The purpose of the proposed rule change is to extend the current pilot program related to Rule 7.10 (Clearly Erroneous Executions) to the close of business on October 20, 2022. The pilot program is currently due to expire on July 20, 2022.
On September 10, 2010, the Commission approved, on a pilot basis, changes to Rule 128 (Clearly Erroneous Executions) that, among other things: (i) provided for uniform treatment of clearly erroneous execution 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.
In 2013, the Exchange adopted a provision to Rule 128 designed to address the operation of the Plan.5 Finally, in 2014, the Exchange adopted two additional provisions to Rule 128 providing that: (i) a series of transactions in a particular security on one or more trading days may be viewed as one event if all such transactions were effected based on the same fundamentally incorrect or grossly misinterpreted issuance information resulting in a severe valuation error for all such transactions; and (ii) in the event of any disruption or malfunction in the operation of the electronic communications and trading facilities of an Exchange, another SRO, or responsible single plan processor in connection with the transmittal or receipt of a trading halt, an Officer, acting on his or her own motion, shall nullify any transaction that occurs after a trading halt has been declared by the primary listing market for a security and before such trading halt has officially ended according to the primary listing market. Rule 128 is no longer applicable to any securities that trade on the Exchange and has been replaced with Rule 7.10, which is substantively identical to Rule 128.
These changes were originally scheduled to operate for a pilot period to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility (the “Limit Up-Limit Down Plan” or “LULD Plan”), including any extensions to the pilot period for the LULD Plan.
In April 2019, the Commission approved an amendment to the LULD Plan for it to operate on a permanent, rather than pilot, basis. In light of that change, the Exchange amended Rules 7.10 and 128 to untie the pilot program’s effectiveness from that of the LULD Plan and to extend the pilot’s effectiveness to the close of business on October 18, 2019. The Exchange later amended Rule 7.10 to extend the pilot’s effectiveness to the close of business on April 20, 2020, October 20, 2020, April 20, 2021, October 20, 2021, April 20, 2022, and July 20, 2022.