning as that 
term is defined in Section X.A.11. of the Nasdaq UTP Plan, namely ``a 
Regulatory Halt to trading in one or more securities that a Primary 
Listing Market declares in the event of a SIP Outage or Material SIP 
Latency.'' This new category of Regulatory Halt will address situations 
where the Primary Listing Market declares a Regulatory Halt in one or 
more securities as a result of a SIP outage \25\ or material SIP 
latency.\26\
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    \24\ See proposed Rule 3100(a)(12).
    \25\ SIP outage means a situation in which the Processor has 
ceased, or anticipates being unable, to provide updated and/or 
accurate quotation or last sale price information in one or more 
securities for a material period that exceeds the time thresholds 
for an orderly failover to backup facilities established by mutual 
agreement among the Processor, the Primary Listing Market for the 
affected securities, and the Operating Committee unless the Primary 
Listing Market, in consultation with the Processor and the Operating 
Committee, determines that resumption of accurate data is expected 
in the near future. See Amended Nasdaq UTP Plan, Section X.A.13.
    \26\ Material SIP latency means a delay of quotation or last 
sale price information in one or more securities between the time 
data is received by the Processor and the time the Processor 
disseminates the data over the Processor's vendor lines, which delay 
the Primary Listing Market determines, in consultation with, and in 
accordance with, publicly disclosed guidelines established by the 
Operating Committee, to be (a) material and (b) unlikely to be 
resolved in the near future. See Amended Nasdaq UTP Plan, Section 
X.A.5.
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    The Exchange proposes to add a definition of ``Regulatory Halt'' 
\27\ as having the same meaning as in Section X.A.10 of the Amended 
Nasdaq UTP Plan. Specifically, the Exchange has proposed to define 
Regulatory Halt to mean a halt declared by the Primary Listing Market 
in trading in one or more securities on all Trading Centers for 
regulatory purposes, including for the dissemination of material news, 
news pending, suspensions, or where otherwise necessary to maintain a 
fair and orderly market. A Regulatory Halt includes a trading pause 
triggered by Limit Up Limit Down, a halt based on Extraordinary Market 
Activity (as defined in the Amended Nasdaq UTP Plan), a trading halt 
triggered by a Market-Wide Circuit Breaker, and a SIP Halt.
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    \27\ See proposed Rule 3100(a)(9).
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    The Exchange proposes to add a definition of ``Operational Halt,'' 
\28\ which is defined as having the same meaning as in Section X.A.7 of 
the Amended Nasdaq UTP Plan. Specifically, the Exchange is proposing to 
define Operational Halt to mean a halt in trading in one or more 
securities only on the market declaring the halt and is not a 
Regulatory Halt. An Operational Halt is effective only on the Exchange; 
other markets are not required to halt trading in the impacted 
securities. In practice, the Exchange has always had the capacity to 
implement operational halts in specified circumstances.\29\ The 
proposed change would provide greater clarity on when an Operational 
Halt may be implemented and the process for halting and resuming 
trading in the event of an Operational Halt. An Operational Halt is not 
a Regulatory Halt.\30\
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    \28\ See proposed Rule 3100(a)(4).
    \29\ See By-Laws of Nasdaq PHLX LLC, Section 7-5 (``Authority to 
Take Action Under Emergency or Extraordinary Market Conditions''), 
available at https://listingcenter.nasdaq.com/assets/rulebook/phlx/rules/Phlx_By-Laws.pdf.
    \30\ The Exchange notes that it proposes to amend the existing 
definition of the term ``Post-Market Session'' to clarify that it is 
a trading session that begins after ``Regular Trading Hours''--a 
term that, in turn, is defined in the Nasdaq UTP Plan--and that such 
session begins at ``approximately'' 4:00 p.m. See Proposed Rule 
3100(a)(5).
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    Finally, the Exchange proposes to delete the defined terms of 
``Derivative Securities Product,'' ``UTP Listing Market,'' ``UTP 
Regulatory Halt,'' and ``UTP Security'' as the definitions are obsolete 
and not utilized within the Exchange's Rules with the proposed changes 
herein.
Regulatory Halt
    Proposed Rule 3100(b)(1)(A)(i)-(ii) includes two situations in 
which the Exchange must halt trading pursuant to a Regulatory Halt: 
under the Limit Up-Limit Down Plan or pursuant to extraordinary market 
volatility (market-wide circuit breakers). Proposed Rule 
3100(b)(1)(A)(i) retains without substantive modification the existing 
rule with respect to the Limit Up-Limit Down Plan (current Rule 
3100(a)(2)-(5)). The Exchange, as a non-Primary Listing Market, does 
not itself declare trading pauses pursuant to the Limit Up-Limit Down 
Plan, but rather implements such pauses declared by Primary Listing 
Markets. The Exchange proposes to make clear in Rule 3100(b)(1)(A)(ii) 
that

[[Page 80216]]

a trading halt pursuant to extraordinary market volatility (market-wide 
circuit breakers), as is described in Rule 3101, constitutes a 
Regulatory Halt.
    The Exchange would also consolidate subsections concerning a 
Regulatory Halt declared by Primary Listing Markets in Rule 
3100(b)(1)(A)(iii). The Exchange believes this consolidation would add 
clarity to the rule. As is the case under the current rule, the 
Exchange would honor a Regulatory Halt.
    The Exchange proposes to add proposed Rule 
3100(b)(1)(A)(iii)(a)(1), which makes clear that the start time of a 
Regulatory Halt is the time the Primary Listing Market declares the 
Regulatory Halt, regardless of whether communications issues impact the 
dissemination of notice of the Halt.\31\ This proposal would provide 
market participants with certainty on the official start time of the 
Regulatory Halt. Under the proposed rule, the start time is fixed by 
the Primary Listing Market; it is not dependent on whether notice is 
disseminated immediately. This will avoid possible disagreement if the 
Regulatory Halt time were tied to dissemination or receipt of 
notification, which may occur at different times. The Exchange 
recognizes that in situations where communication is interrupted, 
trades may continue to occur until news of the Regulatory Halt reaches 
all trading centers. However, a fixed ``official'' Regulatory Halt time 
will allow SROs to revisit trades after the fact and determine in a 
consistent manner whether specific trades should stand.
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    \31\ This is consistent with the Amended Nasdaq UTP Plan. See 
Amended Nasdaq UTP Plan, Section X.D.1.
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    Current Rule 3100(d), states, in part, that if the UTP Listing 
Market declares a UTP Regulatory Halt, the Exchange will halt trading 
in that security. This would become proposed Rule 
3100(b)(1)(A)(iii)(a)(2). Consistent with Section X.G of the Nasdaq UTP 
Plan, the proposed Rule will more broadly require the Exchange to halt 
trading of a UTP security if the Primary Listing Market declares a 
Regulatory Halt in that security.
    Current Rule 3100(f)(1)-(3), which governs trading halts in certain 
Exchange Traded Products traded on the Exchange pursuant to unlisted 
trading privileges during pre-market, regular market, and post-market 
sessions, would become proposed Rule 3100(b)(1)(A)(iii)(a)(3), without 
any substantive changes. Subsection (b)(1)(A)(iii)(a)(3) would replace 
the term ``Regular Market Session'' with the term ``Regular Trading 
Hours'' to stay consistent with other portions of the proposed rule. 
The change is non-substantive and would still refer to the period 
between 9:30 a.m. and 4:00 p.m. Eastern Time on days when the Exchange 
is open for trading. No other changes have been made to this 
subsection.
Resumption of Trading After a Regulatory Halt
    The SROs have jointly developed processes to govern the resumption 
of trading in the event of a Regulatory Halt. While the actual process 
of re-launching trading will remain unique to each exchange, the 
proposed rule would harmonize certain common elements of the reopening 
process that would benefit from consistency across markets. These 
common elements include the primacy of the Primary Listing Market in 
resumption decisions, the requirement that the Primary Listing Market 
make its determination to resume trading in good faith,\32\ and certain 
parts of the complex process of reopening trading after a SIP Halt. 
With respect to a SIP Halt, common elements of the reopening process 
include the interaction among SROs (including the Primary Listing 
Market with the SIP), the requirement that the Primary Listing Market 
terminate a SIP Halt with a notification that specifies a SIP Halt 
Resume Time, the minimum quoting times before resumption of trading, 
the cutoff time after which trading would not resume during Regular 
Trading Hours, and the time when trading may resume if the Primary 
Listing Market does not open a security within the amount of time 
specified in its rules after the SIP Halt Resume Time.
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    \32\ See Partial Amendment No. 1 of Trading Halt Amendments to 
the UTP Plan, dated March 31, 2021.
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    Proposed Rule 3100(b)(2) provides the process to be followed when 
resuming trading upon the conclusion of a Regulatory Halt. The new 
rule, which incorporates Section X.E.1 and X.F.3 of the Amended Nasdaq 
UTP Plan, is divided into the following two subsections concerning 
resumption of trading: (A) after a Regulatory Halt other than a SIP 
Halt; and (B) after a SIP Halt. Proposed Rule 3100(b)(2)(A)(i) provides 
that, for a Regulatory Halt other than a SIP Halt, the Exchange may 
resume trading subject to the Regulatory Halt after the Exchange 
receives notification from the Primary Listing Market that the 
Regulatory Halt has been terminated. The Exchange does not conduct halt 
crosses and, therefore, the resumption of trading in these securities 
will occur once notice from the Primary Listing Market is received.
    Proposed Rule 3100(b)(2)(B)(i) provides that, for securities 
subject to a SIP Halt initiated by another exchange that is the Primary 
Listing Market, during Regular Trading Hours, the Exchange may resume 
trading after trading has resumed on the Primary Listing Market or 
notice has been received from the Primary Listing Market that trading 
may resume. During Regular Trading Hours, if the Primary Listing Market 
does not open a security within the amount of time specified by the 
rules of the Primary Listing Market after the SIP Halt Resume Time, the 
Exchange may resume trading in that security. Outside Regular Trading 
Hours, the Exchange may resume trading immediately after the SIP Halt 
Resume Time.\33\ Proposed Rule 3100(b)(2) is consistent with current 
practice.
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    \33\ See Partial Amendment No. 2 of Trading Halt Amendments to 
the UTP Plan, dated April 7, 2021.
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    Proposed Rule 3100(b)(3) retains without substantive modification 
existing Rule 3100(e). Proposed Rule 3100(b)(3) states that the 
Exchange will not conduct a halt cross or re-opening cross and will 
process new and existing orders during a Regulatory Halt as follows: 
(1) any unexecuted portion of Midpoint Peg and Midpoint Peg Post-Only 
Orders will be cancelled,\34\ (2) all other resting Orders in the 
Exchange Book will be maintained at their last ranked price and 
displayed price, (3) the Exchange will accept and process all 
cancellations, and (4) Orders, including Order modifications, entered 
during the Regulatory Halt will not be accepted.
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    \34\ Proposed Rule 3100(b)(3) applies to Regulatory Halts. 
Consistent with current practice, Midpoint Pegged Orders are only 
cancelled during Regulatory Halts. In contrast, during an 
Operational Halt, Midpoint Pegged Orders are not cancelled. The 
Exchange notes that its sister exchange, Nasdaq, intends to file a 
proposed rule change to reflect this concept.
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    The Exchange proposes to delete current Rule 3100(c), which 
provides procedures for initiating and terminating a trading halt. The 
Exchange would not initiate a Regulatory Halt given its status as a 
non-Primary Listing Market, rendering language in the current rule 
inapplicable. In addition, the procedures for terminating a trading 
halt in current Rule 3100(c) would be deleted. Proposed procedures for 
terminating Regulatory Halts and resuming trading are included in 
proposed Rule 3100(b)(2), as discussed above.

[[Page 80217]]

Operational Halt
    The Exchange proposes in Rule 3100(c) to address Operational Halts, 
which are non-regulatory in nature and apply only to the exchange that 
calls the halt. The ability to call an Operational Halt has existed for 
a long time, although in the Exchange's experience, such halts have 
rarely been initiated. As part of the Exchange's assessment with the 
other SROs of the halting and resumption of trading, the Exchange 
believes that the markets would benefit from greater clarity regarding 
when an Operational Halt may be appropriate.\35\ In part, the proposed 
change is designed to cover situations similar to those that might 
constitute a Regulatory Halt, but where the impact is limited to a 
single market. For example, just as a market disruption might trigger a 
Regulatory Halt for Extraordinary Market Activity (as defined in the 
Amended Nasdaq UTP Plan) if it affects multiple markets, so a 
disruption at the Exchange, such as a technical issue affecting trading 
in one or more securities, could impact trading on the Exchange so 
significantly that an Operational Halt is appropriate in one or more 
securities. In such an instance, it would be in the public interest to 
institute an Operational Halt to minimize the impact of a disruption 
that, if trading were allowed to continue, might negatively affect a 
greater number of market participants. An Operational Halt does not 
implicate other trading centers.
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    \35\ Differences between Nasdaq and the Exchange's proposals as 
it relates to Operational Halts stem from Nasdaq's status as a 
Primary Listing Market, unlike the Exchange.
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    Proposed Rule 3100(c) would authorize the Exchange to implement an 
Operational Halt for any security trading on the Exchange:
     if it is experiencing Extraordinary Market Activity \36\ 
on the Exchange; or
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    \36\ ``Extraordinary Market Activity'' in proposed Rule 3100(c) 
would have the meaning proposed by the Exchange, which is a modified 
form of the term from the Amended Nasdaq UTP Plan, as described 
above.
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     when otherwise necessary to maintain a fair and orderly 
market or in the public interest.
    The Exchange is proposing to delete Rule 3100(a)(1) that authorizes 
the Exchange to institute an ``operational trading halt'' in a security 
listed on another exchange when that exchange imposes a trading halt 
because of an order imbalance or influx. The Exchange believes this 
language could restrict its ability to follow an Operational Halt 
imposed by another market to a limited set of fact patterns. The 
Exchange believes that the broader language provided by the definition 
of Extraordinary Market Activity and the ability to initiate an 
Operational Halt when necessary to maintain a fair and orderly market 
will better serve the interests of investors by allowing the Exchange 
to act where appropriate.
    Proposed Rule 3100(c)(2) provides the process for initiating an 
Operational Halt. Under the proposed rule, the Exchange must notify the 
SIP if it has concerns about its ability to collect and transmit 
Quotation Information or Transaction Reports, or if it has declared an 
Operational Halt or suspension of trading in one or more Eligible 
Securities, pursuant to the procedures adopted by the Operating 
Committee.
    Proposed Rule 3100(c)(3) will clarify how the Exchange resumes 
trading after an Operational Halt. Proposed Rule 3100(c)(3)(A) provides 
that the Exchange would resume trading when it determines that trading 
may resume in a fair and orderly manner consistent with the Exchange's 
rules. Proposed Rule 3100(c)(3)(B) provides that orders entered during 
the Operational Halt will not be accepted, unless subject to 
instructions that the order will be directed to another exchange. 
Proposed Rule 3100(c)(3)(C) provides that trading in a halted security 
shall resume at the time specified by the Exchange in a notice. 
Proposed Rule 3100(c)(3)(C) also specifies that Exchange will notify 
all other Plan participants and the SIP using such protocols and other 
emergency procedures as may be mutually agreed to between the Operating 
Committee and the Exchange. If the SIP is unable to disseminate notice 
of an Operational Halt or the Exchange is not open for trading, the 
Exchange will take reasonable steps to provide notice of an Operational 
Halt, which shall include both the type and start time of the 
Operational Halt. Each Plan participant shall continuously monitor 
communication protocols established by the Operating Committee and the 
Processor during market hours to disseminate notice of an Operational 
Halt, and the failure of a participant to do so shall not prevent the 
Exchange from initiating an Operational Halt.
Conforming Changes to Other Rules
    The Exchange is proposing to modify Rule 3301A that cross 
references Rule 3100 in light of the reorganization of Rule 3100. Rule 
3301A (Order Types) will be modified to update a cross reference to the 
Rule that governs Limit-Up-Limit-Down procedures.
    In addition, the Exchange is proposing to amend several rules that 
rely on the definition of ``Regular Market Session'' in current Rule 
3100(b)(4). Regular Market Session is defined as ``the trading session 
from 9:30 a.m. until 4:00 p.m. or 4:15 p.m.'' The Exchange is proposing 
to replace the references to Regular Market Session in Rule 3301A 
(Order Types) and 3312 (Clearly Erroneous Transactions) with references 
to Regular Trading Hours as proposed in Rule 3100(a)(10). The term 
``Regular Trading Hours'' would be consistent with the existing 
application of the definition of ``Regular Market Session'' and obviate 
the need for multiple definitions for the regular trading day. No 
securities traded on the Exchange currently close at 4:15 p.m. and, 
therefore, the alternative closing time in the current Regular Market 
Session definition is not needed.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\37\ Specifically, the 
proposal is consistent with Section 6(b)(5) of the Act \38\ because it 
would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system, and, in general, protect investors and 
the public interest.
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    \37\ 15 U.S.C. 78f(b).
    \38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As described above, the Exchange and other SROs are seeking to 
adopt harmonized rules related to halting and resuming trading in U.S.-
listed equity securities. The Exchange believes that the proposed rules 
will provide greater transparency and clarity with respect to the 
situations in which trading will be halted and the process through 
which that halt will be implemented and terminated. Particularly, the 
proposed changes seek to achieve consistent results for participants 
across U.S. equities exchanges while maintaining a fair and orderly 
market, protecting investors and protecting the public interest. Based 
on the foregoing, the Exchange believes that the proposed rules are 
consistent with Section 6(b)(5) of the Act \39\ because they will 
foster cooperation and coordination with persons engaged in regulating 
and facilitating transactions in securities.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As discussed previously, the Exchange believes that the various 
provisions of the proposed rules that will apply to all SROs are 
focused on the type of cross-market event where a consistent approach 
will assist market

[[Page 80218]]

participants and reduce confusion during a crisis. Because market 
participants often trade the same security across multiple venues and 
trade securities listed on different exchanges as part of a common 
strategy, the Exchange believes that the proposed rules will lessen the 
risk that market participants holding a basket of securities will have 
to deal with divergent outcomes depending on where the securities are 
listed or traded. Conversely, the proposed rules would still allow 
individual SROs to react differently to events that impact various 
securities or markets in different ways. This avoids the ``brittle 
market'' risk where an isolated event at a single market forces all 
markets trading equities securities to halt or halts trading in all 
securities where the issue impacted only a subset of securities. By 
addressing both concerns, the Exchange believes that the proposed rules 
further the Act's goal of maintaining fair and orderly markets.
    The Exchange believes that the proposed rules' focus of 
responsibility on the Primary Listing Market for decisions related to a 
Regulatory Halt and the resumption of trading is consistent with the 
Act, which itself imposes obligations on exchanges with respect to 
issuers that are listed. As is currently the case, the Primary Listing 
Market would be responsible for the many regulatory functions related 
to its listings, including the determination of when to declare a 
Regulatory Halt. While these core responsibilities remain with the 
Primary Listing Market, trading in the security can occur on multiple 
exchanges that have unlisted trading privileges for the security, such 
as on the Exchange, or in the over-the-counter market, regulated by 
FINRA. The Exchange is responsible for monitoring activity on its own 
markets, but also must honor a Regulatory Halt.
    The proposed changes relating to Regulatory Halts would ensure that 
all SROs handle the situations covered therein in a consistent manner 
that would prevent conflicting outcomes in cross-market events and 
ensure that all trading centers recognize a Regulatory Halt declared by 
the Primary Listing Market. The changes are consistent with and 
implement the Amended Nasdaq UTP Plan.
    The Exchange believes that the definitions in the proposed rules 
are also consistent with the Act. The Exchange proposes adding a 
definitions section as Rule 3100(a) to consolidate the various 
definitions that will be used in the Rule, some of which are taken from 
the Amended Nasdaq UTP Plan. The Exchange is adopting a modified form 
of the term ``Extraordinary Market Activity'' from the Amended Nasdaq 
UTP Plan, as described above. In addition, several other definitions 
have been moved into the definitions section from elsewhere in the 
current rule without changes in the definitions. As noted, certain 
definitions are consistent with the definitions in the Amended Nasdaq 
UTP Plan, furthering the Act's goal of promoting fair and orderly 
markets. For example, the Exchange is proposing to adopt a definition 
of ``SIP Halt,'' to explicitly address a situation that may disrupt the 
markets, and this definition is identical to the definition in the 
Amended Nasdaq UTP Plan. In addition to ``SIP Halt,'' the Exchange is 
adopting the following terms from the Amended Nasdaq UTP Plan: 
``Operating Committee,'' ``Operational Halt,'' ``Primary Listing 
Market,'' ``Processor,'' ``Regulatory Halt,'' ``Regular Trading 
Hours,'' and ``SIP Halt Resume Time,'' as discussed above.
    The Exchange believes that the proposed rules, which make halts 
more consistent across exchange rules, are consistent with the Act in 
that they will foster cooperation and coordination with persons engaged 
in regulating the equities markets. In particular, the Exchange 
believes it is important for SROs to coordinate when there is a 
widespread and significant event, as multiple trading centers are 
impacted in such an event. Further, while the Exchange recognizes that 
the proposed rule will not guarantee a consistent result on every 
market in all situations, the Exchange does believe that it will assist 
in that outcome. While the proposed rules relating to Regulatory Halts 
focuses primarily on the kinds of cross-market events that would likely 
impact multiple markets, individual SROs will still retain flexibility 
to deal with unique products or smaller situations confined to a 
particular market.
    Also consistent with the Act, and with the Amended Nasdaq UTP Plan, 
is the Exchange's proposal in Rule 3100(c) to address Operational 
Halts, which are non-regulatory in nature and apply only to the 
exchange that calls the halt. As noted earlier, the Exchange presently 
has the ability to call an Operational Halt, but does so rarely. The 
Exchange believes that the markets would benefit from greater clarity 
regarding when an Operational Halt may be appropriate. The proposed 
change is designed to cover situations where the impact is limited to a 
single market. For example, a disruption at the Exchange, such as a 
technical issue affecting trading in one or more securities, could 
impact trading on the Exchange so significantly that an Operational 
Halt is appropriate in one or more securities. In such an instance, it 
would be in the public interest to institute an Operational Halt to 
minimize the impact of a disruption that, if trading were allowed to 
continue, might negatively affect a greater number of market 
participants. An Operational Halt does not implicate other trading 
centers.
    Proposed Rule 3100(c) would authorize the Exchange to implement an 
Operational Halt for any security trading on the Exchange: (i) if it is 
experiencing Extraordinary Market Activity on the Exchange; or (ii) 
when otherwise necessary to maintain a fair and orderly market or in 
the public interest.
    The Exchange believes that it is consistent with the Act to delete 
parts of Rule 3100 that are no longer needed, including certain 
definitions, current Rule 3100(c), and Rule 3100(a)(1). The Exchange 
proposes to delete certain defined terms (``Derivative Securities 
Product,'' ``UTP Listing Market,'' ``UTP Regulatory Halt,'' and ``UTP 
Security'') that are obsolete and would no longer be referenced under 
the proposed Rules, providing increased clarity in the Rules. The 
Exchange proposes to delete current Rule 3100(c), which provides 
procedures for initiating and terminating a trading halt, to remove 
obsolete language and harmonize procedures for terminating Regulatory 
Halts and resuming trading. Current Rule 3100(a)(1) authorizes the 
Exchange to institute an ``operational trading halt'' in a security 
listed on another exchange when that exchange imposes a trading halt 
because of an order imbalance or influx. The Exchange believes this 
language could restrict its ability to follow an Operational Halt 
imposed by another market to a limited set of fact patterns. The 
Exchange believes that the broader language provided by the definition 
of Extraordinary Market Activity in proposed Rule 3100(c) will better 
serve the interests of investors by allowing the Exchange to act where 
appropriate. Other sections of current Rule 3100 are reorganized and 
retained without substantive modifications, as described above.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposal is consistent with Section 
6(b)(8) of the Act \40\ in that it does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act as explained below.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b)(8).

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[[Page 80219]]

    Importantly, the Exchange believes the proposal will not impose a 
burden on intermarket competition but will rather alleviate any burden 
on competition because it is the result of a collaborative effort by 
all SROs to harmonize and improve the process related to the halting 
and resumption of trading in U.S.-listed equity securities, consistent 
with the Amended Nasdaq UTP Plan. In this area, the Exchange believes 
that all SROs should have consistent rules to the extent possible in 
order to provide additional transparency and certainty to market 
participants and to avoid inconsistent outcomes that could cause 
confusion and erode market confidence. The proposed changes would 
ensure that all SROs handle the situations covered therein in a 
consistent manner and ensure that all trading centers handle a 
Regulatory Halt consistently. The Exchange understands that all other 
non-Primary Listing Markets intend to file proposals that are 
substantially similar to this proposal.
    The Exchange does not believe that its proposals concerning 
Operational Halts impose an undue burden on competition. Under the 
existing Rules, the Exchange already possesses discretionary authority 
to impose Operational Halts for various reasons, including because of 
an order imbalance or influx that causes another national securities 
exchange to impose a trading halt in a security. As described earlier, 
the proposed Rule change clarifies and broadens the circumstances in 
which the Exchange may impose such Halts, and specifies procedures for 
both imposing and lifting them. The Exchange does not intend for these 
proposals to have any competitive impact whatsoever. Indeed, the 
Exchange expects that other exchanges will adopt similar rules and 
procedures to govern operational halts, to the extent that they have 
not done so already.
    The Exchange does not believe that the proposed rule change imposes 
a burden on intramarket competition because the provisions apply to all 
market participants equally. In addition, information regarding the 
halting and resumption of trading will be disseminated using several 
freely accessible sources to ensure broad availability of information 
in addition to the SIP data and proprietary data feeds offered by the 
Exchange and other SROs that are available to subscribers. In addition, 
the declaration and timing of trading halts and the resumption of 
trading is designed to avoid any advantage to those who can react more 
quickly than other participants. The proposals encourage early and 
frequent communication among the SROs, SIPs and market participants to 
enable the dissemination of timely and accurate information concerning 
the market to market participants.

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 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 \41\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\42\
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    \41\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \42\ 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 Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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 [email protected]. Please include 
File Number SR-Phlx-2022-49 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-Phlx-2022-49. 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-Phlx-2022-49 and should be 
submitted on or before January 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28301 Filed 12-28-22; 8:45 am]
BILLING CODE 8011-01-P


