16286 Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices 

24 15 U.S.C. 78s(b)(3)(A)(iii). 

25 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4 requires a self-regulatory organization to give the 

Commission written notice of its intent to file a 

proposed rule change under that subsection at least 

five business days prior to the date of filing, or such 

shorter time as designated by the Commission. The 

Commission has waived this requirement. 

26 17 CFR 240.19b–4(f)(6). 

27 17 CFR 240.19b–4(f)(6)(iii). 

28For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

29 15 U.S.C. 78s(b)(2)(B). 30 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 92428 

(July 16, 2021), 86 FR 38776 (SR–NYSE–2021–40) 

(‘‘Notice’’). 

4See Securities Exchange Act Release No. 

92785A, 86 FR 50202 (September 7, 2021). 

5See Securities and Exchange Act Release No. 

93212, 86 FR 50566 (October 5, 2021). The 

Commission instituted these proceedings to request 

comments regarding the Exchange’s proposed 

testing requirement, which did not contemplate an 

ongoing assessment of whether the MWCB design 

remains appropriate over time, nor require the 

Exchange to participate in testing. 

6See Securities Exchange Act Release No. 93933, 

87 FR 2189 (January 13, 2022). 

7 In Amendment No. 1, the Exchange revised the 

proposal to: (1) Explain options market 

enhancements following the March 2020 MWCBs 

events to eliminate latency in their responses to 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 24 and Rule 19b–4(f)(6)(iii) 

thereunder.25

A proposed rule change filed under 

Rule 19b–4(f)(6) 26 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),27 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange asked that the 

Commission waive the 30 day operative 

delay so that the proposal may become 

operative immediately upon filing. 

Extending the Pilot Rules’ effectiveness 

to the close of business on April 18, 

2022 will extend the protections 

provided by the Pilot Rules, which 

would otherwise expire in less than 30 

days. Waiver of the operative delay 

would therefore permit uninterrupted 

continuation of the MWCB pilot while 

the Commission reviews the NYSE’s 

proposed rule change to make the Pilot 

Rules permanent. Therefore, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposed rule change as operative upon 

filing.28

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 29 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2022–026 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2022–026. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). 

Copies of the submission, all 

subsequent amendments, all written 

statements with respect to the proposed 

rule change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2022–026 and 

should be submitted on or before April 

12, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–05983 Filed 3–21–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94441; File No. SR–NYSE– 

2021–40] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Amendment No. 1 and Order 

Granting Accelerated Approval of a 

Proposed Rule Change, as Modified by 

Amendment No. 1 To Adopt on a 

Permanent Basis the Pilot Program for 

Market-Wide Circuit Breakers in Rule 

7.12 

March 16, 2022. 

I. Introduction 

On July 2, 2021, New York Stock 

Exchange LLC (‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) pursuant to Section 

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

of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposal to make its rules 

governing the operation of Market-Wide 

Circuit Breakers (‘‘MWCB’’) permanent. 

The proposed rule change was 

published for comment in the Federal 

Register on July 22, 2021.3 On August 

27, 2021, the Commission designated a 

longer period within which to either 

approve the proposed rule changes, 

disapprove the proposed rule changes, 

or institute proceedings to determine 

whether to disapprove the proposed 

changes.4 On September 30, 2021, the 

Commission instituted proceedings to 

determine whether to approve or 

disapprove the proposed rule change.5

On January 7, 2022, the Commission 

again designated a longer period within 

which to either approve the proposed 

rule changes, disapprove the proposed 

rule changes, or institute proceedings to 

determine whether to disapprove the 

proposed changes.6 On February 28, 

2022, the Exchange filed Amendment 

No. 1 to the proposed rule change.7 The 


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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices 16287 

MWCB halt messages; (2) reflect that the pilot 

period of the Rule 7.12 (MWCB Rule) expires on 

March 18, 2022; (3) require that the Exchange 

participate in all industry-wide tests of the MWCBs; 

(4) require members participating in MWCB tests to 

notify the Exchange of any inability to process 

messages relating to the MWCB test, records of 

which would be retained by the Exchange along 

with records of the Exchange’s own participation in 

the test; (5) require the Exchange, along with the 

other SROs, to prepare and submit a report 

containing an analysis of any MWCB event and 

recommendations to the Commission within six 

months of a halt being triggered following a Level 

1, Level 2, or Level 3 Market Decline; and (6) 

require the Exchange, together with the other SROs, 

to review the MWCB in the event of 5% market 

declines and any time an SRO makes changes to 

MWCB reopening processes, and provide a report 

to the Commission concerning such review should 

a modification to the MWCB be recommended. 

Amendment No. 1 is available on the Commission’s 

website at https://www.sec.gov/comments/sr-nyse2021-40/srnyse202140.htm. 

8See Securities Exchange Act Release Nos. 26198 

(October 19, 1988), 53 FR 41637 (October 24, 1988) 

(approving MWCB rules for Amex, CBOE, NASD, 

and NYSE); 26218 (October 26, 1988), 53 FR 44127 

(November 1, 1988) (approving rules for CHX); 

26357 (December 14, 1988), 53 FR 51182 (December 

20, 1988) (approving rules for BSE); 26368 

(December 16, 1988), 53 FR 51942 (December 23, 

1988) (approving rules for PSE); 26386 (December 

22, 1988), 53 FR 52904 (December 29, 1998) 

(approving rules for PHLX); and 26440 (January 10, 

1989), 54 FR 1830 (January 17, 1989) (approving 

rules for CSE). 

9The events of October 19, 1987 are described 

more fully in a report by the staff of the 

Commission’s Division of Market Regulation. See 

‘‘The October 1987 Market Break, A Report by the 

Division of Market Regulation’’ (February 1988). 

10See supra note 8. 

11See Securities Exchange Act Release Nos. 

37457 (July 19, 1996), 61 FR 39176 (July 26, 1996) 

(SR–NYSE–96–09); 37458 (July 19, 1996), 61 FR 

39167 (July 26, 1996) (SR–Amex–96–13); and 37459 

(July 19, 1996), 61 FR 39172 (July 26, 1996) (SR– 

BSE–96–4; SR–CBOE–96–27; SR–CHX–96–20; SR– 

Phlx–96–12). 

12See Securities Exchange Act Release No. 38221 

(January 31, 1997), 62 FR 5871 (February 7, 1997). 

13See id. at 5875. 

14The events of October 27, 1997 are described 

more fully in a report by the staff of the 

Commission’s Division of Market Regulation. See 

‘‘Trading Analysis Findings of October 27 and 

October 28, 1997’’ (Sept. 1998), available at https:// 

www.sec.gov/news/studies/tradrep.

htm#FOOTNOTE_24. 

15See id. 

16See Securities Exchange Act Release No. 39846 

(April 9, 1998), 63 FR 18477 (April 15, 1998), at 

18478. 

17See id. 

18See id. 

19See id. 

20See id. 

21See Securities Exchange Act Release No. 67090 

(May 31, 2012), 77 FR 33531 (June 6, 2012). 

22See id. at 33532. 

23See id. 

24See id. 

25For a full description of the trading halts on 

March 9, 12, 14, and 16, see Notice at 38777–78. 

26This task force was formed in late 2019, prior 

to the MWCB events in 2020, to evaluate the 

operation and design of the MWCB mechanism. See 

Securities Exchange Act Release No. 85560 (April 

9, 2019), 84 FR 15247 (April 15, 2019) (SR–NYSE– 

2019–19). The task force made two 

recommendations after reviewing the MWCB events 

in 2020: (1) Futures markets should change the S&P 

500 futures market volatility threshold from 5% to 

7% to better align with the securities market MWCB 

Level 1 threshold of 7% and 2) futures markets 

should resume trading in S&P 500 futures contracts 

5 minutes before end of MWCB halt. The futures 

markets have made changes to address these two 

recommendations, as discussed further below. See 

supra note 96. 

27See id. at 38778. 

Commission has received no comments 

on the proposed rule change. The 

Commission is approving the proposed 

rule change, as modified by Amendment 

No. 1, on an accelerated basis. 

II. Background 

MWCBs are coordinated, cross-market 

trading halts designed to operate during 

extreme market-wide declines to 

provide opportunities for markets and 

market participants to assess market 

conditions and systemic stress. Each 

cash equity exchange and options 

exchange have rules that govern the 

operation of these MWCBs. The 

Commission first approved MWCB rules 

on a pilot basis in 1988 8 following the 

market crash in October 1987.9 These 

rules provided for a one-hour halt across 

all securities markets if the Dow Jones 

Industrial Average (‘‘DJIA’’) declined 

250 points from the previous day’s 

closing level and for a two-hour halt if 

the DJIA declined 400 points from the 

previous day’s close.10 The Commission 

approved amendments to MWCB rules 

in July 1996 to reduce the duration of 

the 250- and 400- point halts to 30 

minutes and 60 minutes from one hour 

and two hours, respectively.11

Subsequently, the Commission 

approved modifications to raise the 

point triggers to 350 points and 550 

points in 1997.12 In its order approving 

these changes, the Commission noted 

the importance of revisiting these 

triggers over time and stated that it 

would work with the markets and the 

Commodities and Futures Trading 

Commission (‘‘CFTC’’) to develop 

procedures for reevaluating the triggers 

on at least an annual basis.13

An MWCB was triggered for the first 

time on October 27, 1997, when the 

market dropped 350 points, 

representing a decline of 4.5%.14 After 

a 30-minute halt, the market declined 

again, reaching the 550-point trigger, 

representing a total decline of 7%.15

After studying the events of that day, 

the Commission approved revised 

MCWB rules on a pilot basis. These 

rules established trading halts following 

one-day declines in the DJIA of 10%, 

20%, and 30%, rather than at specific 

point declines, to be calculated at the 

beginning of each calendar quarter using 

the average closing value of the DJIA for 

the previous month to establish specific 

point values for the quarter.16 Under 

these revised MWCB rules, trading 

would halt for one hour if the DJIA 

declined 10% prior to 2:00 p.m., and for 

one-half hour if the DJIA declined 10% 

between 2:00 p.m. and 2:30 p.m.17 If the 

DJIA declined by 10% at or after 2:30 

p.m., trading would not halt at the 10% 

level.18 If the DJIA declined 20% prior 

to 1:00 p.m., trading would halt for two 

hours; trading would halt for one hour 

if the DJIA declined 20% between 1:00 

p.m. and 2:00 p.m., and for the 

remainder of the day if a 20% decline 

occurred at or after 2:00 p.m.19 If the 

DJIA declined 30% at any time, trading 

will halt for the remainder of the day.20

On May 6, 2010, the markets sharply 

dropped 9%, but did not reach the 10% 

MWCB, before rebounding (the ‘‘Flash 

Crash’’). Following these events, in 2012 

the Commission approved several 

modifications to MWCB rules (the ‘‘Pilot 

Rules’’) that were designed to make 

them more meaningful in high-speed, 

electronic trading environments.21 The 

MWCB triggers were lowered to 7% 

(‘‘Level 1’’), 13% (‘‘Level 2’’), and 20% 

(‘‘Level 3’’); the DJIA was replaced with 

the S&P 500® Index (‘‘S&P 500’’) as the 

reference index; the recalculation of the 

values of the triggers was changed to 

daily instead of each calendar quarter; 

the length of the trading halts associated 

with each market decline level was 

shortened from 30 minutes to 15 

minutes; and the times when a trading 

halt may be triggered were modified.22

Specifically, these rules provided that if 

a Level 1 or Level 2 trigger was hit 

before 3:25 p.m., trading would halt for 

15 minutes, and if a Level 1 or Level 2 

trigger was hit at or after 3:25 p.m., 

trading would continue, unless a Level 

3 trigger was hit.23 If a Level 3 trigger 

was hit at any time, trading would halt 

for the rest of the day.24

The modified thresholds in the Pilot 

Rules were not triggered for the first 

time until March 2020 when MWCB 

Level 1 halts occurred on March 9, 12, 

16, and 18, 2020.25 In response to these 

events, a task force comprised of the 

SROs and industry participants 26

reviewed the events and concluded that 

the MWCBs had performed as expected 

and recommended that no changes be 

made to the MWCB rules.27 In 2020, the 

SROs conducted a more complete study 

of the design and operation of the Pilot 

Rules and the National Market System 

(‘‘NMS’’) Plan to Address Extraordinary 

Market Volatility (‘‘Limit Up-Limit 

Down’’ or ‘‘LULD’’) during the period of 

volatility in the Spring of 2020. The 

SROs created an MWCB ‘‘Working 

Group’’ composed of SRO 


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16288 Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices 

28See ‘‘Report of the Market-Wide Circuit Breaker 

(‘‘MWCB’’) Working Group Regarding the March 

2020 MWCB Events,’’ submitted March 31, 2021 

(the ‘‘Study’’), attached hereto as Exhibit 3 [sic] and 

available at Exhibit 3 [sic] (sec.gov). 

29NYSE Rule 7.12. 

30 15 U.S.C. 78f(b)(5). 

31 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

Sections IV(A)(2)(f), IV(B), IV(C), and IV(D). 

32See Notice, supra note 3, at 10. 

33See id. at 12. 

34See id. at 10. 

35See id. 

36See id. 

37See id. 

38See id. 

39As noted by the Exchange, options markets are 

required to halt trading in options if there is an 

MWCB Halt in the cash equities market. See Study, 

supra note 27, at 3. 

40Approximately 5,000 options trades that were 

sent to OPRA after the time of the four MWCB Halts 

were nullified. See id. Additionally, approximately 

4,400 futures and options on futures traded for one 

minute following the initiation of the MWCB Halt. 

See id. at 11. The Exchange states that it 

understands that the Nasdaq options markets made 

a number of enhancements to internal systems to 

eliminate latency in the Nasdaq options markets’ 

response to MWCB halt messages. See Amendment 

No. 1, supra note 7, at 3. 

41See Notice, supra note 3, at 17. 

42See Amendment No. 1, supra note 7, at 3. 

43The MWCB Pilot Rules do not prescribe a time 

in which securities trading must resume following 

the halt. These rules require that trading halt for 15 

minutes, after which exchanges may resume trading 

based on their rules governing reopening auctions 

representatives and industry advisers 

that included members of the advisory 

committees to both the LULD Plan and 

the NMS Plans governing the collection, 

consolidation, and dissemination of 

last-sale transaction reports and 

quotations in NMS Stocks. The Working 

Group prepared a study (the ‘‘Study’’),28

which includes a timeline of the MWCB 

events in March 2020; a summary of the 

analysis and recommendations of the 

MWCB Task Force; an evaluation of the 

operation of the Pilot Rules during the 

March 2020 events; an evaluation of the 

design of the current MWCB system; 

and the Working Group’s conclusions 

and recommendations. 

III. Description of the Proposal, as 

Modified by Amendment No. 1 

Based on the conclusions and 

recommendations reached by the 

Working Group after analyzing how the 

MWCBs performed in March 2020, the 

Exchange is proposing to transition the 

Pilot Rules 29 to operate on a permanent 

basis, as modified by Amendment No. 1. 

IV. Discussion and Commission 

Findings 

After careful consideration, the 

Commission finds that the Exchange’s 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to national securities 

exchanges. In particular, the 

Commission finds that the Exchange’s 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,30 which 

requires that the rules of an exchange be 

designed, among other things, to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system.31

In its proposal to make the MWCB 

rules permanent in their current form, 

the Exchange considered whether the 

MWCBs functioned as designed, and 

whether the MWCBs calmed volatility 

without causing harm. The Exchange 

also examined the specific 

characteristics of the MWCBs: (1) 

Trigger levels; (2) trading halt times; and 

(3) use of the S&P 500 Index (‘‘SPX’’) as 

the reference for the MWCB mechanism. 

Further, the Exchange evaluated the 

impact of LULD Amendment 10 on the 

MWCB mechanism, whether changes 

should be made to MWCBs to prevent 

the market from halting shortly after the 

beginning of regular trading hours, and 

whether excessive LULD pauses should 

trigger a MWCB halt. Finally, the 

Exchange discussed the requirements 

for industry participants to test the 

operation of the MWCBs at least 

annually. Each of these elements are 

discussed in greater detail below. 

A. MWCB Operation and Effect on 

Market Volatility 

The Exchange finds that the MWCBs 

(1) operated as intended during the 

period in March considered in the 

Study 32 and (2) had the intended effect 

of calming volatility in the market 

without causing harm.33 The Exchange 

considered the findings of the Study, 

including the effectiveness of 

communications instructing market 

participants to initiate an MWCB Halt, 

volatility and liquidity preceding and 

following the MWCB Halts, various 

measures of liquidity during MWCB 

Halts, and additional LULD halts 

following MWCB reopening auctions. 

As discussed further below, the 

Commission believes that the MWCBs 

operated as designed, appropriately 

halting trading and facilitating 

reopening auctions in NMS stocks. The 

Commission believes that the evidence, 

however, is not conclusive regarding the 

MWCB’s effect on calming market 

volatility, although the Commission 

does believe that the MWCBs did not 

appear to harm the market. 

1. MWCB Operated as Designed 

On March 9, 12, 16, and 18, 2020, 

market conditions indicated that a Level 

1 MWCB halt was likely to occur.34 On 

each of these days, the Exchange 

activated an ‘‘Intermarket Bridge’’ call 

and sent an email alert to a pre-existing 

distribution list comprising multiple 

staff from securities and futures 

exchanges, FINRA, the Commission, the 

CFTC, the Depository Trust & Clearing 

Corporation, and the Options Clearing 

Corporation.35 On each day when a 

Level 1 MWCB Halt was triggered, the 

call opened before the halt was triggered 

and remained open during the entire 

period of the halt, until trading in all 

symbols was reopened.36 When SPX 

declined 7% from the previous day’s 

closing value, breaching the MWCB 

Level 1 trigger, breach messages and 

regulatory halt messages were sent to 

relevant market participants.37

Following these messages, all 9,000+ 

equity symbols were halted in a timely 

manner.38 Further, approximately 

900,000 options series were halted once 

regulatory halt messages were received 

by the options markets.39 However, a 

relatively small number of options 

traded following the MWCB Halt 

messages.40 Finally, on each of the four 

days where MWCB Halts were triggered, 

all SPX stocks reopened within 15 

minutes of the end of the MWCB Halt.41

The Commission believes that the 

mechanism for communicating and 

initiating MWCB Halts worked as 

intended during March 2020. Prior to 

the triggering of the MWCB Halts, the 

SROs and industry members were 

actively monitoring market conditions 

in anticipation of an MWCB Halt. 

Before, during, and after the MWCB 

Halts occurred, the relevant SROs and 

regulators remained in communication 

about the implementation of an MWCB 

Halt and reopening. Additionally, all 

equity symbols subject to the MWCB 

were successfully halted in a timely 

manner, and while a small percentage of 

options continued trading during the 

MWCBs, the vast majority of affected 

options series halted following the 

initiation of the MWCBs. Furthermore, 

remedial steps have been taken by 

options exchanges to prevent trades 

from occurring following a future 

MWCB Halt.42 Finally, all SPX symbols 

reopened within 15 minutes of the end 

of the MWCB Halts, and all securities 

had reopened within 30 minutes of the 

end of the MWCB Halt.43


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and trade resumption. See NYSE Rules 7.12 and 

7.35A. 

44See Study, supra note 27, at 12. The other 

trading periods include the month of January 2020 

and the period from February 24 through May 1, 

2020, excluding the four days with MWCB Halts 

(‘‘High-Volatility Period’’) 

45See id. 

46See Notice, supra note 3, at 12. 

47See Study, supra note 27, at 13. 

48Capitalized terms used but not defined herein 

have the meanings specified in the Study. 

49See Study, supra note 27, at 13 

50See id. 

51See id. 

52See id. at 14–15. The Exchange notes that it 

does not express any opinion about whether 

opening on a trade is preferable to opening on a 

quote. 

53See id. 

54See id. 

55See id. The Commission notes that the Study 

does show a notable difference in the percentage of 

securities opening on a trade during the reopen 

versus the open for certain Tier 2 securities 

including ETPs and Non-ETPs. See id. at 14 (Chart 

2, G4 and G5 graphs). However, as discussed in the 

Study, this does not necessarily reflect inferior 

market functioning. See Id. 

56See id. 

57See id at 15. 

58See id. at 15–16. The Study notes that the 

March 18 MWCB event was excluded from this 

analysis since the MWCB Halt that day occurred 

midday rather than the early morning. Id. 

59See id. 

60The Study noted that when the March 16 Halt 

occurred, many securities had not yet started 

trading or quoting. Despite this, the size of the 

reopening auctions were similar to the opening 

auction volumes in January 2020. See id. 

61See id. The Study noted that liquidity 

providers typically act as principal on such 

transactions and therefore principal trades are a 

proxy for trading by liquidity providers. See id. at 

17. The Commission notes that the Study does not 

distinguish riskless principal trading by market 

makers and therefore some of the ‘‘principal’’ 

market maker interest may have represented as 

either retail or institutional customer interest. 

However, the Commission believes that this 

distinction does not significantly alter the broader 

analysis showing that the market appropriately 

reopened following each of the events, and market 

participants were able to resume trading in a 

normal fashion without apparent harmful impacts 

to either the auction processes or market liquidity. 

62See id. at 17–18. 

63See id. 

2. Effect of MWCB Halts on Volatility 

and Market Functioning 

The Study evaluated the effects of the 

MWCB Halts in March 2020 on market 

volatility and functioning by examining 

various measurements of liquidity and 

volatility following each of the March 

2020 MWCB Halts and comparing them 

to liquidity and volatility measurements 

of other trading periods.44 In particular, 

the Study reviewed: (1) Activity before 

the opening of regular trading hours and 

the number of securities opening on a 

trade vs. opening on a quote; (2) size 

and liquidity in the opening auctions 

and post-MWCB halt reopening 

auctions; (3) quote volatility as 

measured by the median mid-point to 

mid-point price change every second in 

basis points; (4) liquidity at the national 

best bid and offer (‘‘NBBO’’); and (5) 

LULD Trading Pauses following MWCB 

reopening auctions.45 The Exchange 

concludes that, based on the liquidity 

and volatility measures reviewed in the 

Study and discussed below, the MWCBs 

had the intended effect of calming 

volatility in the market, without causing 

harm.46

a. Activity Before the Opening of 

Regular Trading Hours and the Number 

of Securities Opening on a Trade vs. 

Opening on a Quote 

The Study examined liquidity and 

volatility in the SPDR S&P 500 Trust 

ETF (‘‘SPY’’) prior to the market open 

on the four days where MWCB Halts 

occurred.47 Generally, pre-market early 

morning trading activity is fairly 

limited. However, during the HighVolatility Period,48 and particularly 

during the four days where an MWCB 

Halt was triggered, pre-market trading 

activity was significantly higher.49 On 

the four MWCB Halt days, roughly five 

to nine times the number of shares 

traded in pre-market trading, relative to 

January 2020 levels.50 Further, SPYs 

pre-market price range on those four 

days was up to ten times larger than 

what was typical in January 2020.51

These levels indicate that markets were 

experiencing significant volatility prior 

to the MWCB being triggered. 

The Study also reviewed whether 

there were any differences between the 

number of securities opened on a trade 

vs. opened on a quote during the four 

days with MWCB Halts.52 The Study 

found that there was no meaningful 

difference in the percentage of securities 

opening on a trade versus quote during 

January 2020, MWCB Halt days, or the 

High-Volatility Period.53 The one 

exception to this, however, was with 

respect to Tier 2 ETPs, which had a 

higher percentage of openings on a trade 

on each of the four MWCB Halt days 

than in January or during the HighVolatility Period.54 Further, for most 

groups of securities, there was not a 

significant difference in the percentage 

of securities opening on a trade during 

reopening versus the open.55 To the 

extent a difference did exist for certain 

classes of securities, this does not 

necessarily reflect inferior market 

function, as the reopening auctions 

examined were for securities that had 

opened prior to the MWCB Halts.56

Therefore, the Study noted that it would 

expect there to be less interest 

represented in those reopening auctions. 

b. Size and Liquidity of Opening and 

Reopening Auction 

To assess the effect of MWCB Halts on 

available liquidity, the Study reviewed 

the liquidity available in the reopening 

auctions following an MWCB Halt and 

compared it to the average volume in 

opening auctions during other trading 

periods. The Study first compared (i) 

the median opening auction in share 

volume in January 2020, (ii) the median 

opening auction volumes in the HighVolatility Period, and (iii) the median 

volumes in shares traded in the 

reopening auctions following the 

MWCB Halts for symbols that had 

already executed opening auctions.57

The Study found that given how many 

securities had already opened before the 

four MWCB Halts, the size of the 

reopening auctions were somewhat 

smaller than the opening auctions. 

The Study also compared the size of 

the opening auctions plus reopening 

auctions following the MWCB Halts on 

the MWCB Halt days to the size of 

opening auctions in January 2020. The 

Study concluded that the MWCB Halts 

did not result in a loss of liquidity 

overall in the opening and reopening 

auctions. This was demonstrated, 

according to the Study, because the 

opening auction plus MWCB reopening 

auction volumes on the MWCB Halt 

days hewed closely to the January 2020 

auction volumes.58

The Study also reviewed the March 

16 MWCB Halt (which took place 

almost immediately upon the market 

open at 9:30:01 a.m.) and reopen.59 The 

Study found that the size of the 

reopening auctions after the March 16 

MWCB Halt were similar to opening 

auction volumes in January 2020.60 This 

suggests, according to the Study, that 

MWCB Halts did not cause a significant 

deterioration in market liquidity. 

The Study also assessed the nature of 

participation in reopening auctions. 

First, the Study assessed the 

participation of market makers in 

reopening auctions following MWCB 

Halts by reviewing principal versus 

agency activity in opening and MWCB 

reopening auctions.61 In particular, the 

Study showed that the share of 

principal transactions in opening 

auctions on MWCB days was higher as 

compared to control periods.62

Furthermore, the Study showed that 

while principal activity was lower in 

the MWCB reopening auctions, 

principal auction participation generally 

increased with each MWCB event.63


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64See id. 

65See id. 

66The Commission notes, however, that it is not 

clear from the Study whether the reopening 

liquidity represented by the top five firms was due 

to their principal trading interest or agency 

customer orders (whether retail or institutional) 

routed to participate in the reopening auctions. 

However, the Commission believes that this 

distinction does not significantly alter the broader 

analysis showing that the market appropriately 

reopened following each of the events, and market 

participants were able to resume trading in a 

normal fashion without apparent harmful impacts 

to either the auction processes or market liquidity. 

67See id at 22. 

68See id. 

69See id. 

70See id at 23. 

71See id. 

72See id. 

73See id at 25. 

74See id. The Commission notes, however, that 

the Study shows that for G1 securities, median size 

at the NBBO was larger on March 9 than both 

January 2020 and the High-Volatility Period. G2 

securities median size at the NBBO on March 12 

was higher than the January period but lower than 

the High-Volatility Period. See id. 

75See id. 

76See id. 

77See id at 20. 

78See id. 

79See id. 

80See id. 

81The March 18 MWCB reopening auction was 

the one exception to this trend, where the levels of 

limit up and limit down LULD pauses were similar. 

See id. 

82See id. 

83See id. at 22. 

84See id. at 23. 

Second, the Study looked at the top five 

market participants by volume during 

January 2020 and reviewed their 

involvement in MWCB reopening 

auctions.64 The Study found that, 

compared to January 2020, their share of 

transactions in reopening auctions was 

higher than their share of opening 

auctions on days where an MWCB Halt 

was triggered.65 According to the Study, 

these results suggest that the most active 

market participants were important 

providers of liquidity in the MWCB 

reopening auctions.66

c. Quote Volatility 

The Study also reviewed the volatility 

of quoted equity prices before and after 

MWCB Halts were initiated as another 

method of testing the effects of MWCB 

Halts on liquidity and volatility.67 As 

discussed above, following an MWCB 

Halt, if MWCBs perform as intended, 

volatility should decline as markets and 

market participants have the 

opportunity to assess market conditions 

and systemic stress. The Study 

concluded that MWCB Halts performed 

in this manner. 

The Study reviewed the median 

second-to-second quote volatility before 

and after the MWCB Halts, as well as 

second-to-second quote volatility during 

January 2020 and the High-Volatility 

Period.68 The Study stated that although 

second-to-second quote volatility was 

higher on the four MWCB days as 

compared to during January 2020 and 

the High-Volatility Period, volatility fell 

or stabilized following MWCB Halts.69

Further, The Study concluded that 

during the four days where an MWCB 

was triggered, volatility fell to a level 

similar with the High-Volatility 

Period.70 For Tier 1 and Tier 2 ETPs, 

volatility fell further and stabilized near 

January 2020 levels, although the Study 

recognized brief spikes in volatility 

midday on March 12 and March 18.71

The Study asserted that market 

stabilization may be an indication that 

the MWCB Halts helped to calm the 

market, since volatility did not continue 

to escalate throughout the day.72

d. Liquidity at the NBBO 

The Working Group also examined 

the intraday median quoted size (i.e., 

number of shares) at the NBBO on days 

when MWCB Halts were triggered to 

understand the impact of the MWCB 

Halts on liquidity.73 Specifically, the 

Study looked at two time periods: (1) 

9:30 a.m.–9:34 a.m. and (2) 12:50 p.m.– 

12:55 p.m. Generally, when compared to 

January 2020 and the High-Volatility 

Period, the median size at the NBBO in 

the 9:30 a.m.–9:34 a.m. was smaller on 

days where an MWCB Halt was 

triggered.74 However, on the three days 

with early morning MWCB Halts, many 

stocks did not open at 9:30 a.m. and 

many stocks also did not open on 

primary exchanges until after trading 

resumed following MWCB Halts, 

possibly explaining the relatively small 

size at the median NBBO.75 Further, on 

March 18, when there was no early 

morning MWCB Halt and the only 

MWCB Halt took place in the afternoon, 

early morning liquidity was similar to 

the High-Volatility Period, and liquidity 

during the 12:50 p.m.–12:55 p.m. period 

was similar to January 2020 levels in 

most groups of securities.76

e. LULD Trading Pauses Following 

MWCB Reopening Auctions 

Finally, the Study reviewed the 

number of LULD pauses following 

reopenings after MWCB Halts.77 A 

significant increase in the number of 

LULD pauses may suggest that MWCBs 

did not serve their purpose of reducing 

volatility, or that adjustments need to be 

made to the reopening process, 

according to the Study.78 A large 

number of LULD pauses may also 

suggest that reopenings occurred too 

quickly and the market did not have 

sufficient time to reprice.79 The Study 

also distinguished limit up and limit 

down LULD pauses.80 Generally, there 

were more limit up LULD pauses than 

limit down following MWCB reopening 

auctions.81 This result is unsurprising as 

markets bounced back following large 

drops at the open, according to the 

Study.82

Having reviewed the findings of the 

Study, the Exchange concludes that the 

MWCB Halts triggered in March 2020 

appeared to have the intended effect of 

calming volatility.83 Specifically the 

Exchange found that (i) there was not a 

significant difference in the percentage 

of securities opening on a trade vs. 

quote during the MWCB days versus 

other periods reviewed; (ii) the size of 

MWCB reopening plus the initial 

opening for those days were on average 

equal to opening auction sizes during 

January 2020; (iii) securities in SPX 

opened relatively quickly following the 

MWCB Halt; (iv) volatility stabilized 

following MWCB Halt days and reached 

levels similar to other periods studied; 

and (v) the LULD mechanisms following 

MWCB Halts worked as designed to 

address intra-day volatility.84 Based on 

the Exchange’s conclusion that the 

MWCBs worked as intended, and 

calmed volatility without causing harm, 

it is proposing to make the MWCB rules 

permanent, as modified by Amendment 

No. 1. The MWCB rules include three 

main operational components, the 

trigger levels, halt times, and reference 

value, and a testing requirement. The 

Exchange addressed each of these in its 

proposed rule change, discussed further 

below. 

f. Commission Assessment of MWCB 

Effect on Market Volatility and Market 

Functioning 

While the Commission believes that 

the mechanism for communicating and 

initiating MWCB Halts and resumption 

of trading worked as intended during 

March 2020 as discussed above, we 

believe the evidence is less conclusive 

regarding the MWCB’s effect on calming 

market volatility. For example, the 

Commission believes that the analysis 

regarding quote volatility is 

inconclusive. First, because three events 

occurred at the beginning of the trading 

day, the Study could not compare U.S. 

equity quote volatility before and after 

the MWCB event; rather it could only 

describe quote volatility after the 

MWCB event. Second, while the Study’s 

analysis shows quote volatility 

decreasing following the MWCB halts, it 

does not necessarily lead to the 

conclusion that the MWCB halts caused 


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85See, e.g., Robert A. Wood, Thomas H. McInish, 

and J. Keith Ord., ‘‘Investigation of Transactions 

Data for NYSE Stocks,’’ 40 The Journal of Finance 

(1985). 86See Study, supra note 27, at 23–25. For 

example, when comparing Charts 8 and 10 of the 

Study, volatility appears to increase for Tier 2 

securities after the three morning MWCB Halts 

when compared to the 9:30–9:35 a.m. periods. 

Additionally, after the midday March 18 MWCB 

Halt, it appears from Chart 9 of the Study that 

volatility rose in some securities. Id. We note, 

however, that the Study does not demonstrate a 

causal link between the MWCB Halts and the 

volatility increases in these instances. 

87The Commission recognizes the challenges in 

empirically demonstrating a statistically significant 

causal relationship between MWCBs and volatility 

because MWCBs are rare events that occur during 

times of heightened volatility. 

88See id. at 16. 

89See id. at 14. 

90See id. at 25. 

91See id. at 25–27. 

92See id. 

93See id. at 18–21 (showing some evidence of 

increasing principal participation with each MWCB 

event). 

94 15 U.S.C. 78f(b)(5). 

95See NYSE Rule 7.12(a)(i)–(iii). 

96See Notice, supra note 3, at 38778. The 

Exchange also noted that the Chicago Mercantile 

Exchange (‘‘CME’’) considered whether changes 

could be made to better align the cash and futures 

market. See Study, supra note 27, at 7. Specifically, 

CME considered whether the futures limit-down 

percentage should be widened to 7% from a 5% 

level. Id. Ultimately, on October 12, 2020, CME 

decided to implement a 7% price limit for 

overnight trading hours in certain futures and 

options on futures. See CME Submission No. 20– 

392, dated September 25, 2020. 

97See EMSAC Recommendations for Rulemaking 

on Issues of Market Quality, July 25, 2016, available 

at https://www.sec.gov/spotlight/emsac/emsacmarket-quality-subcommittee-recomendation072516.pdf. 

quote volatility to decrease. Indeed, the 

quote volatility metrics described in the 

study are broadly consistent with the 

natural and well-known volatility 

dynamic in the U.S. equity market 

where volatility tends to be highest at 

the beginning of the trading day, 

decreases as the trading day progresses, 

and then increases again as the trading 

day approaches the close.85 Third, the 

Study does describe some volatility 

analysis that shows volatility increasing 

for some stocks after some of the MWCB 

events and market reopenings, although 

again, it is not clear whether that 

volatility increase was caused by the 

MWCB.86 The analysis is complicated 

further by the fact that three of the 

MWCB events in March occurred at the 

beginning of the trading day, preventing 

any comparison of the volatility of 

securities trading before the MWCB 

event with volatility after the MWCB 

event.87

Based on information available to 

analyze the MWCB’s impact on market 

volatility, the Commission believes that 

the evidence provided in the Study 

generally indicates that the MWCB did 

not cause harm to the market. One 

concern with the three MWCB events 

occurring at the open of the trading day 

was that it could harm the opening 

process for equity securities, for 

example. The Study provides evidence 

that the size of the opening and MWCB 

reopening auctions, in tandem, was 

similar in size to the opening auction in 

other time periods considered.88

Furthermore, on each of the four MWCB 

event days, the Study showed that there 

was no meaningful difference in the 

percentage of securities opening on a 

trade versus opening on a quote, with 

the exception of Tier 2 ETPs, which had 

a higher percentage opening on a trade 

on each of those days.89 The Study’s 

look at liquidity by measuring size at 

the NBBO does not present evidence 

which indicates the MWCB Halts had a 

significant impact on the liquidity 

available at the NBBO. While the Study 

showed that there was less size at the 

NBBO on the three MWCB event days 

that occurred at the beginning of the 

trading day, that result is not surprising 

given many stocks did not open until 

trading resumed after the MWCB 

reopening.90 Additionally, the Study’s 

observation of a drop in size at the 

NBBO around 1:30 p.m. for G4 and G5 

securities on March 18 is not 

particularly concerning, given that by 2 

p.m. size at the NBBO in these securities 

were back to normal.91 Finally, the 

March 18 event analysis shows that on 

the day the MWCB was triggered in the 

middle of the trading day, size at the 

NBBO leading up to the MWCB event 

was similar to January 2020 levels and 

was slightly larger for non-ETPs when 

compared to the remainder of the HighVolatility Period.92

In sum, the Commission believes that 

the MWCB operated appropriately as 

designed. While the MWCB impact on 

volatility is inconclusive, evidence 

shows that the MWCB effectively halted 

the market after the Level 1 threshold 

was reached on each of the four days in 

March 2020. The market appropriately 

reopened following each of the events, 

and market participants were able to 

resume trading in a normal fashion 

without apparent harmful impacts to 

either the auction processes or market 

liquidity. It is also notable that while 

the Pilot Rules approved in 2012 had 

never previously been triggered, the four 

events in March 2020 have provided 

market participants with significant 

experience with the current MWCB 

design. This familiarity with how the 

mechanism operates should further 

support a fair and orderly market 

function in the event of a future MWCB 

halt.93 Finally, the Exchange’s proposed 

testing provisions, along with the 

provisions requiring an analysis and 

report to the Commission should future 

MWCB events occur and a commitment 

to review the MWCB in the event of 5% 

market declines and changes to MWCB 

reopening processes, will help ensure 

that the MWCB design remains 

appropriate as market conditions and 

structure change over time. For these 

reasons, the Commission finds that the 

Exchange’s proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to national 

securities exchanges. In particular, the 

Commission finds that the Exchange’s 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,94 which 

requires that the rules of an exchange be 

designed, among other things, to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. The 

Commission discusses below each of the 

key elements of the MWCB in more 

detail. 

B. MWCB Threshold Levels 

Under the Pilot Rules, a market-wide 

trading halt will be triggered if SPX 

declines in price by specified 

percentages from the prior day’s closing 

price of that index. The triggers are set 

at three circuit breaker thresholds: 7% 

(Level 1), 13% (Level 2), and 20% 

(Level 3).95 Based on the analysis of 

these levels, the Exchange is proposing 

to make this aspect of the MWCB rules 

permanent.96 In conducting its Study 

following the March 2020 MWCB 

trading halts, the Working Group 

examined historical data on large-scale 

market declines. It also considered the 

recommendation of the Equity Market 

Structure Advisory Committee’s 

(‘‘EMSAC’’) Subcommittee on Market 

Quality from 2016 suggesting that the 

Level 1 trigger should be adjusted to 

10% based on evidence from the 

Chinese markets that indicated that 

when markets began to approach a 7% 

band, selling pressure increase as 

market participants tried to complete 

trades before trading halted.97

The Study observed that since 1962, 

intraday losses as large as 7% in SPX 

have occurred only 16 times, and that 

the four times that such losses did occur 

since the implementation of the LULD 

Plan were the four dates in March 2020 


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98See Study, supra note 27, at 38. 

99See id. 

100See id. 

101See id. 

102See id. 

103 Id. 

104 Id. The Study did not draw any conclusions 

about whether a ‘‘magnet effect’’ exists when 

market declines approach 20% (the Level 3 MWCB 

trigger that would end trading for the remainder of 

the day), given the lack of data. See id. 

105See Notice, supra note 3, at 38782. 

106See supra note 6. 

107See ‘‘Trading Analysis of October 27 and 28, 

1997,’’ A Report by the Division of Market 

Regulation U.S. Securities and Exchange 

Commission, dated September 1998, available at 

https://www.sec.gov/news/studies/tradrep.htm#cbs 

(‘‘1997 Trading Analysis’’). 

108See supra, note 10. 

109See 1997 Trading Report, supra note 118. 

110See supra note 14. 

111See supra note 19. 

112See Notice, supra note 3, at 38777–78. 

113See NYSE Rule 7.12(b). 

114See id. 

115See Notice, supra note 3, at 38783–84. The 

Exchange also proposed no changes be made to the 

MWCB to prevent the market from halting shortly 

after the open of regular trading at 9:30 a.m., despite 

the three MWCB events that occurred near the open 

of regular trading. See Study, supra note 27, at 2. 

As noted in the Study, after considering this 

potential change, it was determined that (1) there 

was no simple way to design an alternative that 

would prevent a halt at the open, (2) the markets 

should be protected at the open in any event, as it 

tends to be the most volatile period of the trading 

day and different future scenarios such as breaking 

news at the open would merit a halt, (3) market 

participants are now accustomed to how the 

MWCBs operate at the open of regular trading, and 

(4) the MWCB Halts at the open of regular trading 

did not harm the market functioning, including the 

conduct of opening and reopening auctions. See 

Study, supra note 27, at 43–44. 

116See Study, supra note 25, at 38. 

117See id. 

that triggered the MWCB Halts.98 The 

Study further noted that since the LULD 

Plan was implemented, there have been 

only five days where SPX fell as much 

as 6%, and all took place during the 

March 9–March 18, 2020 time period.99

The Study observed that on March 11, 

2020 the index fell as much as 6.07%, 

but did not continue lower to trigger a 

Level 1 MWCB halt at 7%.100 On March 

16, 2020, SPX declined enough to 

trigger a Level 1 halt, and continued to 

fall after reopening down 12.18%, but 

did not fall to the 13% trigger for a 

Level 2 halt, according to the Study.101

The Study also noted that on March 9, 

12, and 18, 2020, SPX also declined 

further after the Level 1 halt, with 

intraday lows of –8.01%, –9.58%, and 

–9.83%.102 The Study concluded that 

the fact that SPX continued to decline 

after the halt at 7% suggests that ‘‘the 

market found an equilibrium level that 

was not particularly tied to the 7% 

Level 1 trigger or the 13% Level 2 

trigger.’’ 103 The Study further 

concluded that the available evidence 

supports a conclusion that the current 

7% and 13% triggers did not create a 

‘‘magnet effect.’’ 104 The Exchange has 

represented that it agrees with this 

analysis and therefore is proposing that 

the MWCB trigger levels be permanently 

approved without change.105

The Commission believes that the 

Level 1 (7%), Level 2 (13%), and Level 

3 (20%) thresholds are appropriate 

levels of market decline at which the 

MWCB halts are triggered. The 

Commission has reviewed the levels at 

which the MWCBs are triggered on 

several occasions following sharp 

declines in the markets and has made 

adjustments over the last three decades 

to ensure the thresholds remain 

meaningful as the markets evolve. The 

initial MWCB rules, approved in 1988, 

established thresholds based on DJIA 

point values of 250 and 400, which at 

the time represented market declines of 

12% and 19%, respectively.106 Years 

later, it became clear that the thresholds 

needed to be updated to keep up with 

changes in the market. Stock prices had 

risen substantially since the MWCBs 

were first approved, such that by July 

1996, a 250-point decline and a 400- 

point decline, represented declines of 

the DJIA of only 4.5% and 7%, 

respectively.107 In 1997, the 

Commission approved proposals to 

increase the thresholds to 350 points 

and 550 points.108 After the MWCB 

halts were triggered in October 1997, the 

industry concluded that the thresholds 

were too low, as they were triggered at 

declines of only 4.54% and 7.18%, 

which the industry believed did not 

justify halts in trading.109 The 

Commission subsequently approved 

modifications to base the thresholds on 

a percentage of market decline instead 

of a point decline and set them at 10%, 

20% and 30%.110 The market sharply 

declined 9% in the Flash Crash on May 

6, 2010, which was not enough to trigger 

a Level 1 MWCB halt. Amidst concerns 

that events such as the Flash Crash 

could seriously undermine the integrity 

of the U.S. securities markets, in 2012, 

as discussed above, the Commission 

again approved modification to the 

thresholds, and lowered the Level 1 and 

Level 2 thresholds to 7% and 13%, 

respectively.111

The MWCB thresholds set in 2012 

have been in place on a pilot basis since 

their approval and were not reached 

until the market declines experienced in 

March 2020.112 Over the last 18 months, 

the SROs, Industry Members, and the 

Commission have had an opportunity to 

study data from these events and 

consider whether the current trigger 

levels are appropriately set. The 

Commission believes that data and 

analysis in the Study, in addition to the 

lessons learned since the original 

implementation of circuit breakers in 

1988, support a conclusion that the 

current MWCB threshold levels 

represent appropriate levels of decline 

in NMS stocks that warrant a temporary 

halt, in the case of a Level 1 and Level 

2 decline, or a halt for the remainder of 

the day, in the event of a Level 3. 

Furthermore, as discussed above, the 

Exchange’s proposed testing provisions, 

along with the provisions requiring an 

analysis and report to the Commission 

should future MWCB events occur and 

a commitment to review the MWCB in 

the event of 5% market declines and 

changes to MWCB reopening processes, 

will help ensure that the MWCB design 

remains appropriate as market 

conditions and structure change over 

time. 

C. Trading Halt Times 

The Pilot Rules provide that in the 

event an MWCB Level 1 or Level 2 halt 

is triggered after 9:30 a.m. but before 

3:25 p.m., trading will halt for 15 

minutes. If the threshold for a Level 1 

or Level 2 MWCB halt is triggered after 

3:25 p.m., trading will continue unless 

a Level 3 halt is triggered.113 If the 

threshold to trigger a Level 3 MWCB is 

reached at any time, trading will halt for 

the remainder of the day.114 The 

Exchange has represented that it agrees 

with the conclusion in the Study that a 

15-minute trading halt following a Level 

1 or Level 2 MWCB is appropriate, and 

is proposing to make this aspect of the 

Pilot Rules permanent, along with the 

provision that provides that trading will 

halt for the remainder of the day 

following a Level 3 circuit breaker.115

In reaching its conclusion, the Study 

noted that in October 2020, CME 

implemented a change to reopen the Emini S&P 500 futures five minutes 

before the end of a 15-minute Level 1 or 

Level 2 MWCB halt, in order to enhance 

the equity market price discovery 

process leading into an MWCB 

reopening auction process, which begin 

after the end of the 15-minute MWCB 

halts.116 The Study noted, however, that 

a similar change to the length of the 

Level 1 and 2 MWCB Halts was 

unnecessary, and recommended the 15- 

minute length of the Level 1 and Level 

2 MWCB halts be approved on a 

permanent basis without change.117

The Commission believes that a 

trading halt of 15 minutes following a 

triggering of a Level 1 or Level 2 MWCB 

halt between 9:30–3:25 p.m. is 

appropriate to allow market participants 


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118See supra Section IV(2)(f). 

119The Exchange also considered the question of 

whether or not the MWCB should be triggered if 

there is a sufficient number of LULD price limits 

triggered. See Study, supra note 25, at 44. 

According to the Study, the LULD trading pause 

data prior to the MWCB Halts did not shed light on 

this question, as the March MWCB Halts were 

proceeded by very few LULD Halts. While the 

MWCB Halts did not provide evidence in support 

of this alternative MWCB trigger, the Exchange and 

the Study note that future events may merit looking 

at this potential modification again. See Study, 

supra note 25, at 44. 

120See NYSE Rule 7.12(a)(i). 

121See Notice, supra note 3, at 38784–85. 

122See Study, supra note 27, at 39–40. 

123See id. at 40–41. 

124See id. at 41. 

125See id. at 41. 

126See Notice, supra note 3, at 38785. 

127See id. 

128See id. at 38784–5. For example, following the 

events of August 24, 2015, S&P DJI changed its 

methodology for calculating SPX to use 

consolidates prices. The Exchange believes that this 

change likely helped to ensure that SPX accurately 

reflected market conditions preceding the MWCB 

Halts in March 2020. See id. 

129See id. at 38785. 

130See id. 

to assess the state of the market. 

Regarding the application of MWCB 

shortly after the open of regular trading, 

the Commission agrees that on balance 

it remains appropriate. In particular, the 

Commission believes that the MWCB 

protections are an important protection 

at the beginning of regular trading. 

Furthermore, as discussed above, the 

Commission believes that the Study 

provides evidence that the three MWCB 

events at or near the open of regular 

trading did not cause harm to the 

market, including the conduct of the 

opening and reopening auctions.118

Finally, market participants now have 

substantial experience with how the 

MWCB operates at or near the open of 

regular trading, and any changes to the 

MWCB at the time of day would 

introduce new uncertainty that is not 

necessary at this time, given the benefit 

of opening protections and the market’s 

experience thus far. Additionally, the 

Commission believes that the CME’s 

modification to resume trading in the Emini S&P 500 futures should further 

improve the function of the MWCB, as 

market participants will have a better 

sense of market valuations leading into 

the MWCB reopening auction for equity 

securities. The Commission further 

believes that permitting trading to 

continue after 3:25 p.m. despite a 

decline in the markets, unless a Level 3 

MWCB threshold is reached remains 

appropriate as this will help ensure a 

fair and orderly closing at 4 p.m. 

Finally, the declines in SPX in March 

2020 did not approach the 20% 

threshold for triggering a Level 3 MWCB 

halt. Therefore, there is no data 

available to analyze how the markets 

would respond in the event SPX drops 

20% and markets close for the day. The 

Commission believes, however, that any 

disruption in the markets that would 

cause a 20% decline in SPX would 

require market participants to make 

significant adjustments to their trading 

strategies, and thus halting trading for 

the remainder of the day is appropriate 

in such a situation. Furthermore, as 

discussed above, the Exchange’s 

proposed testing provisions, along with 

the provisions requiring an analysis and 

report to the Commission should future 

MWCB events occur and a commitment 

to review the MWCB in the event of 5% 

market declines and changes to MWCB 

reopening processes, will help ensure 

that the MWCB design remains 

appropriate as market conditions and 

structure change over time. 

D. SPX as Reference Value 119

The Pilot Rules provide that SPX shall 

be used as the reference value for 

determining any percentage decline in 

the markets.120 Based on the conclusion 

in the Study that SPX is the best 

measure for this purpose, the Exchange 

is proposing that the Pilot Rule 

designating SPX as the reference value 

be approved on a permanent basis.121

In analyzing whether to retain SPX as 

the reference for triggering MWCB halts, 

the Study examined criteria for 

considering an instrument or 

methodology to replace SPX and 

compared a number of potential 

alternatives to SPX. The Study 

considered the DJIA, S&P 100, Nasdaq 

100, Russell 1000, Russell 3000, 

Wilshire 5000, E-Mini S&P 500 Futures, 

Exchange Trading Products-related SPX 

(i.e., SPY, IVV, VOO) as potential 

alternatives to SPX and for each 

alternative considered: The breath of 

securities in an index or an index or in 

the index underlying a specific product; 

breadth of sectors represented by 

product/index; breadth of listing 

exchanges represented by product/ 

index; correlation with related products, 

including derivatives and ETPs; does 

the reference value demonstrate 

dislocations from the underlying value; 

industry awareness of the index/product 

level; activity level in/liquidity 

generally present in the product (or 

correlated products if reference value is 

an index); if reference value is a traded 

product, susceptibility of that product to 

short term liquidity imbalances that 

might erroneously trigger an MWCB; 

potential concerns regarding crossmarket coordination; whose regulatory 

purview does the reference value fall 

under; reference calculation method; 

and the index methodology.122

The Study reflected the view of 

industry practitioners that it is 

important that the reference price be 

based an index rather than an 

individual tradable product because 

individual product are vulnerable to 

temporary order imbalances or price 

shocks, which may result in transient 

premiums or discounts.123 In addition, 

the Study considered that individual 

products may be subject to single stock 

price bands or circuit breakers, but an 

index has less potential to be influenced 

by these factors than an individual 

product.124

Of the indices the Study examined, it 

found that SPX contains a large number 

of securities with a high degree of 

breadth, an extremely high correlation 

with the liquidity of its underlying 

securities, and a well-understood 

calculation methodology. S&P DJI 

disseminates documentation regarding 

the calculation of SPX, especially at and 

around market open and reopen that 

addresses technical questions regarding 

the index calculation and value 

dissemination.125

Based on the Study’s review of the 

potential alternatives to SPX and the 

Exchange’s own observations of the 

product, the Exchange believes that SPX 

is an appropriate product to use as the 

reference for the MWCB mechanism, 

and is proposing to make this aspect of 

the Pilot Rules permanent without 

change.126 The Exchange acknowledges 

that non-traded products are not subject 

to regulatory oversight, but due to the 

safeguards provided by S&P DJI the 

Exchange nevertheless believes that SPX 

is an appropriate reference.127 In 

particular, the Exchange notes that S&P 

DJI periodically improves its calculation 

methods for SPX.128 The Exchange also 

considered that S&P DJI was 

forthcoming and transparent in 

responding to the Working Group’s 

questions about the resiliency and 

redundancy of the SPX calculation.129

In meetings with the Working Group, 

S&P DJI explained that three 

geographically disperse data centers 

independently calculate the SPX, and 

S&P DJI monitors for consistency of 

values.130 The Exchange also considered 

however that, while S&P DJI’s index 

computations are conducted and made 

available from three geographic 

locations with delivery through separate 

communications lines, there is no 

completely independent backup 

maintained for SPX, which remains a 


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131See id. 132See id. 133The Commission believes that further efforts 

to enhance the redundancy and resiliency of the 

SPX calculation is appropriate. 

134See Study, supra note 27, at 9. 

135See id. 

136See Notice, supra note 3, at 42. 137See Amendment No. 1, supra note 7. 138See supra note 137. 139See supra note 138. 140See id. 141See id. 142See id. 143See Notice, supra note 3, at 47. 144See id. 

145See supra note 138, at 6. 

146See id. 

147See id. 

148See id. at 7. 

149See id. 

single point of failure.131 S&P DJI 

addressed this concern by explaining 

that it intends to establish an 

independent index calculation to be 

conducted and maintained by a 

separate, independent entity to further 

reinforce redundancy and resiliency of 

the calculation.132

The Commission believes that SPX is 

the best reference for gauging a decline 

in the markets overall. The Commission 

agrees that at this time an index is a 

more reliable reference than a single 

tradable product as it is not subject to 

same degree of temporary volatility or 

liquidity gaps and remains more in-line 

with a large number of products. 

Additionally, SPX’s number and 

breadth of securities, high correlation to 

those underlying securities, and its 

well-understood calculation 

methodology makes it an appropriate 

benchmark for the MWCB. The SPX 

calculation is performed at separate, 

geographically diverse locations to help 

ensure the integrity of the index 

calculation. Further, as noted by the 

Exchange, S&P DJI has been transparent 

and responsive to the Exchange and the 

other Working Group members about 

the calculation of SPX, and has 

committed to further enhance the 

redundancy and resiliency of the SPX 

calculation by establishing an 

independent index calculation to be 

conducted and maintained by a 

separate, independent entity.133 Finally, 

as discussed above, the Exchange’s 

proposed testing provisions, along with 

the provisions requiring an analysis and 

report to the Commission should future 

MWCB events occur and a commitment 

to review the MWCB in the event of 5% 

market declines and changes to MWCB 

reopening processes, will help ensure 

that the MWCB design remain 

appropriate as market conditions and 

structure change over time 

E. Testing Requirement 

The Exchange’s Rules require that the 

Exchange participate in all industry 

wide tests of the MWCB Mechanism. 

Further, the Rules also provide that all 

designated Regulation SCI firms 

participate in at least one MWCB test 

each year.134 This test is designed to 

ensure that relevant systems function as 

intended in the event an MWCB is 

triggered.135 Each of these firms must 

also verify their participation in a 

MWCB test by attesting that they are 

able to or have attempted to: (1) Receive 

and process MWCB halt messages from 

the securities information processors 

(‘‘SIPs’’); (2) receive and process resume 

messages from the SIP following a 

MWCB Halt; (3) receive and process 

market data from the SIPs relevant to 

MWCB Halts; and (4) send orders 

following a Level 1 or Level 2 MWCB 

halt in a manner consistent with their 

usual trading behavior.136 To the extent 

that a member organization that 

participated in a MWCB test is unable 

to receive and process any of these 

messages, its attestation should notify 

the Exchange which messages it was 

unable to process and any known reason 

why the messages could not be received 

or processed.137 Member organizations 

not designated pursuant to standards 

established in paragraphs (b)(1) and (3) 

of Rule 48 are permitted to participate 

in any MWCB test.138

In addition to testing of MWCB 

technical functionalities, the Exchange 

has also proposed a mandatory review 

of the performance of MWCBs generally, 

should certain events occur. In the event 

of a MWCB Halt, the Working Group 

will analyze the MWCB performance 

and prepare a report that documents its 

analysis and recommendations.139 This 

report will be provided to the 

Commission within 6 months of MWCB 

Halt.140 In the event that there is (1) a 

market decline of more than 5% or (2) 

an SRO implements a rule change that 

effects its reopening process following a 

MWCB Halt, the Exchange and the 

Working Group will review such event 

and consider when any modification 

should be made to the MWCB rules.141

If the Working Group recommends that 

a modification be made, the Working 

Group will prepare a report that 

documents its analysis and 

recommendations and provide that 

report to the Commission.142

The Exchange believes that these 

testing obligations remove impediments 

to and perfect the mechanism of a free 

and open market and a national market 

system.143 Specifically, the Exchange 

contends that adding specificity by 

requiring SCI firms to attest to their 

participation in the MWCB will promote 

stability and investor confidence in the 

MWCB mechanism.144 Further, the 

Exchange believes that requiring firms 

to identify any inability to process any 

messages related to the MWCB 

mechanism will contribute to a fair and 

orderly market by flagging potential 

issues that should be corrected.145 The 

Exchange also notes that the 

attestations, as well as the Exchange’s 

own records regarding the MWCB test, 

will be preserved and retained by the 

Exchange.146

The Exchange is also of the opinion 

that the ‘‘event driven’’ MWCB review 

described in the MWCB Rules would 

benefit market participants, promote 

just and equitable principles of trade, 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and 

protect investors and the public 

interest.147 The Exchange believes that 

requiring the Working Group to review 

any halt triggered under the MWCB 

Rules and prepare a report on of its 

analysis and recommendations, would 

permit the Working Group and the 

Commission to evaluate the efficacy of 

the MWCB mechanism and whether any 

modifications should be made.148 The 

Exchange also contends that having the 

Working Group review instances of a 

market decline of more than 5% or an 

SRO rule that changes its reopening 

process following a MWCB Halt will 

allow the Working Group to identify 

situations where it recommends that the 

MWCB Rules should be modified. 

Finally, the Exchange notes that in those 

situations where the Working Group 

recommends that a modification should 

be made and a report is submitted to the 

Commission, providing this report to 

the Commission will help protect 

investors and the public interest.149

The Commission believes that these 

testing and ongoing assessment 

provisions will allow the Commission 

and the SROs to evaluate the MWCB 

mechanism going forward. As noted by 

the Exchange, by requiring Regulation 

SCI firms and the Exchange to 

participate in yearly tests of certain 

basic messaging functionalities, the 

SROs and the Commission can help 

ensure that important technical aspects 

of the MWCB mechanism will function 

properly should a MWCB Halt occur. 

Additionally, as the Exchange noted, the 

results of this testing will be retained by 

the Exchange pursuant to its obligation 

to keep books and records. This will 

allow the Commission to review the 

results of the MWCB test to ensure that 

the MWCB mechanism continues to 

operate as intended. 


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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices 16295 

150 15 U.S.C.78s(b)(2). 

151Amendment No. 1 also makes technical 

changes to the proposal to update the dates on 

which the MWCB Pilot Rule expires and the 

proposed rule would take effect. 

152 15 U.S.C. 78s(b)(2). 

153 15 U.S.C. 78s(b)(2). 

The Commission also believes that the 

proposed ‘‘event driven’’ reviews of the 

MWCB mechanism will allow the 

Commission and the SROs to evaluate 

whether any modification to the MWCB 

mechanism is necessary. Specifically, 

should a MWCB Halt occur, the SROs 

will examine how the MWCBs 

functioned and report this to the 

Commission. If the SROs or the 

Commission finds that the MWCB 

mechanism did not work as intended 

during a future MWCB Halt, then the 

MWCB mechanism can be further 

refined to address this deficiency. The 

Commission also supports the proposal 

concerning review of the MWCB when 

either (1) a market decline of more than 

5% or (2) an SRO implements a rule that 

changes its reopening process following 

a MWCB Halt. A review of a market 

decline of more than 5% will allow the 

Working Group to evaluate significant 

market events that do not reach the 

threshold for initiating a MWCB, and 

determine whether any alterations to the 

MWCB mechanism should be made. 

Further, a review of any changes to 

reopening processes following a MWCB 

Halt will allow the Working Group to 

evaluate the implications of the 

proposed changes on the effectiveness 

of the MWCB mechanism. Finally, the 

Commission believes that the 

requirement to report any proposed 

modification following the Working 

Group’s review will give the 

Commission an opportunity to study the 

event that preceded the Working 

Group’s review and any potential 

modification that the Working Group 

recommends. 

In conclusion, the Commission 

believes that the analysis presented by 

the Exchange demonstrates that the 

MWCBs operated effectively in 

accomplishing the goal of providing a 

trading halt during extreme market-wide 

declines to provide opportunities for 

markets and market participants to 

assess market conditions and systemic 

stress. Further, the Commission believes 

that the proposal sets forth testing and 

ongoing assessment requirements for 

industry members and the Exchange 

that should allow market participants 

and the Exchange to detect issues with 

the MWCB design or their internal 

system in response to MWCB halts and 

recommend modifications. For these 

reasons, the Commission finds that it is 

appropriate to approve the Exchange’s 

MWCB rules on a permanent basis. 

V. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSE–2021–40 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2021–40. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–NYSE– 

2021–40 and should be submitted on or 

before April 12, 2022. 

VI. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment No. 1 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,150 to approve the proposed rule 

change, as modified by Amendment No. 

1, prior to the 30th day after the date of 

publication of Amendment No. 1, in the 

Federal Register. As discussed above, 

Amendment No. 1 requires Exchange 

participation in all industry-wide 

testing of the MWCBs, and further 

requires the Exchange, together with the 

other SROs, to provide the Commission 

with a report that documents its 

analysis and recommendations 

following a halt that is triggered 

following a Level 1, Level 2, or Level 3 

Market Decline. The amendment also 

requires the Exchange, together with the 

other SROs, to review the MWCB in the 

event of 5% market declines and any 

time an SRO makes changes to MWCB 

reopening processes, and provide a 

report to the Commission concerning 

such review should a modification to 

the MWCB be recommended. 

Amendment No. 1 also requires an 

industry member to notify the Exchange 

in its attestation following testing if it 

was unable to process any messages 

and, if known, why. In Amendment No. 

1, the Exchange commits to maintain 

records documenting its participation in 

MWCB testing. Amendment No. 1 also 

provides additional detail on actions 

taken by SROs in response to the March 

2020 MWCB halts.151

The Commission believes that the 

revisions to the proposal in Amendment 

No. 1 raise no novel regulatory issues. 

The amendment proposes additional 

protections that will help ensure that 

the MWCB design is appropriate over 

time. In particular, it provides for more 

robust ongoing testing processes and 

assessments of the operation of the 

MWCBs. The tests will be conducted on 

an industry-wide basis with Exchange 

participation and will require the 

creation and retention of records 

concerning testing effectiveness. 

Furthermore, the amendment provides 

for MWCB assessments in key events 

that will provide an opportunity for the 

Exchange, along with the other SROs, to 

more effectively evaluate the MWCB 

design. Accordingly, the Commission 

finds good cause, pursuant to Section 

19(b)(2) of the Act,152 to approve the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,153 that the 

proposed rule change, as modified by 

Amendment No. 1, (SR–NYSE–2021– 

40), be, and hereby is, approved on an 

accelerated basis. 


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154 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange initially filed the proposed fee 

changes on March 1, 2022 (SR–CboeEDGX–2022– 

009). On March 9, 2022, the Exchange withdrew 

that filing and submitted this proposal. 

4See Cboe Global Markets, U.S. Equities Market 

Volume Summary, Month-to-Date (February 27, 

2022), available at https://markets.cboe.com/us/ 

equities/market_statistics/. 

5See Exchange Rule 11.6(q)(2) 6See Exchange Rule 11.6(q)(6). 7See Exchange Rule 11.6(q)(5). 8Orders yielding Fee Code ‘‘B’’ are orders adding 

liquidity to EDGX (Tape B). 9Orders yielding Fee Code ‘‘V’’ are orders adding 

liquidity to EDGX (Tape A). 10Orders yielding Fee Code ‘‘Y’’ are orders 

adding liquidity to EDGX (Tape C). 11Orders yielding Fee Code ‘‘3’’ are orders adding 

liquidity to EDGX in the pre and post market (Tapes 

A or C). 12Orders yielding Fee Code ‘‘4’’ are orders adding 

liquidity to EDGX in the pre and post market (Tape 

B). 13 ‘‘Step-Up ADAV’’ means ADAV in the relevant 

baseline month subtracted from current ADAV. 14 ‘‘TCV’’ means total consolidated volume 

calculated as the volume reported by all exchanges 

By the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.154

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–05980 Filed 3–21–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94437; File No. SR– 

CboeEDGX–2022–013] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend its 

Fee Schedule 

March 16, 2022. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 9, 

2022, Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘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 

Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’ or ‘‘EDGX 

Equities’’) proposes to amend its Fee 

Schedule. The text of the proposed rule 

change is provided in Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

options/regulation/rule_filings/edgx/), 

at the Exchange’s Office of the 

Secretary, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

Fee Schedule applicable to its equities 

trading platform (‘‘EDGX Equities’’) as 

follows: (1) Amend fee code ZM so that 

it applies to applicable orders with a 

time-in-force of Good ‘til Extended Day 

(‘‘GTX’’); and (2) modify the criteria of 

Growth Tier 2. The Exchange proposes 

to implement these changes effective 

March 1, 2022.3

The Exchange first notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive or 

incentives to be insufficient. More 

specifically, the Exchange is only one of 

16 registered equities exchanges, as well 

as a number of alternative trading 

systems and other off-exchange venues 

that do not have similar self-regulatory 

responsibilities under the Exchange Act, 

to which market participants may direct 

their order flow. Based on publicly 

available information,4 no single 

registered equities exchange has more 

than 17% of the market share. Thus, in 

such a low-concentrated and highly 

competitive market, no single equities 

exchange possesses significant pricing 

power in the execution of order flow. 

The Exchange in particular operates a 

‘‘Maker-Taker’’ model whereby it pays 

rebates to members that add liquidity 

and assesses fees to those that remove 

liquidity. The Exchange’s Fee Schedule 

sets forth the standard rebates and rates 

applied per share for orders that provide 

and remove liquidity, respectively. 

Currently, for orders in securities priced 

at or above $1.00, the Exchange 

provides a standard rebate of $0.00160 

per share for orders that add liquidity 

and assesses a fee of $0.0030 per share 

for orders that remove liquidity. For 

orders in securities priced below $1.00, 

the Exchange provides a standard rebate 

of $0.00009 per share for orders that add 

liquidity and assesses a fee of 0.30% of 

total dollar value for orders that remove 

liquidity. Additionally, in response to 

the competitive environment, the 

Exchange also offers tiered pricing 

which provides Members opportunities 

to qualify for higher rebates or reduced 

fees where certain volume criteria and 

thresholds are met. Tiered pricing 

provides an incremental incentive for 

Members to strive for higher tier levels, 

which provides increasingly higher 

benefits or discounts for satisfying 

increasingly more stringent criteria. 

As noted under the Fee Codes and 

Associated Fees section of the Fee 

Schedule, fee code ZM is appended to 

retail orders with a time-in-force of 

Day 5/Regular Hours Only (‘‘RHO’’) 6

that remove liquidity on arrival and 

provides a fee/rebate of free. Now the 

Exchange proposes to amend fee code 

ZM so that is appended to retail with a 

time-in-force of Day/RHO or GTX 7 that 

remove liquidity on arrival. Currently, 

retail orders with a time-in-force of GTX 

that remove liquidity upon arrival are 

appended fee code ZR which are 

assessed a fee of $0.00300 per share in 

securities at or above $1.00 and 0.30% 

of dollar value to securities below $1.00. 

Therefore, the proposal would decrease 

the fee associated with retail orders with 

a time-in-force of GTX that remove 

liquidity upon arrival by $0.00300. 

Further, the Growth Volume Tiers 

Volume Tiers set forth in footnote 1 of 

the Fee Schedule (Add/Remove Volume 

Tiers) provide Members an opportunity 

for qualifying orders (i.e., orders 

yielding fee code B,8 V,9 Y,10 3 11 or 4 12) 

to receive an enhanced rebate and are 

designed to encourage growth in order 

flow by providing specific criteria in 

which Members must increase their 

relative liquidity each month over a 

predetermined baseline. Growth Tier 2, 

for example, provides an opportunity 

for qualifying orders (i.e., orders 

yielding fee code B, V, Y, 3 or 4) to 

receive an enhanced rebate of $0.0027 

per share to Members that (1) add a 

Step-Up ADAV 13 from June 2021 

greater than or equal to 0.10% of the 

TCV 14 or Members that add a Step-Up 


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