Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Continued Listing Standards for Exchange Traded Products, 27748-27752 [2017-12456]

Download as PDF 27748 Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices options market to attract order volume away from larger competitors by adopting an innovative pricing strategy, as evidenced by the volume thresholds of the Program that represent fractions of 1% of OCC ADV. The Exchange notes that if the Program resulted in a modest percentage increase in the average daily trading volume in options executing on MIAX Options, while such percentage would represent a large volume increase for MIAX Options, it would represent a minimal reduction in volume of its larger competitors in the industry. The Exchange believes that the Program will help further competition, because market participants will have yet another option in determining where to execute orders and post liquidity if they factor the benefits of MIAX Options equity participation into the determination. The Exchange notes that other exchanges have engaged in the practice of incentivizing increased order flow in order to attract liquidity providers through equity sharing arrangements.17 In addition, the Exchange previously adopted substantially similar programs to incentivize increased order flow in order to attract liquidity providers through an equity sharing arrangement.18 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. sradovich on DSK3GMQ082PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,19 and Rule 19b–4(f)(2) 20 thereunder. 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. 17 See supra note 11. supra note 12. 19 15 U.S.C. 78s(b)(3)(A)(ii). 20 17 CFR 240.19b–4(f)(2). 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: 17:12 Jun 15, 2017 [FR Doc. 2017–12484 Filed 6–15–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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– MIAX–2017–28 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–MIAX–2017–28. 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–MIAX–2017–28 and should be submitted on or before July 7, 2017. 18 See VerDate Sep<11>2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Assistant Secretary. [Release No. 34–80905; File No. SR–IEX– 2017–14] Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Continued Listing Standards for Exchange Traded Products June 12, 2017. 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 June 5, 2017, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) 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 Pursuant to the provisions of Section 19(b)(1) under the Securities Exchange Act of 1934 (‘‘Act’’), and Rule 19b–4 thereunder, Investors Exchange LLC (‘‘IEX’’ or ‘‘Exchange’’) is filing with the Commission a proposed rule change to amend Chapter 16 of IEX Rules to add additional continued listing requirements for exchange traded products (‘‘ETP’’) listed under those rules, as well as a related amendment to IEX Rule 14.501 (Notification of Deficiency by IEX Regulation), and several clarifying and conforming changes to IEX Rules 14.101, 14.500, 14.501 and 14.505. The Exchange is also proposing various housekeeping changes throughout Chapter 16 for improved clarity. In addition, the Exchange is proposing to revise certain of the initial and continued listing standards applicable to Linked Securities and Index-Linked Exchangeable Notes in Rules 16.110 and 16.111 respectively. The Exchange has 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 21 17 Jkt 241001 PO 00000 CFR 200.30–3(a)(12). Frm 00074 Fmt 4703 Sfmt 4703 E:\FR\FM\16JNN1.SGM 16JNN1 Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices designated this proposal as noncontroversial and provided the Commission with the notice required by Rule 19b–4(f)(6)(iii) under the Act. The text of the proposed rule change is available at the Exchange’s Web site at www.iextrading.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 these statement may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose sradovich on DSK3GMQ082PROD with NOTICES The Exchange proposes to amend Chapter 16 of IEX Rules to add additional continued listing standards for products listed under those rules (i.e., ETPs), as well as a related amendment to IEX Rule 14.501 (Notification of Deficiency by IEX Regulation), and several clarifying and conforming changes to IEX Rules 14.101, 14.500, 14.501 and 14.505. The Exchange is also proposing various housekeeping changes throughout Chapter 16 (e.g., punctuation, formatting, capitalization and renumbering) for improved clarity. The Exchange does not currently list any ETPs.4 The proposed rule changes are based on substantially identical Nasdaq Stock Market (‘‘Nasdaq’’) rule changes that were recently approved by the Commission, or that have become effective.5 The listing rules, as amended 4 In connection with IEX’s Form 1 application for registration as a national securities exchange, the Commission approved rules applicable to the listing of ETPs on IEX. See Securities Exchange Act Release No. 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016). These IEX rules are modelled on Nasdaq’s rules applicable to the listing of ETPs on Nasdaq, except that IEX rules do not provide for the listing of currency warrants, alpha index securities and NextShares. Additionally, the continued listing requirements applicable to Managed Fund Shares under IEX Rule 16.135 are included in SR–IEX– 2017–03 (See, Securities Exchange Act Release No. 80545 (April 27, 2017), 82 FR 20648 (May 3, 2017)). 5 See, Securities Exchange Act Release No. 79784 (Jan. 12, 2017), 82 FR 6664 (January 19, 2017) (SR– VerDate Sep<11>2014 17:12 Jun 15, 2017 Jkt 241001 by this proposed rule change, will become operative no later than October 1, 2017.6 In Nasdaq’s recent Commission approved rule filing amending its ETP listing standards, Nasdaq noted that staff of the Commission’s Division of Trading and Markets (‘‘DTM’’) requested that Nasdaq adopt certain additional continued listing standards for ETPs, citing their concern for potential manipulation of ETPs.7 As a result, the Nasdaq rule change, as well as the Exchange’s rule changes proposed in this filing, reflect guidance provided by DTM that most initial listing standards, as well as certain representations included in Exchange rule filings under SEC Rule 19b–4 8 to list an ETP (‘‘Exchange Rule Filing’’), are also considered continued listing standards. The Exchange Rule Filing representations that will also be required to be maintained on a continuous basis include: (a) The description of the fund; (b) the fund’s investment restrictions; and (c) the applicability of IEX listing rules specified in an Exchange Rule filing. The proposed rule changes would require that ETPs listed by the Exchange without an Exchange Rule Filing maintain the initial index or reference asset criteria on a continued basis. For example, in the case of a domestic equity index, these criteria generally include: (a) Stocks with 90% of the weight of the index must have a minimum market value of at least $75 million; (b) stocks with 70% of the weight of the index must have a minimum monthly trading volume of at least 250,000 shares; (c) the most heavily weighted component cannot exceed 30% of the index, and the five most heavily weighted stocks cannot exceed 65%; (d) there must be at least 13 stocks in the index; and (e) all securities in the index must be listed in the U.S. There are similar criteria for international indexes, fixed-income indexes and indexes with a combination of components. If an Exchange Rule Filing is made to list a specific ETP, the proposed rule NASDAQ–2016–135). See also, Securities Exchange Act Release No. 80210 (March 10, 2017), 82 FR 14094 (March 16, 2017) (SR–NASDAQ–2017–023). See also, SR–NASDAQ–2017–040 filed with the Commission on May 3, 2017 for effectiveness pursuant to Section 19b(3)(A)(iii) of the Act and Rule 19b–4(f)(6) thereunder. 6 The Exchange does not intend to list ETPs at this time or in the near future, but this date ensures the Exchange has sufficient time to meet its compliance obligations. 7 See, Securities Exchange Act Release No. 79784 (Jan. 12, 2017), 82 FR 6664 (January 19, 2017) (SR– NASDAQ–2016–135). 8 17 CFR 240.19b–4. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 27749 change would require that the issuer of the security comply on a continuing basis with any statements or representations contained in the applicable rule proposal, including: (a) The description of the portfolio; (b) limitations on portfolio holdings or reference assets; and (c) the applicability of IEX listing rules specified in such Exchange Rule Filing. As proposed, the Exchange would initiate delisting proceedings for a product listed under Chapter 16 if any of its continued listing requirements (including those set forth in an IEX rule and those set forth in an Exchange Rule Filing) are not continuously maintained.9 The continued listing rules are also proposed to be amended to modify ETP compliance with the minimum 50 beneficial holder requirement for continued listing (the ‘‘ETP Beneficial Holder Rule’’). Specifically, the portion of the ETP Beneficial Holder Rule regarding when IEX would consider the suspension of trading following the initial twelve month period beginning upon the commencement of trading will be amended to delete the ‘‘30 or more consecutive trading days’’ requirement. IEX’s other shareholder tests in the listing rules do not prescribe minimum time frames for compliance and the Exchange believes that more frequent review is not necessary to provide meaningful assurances of liquidity or trading interest. This modification will conform the ETP Beneficial Holder Rule to the other shareholder tests in the listing rules and remove references to a requirement that necessitates daily monitoring of shareholders. The IEX listing rules would also be modified to require that issuers of securities listed under Chapter 16 must notify the Exchange regarding instances of non-compliance. In addition, while any listed ETPs would be subject to the delisting process specified in IEX Rule Series 14.500, the rules would be clarified to make this explicit.10 Specifically, the Exchange proposes to make conforming and technical changes to Rules 14.500(a), 14.501(a) and (d), Supplementary Material .01 to Rule 14.501, and 14.505 to specify that the provisions therein relate to securities 9 Unlike failures to comply with other continued listing requirements, if there is an interruption to the dissemination of the reference asset, index, or intraday indicative values for a listed product, the Exchange would initiate delisting proceedings under the IEX Rule Series 14.500 only if the interruption persists past the trading day in which it occurred. See, e.g., proposed changes to Rules 16.105(a)(9)(B)(i)(d)–(e) and 16.105(b)(9)(B)(i)(d)– (e). 10 ETPs would also be subject to IEX Rule 11.280, which governs trading halts. E:\FR\FM\16JNN1.SGM 16JNN1 27750 Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES listed under Chapter 16 as well as Chapter 14, and to make several technical and conforming changes. The Rule Series 14.500 would also be clarified to make explicit that in cases where IEX Regulation has notified an ETP that it is deficient under one or more listing standards, the ETP may submit a plan to regain compliance as set forth under the Exchange’s listing rules. In this regard, consistent with deficiencies from most other rules that allow issuers to submit a plan to regain compliance,11 IEX proposes to allow issuers of ETPs 45 calendar days to submit such a plan. IEX staff will review the plan and may grant a limited period of time for the ETP to regain compliance as permitted under the listing rules. If IEX staff does not accept the plan, IEX staff would issue a Delisting Determination, which the company could appeal to the Listings Review Committee pursuant to Rule 14.502. In addition, proposed amendments to Rule 14.101 would specify that the Exchange’s broad discretionary authority over the initial and continued listing of securities on the Exchange also applies to securities listed under Chapter 16 as well as under Chapter 14. Additionally, the Exchange proposes to make conforming and technical changes throughout Chapter 16 to maintain consistency in its rules. For example, the Exchange proposes to consistently use the language ‘‘initiate delisting proceedings under the IEX Rule Series 14.500’’ when describing the delisting process for a product that fails to meet continued listing requirements; 12 consistently state in the Portfolio Depository Receipts and Index Fund Shares rules that, if the index that underlies a series of Portfolio Depository Receipts or Index Fund Shares is maintained by a broker-dealer or fund advisor, the index shall be calculated by a third party who is not a broker-dealer or fund advisor; 13 and 11 Pursuant to Rule 14.501, a company is provided 45 days to submit a plan to regain compliance with Rules 14.408((c) (Quorum), 14.411 (Review of Related Party Transactions), 14.412 (Shareholder Approval), 14.207(c)(3) (Auditor Registration), 14.208(a) (Direct Registration Program), 14.406 (Code of Conduct), 14.407(a)(4)(E) (Quorum of Limited Partnerships), 14.407(a)(4)(G) (Related Party Transactions of Limited Partnerships), 14.413 (Voting Rights), or 14.414 (Internal Audit Function). A company is generally provided 60 days to submit a plan to regain compliance with the requirement to timely file reports contained in Rule14.207(c)(1) or (2). 12 See, e.g., proposed changes to Rules 16.105(a)(9)(B)(i) and 16.105(b)(9)(B)(i). 13 See proposed changes to Rules 16.105(a)(4)(B)(i), 16.105(a)(5)(A)(i), 16.105(b)(4)(B)(i), and 16.105(b)(5)(A)(i); see also Rule 16.105(a)(3)(B)(i) (currently stating that, for certain Portfolio Depository Receipts, ‘‘[i]f the index is maintained by a broker-dealer or fund advisor VerDate Sep<11>2014 17:12 Jun 15, 2017 Jkt 241001 consistently reflect that delisting ‘‘following the initial 12-month period following commencement of trading on IEX only applies to the record/beneficial holder, number of shares issued and outstanding, and the market value of shares issued and outstanding requirements.14 Further, references in the Chapter 16 continued listing standards that state that if the requirements set forth in that particular section are not continuously maintained constitute a reason for IEX to consider the suspension of trading, covers only listing criteria that are explicitly considered continued listing standards for that rule. Finally, the Exchange is proposing to revise certain of the initial and continued listing standards applicable to Linked Securities and Index-Linked Exchangeable Notes in Rules 16.110 and 16.111 respectively to conform to provisions in comparable Nasdaq rules. Specifically, the Exchange proposes to amend paragraph (e) of Rule 16.110 (Securities Linked to the Performance of Indexes and Commodities (Including Currencies)), which allows the listing of Linked Securities. In addition to providing that the relevant provisions are considered continued as well as initial listing standards (as discussed above generally) the proposed rule change will modify the specific provisions of Rule 16.110(e) to reflect a substantially identical change previously made by Nasdaq to Nasdaq Rule 5710(e).15 Rule 16.110 states that for the listing of a Linked Security, the issuer will be expected to have a minimum tangible net worth in excess of $250 million and income from continuing operations before income taxes of at least $1,200,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years. As proposed, the income from continuing operations requirement would be deleted, and a parenthetical will be added following the existing minimum tangible net worth requirement to state that if the Linked Securities are fully and unconditionally . . . the index shall be calculated by a third party who is not a broker-dealer or fund advisor’’) and 16.105(b)(3)(B)(i) (currently stating that, for certain Index Fund Shares, ‘‘[i]f the index is maintained by a broker-dealer or fund advisor . . . the index shall be calculated by a third party who is not a brokerdealer or fund advisor’’). 14 See, e.g., proposed changes to Rule 16.111(d)(6)(B); see also, e.g., Rule 16.111(h)(4)(B)(i) (currently applying the 12-month threshold only to the record/beneficial holder, number of units issued and outstanding, and market value of units issued and outstanding requirements for Partnership Units). 15 See Securities Exchange Act Release No. 80348 (March 30, 2017), 82 FR 16651 (April 5, 2017 (SR– NASDAQ–2017–032). PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 guaranteed by an affiliate of the Company, IEX will rely on such affiliate’s tangible net worth for purposes of this requirement. In addition, the Exchange proposes to add the following provisions that are substantively identical to provisions in Nasdaq Rule 5710(e). First, with respect to the alternative listing requirement, the original issue price of the Linked Securities, combined with all of the company’s other Linked Securities listed on a national securities exchange or otherwise publicly traded in the United States, must not be greater than 25 percent of the company’s tangible net worth at the time of issuance. Second, a parenthetical will be added following this provision to state that if the Linked Securities are fully and unconditionally guaranteed by an affiliate of the Company, IEX will apply the provisions of this paragraph to such affiliate instead of the Company and will include in its calculation all Linked Securities that are fully and unconditionally guaranteed by such affiliate. Third, as with the Nasdaq provision, a sentence at the end of this listing standard will state that Government issuers and supranational entities will be evaluated on a case-bycase basis. With respect to Rule 16.111(a)(3) relating to the initial and continued listing standards applicable to IndexLinked Exchangeable Notes, the Exchange proposes to amend the rule to conform to current provisions of Nasdaq Rule 5711(a)(iii), as well as to provide that the relevant provisions are considered continued as well as initial listing standards (as discussed above generally). Currently, Rule 16.111(a)(3) provides for two alternative listing standards for Index-Linked Exchangeable Notes. Each alternative includes a requirement that the issuer of the Index-Linked Exchangeable Notes have annual income from continuing operations before income taxes of at least $1,200,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years. The Exchange proposes to replace each such requirement with a requirement that the issuer of the IndexLinked Exchangeable Notes have income from continuing operations before income taxes substantially exceeding $1,000,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years. As proposed, this provision is substantially identical to E:\FR\FM\16JNN1.SGM 16JNN1 Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices corresponding provisions in Nasdaq Rule 5711(a)(iii).16 2. Statutory Basis sradovich on DSK3GMQ082PROD with NOTICES IEX believes that the proposed rule change is consistent with Section 6(b) 17 of the Act in general, and furthers the objectives of Section 6(b)(5) of the Act,18 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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. The Exchange notes that the changes proposed herein are substantially similar to Nasdaq rule changes approved by the Commission or that have become effective. IEX’s listing rules for ETPs are also substantially similar to Nasdaq’s listing rules for ETPs. Accordingly, the Exchange does not believe that the proposed rule change raises any new or novel issues and is consistent with the requirements of Section 6(b)(5) of the Act. Specifically, the Exchange believes that the proposed rule changes accomplish these objectives by enhancing the current continued listing standards, as well as by clarifying that most initial listing standards, as well as certain representations included in Exchange Rule Filings to list an ETP, would be considered continued listing standards. In approving comparable Nasdaq changes to its continued listing standards for ETPs, the Commission found that the proposal is consistent with the Act, noting the importance of continued listing criteria to the maintenance of fair and orderly markets. Specifically, the Commission stated that the proposal is designed to ensure that stocks with substantial market capitalization and trading volume account for a substantial portion of the weight of an index or portfolio underlying a listed ETP, provide transparency regarding the components of an index or portfolio underlying a listed ETP, ensure that there is adequate liquidity in a listed ETP itself, and provide timely and fair disclosure of 16 In relevant part, Nasdaq Rule 5711(a)(iii) provides that the issuer will be expected to ‘‘substantially exceed the earnings requirements set forth in Nasdaq Rule 5405(b), which requires ‘‘[a]nnual income from continuing operations before income taxes of at least $1,000,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.’’ 17 15 U.S.C. 78f. 18 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:12 Jun 15, 2017 Jkt 241001 useful information that may be necessary to price the listed ETP. Further, the Commission stated that the Nasdaq proposal would increase transparency regarding the process Nasdaq will follow if a listed product fails to meet its continued listing requirements. The Commission also stated that it does not believe Nasdaq’s proposal raises any unique or novel regulatory issues.19 The Exchange believes that the same considerations support that the proposed rule change is consistent with the Act. The continued listing rules will be amended to modify ETP compliance with the ETP Beneficial Holder Rule regarding when IEX would consider the suspension of trading following the initial twelve month period beginning upon commencement of trading by deleting the ‘‘30 or more consecutive trading days’’ requirement. The Exchange believes that this change serves 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 since it will conform the ETP Beneficial Holder Rule with the other shareholder tests in the listing rules and the Exchange believes that more frequent review is not necessary to provide meaningful assurances of liquidity or trading interest. Additionally, IEX listing rules will be modified to require that issuers of any securities to be listed under Chapter 16 must notify the Exchange regarding instances of non-compliance and to clarify that deficiencies will be subject to potential trade halts and the delisting process in the IEX Rule Series 14.500. The Exchange believes that these amendments will enhance IEX listing rules, thereby serving to improve the national market system and protect investors and the public interest. Further, IEX listing rules will be amended to clarify the applicability of the Exchange’s broad discretionary authority over the initial and continued listing of securities on the Exchange to securities listed under Chapter 16 as well as under Chapter 14. The Exchange believes that these amendments will enhance IEX listing rules by clarifying the Exchange authority to make listing decisions consistent with the protection of investors and the public interest. In addition, the Exchange believes that the conforming, technical and housekeeping changes are designed to further the goals of the listing standards 19 See generally, Securities Exchange Act Release No. 79784 (Jan. 12, 2017), 82 FR 6664 (January 19, 2017) (SR–NASDAQ–2016–135). PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 27751 by providing clarity and consistency in the Exchange’s rules. Finally, the Exchange believes that the changes to Rules 16.110 and 16.111 to conform to substantially identical Nasdaq rules are consistent with the protection of investors and the public interest since the applicable listing standards as revised will continue to provide a strong indication of the issuer’s ability to make necessary payments on Linked Securities and Index-Linked Exchangeable Notes. Moreover, the conforming changes are substantially identical to Nasdaq rules that were approved by the Commission or that have become effective and therefore the Exchange does not believe that the proposed changes raise any new or novel issues not previously considered by the Commission. For these reasons, IEX believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition IEX 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. The proposed rule change is based on substantially identical Nasdaq rules and is comparable to NYSE Arca rules, in each case based on DTM Staff guidance. Consequently, the Exchange believes the proposed rule changes will have no negative effect on competition. 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 19(b)(3)(A) of the Act 20 and Rule 19b– 4(f)(6) thereunder.21 20 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 21 17 E:\FR\FM\16JNN1.SGM Continued 16JNN1 27752 Federal Register / Vol. 82, No. 115 / Friday, June 16, 2017 / Notices 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: sradovich on DSK3GMQ082PROD with NOTICES 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– IEX–2017–14 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–IEX–2017–14. 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 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. VerDate Sep<11>2014 17:12 Jun 15, 2017 Jkt 241001 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–IEX– 2017–14 and should be submitted on or before July 7, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–12456 Filed 6–15–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–0213 Extension: Rule 22d–1, SEC File No. 270–275, OMB Control No. 3235–0310 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (‘‘Paperwork Reduction Act’’) (44 U.S.C. 3501–3520), the Securities and Exchange Commission (the ‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for extension of the previously approved collection of information discussed below. Rule 22d–1 under the Investment Company Act of 1940 (the ‘‘1940 Act’’) (17 CFR 270.22d–1) provides registered investment companies that issue redeemable securities (‘‘funds’’) an exemption from section 22(d) of the 1940 Act (15 U.S.C. 80a–22(d)) to the extent necessary to permit scheduled variations in or elimination of the sales load on fund securities for particular classes of investors or transactions, provided certain conditions are met. The rule imposes an annual burden per series of a fund of approximately 15 minutes, so that the total annual burden for the approximately 4,509 series of funds that might rely on the rule is estimated to be 1127.25 hours. The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. The estimate is based on communications with industry representatives, and is not 22 17 PO 00000 CFR 200.30–3(a)(12). Frm 00078 Fmt 4703 Sfmt 4703 derived from a comprehensive or even a representative survey or study. Responses will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The public may view the background documentation for this information collection at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email to: PRA_Mailbox@ sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: June 13, 2017. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–12537 Filed 6–15–17; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #15163 and #15164; WISCONSIN Disaster #WI–00058] Administrative Declaration of a Disaster for the State of Wisconsin U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a notice of an Administrative declaration of a disaster for the State of Wisconsin dated 06/12/ 2017. Incident: Tornado. Incident Period: 05/16/2017. DATES: Effective 06/12/2017. Physical Loan Application Deadline Date: 08/11/2017. Economic Injury (EIDL) Loan Application Deadline Date: 03/12/2018. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the SUMMARY: E:\FR\FM\16JNN1.SGM 16JNN1

Agencies

[Federal Register Volume 82, Number 115 (Friday, June 16, 2017)]
[Notices]
[Pages 27748-27752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12456]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80905; File No. SR-IEX-2017-14]


Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Related to 
Continued Listing Standards for Exchange Traded Products

June 12, 2017.
    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 June 5, 2017, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') 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

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''), and Rule 19b-4 thereunder, Investors 
Exchange LLC (``IEX'' or ``Exchange'') is filing with the Commission a 
proposed rule change to amend Chapter 16 of IEX Rules to add additional 
continued listing requirements for exchange traded products (``ETP'') 
listed under those rules, as well as a related amendment to IEX Rule 
14.501 (Notification of Deficiency by IEX Regulation), and several 
clarifying and conforming changes to IEX Rules 14.101, 14.500, 14.501 
and 14.505. The Exchange is also proposing various housekeeping changes 
throughout Chapter 16 for improved clarity. In addition, the Exchange 
is proposing to revise certain of the initial and continued listing 
standards applicable to Linked Securities and Index-Linked Exchangeable 
Notes in Rules 16.110 and 16.111 respectively. The Exchange has

[[Page 27749]]

designated this proposal as non-controversial and provided the 
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the 
Act. The text of the proposed rule change is available at the 
Exchange's Web site at www.iextrading.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 these statement may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend Chapter 16 of IEX Rules to add 
additional continued listing standards for products listed under those 
rules (i.e., ETPs), as well as a related amendment to IEX Rule 14.501 
(Notification of Deficiency by IEX Regulation), and several clarifying 
and conforming changes to IEX Rules 14.101, 14.500, 14.501 and 14.505. 
The Exchange is also proposing various housekeeping changes throughout 
Chapter 16 (e.g., punctuation, formatting, capitalization and 
renumbering) for improved clarity.
    The Exchange does not currently list any ETPs.\4\ The proposed rule 
changes are based on substantially identical Nasdaq Stock Market 
(``Nasdaq'') rule changes that were recently approved by the 
Commission, or that have become effective.\5\ The listing rules, as 
amended by this proposed rule change, will become operative no later 
than October 1, 2017.\6\
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    \4\ In connection with IEX's Form 1 application for registration 
as a national securities exchange, the Commission approved rules 
applicable to the listing of ETPs on IEX. See Securities Exchange 
Act Release No. 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016). 
These IEX rules are modelled on Nasdaq's rules applicable to the 
listing of ETPs on Nasdaq, except that IEX rules do not provide for 
the listing of currency warrants, alpha index securities and 
NextShares. Additionally, the continued listing requirements 
applicable to Managed Fund Shares under IEX Rule 16.135 are included 
in SR-IEX-2017-03 (See, Securities Exchange Act Release No. 80545 
(April 27, 2017), 82 FR 20648 (May 3, 2017)).
    \5\ See, Securities Exchange Act Release No. 79784 (Jan. 12, 
2017), 82 FR 6664 (January 19, 2017) (SR-NASDAQ-2016-135). See also, 
Securities Exchange Act Release No. 80210 (March 10, 2017), 82 FR 
14094 (March 16, 2017) (SR-NASDAQ-2017-023). See also, SR-NASDAQ-
2017-040 filed with the Commission on May 3, 2017 for effectiveness 
pursuant to Section 19b(3)(A)(iii) of the Act and Rule 19b-4(f)(6) 
thereunder.
    \6\ The Exchange does not intend to list ETPs at this time or in 
the near future, but this date ensures the Exchange has sufficient 
time to meet its compliance obligations.
---------------------------------------------------------------------------

    In Nasdaq's recent Commission approved rule filing amending its ETP 
listing standards, Nasdaq noted that staff of the Commission's Division 
of Trading and Markets (``DTM'') requested that Nasdaq adopt certain 
additional continued listing standards for ETPs, citing their concern 
for potential manipulation of ETPs.\7\ As a result, the Nasdaq rule 
change, as well as the Exchange's rule changes proposed in this filing, 
reflect guidance provided by DTM that most initial listing standards, 
as well as certain representations included in Exchange rule filings 
under SEC Rule 19b-4 \8\ to list an ETP (``Exchange Rule Filing''), are 
also considered continued listing standards. The Exchange Rule Filing 
representations that will also be required to be maintained on a 
continuous basis include: (a) The description of the fund; (b) the 
fund's investment restrictions; and (c) the applicability of IEX 
listing rules specified in an Exchange Rule filing.
---------------------------------------------------------------------------

    \7\ See, Securities Exchange Act Release No. 79784 (Jan. 12, 
2017), 82 FR 6664 (January 19, 2017) (SR-NASDAQ-2016-135).
    \8\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The proposed rule changes would require that ETPs listed by the 
Exchange without an Exchange Rule Filing maintain the initial index or 
reference asset criteria on a continued basis. For example, in the case 
of a domestic equity index, these criteria generally include: (a) 
Stocks with 90% of the weight of the index must have a minimum market 
value of at least $75 million; (b) stocks with 70% of the weight of the 
index must have a minimum monthly trading volume of at least 250,000 
shares; (c) the most heavily weighted component cannot exceed 30% of 
the index, and the five most heavily weighted stocks cannot exceed 65%; 
(d) there must be at least 13 stocks in the index; and (e) all 
securities in the index must be listed in the U.S. There are similar 
criteria for international indexes, fixed-income indexes and indexes 
with a combination of components.
    If an Exchange Rule Filing is made to list a specific ETP, the 
proposed rule change would require that the issuer of the security 
comply on a continuing basis with any statements or representations 
contained in the applicable rule proposal, including: (a) The 
description of the portfolio; (b) limitations on portfolio holdings or 
reference assets; and (c) the applicability of IEX listing rules 
specified in such Exchange Rule Filing.
    As proposed, the Exchange would initiate delisting proceedings for 
a product listed under Chapter 16 if any of its continued listing 
requirements (including those set forth in an IEX rule and those set 
forth in an Exchange Rule Filing) are not continuously maintained.\9\
---------------------------------------------------------------------------

    \9\ Unlike failures to comply with other continued listing 
requirements, if there is an interruption to the dissemination of 
the reference asset, index, or intraday indicative values for a 
listed product, the Exchange would initiate delisting proceedings 
under the IEX Rule Series 14.500 only if the interruption persists 
past the trading day in which it occurred. See, e.g., proposed 
changes to Rules 16.105(a)(9)(B)(i)(d)-(e) and 
16.105(b)(9)(B)(i)(d)-(e).
---------------------------------------------------------------------------

    The continued listing rules are also proposed to be amended to 
modify ETP compliance with the minimum 50 beneficial holder requirement 
for continued listing (the ``ETP Beneficial Holder Rule''). 
Specifically, the portion of the ETP Beneficial Holder Rule regarding 
when IEX would consider the suspension of trading following the initial 
twelve month period beginning upon the commencement of trading will be 
amended to delete the ``30 or more consecutive trading days'' 
requirement. IEX's other shareholder tests in the listing rules do not 
prescribe minimum time frames for compliance and the Exchange believes 
that more frequent review is not necessary to provide meaningful 
assurances of liquidity or trading interest. This modification will 
conform the ETP Beneficial Holder Rule to the other shareholder tests 
in the listing rules and remove references to a requirement that 
necessitates daily monitoring of shareholders.
    The IEX listing rules would also be modified to require that 
issuers of securities listed under Chapter 16 must notify the Exchange 
regarding instances of non-compliance. In addition, while any listed 
ETPs would be subject to the delisting process specified in IEX Rule 
Series 14.500, the rules would be clarified to make this explicit.\10\ 
Specifically, the Exchange proposes to make conforming and technical 
changes to Rules 14.500(a), 14.501(a) and (d), Supplementary Material 
.01 to Rule 14.501, and 14.505 to specify that the provisions therein 
relate to securities

[[Page 27750]]

listed under Chapter 16 as well as Chapter 14, and to make several 
technical and conforming changes.
---------------------------------------------------------------------------

    \10\ ETPs would also be subject to IEX Rule 11.280, which 
governs trading halts.
---------------------------------------------------------------------------

    The Rule Series 14.500 would also be clarified to make explicit 
that in cases where IEX Regulation has notified an ETP that it is 
deficient under one or more listing standards, the ETP may submit a 
plan to regain compliance as set forth under the Exchange's listing 
rules. In this regard, consistent with deficiencies from most other 
rules that allow issuers to submit a plan to regain compliance,\11\ IEX 
proposes to allow issuers of ETPs 45 calendar days to submit such a 
plan. IEX staff will review the plan and may grant a limited period of 
time for the ETP to regain compliance as permitted under the listing 
rules. If IEX staff does not accept the plan, IEX staff would issue a 
Delisting Determination, which the company could appeal to the Listings 
Review Committee pursuant to Rule 14.502.
---------------------------------------------------------------------------

    \11\ Pursuant to Rule 14.501, a company is provided 45 days to 
submit a plan to regain compliance with Rules 14.408((c) (Quorum), 
14.411 (Review of Related Party Transactions), 14.412 (Shareholder 
Approval), 14.207(c)(3) (Auditor Registration), 14.208(a) (Direct 
Registration Program), 14.406 (Code of Conduct), 14.407(a)(4)(E) 
(Quorum of Limited Partnerships), 14.407(a)(4)(G) (Related Party 
Transactions of Limited Partnerships), 14.413 (Voting Rights), or 
14.414 (Internal Audit Function). A company is generally provided 60 
days to submit a plan to regain compliance with the requirement to 
timely file reports contained in Rule14.207(c)(1) or (2).
---------------------------------------------------------------------------

    In addition, proposed amendments to Rule 14.101 would specify that 
the Exchange's broad discretionary authority over the initial and 
continued listing of securities on the Exchange also applies to 
securities listed under Chapter 16 as well as under Chapter 14.
    Additionally, the Exchange proposes to make conforming and 
technical changes throughout Chapter 16 to maintain consistency in its 
rules. For example, the Exchange proposes to consistently use the 
language ``initiate delisting proceedings under the IEX Rule Series 
14.500'' when describing the delisting process for a product that fails 
to meet continued listing requirements; \12\ consistently state in the 
Portfolio Depository Receipts and Index Fund Shares rules that, if the 
index that underlies a series of Portfolio Depository Receipts or Index 
Fund Shares is maintained by a broker-dealer or fund advisor, the index 
shall be calculated by a third party who is not a broker-dealer or fund 
advisor; \13\ and consistently reflect that delisting ``following the 
initial 12-month period following commencement of trading on IEX only 
applies to the record/beneficial holder, number of shares issued and 
outstanding, and the market value of shares issued and outstanding 
requirements.\14\
---------------------------------------------------------------------------

    \12\ See, e.g., proposed changes to Rules 16.105(a)(9)(B)(i) and 
16.105(b)(9)(B)(i).
    \13\ See proposed changes to Rules 16.105(a)(4)(B)(i), 
16.105(a)(5)(A)(i), 16.105(b)(4)(B)(i), and 16.105(b)(5)(A)(i); see 
also Rule 16.105(a)(3)(B)(i) (currently stating that, for certain 
Portfolio Depository Receipts, ``[i]f the index is maintained by a 
broker-dealer or fund advisor . . . the index shall be calculated by 
a third party who is not a broker-dealer or fund advisor'') and 
16.105(b)(3)(B)(i) (currently stating that, for certain Index Fund 
Shares, ``[i]f the index is maintained by a broker-dealer or fund 
advisor . . . the index shall be calculated by a third party who is 
not a broker-dealer or fund advisor'').
    \14\ See, e.g., proposed changes to Rule 16.111(d)(6)(B); see 
also, e.g., Rule 16.111(h)(4)(B)(i) (currently applying the 12-month 
threshold only to the record/beneficial holder, number of units 
issued and outstanding, and market value of units issued and 
outstanding requirements for Partnership Units).
---------------------------------------------------------------------------

    Further, references in the Chapter 16 continued listing standards 
that state that if the requirements set forth in that particular 
section are not continuously maintained constitute a reason for IEX to 
consider the suspension of trading, covers only listing criteria that 
are explicitly considered continued listing standards for that rule.
    Finally, the Exchange is proposing to revise certain of the initial 
and continued listing standards applicable to Linked Securities and 
Index-Linked Exchangeable Notes in Rules 16.110 and 16.111 respectively 
to conform to provisions in comparable Nasdaq rules.
    Specifically, the Exchange proposes to amend paragraph (e) of Rule 
16.110 (Securities Linked to the Performance of Indexes and Commodities 
(Including Currencies)), which allows the listing of Linked Securities. 
In addition to providing that the relevant provisions are considered 
continued as well as initial listing standards (as discussed above 
generally) the proposed rule change will modify the specific provisions 
of Rule 16.110(e) to reflect a substantially identical change 
previously made by Nasdaq to Nasdaq Rule 5710(e).\15\ Rule 16.110 
states that for the listing of a Linked Security, the issuer will be 
expected to have a minimum tangible net worth in excess of $250 million 
and income from continuing operations before income taxes of at least 
$1,200,000 in the most recently completed fiscal year or in two of the 
three most recently completed fiscal years. As proposed, the income 
from continuing operations requirement would be deleted, and a 
parenthetical will be added following the existing minimum tangible net 
worth requirement to state that if the Linked Securities are fully and 
unconditionally guaranteed by an affiliate of the Company, IEX will 
rely on such affiliate's tangible net worth for purposes of this 
requirement. In addition, the Exchange proposes to add the following 
provisions that are substantively identical to provisions in Nasdaq 
Rule 5710(e). First, with respect to the alternative listing 
requirement, the original issue price of the Linked Securities, 
combined with all of the company's other Linked Securities listed on a 
national securities exchange or otherwise publicly traded in the United 
States, must not be greater than 25 percent of the company's tangible 
net worth at the time of issuance. Second, a parenthetical will be 
added following this provision to state that if the Linked Securities 
are fully and unconditionally guaranteed by an affiliate of the 
Company, IEX will apply the provisions of this paragraph to such 
affiliate instead of the Company and will include in its calculation 
all Linked Securities that are fully and unconditionally guaranteed by 
such affiliate. Third, as with the Nasdaq provision, a sentence at the 
end of this listing standard will state that Government issuers and 
supranational entities will be evaluated on a case-by-case basis.
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 80348 (March 30, 
2017), 82 FR 16651 (April 5, 2017 (SR-NASDAQ-2017-032).
---------------------------------------------------------------------------

    With respect to Rule 16.111(a)(3) relating to the initial and 
continued listing standards applicable to Index-Linked Exchangeable 
Notes, the Exchange proposes to amend the rule to conform to current 
provisions of Nasdaq Rule 5711(a)(iii), as well as to provide that the 
relevant provisions are considered continued as well as initial listing 
standards (as discussed above generally). Currently, Rule 16.111(a)(3) 
provides for two alternative listing standards for Index-Linked 
Exchangeable Notes. Each alternative includes a requirement that the 
issuer of the Index-Linked Exchangeable Notes have annual income from 
continuing operations before income taxes of at least $1,200,000 in the 
most recently completed fiscal year or in two of the three most 
recently completed fiscal years. The Exchange proposes to replace each 
such requirement with a requirement that the issuer of the Index-Linked 
Exchangeable Notes have income from continuing operations before income 
taxes substantially exceeding $1,000,000 in the most recently completed 
fiscal year or in two of the three most recently completed fiscal 
years. As proposed, this provision is substantially identical to

[[Page 27751]]

corresponding provisions in Nasdaq Rule 5711(a)(iii).\16\
---------------------------------------------------------------------------

    \16\ In relevant part, Nasdaq Rule 5711(a)(iii) provides that 
the issuer will be expected to ``substantially exceed the earnings 
requirements set forth in Nasdaq Rule 5405(b), which requires 
``[a]nnual income from continuing operations before income taxes of 
at least $1,000,000 in the most recently completed fiscal year or in 
two of the three most recently completed fiscal years.''
---------------------------------------------------------------------------

2. Statutory Basis
    IEX believes that the proposed rule change is consistent with 
Section 6(b) \17\ of the Act in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\18\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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. The Exchange notes that the 
changes proposed herein are substantially similar to Nasdaq rule 
changes approved by the Commission or that have become effective. IEX's 
listing rules for ETPs are also substantially similar to Nasdaq's 
listing rules for ETPs. Accordingly, the Exchange does not believe that 
the proposed rule change raises any new or novel issues and is 
consistent with the requirements of Section 6(b)(5) of the Act.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that the proposed rule changes 
accomplish these objectives by enhancing the current continued listing 
standards, as well as by clarifying that most initial listing 
standards, as well as certain representations included in Exchange Rule 
Filings to list an ETP, would be considered continued listing 
standards. In approving comparable Nasdaq changes to its continued 
listing standards for ETPs, the Commission found that the proposal is 
consistent with the Act, noting the importance of continued listing 
criteria to the maintenance of fair and orderly markets. Specifically, 
the Commission stated that the proposal is designed to ensure that 
stocks with substantial market capitalization and trading volume 
account for a substantial portion of the weight of an index or 
portfolio underlying a listed ETP, provide transparency regarding the 
components of an index or portfolio underlying a listed ETP, ensure 
that there is adequate liquidity in a listed ETP itself, and provide 
timely and fair disclosure of useful information that may be necessary 
to price the listed ETP. Further, the Commission stated that the Nasdaq 
proposal would increase transparency regarding the process Nasdaq will 
follow if a listed product fails to meet its continued listing 
requirements. The Commission also stated that it does not believe 
Nasdaq's proposal raises any unique or novel regulatory issues.\19\ The 
Exchange believes that the same considerations support that the 
proposed rule change is consistent with the Act.
---------------------------------------------------------------------------

    \19\ See generally, Securities Exchange Act Release No. 79784 
(Jan. 12, 2017), 82 FR 6664 (January 19, 2017) (SR-NASDAQ-2016-135).
---------------------------------------------------------------------------

    The continued listing rules will be amended to modify ETP 
compliance with the ETP Beneficial Holder Rule regarding when IEX would 
consider the suspension of trading following the initial twelve month 
period beginning upon commencement of trading by deleting the ``30 or 
more consecutive trading days'' requirement. The Exchange believes that 
this change serves 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 since it will conform the 
ETP Beneficial Holder Rule with the other shareholder tests in the 
listing rules and the Exchange believes that more frequent review is 
not necessary to provide meaningful assurances of liquidity or trading 
interest.
    Additionally, IEX listing rules will be modified to require that 
issuers of any securities to be listed under Chapter 16 must notify the 
Exchange regarding instances of non-compliance and to clarify that 
deficiencies will be subject to potential trade halts and the delisting 
process in the IEX Rule Series 14.500. The Exchange believes that these 
amendments will enhance IEX listing rules, thereby serving to improve 
the national market system and protect investors and the public 
interest.
    Further, IEX listing rules will be amended to clarify the 
applicability of the Exchange's broad discretionary authority over the 
initial and continued listing of securities on the Exchange to 
securities listed under Chapter 16 as well as under Chapter 14. The 
Exchange believes that these amendments will enhance IEX listing rules 
by clarifying the Exchange authority to make listing decisions 
consistent with the protection of investors and the public interest.
    In addition, the Exchange believes that the conforming, technical 
and housekeeping changes are designed to further the goals of the 
listing standards by providing clarity and consistency in the 
Exchange's rules.
    Finally, the Exchange believes that the changes to Rules 16.110 and 
16.111 to conform to substantially identical Nasdaq rules are 
consistent with the protection of investors and the public interest 
since the applicable listing standards as revised will continue to 
provide a strong indication of the issuer's ability to make necessary 
payments on Linked Securities and Index-Linked Exchangeable Notes. 
Moreover, the conforming changes are substantially identical to Nasdaq 
rules that were approved by the Commission or that have become 
effective and therefore the Exchange does not believe that the proposed 
changes raise any new or novel issues not previously considered by the 
Commission.
    For these reasons, IEX believes that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

    IEX 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. The proposed rule change is 
based on substantially identical Nasdaq rules and is comparable to NYSE 
Arca rules, in each case based on DTM Staff guidance. Consequently, the 
Exchange believes the proposed rule changes will have no negative 
effect on competition.

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 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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.

---------------------------------------------------------------------------

[[Page 27752]]

    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-IEX-2017-14 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-IEX-2017-14. 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-IEX-2017-14 and should be 
submitted on or before July 7, 2017.
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-12456 Filed 6-15-17; 8:45 am]
BILLING CODE 8011-01-P
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