Document ID: SEC-2019-0456-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2019-04-12T04:00Z

[Federal Register Volume 84, Number 71 (Friday, April 12, 2019)]
[Notices]
[Pages 14981-14983]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07243]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85547; File No. SR-FINRA-2019-010]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Pilot Period Related to FINRA Rule 
6121.02 (Market-Wide Circuit Breakers in NMS Stocks)

April 8, 2019.
    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 April 5, 2019, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to extend the pilot period related to FINRA Rule 
6121.02 (Market-wide Circuit Breakers in NMS Stocks) to the close of 
business on October 18, 2019.
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

[[Page 14982]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule 6121.02 provides a methodology for determining when to halt 
trading in all NMS Stocks due to extraordinary market volatility, i.e., 
market-wide circuit breakers. The market-wide circuit breaker mechanism 
under Rule 6121.02 was approved by the Commission to operate on a pilot 
basis, the term of which was to coincide with the pilot period for the 
Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of 
Regulation NMS (the ``LULD Plan''),\4\ including any extensions to the 
pilot period for the LULD Plan.\5\ The Commission published an 
amendment to the LULD Plan for it to operate on a permanent, rather 
than pilot, basis.\6\
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    \4\ See Securities Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (the ``Limit Up-Limit Down 
Release'').
    \5\ See Securities Exchange Act Release Nos. 67090 (May 31, 
2012), 77 FR 33531 (June 6, 2012) (Order Approving File No. SR-
FINRA-2011-054).
    \6\ See Securities Exchange Act Release Nos. 84843 (December 18, 
2018), 83 FR 66464 (December 26, 2018) (Amendment No. 18 Proposing 
Release).
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    FINRA proposes to amend Rule 6121.02 to untie the pilot's 
effectiveness from that of the LULD Plan and to extend the pilot's 
effectiveness to the close of business on October 18, 2019. FINRA does 
not propose any additional changes to Rule 6121.02.
    Market-wide circuit breakers under Rule 6121.02 provide an 
important, automatic mechanism that is invoked to promote stability and 
investor confidence during a period of significant stress when 
securities markets experience extreme broad-based declines. All U.S. 
equity exchanges have rules similar to Rule 6121.02 relating to market-
wide circuit breakers, which are designed to slow the effects of 
extreme price movement through coordinated trading halts across 
securities markets when severe price declines reach levels that may 
exhaust market liquidity. Market-wide circuit breakers provide for 
trading halts in all equities and options markets during a severe 
market decline as measured by a single-day decline in the S&P 500 
Index.
    Rule 6121.02 generally provides that, in the event of a Level 1, 
Level 2 or Level 3 Market Decline,\7\ as determined by a primary 
listing market and publicly disseminated, FINRA shall halt trading 
otherwise than on an exchange in all NMS stocks and shall not permit 
the resumption of trading for the time periods specified by the primary 
listing market. Rule 6121.02 also provides that, if trading is halted 
in all NMS stocks for a Level 1 or a Level 2 Market Decline, FINRA will 
halt trading otherwise than on an exchange in all NMS stocks until 
trading has resumed on the primary listing market; if, however, the 
primary listing market does not reopen a security within 15 minutes 
following the end of the 15-minute halt period, FINRA may permit the 
resumption of trading otherwise than on an exchange in that security if 
trading in the security has commenced on at least one other national 
securities exchange. If a Level 3 Market Decline occurs at any time 
during the trading day, FINRA shall halt trading otherwise than on an 
exchange in all NMS stocks until the primary listing market opens the 
next trading day.
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    \7\ For purposes of the Rule, a ``Market Decline'' means a 
decline in the value of the S&P 500[supreg] Index between 9:30 a.m. 
and 4:00 p.m. on a trading day as compared to the closing value of 
the S&P 500[supreg] Index for the immediately preceding trading day.
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    FINRA intends to file a separate proposed rule change with the 
Commission to operate Rule 6121.02 on a permanent, rather than pilot, 
basis. Extending the effectiveness of Rule 6121.02 to the close of 
business on October 18, 2019 should provide the Commission adequate 
time to consider whether to approve FINRA's separate proposal to 
operate the market-wide circuit breaker mechanism under Rule 6121.02 on 
a permanent basis.
    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so FINRA can implement the proposed rule change 
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, 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. FINRA also 
believes that the proposed rule change promotes just and equitable 
principles of trade in that it promotes transparency and uniformity 
across markets concerning when and how to halt trading in all stocks as 
a result of extraordinary market volatility. Extending the market-wide 
circuit breaker pilot under Rule 6121.02 for an additional six months 
would ensure the continued, uninterrupted operation of a consistent 
mechanism to halt trading across the U.S. markets while the Commission 
considers whether to approve the pilot on a permanent basis. The 
proposed rule change would thus promote fair and orderly markets and 
the protection of investors and the public interest. Based on the 
foregoing, FINRA believes the benefits to market participants from the 
market-wide circuit breaker mechanism under Rule 6121.02 should 
continue on a pilot basis while the Commission considers whether to 
permanently approve Rule 6121.02.
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    \8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. FINRA does not believe that the 
proposed rule change implicates any competitive issues because the 
proposal would ensure the continued, uninterrupted operation of a 
consistent mechanism to halt trading across the U.S. markets while the 
Commission considers whether to permanently approve the market-wide 
circuit breaker mechanism under Rule 6121.02. Further, FINRA 
understands that the other self-regulatory organizations will file 
proposals to extend their rules regarding the market-wide circuit 
breaker pilot with the Commission so that the market-wide circuit 
breaker mechanism may continue uninterrupted while the Commission 
considers whether to approve its operation on a permanent basis.

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section

[[Page 14983]]

19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. FINRA has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative upon filing. Extending the pilot for an additional six 
months will allow the uninterrupted operation of the existing pilot to 
halt trading across the U.S. markets while the Commission considers 
whether to approve the pilot on a permanent basis. The extension simply 
maintains the status quo. Therefore, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. The Commission hereby designates the 
proposed rule change to be operative upon filing.\13\
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    \11\ Id.
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FINRA-2019-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2019-010. 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 FINRA. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FINRA-2019-010, and should be submitted 
on or before May 3, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07243 Filed 4-11-19; 8:45 am]
BILLING CODE 8011-01-P