Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81131 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

12 15 U.S.C. 78f(b)(5). 

13See Securities Exchange Act Release No. 98456 

(September 20, 2023), 88 FR 66091 (September 26, 

2023) (SR–CBOE–2023–020) (permanent approval 

of nonstandard expirations pilot program) 

(‘‘Nonstandard Approval Order’’). 

14See Notice, supra note 3 at 68898. 

15See id. 

16See id. 

17See Securities Exchange Act Release No. 65256 

(September 2, 2011), 76 FR 55969, at 55972 

(September 9, 2011) (SR–C2–2011–008) (Order 

approving proposed rule change to establish a pilot 

program to list and trade SPXPM options on the C2 

Options Exchange, Incorporated). 

18See, e.g., Securities Exchange Act Release Nos. 

98454 (September 20, 2023), 88 FR 66103 at 66103– 

04 (September 26, 2023) (SR–CBOE–2023–005) 

(Order approving p.m.-settled Third Friday SPX 

options); 98450 (September 20, 2023), 88 FR 66 111 

(September 26, 2023) (SR–ISE–2023–08) (Order 

Granting Approval of a Proposed Rule Change, as 

Modified by Amendment No. 1, to Make Permanent 

Certain P.M.-Settled Pilots); 98451 (September 20, 

2023), 88 FR 66088 (September 26, 2023) (SR–Phlx– 

203–07) (Order approving a nonstandard 

expirations pilot program and p.m.-settled XND 

options); and Nonstandard Approval Order. 

19See e.g., Nonstandard Approval Order, 88 FR 

at 66094. 

20See id. 

21See supra note 13. 

22See supra note 16 and accompanying text. 

23 15 U.S.C. 78f(b)(5). 

24 15 U.S.C. 78s(b)(2). 

25 17 CFR 200.30–3(a)(12). 

1On May 31, 2012, the Commission approved the 

Plan, as modified by Amendment No. 1. See 

Securities Exchange Act Release No. 67091, 77 FR 

33498 (June 6, 2012) (File No. 4–631) (‘‘Approval 

Order’’). On February 20, 2013, the Commission 

Continued 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,12 which 

requires, among other things, that the 

Exchange’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices, 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. 

In support of its proposal, the 

Exchange notes that the Commission 

recently approved the listing of Tuesday 

and Thursday expirations for SPX and 

XSP options in addition to Monday, 

Wednesday, and Friday expirations for 

options on any broad-based index 

eligible for standard options trading.13

The Exchange states that the 

introduction of Tuesday and Thursday 

expirations for all broad-based index 

options (rather than offering those 

expirations for just two indexes) will 

provide investors with expanded 

hedging tools and greater trading 

opportunities and flexibility, and will 

allow market participants to trade in a 

manner more aligned with specific 

timing needs and more effectively tailor 

their investment and hedging strategies 

and manage their portfolios.14 The 

Exchange further believes that the 

listing of additional p.m.-settled options 

on other broad-based indexes will not 

have any significant economic impact 

on the underlying component securities 

surrounding the close as a result of 

expiring p.m.-settled options or impact 

market quality.15 Finally, the Exchange 

represents it has sufficient capacity to 

handle additional traffic associated with 

trading of broad-based index options 

with Tuesday and Thursday expirations, 

and will monitor the trading volume 

associated with any possible additional 

options series listed as a result of this 

proposal and the effect (if any) of these 

additional series on market 

fragmentation and on the capacity of the 

Exchange’s automated systems.16

The Commission has had concerns 

about the adverse effects and impact of 

p.m.-settlement upon market volatility 

and the operation of fair and orderly 

markets on the underlying cash market 

at or near the close of trading on 

expiration days.17 However, the 

Commission recently approved 

proposals from several exchanges, 

including the Exchange, to permanently 

establish programs permitting the listing 

and trading of certain p.m.-settled 

broad-based index options.18 In 

approving these proposals, the 

Commission reviewed data provided by 

the exchanges in their filings, the 

exchanges’ pilot data and reports, as 

well as an analysis conducted at the 

direction of Staff from the Commission’s 

Division of Economic and Risk Analysis 

and concluded that analysis of the pilot 

data did not identify any significant 

economic impact on the underlying 

component securities surrounding the 

close as a result of expiring p.m.-settled 

options nor did it indicate a 

deterioration in market quality for an 

existing product when a new p.m.- 

settled expiration was introduced.19

Further, the Commission stated that 

significant changes in closing 

procedures in the decades since index 

options moved to a.m. settlement may 

also serve to mitigate the potential 

impact of p.m.-settled index options on 

the underlying cash markets.20

As noted above, the Exchange 

currently may list Tuesday and 

Thursday expirations for SPX and XSP 

options in addition to Monday, 

Wednesday, and Friday expirations for 

options on any broad-based index 

eligible for standard options trading.21

The Exchange’s proposal, which would 

permit Tuesday and Thursday 

expirations for options on any broadbased index, is reasonably designed as 

a limited expansion of existing p.m.- 

settled broad-based index option 

programs and may provide the investing 

public and other market participants 

more flexibility to closely tailor their 

investment and hedging decisions. The 

Exchange has represented that it has 

adequate systems capacity and that it 

will monitor trading of broad-based 

index options with Tuesday and 

Thursday expirations.22 The 

Commission expects the Exchange to 

continue to monitor any potential risks 

from large p.m.-settled positions and 

take appropriate action on a timely basis 

if warranted. 

Accordingly, the Commission finds 

that the proposed rule change is 

consistent with Section 6(b)(5) of the 

Act 23 and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,24 that the 

proposed rule change (SR–CBOE–2023– 

054) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25670 Filed 11–20–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98928; File No. 4–631] 

Joint Industry Plan; Notice of Filing of 

the Twenty-Third Amendment to the 

National Market System Plan To 

Address Extraordinary Market 

Volatility by Cboe BYX Exchange, Inc., 

Cboe BZX Exchange, Inc., Cboe EDGA 

Exchange, Inc., Cboe EDGX Exchange, 

Inc., Financial Industry Regulatory 

Authority, Inc., Investors Exchange 

LLC, Long-Term Stock Exchange, Inc., 

MEMX LLC, MIAX Pearl, LLC, NASDAQ 

BX, Inc., NASDAQ PHLX LLC, The 

NASDAQ Stock Market LLC, New York 

Stock Exchange LLC, NYSE American 

LLC, NYSE Arca, Inc., NYSE Chicago, 

Inc., and NYSE National, Inc. 

November 14, 2023. 

I. Introduction 

On October 24, 2023, NYSE Group, 

Inc., on behalf of the following parties 

to the National Market System Plan to 

Address Extraordinary Market Volatility 

(‘‘the Plan’’): 1 Cboe BZX Exchange, Inc., 


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81132 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

noticed for immediate effectiveness the Second 

Amendment to the Plan. See Securities Exchange 

Act Release No. 68953, 78 FR 13113 (February 26, 

2013). On April 3, 2013, the Commission approved 

the Third Amendment to the Plan. See Securities 

Exchange Act Release No. 69287, 78 FR 21483 

(April 10, 2013). On August 27, 2013, the 

Commission noticed for immediate effectiveness 

the Fourth Amendment to the Plan. See Securities 

Exchange Act Release No. 70273, 78 FR 54321 

(September 3, 2013). On September 26, 2013, the 

Commission approved the Fifth Amendment to the 

Plan. See Securities Exchange Act Release No. 

70530, 78 FR 60937 (October 2, 2013). On January 

7, 2014, the Commission noticed for immediate 

effectiveness the Sixth Amendment to the Plan. See 

Securities Exchange Act Release No. 71247, 79 FR 

2204 (January 13, 2014). On April 3, 2014, the 

Commission approved the Seventh Amendment to 

the Plan. See Securities Exchange Act Release No. 

71851, 79 FR 19687 (April 9, 2014). On February 

19, 2015, the Commission approved the Eight 

Amendment to the Plan. See Securities Exchange 

Act Release No. 74323, 80 FR 10169 (February 25, 

2015). On October 22, 2015, the Commission 

approved the Ninth Amendment to the Plan. See 

Securities Exchange Act Release No. 76244, 80 FR 

66099 (October 28, 2015). On April 21, 2016, the 

Commission approved the Tenth Amendment to the 

Plan. See Securities Exchange Act Release No. 

77679, 81 FR 24908 (April 27, 2016). On August 26, 

2016, the Commission noticed for immediate 

effectiveness the Eleventh Amendment to the Plan. 

See Securities Exchange Act Release No. 78703, 81 

FR 60397 (September 1, 2016). On January 19, 2017, 

the Commission approved the Twelfth Amendment 

to the Plan. See Securities Exchange Act Release 

No. 79845, 82 FR 8551 (January 26, 2017). On April 

13, 2017, the Commission approved the Thirteenth 

Amendment to the Plan. See Securities Exchange 

Act Release No. 80455, 82 FR 18519 (April 19, 

2017). On April 28, 2017, the Commission noticed 

for immediate effectiveness the Fourteenth 

Amendment to the Plan. See Securities Exchange 

Act Release No. 80549, 82 FR 20928 (May 4, 2017). 

On September 26, 2017, the Commission noticed for 

immediate effectiveness the Fifteenth Amendment 

to Plan. See Securities Exchange Act Release No. 

81720, 82 FR 45922 (October 2, 2017). On March 

15, 2018, the Commission noticed for immediate 

effectiveness the Sixteenth Amendment to the Plan. 

See Securities Exchange Act Release No. 82887, 83 

FR 12414 (March 21, 2018) (File No. 4–631). On 

April 12, 2018, the Commission approved the 

Seventeenth Amendment to the Plan. See Securities 

Exchange Act Release No. 83044, 83 FR 17205 

(April 18, 2018). On April 11, 2019, the 

Commission approved the Eighteenth Amendment 

to the Plan. See Securities Exchange Act Release 

No. 85623, 84 FR 16086 (April 17, 2019). On 

February 5, 2020, the Commission noticed for 

immediate effectiveness the Nineteenth 

Amendment to the Plan. See Securities Exchange 

Act Release No. 88122, 85 FR 7805 (February 11, 

2020) (File No. 4–631). On April 21, 2020, the 

Commission approved the Twentieth Amendment 

to the Plan. See Securities Exchange Act Release 

No. 88704, 85 FR 23383 (April 27, 2020). On July 

29, 2020, the Commission noticed for immediate 

effectiveness the Twenty-First Amendment to the 

Plan. See Securities Exchange Act Release No. 

89420, 85 FR 46762 (August 3, 2020) (File No. 4– 

631). On October 1, 2020, the Commission noticed 

for immediate effectiveness the Twenty-Second 

Amendment to the Plan. See Securities Exchange 

Act Release No. 90068, 85 FR 63322 (October 7, 

2020) (File No. 4–631). 

2 15 U.S.C. 78k–1(a)(3). 

3 17 CFR 242.608. 

4See Letter from Elizabeth King, General Counsel 

and Corporate Secretary, NYSE, to Brent Fields, 

Secretary, Commission, dated November 2, 2018 

(‘‘Transmittal Letter’’). 

5 17 CFR 242.608. 

6See 17 CFR 242.608(a)(4) and (a)(5). 

7See Transmittal Letter, supra note 4. The 

statement of the purpose and summary of the 

amendment and the information required by Rule 

608(a)(4) and (5) is reproduced verbatim from the 

Transmittal Letter unless otherwise noted; crossreferences have been revised to conform with the 

footnote sequencing of this notice. 

8 17 CFR 242.600(b)(47). 

Cboe BYX Exchange, Inc., Cboe EDGA 

Exchange, Inc., Cboe EDGX Exchange, 

Inc., the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’), Investors 

Exchange LLC, Long-Term Stock 

Exchange, Inc., MEMX LLC, MIAX 

Pearl, LLC, NASDAQ BX, Inc., 

NASDAQ PHLX LLC, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’), New 

York Stock Exchange LLC (‘‘NYSE’’), 

NYSE American LLC, NYSE Arca, Inc., 

NYSE Chicago, Inc., and NYSE National 

Inc. (collectively, the ‘‘Participants’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) pursuant 

to section 11A(a)(3) of the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’) 2 and Rule 608 thereunder,3 a 

proposal to amend the Plan (‘‘TwentyThird Amendment’’).4 The proposal 

reflects changes unanimously approved 

by the Participants. The Twenty-Third 

Amendment proposes to amend 

Appendix A to the Plan to provide that 

all exchange-traded products (‘‘ETPs’’) 

will be assigned to Tier 1 of the Plan, 

except for single stock ETPs, which will 

be assigned to the same tier as their 

underlying stock, and in each case 

adjusted for any leverage factor. A copy 

of the Plan, as proposed to be amended, 

is Exhibit A. The Commission is 

publishing this notice to solicit 

comments from interested persons on 

the Twenty-Third Amendment.5

II. Description of the Plan 

Set forth in this Section II is the 

statement of the purpose and summary 

of the Twenty-Third Amendment, along 

with the information required by Rule 

608(a)(4) and (5) under the Exchange 

Act,6 substantially prepared and 

submitted by the Participants to the 

Commission.7

A. Statement of Purpose and Summary 

of the Plan Amendment 

The Participants filed the Plan with 

the Commission on April 5, 2011 to 

create a market-wide limit up-limit 

down mechanism intended to address 

extraordinary market volatility in NMS 

Stocks, as defined in Rule 600(b)(47) of 

Regulation NMS under the Exchange 

Act.8 The Plan sets forth procedures that 

provide for market-wide limit up-limit 

down requirements to prevent trades in 

individual NMS Stocks from occurring 

outside of the specified Price Bands. 

These limit up-limit down requirements 

are coupled with Trading Pauses, as 

defined in Section I(Y) of the Plan, to 

accommodate more fundamental price 

moves. In particular, the Participants 

adopted this Plan to address 

extraordinary volatility in the securities 

markets, i.e., significant fluctuations in 

individual securities’ prices over a short 

period of time, such as those 

experienced during the ‘‘Flash Crash’’ 

on the afternoon of May 6, 2010. 

As set forth in more detail in the Plan, 

the single plan processor (‘‘Processors’’), 

which is responsible for consolidation 

of information for an NMS Stock 

pursuant to Rule 603(b) of Regulation 

NMS under the Exchange Act, 

calculates and disseminates a lower 

Price Band and upper Price Band for 

each NMS Stock. As set forth in Section 

V of the Plan, the Price Bands are based 

on a Reference Price for each NMS 

Stock that equals the arithmetic mean 

price of Eligible Reported Transactions 

for the NMS Stock over the immediately 

preceding five-minute period. The Price 

Bands for an NMS Stock are calculated 

by applying the Percentage Parameters, 

as set out in Appendix A to the Plan, for 

such NMS Stock to the Reference Price, 

with the lower Price Band being a 

Percentage Parameter below the 

Reference Price, and the upper Price 

Band being a Percentage Parameter 

above the Reference Price. 

Appendix A to the Plan sets out the 

definitions of Tier 1 and Tier 2 NMS 

Stocks and the Percentage Parameters 

for each. Appendix A currently provides 

that Tier 1 includes all NMS Stocks 

included in the S&P 500 Index and the 

Russell 1000 Index, as well as ‘‘eligible’’ 

ETPs. Appendix A specifies: 

To determine eligibility for an ETP to be 

included as a Tier 1 NMS Stock, all ETPs 

across multiple asset classes and issuers, 

including domestic equity, international 

equity, fixed income, currency, and 

commodities and futures will be identified. 

Leveraged ETPs will be excluded, and the list 

will be sorted by notional consolidated 

average daily volume (‘‘CADV’’). The period 

used to measure CADV will be from the first 

day of the previous fiscal half year up until 

one week before the beginning of the next 

fiscal half year. Daily volumes will be 

multiplied by closing prices and then 

averaged over the period. ETPs, including 

inverse ETPs, that trade over $2,000,000 

CADV will be eligible to be included as a 

Tier 1 NMS Stock. 

The eligible ETPs are then listed in 

Schedule 1 to Appendix A, and the list 

is reviewed and updated semi-annually. 

All ETPs that do not meet the 

‘‘eligibility’’ definition are currently 

assigned to Tier 2. 

For Tier 1 NMS Stocks, Appendix A 

defines the Percentage Parameters as: 


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• 5% for Tier 1 NMS Stocks with a 

Reference Price more than $3.00; 

• 20% for Tier 1 NMS Stocks with a 

Reference Price equal to $0.75 and up to 

and including $3.00; and 

• The lesser of $0.15 or 75% for Tier 

1 NMS Stocks with a Reference Prices 

less than $0.75. 

For Tier 2 NMS Stocks, Appendix A 

defines the Percentage Parameters as: 

• 10% for Tier 2 NMS Stocks with a 

Reference Price of more than $3.00; 

• 20% for Tier 2 NMS Stocks with a 

Reference Price equal to $0.75 and up to 

and including $3.00; and 

• The lesser of $0.15 or 75% for Tier 

2 NMS Stocks with a Reference Price 

less than $0.75. 

The Percentage Parameter for a Tier 2 

NMS Stock that is a leveraged ETP is the 

applicable Percentage Parameter set 

forth above, multiplied by the leverage 

ratio of such product. 

At the request of market participants, 

the Participants have studied the 

calibration of the parameters set forth in 

the Plan with respect to ETPs in Tier 2, 

and, specifically, whether the ETPs 

currently in Tier 2 should be 

consolidated into Tier 1. The 

Participants undertook this study at the 

request of ETP issuers who are 

concerned about protecting investors 

from the harm caused by sharp moves 

in ETP prices when execution prices 

diverge from their indicative index 

value. The purpose of the Participants’ 

study was to assess whether improving 

investor protection by narrowing the 

Percentage Parameters from 10% to 5% 

on Tier 2 ETPs with Reference Prices of 

more than $3.00 would result in an 

unreasonable disruption in trading, 

which might hamper the price discovery 

process. 

The Participants, in conjunction with 

the Plan Advisors and ETP issuers, 

studied the potential impact of 

recategorizing all ETPs currently in Tier 

2 into Tier 1, such that they would be 

subject to narrower Percentage 

Parameters, and, in turn, narrower Price 

Bands. The Participants presented their 

initial findings to Commission staff at a 

meeting of the LULD Plan Operating 

Committee on February 25, 2020, and 

provided supplemental information as a 

part of the Operating Committee’s 2019 

Annual Report, submitted in March 

2020. The Participants have received 

and reviewed feedback from 

Commission staff. 

Since that time, the Participants have 

incorporated additional analyses 

bearing on the question of whether any 

ETPs should remain in Tier 2, or 

whether the operation of fair and 

orderly markets would be enhanced by 

moving all ETPs (except for single-stock 

ETPs whose underlying stock is in Tier 

2) to Tier 1. The results of this expanded 

study are presented below. 

For the reasons below, the 

Participants propose to amend 

Appendix A of the Plan as follows. The 

Participants propose to amend 

Appendix A, Section I, paragraph (1) to 

delete the definition of ETPs ‘‘eligible’’ 

for Tier 1 and to specify that all ETPs 

except for single-stock ETPs would be 

assigned to Tier 1: 

(1) Tier 1 NMS Stocks shall include all 

NMS Stocks included in the S&P 500 Index 

and the Russell 1000 Index, and [the] all 

exchange-traded products (‘‘ETP’’), except for 

single stock ETPs, which will be assigned to 

the same Tier as their underlying stock, 

adjusted for any leverage factor. [identified 

as Schedule 1 to this Appendix. Schedule 1 

to the Appendix will be reviewed and 

updated semi-annually based on the fiscal 

year by the Primary Listing Exchange to add 

ETPs that meet the criteria, or delete ETPs 

that are no longer eligible. To determine 

eligibility for an ETP to be included as a Tier 

1 NMS Stock, all ETPs across multiple asset 

classes and issuers, including domestic 

equity, international equity, fixed income, 

currency, and commodities and futures will 

be identified. Leveraged ETPs will be 

excluded and the list will be sorted by 

notional consolidated average daily volume 

(‘‘CADV’’). The period used to measure 

CADV will be from the first day of the 

previous fiscal half year up until one week 

before the beginning of the next fiscal half 

year. Daily volumes will be multiplied by 

closing prices and then averaged over the 

period. ETPs, including inverse ETPs, that 

trade over $2,000,000 CADV will be eligible 

to be included as a Tier 1 NMS Stock. The 

semi-annual updates to Schedule 1 do not 

require an amendment to the Plan. The 

Primary Listing Exchanges will maintain the 

updated Schedule 1 on their respective 

websites.] 

The Participants also propose to delete 

Schedule 1 to Appendix A as obsolete. 

Because all leveraged ETPs (except 

Tier 2 single stock ETPs) would be 

assigned to Tier 1, the Participants also 

propose to add text into Section I of 

Appendix A describing how the 

Percentage Parameters would be set for 

leveraged ETPs. The Participants 

propose to insert the following as 

paragraph (5) of Section I, and to 

renumber the paragraphs of Section I 

accordingly: 

(5) Notwithstanding the foregoing, the 

Percentage Parameters for a Tier 1 NMS 

Stock that is a leveraged ETP shall be the 

applicable Percentage Parameter set forth in 

clauses (2), (3), or (4) above, multiplied by 

the leverage ratio of such product. 

Study Data 

The Participants reviewed trading and 

quoting in all ETPs during the period 

from Q4 of 2019 through Q2 of 2021. 

This span included periods of greatly 

varying volatility and heterogeneous 

market conditions, including the sell-off 

during the onset of Covid–19 pandemic, 

the volatile period surrounding the 2020 

U.S. presidential election, and the 

meme stock episode in early 2021. This 

time span afforded the Participants the 

opportunity to study how the Plan 

performed during these particularly 

stressful periods. 

The ETPs studied covered several 

asset classes, including domestic 

equities, international equities, fixed 

income, currency, commodity, and 

digital currency ETPs. 

At the time the Participants 

conducted the study, there were not yet 

any single stock ETPs listed in the U.S. 

markets. However, as discussed below, 

the purpose of having different LULD 

tiers is to assign price bands that are 

commensurate with a security’s 

underlying volatility. Since a single 

stock ETP should closely track the price 

movement and volatility of its 

underlying security, it should be 

assigned to the same LULD tier, 

adjusted for any leverage factor, to 

maintain the uniform and congruous 

application of LULD controls. 

The Participants also excluded Tier 2 

ETPs with a Reference Price of $3.00 or 

less, since ETPs with a Reference Price 

of $3.00 or less are subject to identical 

Percentage Parameters under Tier 1 and 

Tier 2. The Participants also excluded 

the last 25 minutes of the trading day 

from the study, since the Percentage 

Parameters for Tier 1 and Tier 2 NMS 

Stocks with Reference Prices more than 

$3.00 are identical during that period. 

Study Methodology 

The Participants’ study consists of 

three parts. 

First, the Participants compared the 

realized volatility and incidence of 

Limit States and Trading Halts in Tier 

2 ETPs against both Tier 1 and Tier 2 

non-ETPs, to review the reasonableness 

of assigning ETPs to Tier 2. 

Second, the Participants calculated 

theoretical Tier 1 (i.e., 5%) Price Bands 

for all Tier 2 ETPs in the study. For 

example, normally a Tier 2 ETP with a 

Reference Price of $10.00 would have a 

lower Price Band of $9.00 and an upper 

Price Band of $11.00 (i.e., 10% bands). 

For purposes of the study, that same 

ETP would have a theoretical Tier 1 

lower Price Band of $9.50 and an upper 

Price Band of $10.50 (i.e., 5% bands). 

Once the theoretical narrower bands 

were calculated, the Participants 

identified all trades that occurred at 

prices between the theoretical narrower 

bands and the actual Tier 2 bands. The 

Participants then calculated the total 

notional value if all trades beyond the 


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81134 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

9See Letter from Janet M. McGinness, Senior Vice 

President, Legal and Corporate Secretary, NYSE 

Euronext on behalf of the NYSE Exchanges as well 

as the other parties to the Plan, to Elizabeth M. 

Murphy, Secretary, Commission, dated November 

2, 2011 (‘‘Including only certain ETPs in Tier 1 

NMS Stocks and including ETPs in the Plan in 

phases would treat ETPs in the same manner as 

they were treated in the trading pause pilot.’’). 

10See Securities Exchange Act Release No. 62883 

(September 10, 2010), 75 FR 56608 (September 16, 

2010) (SR–FINRA–2010–033) (Order Approving 

Proposed Rule Change Relating To Expanding the 

Pilot Rule for Trading Pauses Due to Extraordinary 

Market Volatility to the Russell 1000® Index and 

Specified Exchange Traded Products). 

11The Participants measured quote volatility as 

the average basis point change of each second’s 

mid-point during core hours annualized. 

theoretical narrow bands had been 

prevented, as well as the total notional 

value if all such trades had occurred at 

the price of the new bands, to determine 

the range of potential notional value 

impact of applying Tier 1 bands to Tier 

2 ETPs. The Participants also studied 

the price movement following these 

‘‘breaches’’ of the theoretical narrower 

bands and the likelihood of reversion to 

determine the efficacy of tightening the 

bands. 

Third, the Participants compared 

market quality changes and the 

frequency of Limit States and Trading 

Halts for Tier 1 ETPs vs. Tier 2 ETPs by 

studying the ETPs that shift from one 

tier to the other as part of the current 

semi-annual review process. 

Study Results 

1. Volatility of Tier 2 ETPs vs. Tier 1 

and Tier 2 Non-ETPs 

In creating the Plan in 2012, the 

Participants assigned ETPs with more 

than $2 million CADV to Tier 1 and all 

other ETPs to Tier 2. The $2 million 

CADV cutoff for Tier 1 ETPs was based 

on the classification under the prior 

single stock circuit breaker pilot,9 which 

applied to ‘‘more liquid ETPs . . . with 

a minimum average daily volume of 

$2,000,000 . . . that tend to have 

similar trading characteristics as 

securities in the S&P 500 and Russell 

1000.’’ 10 However, given the need for a 

swift regulatory response to the Flash 

Crash, the single stock circuit breaker 

pilot was adopted without an 

opportunity for the Participants to 

properly study this classification—or 

the underlying assumptions it was 

based upon—and no additional analysis 

was conducted in connection with the 

adoption of the LULD Plan pilot in 

2012. 

For the first part of the study, the 

Participants examine the reasonableness 

of the assumption that only ‘‘more 

liquid ETPs . . . tend to have similar 

trading characteristics as securities in 

the S&P 500 and Russell 1000’’ by 

comparing the volatility of Tier 2 ETPs 

during the study period to the volatility 

of non-ETP securities. If the purpose of 

Tier 2’s wider bands is to address higher 

expected volatility in Tier 2 NMS 

Stocks, but ETPs in Tier 2 are already 

less volatile than non-ETPs in Tier 1, 

that would suggest that ETPs do not 

actually need Tier 2’s wider bands. 

Except for single-stock, commodity, 

and foreign exchange-based ETPs, ETPs 

are, by definition, diversified 

instruments. According to modern 

portfolio theory, one would expect that 

a portfolio of securities will exhibit 

lower volatility than individual 

securities, unless those products are 

perfectly correlated. The results of the 

study show that this is in fact the case. 

Notwithstanding the lower trading 

volumes associated with the less liquid 

ETPs included in Tier 2, Tier 2 ETPs 

exhibit volatilities that are lower than 

those observed for Tier 1 non-ETPs that 

already trade with narrower Price Bands 

today. 

The Participants calculated quote 

volatilities 11 for all securities that were 

part of the Plan during 2021. As shown 

in Table 1 below, non-leveraged Tier 2 

ETPs had an average quote volatility of 

0.241 basis points with a 90th percentile 

of 0.275 basis points. Those figures are 

lower than for Tier 1 non-ETPs during 

the same period, which had an average 

quote volatility of 0.258 basis points 

with a 90th percentile of 0.446 basis 

points. Tier 2 non-ETPs had more than 

four times higher average quote 

volatility and almost double the average 

quote volatility at the 90th percentile 

compared to Tier 2 non-leveraged ETPs. 

Leveraged Tier 2 ETPs were, not 

surprisingly, somewhat higher than 

non-leveraged Tier 2 ETPs, with an 

average quote volatility of 0.736 basis 

points and a 90th percentile of 1.317 

basis points. Most leveraged ETPs 

represent commodities or volatility 

index products, which would be 

expected to exhibit higher volatility. 

However, these products’ Price Bands 

are also multiplied by their leverage 

factor, which makes their higher 

volatility relative to other ETPs 

acceptable. 

TABLE 1—QUOTE VOLATILITY OF TIER 1 NON-ETPS VS. TIER 2 ETPS AND NON-ETPS DURING 2021 

[basis points] 

Average 90th %ile 

Tier 1 Non-ETPs ...................................................................................................................................................... 0.258 0.446 

Tier 2 ETPs (non-leveraged) ................................................................................................................................... 0.241 0.275 

Tier 2 ETPs (leveraged) .......................................................................................................................................... 0.736 1.317 

Tier 2 Non-ETPs ...................................................................................................................................................... 1.182 0.502 

Next, in Table 2 below, the 

Participants compare the incidence of 

Trading Pauses and Limit States during 

2021 by Tier 1 non-ETPs, Tier 2 ETPs, 

and Tier 2 non-ETPs priced above $3.00. 

The data shows that during 2021, Tier 

2 non-leveraged ETPs had fewer Trading 

Pauses and Limit States than Tier 1 nonETPs, even though the Tier 2 nonleveraged ETPs comprised nearly 50% 

more securities. In addition, Tier 2 nonETPs had roughly four times the number 

of symbols, but 63 times the number of 

Limit States per day compared to Tier 

2 non-leveraged ETPs. Tier 2 ETPs at the 

90th percentile did not have any 

Trading Pauses, while there were 30 

Trading Pauses for Tier 2 non-ETPs. 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81135 

12The Participants have reviewed 2020 data from 

February 24, 2020 to December 31, 2020, but such 

data are not included in this filing. 

TABLE 2—INCIDENCE OF LIMIT STATES AND TRADING PAUSES AMONG TIER 1 NON-ETPS AND TIER 2 ETPS AND NONETPS DURING 2021 

Average 

symbol count 

Limit states 

per day 

Trading 

pauses per 

day 

90th %ile 

limit states 

per day 

90th %ile 

trading 

pauses 

per day 

Tier 1 Non-ETPs .................................................................. 1023.3 18.2 0.3 17.0 0.0 

Tier 2 ETPs (non-leveraged) ............................................... 1520.6 4.5 0.2 2.0 0.0 

Tier 2 ETPs (leveraged) ...................................................... 169.8 0.0 0.0 0.0 0.0 

Tier 2 Non-ETPs .................................................................. 5918.9 284.3 14.6 460.0 30.0 

There was a similar pattern in 2020.12

In 2020, non-leveraged Tier 2 ETPs 

averaged 19.7 Limit States per day 

versus 68.8 for Tier 1 non-ETPs. 

Leveraged ETPs averaged 3.6 Limit 

States per day, but over 181 symbols, 

which still comes to fewer Limit States 

than Tier 1 securities, which average 

1,003 securities covered per day. Tier 2 

leveraged ETPs averaged 0.4 Trading 

Pauses per day, versus 2.8 for nonleveraged Tier 2 ETPs and 6.4 for Tier 

1 non-ETPs. The 90th percentile results 

also evidenced a far lower incidence of 

LULD events for non-leveraged Tier 2 

ETPs compared to Tier 1 non-ETPs. 

Overall, the comparison between Tier 

1 non-ETPs and Tier 2 ETPs shows that 

quote volatility of Tier 2 ETPs operating 

under wider Price Bands is lower than 

Tier 1 non-ETPs, and that the incidence 

of Limit States and Trading Pauses for 

Tier 1 non-ETPs is substantially higher 

than that of Tier 2 ETPs. By contrast, 

Tier 2 non-ETPs are considerably more 

volatile than Tier 1 non-ETPs, which 

substantiates the wider Price Bands 

applied to these securities, as the higher 

number of Limit States and Trading 

Pauses in Tier 2 non-ETPs are occurring 

under 10% Price Bands. The 

Participants believe that these data 

indicate that the Price Bands are not 

well-calibrated to the realized volatility 

for Tier 2 ETPs and should not be twice 

as wide as those for Tier 1 non-ETPs. 

2. Analysis of ETP Trades Executing 

Past Theoretical Tier 1 Bands 

For the second part of the study, the 

Participants sought to identify the range 

of potential notional value that would 

have been impacted during the study 

period if trades in Tier 2 ETPs had been 

bounded by 5% Price Bands instead of 

10% Price Bands. Specifically, the 

Participants calculated theoretical Tier 1 

(i.e., 5%, adjusted for leverage factor) 

Price Bands for all Tier 2 ETPs in the 

study (‘‘Theoretical Tier 1 Bands’’). 

Once the theoretical narrower bands 

were calculated, the Participants 

identified 101,956 trades that occurred 

at prices between the Theoretical Tier 1 

Bands and the actual Tier 2 bands. The 

results are shown in Table 3 below. 

TABLE 3—TRADE COUNTS PAST THEORETICAL TIER 1 BANDS

Period Avg. daily 

trades 

Median daily 

trades 

Max daily 

trades 

5th %ile daily 

trades 

95th %ile daily 

trades 

2019:Q4 ............................................................................... 5 3 20 1 15 

2020:H1 ................................................................................ 736 39 17,785 3 2,048 

2020:H2 ................................................................................ 44 23 1,841 6 88 

2021:H1 ................................................................................ 102 33 1,799 4 368 

Table 3 divides the study period into 

four different time segments: Q4 of 

2019, the first half of 2020, the second 

half of 2020, and the first half of 2021. 

The number of trades occurring between 

the narrower Theoretical Tier 1 Bands 

and the actual Tier 2 bands varied 

substantially between these time 

segments, reflecting the overall trading 

volatility during that timeframe. For 

instance, the first half of 2020 shows the 

greatest numbers of Tier 2 ETP trades 

occurring between the narrower 

Theoretical Tier 1 Bands and the actual 

Tier 2 bands due to the unprecedented 

volatility during that period, which 

included the onset of the Covid–19 

pandemic and four market-wide circuit 

breaker events. The next highest number 

of trades occurred during the first half 

of 2021, which did not include a major 

market-wide event but was roiled by a 

limited number of securities tied to the 

meme stock episode in Q1 of that year. 

The second half of 2020 was impacted 

by the U.S. presidential election and 

continued pandemic-induced volatility, 

while the fourth quarter of 2019 had 

lower volatility and a lower number of 

trades overall. 

The Participants then calculated the 

upper and lower ranges of the notional 

value of the trades that would have been 

impacted during the study period if Tier 

2 ETPs had been subject to the narrower 

Theoretical Tier 1 Bands instead of the 

actual Tier 2 bands. Panel A of Table 4 

below assumes that all such trades 

would have been prevented, and thus 

represents the upper end of the range. 

Panel B assumes that all such trades 

would have occurred but at the level of 

the narrower Theoretical Tier 1 Bands, 

and thus represents a more conservative 

estimate of notional value impacted. 

The panels show the average, mean, 

maximum, 5th percentile, and 95th 

percentile daily statistics, as well as the 

total notional value impacted under 

each approach. 


lotter on DSK11XQN23PROD with NOTICES1
Panel B—Notional Value Impact Assuming All Trades Occur at New Bands (Lower Bound) 

2019:Q4 ................................................... 1,283 399 14,371 2 4,102 75,709 

2021:H1 .................................................... 40,537 2,319 2,505,951 158 95,941 5,026,635 

2020:H2 .................................................... 13,403 1,710 1,121,532 158 15,425 1,715,602 

2020:H1 .................................................... 243,507 5,202 8,049,877 163 588,279 29,956,293 

36,774,239 

The Participants believe that the 

would have been prevented by the 

those revised bands, while other trades 

some of those trades executing at or near 

Theoretical Tier 1 Bands, resulting in 

liquidity focused near the narrower 

because there would likely be more 

upper end at $711.1 million. This is 

$36.8 million on the lower end, with 

between these two numbers—at least 

during the study period would be 

notional value of trades impacted 

of $711.1 million. 

prevented could reach the upper bound 

it is unlikely that the dollar value 

at prices at or near the narrower bands, 

significant additional volume executed 

However, because there could be 

to the narrower theoretical bands. 

that all of the market depth would shift 

available in Tier 2 ETPs, it is not likely 

Given the lower liquidity typically 

narrower Theoretical Tier 1 Bands. 

Bands 

Symbols Impacted by Theoretical Tier 1 

Daily Notional Value Prevented and 

The Participants drilled down into the 

results are shown in Chart 1 below: 

narrower Theoretical Tier 1 Bands. The 

number of symbols impacted by the 

notional value prevented and the 

a day-by-day basis, the amount of 

results discussed above to determine, on 

As Chart 1 shows, most of the 

notional value that would have been Theoretical Tier 1 Bands for Tier 2 ETPs 

prevented by using the narrower 

when the markets were very volatile. 

occurred across a handful of trade dates 


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Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81137 

Together, the 10 days with the highest 

notional value for trades prevented 

account for 59% of the trades prevented 

and 61% of the total notional value 

overall. More than $45 million in trades 

could have been prevented during the 

pandemic-driven volatility in 2020. In 

contrast, over the entire study period, 

the number of Tier 2 ETPs that would 

have been impacted by using narrower 

Theoretical Tier 1 Bands was a median 

of nine ETPs per day. 

From Chart 1 and the data above in 

Tables 3 and 4, the Participants 

conclude that on most days, tighter 

Price Bands would have had little 

impact on the trading of Tier 2 ETPs. 

However, during periods of extreme 

volatility overall, the narrower bands 

may prevent unnecessary volatility in 

Tier 2 ETPs. Using narrower Tier 1 

Bands for these ETPs could protect 

investors from executing trades at 

inferior prices that may occur due to 

transitory gaps in liquidity. 

Price Movement After the Theoretical 

Blocked Trades 

The Participants recognize that the 

positive impacts of using narrower 

Theoretical Tier 1 Bands would be 

blunted if the price trend that triggers a 

Trading Pause continues in the same 

direction. Consider, for example, an ETP 

with a Tier 2 upper Price Band of $11.00 

and a theoretical Tier 1 narrower upper 

Price Band of $10.50. If prices 

continued to move towards or past 

$11.00, preventing those trades would 

likely result in a Trading Pause followed 

by an auction at a price higher than the 

Theoretical Tier 1 Band. In that case, 

investors would be negatively affected, 

since they could have traded at better 

prices if the Tier 2 Price Bands were in 

effect. 

To study this issue, the Participants 

computed several statistics to measure 

the impact of blocking these trades at 

the narrower Theoretical Tier 1 Bands. 

The Participants calculated these 

statistics as a fraction of simple trade 

counts, as well as the percentage of 

shares that were impacted by the 

theoretical narrower bands. The 

calculations are as follows: 

1. Last mid-quote 5 minutes after the 

blocked trade compared to the trade 

execution price. 

2. Last mid-quote 10 minutes after the 

blocked trade compared to the trade 

execution price. 

3. Same as #1, except cases where the 

stock paused in the next 5 minutes 

(because there may not be reliable 5- 

minute mid-quotes). 

4. Same as #2, except cases where the 

stock paused in the next 10 minutes 

(because there may not be reliable 10- 

minute mid-quotes). 

5. Same as #1–#4, except measured 

against the theoretical narrower bands. 

This measures the worst-case situation, 

where none of the trades would have 

occurred and the full impact of blocking 

the trades is shown. 

Table 5 below measures quote 

movement in the 5 and 10 minutes after 

a breach of the narrower Theoretical 

Tier 1 Bands. The table below presents 

several statistics that measure price 

reversion following a breach of the 

Theoretical Tier 1 Bands. The first two 

rows show the percentage of trades 

where the mid-quote reverts following a 

theoretical band breach, while the last 

two rows show the percentage of shares 

executed at prices past the new 

Theoretical Tier 1 Bands when the midquote subsequently reverts. The table 

shows two different reversion measures: 

(1) the first and third columns calculate 

when the last mid-quote 5 or 10 minutes 

after the breach reverts past the trade 

price that caused the breach, and (2) the 

second and fourth columns show what 

percentage of trades or share prices 

move back inside the new Theoretical 

Tier 1 Bands. 

TABLE 5—PRICE PERFORMANCE FOLLOWING THEORETICAL BLOCKED TRADES

Includes 

pauses vs. 

trade price 

(percent) 

Includes 

pauses vs. 

revised band 

(percent) 

Excludes 

pauses vs. 

trade price 

(percent) 

Excludes 

pauses vs. 

revised band 

(percent) 

5-Min % of Trades ........................................................................................... 70.5 54.5 71.2 55.1

10-Min % of Trades ......................................................................................... 75.7 65.2 76.0 65.4 

5-Min % of Shares ........................................................................................... 74.2 60.3 74.9 61.1

10-Min % of Shares ......................................................................................... 78.1 71.4 78.3 71.8 

As Table 5 shows, prices 5 and 10 

minutes after a theoretically prevented 

trade usually reverted away from the 

offending trade price towards prior 

prices, and less often moved back to 

levels inside the new bands. When 

prices do not revert, the benefit of the 

tighter bands is less clear, but the 

tendency toward reversion is further 

evidence in support of narrowing the 

bands to Tier 1 levels. As shown in the 

first column, after 5 minutes, more than 

70% of the trades and nearly 75% of the 

shares impacted had their last quote 

return to price levels prior to the move 

that caused the breach of the Theoretical 

Tier 1 Band. After 10 minutes, reversion 

rates improved further (i.e., more than 

75% of trades and 78% of shares). When 

Trading Pauses are excluded (e.g., third 

column), the results appeared even 

more positive, although the Participants 

believe that including Trading Pauses is 

the superior measure, as these situations 

better reflect the general direction of the 

market. 

It is worth noting that when reversion 

is measured relative to the narrower 

Theoretical Tier 1 Bands (i.e., ‘‘Revised 

Bands’’ in Table 5) instead of the price 

of the offending trade, mean reversion 

decreases. As shown in the second 

column, only about 54% of trades revert 

after 5 minutes with 65% reverting after 

10 minutes and, importantly, 60% of 

shares revert after 5 minutes and more 

than 70% of shares revert after 10 

minutes. These results offer strong 

evidence that narrowing the bands for 

Tier 2 ETPs will likely both decrease 

volatility as well as protect investors. 

Likely Impact on Trading Pauses 

The Participants note that during the 

study period, only 7.1% of the trades 

that executed beyond the narrower 

Theoretical Tier 1 Bands (4.6% of shares 

executed across the entire study period) 

ultimately resulted in a Trading Pause 

under the LULD bands currently in 

place. This further highlights the 

benefits of tightening the bands. Prices 

did ultimately hit a Limit State within 

10 minutes in 12.6% of the trades that 

moved through the bands, accounting 

for 10.3% of shares traded, but as noted 

above, less than half of these shares 

resulted in a Trading Pause. 

The Participants note that by 

narrowing the bands, in all likelihood, 

there may be an increase in Trading 

Pauses, even with market makers 

moving liquidity in front of the revised 

tighter bands. Because prices may likely 


lotter on DSK11XQN23PROD with NOTICES1
81138 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

revert inside the bands after 10 minutes, 

these Trading Pauses may be beneficial 

for investors. 

Such Trading Pauses may also be 

beneficial for investors because many 

Tier 2 ETPs do not trade actively. Their 

initial Price Bands are often based on 

the prior day’s official closing price, 

which may not perfectly reflect current 

market conditions, but their Reference 

Prices and Price Bands are not reset if 

there are no trades. In such cases, it may 

be beneficial to trigger a Trading Pause 

that will permit a reopening auction, 

which can more efficiently aggregate 

liquidity, determine equilibrium prices, 

reset the Price Bands, and further 

mitigate volatility. 

Consider the hypothetical situation as 

depicted by Chart 2 below. The red line 

represents the Tier 2 10% upper Price 

Band, while the purple line represents 

the theoretical narrower Tier 1 5% 

upper Price Band. The aqua and orange 

lines represent the movement of the 

NBBO throughout the day. An ETP’s 

price is typically based on a basket of 

products, so the NBBO tracks the 

underlying value of the securities 

comprising the ETP. As the orange NBO 

moves above the red line at 11:15 a.m., 

the ETP enters a Straddle State. This 

means that even though the ETP’s 

quoted prices had been rising 

throughout the morning, if a customer 

actually wanted to aggressively buy the 

ETP, they would not be able to because 

the NBO is above the upper Price 

Band—in a Straddle State. 

Note, however, that by 11:00 a.m., the 

NBB had touched the theoretical 

narrower upper Price Band. If the ETP 

were then to enter a Trading Pause, the 

Price Bands would be reset. In this 

example, there would be no damage 

caused by the ETP entering a Trading 

Pause—it was not currently trading, and 

the Price Bands would reset after an 

auction at the end of the Trading Pause 

(or reopening on a quote), permitting the 

aggressive buyer to purchase the ETP in 

the reopening auction or when the 

bands are reset and continuous trading 

resumes. 

3. Market Quality Changes When ETPs 

Change Tier Designation 

For the third part of the study, the 

Participants examined ETPs that have 

moved between tiers. As background, at 

launch, each ETP is assigned to Tier 2. 

Per Appendix A, tiers are recalculated at 

the end of each June and December and 

any non-leveraged ETPs that trade over 

$2,000,000 CADV during the 

measurement period move from Tier 2 

to Tier 1. It is common for an otherwiseilliquid ETP to have one or two very 

high-volume days immediately after 

listing, causing it to be recategorized 

into Tier 1, and then ultimately settle 

back into Tier 2 following its second 

measurement period. 

These tier changes provide the 

Participants with an opportunity to 

evaluate and compare the market 

quality of ETPs under different price 

band regimes. The Participants 

understand that, in some cases, changes 

in the volume of trades are what cause 

an ETP to change from one tier to 

another, and the improvements in 

market quality may be attributable to 

that increased volume, and not the tier 

change in and of itself. But as noted 

above, the Plan initially assigns ETPs 

into Tier 2 irrespective of their volume 

of trades, and many are then 

subsequently reassigned to Tier 1 due to 

high notional volume on a few days 

after they are first funded, without 

experiencing any real change in 

notional volume overall. As such, the 

Participants believe that market quality 

changes after a tier shift are meaningful 

because they are often not due to 

developments in the character of the 

market for the ETPs. 

The Participants compared quoted 

spreads and notional liquidity at the 

NBBO, comparing changes in these two 

values from half-year to half-year for 


lotter on DSK11XQN23PROD with NOTICES1EN21NO23.001</GPH>

Chart 2 - Example of a Beneficial Trading Pause of an ETP 

$11.00 

$10.50 

$10.00 

$9.50 --··----------------------------

$9.00 

9:30 9:45 10:00 10:15 10:30 10:45 11:00 11:15 11:30 11:45 

-Lower Band -Upper Band -Theor. Lower Band 

-Theor. Upper Band ''""'"""""'NBB -NBO 
Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81139 

ETPs that: stayed in Tier 1; stayed in 

Tier 2; switched from Tier 1 to Tier 2; 

and switched from Tier 2 to Tier 1. 

Charts 3 and 4 below summarize the 

results. 

Spread Changes 

Chart 3 below summarizes the 

changes to quoted spreads among ETPs 

that shifted tiers vs. stayed in their tiers. 

As Chart 3 shows, ETPs that were in 

Tier 1 in the second half of 2019 and 

stayed in Tier 1 during the first half of 

2020 (see the section labeled ‘‘2019H2’’ 

in Chart 2) had their consolidated 

quoted spread increase by 102.0%, 

while those that shifted to Tier 2 saw 

their consolidated quoted spread widen 

by 152.3%. Tier 2 ETPs that moved to 

Tier 1 in the first half of 2020 had their 

spreads rise 96.6%—less than those that 

stayed in Tier 1 for both periods. ETPs 

that stayed in Tier 2 performed the 

worst, with their spreads increasing by 

175.7%. The pattern is similar regarding 

ETPs that changed tier in the second 

half of 2020 (labeled ‘‘2020H1’’ in Chart 

3). Chart 3 shows that ETPs that stayed 

in Tier 1 had their spreads narrow by 

34.2% while those that moved to Tier 2 

performed worse, with their spreads 

tightening by 26.7%. Tier 2 ETPs that 

remained in Tier 2 performed similarly 

to those that stayed in Tier 1, with their 

spreads narrowing by 35.7%. The best 

performing category was ETPs that 

moved to Tier 1 from Tier 2, as their 

spreads narrowed by 43.6%. 

The last period (labeled ‘‘2020H2’’ in 

Chart 3) did not show the same 

consistency, but spreads were much less 

volatile. Chart 3 shows that spreads fell 

the most for ETPs that moved from Tier 

1 to Tier 2. However, Tier 2 ETPs that 

moved to Tier 1 saw a larger drop than 

Tier 2 ETPs that remained in Tier 2. 

Notional Liquidity Inside 

The Participants note that narrower 

spreads can lead to less available 

liquidity, but the tier changes studied 

above do not appear to have caused a 

negative impact on liquidity. Chart 4 

below shows that for ETPs that changed 

tiers between the second half of 2019 

and the first half of 2020 (‘‘2019H2’’), 

the amount of available liquidity 

dropped a similar amount for Tier 1 

ETPs that stayed in Tier 1 or moved to 

Tier 2. Tier 2 ETPs in general lost fewer 

dollars at the inside, but those Tier 2 

ETPs that transferred to Tier 1 did lose 

slightly more—12.2% versus 10.1%. 

Chart 4 shows that for ETPs that 

changed tiers between the first half and 

second half of 2020, Tier 2 ETPs again 

saw the largest increase in liquidity, 

with those that moved to Tier 1 gaining 

51.0% versus just 38.0% for those that 

stayed in Tier 2. Tier 1 ETPs that moved 

to Tier 2 saw a drop in liquidity inside 

of 4.2%. 

Finally, for those ETPs that changed 

tiers between the second half of 2020 

and the first half of 2021, Chart 4 shows 

that Tier 2 ETPs that moved to Tier 1 

saw the smallest gains in liquidity at the 

inside, increasing just 32.1% compared 

to Tier 2 ETPs that remained in Tier 2, 

which gained 42.7%. Tier 1 ETPs, 

whether they stayed in Tier 1 or moved 

to Tier 2, garnered larger gains of 

liquidity at the inside. 


lotter on DSK11XQN23PROD with NOTICES1EN21NO23.002</GPH>

Chart 3 - Chanp in Basis Points .> 1⁄4,.,A ,,S. ,_.> 115.'1""''"' = hkh,,h HXh, h,-0,,,7, •• ,Y,. H.H.p A 

Next Tier Tlef :1 Tier 2 Tier :1 Tier l Tier 1 'fffl!' 2 Tier l Tier l Tier :1 lmr 2 

Current Tier T~ 1 •~ 2 Tier 1 Tlerl Tierl 

2020H2 
81140 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

In sum, for two of the three half-year 

changes the Participants studied, 

spreads improved and there was a 

neutral to positive effect on inside 

liquidity for ETPs shifting from Tier 2 

to Tier 1. The opposite was true for Tier 

2 ETPs that changed tier from the 

second half of 2020 to the first half of 

2021. 

These results show that, on balance, 

market quality statistics improved for 

Tier 2 ETPs that moved to Tier 1. 

Incidence of Limit States and Trading 

Pauses for ETPs That Changed LULD 

Tiers 

The Participants note that even if 

market quality statistics improved for 

Tier 2 ETPs that moved to Tier 1, the 

efficacy of such a move might be 

questioned if the move created notably 

more Limit States or Trading Pauses. To 

study this issue, the Participants 

examined three statistics for ETPs that 

had a tier change in either direction 

from one period to the next: 

• the average number of Trading 

Pauses per symbol during the next halfyear; 

• the average number of Limit States 

per symbol during the next half-year; 

and 

• the average number of seconds in a 

Limit State per symbol during the next 

half-year. 

The results are shown in Charts 5, 6, 

and 7 below. 

Regarding Trading Pauses, Chart 5 

below shows that ETPs that switched 

from Tier 2 to Tier 1 had fewer Trading 

Pauses than those that remained in Tier 

2. ETPs that moved from Tier 1 to Tier 

2 had more Trading Pauses than those 

that remained in Tier 1. 


lotter on DSK11XQN23PROD with NOTICES1EN21NO23.003</GPH>

Chart 4 - Notional Inside Change 

58.5% G0.4% 

24.5% 

-4.2% 

-12.2% -10.1% 

-17.6% -17.9% 

Next Tier 

Current Tier 

' Tier 1 Tier 2 Tier 1 Tier 2 Tier 1 Tier 2 Tier 1 Tier 2 Tier 1 j Tier 2 Tier 1 Tier 2 

Tier 1 Tier2 Tier 1 Tier2 Tier 1 Tier2 

2019H2 2020H1 2020H2 
Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81141 

Regarding Limit States, Chart 6 below 

shows similar results. ETPs that were 

recategorized from Tier 2 to Tier 1 

showed a decrease in the number Limit 

States, while ETPs that were moved 

from Tier 1 to Tier 2 showed an increase 

in the number of Limit States. 

Chart 7 below shows the amount of 

time that ETPs spent in Limit States for 

each period. ETPs that moved from Tier 

1 to Tier 2 spent more time in Limit 

States than those that remained in Tier 

1. ETPs that shifted from Tier 2 to Tier 

1 saw a decrease in the amount of time 

in Limit States when compared to Tier 

2 ETPs that stayed in Tier 2. 


lotter on DSK11XQN23PROD with NOTICES1EN21NO23.004</GPH> EN21NO23.005</GPH>

Chart 5 -Trading Pauses Per ETP 

4.275 

Current Tier 

Tier 1 Tier 1 

2020H1 

Chart 6 - Number of Limit States Per ETP 

0.000 0.000 0.000 

Current Tier Tier 1 Tier 2 Tier 1 

Prior Tier 

Tier 1 Tier 2 Tier 1 

2019H2 

0.997 

,.l 

I Tier 2 ! 

Tier 2 

I 

0.000 0.000 

"' '' '''"'"'"""(""'" 

Tier 1 1 Tier 2 

Tier 1 

0.000 

................... I 

0.037 

! 

i 

Tier 1 rTier 2, I ! 

I I 

Tier 2 I ! 

i I 

,, ' "' ""'''"""" ,,,,,,,,,t,,,"," 

2020H2 

1.149 

0.058 

0.000 0.000 

, ................. ,,,,\'''·''"'·"'""··"'····"1"'""··" 

Tier 1 I Tier 2 I Tier 1 

Tier 2 Tier 1 

2020H2 
81142 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

13 17 CFR 242.608(b)(2). 

As these data show, contrary to 

expectations, narrowing the Price Bands 

for ETPs that moved from Tier 2 into 

Tier 1 did not increase the incidence of 

Trading Pauses, Limit States, or the 

amount of time spent in Limit States. 

This is likely because market 

participants adjust their behavior and 

provide more liquidity to ETPs once 

their bands are tightened. The 

Participants acknowledge that the 

number of ETPs that move between 

Tiers, especially into Tier 1 after being 

in Tier 2, is relatively small and may not 

provide a significant enough population 

to offer strong support for that statistic. 

The Participants note, however, that 

Amendment 18 removed double-wide 

bands at the open for all stocks and at 

the close for Tier 2 stocks, market 

participants adjusted to the tighter 

bands without a large increase in LULD 

Trading Pauses. 

Study Conclusions 

In sum, the Participants’ study shows 

the following: 

• Tier 1 non-ETPs are far more likely 

than Tier 2 ETPs to enter into Limit 

States and Trading Pauses due to the 

underlying volatility of these securities. 

This finding suggests that the Price 

Band width for Tier 2 ETPs is poorly 

calibrated relative to their actual trading 

behavior. 

• During the study period, the 

notional value of trades that would have 

been prevented if Tier 2 ETPs had used 

tighter Tier 1 bands would have been 

substantial for such thinly traded 

products, bounded on the lower end at 

$36.8 million and the upper end at 

$711.1 million. 

• In the majority of cases where a 

trade would have been prevented by the 

narrower Theoretical Tier 1 Bands, 

prices reverted by the end of the 

following 5- and 10- minute periods, 

suggesting that having these thinlytraded ETPs in Tier 1 would protect 

investors from executing trades at 

inferior prices that may occur due to 

transitory gaps in liquidity rather than 

fundamental valuation changes. 

• In most cases where ETPs have 

been reclassified from Tier 2 to Tier 1, 

market quality improved as evidenced 

by the lower quote volatility, tighter 

spreads, and increased liquidity for 

ETPs that moved from Tier 2 to Tier 1. 

• Using tighter Tier 1 bands for all 

ETPs would provide greater investor 

protection from temporary liquidity 

gaps, which are facilitated by the wider 

price bands in Tier 2. 

• The number of Limit States and 

Trading Pauses decreased when Tier 2 

ETPs moved to Tier 1 and increased 

when Tier 1 ETPs moved to Tier 2. 

From this evidence, the Participants 

conclude that moving Tier 2 ETPs to 

Tier 1 would improve market quality, 

more effectively dampen volatility, 

provide greater investor protection, and 

decrease the number of unnecessary 

Limit States and Trading Pauses. 

Accordingly, the Participants seek 

approval of this amendment because it 

enhances the public interest, the 

protection of investors, and the 

maintenance of fair and orderly markets, 

and would remove impediments to and 

perfect the mechanisms of a national 

market system in conformance with 

Rule 608.13

B. Governing or Constituent Documents 

The governing documents of the 

Processor, as defined in Section I(P) of 

the Plan, will not be affected by the 

Plan. 

C. Implementation of Amendment 

After Commission approval of the 

proposed amendment, the Participants 

propose to announce to market 

participants the future date on which 

the change will be implemented. 

D. Development and Implementation 

Phases 

The Participants propose to 

implement the proposed amendment on 

a permanent basis upon Commission 

approval. 

E. Analysis of Impact on Competition 

The Participants believe that the 

proposed amendment does not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Exchange Act. 

The proposed amendment to the Plan 

would apply to all market participants 

equally and would not impose a 

competitive burden on one category of 

market participants in favor of another 

category of market participant. The 

proposed amendment would apply to 

trading on all Trading Centers and all 

NMS Stocks would be subject to the 

amended Plan’s requirements. The 

Participants do not believe that the 


lotter on DSK11XQN23PROD with NOTICES1EN21NO23.006</GPH>

Chart 7 - Seconds Spent in Limit States Per ETP 

24.060 

7.310 8.230 

0.000 0.000 

Current Tier 

0.000 

l'""""'' "''""" '""·"""""r .,, ,,.,._,, .... ,N, '" ··~ , '"""""'"'"l 

Tier 1 j Tier 2 Tier 1 I 

' 

0.110_" 1 .. -. .. /, l 

Tier 2 I Tier 1 I 

1.730 I """'""""■, ... ,""""'"',! l l l Tier 2 1 Tier 1 1 Tier 2 

Prior Tier Tier 1 Tier 2 Tier 1 Tier 2 

2019H2 2020H1 

0.090 1.060 0.200 0.640 

-

- -,,,,,,1:1:,i, '""""'"""""1 "'"·"'" "" """"'"'")""'' ""'""" ''"""'"""")"" '"'"'""""'"''" " 

Tier 1 I Tier 2 Tier 1 I Tier 2 I ! 

Tier 1 Tier 2 

2020H2 

l l \) 

i l 11 

( \ 1, ( 

""""""''"\,,.' 
Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81143 

proposed amendment introduces terms 

that are unreasonably discriminatory for 

the purposes of section 11A(c)(1)(D) of 

the Exchange Act because it would 

apply to all market participants equally. 

F. Written Understanding or Agreements 

Relating to Interpretation of, or 

Participation in, Plans 

The Participants have no written 

understandings or agreements relating 

to interpretation of the Plan. Section 

II(C) of the Plan sets forth how any 

entity registered as a national securities 

exchange or national securities 

association may become a Participant. 

G. Approval of Amendment of the Plan 

On October 24, 2023, the Operating 

Committee, duly constituted and 

chaired by Mr. Robert Books of Cboe 

Global Markets, Inc., voted unanimously 

to amend the Plan as set forth herein in 

accordance with Section III(C) of the 

Plan. The Plan Advisory Committee was 

notified in connection with the 

Twentieth-Amendment and was in 

favor. Each of the Plan’s Participants has 

executed a written amended Plan. 

H. Description of Operation of Facility 

Contemplated by the Proposed 

Amendment 

Not applicable. 

I. Terms and Conditions of Access 

Section II(C) of the Plan provides that 

any entity registered as a national 

securities exchange or national 

securities association under the 

Exchange Act may become a Participant 

by: (1) becoming a participant in the 

applicable Market Data Plans, as defined 

in Section I(F) of the Plan; (2) executing 

a copy of the Plan, as then in effect; (3) 

providing each then-current Participant 

with a copy of such executed Plan; and 

(4) effecting an amendment to the Plan 

as specified in Section III(B) of the Plan. 

J. Method of Determination and 

Imposition, and Amount of, Fees and 

Charges 

This section is not applicable as the 

proposed amendment to the Plan does 

not involve fees or charges. 

K. Method and Frequency of Processor 

Evaluation 

This section is not applicable as the 

operation of the Plan is conducted by 

the Primary Listing Exchange. 

L. Dispute Resolution 

Section III(C) of the Plan provides that 

each Participant shall designate an 

individual to represent the Participant 

as a member of an Operating Committee. 

No later than the initial date of the Plan, 

the Operating Committee shall designate 

one member of the Operating Committee 

to act as the Chair of the Operating 

Committee. Any recommendation for an 

amendment to the Plan from the 

Operating Committee that receives an 

affirmative vote of at least two-thirds of 

the Participants, but is less than 

unanimous, shall be submitted to the 

Commission as a request for an 

amendment to the Plan initiated by the 

Commission under Rule 608. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the Twenty-Third 

Amendment is consistent with the 

Exchange Act and the rules thereunder. 

1. The Participants propose to amend 

Appendix A of the Plan by deleting the 

definition of ETPs ‘‘eligible’’ for Tier 1 

and to specify that all ETPs, except for 

single stock ETPs, would be assigned to 

Tier 1. What are commenters’ views on 

whether the proposal is consistent with 

the Exchange Act? 

2. Because all leveraged ETPs (except 

Tier 2 single stock ETPs) would be 

assigned to Tier 1, the Participants also 

propose to add text into Section I of 

Appendix A describing how the 

Percentage Parameters would be set for 

leveraged ETPs. What are commenters’ 

views on whether this proposal 

regarding leveraged ETPs to the Plan is 

consistent with the Exchange Act? 

3. The proposal acknowledges that the 

ETPs studied covered several asset 

classes, including domestic equities, 

international equities, fixed income, 

currency, commodity, and digital 

currency ETPs. For example, the 

Participants’ analysis provides aggregate 

statistical information with respect to 

Tier 2 ETPs as a whole. In addition, the 

proposal states that, except for singlestock, commodity, and foreign 

exchange-based ETPs, ETPs are by 

definition diversified instruments. The 

proposed amendment to the Plan, which 

would assign all ETPs to Tier 1, only 

excludes single stock ETPs, but does not 

propose to exclude other ETPs based on 

other single reference assets, such as 

ETPs based on single commodities or 

single digital currency-related assets. Do 

commenters agree that the methodology 

and results of the analysis support the 

conclusions drawn by the Participants? 

Please explain. Does this aggregated 

approach to evaluating Tier 2 ETPs as a 

whole support the conclusions drawn 

by the Participants with respect to 

different segments of Tier 2 ETPs? For 

example, what are commenters’ views 

on whether the proposal’s study 

explains why such other ETPs based on 

a single asset (other than stocks) should 

be assigned to Tier 1? 

4. The proposal compares the quote 

volatility of Tier 2 ETPs to that of Tier 

1 non-ETPs, where quote volatility is 

measured using the mid-point at each 

second. With this measure of volatility, 

the proposal concludes that Tier 2 ETPs 

have lower quote volatility than Tier 1 

non-ETPs, suggesting that Tier 2 ETPs 

are not too volatile for the Tier 1 price 

bands. In addition, the proposal 

acknowledges that Tier 2 ETPs are often 

thinly traded, and we request comment 

on whether being thinly traded might 

bias the particular volatility measure 

used in the analysis due to infrequent 

updates of the mid-point. What are 

commenters’ views on whether the 

analysis has adequately captured Tier 2 

ETP volatility in support of the 

conclusion that they are not too volatile 

for the Tier 1 price bands? If not, what 

measure of volatility would be more 

appropriate? Please explain. 

5. The Participants conclude that the 

proposal would protect investors from 

executing trades at inferior prices 

(Theoretical Blocked Trades). To 

support this conclusion, the Participants 

deduce from an analysis that if the 

proposal was in place from 2019–2021, 

it would have prevented $45 million in 

trades during the pandemic-driven 

volatility in 2020. Do commenters agree 

that the analysis supports the 

conclusion that preventing Theoretical 

Blocked Trades would have protected 

investors during this volatile period? 

Please explain. 

6. The Participants’ analysis finds that 

trades in Tier 2 ETPs that executed 

outside the Tier 1 price bands 

(Theoretical Blocked Trades) are 

generally followed by midpoint prices 

within the Tier 1 bands. Based on this 

finding, the Participants conclude that 

prices revert after these Theoretical 

Blocked Trades, indicating that the 

Theoretical Blocked Trades executed 

during temporary liquidity gaps. Do 

commenters agree that the analysis 

measures price reversion and that the 

Theoretical Blocked Trades often 

executed during temporary liquidity 

gaps? If not, how do commenters 

suggest the analysis could examine the 

extent to which Theoretical Blocked 

Trades executed during temporary 

liquidity gaps? Please explain. 

7. The Participants state that Plan 

does not impose any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. Do 

commenters believe that the Plan 

imposes any burden on competition that 

is not necessary or appropriate in 


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81144 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

14 17 CFR 200.30–3(a)(85). 

furtherance of the purposes of the 

Exchange Act? 

8. Further, would the proposal have a 

positive, negative, or neutral impact on 

competition? Please explain. How 

would the proposal impact competition 

across ETP issuers or ETPs on similar 

baskets of securities currently in 

different tiers? Please explain. How 

would any impact on competition from 

the proposal benefit or harm the 

national market system or the various 

market participants? Please describe and 

explain how, if at all, aspects of the 

national market system or different 

market participants would be affected. 

Please support any response with data, 

if possible. 

9. More generally, to the extent 

possible please provide specific data, 

analyses, or studies for support 

regarding any impacts of the proposal 

on competition. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number 4– 

631 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 4–631. 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 (https://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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

4–631 and should be submitted on or 

before December 12, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Sherry R. Haywood, 

Assistant Secretary. 

Exhibit A 

Proposed new language is italicized; 

proposed deletions are in [brackets] 

PLAN TO ADDRESS EXTRAORDINARY 

MARKET VOLATILITY SUBMITTED TO 

THE SECURITIES AND EXCHANGE 

COMMISSION PURSUANT TO RULE 608 

OF REGULATION NMS UNDER THE 

SECURITIES EXCHANGE ACT OF 1934 

Table of Contents 

Section Page 

Preamble ....................................................... 1 

I. Definitions ................................................... 2 

II. Parties ....................................................... 4 

III. Amendments to Plan ................................ 7 

IV. Trading Center Policies and Procedures 8 

V. Price Bands .............................................. 8 

VI. Limit Up-Limit Down Requirements ......... 11 

VII. Trading Pauses ....................................... 13 

VIII. Implementation ...................................... 15 

IX. Withdrawal from Plan .............................. 15 

X. Counterparts and Signatures .................... 16 

Appendix A—Percentage Parameters .......... 18 

[Appendix A—Schedule 1 ............................. 20] 

Appendix B—Data and Reporting ................. 21 

Preamble 

The Participants submit to the SEC 

this Plan establishing procedures to 

address extraordinary volatility in NMS 

Stocks. The procedures provide for 

market-wide limit up-limit down 

requirements that prevent trades in 

individual NMS Stocks from occurring 

outside of the specified Price Bands. 

These limit up-limit down requirements 

are coupled with Trading Pauses to 

accommodate more fundamental price 

moves. The Plan procedures are 

designed, among other things, to protect 

investors and promote fair and orderly 

markets. The Participants developed 

this Plan pursuant to Rule 608(a)(3) of 

Regulation NMS under the Exchange 

Act, which authorizes the Participants 

to act jointly in preparing, filing, and 

implementing national market system 

plans. 

I. Definitions 

(A) ‘‘Eligible Reported Transactions’’ 

shall have the meaning prescribed by 

the Operating Committee and shall 

generally mean transactions that are 

eligible to update the last sale price of 

an NMS Stock. 

(B) ‘‘Exchange Act’’ means the 

Securities Exchange Act of 1934, as 

amended. 

(C) ‘‘Limit State’’ shall have the 

meaning provided in Section VI of the 

Plan. 

(D) ‘‘Limit State Quotation’’ shall have 

the meaning provided in Section VI of 

the Plan. 

(E) ‘‘Lower Price Band’’ shall have the 

meaning provided in Section V of the 

Plan. 

(F) ‘‘Market Data Plans’’ shall mean 

the effective national market system 

plans through which the Participants act 

jointly to disseminate consolidated 

information in compliance with Rule 

603(b) of Regulation NMS under the 

Exchange Act. 

(G) ‘‘National Best Bid’’ and ‘‘National 

Best Offer’’ shall have the meaning 

provided in Rule 600(b)(42) of 

Regulation NMS under the Exchange 

Act. 

(H) ‘‘NMS Stock’’ shall have the 

meaning provided in Rule 600(b)(47) of 

Regulation NMS under the Exchange 

Act. 

(I) ‘‘Opening Price’’ shall mean the 

price of a transaction that opens trading 

on the Primary Listing Exchange. If the 

Primary Listing Exchange opens with 

quotations, the ‘‘Opening Price’’ shall 

mean the closing price of the NMS 

Stock on the Primary Listing Exchange 

on the previous trading day, or if no 

such closing price exists, the last sale on 

the Primary Listing Exchange. 

(J) ‘‘Operating Committee’’ shall have 

the meaning provided in Section III(C) 

of the Plan. 

(K) ‘‘Participant’’ means a party to the 

Plan. 

(L) ‘‘Plan’’ means the plan set forth in 

this instrument, as amended from time 

to time in accordance with its 

provisions. 

(M) ‘‘Percentage Parameter’’ shall 

mean the percentages for each tier of 

NMS Stocks set forth in Appendix A of 

the Plan. 

(N) ‘‘Price Bands’’ shall have the 

meaning provided in Section V of the 

Plan. 

(O) ‘‘Primary Listing Exchange’’ shall 

mean the Participant on which an NMS 

Stock is listed. If an NMS Stock is listed 

on more than one Participant, the 

Participant on which the NMS Stock has 

been listed the longest shall be the 

Primary Listing Exchange. 

(P) ‘‘Processor’’ shall mean the single 

plan processor responsible for the 

consolidation of information for an 

NMS Stock pursuant to Rule 603(b) of 

Regulation NMS under the Exchange 

Act. 


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Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 81145 

(Q) ‘‘Pro-Forma Reference Price’’ shall 

have the meaning provided in Section 

V(A)(2) of the Plan. 

(R) ‘‘Reference Price’’ shall have the 

meaning provided in Section V of the 

Plan. 

(S) ‘‘Regular Trading Hours’’ shall 

have the meaning provided in Rule 

600(b)(64) of Regulation NMS under the 

Exchange Act. For purposes of the Plan, 

Regular Trading Hours can end earlier 

than 4:00 p.m. ET in the case of an early 

scheduled close. 

(T) ‘‘Regulatory Halt’’ shall have the 

meaning specified in the Market Data 

Plans. 

(U) ‘‘Reopening Price’’ shall mean the 

price of a transaction that reopens 

trading on the Primary Listing Exchange 

following a Trading Pause or a 

Regulatory Halt, or, if the Primary 

Listing Exchange reopens with 

quotations, the midpoint of those 

quotations. 

(V) ‘‘SEC’’ shall mean the United 

States Securities and Exchange 

Commission. 

(W) ‘‘Straddle State’’ shall have the 

meaning provided in Section VII(A)(2) 

of the Plan. 

(X) ‘‘Trading center’’ shall have the 

meaning provided in Rule 600(b)(78) of 

Regulation NMS under the Exchange 

Act. 

(Y) ‘‘Trading Pause’’ shall have the 

meaning provided in Section VII of the 

Plan. 

(Z) ‘‘Upper Price Band’’ shall have the 

meaning provided in Section V of the 

Plan. 

II. Parties 

(A) List of Parties 

The parties to the Plan are as follows: 

(1) Cboe BZX Exchange, Inc., 400 South 

LaSalle Street, Chicago, Illinois 

60605 

(2) Cboe BYX Exchange, Inc., 400 South 

LaSalle Street, Chicago, Illinois 

60605 

(3) Cboe EDGA Exchange, Inc., 400 

South LaSalle Street, Chicago, 

Illinois 60605 

(4) Cboe EDGX Exchange, Inc., 400 

South LaSalle Street, Chicago, 

Illinois 60605 

(5) Financial Industry Regulatory 

Authority, Inc., 1735 K Street NW, 

Washington, DC 20006 

(6) Investors Exchange LLC, 4 World 

Trade Center, 44th Floor, New 

York, New York 10007 

(7) Long-Term Stock Exchange, Inc., 101 

Greenwich Street, Suite 11A, New 

York, New York 10006 

(8) MEMX LLC, 111 Town Square Place, 

Suite 520, Jersey City, New Jersey 

07310 

(9) MIAX Pearl, LLC, 7 Roszel Road, 

Suite 1A, Princeton, New Jersey 

08540 

(10) NASDAQ BX, Inc., One Liberty 

Plaza, 165 Broadway, New York, 

New York 10006 

(11) NASDAQ PHLX LLC, 1900 Market 

Street, Philadelphia, Pennsylvania 

19103 

(12) The Nasdaq Stock Market LLC, One 

Liberty Plaza, 165 Broadway, New 

York, NY 10006 

(13) NYSE National, Inc., 11 Wall Street, 

New York, NY 10005 

(14) New York Stock Exchange LLC, 11 

Wall Street, New York, New York 

10005 

(15) NYSE American LLC, 11 Wall 

Street, New York, New York 10005 

(16) NYSE Arca, Inc., 11 Wall Street, 

New York, New York 10005 

(17) NYSE Chicago, Inc., 11 Wall Street, 

New York, New York 10005 

(B) Compliance Undertaking 

By subscribing to and submitting the 

Plan for approval by the SEC, each 

Participant agrees to comply with and to 

enforce compliance, as required by Rule 

608(c) of Regulation NMS under the 

Exchange Act, by its members with the 

provisions of the Plan. To this end, each 

Participant shall adopt a rule requiring 

compliance by its members with the 

provisions of the Plan, and each 

Participant shall take such actions as are 

necessary and appropriate as a 

participant of the Market Data Plans to 

cause and enable the Processor for each 

NMS Stock to fulfill the functions set 

forth in this Plan. 

(C) New Participants 

The Participants agree that any entity 

registered as a national securities 

exchange or national securities 

association under the Exchange Act may 

become a Participant by: (1) becoming a 

participant in the applicable Market 

Data Plans; (2) executing a copy of the 

Plan, as then in effect; (3) providing 

each then-current Participant with a 

copy of such executed Plan; and (4) 

effecting an amendment to the Plan as 

specified in Section III (B) of the Plan. 

(D) Advisory Committee 

(1) Formation. Notwithstanding other 

provisions of this Plan, an Advisory 

Committee to the Plan shall be formed 

and shall function in accordance with 

the provisions set forth in this section. 

(2) Composition. Members of the 

Advisory Committee shall be selected 

for two-year terms as follows: 

(A) Advisory Committee Selections. 

By affirmative vote of a majority of the 

Participants, the Participants shall select 

at least one representatives from each of 

the following categories to be members 

of the Advisory Committee: (1) a brokerdealer with a substantial retail investor 

customer base; (2) a broker-dealer with 

a substantial institutional investor 

customer base; (3) an alternative trading 

system; (4) a broker-dealer that 

primarily engages in trading for its own 

account; and (5) an investor. 

(3) Function. Members of the 

Advisory Committee shall have the right 

to submit their views to the Operating 

Committee on Plan matters, prior to a 

decision by the Operating Committee on 

such matters. Such matters shall 

include, but not be limited to, proposed 

material amendments to the Plan. 

(4) Meetings and Information. 

Members of the Advisory Committee 

shall have the right to attend meetings 

of the Operating Committee and to 

receive any information concerning Plan 

matters; provided, however, that the 

Operating Committee may meet in 

executive session if, by affirmative vote 

of a majority of the Participants, the 

Operating Committee determines that an 

item of Plan business requires 

confidential treatment. 

III. Amendments to Plan 

(A) General Amendments 

Except with respect to the addition of 

new Participants to the Plan, any 

proposed change in, addition to, or 

deletion from the Plan shall be effected 

by means of a written amendment to the 

Plan that: (1) sets forth the change, 

addition, or deletion; (2) is executed on 

behalf of each Participant; and, (3) is 

approved by the SEC pursuant to Rule 

608 of Regulation NMS under the 

Exchange Act, or otherwise becomes 

effective under Rule 608 of Regulation 

NMS under the Exchange Act. 

(B) New Participants 

With respect to new Participants, an 

amendment to the Plan may be effected 

by the new national securities exchange 

or national securities association 

executing a copy of the Plan, as then in 

effect (with the only changes being the 

addition of the new Participant’s name 

in Section II(A) of the Plan) and 

submitting such executed Plan to the 

SEC for approval. The amendment shall 

be effective when it is approved by the 

SEC in accordance with Rule 608 of 

Regulation NMS under the Exchange 

Act or otherwise becomes effective 

pursuant to Rule 608 of Regulation NMS 

under the Exchange Act. 

(C) Operating Committee 

(1) Each Participant shall select from 

its staff one individual to represent the 

Participant as a member of an Operating 


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81146 Federal Register / Vol. 88, No. 223 / Tuesday, November 21, 2023 / Notices 

Committee, together with a substitute 

for such individual. The substitute may 

participate in deliberations of the 

Operating Committee and shall be 

considered a voting member thereof 

only in the absence of the primary 

representative. Each Participant shall 

have one vote on all matters considered 

by the Operating Committee. No later 

than the initial date of Plan operations, 

the Operating Committee shall designate 

one member of the Operating Committee 

to act as the Chair of the Operating 

Committee. 

(2) The Operating Committee shall 

monitor the procedures established 

pursuant to this Plan and advise the 

Participants with respect to any 

deficiencies, problems, or 

recommendations as the Operating 

Committee may deem appropriate. The 

Operating Committee shall establish 

specifications and procedures for the 

implementation and operation of the 

Plan that are consistent with the 

provisions of this Plan and the 

Appendixes thereto. With respect to 

matters in this paragraph, Operating 

Committee decisions shall be approved 

by a simple majority vote. 

(3) Any recommendation for an 

amendment to the Plan from the 

Operating Committee that receives an 

affirmative vote of at least two-thirds of 

the Participants, but is less than 

unanimous, shall be submitted to the 

SEC as a request for an amendment to 

the Plan initiated by the Commission 

under Rule 608 of Regulation NMS. 

IV. Trading Center Policies and 

Procedures 

All trading centers in NMS Stocks, 

including both those operated by 

Participants and those operated by 

members of Participants, shall establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to comply with the limit up– 

limit down requirements specified in 

Sections VI of the Plan, and to comply 

with the Trading Pauses specified in 

Section VII of the Plan. 

V. Price Bands 

(A) Calculation and Dissemination of 

Price Bands 

(1) The Processor for each NMS stock 

shall calculate and disseminate to the 

public a Lower Price Band and an 

Upper Price Band during Regular 

Trading Hours for such NMS Stock. The 

Price Bands shall be based on a 

Reference Price for each NMS Stock that 

equals the arithmetic mean price of 

Eligible Reported Transactions for the 

NMS stock over the immediately 

preceding five-minute period (except for 

periods following openings and 

reopenings, which are addressed 

below). If no Eligible Reported 

Transactions for the NMS Stock have 

occurred over the immediately 

preceding five-minute period, the 

previous Reference Price shall remain in 

effect. The Price Bands for an NMS 

Stock shall be calculated by applying 

the Percentage Parameter for such NMS 

Stock to the Reference Price, with the 

Lower Price Band being a Percentage 

Parameter below the Reference Price, 

and the Upper Price Band being a 

Percentage Parameter above the 

Reference Price. The Price Bands shall 

be calculated during Regular Trading 

Hours. Between 3:35 p.m. and 4:00 p.m. 

ET, or in the case of an early scheduled 

close, during the last 25 minutes of 

trading before the early scheduled close, 

the Price Bands shall be calculated by 

applying double the Percentage 

Parameters set forth in Appendix A for 

(i) all Tier 1 NMS Stocks and (ii) Tier 

2 NMS Stocks priced equal to or below 

$3.00. If the Processor has not yet 

disseminated Price Bands, but a 

Reference Price is available, a trading 

center may calculate and apply Price 

Bands based on the same Reference 

Price that the Processor would use for 

calculating such Price Bands until such 

trading center receives Price Bands from 

the Processor. If, under Section 

VII(B)(2), the Primary Listing Exchange 

notifies the Processor that it is unable to 

reopen an NMS Stock due to a systems 

or technology issue and it has not 

declared a Regulatory Halt, the 

Processor will calculate and disseminate 

Price Bands by applying triple the 

Percentage Parameters set forth in 

Appendix A for the first 30 seconds 

such Price Bands are disseminated. 

(2) The Processor shall calculate a 

Pro-Forma Reference Price on a 

continuous basis during Regular 

Trading Hours, as specified in Section 

V(A)(1) of the Plan. If a Pro-Forma 

Reference Price has not moved by 1% or 

more from the Reference Price currently 

in effect, no new Price Bands shall be 

disseminated, and the current Reference 

Price shall remain the effective 

Reference Price. When the Pro-Forma 

Reference Price has moved by 1% or 

more from the Reference Price currently 

in effect, the Pro-Forma Reference Price 

shall become the Reference Price, and 

the Processor shall disseminate new 

Price Bands based on the new Reference 

Price; provided, however, that each new 

Reference Price shall remain in effect for 

at least 30 seconds. 

(B) Openings 

(1) Except when a Regulatory Halt is 

in effect at the start of Regular Trading 

Hours, the first Reference Price for a 

trading day shall be the Opening Price 

on the Primary Listing Exchange in an 

NMS Stock if such Opening Price occurs 

less than five minutes after the start of 

Regular Trading Hours. During the 

period less than five minutes after the 

Opening Price, a Pro-Forma Reference 

Price shall be updated on a continuous 

basis to be the arithmetic mean price of 

Eligible Reported Transactions for the 

NMS Stock during the period following 

the Opening Price (including the 

Opening Price), and if it differs from the 

current Reference Price by 1% or more 

shall become the new Reference Price, 

except that a new Reference Price shall 

remain in effect for at least 30 seconds. 

Subsequent Reference Prices shall be 

calculated as specified in Section V(A) 

of the Plan. 

(2) If the Opening Price on the 

Primary Listing Exchange in an NMS 

Stock does not occur within five 

minutes after the start of Regular 

Trading Hours, the first Reference Price 

for a trading day shall be the arithmetic 

mean price of Eligible Reported 

Transactions for the NMS Stock over the 

preceding five minute time period, and 

subsequent Reference Prices shall be 

calculated as specified in Section V(A) 

of the Plan. 

(C) Reopenings 

(1) Following a Trading Pause in an 

NMS Stock, and if the Primary Listing 

Exchange has not declared a Regulatory 

Halt, if the Primary Listing Exchange 

reopens trading with a transaction or 

quotation that does not include a zero 

bid or zero offer, the next Reference 

Price shall be the Reopening Price on 

the Primary Listing Exchange. 

Subsequent Reference Prices shall be 

determined in the manner prescribed for 

normal openings, as specified in Section 

V(B)(1) of the Plan. If the Primary 

Listing Exchange notifies the Processor 

that it is unable to reopen an NMS Stock 

due to a systems or technology issue, or 

if the Primary Listing Exchange reopens 

trading with a quotation that has a zero 

bid or zero offer, or both, the next 

Reference Price shall be the last 

effective Price Band that was in a Limit 

State before the Trading Pause. 

Subsequent Reference Prices shall be 

calculated as specified in Section V(A) 

of the Plan. 

(2) Following a Regulatory Halt, the 

next Reference Price shall be the 

Opening or Reopening Price on the 

Primary Listing Exchange if such 

Opening or Reopening Price occurs 

within five minutes after the end of the 

Regulatory Halt, and subsequent 

Reference Prices shall be determined in 

the manner prescribed for normal 


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openings, as specified in Section V(B)(1) 

of the Plan. If such Opening or 

Reopening Price has not occurred 

within five minutes after the end of the 

Regulatory Halt, the Reference Price 

shall be equal to the arithmetic mean 

price of Eligible Reported Transactions 

for the NMS Stock over the preceding 

five minute time period, and subsequent 

Reference Prices shall be calculated as 

specified in Section V(A) of the Plan. 

VI. Limit Up-Limit Down Requirements 

(A) Limitations on Trades and 

Quotations Outside of Price Bands 

(1) All trading centers in NMS Stocks, 

including both those operated by 

Participants and those operated by 

members of Participants, shall establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to prevent trades at prices that 

are below the Lower Price Band or 

above the Upper Price Band for an NMS 

Stock. Single-priced opening, 

reopening, and closing transactions on 

the Primary Listing Exchange, however, 

shall be excluded from this limitation. 

In addition, any transaction that both (i) 

does not update the last sale price 

(except if solely because the transaction 

was reported late or because the 

transaction was an odd-lot sized 

transaction), and (ii) is excepted or 

exempt from Rule 611 under Regulation 

NMS shall be excluded from this 

limitation. 

(2) When a National Best Bid is below 

the Lower Price Band or a National Best 

Offer is above the Upper Price Band for 

an NMS Stock, the Processor shall 

disseminate such National Best Bid or 

National Best Offer with an appropriate 

flag identifying it as non-executable. 

When a National Best Offer is equal to 

the Lower Price Band or a National Best 

Bid is equal to the Upper Price Band for 

an NMS Stock, the Processor shall 

distribute such National Best Bid or 

National Best Offer with an appropriate 

flag identifying it as a ‘‘Limit State 

Quotation’’. 

(3) All trading centers in NMS Stocks, 

including both those operated by 

Participants and those operated by 

members of Participants, shall establish, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to prevent the display of offers 

below the Lower Price Band and bids 

above the Upper Price Band for an NMS 

Stock. The Processor shall disseminate 

an offer below the Lower Price Band or 

bid above the Upper Price Band that 

may be submitted despite such 

reasonable policies and procedures, but 

with an appropriate flag identifying it as 

non-executable; provided, however, that 

any such bid or offer shall not be 

included in National Best Bid or 

National Best Offer calculations. 

(B) Entering and Exiting a Limit State 

(1) All trading for an NMS Stock shall 

immediately enter a Limit State if the 

National Best Offer equals the Lower 

Price Band and does not cross the 

National Best Bid, or the National Best 

Bid equals the Upper Price Band and 

does not cross the National Best Offer. 

(2) When trading for an NMS Stock 

enters a Limit State, the Processor shall 

disseminate this information by 

identifying the relevant quotation (i.e., a 

National Best Offer that equals the 

Lower Price Band or a National Best Bid 

that equals the Upper Price Band) as a 

Limit State Quotation. At this point, the 

Processor shall cease calculating and 

disseminating updated Reference Prices 

and Price Bands for the NMS Stock until 

either trading exits the Limit State or 

trading resumes with an opening or reopening as provided in Section V. 

(3) Trading for an NMS Stock shall 

exit a Limit State if, within 15 seconds 

of entering the Limit State, the entire 

size of all Limit State Quotations are 

executed or cancelled. 

(4) If trading for an NMS Stock exits 

a Limit State within 15 seconds of entry, 

the Processor shall immediately 

calculate and disseminate updated Price 

Bands based on a Reference Price that 

equals the arithmetic mean price of 

Eligible Reported Transactions for the 

NMS Stock over the immediately 

preceding five-minute period (including 

the period of the Limit State). 

(5) If trading for an NMS Stock does 

not exit a Limit State within 15 seconds 

of entry, the Limit State will terminate 

when the Primary Listing Exchange 

declares a Trading Pause pursuant to 

Section VII of the Plan or at the end of 

Regular Trading Hours. 

VII. Trading Pauses 

(A) Declaration of Trading Pauses 

(1) If trading for an NMS Stock does 

not exit a Limit State within 15 seconds 

of entry during Regular Trading Hours, 

then the Primary Listing Exchange shall 

declare a Trading Pause for such NMS 

Stock and shall notify the Processor. 

(2) The Primary Listing Exchange may 

also declare a Trading Pause for an NMS 

Stock when an NMS Stock is in a 

Straddle State, which is when National 

Best Bid (Offer) is below (above) the 

Lower (Upper) Price Band and the NMS 

Stock is not in a Limit State, and trading 

in that NMS Stock deviates from normal 

trading characteristics such that 

declaring a Trading Pause would 

support the Plan’s goal to address 

extraordinary market volatility. The 

Primary Listing Exchange shall develop 

policies and procedures for determining 

when it would declare a Trading Pause 

in such circumstances. If a Trading 

Pause is declared for an NMS Stock 

under this provision, the Primary 

Listing Exchange shall notify the 

Processor. 

(3) The Processor shall disseminate 

Trading Pause information to the public. 

No trades in an NMS Stock shall occur 

during a Trading Pause, but all bids and 

offers may be displayed. 

(B) Reopening of Trading During 

Regular Trading Hours 

(1) Five minutes after declaring a 

Trading Pause for an NMS Stock, and if 

the Primary Listing Exchange has not 

declared a Regulatory Halt, the Primary 

Listing Exchange shall attempt to 

reopen trading using its established 

reopening procedures. The Processor 

will publish the following information 

that the Primary Listing Exchange 

provides to the Processor in connection 

with such reopening: auction reference 

price; auction collars; and number of 

extensions to the reopening auction. 

The Trading Pause shall end when the 

Primary Listing Exchange reports a 

Reopening Price. 

(2) The Primary Listing Exchange 

shall notify the Processor if it is unable 

to reopen trading in an NMS Stock due 

to a systems or technology issue and if 

it has not declared a Regulatory Halt. 

The Processor shall disseminate this 

information to the public. 

(3) Trading centers may not resume 

trading in an NMS Stock following a 

Trading Pause without Price Bands in 

such NMS Stock. 

(4) The Processor shall update the 

Price Bands as set forth in Section 

V(C)(1)–(2) of the Plan after receiving 

notification from the Primary Listing 

Exchange of a Reopening Price 

following a Trading Pause (or a resume 

message in the case of a reopening quote 

that has a zero bid or zero offer, or both) 

or that it is unable to reopen trading 

following a Trading Pause due to a 

systems or technology issue, provided 

that if the Primary Listing Exchange is 

unable to reopen due to a systems or 

technology issue, the update to the Price 

Bands will be no earlier than ten 

minutes after the beginning of the 

Trading Pause. 

(C) Trading Pauses Within Ten Minutes 

of the End of Regular Trading Hours 

(1) If an NMS Stock is in a Trading 

Pause during the last ten minutes of 

trading before the end of Regular 

Trading Hours, the Primary Listing 

Exchange shall not reopen trading and 

shall attempt to execute a closing 


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transaction using its established closing 

procedures. All trading centers may 

begin trading the NMS Stock when the 

Primary Listing Exchange executes a 

closing transaction. 

(2) If the Primary Listing Exchange 

does not execute a closing transaction 

within five minutes after the end of 

Regular Trading Hours, all trading 

centers may begin trading the NMS 

Stock. 

VIII. Implementation 

The initial date of Plan operations 

shall be April 8, 2013. 

IX. Withdrawal From Plan 

If a Participant obtains SEC approval 

to withdraw from the Plan, such 

Participant may withdraw from the Plan 

at any time on not less than 30 days’ 

prior written notice to each of the other 

Participants. At such time, the 

withdrawing Participant shall have no 

further rights or obligations under the 

Plan. 

X. Counterparts and Signatures 

The Plan may be executed in any 

number of counterparts, no one of 

which need contain all signatures of all 

Participants, and as many of such 

counterparts as shall together contain all 

such signatures shall constitute one and 

the same instrument. 

In witness thereof, this Plan has been 

executed as of the __ day of ______ 2023 

by each of the parties hereto. 

Cboe BZX EXCHANGE, INC. 

BY: llllllllllllllll

Cboe BYX EXCHANGE, INC. 

BY: llllllllllllllll

Cboe EDGA EXCHANGE, INC. 

BY: llllllllllllllll

Cboe EDGX EXCHANGE, INC. 

BY: llllllllllllllll

FINANCIALINDUSTRY REGULATORY 

AUTHORITY, INC. 

BY: llllllllllllllll

INVESTORS EXCHANGE LLC 

BY: llllllllllllllll

LONG-TERM STOCK EXCHANGE 

BY: llllllllllllllll

MEMX LLC 

BY: llllllllllllllll

MIAX PEARL, LLC 

BY: llllllllllllllll

NASDAQ BX, Inc. 

BY: llllllllllllllll

NASDAQ PHLX LLC 

BY: llllllllllllllll

THE NASDAQ STOCK MARKET LLC 

BY: llllllllllllllll

NEW YORK STOCK EXCHANGE LLC 

BY: llllllllllllllll

NYSE AMERICAN LLC 

BY: llllllllllllllll

NYSE ARCA, INC. 

BY: llllllllllllllll

NYSE CHICAGO, INC. 

BY: llllllllllllllll

NYSE NATIONAL, INC. 

BY: llllllllllllllll

Appendix A—Percentage Parameters 

I. Tier 1 NMS Stocks 

(1) Tier 1 NMS Stocks shall include all 

NMS Stocks included in the S&P 500 Index 

and the Russell 1000 Index, and [the] all 

exchange-traded products (‘‘ETP’’), except for 

single stock ETPs, which will be assigned to 

the same Tier as their underlying stock, 

adjusted for any leverage factor, if 

applicable. [identified as Schedule 1 to this 

Appendix. Schedule 1 to the Appendix will 

be reviewed and updated semi-annually 

based on the fiscal year by the Primary 

Listing Exchange to add ETPs that meet the 

criteria, or delete ETPs that are no longer 

eligible. To determine eligibility for an ETP 

to be included as a Tier 1 NMS Stock, all 

ETPs across multiple asset classes and 

issuers, including domestic equity, 

international equity, fixed income, currency, 

and commodities and futures will be 

identified. Leveraged ETPs will be excluded 

and the list will be sorted by notional 

consolidated average daily volume 

(‘‘CADV’’). The period used to measure 

CADV will be from the first day of the 

previous fiscal half year up until one week 

before the beginning of the next fiscal half 

year. Daily volumes will be multiplied by 

closing prices and then averaged over the 

period. ETPs, including inverse ETPs, that 

trade over $2,000,000 CADV will be eligible 

to be included as a Tier 1 NMS Stock. The 

semi-annual updates to Schedule 1 do not 

require an amendment to the Plan. The 

Primary Listing Exchanges will maintain the 

updated Schedule 1 on their respective 

websites.] 

(2) The Percentage Parameters for Tier 1 

NMS Stocks with a Reference Price more 

than $3.00 shall be 5%. 

(3) The Percentage Parameters for Tier 1 

NMS Stocks with a Reference Price equal to 

$0.75 and up to and including $3.00 shall be 

20%. 

(4) The Percentage Parameters for Tier 1 

NMS Stocks with a Reference Price less than 

$0.75 shall be the lesser of (a) $0.15 or (b) 

75%. 

(5) Notwithstanding the foregoing, the 

Percentage Parameters for a Tier 1 NMS 

Stock that is a leveraged ETP shall be the 

applicable Percentage Parameter set forth in 

clauses (2), (3), or (4) above, multiplied by 

the leverage ratio of such product. 

(6[5]) The Reference Price used for 

determining which Percentage Parameter 

shall be applicable during a trading day shall 

be based on the closing price of the NMS 

Stock on the Primary Listing Exchange on the 

previous trading day, or if no closing price 

exists, the last sale on the Primary Listing 

Exchange reported by the Processor. 

II. Tier 2 NMS Stocks 

(1) Tier 2 NMS Stocks shall include all 

NMS Stocks other than those in Tier 1, 

provided, however, that all rights and 

warrants are excluded from the Plan. 

(2) The Percentage Parameters for Tier 2 

NMS Stocks with a Reference Price more 

than $3.00 shall be 10%. 

(3) The Percentage Parameters for Tier 2 

NMS Stocks with a Reference Price equal to 

$0.75 and up to and including $3.00 shall be 

20%. 

(4) The Percentage Parameters for Tier 2 

NMS Stocks with a Reference Price less than 

$0.75 shall be the lesser of (a) $0.15 or (b) 

75%. 

(5) Notwithstanding the foregoing, the 

Percentage Parameters for a Tier 2 NMS 

Stock that is a leveraged ETP shall be the 

applicable Percentage Parameter set forth in 

clauses (2), (3), or (4) above, multiplied by 

the leverage ratio of such product. 

(6) The Reference Price used for 

determining which Percentage Parameter 

shall be applicable during a trading day shall 

be based on the closing price of the NMS 

Stock on the Primary Listing Exchange on the 

previous trading day, or if no closing price 

exists, the last sale on the Primary Listing 

Exchange reported by the Processor. 

[Appendix A—Schedule 1] 

Appendix B—Data and Reporting 

I. Data Provision 

The Commission may request from the 

Primary Listing Exchanges the below data 

that is not otherwise publicly available. The 

requested data shall be collected and 

transmitted to the Commission in an agreedupon format, to be provided 30 calendar days 

following the date of the request, or such 

other date as agreed upon by the Commission 

and Primary Listing Exchange. Data collected 

in connection with a Commission request 

shall be transmitted to the Commission with 

a request for confidential treatment under the 

Freedom of Information Act, 5 U.S.C. 552, 

and the Commission’s rules and regulations 

thereunder. This section shall expire at the 

time the below data becomes available via 

the National Market System Plan Governing 

the Consolidated Audit Trail or becomes 

publicly available. 

A. Data set of all orders entered during 

halts or Trading Pauses. 

1. Normal or Auction Only orders, Arrivals, 

Changes, Cancels, # shares, limit/market, 

side, Limit State side 

2. Pipe delimited with field name as first 

record 

B. Data set of order events received during 

Limit States. 

C. Summary data on order flow of arrivals 

and cancellations for each 15-second period 

for discrete time periods and sample stocks 

to be determined by the SEC in subsequent 

data requests. Must indicate side(s) of Limit 

State. 

1. Market/marketable sell orders arrivals and 

executions 

a. Count 

b. Shares 

c. Shares executed 

2. Market/marketable buy orders arrivals and 

executions 

a. Count 

b. Shares 

c. Shares executed 

3. Count arriving, volume arriving and shares 


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executing in limit sell orders above NBO 

mid-point 

4. Count arriving, volume arriving and shares 

executing in limit sell orders at or below 

NBBO mid-point (non-marketable) 

5. Count arriving, volume arriving and shares 

executing in limit buy orders at or above 

NBBO mid-point (non-marketable) 

6. Count arriving, volume arriving and shares 

executing in limit buy orders below 

NBBO mid-point 

7. Count and volume arriving of limit sell 

orders priced at or above NBBO 

midpoint plus $0.05 

8. Count and volume arriving of limit buy 

orders priced at or below NBBO 

midpoint minus $0.05 

9. Count and volume of (3–8) for cancels 

10. Include: ticker, date, time at start, time of 

Limit State, all data item fields in 1, last 

sale prior to 15-second period (null if no 

trades today), range during 15-second 

period, last trade during 15-second 

period 

II. Reporting 

A. Annual Report 

No later than March 31, 2020 and annually 

thereafter, the Operating Committee, in 

consultation with the Advisory committee, 

will provide the Commission and make 

publicly available a report containing key 

information concerning the Plan’s 

performance during the preceding calendar 

year which shall include the following items: 

(1) an update on the Plan’s operations; (2) an 

analysis of any amendments to the Plan 

implemented during the period covered by 

the report; and (3) an analysis of potential 

material emerging issues that may directly 

impact the operation of the Plan. 

1. Update on the Plan’s Operations. This 

section of the Annual Report shall analyze 

the Plan’s operations during the covered 

period, including a discussion of any areas of 

the Plan’s operation that require additional 

analysis. In particular, this section of the 

Annual Report shall examine the calibration 

of the parameters set forth in the Plan (e.g., 

Price Bands, duration of Limit States, impact 

of Straddle States, duration of Trading 

Pauses, and the performance of reopening 

procedures following a Trading Pause). This 

section of the Annual Report also shall 

consider stock characteristics and variations 

in market conditions over time, and may 

include tests that differentiate results for 

different characteristics, both in isolation and 

in combination. 

2. Analysis of Amendments Implemented. 

This section of the Annual Report shall 

provide an analysis of any amendments 

implemented during the covered period. The 

analysis shall include a discussion of any 

such amendment’s operation and its impact 

on the overall operation of the Plan. 

3. Analysis of Emerging Issues. This 

section of the Annual Report should vary 

from year-to-year and will include a 

discussion and analysis of the Plan’s 

operation during a significant market event 

that may have occurred during the covered 

period. This section shall also include any 

additional analyses performed during the 

covered period on issues that were raised in 

previous Annual Reports. 

B. Quarterly Data 

Thirty days following the end of each 

calendar quarter, the Operating Committee 

shall provide the Commission and make 

publicly available a report (‘‘Monitoring 

Report’’) including basic statistics aggregated 

across primary listing exchanges regarding 

the Plan’s operation during the preceding 

calendar quarter, as well as data aggregated 

across primary listing exchanges from the 

previous 12 quarters beginning with the 

calendar quarter covered by the first 

Monitoring Report. The purpose of the 

Monitoring Report is to identify trends in the 

performance and impact of the Plan on 

market activity. The Monitoring Report shall 

include data on the following events for each 

month during the preceding calendar quarter: 

1. Limit States, Trading Pauses, Straddle 

States, and Clearly Erroneous Events 

a. Definitions. For the purpose of this 

Section B.1, the following definitions apply: 

i. ‘‘Category’’ means the following 

categories of securities: 

(1) Tier 1 non-ETP securities > $3.00 

(2) Tier 1 non-ETP securities >= $0.75 and <= 

$3.00 

(3) Tier 1 non-ETP securities < $0.75 

(4) Tier 1 non-leveraged ETPs > $3.00 

(5) Tier 1 non-leveraged ETPs >= $0.75 and 

<= $3.00 

(6) Tier 1 non-leveraged ETPs < $0.75 

(7) Tier 1 leveraged ETPs > $3.00 

(8) Tier 1 leveraged ETPs >= $0.75 and <= 

$3.00 

(9) Tier 1 leveraged ETPs < $0.75 

(10) Tier 2 non-ETPs > $3.00 

(11) Tier 2 non-ETPs >= $0.75 and <= $3.00 

(12) Tier 2 non-ETPs < $0.75 

(13) Tier 2 non-leveraged ETPs > $3.00 

(14) Tier 2 non-leveraged ETPs >= $0.75 and 

<= $3.00 

(15) Tier 2 non-leveraged ETPs < $0.75 

(16) Tier 2 leveraged ETPs > $3.00 

(17) Tier 2 leveraged ETPs >= $0.75 and <= 

$3.00 

(18) Tier 2 leveraged ETPs < $0.75 

ii. ‘‘Time of Day’’ means the following time 

spans: 

(1) Opening (prior to 9:45 a.m. ET) 

(2) Regular (between 9:45 a.m. ET and 25 

minutes prior to the end of core trading 

hours) 

(3) Closing (the last 25 minutes of core 

trading hours) 

(4) Within five minutes of a Trading Pause 

reopen or IPO open 

b. Limit States. The Monitoring Report will 

include: 

i. Monthly distribution statistics (mean, 

median, 25th percentile, and maximum) on 

the number of Limit States per day, broken 

out by Category and Time of Day. 

ii. Monthly distribution statistics (mean, 

median, 25th percentile, and maximum) on 

the number of NMS Stocks that experienced 

more than one Limit State on a single day, 

broken out by Category. 

iii. Monthly distribution statistics (mean, 

median, 90th percentile, and 99th percentile) 

on the number of Limit States experienced 

per day by individual NMS Stocks that had 

more than one Limit State on a single day, 

broken out by Category. 

iv. Monthly distribution statistics (mean, 

median, 90th percentile, and 99th percentile) 

on the total length of Limit States 

experienced per day by individual NMS 

Stocks that had more than one Limit State on 

a single day, broken out by Category. 

c. Trading Pauses. The Monitoring Report 

will include: 

i. Monthly distribution statistics (mean, 

median, 25th percentile, and maximum) on 

the number of Trading Pauses per day, 

broken out by Category and Time of Day. 

ii. Monthly distribution statistics (mean, 

median, 25th percentile, and maximum) on 

the number of NMS Stocks that experienced 

more than one Trading Pause on a single day, 

broken out by Category. 

iii. Monthly distribution statistics (mean, 

median, 90th percentile, and maximum) on 

the number of Trading Pauses per day 

experienced by individual NMS Stocks 

having more than one Trading Pause on a 

single day, broken out by Category. 

d. Straddle States. The Monitoring Report 

will include: 

i. Monthly distribution statistics (mean, 

median, 25th percentile, and maximum) on 

the number of Straddle States per day, 

broken out by Category and Time of Day. 

ii. Monthly distribution statistics (mean, 

median, 25th percentile, and maximum) on 

the number of NMS Stocks that experienced 

more than one Straddle State on a single day, 

broken out by Category. 

iii. Monthly distribution statistics (mean, 

median, 90th percentile, and 99.9th 

percentile) on the total time spent in a 

Straddle State per day for individual NMS 

Stocks experiencing one or more Straddle 

States on a single day, broken out by 

Category. 

e. The Monitoring Report will include the 

number of Clearly Erroneous Events per day 

for all NMS Stocks that occurred during the 

time when Price Bands are disseminated by 

the Processor, broken out by Category and 

Time of Day. 

2. Reopening Data 

a. Definitions. For the purpose of this 

Section B.2, the following definitions apply: 

i. ‘‘Type of Reopening’’ means either (1) 

manual or (2) automated. 

ii. ‘‘Category’’ means the following 

categories of securities: 

(1) Tier 1 non-ETP securities 

(2) Tier 1 non-leveraged ETPs 

(3) Tier 1 leveraged ETPs 

(4) Tier 2 non-ETP securities 

(5) Tier 2 non-leveraged ETPs 

(6) Tier 2 leveraged ETPs 

iii. ‘‘Length of the Trading Pause’’ means 

the following durations: 

(1) less than 6 minutes (for manual 

reopenings) or no extensions of the 

Trading Pause (for automated 

reopenings); 

(2) 6 to 10 minutes (for manual reopenings) 

or one extension of the Trading Pause 

(for automated reopenings); 

(3) more than 10 minutes (for manual 

reopenings) or more than one extension 

of the Trading Pause (for automated 

reopenings) 

b. The Monitoring Report will include the 

following monthly data on reopenings: 


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1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98562 

(Sept. 27, 2023), 88 FR 68240. The Commission has 

received no comments on the proposal. 

4 15 U.S.C. 78s(b)(2). 

5 15 U.S.C. 78s(b)(2). 

6 17 CFR 200.30–3(a)(31). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

i. The number of Trading Pauses per 

month, broken out by (1) Type of Reopening, 

(2) Category, and (3) Length of the Trading 

Pause. 

ii. Monthly distribution statistics (mean, 

median, 90th percentile, and 99th percentile) 

on the duration of each Trading Pause, 

broken out by (1) Type of Reopening and (2) 

Category. 

iii. The number of Trading Pauses ending 

in a: 

(1) trade; 

(2) quote; and 

(3) potential closing auction, broken out by 

(a) Type of Reopening, (b) Category, and (c) 

Length of Trading Pause. 

iv. For Trading Pauses in NMS Stocks 

preceded by a Limit Up state, monthly 

distribution statistics (mean, median, 90th 

percentile, and 99th percentile) on the 

percentage price change from the Limit Up 

pricing that triggered the Trading Pause to 

the reopening price on exiting the Trading 

Pause (i.e., the reopening trade or midpoint 

price), broken out by (1) Category and (2) 

whether the Trading Pause ended in a trade 

or (3) in a quote (i.e., the reopening price was 

a midpoint). 

v. For Trading Pauses in NMS Stocks 

preceded by a Limit Down state, monthly 

distribution statistics (mean, median, 90th 

percentile, and 99th percentile) on the 

percentage price change from the Limit Down 

pricing that triggered the Trading Pause to 

the reopening price on exiting the Trading 

Pause (i.e., the reopening trade or midpoint 

price), broken out by (1) Category and (2) 

whether the Trading Pause ended in a trade 

or (3) in a quote (i.e., the reopening price was 

a midpoint). 

vi. For Trading Pauses in NMS Stocks 

where the reopening process ended in a trade 

or quote (with resulting reference price equal 

to the midpoint of that quote), monthly 

distribution statistics (mean, median, 90th 

percentile, and 99th percentile) on the 

percentage price change from the reopening 

price on exiting the Trading Pause (i.e., the 

reopening trade or midpoint price) to 

(1) the highest price of all last sale eligible 

trades; 

(2) the lowest price of all last sale eligible 

trades; and 

(3) the trade-weighted average price of all 

last sale eligible trades for the five minutes 

following the conclusion of the Trading 

Pause, broken out by (a) Category, (b) 

whether the Trading Pause was preceded by 

a Limit Up state or (c) a Limit Down state, 

and (d) whether the Trading Pause ended in 

a trade or (e) in a quote (i.e., the reopening 

price was a midpoint). 

C. Reports on Market Events 

At the Commission’s request, the Operating 

Committee shall provide the Commission 

and make publicly available a report 

analyzing the Plan’s operation during a 

significant market event that (1) materially 

impacted the trading of more than one 

security across multiple Trading Centers; and 

(2) is directly related to or implicating the 

performance of the Plan. Such report shall be 

provided to the Commission no later than 30 

days following the Commission’s request, or 

at a later date as agreed upon between the 

Commission and the Operation Committee. 

The requirement to submit a report under 

this section may be satisfied by including the 

required analysis within an Annual Report. 

[FR Doc. 2023–25543 Filed 11–20–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98945; File No. SR– 

CboeBZX–2023–072] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of 

Designation of a Longer Period for 

Commission Action on a Proposed 

Rule Change To List and Trade Shares 

of the Franklin Bitcoin ETF Under BZX 

Rule 14.11(e)(4), Commodity-Based 

Trust Shares 

November 15, 2023. 

On September 26, 2023, Cboe BZX 

Exchange, Inc. (‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

list and trade shares of the Franklin 

Bitcoin ETF under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares. The 

proposed rule change was published for 

comment in the Federal Register on 

October 3, 2023.3

Section 19(b)(2) of the Act 4 provides 

that within 45 days of the publication of 

notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. The 45th day after 

publication of the notice for this 

proposed rule change is November 17, 

2023. The Commission is extending this 

45-day time period. 

The Commission finds it appropriate 

to designate a longer period within 

which to take action on the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change 

and the issues raised therein. 

Accordingly, the Commission, pursuant 

to Section 19(b)(2) of the Act,5

designates January 1, 2024 as the date 

by which the Commission shall either 

approve or disapprove, or institute 

proceedings to determine whether to 

disapprove, the proposed rule change 

(File No. SR–CboeBZX–2023–072). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–25660 Filed 11–20–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98941; File No. SR–Phlx– 

2023–47] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Its Pricing 

Schedule at Options 7, Sections 4 and 

7 Regarding Multiply Listed Options 

Fees and Routing Fees 

November 15, 2023. 

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 November 

1, 2023, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Phlx’s Pricing Schedule at Options 7, 

Section 4, Multiply Listed Options Fees, 

and Options 7, Section 7, Routing Fees. 

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. 


lotter on DSK11XQN23PROD with NOTICES1