Document ID: SEC-2022-1183-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2022-09-08T04:00Z

[Federal Register Volume 87, Number 173 (Thursday, September 8, 2022)]
[Notices]
[Pages 55060-55063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19351]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95658; File No. SR-CboeBZX-2022-037]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Approving a Proposed Rule Change, as Modified by Amendment Nos. 1 and 
2, To Amend BZX Rule 11.17, Clearly Erroneous Executions

September 1, 2022.

I. Introduction

    On July 11, 2022, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to (i) make the current clearly erroneous 
execution (``CEE'') pilot permanent, and (ii) apply the Limit Up-Limit 
Down (``LULD'') mechanism in place of the CEE review process during 
regular trading hours, except in limited circumstances. The proposed 
rule change was published for comment in the Federal Register on July 
18, 2022.\3\ On July 29, 2022, the Exchange filed Amendment No. 1 to 
the proposed rule change.\4\ On August 26, 2022, the Exchange filed 
Amendment No. 2 to the proposed rule change.\5\ This order approves the 
proposed rule change, as modified by Amendment Nos. 1 and 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 95259 (July 12, 
2022), 87 FR 42760 (``Notice'').
    \4\ In Amendment No. 1, the Exchange made technical and non-
substantive corrections to the proposal. Specifically, the Exchange 
corrected an erroneous mismarking in the rule text and removed 
certain redundant language in the proposal. Because Amendment No. 1 
does not materially alter the substance of the proposed rule change, 
Amendment No. 1 is not subject to notice and comment. Amendment No. 
1 is available at: https://www.sec.gov/comments/sr-cboebzx-2022-037/srcboebzx2022037-20135398-306303.pdf.
    \5\ In Amendment No. 2, the Exchange revised the proposal to 
provide information on the implementation date of the proposal. 
Because Amendment No. 2 does not materially alter the substance of 
the proposed rule change, Amendment No. 2 is not subject to notice 
and comment. Amendment No. 2 is available at: https://www.sec.gov/comments/sr-cboebzx-2022-037/srcboebzx2022037-20137788-308117.pdf 
(``Amendment No. 2'').
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II. Description of the Proposed Rule Change, as Modified by Amendment 
Nos. 1 and 2

A. Background

    On September 10, 2010, the Commission approved, on a pilot basis, 
changes to BZX Rule 11.17 (Clearly Erroneous Executions) that, among 
other things: (i) provided for uniform treatment of CEE reviews in 
multi-stock events involving twenty or more securities; and (ii) 
reduced the ability of the Exchange to deviate from the objective 
standards set forth in the rule.\6\ In 2013, BZX Rule 11.17 was further 
modified to account for the operation of the Plan to Address 
Extraordinary Market Volatility (the ``LULD Plan'').\7\ The Exchange 
states that in the 12 years since the initiation of the CEE pilot, the 
Exchange, other national securities exchanges, and Financial Industry 
Regulatory Authority (``FINRA'') have gained considerable experience in 
the operation of the CEE rule, as amended on a pilot basis.\8\ Based on 
that experience, the Exchange states that the CEE pilot should continue 
on a permanent basis so that equities market participants and investors 
can continue benefit from the increased certainty provided by the 
amended CEE rule.\9\ The CEE pilot is currently set to expire at the 
close of business on October 20, 2022.\10\
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    \6\ See Securities Exchange Act Release No. 62886 (Sept. 10, 
2010), 75 FR 56613 (Sept. 16, 2010) (SR-BATS-2010-016) (``CEE Pilot 
Approval Order'').
    \7\ See Securities Exchange Act Release No. 68797 (Jan. 31, 
2013), 78 FR 8635 (Feb. 6, 2013) (SR-BATS-2013-008).
    \8\ See Notice, supra note 3, at 42761.
    \9\ See id.
    \10\ See Securities Exchange Act Release No. 95288 (July 14, 
2022), 87 FR 43346 (July 20, 2022) (SR-CboeBZX-2022-039).
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    When the participants to the LULD Plan (``Participants'') filed to 
introduce the LULD mechanism, some commenters noted the potential 
discordance between the CEE rules and the Price Bands \11\ used to 
limit the price at which trades would be permitted to be executed 
pursuant to the LULD Plan.\12\ While the Participants acknowledged that 
the potential to prevent CEE would be a ``key benefit'' of the LULD 
Plan, the Participants decided not to amend the CEE rules at that time 
in order to study how CEE rules and the LULD mechanism interact.\13\ 
After gaining experience with the LULD Plan, the Exchange now believes 
that it is appropriate to largely eliminate CEE review during Regular 
Trading Hours (``RTH'') \14\ when Price

[[Page 55061]]

Bands are in effect.\15\ Thus, as proposed and discussed further below, 
trades executed within the Price Bands will stand, barring one of a 
handful of identified scenarios where CEE review may still be necessary 
for the protection of investors and the public interest.
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    \11\ ``Price Bands'' refers to the term provided in Section V of 
the LULD Plan.
    \12\ See Notice, supra note 3, at 42761. The Exchange states 
that two commenters on File No. 4-631, Plan to Address Extraordinary 
Market Volatility, requested that the clearly erroneous rules be 
amended so the presumption would be that trades executed within the 
Price Bands would not be not subject to review. Id.
    \13\ See id. at 42761-62.
    \14\ The term ``Regular Trading Hours'' means the time between 
9:30 a.m. and 4:00 p.m. Eastern Time. See BZX Rule 1.5(w).
    \15\ See Notice, supra note 3, at 42762. The Exchange also 
states that industry feedback has reflected a desire to eliminate 
the discordance between the LULD mechanism and the CEE rules so that 
market participants would have more certainty that trades executed 
within the Price Bands would stand. See Notice, supra note 3, at 
42762.
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    Based on the forgoing, the Exchange proposes to: (1) make the 
current CEE pilot permanent; and (2) apply the LULD mechanism in place 
of the CEE review process during RTH, except in limited circumstances. 
The Exchange believes that these changes are appropriate as the LULD 
Plan has been approved by the Commission on a permanent basis,\16\ and 
in light of recent amendments to the LULD Plan, including changes to 
the applicable Price Bands around the Open and Close of trading.\17\
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    \16\ See Securities Exchange Act Release Nos. 84843 (Dec. 18, 
2018), 83 FR 66464 (Dec. 26, 2018); 85623 (April 11, 2019), 84 FR 
16086 (April 17, 2019) (File No. 4-631) (``Amendment Eighteen'').
    \17\ See Notice, supra note 3, at 42762. Amendment Eighteen to 
the LULD Plan eliminated double-wide Price Bands: (1) between 9:30 
a.m. and 9:45 a.m. (``the Open''), and (2) between 3:35 p.m. and 
4:00 p.m., or in the case of an early scheduled close (``the 
Close''), during the last 25 minutes of trading before the Close, 
for Tier 2 NMS Stocks 2 with a Reference Price above $3.00. See 
Amendment Eighteen, supra note 16, at 16090.
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B. Clearly Erroneous Review During Regular Trading Hours

    As proposed, BZX Rule 11.17(c)(1) provides that trades executed 
within the Price Bands during RTH will not be reviewable as clearly 
erroneous, except in limited circumstances.\18\ Specifically, proposed 
BZX Rule 11.17(c)(1)(A) provides that a transaction executed during RTH 
will continue to be eligible for CEE review if the transaction is in an 
NMS Stock that is not subject to the LULD Plan. In such case, the 
Numerical Guidelines set forth in BZX Rule 11.17(c)(2) will be 
applicable to such NMS Stock.\19\
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    \18\ See id.
    \19\ See proposed BZX Rule 11.17(c)(1)(A). While the majority of 
securities traded on the Exchange will be subject to the LULD Plan, 
certain equity securities, such as rights and warrants, are 
explicitly excluded from the provisions of the LULD Plan and will 
therefore be eligible for CEE review instead. See Notice, supra note 
3, at 42762. Similarly, there are instances, such as the opening 
auction on the primary listing market, where transactions are not 
ordinarily subject to the LULD Plan. See id.
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    Another such scenario where members will continue to be able to 
request CEE review is where a transaction resulted from certain systems 
issues pursuant to proposed BZX Rule 11.17(c)(1)(B). Specifically, as 
proposed, transactions executed during RTH will be eligible for CEE 
review if the transaction is the result of an Exchange technology or 
systems issue that results in the transaction occurring outside the 
applicable Price Bands pursuant to BZX Rule 11.17(g), or is executed 
after the primary listing market for the security declares a regulatory 
trading halt, suspension, or pause pursuant to BZX Rule 11.17(i).\20\ 
Proposed BZX Rule 11.17(c)(1)(B) also provides that a transaction 
subject to review pursuant to this paragraph shall be found to be 
clearly erroneous if the price of the transaction to buy (sell) that is 
the subject of the complaint is greater than (less than) the Reference 
Price, described in proposed BZX Rule 11.17(d), by an amount that 
equals or exceeds the applicable Percentage Parameter defined in 
Appendix A to the LULD Plan (``Percentage Parameters'').\21\
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    \20\ See id. The Exchange also proposes to delete paragraph (f) 
of BZX Rule 11.17, System Disruption or Malfunctions.
    \21\ See id.
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    Finally, the Exchange proposes to allow for CEE review of 
transactions during RTH in limited cases when the Reference Price, 
described in proposed BZX Rule 11.17(d), is determined to be erroneous 
by an Officer of the Exchange. Specifically, a transaction executed 
during RTH would be eligible for clearly erroneous review pursuant to 
proposed BZX Rule 11.17(c)(1)(C), if the transaction involved, in the 
case of (1) a corporate action or new issue or (2) a security that 
enters a Trading Pause \22\ pursuant to the LULD Plan and resumes 
trading without an auction,\23\ a Reference Price that is determined to 
be erroneous by an Officer of the Exchange.\24\ In such circumstances, 
the Exchange may use a different Reference Price pursuant to proposed 
BZX Rule 11.17(d)(2).\25\
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    \22\ ``Trading Pause'' refers to the term provided in Section 
I(V) of the LULD Plan.
    \23\ The Exchange states that the ``resumption of trading 
without an auction'' provision of the proposed rule text applies 
only to securities that enter a Trading Pause pursuant to the LULD 
Plan and does not apply to a corporate action or new issue. See 
Notice, supra note 3, at 42763, n.22.
    \24\ See id. at 42763.
    \25\ See id.
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    In the context of a corporate action or a new issue under proposed 
BZX Rule 11.17(c)(1)(C), when determining whether the Reference Price 
is erroneous, the Exchange will examine whether such Reference Price 
clearly deviated from the theoretical value of the security.\26\ In 
such cases, the Exchange will consider a number of factors to determine 
a new Reference Price that is based on the theoretical value of the 
security, including but not limited to, the offering price of the new 
issue, the ratio of the stock split applied to the prior day's closing 
price, the theoretical price derived from the numerical terms of the 
corporate action transaction such as the exchange ratio and spin-off 
terms, and for an OTC up-listing, the price of the security as provided 
in the prior day's FINRA Trade Data Dissemination Service final closing 
report.\27\ In the foregoing instances, the theoretical value of the 
security will be used as the new Reference Price when applying the 
Percentage Parameters under the LULD Plan (or Numerical Guidelines if 
the transaction is in an NMS Stock that is not subject to the LULD 
Plan) to determine whether executions would be cancelled as clearly 
erroneous.\28\
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    \26\ See id.
    \27\ See proposed BZX Rule 11.17(d)(2).
    \28\ See Notice, supra note 3, at 42763.
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    In the context where a security that enters a LULD Trading Pause 
and resumes trading without an auction (i.e., reopens with quotations) 
under proposed BZX Rule 11.17(c)(1)(C), the Reference Price will be the 
last effective Price Band that was in a limit state before the Trading 
Pause.\29\
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    \29\ See proposed BZX Rule 11.17(d)(2). The Exchange states that 
the LULD Plan requires that the new Reference Price in this instance 
be established by using the midpoint of the best bid and offer 
(``BBO'') on the primary listing exchange at the reopening time. See 
Notice, supra note 3, at 42763. The Exchange states that this can 
result in a Reference Price and subsequent Price Band calculation 
that is significantly away from the security's last traded or more 
relevant price, especially in less liquid names. See id. Thus, the 
Exchange proposes to use a Reference Price that is based on the 
prior LULD Price Band that triggered the Trading Pause, rather than 
the midpoint of the BBO. See id.
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    Proposed BZX Rule 11.17(c)(1)(C) also provides that a transaction 
subject to review pursuant to this paragraph shall be found to be 
clearly erroneous if the price of the transaction to buy (sell) that is 
the subject of the complaint is greater than (less than) the new 
Reference Price, described in proposed BZX Rule 11.17(d)(2), by an 
amount that equals or exceeds the applicable Numerical Guidelines or 
Percentage Parameters, as applicable depending on whether the security 
is subject to the LULD Plan.\30\
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    \30\ The Percentage Parameters will apply to all transactions 
except those in an NMS Stock that is not subject to the LULD Plan, 
as described in proposed BZX Rule 11.17(c)(1)(A). See id. at 42763.
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C. Review of Transactions During the Early Trading, Pre-Opening, and 
After Hours Sessions

    The Exchange proposes to move existing paragraphs (c)(2), (c)(3), 
and (d)

[[Page 55062]]

of BZX Rule 11.17 to proposed paragraph (c)(2)(B), (c)(2)(C), and 
(C)(2)(D) of BZX Rule 11.17, respectively, as Multi-Stock Events, 
Additional Factors, and Outlier Transactions will only be subject to 
review and consideration using the Numerical Guidelines if those NMS 
Stocks are not subject to the LULD Plan or occur during the Early 
Trading, Pre-Opening, and After Hours Sessions.\31\ Additionally, the 
Exchange proposes to add rule text in renumbered paragraph (f) of BZX 
Rule 11.17, Officer Acting on Own Motion, to specify that an Officer of 
the Exchange or senior level employee designee, acting on his or her 
own motion, may review potentially erroneous transactions that occur 
only during Early Trading, Pre-Opening, or After Hours Sessions, or 
that are eligible for review pursuant to proposed BZX Rule 11.17(c)(1).
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    \31\ See id.
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    The Exchange also proposes to modify the Numerical Guidelines 
applicable to leveraged ETF/ETN securities during RTH.\32\ As leveraged 
ETF/ETN securities are subject to LULD and thus the Percentage 
Parameters will be applicable during RTH, the Exchange proposes to 
eliminate the Numerical Guidelines for leveraged ETF/ETN securities 
traded during RTH.\33\
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    \32\ See id.
    \33\ See id.
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    Finally, the Exchange proposes to make conforming edits to update 
applicable rule references throughout BZX Rule 11.17.

D. Reference Price

    As proposed, the Reference Price used will continue to be equal to 
the consolidated last sale immediately prior to the execution(s) under 
review.\34\ The Exchange also proposes to allow for an alternate 
Reference Price to be used as prescribed in proposed paragraphs (d)(1), 
(2), and (3) of BZX Rule 11.17.\35\ Specifically, the Reference Price 
may be a value other than the consolidated last sale immediately prior 
to the execution(s) under review (1) in the case of Multi-Stock Events 
involving twenty or more securities,\36\ (2) in the case of an 
erroneous Reference Price (as described above in proposed BZX Rule 
11.17(c)(1)(C)),\37\ or (3) in other circumstances, such as, for 
example, relevant news impacting a security or securities, periods of 
extreme market volatility, sustained illiquidity, or widespread system 
issues, where use of a different Reference Price is necessary for the 
maintenance of a fair and orderly market and the protection of 
investors and the public interest, provided that such circumstances 
occurred during Early Trading, Pre-Opening or After-Hours Session, or 
are eligible for review pursuant to BZX Rule 11.17(c)(1)(A).\38\
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    \34\ See proposed BZX Rule 11.17(d). The Exchange states that 
continuing to use the consolidated last sale as the Reference Price 
is necessary for operational efficiency as it may not be possible to 
perform a timely CEE review if doing so required computing the 
arithmetic mean price of eligible reported transactions over the 
past five minutes, as contemplated by the LULD Plan. See Notice, 
supra note 3, at 42764. The Exchange states that while this means 
that there will still be some differences between the Price Bands 
and the clearly erroneous parameters, the Exchange believes that 
this difference is reasonable in light of the need to ensure timely 
review if clearly erroneous rules are invoked. Id.
    \35\ See id.
    \36\ See proposed BZX Rule 11.17(d)(1).
    \37\ See proposed BZX Rule 11.17(d)(2).
    \38\ See proposed BZX Rule 11.17(d)(3).
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E. Appeals

    The Exchange proposes to eliminate paragraph (f) of BZX Rule 11.17, 
System Disruption or Malfunction. Pursuant to proposed BZX Rule 
11.17(c)(1)(B), transactions occurring during RTH that are executed 
outside of the Price Bands due to an Exchange technology or system 
issue, may be subject to clearly erroneous review pursuant to proposed 
paragraph (g) of BZX Rule 11.17. The Exchange believe that the 
elimination of paragraph (f) of BZX Rule 11.17 will remove overlapping 
provisions in the proposal.\39\ Accordingly, the Exchange proposes to 
remove from paragraph (e)(2), Appeals, each reference to paragraph (f), 
and include language referencing proposed paragraph (g), Transactions 
Occurring Outside of the LULD Plan Price Bands.
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    \39\ See Notice, supra note 3, at 42765.
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F. Trade Nullification for UTP Securities That Are the Subject of 
Initial Public Offerings

    Current paragraph (h) of BZX Rule 11.17 provides different 
procedures for conducting CEE review in initial public offering 
(``IPO'') securities that are traded pursuant to unlisted trading 
privileges (``UTP'') after the initial opening of such IPO securities 
on the listing market. The Exchange states that it no longer believes 
that this provision is necessary as opening transactions on the 
Exchange following an IPO are subject to Price Bands pursuant to the 
LULD Plan.\40\ Accordingly, the Exchange proposes to eliminate this 
provision in connection with the broader changes to CEE review during 
RTH.\41\
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    \40\ See Notice, supra note 3, at 42765.
    \41\ See id.
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G. Securities Subject to Limit Up-Limit Down Plan

    The Exchange proposes to renumber paragraph (i) to paragraph (h) 
based on the proposal to eliminate existing paragraph (h), to rename 
the paragraph to provide for transactions occurring outside of LULD 
Price Bands, and to eliminate redundant language from proposed 
paragraph (h).\42\ The Exchange also proposes to update references to 
the LULD Plan and Price Bands so that they are uniform throughout BZX 
Rule 11.17 and to update rule references throughout the paragraph to 
conform to the structural changes described above.\43\
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    \42\ See id.
    \43\ See id.
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H. Multi-Day Event and Trading Halts

    The Exchange proposes to renumber paragraphs (j) and (k) to 
paragraphs (h) and (i), respectively.\44\ Additionally, the Exchange 
proposes to modify the text of both paragraphs to reference the 
Percentage Parameters as well as the Numerical Guidelines.\45\ 
Specifically, the Exchange proposes to amend the rule text to provide 
that any action taken in connection with paragraphs (h) and (i) will be 
taken without regard to the Percentage Parameters or Numerical 
Guidelines set forth in BZX Rule 11.17, with the Percentage Parameters 
being applicable to an NMS Stock subject to the LULD Plan and the 
Numerical Guidelines being applicable to an NMS Stock not subject to 
the LULD Plan.\46\
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    \44\ See id.
    \45\ See id.
    \46\ See id.
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I. Implementation Date

    In order to ensure that the other equity exchanges and FINRA are 
able to adopt rules consistent with this proposal and to coordinate the 
effectiveness of such harmonized rules, the Exchange proposes to delay 
the effectiveness of this proposal to October 1, 2022.\47\
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    \47\ See Amendment No. 2.
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III. Discussion and Commission Findings

    The Commission finds that the proposed rule change, as modified by 
Amendment Nos.1 and 2, is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\48\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment

[[Page 55063]]

Nos. 1 and 2, is consistent with the requirements of Section 6(b) of 
the Act \49\ and with Section 6(b)(5) of the Act,\50\ which requires, 
among other things, that the Exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \48\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \49\ 15 U.S.C. 78f(b).
    \50\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal to make the CEE pilot 
permanent will help assure greater objectivity, transparency, and 
clarity with respect to the CEE review process. When the Commission 
originally approved the CEE pilot, it explained that the changes were 
``being implemented on a pilot basis so that the Commission and the 
Exchanges can monitor the effects of the pilot on the markets and 
investors, and consider appropriate adjustments, as necessary.'' \51\ 
The Exchange represents that, since that time, the equity exchanges and 
FINRA have gained considerable experience in the operation of the rule 
and that the pilot has provided greater certainty and transparency to 
the process for conducting CEE reviews.\52\ In particular, the Exchange 
states that the pilot has reduced the discretion of the equities 
exchanges and FINRA to deviate from the objective standards in their 
respective rules when dealing with potentially erroneous 
transactions.\53\ Accordingly, the Commission finds that approving the 
CEE pilot as a permanent program is designed to continue to provide 
members and investors greater certainty and transparency in the CEE 
review process, thus furthering fair and orderly markets, the 
protection of investors, and the public interest.
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    \51\ See CEE Pilot Approval Order, supra note 6, at 56618.
    \52\ See Notice, supra note 3, at 42765.
    \53\ See id. at 42761.
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    The Commission also finds that applying the LULD mechanism in place 
of CEE review during RTH except for limited circumstances is consistent 
with the Act and will further the goal of providing greater certainty 
to market participants that trades executed within the Price Bands will 
stand and not be broken. Since the introduction of the LULD mechanism 
in 2013, the Exchange represents that clearly erroneous trades are 
largely prevented by the requirement that trades be executed within the 
Price Bands.\54\ Additionally, the Exchange states that the LULD 
mechanism may provide greater investor protections as it prevents 
erroneous trades that are outside the Price Bands from being executed 
in the first place.\55\ Thus, the proposal is designed to limit the 
potential discordance between the LULD mechanism and CEE review 
process.
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    \54\ See id. at 42762.
    \55\ See id.
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    Additionally, the Commission believes that limiting the 
availability of CEE review during RTH to a few exceptional 
circumstances furthers the goal of providing transparency and certainty 
to market participants while also balancing the need for flexibility to 
address a narrow set of circumstances during RTH for the protection of 
investors and the public interest. Specifically, in the context of 
transactions that resulted from certain systems issues, CEE review 
would only be permitted for transactions that would not have occurred 
if the Price Bands had been available or transactions that would not 
have occurred because a primary listing market for a security declared 
a halt, suspension, or pause. Additionally, in the case of a corporate 
action or a new issue, and a security that enters a Trading Pause 
pursuant to the LULD Plan and resumes trading without an auction, the 
Exchange represents that CEE reviews in such cases represent very 
limited circumstances and will only occur if the Reference Price of a 
security clearly deviates from the security's theoretical value.\56\
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    \56\ See id. at 42765.
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    At the same time, the proposed rules in these limited circumstances 
expressly delineate the boundaries for determining an erroneous 
Reference Price and subject the Exchange to specific considerations 
when determining a new Reference Price. In these instances, the result 
of an erroneous Reference Price that clearly deviated from the 
theoretical value of the security (e.g., due to a bad first trade for a 
new issue) can result in subsequent Price Bands being calculated from 
that incorrect Reference Price, thus diminishing the investor 
protections under the LULD Plan for the trades that occurred within the 
erroneous Price Bands and with no remedy to request clearly erroneous 
review. In the context of the Trading Pause circumstance, the proposal 
defines the new Reference Price to be the last effective Price Band 
that was in a limit state before the Trading Pause.\57\ In the context 
of a corporate action or new issue, the proposal describes certain 
objective factors that will be used to determine a new reference price 
based on the theoretical value of the security.\58\ Accordingly, the 
Commission finds that these limited circumstances for CEE review are 
narrowly tailored and designed to provide market participants with 
greater transparency and certainty to the process of breaking trades.
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    \57\ See proposed BZX Rule 11.17(d)(2).
    \58\ See id.
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    Furthermore, the Commission believes that the conforming and 
organizational updates to the CEE rule that are designed to improve the 
readability and clarity of the CEE review process will remove 
impediments to a free and open market and will ultimately benefit 
investors, particularly those involved in the process of breaking 
trades.
    Finally, the Exchange represents that the other U.S. equities 
exchanges and FINRA will file largely identical proposals to make their 
respective clearly erroneous pilots permanent.\59\ Accordingly, the 
proposed rule change also should help assure consistent results in 
handling erroneous trades across the U.S. equities markets, thus 
furthering fair and orderly markets, the protection of investors, and 
the public interest. The Commission notes that the proposed rule change 
will become operative on October 1, 2022. This delayed implementation 
is to ensure that the other equities exchanges and FINRA will have 
sufficient time to adopt rules consistent with this proposal.
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    \59\ See id. at 42766.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\60\ that the proposed rule change, as modified by Amendment Nos. 1 
and 2 (SR-CboeBZX-2022-037), be, and hereby is, approved.
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    \60\ 15 U.S.C. 78s(b)(2).
    \61\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\61\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19351 Filed 9-7-22; 8:45 am]
BILLING CODE 8011-01-P