Justia Agencies And Commissions Securities And Exchange Commission Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 to Proposed Rule Change To Amend Section 102.01B of the NYSE Listed Company Manual To Provide for the Listing of Companies That List Without a Prior Exchange Act Registration and That Are Not Listing in Connection With an Underwritten Initial Public Offering and Related Changes to Rules 15, 104, and 123D, 40183-40187 [2017-17922]

Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 to Proposed Rule Change To Amend Section 102.01B of the NYSE Listed Company Manual To Provide for the Listing of Companies That List Without a Prior Exchange Act Registration and That Are Not Listing in Connection With an Underwritten Initial Public Offering and Related Changes to Rules 15, 104, and 123D, 40183-40187 [2017-17922]

Download as PDF Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–FINRA–2017–027 and should be submitted on or before September 14, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–17910 Filed 8–23–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81440; File No. SR–NYSE– 2017–30] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 2 to Proposed Rule Change To Amend Section 102.01B of the NYSE Listed Company Manual To Provide for the Listing of Companies That List Without a Prior Exchange Act Registration and That Are Not Listing in Connection With an Underwritten Initial Public Offering and Related Changes to Rules 15, 104, and 123D rmajette on DSKBCKNHB2PROD with NOTICES August 18, 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 13, 2017, New York Stock Exchange LLC (‘‘NYSE’’ 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 proposed rule change was published for comment in the 13 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 Federal Register on June 20, 2017.4 The Commission received one comment on the proposed rule change.5 On August 3, 2017, 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 September 18, 2017.6 The Exchange filed Amendment No. 2 to the proposed rule change on August 16, 2017, which amended and replaced the proposed rule change.7 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 2, from interested persons.8 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend: (i) Footnote (E) to Section 102.01B of the NYSE Listed Company Manual (the ‘‘Manual’’) to modify the provisions relating to the qualification of companies listing without a prior Exchange Act registration; (ii) Rule 15 to add a Reference Price for when a security is listed under Footnote (E) to Section 102.01B; (iii) Rule 104 to specify DMM requirements when a security is listed under Footnote (E) to Section 102.01B and there has been no 4 See Securities Exchange Act Release No. 809333 (June 15, 2017), 82 FR 28200 (June 20, 2017)(‘‘Notice’’). 5 See letter from James J. Angel, Associate Professor of Finance, Georgetown University, dated July 28, 2017. 6 See Securities Exchange Act Release No. 81309 (August 3, 2017), 82 FR 37244 (August 9, 2017). 7 The Exchange filed Amendment No. 1 to the proposed rule change on July 28, 2017 and withdrew Amendment No. 1 on August 16, 2017. 8 In Amendment No. 2, the Exchange, among other things, provides that a Designated Market Maker (‘‘DMM’’) can only use a trading price in a private placement market as a reference price and to facilitate a fair and orderly opening on the first day of trading in a security being listed under proposed Footnote (E) to Section 102.01(B) of the NYSE’s Listed Company Manual (‘‘non-IPO new listing’’) if the private placement market has had recent sustained history of trading prior to listing. If there is no recent sustained history of trading prior to listing in the private placement market, the proposal states that the DMM will consult with a financial advisor to the issuer of the security to establish a reference price pursuant to Exchange Rule 15 and facilitate a fair and orderly opening pursuant to Exchange Rule 104. Amendment No. 2, also amended the proposal to delete the proposed regulatory halt provision for an initial public offering so that the proposed new regulatory halt authority is only applicable to a security that is the subject of a non-IPO new listing. Amendment No 2 also adds language to make clear that the regulatory halt authority for a non-IPO new listing will be terminated when the DMM opens the security for trading. The proposed new regulatory halt will, therefore, only apply during the preopening period on the first day of trading on the Exchange in a non-IPO new listing. PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 40183 trading in the private market for such security; and (iv) Rule 123D to specify that the Exchange may declare a regulatory halt in a security that is the subject of an initial listing on the Exchange. 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. 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: (i) Footnote (E) to Section 102.01B of the Manual to modify the provisions relating to the qualification of companies listing without a prior Exchange Act registration; (ii) Rule 15 to add a Reference Price for when a security is listed under Footnote (E) to Section 102.01B; (iii) Rule 104 to specify DMM requirements when a security is listed under Footnote (E) to Section 102.10B and there has been no trading in the private market for such security; and (iv) Rule 123D to specify that the Exchange may declare a regulatory halt in a security that is the subject of an initial listing on the Exchange.9 Amendments to Footnote (E) to Section 102.01B Generally, the Exchange expects to list companies in connection with a firm commitment underwritten initial public offering (‘‘IPO’’), upon transfer from another market, or pursuant to a spinoff. Companies listing in connection with an IPO must demonstrate that they have $40 million in market value of 9 The Exchange has previously filed this proposal as SR–NYSE–2017–30. See Securities Exchange Act Release No. 80933 (June 15, 2017), 82 FR 28200 (June 20, 2017) (SR–NYSE–2017–30). This Amendment No. 2 replaces and supersedes the original filing of SR–NYSE–2017–30 in its entirety. E:\FR\FM\24AUN1.SGM 24AUN1 rmajette on DSKBCKNHB2PROD with NOTICES 40184 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices publicly-held shares,10 while companies that are listing upon transfer from another exchange or the over-the counter market or pursuant to a spin-off must demonstrate that they have $100 million in market value of publicly-held shares. Section 102.01B currently contains a provision under which the Exchange recognizes that some companies that have not previously had their common equity securities registered under the Exchange Act, but which have sold common equity securities in a private placement, may wish to list their common equity securities on the Exchange at the time of effectiveness of a registration statement filed solely for the purpose of allowing existing shareholders to sell their shares. Footnote (E) to Section 102.01B provides that the Exchange will, on a case by case basis, exercise discretion to list such companies. In exercising this discretion, Footnote (E) provides that the Exchange will determine that such company has met the $100 million aggregate market value of publicly-held shares requirement based on a combination of both (i) an independent third-party valuation (a ‘‘Valuation’’) of the company and (ii) the most recent trading price for the company’s common stock in a trading system for unregistered securities operated by a national securities exchange or a registered broker-dealer (a ‘‘Private Placement Market’’). The Exchange will attribute a market value of publicly-held shares to the company equal to the lesser of (i) the value calculable based on the Valuation and (ii) the value calculable based on the most recent trading price in a Private Placement Market. Any Valuation used for purposes of Footnote (E) must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations. The Valuation must be of a recent date as of the time of the approval of the company for listing and the evaluator must have considered, among other factors, the annual financial statements required to be included in the registration statement, along with financial statements for any completed fiscal quarters subsequent to the end of the last year of audited financials included in the registration statement. The Exchange will consider any market factors or factors particular to the listing applicant that would cause concern that 10 Shares held by directors, officers, or their immediate families and other concentrated holdings of 10 percent or more are excluded in calculating the number of publicly-held shares. VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 the value of the company had diminished since the date of the Valuation and will continue to monitor the company and the appropriateness of relying on the Valuation up to the time of listing. In particular, the Exchange will examine the trading price trends for the stock in the Private Placement Market over a period of several months prior to listing and will only rely on a Private Placement Market price if it is consistent with a sustained history over that several month period evidencing a market value in excess of the Exchange’s market value requirement. The Exchange may withdraw its approval of the listing at any time prior to the listing date if it believes that the Valuation no longer accurately reflects the company’s likely market value. While Footnote (E) to Section 102.01B provides for a company listing upon effectiveness of a selling shareholder registration statement, it does not make any provision for a company listing in connection with the effectiveness of an Exchange Act registration statement in the absence of an IPO or other Securities Act registration. A company is able to become an Exchange Act registrant without a concurrent public offering by filing a Form 10 (or, in the case of a foreign private issuer, a Form 20–F) with the SEC. The Exchange believes that it is appropriate to list companies that wish to list immediately upon effectiveness of an Exchange Act registration statement without a concurrent Securities Act registration provided the applicable company meets all other listing requirements. Consequently, the Exchange proposes to amend Footnote (E) to Section 102.01B to explicitly provide that it applies to companies listing upon effectiveness of an Exchange Act registration statement without a concurrent Securities Act registration as well as to companies listing upon effectiveness of a selling shareholder registration statement. The Exchange notes that the requirement of Footnote (E) that the Exchange should rely on recent Private Placement Market trading in addition to a Valuation may cause difficulties for certain companies that are otherwise clearly qualified for listing. Some companies that are clearly large enough to be suitable for listing on the Exchange do not have their securities traded at all on a Private Placement Market prior to going public. In other cases, the Private Placement Market trading is too limited to provide a reasonable basis for reaching conclusions about a company’s qualification. Consequently, the Exchange proposes to amend Footnote (E) to provide an exception to the Private Placement Market trading PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 requirement for companies with respect to which there is a recent Valuation available indicating at least $250 million in market value of publicly-held shares. Adopting a requirement that the Valuation must be at least two-and-ahalf times the $100 million requirement will give a significant degree of comfort that the market value of the company’s shares will meet the standard upon commencement of trading on the Exchange. The Exchange notes that it is unlikely that any Valuation would reach a conclusion that was incorrect to the degree necessary for a company using this provision to fail to meet the $100 million requirement upon listing, in particular because any Valuation used for this purpose must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations. The Exchange proposes to further amend Footnote (E) by providing that a valuation agent will not be deemed to be independent if: • At the time it provides such valuation, the valuation agent or any affiliated person or persons beneficially own in the aggregate as of the date of the valuation, more than 5% of the class of securities to be listed, including any right to receive any such securities exercisable within 60 days. • The valuation agent or any affiliated entity has provided any investment banking services to the listing applicant within the 12 months preceding the date of the valuation. For purposes of this provision, ‘‘investment banking services’’ includes, without limitation, acting as an underwriter in an offering for the issuer; acting as a financial adviser in a merger or acquisition; providing venture capital, equity lines of credit, PIPEs (private investment, public equity transactions), or similar investments; serving as placement agent for the issuer; or acting as a member of a selling group in a securities underwriting. • The valuation agent or any affiliated entity has been engaged to provide investment banking services to the listing applicant in connection with the proposed listing or any related financings or other related transactions. The Exchange believes that this proposed new requirement will provide a significant additional guarantee of the independence of any entity providing a Valuation for purposes of Footnote (E). The proposed amendments would enable the Exchange to compete for listings of companies that the Exchange believes would be able to list on the Nasdaq Stock Market (‘‘Nasdaq’’) but would not be able to list on the NYSE under its current rules. Nasdaq’s initial E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices listing rules do not explicitly address how Nasdaq determines compliance with its initial listing market capitalization requirements by private companies seeking to list upon effectiveness of a selling shareholder registration statement or Exchange Act registration without a concurrent underwritten public offering. However, over an extended period of time Nasdaq has listed a number of previously private companies in conjunction with the effectiveness of a selling shareholder registration statement without an underwritten offering. In light of this precedent and the absence of any Nasdaq rule provision explicitly limiting the ability of a company to qualify for listing without a public offering or prior public market price, the Exchange believes that Nasdaq would take the position that it could also list a previously private company upon effectiveness of an Exchange Act registration statement without a concurrent public offering. Therefore, the Exchange believes that its proposed amendment would permit it to compete on equal terms with Nasdaq for the listing of companies seeking to list in either of these circumstances. The Exchange believes that it is important to have a transparent and consistent approach to determining compliance with applicable market capitalization requirements by previously private companies seeking to list without a public offering and that Footnote (E) to Section 102.01B as amended would provide such a mechanism. In the absence of the proposed amendments, companies listing upon effectiveness of an Exchange Act registration statement would have no means of listing on the NYSE, while the Exchange believes that Nasdaq would interpret its own rules as enabling it to list a company under those circumstances. As such, the proposed amendment would address a significant competitive disadvantage faced by the NYSE, while also providing certain companies with an alternative listing venue where none currently exists. rmajette on DSKBCKNHB2PROD with NOTICES Proposed Amendments to NYSE Rules The Exchange proposes to amend its rules governing the opening of trading to specify procedures for the opening trade on the day of initial listing of a company that lists under the amended provisions of Footnote (E) to Section 102.01B of the Manual and that did not have recent sustained history of trading in a Private Placement Market before listing on the Exchange. The Exchange proposes that the issuer must retain a VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 financial advisor to provide specified functions, as described below. Rule 15 Rule 15(b) provides that a designated market maker (‘‘DMM’’) will publish a pre-opening indication either (i) before a security opens if the opening transaction on the Exchange is anticipated to be at a price that represents a change of more than the ‘‘Applicable Price Range,’’ as specified in Rule 15(d), from a specified ‘‘Reference Price,’’ as specified in Rule 15(c), or (ii) if a security has not opened by 10:00 a.m. Eastern Time. Rule 15(c)(1) specifies the Reference Price for a security other than an American Depository Receipt, which would be either (A) the security’s last reported sale price on the Exchange; (B) the security’s offering price in the case of an IPO; or (C) the security’s last reported sale price on the securities market from which the security is being transferred to the Exchange, on the security’s first day of trading on the Exchange. The Exchange proposes to amend Rule 15(c)(1) to add new sub-paragraph (D) to specify the Reference Price for a security that is listed under Footnote (E) to Section 102.01B of the Manual. As proposed, if such security has had recent sustained trading in a Private Placement Market prior to listing, the Reference Price in such scenario would be the most recent transaction price in that market or, if none, a price determined by the Exchange in consultation with a financial advisor to the issuer of such security. Rule 104 Rule 104(a)(2) provides that the DMM has a responsibility for facilitating openings and reopenings for each of the securities in which the DMM is registered as required under Exchange rules, which includes supplying liquidity as needed.11 The Exchange proposes to amend Rule 104(a)(2) to specify the role of a financial adviser to an issuer that is listing under Footnote (E) to Section 102.01B of the Manual and that has not had recent sustained history of trading in a Private Placement Market prior to listing. As described above, an issuer that seeks to list under Footnote (E) to Section 102.01B and that does not have any recent Private Market Placement trading would be required to have a financial advisor in connection with such listing. The Exchange proposes that the DMM would be required to consult with such financial advisor 11 Rules 15, 115A, and 123D specify the procedures for opening securities on the Exchange. PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 40185 when facilitating the open of trading of the first day of trading of such listing. This requirement is based in part on Nasdaq Rule 4120(c)(9), which requires that a new listing on Nasdaq that is not an IPO have a financial advisor willing to perform the functions performed by an underwriter in connection with pricing an IPO on Nasdaq.12 The Exchange believes that such a financial advisor would have an understanding of the status of ownership of outstanding shares in the company and would have been working with the issuer to identify a market for the securities upon listing. Such financial advisor would be able to provide input to the DMM regarding expectations of where such a new listing should be priced, based on pre-listing selling and buying interest and other factors that would not be available to the DMM through other sources. To effect this change, the Exchange proposes to amend Rule 104(a)(3) to provide that when facilitating the opening on the first day of trading of a security that is listed under Footnote (E) to Section 102.01B of the Manual and that has not had recent sustained history of trading in a Private Placement Market prior to listing, the DMM would be required to consult with a financial advisor to the issuer of such security in order to effect a fair and orderly opening of such security. Notwithstanding the proposed obligation to consult with the financial advisor, the DMM would remain responsible for facilitating the opening of trading of such security, and the opening of such security must take into consideration the buy and sell orders available on the Exchange’s book in connection. Accordingly, just as a DMM is not bound by an offering price in an IPO, and will open such a security at a 12 Nasdaq operates an automated IPO opening process, which is described in Nasdaq Rule 4120(c)(8). In contrast to the NYSE, which has DMMs to facilitate the opening of trading, for an IPO, Nasdaq requires that the underwriter of the IPO perform specified functions, including (i) notifying Nasdaq that the security is ready to trade; (ii) determining whether an IPO should be postponed; and (iii) selecting price bands for purposes of applying Nasdaq’s automated price validation test. Nasdaq Rule 4120(c)(9) requires that if a new listing does not have an underwriter, the issuer must have a financial advisor willing to perform the above-described functions. The functions that the underwriter/financial advisor performs on Nasdaq as described in Rule 4120(c)(8) are not applicable to the Exchange. The Exchange opening process does not have a concept of ‘‘price bands’’ because, as described in Rule 115A, market orders and limit orders priced better than the opening price are guaranteed to participate in the IPO opening. In addition, because the Exchange does not conduct an automated opening process, the DMM functions as an independent financial expert responsible for facilitating the opening of trading to ensure a fair and orderly opening. E:\FR\FM\24AUN1.SGM 24AUN1 40186 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices price dictated by the buying and selling interest entered on the Exchange in that security, a DMM would not be bound by the input he or she receives from the financial advisor. rmajette on DSKBCKNHB2PROD with NOTICES Rule 123D The Exchange further proposes to amend its rules to provide authority to declare a regulatory halt for a new listing that is not the subject of an IPO. As proposed, Rule 123D(d) would provide that the Exchange may declare a regulatory halt in a security that is the subject of an initial pricing on the Exchange of a security that has not been listed on a national securities exchange or traded in the over-the-counter market pursuant to FINRA Form 211 (‘‘OTC market’’) immediately prior to the initial pricing.13 Proposed Rule 123D(d) would further provide that this regulatory halt would be terminated when the DMM opens the security. Proposed Rule 123D(d) is based in part on Nasdaq Rule 4120(c)(9), which provides that the process for halting and initial pricing of a security that is the subject of an IPO on Nasdaq is also available for the initial pricing of any other security that has not been listed on a national securities exchange or traded in the OTC market immediately prior to the initial public offering, provided that a broker-dealer serving in the role of financial advisor to the issuer of the securities being listed is willing to perform the functions under Rule 4120(c)(7)(B) that are performed by an underwriter with respect to an initial public offering.14 Proposed Rule 123D(d) is also based in part on Nasdaq Rule 4120(c)(8)(A), which provides that such halt condition shall be terminated when the security is released for trading on Nasdaq. Proposed Rule 123D(d) would provide authority for the Exchange to declare a regulatory halt for a security that is having its initial listing on the Exchange, is not an IPO, and has not been listed on a national securities exchange or traded in the OTC market immediately prior to the initial pricing (‘‘non-IPO listing’’). The Exchange does not propose to include the last clause of Nasdaq Rule 4120(c)(9) in proposed Rule 123D(d). Rather, as described above, the Exchange proposes to address the role of a financial advisor to an 13 The Exchange proposes to re-number current Rule 123D(d) as Rule 123D(e). 14 The Exchange believes that the correct cross reference should be to Nasdaq Rule 4120(c)(8)(B). Nasdaq Rule 4120(c)(8) specifies Nasdaq procedures for how it conducts its crossing trade following a trading halt declared for an IPO on Nasdaq, including the role of an underwriter in determining when an IPO may be released for trading. VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 investors, as it ensures that any entity providing a Valuation for purposes of Footnote (E) will have a significant level of independence from the listing applicant. The Exchange believes that the proposed amendments to Rules 15 and 104 would remove impediments to and perfect the mechanism of a free and open market and a national market system because the proposed rule changes would specify requirements relating to the opening of a trading of a security that would be listed under the 2. Statutory Basis proposed amended text of Footnote (E) The Exchange believes that the to Section 102.01B of the Manual. The proposed rule change is consistent with proposed amendments to Exchange Section 6(b) 15 of the Act, in general, and rules are designed to provide DMMs furthers the objectives of Section 6(b)(5) with information to assist them in of the Act,16 in particular in that it is meeting their obligations to open a new designed to promote just and equitable listing under the amended provisions of principles of trade, to foster cooperation the Manual. Rule 15 would be amended and coordination with persons engaged to specify the Reference Price that the in regulating, clearing, settling, DMM would use for purposes of processing information with respect to, determining whether a pre-opening and facilitating transactions in indication is required and Rule 104 securities, to remove impediments to would be amended to provide that the and perfect the mechanism of a free and DMM will consult with a financial open market and a national market advisor when facilitating the opening of system, and, in general, to protect a security that is listed under Footnote investors and the public interest and is (E) to Section 102.01B of the Manual not designed to permit unfair and that has not had recent sustained discrimination between customers, history of trading in a Private Placement issuers, brokers, or dealers. The Market prior to listing. proposed rule change would foster The Exchange believes that the cooperation and coordination with proposed amendments to Rule 123D to persons engaged in clearing and settling provide authority to declare a regulatory transactions in securities, thereby halt in a security that is the subject of facilitating such transactions. a non-IPO listing would remove The proposal to permit companies impediments to and perfect the listing upon effectiveness of an mechanism of a free and open market Exchange Act registration statement and a national market system because it without a concurrent public offering or would provide the Exchange with Securities Act registration is designed to authority to halt trading across all protect investors and the public interest, markets for a security that has not because such companies will be previously listed on the Exchange, but required to meet all of the same for which a regulatory halt would quantitative requirements met by other promote fair and orderly markets. The listing applicants. The proposal to proposed rule change would also align amend Footnote (E) to Section 102.01B halt rule authority among primary of the Manual to allow companies to listing exchanges. The Exchange further avail themselves of that provision believes that having the authority to without any reliance on Private declare a regulatory halt for a security Placement Market trading is designed to that is the subject of a non-IPO listing protect investors and the public interest is consistent with the protection of because any company relying solely on investors and the public interest and a valuation to demonstrate compliance would promote fair and orderly markets with the market value of publicly-held by helping to protect against volatility shares requirement will be required to in pricing and initial trading of demonstrate a market value of publicly- unseasoned securities. held shares of $250 million, rather than B. Self-Regulatory Organization’s the $100 million that is generally Statement on Burden on Competition applicable. The proposal to include a The Exchange does not believe that definition of valuation agent the proposed amendment to Footnote independence in Footnote (E) is (E) to Section 102.01B of the Manual consistent with the protection of will impose any burden on competition 15 15 U.S.C. 78f(b). that is not necessary or appropriate in 16 15 U.S.C. 78f(b)(5). furtherance of the purpose of the issuer in specified circumstances in Rule 104(a)(3). The Exchange believes that it would be consistent with the protection of investors and the public interest for the Exchange, as a primary listing exchange, to have the authority to declare a regulatory halt for a security that is the subject of a non-IPO listing because it would ensure that a new listing that is not the subject of an IPO could not be traded before the security opens on the Exchange. PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 82, No. 163 / Thursday, August 24, 2017 / Notices Exchange Act. Rather, the proposed rule change will increase competition for new listings by enabling companies to list that meet all quantitative requirements but are currently unable to list because of the methodology required by the current rules to demonstrate their compliance. As noted above, Nasdaq’s listing rules do not include explicit limitations applicable to the listing of companies in these circumstances. Additionally, Nasdaq has listed previously private companies upon effectiveness of a selling shareholder registration statement without a concurrent underwritten offering on several occasions in the past. In light of this precedent and the absence of any Nasdaq rule provision explicitly limiting the ability of a company to qualify for listing without a public offering or prior public market price, the Exchange believes that Nasdaq would take the position that it could also list a previously private company upon effectiveness of an Exchange Act registration statement without a concurrent public offering. As such, the proposed amendment to Footnote (E) to Section 102.01B of the Manual would increase competition by enabling the NYSE to compete with Nasdaq for these listings. The Exchange does not believe that the proposed amendments to its Rule Book will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. Specifically, the Exchange believes that the changes are not related to competition, but rather are designed to promote fair and orderly markets in a manner that is consistent with the protection of investors and the public interest. The proposed changes do not impact the ability of any market participant or trading venue to compete. 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. rmajette on DSKBCKNHB2PROD with NOTICES III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as modified by Amendment No. 2, is consistent with the Act. Comments may be submitted by any of the following methods: VerDate Sep<11>2014 15:29 Aug 23, 2017 Jkt 241001 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– NYSE–2017–30 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–NYSE–2017–30. 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–NYSE– 2017–30 and should be submitted on or beforeSeptember 14, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–17922 Filed 8–23–17; 8:45 am] BILLING CODE 8011–01–P 17 17 PO 00000 CFR 200.30–3(a)(12). Frm 00058 Fmt 4703 Sfmt 4703 40187 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81435/August 18, 2017] Securities Exchange Act of 1934; Order Scheduling Filing of Statements on Review in the Matter of the Chicago Stock Exchange, Inc. for an Order Granting the Approval of Proposed Rule Change Regarding the Acquisition of CHX Holdings, Inc. by North America Casin Holdings, Inc. (File No. SR–CHX–2016–20) On December 2, 2016, the Chicago Stock Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’)1 and Rule 19b–4 thereunder,2 a proposed rule change in connection with the acquisition of CHX Holdings, Inc. by North America Casin Holdings, Inc. The proposed rule change was published for comment in the Federal Register on December 12, 2016.3 On January 12, 2017, proceedings were instituted under Section 19(b)(2)(B) of the Exchange Act 4 to determine whether to approve or disapprove the proposed rule change.5 On June 6, 2017, pursuant to Section 19(b)(2) of the Exchange Act,6 a longer period was designated for Commission action on proceedings to determine whether to disapprove the proposed rule change.7 On August 7, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.8 On August 9, 2017, the Division of Trading and Markets, for the Commission pursuant to delegated authority,9 approved the proposed rule change, as modified by Amendment No. 1.10 Pursuant to Commission Rule of Practice 431,11 the Commission is reviewing the delegated action and the August 9, 2017 order is stayed. Accordingly, it is ordered, pursuant to Commission Rule of Practice 431, that by September 17, 2017, any party or 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 79474 (December 6, 2016), 81 FR 89543. 4 15 U.S.C. 78s(b)(2)(B). 5 See Securities Exchange Act Release No. 79781, 82 FR 6669 (January 19, 2017). 6 15 U.S.C. 78s(b)(2). 7 See Securities Exchange Act Release No. 80864, 82 FR 26966 (June 12, 2017). 8 See letter from Albert J. Kim, Vice President and Associate General Counsel, CHX, dated August 8, 2017, available at: https://www.sec.gov/comments/ sr-chx-2016-20/chx201620-2198847-160378.pdf. 9 17 CFR 200.30 3(a)(12). 10 See Securities Exchange Act Release No. 81366, 82 FR 38734 (August 15, 2017). 11 17 CFR 201.431. 2 17 E:\FR\FM\24AUN1.SGM 24AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40183-40187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17922]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81440; File No. SR-NYSE-2017-30]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 2 to Proposed Rule Change To Amend 
Section 102.01B of the NYSE Listed Company Manual To Provide for the 
Listing of Companies That List Without a Prior Exchange Act 
Registration and That Are Not Listing in Connection With an 
Underwritten Initial Public Offering and Related Changes to Rules 15, 
104, and 123D

August 18, 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 13, 2017, New York Stock Exchange LLC (``NYSE'' 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 proposed rule change was published for comment in the 
Federal Register on June 20, 2017.\4\ The Commission received one 
comment on the proposed rule change.\5\ On August 3, 2017, 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 September 18, 2017.\6\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 809333 (June 15, 
2017), 82 FR 28200 (June 20, 2017)(``Notice'').
    \5\ See letter from James J. Angel, Associate Professor of 
Finance, Georgetown University, dated July 28, 2017.
    \6\ See Securities Exchange Act Release No. 81309 (August 3, 
2017), 82 FR 37244 (August 9, 2017).
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    The Exchange filed Amendment No. 2 to the proposed rule change on 
August 16, 2017, which amended and replaced the proposed rule 
change.\7\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 2, from 
interested persons.\8\
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    \7\ The Exchange filed Amendment No. 1 to the proposed rule 
change on July 28, 2017 and withdrew Amendment No. 1 on August 16, 
2017.
    \8\ In Amendment No. 2, the Exchange, among other things, 
provides that a Designated Market Maker (``DMM'') can only use a 
trading price in a private placement market as a reference price and 
to facilitate a fair and orderly opening on the first day of trading 
in a security being listed under proposed Footnote (E) to Section 
102.01(B) of the NYSE's Listed Company Manual (``non-IPO new 
listing'') if the private placement market has had recent sustained 
history of trading prior to listing. If there is no recent sustained 
history of trading prior to listing in the private placement market, 
the proposal states that the DMM will consult with a financial 
advisor to the issuer of the security to establish a reference price 
pursuant to Exchange Rule 15 and facilitate a fair and orderly 
opening pursuant to Exchange Rule 104. Amendment No. 2, also amended 
the proposal to delete the proposed regulatory halt provision for an 
initial public offering so that the proposed new regulatory halt 
authority is only applicable to a security that is the subject of a 
non-IPO new listing. Amendment No 2 also adds language to make clear 
that the regulatory halt authority for a non-IPO new listing will be 
terminated when the DMM opens the security for trading. The proposed 
new regulatory halt will, therefore, only apply during the pre-
opening period on the first day of trading on the Exchange in a non-
IPO new listing.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend: (i) Footnote (E) to Section 102.01B 
of the NYSE Listed Company Manual (the ``Manual'') to modify the 
provisions relating to the qualification of companies listing without a 
prior Exchange Act registration; (ii) Rule 15 to add a Reference Price 
for when a security is listed under Footnote (E) to Section 102.01B; 
(iii) Rule 104 to specify DMM requirements when a security is listed 
under Footnote (E) to Section 102.01B and there has been no trading in 
the private market for such security; and (iv) Rule 123D to specify 
that the Exchange may declare a regulatory halt in a security that is 
the subject of an initial listing on the Exchange. 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.

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: (i) Footnote (E) to Section 102.01B 
of the Manual to modify the provisions relating to the qualification of 
companies listing without a prior Exchange Act registration; (ii) Rule 
15 to add a Reference Price for when a security is listed under 
Footnote (E) to Section 102.01B; (iii) Rule 104 to specify DMM 
requirements when a security is listed under Footnote (E) to Section 
102.10B and there has been no trading in the private market for such 
security; and (iv) Rule 123D to specify that the Exchange may declare a 
regulatory halt in a security that is the subject of an initial listing 
on the Exchange.\9\
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    \9\ The Exchange has previously filed this proposal as SR-NYSE-
2017-30. See Securities Exchange Act Release No. 80933 (June 15, 
2017), 82 FR 28200 (June 20, 2017) (SR-NYSE-2017-30). This Amendment 
No. 2 replaces and supersedes the original filing of SR-NYSE-2017-30 
in its entirety.
---------------------------------------------------------------------------

Amendments to Footnote (E) to Section 102.01B
    Generally, the Exchange expects to list companies in connection 
with a firm commitment underwritten initial public offering (``IPO''), 
upon transfer from another market, or pursuant to a spin-off. Companies 
listing in connection with an IPO must demonstrate that they have $40 
million in market value of

[[Page 40184]]

publicly-held shares,\10\ while companies that are listing upon 
transfer from another exchange or the over-the counter market or 
pursuant to a spin-off must demonstrate that they have $100 million in 
market value of publicly-held shares.
---------------------------------------------------------------------------

    \10\ Shares held by directors, officers, or their immediate 
families and other concentrated holdings of 10 percent or more are 
excluded in calculating the number of publicly-held shares.
---------------------------------------------------------------------------

    Section 102.01B currently contains a provision under which the 
Exchange recognizes that some companies that have not previously had 
their common equity securities registered under the Exchange Act, but 
which have sold common equity securities in a private placement, may 
wish to list their common equity securities on the Exchange at the time 
of effectiveness of a registration statement filed solely for the 
purpose of allowing existing shareholders to sell their shares. 
Footnote (E) to Section 102.01B provides that the Exchange will, on a 
case by case basis, exercise discretion to list such companies. In 
exercising this discretion, Footnote (E) provides that the Exchange 
will determine that such company has met the $100 million aggregate 
market value of publicly-held shares requirement based on a combination 
of both (i) an independent third-party valuation (a ``Valuation'') of 
the company and (ii) the most recent trading price for the company's 
common stock in a trading system for unregistered securities operated 
by a national securities exchange or a registered broker-dealer (a 
``Private Placement Market''). The Exchange will attribute a market 
value of publicly-held shares to the company equal to the lesser of (i) 
the value calculable based on the Valuation and (ii) the value 
calculable based on the most recent trading price in a Private 
Placement Market.
    Any Valuation used for purposes of Footnote (E) must be provided by 
an entity that has significant experience and demonstrable competence 
in the provision of such valuations. The Valuation must be of a recent 
date as of the time of the approval of the company for listing and the 
evaluator must have considered, among other factors, the annual 
financial statements required to be included in the registration 
statement, along with financial statements for any completed fiscal 
quarters subsequent to the end of the last year of audited financials 
included in the registration statement. The Exchange will consider any 
market factors or factors particular to the listing applicant that 
would cause concern that the value of the company had diminished since 
the date of the Valuation and will continue to monitor the company and 
the appropriateness of relying on the Valuation up to the time of 
listing. In particular, the Exchange will examine the trading price 
trends for the stock in the Private Placement Market over a period of 
several months prior to listing and will only rely on a Private 
Placement Market price if it is consistent with a sustained history 
over that several month period evidencing a market value in excess of 
the Exchange's market value requirement. The Exchange may withdraw its 
approval of the listing at any time prior to the listing date if it 
believes that the Valuation no longer accurately reflects the company's 
likely market value.
    While Footnote (E) to Section 102.01B provides for a company 
listing upon effectiveness of a selling shareholder registration 
statement, it does not make any provision for a company listing in 
connection with the effectiveness of an Exchange Act registration 
statement in the absence of an IPO or other Securities Act 
registration. A company is able to become an Exchange Act registrant 
without a concurrent public offering by filing a Form 10 (or, in the 
case of a foreign private issuer, a Form 20-F) with the SEC. The 
Exchange believes that it is appropriate to list companies that wish to 
list immediately upon effectiveness of an Exchange Act registration 
statement without a concurrent Securities Act registration provided the 
applicable company meets all other listing requirements. Consequently, 
the Exchange proposes to amend Footnote (E) to Section 102.01B to 
explicitly provide that it applies to companies listing upon 
effectiveness of an Exchange Act registration statement without a 
concurrent Securities Act registration as well as to companies listing 
upon effectiveness of a selling shareholder registration statement.
    The Exchange notes that the requirement of Footnote (E) that the 
Exchange should rely on recent Private Placement Market trading in 
addition to a Valuation may cause difficulties for certain companies 
that are otherwise clearly qualified for listing. Some companies that 
are clearly large enough to be suitable for listing on the Exchange do 
not have their securities traded at all on a Private Placement Market 
prior to going public. In other cases, the Private Placement Market 
trading is too limited to provide a reasonable basis for reaching 
conclusions about a company's qualification. Consequently, the Exchange 
proposes to amend Footnote (E) to provide an exception to the Private 
Placement Market trading requirement for companies with respect to 
which there is a recent Valuation available indicating at least $250 
million in market value of publicly-held shares. Adopting a requirement 
that the Valuation must be at least two-and-a-half times the $100 
million requirement will give a significant degree of comfort that the 
market value of the company's shares will meet the standard upon 
commencement of trading on the Exchange. The Exchange notes that it is 
unlikely that any Valuation would reach a conclusion that was incorrect 
to the degree necessary for a company using this provision to fail to 
meet the $100 million requirement upon listing, in particular because 
any Valuation used for this purpose must be provided by an entity that 
has significant experience and demonstrable competence in the provision 
of such valuations.
    The Exchange proposes to further amend Footnote (E) by providing 
that a valuation agent will not be deemed to be independent if:
     At the time it provides such valuation, the valuation 
agent or any affiliated person or persons beneficially own in the 
aggregate as of the date of the valuation, more than 5% of the class of 
securities to be listed, including any right to receive any such 
securities exercisable within 60 days.
     The valuation agent or any affiliated entity has provided 
any investment banking services to the listing applicant within the 12 
months preceding the date of the valuation. For purposes of this 
provision, ``investment banking services'' includes, without 
limitation, acting as an underwriter in an offering for the issuer; 
acting as a financial adviser in a merger or acquisition; providing 
venture capital, equity lines of credit, PIPEs (private investment, 
public equity transactions), or similar investments; serving as 
placement agent for the issuer; or acting as a member of a selling 
group in a securities underwriting.
     The valuation agent or any affiliated entity has been 
engaged to provide investment banking services to the listing applicant 
in connection with the proposed listing or any related financings or 
other related transactions.
    The Exchange believes that this proposed new requirement will 
provide a significant additional guarantee of the independence of any 
entity providing a Valuation for purposes of Footnote (E).
    The proposed amendments would enable the Exchange to compete for 
listings of companies that the Exchange believes would be able to list 
on the Nasdaq Stock Market (``Nasdaq'') but would not be able to list 
on the NYSE under its current rules. Nasdaq's initial

[[Page 40185]]

listing rules do not explicitly address how Nasdaq determines 
compliance with its initial listing market capitalization requirements 
by private companies seeking to list upon effectiveness of a selling 
shareholder registration statement or Exchange Act registration without 
a concurrent underwritten public offering. However, over an extended 
period of time Nasdaq has listed a number of previously private 
companies in conjunction with the effectiveness of a selling 
shareholder registration statement without an underwritten offering. In 
light of this precedent and the absence of any Nasdaq rule provision 
explicitly limiting the ability of a company to qualify for listing 
without a public offering or prior public market price, the Exchange 
believes that Nasdaq would take the position that it could also list a 
previously private company upon effectiveness of an Exchange Act 
registration statement without a concurrent public offering. Therefore, 
the Exchange believes that its proposed amendment would permit it to 
compete on equal terms with Nasdaq for the listing of companies seeking 
to list in either of these circumstances.
    The Exchange believes that it is important to have a transparent 
and consistent approach to determining compliance with applicable 
market capitalization requirements by previously private companies 
seeking to list without a public offering and that Footnote (E) to 
Section 102.01B as amended would provide such a mechanism. In the 
absence of the proposed amendments, companies listing upon 
effectiveness of an Exchange Act registration statement would have no 
means of listing on the NYSE, while the Exchange believes that Nasdaq 
would interpret its own rules as enabling it to list a company under 
those circumstances. As such, the proposed amendment would address a 
significant competitive disadvantage faced by the NYSE, while also 
providing certain companies with an alternative listing venue where 
none currently exists.
Proposed Amendments to NYSE Rules
    The Exchange proposes to amend its rules governing the opening of 
trading to specify procedures for the opening trade on the day of 
initial listing of a company that lists under the amended provisions of 
Footnote (E) to Section 102.01B of the Manual and that did not have 
recent sustained history of trading in a Private Placement Market 
before listing on the Exchange. The Exchange proposes that the issuer 
must retain a financial advisor to provide specified functions, as 
described below.
Rule 15
    Rule 15(b) provides that a designated market maker (``DMM'') will 
publish a pre-opening indication either (i) before a security opens if 
the opening transaction on the Exchange is anticipated to be at a price 
that represents a change of more than the ``Applicable Price Range,'' 
as specified in Rule 15(d), from a specified ``Reference Price,'' as 
specified in Rule 15(c), or (ii) if a security has not opened by 10:00 
a.m. Eastern Time. Rule 15(c)(1) specifies the Reference Price for a 
security other than an American Depository Receipt, which would be 
either (A) the security's last reported sale price on the Exchange; (B) 
the security's offering price in the case of an IPO; or (C) the 
security's last reported sale price on the securities market from which 
the security is being transferred to the Exchange, on the security's 
first day of trading on the Exchange.
    The Exchange proposes to amend Rule 15(c)(1) to add new sub-
paragraph (D) to specify the Reference Price for a security that is 
listed under Footnote (E) to Section 102.01B of the Manual. As 
proposed, if such security has had recent sustained trading in a 
Private Placement Market prior to listing, the Reference Price in such 
scenario would be the most recent transaction price in that market or, 
if none, a price determined by the Exchange in consultation with a 
financial advisor to the issuer of such security.
Rule 104
    Rule 104(a)(2) provides that the DMM has a responsibility for 
facilitating openings and reopenings for each of the securities in 
which the DMM is registered as required under Exchange rules, which 
includes supplying liquidity as needed.\11\ The Exchange proposes to 
amend Rule 104(a)(2) to specify the role of a financial adviser to an 
issuer that is listing under Footnote (E) to Section 102.01B of the 
Manual and that has not had recent sustained history of trading in a 
Private Placement Market prior to listing.
---------------------------------------------------------------------------

    \11\ Rules 15, 115A, and 123D specify the procedures for opening 
securities on the Exchange.
---------------------------------------------------------------------------

    As described above, an issuer that seeks to list under Footnote (E) 
to Section 102.01B and that does not have any recent Private Market 
Placement trading would be required to have a financial advisor in 
connection with such listing. The Exchange proposes that the DMM would 
be required to consult with such financial advisor when facilitating 
the open of trading of the first day of trading of such listing. This 
requirement is based in part on Nasdaq Rule 4120(c)(9), which requires 
that a new listing on Nasdaq that is not an IPO have a financial 
advisor willing to perform the functions performed by an underwriter in 
connection with pricing an IPO on Nasdaq.\12\
---------------------------------------------------------------------------

    \12\ Nasdaq operates an automated IPO opening process, which is 
described in Nasdaq Rule 4120(c)(8). In contrast to the NYSE, which 
has DMMs to facilitate the opening of trading, for an IPO, Nasdaq 
requires that the underwriter of the IPO perform specified 
functions, including (i) notifying Nasdaq that the security is ready 
to trade; (ii) determining whether an IPO should be postponed; and 
(iii) selecting price bands for purposes of applying Nasdaq's 
automated price validation test. Nasdaq Rule 4120(c)(9) requires 
that if a new listing does not have an underwriter, the issuer must 
have a financial advisor willing to perform the above-described 
functions. The functions that the underwriter/financial advisor 
performs on Nasdaq as described in Rule 4120(c)(8) are not 
applicable to the Exchange. The Exchange opening process does not 
have a concept of ``price bands'' because, as described in Rule 
115A, market orders and limit orders priced better than the opening 
price are guaranteed to participate in the IPO opening. In addition, 
because the Exchange does not conduct an automated opening process, 
the DMM functions as an independent financial expert responsible for 
facilitating the opening of trading to ensure a fair and orderly 
opening.
---------------------------------------------------------------------------

    The Exchange believes that such a financial advisor would have an 
understanding of the status of ownership of outstanding shares in the 
company and would have been working with the issuer to identify a 
market for the securities upon listing. Such financial advisor would be 
able to provide input to the DMM regarding expectations of where such a 
new listing should be priced, based on pre-listing selling and buying 
interest and other factors that would not be available to the DMM 
through other sources.
    To effect this change, the Exchange proposes to amend Rule 
104(a)(3) to provide that when facilitating the opening on the first 
day of trading of a security that is listed under Footnote (E) to 
Section 102.01B of the Manual and that has not had recent sustained 
history of trading in a Private Placement Market prior to listing, the 
DMM would be required to consult with a financial advisor to the issuer 
of such security in order to effect a fair and orderly opening of such 
security.
    Notwithstanding the proposed obligation to consult with the 
financial advisor, the DMM would remain responsible for facilitating 
the opening of trading of such security, and the opening of such 
security must take into consideration the buy and sell orders available 
on the Exchange's book in connection. Accordingly, just as a DMM is not 
bound by an offering price in an IPO, and will open such a security at 
a

[[Page 40186]]

price dictated by the buying and selling interest entered on the 
Exchange in that security, a DMM would not be bound by the input he or 
she receives from the financial advisor.
Rule 123D
    The Exchange further proposes to amend its rules to provide 
authority to declare a regulatory halt for a new listing that is not 
the subject of an IPO. As proposed, Rule 123D(d) would provide that the 
Exchange may declare a regulatory halt in a security that is the 
subject of an initial pricing on the Exchange of a security that has 
not been listed on a national securities exchange or traded in the 
over-the-counter market pursuant to FINRA Form 211 (``OTC market'') 
immediately prior to the initial pricing.\13\ Proposed Rule 123D(d) 
would further provide that this regulatory halt would be terminated 
when the DMM opens the security.
---------------------------------------------------------------------------

    \13\ The Exchange proposes to re-number current Rule 123D(d) as 
Rule 123D(e).
---------------------------------------------------------------------------

    Proposed Rule 123D(d) is based in part on Nasdaq Rule 4120(c)(9), 
which provides that the process for halting and initial pricing of a 
security that is the subject of an IPO on Nasdaq is also available for 
the initial pricing of any other security that has not been listed on a 
national securities exchange or traded in the OTC market immediately 
prior to the initial public offering, provided that a broker-dealer 
serving in the role of financial advisor to the issuer of the 
securities being listed is willing to perform the functions under Rule 
4120(c)(7)(B) that are performed by an underwriter with respect to an 
initial public offering.\14\ Proposed Rule 123D(d) is also based in 
part on Nasdaq Rule 4120(c)(8)(A), which provides that such halt 
condition shall be terminated when the security is released for trading 
on Nasdaq.
---------------------------------------------------------------------------

    \14\ The Exchange believes that the correct cross reference 
should be to Nasdaq Rule 4120(c)(8)(B). Nasdaq Rule 4120(c)(8) 
specifies Nasdaq procedures for how it conducts its crossing trade 
following a trading halt declared for an IPO on Nasdaq, including 
the role of an underwriter in determining when an IPO may be 
released for trading.
---------------------------------------------------------------------------

    Proposed Rule 123D(d) would provide authority for the Exchange to 
declare a regulatory halt for a security that is having its initial 
listing on the Exchange, is not an IPO, and has not been listed on a 
national securities exchange or traded in the OTC market immediately 
prior to the initial pricing (``non-IPO listing''). The Exchange does 
not propose to include the last clause of Nasdaq Rule 4120(c)(9) in 
proposed Rule 123D(d). Rather, as described above, the Exchange 
proposes to address the role of a financial advisor to an issuer in 
specified circumstances in Rule 104(a)(3).
    The Exchange believes that it would be consistent with the 
protection of investors and the public interest for the Exchange, as a 
primary listing exchange, to have the authority to declare a regulatory 
halt for a security that is the subject of a non-IPO listing because it 
would ensure that a new listing that is not the subject of an IPO could 
not be traded before the security opens on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \15\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\16\ in particular in that it 
is designed to promote just and 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 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The proposed rule change would foster 
cooperation and coordination with persons engaged in clearing and 
settling transactions in securities, thereby facilitating such 
transactions.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposal to permit companies listing upon effectiveness of an 
Exchange Act registration statement without a concurrent public 
offering or Securities Act registration is designed to protect 
investors and the public interest, because such companies will be 
required to meet all of the same quantitative requirements met by other 
listing applicants. The proposal to amend Footnote (E) to Section 
102.01B of the Manual to allow companies to avail themselves of that 
provision without any reliance on Private Placement Market trading is 
designed to protect investors and the public interest because any 
company relying solely on a valuation to demonstrate compliance with 
the market value of publicly-held shares requirement will be required 
to demonstrate a market value of publicly-held shares of $250 million, 
rather than the $100 million that is generally applicable. The proposal 
to include a definition of valuation agent independence in Footnote (E) 
is consistent with the protection of investors, as it ensures that any 
entity providing a Valuation for purposes of Footnote (E) will have a 
significant level of independence from the listing applicant.
    The Exchange believes that the proposed amendments to Rules 15 and 
104 would remove impediments to and perfect the mechanism of a free and 
open market and a national market system because the proposed rule 
changes would specify requirements relating to the opening of a trading 
of a security that would be listed under the proposed amended text of 
Footnote (E) to Section 102.01B of the Manual. The proposed amendments 
to Exchange rules are designed to provide DMMs with information to 
assist them in meeting their obligations to open a new listing under 
the amended provisions of the Manual. Rule 15 would be amended to 
specify the Reference Price that the DMM would use for purposes of 
determining whether a pre-opening indication is required and Rule 104 
would be amended to provide that the DMM will consult with a financial 
advisor when facilitating the opening of a security that is listed 
under Footnote (E) to Section 102.01B of the Manual and that has not 
had recent sustained history of trading in a Private Placement Market 
prior to listing.
    The Exchange believes that the proposed amendments to Rule 123D to 
provide authority to declare a regulatory halt in a security that is 
the subject of a non-IPO listing would remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because it would provide the Exchange with authority to halt 
trading across all markets for a security that has not previously 
listed on the Exchange, but for which a regulatory halt would promote 
fair and orderly markets. The proposed rule change would also align 
halt rule authority among primary listing exchanges. The Exchange 
further believes that having the authority to declare a regulatory halt 
for a security that is the subject of a non-IPO listing is consistent 
with the protection of investors and the public interest and would 
promote fair and orderly markets by helping to protect against 
volatility in pricing and initial trading of unseasoned securities.

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

    The Exchange does not believe that the proposed amendment to 
Footnote (E) to Section 102.01B of the Manual will impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purpose of the

[[Page 40187]]

Exchange Act. Rather, the proposed rule change will increase 
competition for new listings by enabling companies to list that meet 
all quantitative requirements but are currently unable to list because 
of the methodology required by the current rules to demonstrate their 
compliance.
    As noted above, Nasdaq's listing rules do not include explicit 
limitations applicable to the listing of companies in these 
circumstances. Additionally, Nasdaq has listed previously private 
companies upon effectiveness of a selling shareholder registration 
statement without a concurrent underwritten offering on several 
occasions in the past. In light of this precedent and the absence of 
any Nasdaq rule provision explicitly limiting the ability of a company 
to qualify for listing without a public offering or prior public market 
price, the Exchange believes that Nasdaq would take the position that 
it could also list a previously private company upon effectiveness of 
an Exchange Act registration statement without a concurrent public 
offering. As such, the proposed amendment to Footnote (E) to Section 
102.01B of the Manual would increase competition by enabling the NYSE 
to compete with Nasdaq for these listings.
    The Exchange does not believe that the proposed amendments to its 
Rule Book will impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Exchange Act. 
Specifically, the Exchange believes that the changes are not related to 
competition, but rather are designed to promote fair and orderly 
markets in a manner that is consistent with the protection of investors 
and the public interest. The proposed changes do not impact the ability 
of any market participant or trading venue to compete.

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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 2, 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-NYSE-2017-30 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-NYSE-2017-30. 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-NYSE-2017-30 and should be 
submitted on or before September 14, 2017.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-17922 Filed 8-23-17; 8:45 am]
 BILLING CODE 8011-01-P

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