Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Listed Company Manual To Adopt Initial and Continued Listing Standards for Subscription Receipts, 48296-48300 [2017-22408]
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48296
Federal Register / Vol. 82, No. 199 / Tuesday, October 17, 2017 / Notices
Exchanges will be subject to
confidentiality restrictions.73
The Commission finds that the
proposed process regarding
amendments to the Proposed
Certificates and Proposed Bylaws is
consistent with Section 6(b)(1) of the
Act, because it reflects the obligation of
the Board to ensure compliance with the
rule filing requirements under the Act.
Additionally, the Commission finds
these changes to be consistent with
Section 19(b)(1) of the Act and Rule
19b–4 thereunder,74 which require that
a self-regulatory organization file with
the Commission all proposed rules, as
well as all proposed changes in,
additions to, and deletions of its
existing rules. These provisions clarify
that amendments to the Proposed
Certificates and Proposed Bylaws
constitute proposed rule changes within
the meaning of Section 19(b)(2) of the
Act and Rule 19b–4 thereunder, and are
subject to the filing requirements of
Section 19 of the Act and the rules and
regulations thereunder.
The Commission also finds that the
prohibition on the use of regulatory fees
or fines to fund non-regulatory purposes
or to make distributions to the
stockholder is consistent with Section
6(b)(1) of the Act,75 because it is
designed to further each Exchange’s
ability to effectively comply with its
statutory obligations and is designed to
ensure that the regulatory authority of
the Exchange is not improperly used.76
This restriction on the use of regulatory
funds is intended to preclude each
Exchange from using its authority to
raise regulatory funds for the purpose of
benefiting its stockholder.77
C. Related Rule Amendments
Each Exchange proposes to amend its
rules in conjunction with the changes in
the Proposed Bylaws.78 Specifically,
each Exchange proposes to update
certain cross-references to the bylaws in
its rules and to move certain definitions
from the bylaws to the rules.79
73 See
Transaction Order, 81 FR at 93991–92.
U.S.C. 78f(b)(1); 17 CFR 240.19b–4.
75 15 U.S.C. 78f(b)(1).
76 See, e.g., ISE Order, 82 FR at 36505 (approving
a prohibition on the use of regulatory fines, fees, or
penalties to pay dividends). See also CBOE
Demutualization Order, 75 FR at 30089 (approving
CBOE Rule 2.51).
77 See BYX Notice, 82 FR at 42138; BZX Notice,
82 FR at 42192; EDGA Notice, 82 FR at 42217;
EDGX Notice, 82 FR at 42164.
78 See BYX Notice, 82 FR at 42139; BZX Notice,
82 FR at 42192–93; EDGA Notice, 82 FR at 42218;
EDGX Notice, 82 FR at 42165.
79 See proposed BYX Rules 1.1, 2.10, and 8.6;
proposed BZX Rules 1.1, 2.10, and 8.6; proposed
EDGA Rules 1.1, 2.10, and 8.6; proposed EDGX
Rules 1.1, 2.10, and 8.6. The Exchanges also
propose to move the prohibition on the use of
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The Commission finds that these
proposed rule changes are consistent
with the Act in that they are necessary
to update cross-references and certain
defined terms in the rules and would
assist Exchange Members and the public
in understanding the Exchanges’ rules.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,80 that the
proposed rule changes (SR–BatsBYX–
2017–19; SR–BatsBZX–2017–55; SR–
BatsEDGA–2017–22; and SR–
BatsEDGX–2017–35), each as modified
by its respective Amendment No. 1, be,
and hereby are, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.81
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22387 Filed 10–16–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81856; File No. SR–NYSE–
2017–31]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend the
Listed Company Manual To Adopt
Initial and Continued Listing Standards
for Subscription Receipts
October 11, 2017.
I. Introduction
On June 26, 2017, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend the NYSE Listed Company
Manual (‘‘Manual’’) to adopt initial and
continued listing standards for
Subscription Receipts. The proposed
rule change was published for comment
in the Federal Register on July 13,
2017.3 On October 3, 2017, the
Exchange submitted Amendment No. 1
regulatory revenues for non-regulatory purposes
from the Current Bylaws to the rules. See supra
note 70 and accompanying text.
80 15 U.S.C. 78s(b)(2).
81 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81102
(July 7, 2017), 82 FR 32413 (‘‘Notice’’).
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Sfmt 4703
to the proposed rule change.4 The
Commission is publishing this notice of
Amendment No. 1 and approving the
proposed rule change, as modified by
Amendment No. 1, on an accelerated
basis.
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1
The Exchange has proposed to adopt
initial and continued listing standards
for the listing of Subscription Receipts.
In its proposal, NYSE generally
described the structure of Subscription
Receipts and noted that Subscriptions
Receipts have been used as a financing
technique by Canadian public
companies.5 According to the Exchange,
Canadian companies typically use
Subscription Receipts as a means of
providing cash consideration in merger
or acquisition transactions.6
Subscription Receipts are sold in a
public offering that occurs after the
execution of an acquisition agreement.
The proceeds of the Subscription
Receipt offering are held in a custody
account and, if the related acquisition
closes, the Subscription Receipt holders
will have their Subscription Receipts
converted into a specified number of
shares of the primary listed class of
common stock of the issuer.7 If the
acquisition does not close, the
Subscription Receipts are redeemed for
their original purchase price plus any
interest accrued on the custody account.
The Exchange stated in its proposal
that Subscription Receipts provide a
contingent form of financing for an
issuer that only becomes permanent if
the specified acquisition is completed.8
In contrast, the Exchange noted that a
company financing the cash
consideration for an acquisition by
means of a traditional equity or debt
4 Amendment No. 1 amends the original filing to:
(1) Correct a reference in the purpose section of the
filing from a reference to Section 802.01 of the
Manual to a reference to Sections 802.02 and 802.03
of the Manual; (2) change the proposed continued
listing holder requirement from 100 total holders to
100 public holders; (3) provide that Subscription
Receipts will be subject to immediate suspension
and delisting proceedings (with no eligibility with
respect to the procedures set forth in Sections
802.02 and 802.03 of the Manual) in the event that
at any time there are fewer than 100,000 publiclyheld shares or 100 public holders of the
Subscription Receipts; and (4) make clear that
Subscription Receipts convert into primary
common stock of the listed company. When the
Exchange filed Amendment No. 1 with the
Commission, it also submitted Amendment No. 1 to
the public comment file for SR–NYSE–2017–31
(available at: https://www.sec.gov/comments/srnyse-2017-31/nyse201731.htm).
5 See Notice, supra note 3, at 32413.
6 See id.
7 See Amendment No. 1.
8 See Notice, supra note 3, at 32413.
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offering is at risk of having incurred
unnecessary dilution of its shareholders
or indebtedness if the related
acquisition fails to close.9 The Exchange
further noted that Subscription Receipts
provide investors with flexibility to
elect to invest in the post-merger
company and not in the company in its
pre-merger form.
The Exchange has proposed the
following initial listing standards for
Subscription Receipts: 10
(a) At the time of initial listing, the
Subscription Receipts must have a price
per share of at least $4.00, a minimum
total market value of publicly-held
shares of $100 million, 1,100,000
publicly-held shares,11 and 400 holders
of round lots (i.e., 100 securities).
(b) The issuer must be an NYSE listed
company that is not currently noncompliant with any applicable
continued listing standard.
(c) The proceeds of the Subscription
Receipts offering must be designated
solely for use in connection with the
consummation of a specified acquisition
that is the subject of a binding
acquisition agreement (the ‘‘Specified
Acquisition’’).
(d) The proceeds of the Subscription
Receipts offering must be held in an
interest-bearing custody account by an
independent custodian.
(e) The Subscription Receipts must
promptly be redeemable for cash (i) at
any time the Specified Acquisition is
terminated, or (ii) if the Specified
Acquisition does not close within
twelve months from the date of issuance
of the Subscription Receipts, or such
earlier time as is specified in the
operative agreements. If the
Subscription Receipts are redeemed, the
holders must receive cash payments
equal to their proportionate share of the
funds in the custody account, including
any interest earned on those funds.
(f) If the Specified Acquisition is
consummated, the holders of the
Subscription Receipts must receive the
shares of common stock for which their
Subscription Receipts are exchangeable.
(g) The sale of the Subscription
Receipts and the issuance of the
common stock of the issuer in exchange
for the Subscription Receipts must both
be registered under the Securities Act of
1933.12
9 See
id.
id.
11 For purposes of the initial and continued
listing requirements for Subscription Receipts,
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. See proposed
Sections 102.08 and 802.01B of the Manual.
12 See 15 U.S.C. 77a et seq.
10 See
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The Exchange has also proposed to
amend Section 802.01B of the Manual to
include continued listing standards
applicable to Subscription Receipts
listed under proposed Section 102.08 of
the Manual. In its filing, as modified by
Amendment No. 1, the Exchange
proposed to immediately initiate
suspension and delisting procedures
when: (i) The number of publicly-held
shares is less than 100,000; (ii) the
number of public holders is less than
100; 13 (iii) the total market
capitalization of the Subscription
Receipts is below $15 million over 30
consecutive trading days; (iv) the related
common equity security ceases to be
listed; or (v) the issuer announces that
the Specified Acquisition has been
terminated.
An issuer of Subscription Receipts
will not be eligible to follow the
procedures outlined in Sections 802.02
and 802.03 of the Manual with respect
to these criteria,14 and any such security
will be subject to delisting procedures
as set forth in Section 804 of the
Manual.15 The Exchange also stated that
Subscription Receipts will be subject to
potential delisting for all of the reasons
generally applicable to operating
companies under Section 802.01 of the
Manual.16 The Exchange further noted
in its proposal that an issuer of
Subscription Receipts may be subject to
delisting at the time of closing of the
related acquisition pursuant to the
‘‘backdoor listing’’ provisions of Section
703.08(E) of the Manual.17 Further, if
the Specified Acquisition is
consummated, as noted above, the
Subscription Receipts convert into the
primary listed class of common stock of
the issuer, which will thereafter be
13 In adopting a continued listing requirement of
100 public holders, the Exchange notes that this is
similar to other exchange continued listing
standards. See, e.g., NASDAQ Marketplace Rule
5460(a)(4). See also Section 802.01D (providing
continued listing standards for warrants, among
other specialized securities). For purposes of the
continued listing requirements for Subscription
Receipts, ‘‘public holders’’ exclude holders that are
directors, officers, or their immediate families and
holders of other concentrated holdings of 10% or
more. See proposed Section 802.01B of the Manual.
14 Sections 802.02 and 802.03 of the Manual set
forth procedures for listed companies to submit a
plan, which must be approved by the Exchange, to
bring the listed company into conformity with a
continued listing standard within eighteen months
of receiving a letter of non-compliance. As noted
above, an issuer of Subscription Receipts will not
be eligible to utilize the procedures in Sections
802.02 or 802.03 of the Manual to submit a plan of
compliance and instead will be subject to the
procedures in Section 804 of the Manual.
15 Section 804 of the Manual sets forth the
applicable due process procedures, including
appeal rights, for the suspension and delisting of
the securities of a listed company.
16 See Notice, supra note 3, at 32414.
17 See id.
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48297
subject to all of the continued listing
requirements applicable to a primary
class of common stock listed on
NYSE.18
The Exchange also has proposed to
amend Section 202.06 of the Manual to
provide that whenever it halts trading in
a security of a listed company pending
dissemination of material news or
implements any other required
regulatory trading halt, the Exchange
will also halt trading in any listed
Subscription Receipt that is
exchangeable by its terms into the
common stock of such company.19
The Exchange represented that it will
monitor activity in Subscription
Receipts to identify and deter any
potential improper trading activity in
such securities and will adopt enhanced
surveillance procedures to enable it to
monitor Subscription Receipts alongside
the common equity securities into
which they are convertible.20
Additionally, the Exchange states that it
will rely on its existing trading
surveillances, administered by the
Exchange or the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities law.
Finally, the Exchange has proposed to
apply the listing fees for ‘‘short-term’’
securities (i.e., securities with a life of
seven years or less), set forth in Section
902.06 of the Manual, to Subscription
Receipts because these securities, as
noted above, will be short-term
securities that have a maximum term of
twelve months.21 The Exchange has
therefore proposed to amend Section
902.06 of the Manual to make it explicit
that it will apply to Subscription
Receipts. Finally, the Exchange
proposes to amend Section 902.06 of the
Manual to remove a reference to the
annual fees charged prior to January 1,
2017, as that reference is now irrelevant.
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange and, in particular, the
requirements of Section 6(b) of the Act
and the rules and regulations
18 See Amendment No. 1. See also Section 802.01
of the Manual (providing the continued listing
criteria for capital or common stock listed on
NYSE).
19 See Notice, supra note 3, at 32414.
20 See id.
21 See id.
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thereunder. Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,22 which requires that an exchange
have rules designed to, among other
things, promote just and equitable
principles of trade, remove
impediments to an perfect the
mechanisms of a free and open market
and a national market system, protect
investors and the public interest, and
not permit unfair discrimination
between customers, issuers, brokers, or
dealers.23
The development and enforcement of
adequate standards governing the initial
and continued listing of securities on an
exchange is an activity of critical
importance to financial markets and the
investing public. Listing standards,
among other things, serve as a means for
an exchange to screen issuers and to
provide listed status only to bona fide
companies that have or will have
sufficient public float, investor base,
and trading interest to provide the depth
and liquidity necessary to promote fair
and orderly markets. Adequate
standards are especially important given
the expectations of investors regarding
exchange trading and the imprimatur of
listing on a particular market. Once a
security has been approved for initial
listing, maintenance criteria allow an
exchange to monitor the status and
trading characteristics of that issue to
ensure that it continues to meet the
exchange’s standards for market depth
and liquidity so that fair and orderly
markets can be maintained.
Subscription Receipts, as discussed
by the Exchange in its proposal, are a
financing technique to fund a Specified
Acquisition. As NYSE noted in its filing,
an issuer could sell equity securities to
fund an acquisition, but if the
acquisition doesn’t close, investors will
still experience dilution in their
holdings. Subscription Receipts allow
investors the right to invest in the
common stock of the listed company
upon consummation of a Specified
Acquisition. If the deal is not
consummated within a short time frame
of 12 months or less, the Subscription
Receipt holders receive their pro rata
share of the offering proceeds plus
interest. In this sense, Subscription
Receipts could be viewed as a security
with characteristics of both equity and
debt and are similar, but not identical
to, other contingent securities with a
right to receive common stock, such as
22 15
U.S.C. 78f(b)(5).
approving this proposed rule change, the
Commission notes that it has considered the
proposed rules’ impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
23 In
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warrants. At the time investors purchase
a Subscription Receipt they will also
have information about the Specified
Acquisition and are making a decision
to purchase stock in the listed postacquisition company.
To address these unique
characteristics, as discussed in more
detail below, the Exchange has
proposed to adopt new Section 102.08
to list Subscription Receipts, and
specified continued listing standards.
The proposed standards would permit
NYSE to list, and continue to list,
Subscription Receipts that meet specific
criteria, including market value,
distribution, and price requirements,
which should help to ensure that the
Subscription Receipts have sufficient
public float, investor base, and liquidity
to promote fair and orderly markets. In
addition, issuers of Subscription
Receipts would have to comply with
other investor protection criteria in
order to list Subscription Receipts, such
as, among others, holding proceeds in a
custodial account controlled by an
independent custodian and providing
shareholders with cash redemption
rights should the Specified Acquisition
be terminated or not close within 12
months.
The Commission believes that the
proposed initial and continued listing
standards for Subscription Receipts are
consistent with the requirements of the
Act, including the protection of
investors and the promotion of fair and
orderly markets.
At the time of initial listing, the
Subscription Receipts must have a price
per share of at least $4.00, a minimum
total market value of publicly-held
shares of $100 million, 1,100,000
publicly-held shares,24 and 400 holders
of round lots (i.e., 100 securities). The
Commission notes that the distribution
criteria is the same that currently
applies to the listing of common stock
in connection with an initial public
offering under NYSE listing rules and
that the $100 million market value of
publicly-held shares requirement is
similar to the requirements for other
initial listing of securities on the
Exchange.25 The Commission believes
that these standards should help ensure
that a sufficient market, with adequate
24 For purposes of the initial and continued
listing requirements for Subscription Receipts,
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. See proposed
Sections 102.08 and 802.01B of the Manual.
25 See Sections 102.01A and 102.01B of the
Manual.
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depth and liquidity, exists for the initial
listing of Subscription Receipts.26
Similarly, the Commission believes
the Exchange’s proposed continued
listing standards for Subscription
Receipts are consistent with the
requirements of the Act and the
protection of investors. Under the
amended proposal, the Exchange will
immediately initiate suspension and
delisting procedures when (i) the
number of publicly-held shares is less
than 100,000, (ii) the number of public
holders is less than 100,27 (iii) the total
market capitalization of the
Subscription Receipts is below $15
million over 30 consecutive trading
days, (iv) the related common equity
security ceases to be listed, or (v) the
issuer announces that the Specified
Acquisition has been terminated.28 In
addition, Subscription Receipts will be
subject to potential delisting for all of
the reasons generally applicable to
operating companies, including those
outlined in Section 802.01D of the
Manual, which discusses the factors and
criteria that may result in delisting, and
may also be subject to delisting at the
time of closing of the related acquisition
pursuant to the backdoor listing
provisions of Section 703.08 of the
Manual. The Commission notes the
application of the backdoor listing
provision will help to ensure that
companies that would not otherwise
qualify for original listing on the
Exchange could not list, for example, by
merging with a listed company.
The Commission believes that these
standards, taken together, should help
ensure that a sufficient market, with
adequate depth and liquidity, exists for
the continued listing of Subscription
Receipts and are similar to the
continued listing standards for other
securities that have similar
characteristics.29 The Commission also
notes that once the Specified
26 Because the issuer of the Subscription Receipt
is already listing its primary common stock on the
Exchange, it must comply with the continued
listing standards for capital and common stock as
well as the corporate governance requirements
applicable to listed companies.
27 For purposes of the continued listing
requirements for Subscription Receipts, ‘‘public
holders’’ exclude holders that are directors, officers,
or their immediate families and holders of other
concentrated holdings of 10% or more. See
proposed Section 802.01B of the Manual.
28 The Commission notes that an issuer of
Subscription Receipts will not be eligible to follow
the evaluation and follow-up procedures outlined
in Sections 802.02 and 802.03 of the Manual with
respect to these criteria, and any such security will
be subject to delisting procedures as set forth in
Section 804 of the Manual.
29 See, e.g., Section 802.01D of the Manual
(providing the continued listing standards for
certain types of specialized securities, including
warrants).
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Acquisition has occurred and a
Subscription Receipt is converted to
common stock, that common stock is
subject to the continued listing
requirements for capital or common
stock in Section 802.01of the Manual.30
In addition to the quantitative listing
requirements proposed for Subscription
Receipts, the proposed initial and
continued listing standards also include
additional protections for Subscription
Receipt holders. For example, the issuer
of Subscription Receipts must be an
NYSE listed company that is not
currently non-compliant with any
applicable continued listing standard
and must continue to be listed on the
Exchange throughout the time the
Subscription Receipts are traded on the
Exchange. The proposed rules also
provide that whenever the Exchange
halts trading in a security of a listed
company pending dissemination of
material news or implements any other
required regulatory trading halt, the
Exchange will also halt trading in any
listed Subscription Receipt that is
exchangeable by its terms into the
common stock of such company.
The Commission believes that these
additional requirements should protect
investors and the public interest,
consistent with Section 6(b)(5) of the
Act, by assuring that information with
respect to the listed company issuing
the Subscription Receipts is publicly
available and that the issuing company
is meeting all continued listing
standards, including corporate
governance requirements, of the
Exchange. In addition, these
requirements should help assure that
the Exchange has a listing relationship
with, and direct access to information
from, the issuer of the Subscription
Receipts. Among other things, this
direct relationship the Exchange has
with the listed company issuing the
Subscription Receipts will help to
ensure that the Exchange will receive
information in a timely manner to halt
trading in the Subscription Receipts
when there is a material news, or other
regulatory, trading halt imposed on the
common stock, and other securities, of
the listed company.
There are additional protections for
investors in the proposed standards.
These include that all the proceeds of
the Subscription Receipts offering must
be designated solely for use in
connection with the consummation of a
Specified Acquisition pursuant to a
definitive acquisition agreement, the
material terms of which would be
subject to disclosure. Additionally, the
proceeds of the Subscription Receipts
offering must also be held in an interestbearing custody account by an
independent custodian and holders will
promptly redeem the Subscription
Receipts for cash, equal to the holder’s
proportionate share of the funds in the
custody account plus any interest
earned, at any time the Specified
Acquisition is terminated or if the
Specified Acquisition does not close
within twelve months from the date of
issuance of the Subscription Receipts
(or such earlier time as specified in the
operative agreements). If the Specified
Acquisition is consummated, the
holders of the Subscription Receipts
will receive the shares of common stock
for which their Subscription Receipts
are exchangeable. Finally, the listing
standards specifically state and remind
issuers that the sale of Subscription
Receipts and the issuance of the
common stock of the issuer in exchange
for the Subscription Receipts must both
be registered under the Securities Act of
1933.31 This is important because
shareholders, at the time they purchase
a Subscription Receipt, are making an
investment decision to also purchase
the common stock of the merged listed
company should the Specified
Acquisition be consummated, within
twelve months or such shorter specified
time period. Therefore, it is important to
have registration and disclosure under
the Securities Act of both the
Subscription Receipt and the related
common stock. Based on the above, the
Commission believes that specifically
setting forth the Securities Act
registration requirements in the NYSE
rules for listing Subscription Receipts is
consistent with the requirements of
Section 6(b)(5) of the Act to further
investor protection and the public
interest.
The Exchange will also monitor
activity in Subscription Receipts to
identify and deter any potential
improper trading activity in such
securities and will adopt enhanced
surveillance procedures to enable it to
monitor Subscription Receipts alongside
the common equity securities into
which they are convertible. Since the
Subscription Receipts are related to, and
represent an interest in, the common
stock of the post-acquisition listed
company, this enhanced surveillance
should help to monitor the trading
activity in both the issuer’s listed
common stock and the Subscription
Receipts.32
31 See
15 U.S.C. 77a et seq.
noted above, the Exchange will also rely on
its existing trading surveillances, administered by
the Exchange or FINRA on behalf of the Exchange,
32 As
30 See Section 802.01 of the Manual. See also
Amendment No. 1.
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48299
The Commission believes that these
safeguards and standards should help to
ensure that the listing, and continued
listing, of any Subscription Receipts on
NYSE will be consistent with investor
protection, the public interest, and the
maintenance of fair and orderly markets.
In this regard, the Commission expects
NYSE to thoroughly review any
potential listing of Subscription
Receipts to ensure that its listing
standards have been met and continue
to be met, as well as to monitor trading
in the Subscription Receipts and related
common stock of the issuer. Based on
the foregoing, the Commission finds that
the proposed initial and continued
listing standards are consistent with the
Act.
Finally, the Commission believes that
the proposed fees set forth in Section
902.06 of the Manual are consistent
with Section 6(b)(4) of the Act,33 in
particular, in that they are designed to
provide for the equitable allocation of
reasonable dues, fees, and other charges,
and are not designed to permit unfair
discrimination among the Exchange’s
members, issuers, and other persons
using its facilities. The Commission
notes that the proposed fees are the
same as the fees applicable to similar
short term securities under Rule 902.06
of the Manual.
Based on the above, the Commission
believes the proposed rule change, as
amended, is reasonable and should
provide for the listing of Subscription
Receipts, with baseline investor
protection and other standards. The
Commission believes, as discussed
above, that NYSE has developed
sufficient standards to allow the listing
of Subscription Receipts on the
Exchange, and finds the proposal
consistent with the requirements set
forth under the Act, and in particular,
Sections (6)(b)(4) and 6(b)(5).34
IV. Solicitation of Comments on
Amendment No. 1
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 1 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
which are designed to detect violations of Exchange
rules and applicable federal securities laws.
33 15 U.S.C. 78f(b)(4).
34 15 U.S.C. 78s(b)(4) and (b)(5).
E:\FR\FM\17OCN1.SGM
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48300
Federal Register / Vol. 82, No. 199 / Tuesday, October 17, 2017 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2017–31 on the subject line.
sradovich on DSK3GMQ082PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2017–31. 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 will also 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
publicly available. All submissions
should refer to File Number SR–NYSE–
2017–31 and should be submitted on or
before November 7, 2017.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the 30th day after the date of
publication of the notice of Amendment
No. 1 in the Federal Register. As noted
above, in Amendment No. 1, the
Exchange amended the original filing to
correct an incorrect reference to the
Manual in the purpose section of the
filing, replace the proposed continued
listing standard of 100 total holders
with 100 public holders, add two
additional continued listing standards—
the 100,000 publicly-held shares
requirement and the 100 public holder
requirement—to the immediate
VerDate Sep<11>2014
17:10 Oct 16, 2017
Jkt 244001
suspension and delisting proceeding
provisions of Section 804 of the Manual,
and provide a clarification that all
Subscription Receipts convert into
primary common stock of the issuer.
The Commission notes that the
revisions in Amendment No. 1 provide
additional clarity and specificity to the
proposal and do not raise any novel
regulatory concerns. In addition, the
changes to the continued listing
standards strengthen the proposal and
are consistent with investor protection.
Finally, the Commission notes that the
majority of the original proposal was not
modified and was subject to a full
notice-and-comment period, and no
comments were received. Accordingly,
the Commission finds that good cause
exists to approve the proposal, as
modified by Amendment No. 1, on an
accelerated basis, pursuant to Section
19(b)(2) of the Act.35
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,36 that the
proposed rule change (SR–NYSE–2017–
31), as modified by Amendment No. 1
thereto, be, and hereby is, approved on
an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22408 Filed 10–16–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81853; File No. SR–CBOE–
2017–057]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change To Amend
Interpretation and Policy .07 of
Exchange Rule 4.11, Position Limits,
To Increase the Position Limits for
Options on Certain ETFs
October 11, 2017.
On August 15, 2017, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Interpretation and Policy .07 of
Exchange Rule 4.11, Position Limits, to
increase the position limits for options
on the following exchange traded funds
and exchange traded notes: iShares
China Large-Cap ETF, iShares MSCI
EAFE ETF, iShares MSCI Emerging
Markets ETF, iShares Russell 2000 ETF,
iShares MSCI Brazil Capped ETF,
iShares 20+ Year Treasury Bond Fund
ETF, iPath S&P 500 VIX Short-Term
Futures ETN, PowerShares QQQ Trust,
and iShares MSCI Japan ETF. The
proposed rule change was published for
comment in the Federal Register on
August 31, 2017.3 The Commission
received no comments regarding the
proposal.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is October 15, 2017.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act 5 and for the reasons
stated above, the Commission
designates November 29, 2017, as the
date by which the Commission should
either approve or disapprove, or
institute proceedings to determine
whether to disapprove, the proposed
rule change (File No. SR–CBOE–2017–
057).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22390 Filed 10–16–17; 8:45 am]
BILLING CODE 8011–01–P
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 81483
(August 25, 2017), 82 FR 41457.
4 15 U.S.C. 78s(b)(2).
5 15 U.S.C. 78s(b)(2).
6 17 CFR 200.30–3(a)(31).
3 See
35 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
37 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
36 15
PO 00000
Frm 00089
Fmt 4703
Sfmt 9990
E:\FR\FM\17OCN1.SGM
17OCN1
]]>Agencies
[Federal Register Volume 82, Number 199 (Tuesday, October 17, 2017)]
[Notices]
[Pages 48296-48300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22408]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81856; File No. SR-NYSE-2017-31]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend the Listed Company Manual To Adopt Initial and Continued Listing
Standards for Subscription Receipts
October 11, 2017.
I. Introduction
On June 26, 2017, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend the NYSE Listed Company Manual
(``Manual'') to adopt initial and continued listing standards for
Subscription Receipts. The proposed rule change was published for
comment in the Federal Register on July 13, 2017.\3\ On October 3,
2017, the Exchange submitted Amendment No. 1 to the proposed rule
change.\4\ The Commission is publishing this notice of Amendment No. 1
and approving the proposed rule change, as modified by Amendment No. 1,
on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 81102 (July 7,
2017), 82 FR 32413 (``Notice'').
\4\ Amendment No. 1 amends the original filing to: (1) Correct a
reference in the purpose section of the filing from a reference to
Section 802.01 of the Manual to a reference to Sections 802.02 and
802.03 of the Manual; (2) change the proposed continued listing
holder requirement from 100 total holders to 100 public holders; (3)
provide that Subscription Receipts will be subject to immediate
suspension and delisting proceedings (with no eligibility with
respect to the procedures set forth in Sections 802.02 and 802.03 of
the Manual) in the event that at any time there are fewer than
100,000 publicly-held shares or 100 public holders of the
Subscription Receipts; and (4) make clear that Subscription Receipts
convert into primary common stock of the listed company. When the
Exchange filed Amendment No. 1 with the Commission, it also
submitted Amendment No. 1 to the public comment file for SR-NYSE-
2017-31 (available at: https://www.sec.gov/comments/sr-nyse-2017-31/nyse201731.htm).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
The Exchange has proposed to adopt initial and continued listing
standards for the listing of Subscription Receipts. In its proposal,
NYSE generally described the structure of Subscription Receipts and
noted that Subscriptions Receipts have been used as a financing
technique by Canadian public companies.\5\ According to the Exchange,
Canadian companies typically use Subscription Receipts as a means of
providing cash consideration in merger or acquisition transactions.\6\
Subscription Receipts are sold in a public offering that occurs after
the execution of an acquisition agreement. The proceeds of the
Subscription Receipt offering are held in a custody account and, if the
related acquisition closes, the Subscription Receipt holders will have
their Subscription Receipts converted into a specified number of shares
of the primary listed class of common stock of the issuer.\7\ If the
acquisition does not close, the Subscription Receipts are redeemed for
their original purchase price plus any interest accrued on the custody
account.
---------------------------------------------------------------------------
\5\ See Notice, supra note 3, at 32413.
\6\ See id.
\7\ See Amendment No. 1.
---------------------------------------------------------------------------
The Exchange stated in its proposal that Subscription Receipts
provide a contingent form of financing for an issuer that only becomes
permanent if the specified acquisition is completed.\8\ In contrast,
the Exchange noted that a company financing the cash consideration for
an acquisition by means of a traditional equity or debt
[[Page 48297]]
offering is at risk of having incurred unnecessary dilution of its
shareholders or indebtedness if the related acquisition fails to
close.\9\ The Exchange further noted that Subscription Receipts provide
investors with flexibility to elect to invest in the post-merger
company and not in the company in its pre-merger form.
---------------------------------------------------------------------------
\8\ See Notice, supra note 3, at 32413.
\9\ See id.
---------------------------------------------------------------------------
The Exchange has proposed the following initial listing standards
for Subscription Receipts: \10\
---------------------------------------------------------------------------
\10\ See id.
---------------------------------------------------------------------------
(a) At the time of initial listing, the Subscription Receipts must
have a price per share of at least $4.00, a minimum total market value
of publicly-held shares of $100 million, 1,100,000 publicly-held
shares,\11\ and 400 holders of round lots (i.e., 100 securities).
---------------------------------------------------------------------------
\11\ For purposes of the initial and continued listing
requirements for Subscription Receipts, 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. See proposed Sections 102.08 and
802.01B of the Manual.
---------------------------------------------------------------------------
(b) The issuer must be an NYSE listed company that is not currently
non-compliant with any applicable continued listing standard.
(c) The proceeds of the Subscription Receipts offering must be
designated solely for use in connection with the consummation of a
specified acquisition that is the subject of a binding acquisition
agreement (the ``Specified Acquisition'').
(d) The proceeds of the Subscription Receipts offering must be held
in an interest-bearing custody account by an independent custodian.
(e) The Subscription Receipts must promptly be redeemable for cash
(i) at any time the Specified Acquisition is terminated, or (ii) if the
Specified Acquisition does not close within twelve months from the date
of issuance of the Subscription Receipts, or such earlier time as is
specified in the operative agreements. If the Subscription Receipts are
redeemed, the holders must receive cash payments equal to their
proportionate share of the funds in the custody account, including any
interest earned on those funds.
(f) If the Specified Acquisition is consummated, the holders of the
Subscription Receipts must receive the shares of common stock for which
their Subscription Receipts are exchangeable.
(g) The sale of the Subscription Receipts and the issuance of the
common stock of the issuer in exchange for the Subscription Receipts
must both be registered under the Securities Act of 1933.\12\
---------------------------------------------------------------------------
\12\ See 15 U.S.C. 77a et seq.
---------------------------------------------------------------------------
The Exchange has also proposed to amend Section 802.01B of the
Manual to include continued listing standards applicable to
Subscription Receipts listed under proposed Section 102.08 of the
Manual. In its filing, as modified by Amendment No. 1, the Exchange
proposed to immediately initiate suspension and delisting procedures
when: (i) The number of publicly-held shares is less than 100,000; (ii)
the number of public holders is less than 100; \13\ (iii) the total
market capitalization of the Subscription Receipts is below $15 million
over 30 consecutive trading days; (iv) the related common equity
security ceases to be listed; or (v) the issuer announces that the
Specified Acquisition has been terminated.
---------------------------------------------------------------------------
\13\ In adopting a continued listing requirement of 100 public
holders, the Exchange notes that this is similar to other exchange
continued listing standards. See, e.g., NASDAQ Marketplace Rule
5460(a)(4). See also Section 802.01D (providing continued listing
standards for warrants, among other specialized securities). For
purposes of the continued listing requirements for Subscription
Receipts, ``public holders'' exclude holders that are directors,
officers, or their immediate families and holders of other
concentrated holdings of 10% or more. See proposed Section 802.01B
of the Manual.
---------------------------------------------------------------------------
An issuer of Subscription Receipts will not be eligible to follow
the procedures outlined in Sections 802.02 and 802.03 of the Manual
with respect to these criteria,\14\ and any such security will be
subject to delisting procedures as set forth in Section 804 of the
Manual.\15\ The Exchange also stated that Subscription Receipts will be
subject to potential delisting for all of the reasons generally
applicable to operating companies under Section 802.01 of the
Manual.\16\ The Exchange further noted in its proposal that an issuer
of Subscription Receipts may be subject to delisting at the time of
closing of the related acquisition pursuant to the ``backdoor listing''
provisions of Section 703.08(E) of the Manual.\17\ Further, if the
Specified Acquisition is consummated, as noted above, the Subscription
Receipts convert into the primary listed class of common stock of the
issuer, which will thereafter be subject to all of the continued
listing requirements applicable to a primary class of common stock
listed on NYSE.\18\
---------------------------------------------------------------------------
\14\ Sections 802.02 and 802.03 of the Manual set forth
procedures for listed companies to submit a plan, which must be
approved by the Exchange, to bring the listed company into
conformity with a continued listing standard within eighteen months
of receiving a letter of non-compliance. As noted above, an issuer
of Subscription Receipts will not be eligible to utilize the
procedures in Sections 802.02 or 802.03 of the Manual to submit a
plan of compliance and instead will be subject to the procedures in
Section 804 of the Manual.
\15\ Section 804 of the Manual sets forth the applicable due
process procedures, including appeal rights, for the suspension and
delisting of the securities of a listed company.
\16\ See Notice, supra note 3, at 32414.
\17\ See id.
\18\ See Amendment No. 1. See also Section 802.01 of the Manual
(providing the continued listing criteria for capital or common
stock listed on NYSE).
---------------------------------------------------------------------------
The Exchange also has proposed to amend Section 202.06 of the
Manual to provide that whenever it halts trading in a security of a
listed company pending dissemination of material news or implements any
other required regulatory trading halt, the Exchange will also halt
trading in any listed Subscription Receipt that is exchangeable by its
terms into the common stock of such company.\19\
---------------------------------------------------------------------------
\19\ See Notice, supra note 3, at 32414.
---------------------------------------------------------------------------
The Exchange represented that it will monitor activity in
Subscription Receipts to identify and deter any potential improper
trading activity in such securities and will adopt enhanced
surveillance procedures to enable it to monitor Subscription Receipts
alongside the common equity securities into which they are
convertible.\20\ Additionally, the Exchange states that it will rely on
its existing trading surveillances, administered by the Exchange or the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities law.
---------------------------------------------------------------------------
\20\ See id.
---------------------------------------------------------------------------
Finally, the Exchange has proposed to apply the listing fees for
``short-term'' securities (i.e., securities with a life of seven years
or less), set forth in Section 902.06 of the Manual, to Subscription
Receipts because these securities, as noted above, will be short-term
securities that have a maximum term of twelve months.\21\ The Exchange
has therefore proposed to amend Section 902.06 of the Manual to make it
explicit that it will apply to Subscription Receipts. Finally, the
Exchange proposes to amend Section 902.06 of the Manual to remove a
reference to the annual fees charged prior to January 1, 2017, as that
reference is now irrelevant.
---------------------------------------------------------------------------
\21\ See id.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
The Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange and, in particular, the requirements of Section 6(b) of the
Act and the rules and regulations
[[Page 48298]]
thereunder. Specifically, the Commission finds that the proposal is
consistent with Section 6(b)(5) of the Act,\22\ which requires that an
exchange have rules designed to, among other things, promote just and
equitable principles of trade, remove impediments to an perfect the
mechanisms of a free and open market and a national market system,
protect investors and the public interest, and not permit unfair
discrimination between customers, issuers, brokers, or dealers.\23\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b)(5).
\23\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rules' impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
The development and enforcement of adequate standards governing the
initial and continued listing of securities on an exchange is an
activity of critical importance to financial markets and the investing
public. Listing standards, among other things, serve as a means for an
exchange to screen issuers and to provide listed status only to bona
fide companies that have or will have sufficient public float, investor
base, and trading interest to provide the depth and liquidity necessary
to promote fair and orderly markets. Adequate standards are especially
important given the expectations of investors regarding exchange
trading and the imprimatur of listing on a particular market. Once a
security has been approved for initial listing, maintenance criteria
allow an exchange to monitor the status and trading characteristics of
that issue to ensure that it continues to meet the exchange's standards
for market depth and liquidity so that fair and orderly markets can be
maintained.
Subscription Receipts, as discussed by the Exchange in its
proposal, are a financing technique to fund a Specified Acquisition. As
NYSE noted in its filing, an issuer could sell equity securities to
fund an acquisition, but if the acquisition doesn't close, investors
will still experience dilution in their holdings. Subscription Receipts
allow investors the right to invest in the common stock of the listed
company upon consummation of a Specified Acquisition. If the deal is
not consummated within a short time frame of 12 months or less, the
Subscription Receipt holders receive their pro rata share of the
offering proceeds plus interest. In this sense, Subscription Receipts
could be viewed as a security with characteristics of both equity and
debt and are similar, but not identical to, other contingent securities
with a right to receive common stock, such as warrants. At the time
investors purchase a Subscription Receipt they will also have
information about the Specified Acquisition and are making a decision
to purchase stock in the listed post-acquisition company.
To address these unique characteristics, as discussed in more
detail below, the Exchange has proposed to adopt new Section 102.08 to
list Subscription Receipts, and specified continued listing standards.
The proposed standards would permit NYSE to list, and continue to list,
Subscription Receipts that meet specific criteria, including market
value, distribution, and price requirements, which should help to
ensure that the Subscription Receipts have sufficient public float,
investor base, and liquidity to promote fair and orderly markets. In
addition, issuers of Subscription Receipts would have to comply with
other investor protection criteria in order to list Subscription
Receipts, such as, among others, holding proceeds in a custodial
account controlled by an independent custodian and providing
shareholders with cash redemption rights should the Specified
Acquisition be terminated or not close within 12 months.
The Commission believes that the proposed initial and continued
listing standards for Subscription Receipts are consistent with the
requirements of the Act, including the protection of investors and the
promotion of fair and orderly markets.
At the time of initial listing, the Subscription Receipts must have
a price per share of at least $4.00, a minimum total market value of
publicly-held shares of $100 million, 1,100,000 publicly-held
shares,\24\ and 400 holders of round lots (i.e., 100 securities). The
Commission notes that the distribution criteria is the same that
currently applies to the listing of common stock in connection with an
initial public offering under NYSE listing rules and that the $100
million market value of publicly-held shares requirement is similar to
the requirements for other initial listing of securities on the
Exchange.\25\ The Commission believes that these standards should help
ensure that a sufficient market, with adequate depth and liquidity,
exists for the initial listing of Subscription Receipts.\26\
---------------------------------------------------------------------------
\24\ For purposes of the initial and continued listing
requirements for Subscription Receipts, 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. See proposed Sections 102.08 and
802.01B of the Manual.
\25\ See Sections 102.01A and 102.01B of the Manual.
\26\ Because the issuer of the Subscription Receipt is already
listing its primary common stock on the Exchange, it must comply
with the continued listing standards for capital and common stock as
well as the corporate governance requirements applicable to listed
companies.
---------------------------------------------------------------------------
Similarly, the Commission believes the Exchange's proposed
continued listing standards for Subscription Receipts are consistent
with the requirements of the Act and the protection of investors. Under
the amended proposal, the Exchange will immediately initiate suspension
and delisting procedures when (i) the number of publicly-held shares is
less than 100,000, (ii) the number of public holders is less than
100,\27\ (iii) the total market capitalization of the Subscription
Receipts is below $15 million over 30 consecutive trading days, (iv)
the related common equity security ceases to be listed, or (v) the
issuer announces that the Specified Acquisition has been
terminated.\28\ In addition, Subscription Receipts will be subject to
potential delisting for all of the reasons generally applicable to
operating companies, including those outlined in Section 802.01D of the
Manual, which discusses the factors and criteria that may result in
delisting, and may also be subject to delisting at the time of closing
of the related acquisition pursuant to the backdoor listing provisions
of Section 703.08 of the Manual. The Commission notes the application
of the backdoor listing provision will help to ensure that companies
that would not otherwise qualify for original listing on the Exchange
could not list, for example, by merging with a listed company.
---------------------------------------------------------------------------
\27\ For purposes of the continued listing requirements for
Subscription Receipts, ``public holders'' exclude holders that are
directors, officers, or their immediate families and holders of
other concentrated holdings of 10% or more. See proposed Section
802.01B of the Manual.
\28\ The Commission notes that an issuer of Subscription
Receipts will not be eligible to follow the evaluation and follow-up
procedures outlined in Sections 802.02 and 802.03 of the Manual with
respect to these criteria, and any such security will be subject to
delisting procedures as set forth in Section 804 of the Manual.
---------------------------------------------------------------------------
The Commission believes that these standards, taken together,
should help ensure that a sufficient market, with adequate depth and
liquidity, exists for the continued listing of Subscription Receipts
and are similar to the continued listing standards for other securities
that have similar characteristics.\29\ The Commission also notes that
once the Specified
[[Page 48299]]
Acquisition has occurred and a Subscription Receipt is converted to
common stock, that common stock is subject to the continued listing
requirements for capital or common stock in Section 802.01of the
Manual.\30\
---------------------------------------------------------------------------
\29\ See, e.g., Section 802.01D of the Manual (providing the
continued listing standards for certain types of specialized
securities, including warrants).
\30\ See Section 802.01 of the Manual. See also Amendment No. 1.
---------------------------------------------------------------------------
In addition to the quantitative listing requirements proposed for
Subscription Receipts, the proposed initial and continued listing
standards also include additional protections for Subscription Receipt
holders. For example, the issuer of Subscription Receipts must be an
NYSE listed company that is not currently non-compliant with any
applicable continued listing standard and must continue to be listed on
the Exchange throughout the time the Subscription Receipts are traded
on the Exchange. The proposed rules also provide that whenever the
Exchange halts trading in a security of a listed company pending
dissemination of material news or implements any other required
regulatory trading halt, the Exchange will also halt trading in any
listed Subscription Receipt that is exchangeable by its terms into the
common stock of such company.
The Commission believes that these additional requirements should
protect investors and the public interest, consistent with Section
6(b)(5) of the Act, by assuring that information with respect to the
listed company issuing the Subscription Receipts is publicly available
and that the issuing company is meeting all continued listing
standards, including corporate governance requirements, of the
Exchange. In addition, these requirements should help assure that the
Exchange has a listing relationship with, and direct access to
information from, the issuer of the Subscription Receipts. Among other
things, this direct relationship the Exchange has with the listed
company issuing the Subscription Receipts will help to ensure that the
Exchange will receive information in a timely manner to halt trading in
the Subscription Receipts when there is a material news, or other
regulatory, trading halt imposed on the common stock, and other
securities, of the listed company.
There are additional protections for investors in the proposed
standards. These include that all the proceeds of the Subscription
Receipts offering must be designated solely for use in connection with
the consummation of a Specified Acquisition pursuant to a definitive
acquisition agreement, the material terms of which would be subject to
disclosure. Additionally, the proceeds of the Subscription Receipts
offering must also be held in an interest-bearing custody account by an
independent custodian and holders will promptly redeem the Subscription
Receipts for cash, equal to the holder's proportionate share of the
funds in the custody account plus any interest earned, at any time the
Specified Acquisition is terminated or if the Specified Acquisition
does not close within twelve months from the date of issuance of the
Subscription Receipts (or such earlier time as specified in the
operative agreements). If the Specified Acquisition is consummated, the
holders of the Subscription Receipts will receive the shares of common
stock for which their Subscription Receipts are exchangeable. Finally,
the listing standards specifically state and remind issuers that the
sale of Subscription Receipts and the issuance of the common stock of
the issuer in exchange for the Subscription Receipts must both be
registered under the Securities Act of 1933.\31\ This is important
because shareholders, at the time they purchase a Subscription Receipt,
are making an investment decision to also purchase the common stock of
the merged listed company should the Specified Acquisition be
consummated, within twelve months or such shorter specified time
period. Therefore, it is important to have registration and disclosure
under the Securities Act of both the Subscription Receipt and the
related common stock. Based on the above, the Commission believes that
specifically setting forth the Securities Act registration requirements
in the NYSE rules for listing Subscription Receipts is consistent with
the requirements of Section 6(b)(5) of the Act to further investor
protection and the public interest.
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\31\ See 15 U.S.C. 77a et seq.
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The Exchange will also monitor activity in Subscription Receipts to
identify and deter any potential improper trading activity in such
securities and will adopt enhanced surveillance procedures to enable it
to monitor Subscription Receipts alongside the common equity securities
into which they are convertible. Since the Subscription Receipts are
related to, and represent an interest in, the common stock of the post-
acquisition listed company, this enhanced surveillance should help to
monitor the trading activity in both the issuer's listed common stock
and the Subscription Receipts.\32\
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\32\ As noted above, the Exchange will also rely on its existing
trading surveillances, administered by the Exchange or FINRA on
behalf of the Exchange, which are designed to detect violations of
Exchange rules and applicable federal securities laws.
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The Commission believes that these safeguards and standards should
help to ensure that the listing, and continued listing, of any
Subscription Receipts on NYSE will be consistent with investor
protection, the public interest, and the maintenance of fair and
orderly markets. In this regard, the Commission expects NYSE to
thoroughly review any potential listing of Subscription Receipts to
ensure that its listing standards have been met and continue to be met,
as well as to monitor trading in the Subscription Receipts and related
common stock of the issuer. Based on the foregoing, the Commission
finds that the proposed initial and continued listing standards are
consistent with the Act.
Finally, the Commission believes that the proposed fees set forth
in Section 902.06 of the Manual are consistent with Section 6(b)(4) of
the Act,\33\ in particular, in that they are designed to provide for
the equitable allocation of reasonable dues, fees, and other charges,
and are not designed to permit unfair discrimination among the
Exchange's members, issuers, and other persons using its facilities.
The Commission notes that the proposed fees are the same as the fees
applicable to similar short term securities under Rule 902.06 of the
Manual.
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\33\ 15 U.S.C. 78f(b)(4).
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Based on the above, the Commission believes the proposed rule
change, as amended, is reasonable and should provide for the listing of
Subscription Receipts, with baseline investor protection and other
standards. The Commission believes, as discussed above, that NYSE has
developed sufficient standards to allow the listing of Subscription
Receipts on the Exchange, and finds the proposal consistent with the
requirements set forth under the Act, and in particular, Sections
(6)(b)(4) and 6(b)(5).\34\
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\34\ 15 U.S.C. 78s(b)(4) and (b)(5).
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IV. Solicitation of Comments on Amendment No. 1
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
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
[[Page 48300]]
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2017-31 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2017-31. 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 will also 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 publicly available. All
submissions should refer to File Number SR-NYSE-2017-31 and should be
submitted on or before November 7, 2017.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the 30th day after the
date of publication of the notice of Amendment No. 1 in the Federal
Register. As noted above, in Amendment No. 1, the Exchange amended the
original filing to correct an incorrect reference to the Manual in the
purpose section of the filing, replace the proposed continued listing
standard of 100 total holders with 100 public holders, add two
additional continued listing standards--the 100,000 publicly-held
shares requirement and the 100 public holder requirement--to the
immediate suspension and delisting proceeding provisions of Section 804
of the Manual, and provide a clarification that all Subscription
Receipts convert into primary common stock of the issuer.
The Commission notes that the revisions in Amendment No. 1 provide
additional clarity and specificity to the proposal and do not raise any
novel regulatory concerns. In addition, the changes to the continued
listing standards strengthen the proposal and are consistent with
investor protection. Finally, the Commission notes that the majority of
the original proposal was not modified and was subject to a full
notice-and-comment period, and no comments were received. Accordingly,
the Commission finds that good cause exists to approve the proposal, as
modified by Amendment No. 1, on an accelerated basis, pursuant to
Section 19(b)(2) of the Act.\35\
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\35\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\36\ that the proposed rule change (SR-NYSE-2017-31), as modified
by Amendment No. 1 thereto, be, and hereby is, approved on an
accelerated basis.
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\36\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22408 Filed 10-16-17; 8:45 am]
BILLING CODE 8011-01-P
