Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 5.1(c) Regarding the Requirements for the Listing of Securities That Are Issued by the Exchange or Any of Its Affiliates, 86033-86036 [2016-28635]

Download as PDF Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices Exchange believes that it is necessary to have the ability to systematically enforce the requirements of Phlx Rule 1080(l)(ii) with respect to Directed Complex Orders to assure that the Exchange’s Directed Complex Order rules operate as intended. Accordingly, the Exchange requests a waiver of the 30-day operative delay to allow the Exchange to discontinue the participation allocation for Directed Complex Orders prior to December 1, 2016.17 The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the proposed rule change will allow the Exchange to discontinue the participation allocation for Directed Complex Orders until the Exchange is able to systematically enforce the requirements of Phlx Rule 1080(l)(ii) with respect to Directed Complex Orders.18 Accordingly, the Commission designates the proposed rule change to be operative upon filing.19 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 asabaliauskas on DSK3SPTVN1PROD with NOTICES • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or 17 As noted above, the Exchange may seek to offer a participation allocation for Directed Complex Orders after the Exchange has the ability to systematically enforce the requirements of Phlx Rule 1080(l)(ii) with respect to Directed Complex Orders. 18 The Commission also notes that the Exchange stated that if it intends to offer a participation allocation for Directed Complex Orders in the future it will file a proposed rule change with the Commission. 19 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). VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2016–116 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments 86033 [Release No. 34–79376; File No. SR– NYSEARCA–2016–147] • 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–Phlx–2016–116. 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 Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site 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–Phlx– 2016–116 and should be submitted on or before December 20, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–28632 Filed 11–28–16; 8:45 am] BILLING CODE 8011–01–P Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca Equities Rule 5.1(c) Regarding the Requirements for the Listing of Securities That Are Issued by the Exchange or Any of Its Affiliates November 22, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 10, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 5.1(c) regarding the requirements for the listing of securities that are issued by the Exchange or any of its affiliates. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization 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 those 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 parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 20 17 PO 00000 CFR 200.30–3(a)(12). Frm 00114 Fmt 4703 Sfmt 4703 E:\FR\FM\29NON1.SGM 29NON1 86034 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices constitutes an ‘‘affiliate of the Corporation.’’ By contrast, Rule 497 provides the relevant criteria in its definition of ‘‘ICE Affiliate’’: 1. Purpose asabaliauskas on DSK3SPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change ‘‘ICE Affiliate’’ means ICE and any entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with ICE, where ‘‘control’’ means that one entity possesses, directly or indirectly, voting control of the other entity either through ownership of capital stock or other equity securities or through majority representation on the board of directors or other management body of such entity.7 The Exchange proposes to amend NYSE Arca Equities Rule 5.1(c) (Listing of an Affiliate or Entity that Operates and/or Owns a Trading System or Facility of the Corporation) (‘‘Rule 5.1(c)’’) regarding the requirements for the listing of securities that are issued by the Exchange or any of its affiliates. The proposed changes are based on Rule 497 of the Exchange’s affiliate New York Stock Exchange LLC (‘‘NYSE’’) and Rule 497-Equities of the Exchange’s affiliate NYSE MKT LLC (‘‘NYSE MKT’’) (together, ‘‘Rule 497’’).4 The Exchange proposes to amend Rule 5.1(c) to be substantially similar to Rule 497, thereby expanding the Rule 5.1(c) requirements. Rule 5.1(c) provides that if a ‘‘security of an affiliate of the Corporation or any entity that operates and/or owns a trading system or facility of the Corporation’’ is listed pursuant to the rules of NYSE Arca Equities, then NYSE Arca Equities shall: 5 • File monthly reports with the Securities and Exchange Commission (‘‘Commission’’) regarding its monitoring of the issuer’s compliance with listing standards and trading in the security; • have an independent accounting firm conduct an annual review of compliance with listing standards and provide a copy of the review to the Commission; and • notify any non-compliant issuer and provide the Commission with information regarding the noncompliance and plan of remediation. Rule 497 sets forth similar reporting requirements regarding securities issued by the Exchange’s ultimate parent, Intercontinental Exchange, Inc. (‘‘ICE’’), and its affiliates. However, Rule 497 goes further in its requirements than Rule 5.1(c) in several ways. First, in its first sentence, Rule 5.1(c) states that securities ‘‘of an affiliate of the Corporation or any entity that operates and/or owns a trading system or facility of the Corporation’’ 6 are subject to its requirements. However, Rule 5.1(c) does not define what 4 NYSE Rule 497 and NYSE MKT Rule 497Equities are substantially similar. See Securities Exchange Act Release Nos. 79130 (October 21, 2016), 81 FR 74847 (October 27, 2016) (SR–NYSE– 2016–67) and 79132 (October 21, 2016), 81 FR 74851 (October 27, 2016) (SR–NYSEMKT–2016– 94). 5 Rule 5.1(c). 6 Id. VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 A second, substantive difference between the rules is that, unlike Rule 5.1(c), Rule 497 applies not just to securities issued by ICE Affiliates, but also to any listed option on such securities, as set forth in the definition of ‘‘Affiliate Security.’’ 8 Also unlike Rule 5.1(c), Rule 497 has pre-listing requirements that must be met before any Affiliate Security can be listed, including pre-listing approval by the relevant Regulatory Oversight Committee (each, a ‘‘ROC’’) of the board of directors.9 Finally, Rule 497 requires quarterly, not monthly reports, and both the quarterly and annual reports must be provided to the relevant ROC.10 The Exchange proposes to include the definitions of ‘‘ICE Affiliate’’ and ‘‘Affiliate Security’’ in revised Rule 5.1(c), adding them as a new subparagraph (a), together with a definition of ‘‘NYSE Arca Equities, Inc.’’ stating that it is a wholly owned subsidiary of ICE. A new sub-paragraph (b) would incorporate the Rule 497 pre-listing requirements. The existing reporting requirements would be included as subparagraphs (c)(1)–(c)(3), the text of which would be revised consistent with Rule 497. As a result of such changes, under the proposed Rule 5.1(c), prior to listing any security issued by an ICE Affiliate or a new class of options on a security issued by an ICE Affiliate, Exchange regulatory staff would be required to make a finding that the security or option class satisfied the Exchange’s rules for listing, and the Exchange’s ROC would be required to approve such finding. Throughout the continued 7 NYSE Rule 497(a)(1) and NYSE MKT Rule 497— Equities(a)(1). ICE is the Exchange’s ultimate parent. Unlike Rule 5.1(c), under Rule 497 an entity that operates and/or owns a trading system or facility of the relevant exchange would not be an ICE Affiliate unless it meets the definition’s control requirements. 8 NYSE Rule 497(a)(2) and NYSE MKT Rule 497— Equities(a)(2). 9 NYSE Rule 497(b) and NYSE MKT Rule 497— Equities(b). 10 NYSE Rule 497(c)(1)–(2) and NYSE MKT Rule 497—Equities(c)(1)–(2). PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 listing and trading of the Affiliate Security on the Exchange, NYSE Arca Equities would prepare quarterly reports and have annual reviews conducted by an independent accounting firm, providing copies of both reports to the Commission and the Exchange’s ROC. Finally, if an Affiliate Security were not in compliance with listing standards, Exchange regulatory staff would notify the issuer, request a plan of compliance, and provide the Commission with information regarding the noncompliance and plan of compliance. Rule 497 requires that the quarterly report describe the monitoring of the Affiliate Security’s compliance with applicable listing standards, including the Affiliate Security’s compliance with both the minimum share price requirement and the quantitative listing requirements. Because NYSE Arca Equities requirements differ from those of NYSE and NYSE MKT, proposed Rule 5.1(c)(1) would include ‘‘bid price requirement’’ in place of ‘‘minimum share price requirement’’ 11 and ‘‘quantitative and qualitative maintenance requirements’’ in place of ‘‘quantitative listing requirements.’’ 12 Proposed Rule 5.1(c) would also differ from Rule 497 in that it would refer to the Corporation as well as the Exchange. Finally, the Exchange notes that the proposed Rule 5.1(c) would be consistent with Bats BZX Exchange, Inc. (‘‘BZX’’) Rule 14.3 regarding requirements for the listing of securities listed by BZX or any of its affiliates.13 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Exchange Act 14 in general, and Section 6(b)(5) 15 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and 11 See NYSE Arca Equities Rule 5.5(b)(4) (Common Stock—Select Market Companies, Equity Securities and Similar Issues) (maintenance requirement of a share bid price of at least $3) and NYSE Arca Equities Rule 5.5(h)(4) (Common Stock—Development Stage Companies) (maintenance requirement of a share bid price of at least $1). 12 The NYSE Arca Equities rules regarding maintenance requirements provide that the Exchange may consider qualitative factors in determining whether maintenance requirements have been met. See NYSE Arca Equities Rule 5.5(b).02; NYSE Arca Equities NYSE Arca Equities Rule 5.5(g)(1)(C) (Unit Investment Trusts (‘‘UITs’’)); Rule 5.5(g)(2)(a) (Investment Company Units); NYSE Arca Equities Rule 5.5(h).02 and NYSE Arca Equities Rule 5.5(l) (Other Reasons for Suspending or Delisting). 13 See Securities Exchange Act Release No. 77639 (April 18, 2016), 81 FR 23768 (April 22, 2016) (SR– BatsBZX–2016–08). 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). E:\FR\FM\29NON1.SGM 29NON1 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, 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. Specifically, the Exchange believes that the proposed rule change would remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, protect investors and the public interest by requiring heightened oversight of the listing and trading on the Exchange of Affiliate Securities and related reporting to the Commission and the ROC. The proposed changes would help protect against concerns that the Exchange will not effectively enforce its rules with respect to the listing and trading of such securities. The proposed defined terms would add clarity regarding what entities would be considered to be an affiliate and what securities fall within the scope of the rule. Expanding Rule 5.1(c) to incorporate Exchange-listed options on any security issued by an ICE Affiliate and require pre-listing requirements would strengthen the rule’s requirements. In addition, the proposed changes would enhance reporting requirements by requiring NYSE Arca Equities to provide copies of both the annual and quarterly reports to the Commission and the Exchange’s ROC. For these reasons, the Exchange believes that the proposed amendments to Rule 5.1(c) would continue to eliminate any perception of a potential conflict of interest if an ICE Affiliate seeks to list a security on the Exchange. The proposed changes will provide greater harmonization between NYSE Arca Equities, NYSE and NYSE MKT rules of similar purpose, resulting in more comparable and consistent information being provided to the Commission and ROCs. As such, the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The proposed rule change is not intended to address competitive issues but rather provide market participants with additional specificity and VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 transparency regarding the Exchange’s controls that are in place to address the potential conflicts of interest that may arise in the listing of Affiliate Securities on the Exchange. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the 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 19(b)(3)(A) of the Act 16 and Rule 19b– 4(f)(6) thereunder.17 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 18 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 19 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange notes that the proposed rule change would amend Rule 5.1(c) to be substantially similar to Rule 497 of its affiliates NYSE and NYSE MKT, which would result in enhancing the Rule 5.1(c) requirements. The Exchange believes that the proposed rule change would provide market participants with additional specificity and transparency regarding the Exchange’s controls that are in place to address the potential conflicts of interest that may arise in the listing of Affiliate Securities on the Exchange. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to implement the proposed 16 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 18 17 CFR 240.19b–4(f)(6). 19 17 CFR 240.19b–4(f)(6)(iii). 17 17 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 86035 changes to Rule 5.1(c) without delay. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.20 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 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEARCA–2016–147 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–NYSEARCA–2016–147. 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 Web site (https:// www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be 20 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). E:\FR\FM\29NON1.SGM 29NON1 86036 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices available for Web site 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– NYSEARCA–2016–147, and should be submitted on or before December 20, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–28635 Filed 11–28–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79379; File No. SR– NYSEArca–2016–89] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Change, as Modified by Amendment No. 1, Amending the Co-location Services Offered by the Exchange To Add Certain Access and Connectivity Fees asabaliauskas on DSK3SPTVN1PROD with NOTICES November 22, 2016. I. Introduction On August 16, 2016, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) 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 (1) to provide additional information regarding access to various trading and execution services; connectivity to market data feeds and testing and certification feeds; connectivity to Third Party Systems; and connectivity to DTCC provided to Users using data center local area networks; and (2) to establish fees relating to a User’s access to various trading and execution services; connectivity to market data feeds and 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 testing and certification feeds; connectivity to DTCC; and other services. The proposed rule change was published for comment in the Federal Register on August 26, 2016.3 The Commission received no comments in response to the proposed rule change.4 On October 4, 2016, the Commission extended the time period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change to November 24, 2016.5 On November 2, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.6 The Commission is publishing this order to solicit comments on Amendment No. 1 from interested persons and to institute proceedings pursuant to Exchange Act Section 19(b)(2)(B) to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1.7 Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to the proposed rule change, nor does it mean that the Commission will ultimately disapprove the proposed rule change. Rather, as discussed below, the Commission seeks additional input on the proposed rule change, as modified by Amendment No. 1, and on the issues presented by the proposal. II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 The proposed rule change seeks to amend the co-location services offered by the Exchange to (1) provide additional information regarding the access to trading and execution services and connectivity to data provided to Users with local area networks available in the data center; and (2) establish fees relating to a User’s 8 access to trading 3 See Securities Exchange Act Release No. 34– 78628 (August 22, 2016), 81 FR 59004 (‘‘Notice’’). 4 The Commission notes that it did receive one comment letter on a related filing, NYSE–2016–45, which is equally relevant to this filing. See letter to Brent J. Fields, Secretary, Commission, from John Ramsay, Chief Market Policy Officer, Investors Exchange LLC (IEX), dated September 9, 2016 (‘‘IEX Letter’’). On September 23, 2016, the NYSE submitted a response (‘‘Response Letter’’). 5 See Securities Exchange Act Release No. 34– 78967 (September 28, 2016), 81 FR 68480. 6 Amendment No. 1 is discussed further infra. Amendment No. 1 is available on the Commission’s Web site at https://www.sec.gov/comments/srnysearca-2016-89/nysearca201689-1.pdf. 7 15 U.S.C. 78s(b)(2)(B). 8 For purposes of the Exchange’s co-location services, a ‘‘User’’ means any market participant that requests to receive co-location services directly PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 and execution services; connectivity to data feeds and to testing and certification feeds; connectivity to clearing; and other services.9 Background and Access to Exchange Systems As discussed more fully in the Notice, a User can purchase access to the Liquidity Center Network (‘‘LCN’’) and/ or internet protocol (‘‘IP’’) network in the data center through the purchase of a 1, 10, or 40 Gb LCN circuit, a 10 Gb LX Circuit, bundled network access, Partial Cabinet Solution bundle, or 1, 10 or 40 Gb IP network access.10 The purchase of any of the LCN or IP network circuit options gives a User access 11 to the Exchange’s trading and execution systems, connectivity to the Exchange’s certification and testing feeds,12 and the ability to connect to any NYSE Data Product.13 More specifically, access to the Exchange’s trading and execution system provides a User with access to the Exchange’s ‘‘customer gateways that provide for order entry, order receipt (i.e. confirmation that an order has been received), receipt of drop copies and trade reporting (i.e. whether a trade is executed or cancelled), as well as for sending information to shared data services for clearing and settlement.’’ 14 The Exchange seeks to add clarifying language in its proposed from the Exchange. See Securities Exchange Act Release No. 76008 (September 29, 2015), 80 FR 60190 (October 5, 2015) (SR–NYSE–2015–40). As specified in the Fee Schedules, a User that incurs co-location fees for a particular co-location service pursuant thereto would not be subject to co-location fees for the same co-location service charged by the Exchange’s affiliates NYSE MKT LLC (‘‘NYSE MKT’’) and NYSE Arca, Inc. (‘‘NYSE Arca’’ and, together with NYSE MKT, the ‘‘Affiliate SROs’’). See Securities Exchange Act Release No. 70206 (August 15, 2013), 78 FR 51765 (August 21, 2013) (SR–NYSE–2013–59). 9 See Notice, supra note 3, 81 FR at 59004–59005. 10 See id. at 59005. 11 The purchase of access is subject to receiving authorization from the NYSE, NYSE MKT or NYSE Arca for the Included Data Products, as applicable. See id. at 59005 n.10. 12 Certification feeds are used to certify that a User conforms to any relevant technical requirements for receipt of data or access to Exchange systems. Testing feeds, which do not carry live production data, provide Users with an environment to conduct tests with the non-live data, including testing for upcoming Exchange releases and product enhancements or the User’s own software development. See id. at 59005. These feeds are only available over the IP network, however a User without an IP network connection may obtain an IP network circuit for purposes of testing and certification for free for three months. See id. at 59005 n.12. 13 See id. at 59005. 14 See id. at 59006.The Exchange represents that connectivity to the Exchange systems can be obtained without the purchase of access to the LCN or IP network. See id. E:\FR\FM\29NON1.SGM 29NON1

Agencies

[Federal Register Volume 81, Number 229 (Tuesday, November 29, 2016)]
[Notices]
[Pages 86033-86036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28635]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79376; File No. SR-NYSEARCA-2016-147]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Arca 
Equities Rule 5.1(c) Regarding the Requirements for the Listing of 
Securities That Are Issued by the Exchange or Any of Its Affiliates

November 22, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 10, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 5.1(c) 
regarding the requirements for the listing of securities that are 
issued by the Exchange or any of its affiliates. The proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, 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 self-regulatory organization 
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 those 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 parts of such statements.

[[Page 86034]]

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

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 5.1(c) 
(Listing of an Affiliate or Entity that Operates and/or Owns a Trading 
System or Facility of the Corporation) (``Rule 5.1(c)'') regarding the 
requirements for the listing of securities that are issued by the 
Exchange or any of its affiliates. The proposed changes are based on 
Rule 497 of the Exchange's affiliate New York Stock Exchange LLC 
(``NYSE'') and Rule 497-Equities of the Exchange's affiliate NYSE MKT 
LLC (``NYSE MKT'') (together, ``Rule 497'').\4\ The Exchange proposes 
to amend Rule 5.1(c) to be substantially similar to Rule 497, thereby 
expanding the Rule 5.1(c) requirements.
---------------------------------------------------------------------------

    \4\ NYSE Rule 497 and NYSE MKT Rule 497-Equities are 
substantially similar. See Securities Exchange Act Release Nos. 
79130 (October 21, 2016), 81 FR 74847 (October 27, 2016) (SR-NYSE-
2016-67) and 79132 (October 21, 2016), 81 FR 74851 (October 27, 
2016) (SR-NYSEMKT-2016-94).
---------------------------------------------------------------------------

    Rule 5.1(c) provides that if a ``security of an affiliate of the 
Corporation or any entity that operates and/or owns a trading system or 
facility of the Corporation'' is listed pursuant to the rules of NYSE 
Arca Equities, then NYSE Arca Equities shall: \5\
---------------------------------------------------------------------------

    \5\ Rule 5.1(c).
---------------------------------------------------------------------------

     File monthly reports with the Securities and Exchange 
Commission (``Commission'') regarding its monitoring of the issuer's 
compliance with listing standards and trading in the security;
     have an independent accounting firm conduct an annual 
review of compliance with listing standards and provide a copy of the 
review to the Commission; and
     notify any non-compliant issuer and provide the Commission 
with information regarding the non-compliance and plan of remediation.
    Rule 497 sets forth similar reporting requirements regarding 
securities issued by the Exchange's ultimate parent, Intercontinental 
Exchange, Inc. (``ICE''), and its affiliates. However, Rule 497 goes 
further in its requirements than Rule 5.1(c) in several ways.
    First, in its first sentence, Rule 5.1(c) states that securities 
``of an affiliate of the Corporation or any entity that operates and/or 
owns a trading system or facility of the Corporation'' \6\ are subject 
to its requirements. However, Rule 5.1(c) does not define what 
constitutes an ``affiliate of the Corporation.'' By contrast, Rule 497 
provides the relevant criteria in its definition of ``ICE Affiliate'':
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    \6\ Id.

    ``ICE Affiliate'' means ICE and any entity that directly or 
indirectly, through one or more intermediaries, controls, is 
controlled by, or is under common control with ICE, where 
``control'' means that one entity possesses, directly or indirectly, 
voting control of the other entity either through ownership of 
capital stock or other equity securities or through majority 
representation on the board of directors or other management body of 
such entity.\7\
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    \7\ NYSE Rule 497(a)(1) and NYSE MKT Rule 497--Equities(a)(1). 
ICE is the Exchange's ultimate parent. Unlike Rule 5.1(c), under 
Rule 497 an entity that operates and/or owns a trading system or 
facility of the relevant exchange would not be an ICE Affiliate 
unless it meets the definition's control requirements.

    A second, substantive difference between the rules is that, unlike 
Rule 5.1(c), Rule 497 applies not just to securities issued by ICE 
Affiliates, but also to any listed option on such securities, as set 
forth in the definition of ``Affiliate Security.'' \8\ Also unlike Rule 
5.1(c), Rule 497 has pre-listing requirements that must be met before 
any Affiliate Security can be listed, including pre-listing approval by 
the relevant Regulatory Oversight Committee (each, a ``ROC'') of the 
board of directors.\9\ Finally, Rule 497 requires quarterly, not 
monthly reports, and both the quarterly and annual reports must be 
provided to the relevant ROC.\10\
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    \8\ NYSE Rule 497(a)(2) and NYSE MKT Rule 497--Equities(a)(2).
    \9\ NYSE Rule 497(b) and NYSE MKT Rule 497--Equities(b).
    \10\ NYSE Rule 497(c)(1)-(2) and NYSE MKT Rule 497--
Equities(c)(1)-(2).
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    The Exchange proposes to include the definitions of ``ICE 
Affiliate'' and ``Affiliate Security'' in revised Rule 5.1(c), adding 
them as a new sub-paragraph (a), together with a definition of ``NYSE 
Arca Equities, Inc.'' stating that it is a wholly owned subsidiary of 
ICE. A new sub-paragraph (b) would incorporate the Rule 497 pre-listing 
requirements. The existing reporting requirements would be included as 
sub-paragraphs (c)(1)-(c)(3), the text of which would be revised 
consistent with Rule 497.
    As a result of such changes, under the proposed Rule 5.1(c), prior 
to listing any security issued by an ICE Affiliate or a new class of 
options on a security issued by an ICE Affiliate, Exchange regulatory 
staff would be required to make a finding that the security or option 
class satisfied the Exchange's rules for listing, and the Exchange's 
ROC would be required to approve such finding. Throughout the continued 
listing and trading of the Affiliate Security on the Exchange, NYSE 
Arca Equities would prepare quarterly reports and have annual reviews 
conducted by an independent accounting firm, providing copies of both 
reports to the Commission and the Exchange's ROC. Finally, if an 
Affiliate Security were not in compliance with listing standards, 
Exchange regulatory staff would notify the issuer, request a plan of 
compliance, and provide the Commission with information regarding the 
non-compliance and plan of compliance.
    Rule 497 requires that the quarterly report describe the monitoring 
of the Affiliate Security's compliance with applicable listing 
standards, including the Affiliate Security's compliance with both the 
minimum share price requirement and the quantitative listing 
requirements. Because NYSE Arca Equities requirements differ from those 
of NYSE and NYSE MKT, proposed Rule 5.1(c)(1) would include ``bid price 
requirement'' in place of ``minimum share price requirement'' \11\ and 
``quantitative and qualitative maintenance requirements'' in place of 
``quantitative listing requirements.'' \12\ Proposed Rule 5.1(c) would 
also differ from Rule 497 in that it would refer to the Corporation as 
well as the Exchange.
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    \11\ See NYSE Arca Equities Rule 5.5(b)(4) (Common Stock--Select 
Market Companies, Equity Securities and Similar Issues) (maintenance 
requirement of a share bid price of at least $3) and NYSE Arca 
Equities Rule 5.5(h)(4) (Common Stock--Development Stage Companies) 
(maintenance requirement of a share bid price of at least $1).
    \12\ The NYSE Arca Equities rules regarding maintenance 
requirements provide that the Exchange may consider qualitative 
factors in determining whether maintenance requirements have been 
met. See NYSE Arca Equities Rule 5.5(b).02; NYSE Arca Equities NYSE 
Arca Equities Rule 5.5(g)(1)(C) (Unit Investment Trusts (``UITs'')); 
Rule 5.5(g)(2)(a) (Investment Company Units); NYSE Arca Equities 
Rule 5.5(h).02 and NYSE Arca Equities Rule 5.5(l) (Other Reasons for 
Suspending or Delisting).
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    Finally, the Exchange notes that the proposed Rule 5.1(c) would be 
consistent with Bats BZX Exchange, Inc. (``BZX'') Rule 14.3 regarding 
requirements for the listing of securities listed by BZX or any of its 
affiliates.\13\
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    \13\ See Securities Exchange Act Release No. 77639 (April 18, 
2016), 81 FR 23768 (April 22, 2016) (SR-BatsBZX-2016-08).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act \14\ in general, and Section 
6(b)(5) \15\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and

[[Page 86035]]

equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that the proposed rule change 
would remove impediments to, and perfect the mechanism of a free and 
open market and a national market system and, in general, protect 
investors and the public interest by requiring heightened oversight of 
the listing and trading on the Exchange of Affiliate Securities and 
related reporting to the Commission and the ROC. The proposed changes 
would help protect against concerns that the Exchange will not 
effectively enforce its rules with respect to the listing and trading 
of such securities. The proposed defined terms would add clarity 
regarding what entities would be considered to be an affiliate and what 
securities fall within the scope of the rule. Expanding Rule 5.1(c) to 
incorporate Exchange-listed options on any security issued by an ICE 
Affiliate and require pre-listing requirements would strengthen the 
rule's requirements. In addition, the proposed changes would enhance 
reporting requirements by requiring NYSE Arca Equities to provide 
copies of both the annual and quarterly reports to the Commission and 
the Exchange's ROC. For these reasons, the Exchange believes that the 
proposed amendments to Rule 5.1(c) would continue to eliminate any 
perception of a potential conflict of interest if an ICE Affiliate 
seeks to list a security on the Exchange.
    The proposed changes will provide greater harmonization between 
NYSE Arca Equities, NYSE and NYSE MKT rules of similar purpose, 
resulting in more comparable and consistent information being provided 
to the Commission and ROCs. As such, the proposed rule change would 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act. The proposed rule 
change is not intended to address competitive issues but rather provide 
market participants with additional specificity and transparency 
regarding the Exchange's controls that are in place to address the 
potential conflicts of interest that may arise in the listing of 
Affiliate Securities on the Exchange.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the 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 
19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \18\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
notes that the proposed rule change would amend Rule 5.1(c) to be 
substantially similar to Rule 497 of its affiliates NYSE and NYSE MKT, 
which would result in enhancing the Rule 5.1(c) requirements. The 
Exchange believes that the proposed rule change would provide market 
participants with additional specificity and transparency regarding the 
Exchange's controls that are in place to address the potential 
conflicts of interest that may arise in the listing of Affiliate 
Securities on the Exchange. The Commission believes that waiver of the 
operative delay is consistent with the protection of investors and the 
public interest because it will allow the Exchange to implement the 
proposed changes to Rule 5.1(c) without delay. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\20\
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ 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 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEARCA-2016-147 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-NYSEARCA-2016-147. 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 Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be

[[Page 86036]]

available for Web site 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-NYSEARCA-2016-147, and should be submitted on or before 
December 20, 2016.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-28635 Filed 11-28-16; 8:45 am]
BILLING CODE 8011-01-P
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