Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Amended by Amendment No. 1, To Support the Re-Launch of NYSE National, Inc. on the Pillar Trading Platform, 23968-23978 [2018-10986]
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public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–ISE–2018–16 and should be
submitted on or before June 13, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Assistant Secretary.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
May 17, 2018.
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 notice of Amendment No.
1 in the Federal Register. As discussed
above, Amendment No. 1 adds detail to
the proposal and the proposed rule text
regarding the operation of the ATR.
Amendment No. 1 revises the proposed
rule text to specify that for orders routed
to away markets pursuant to the
Supplementary Material to Rule 1901, if
the applicable NBB or NBO price is
improved at the time the order is routed,
a new ATR will be calculated based on
the reference price at that time.
Amendment No. 1 also sets forth
additional justification for the proposed
rule change. The Commission believes
that these revisions provide greater
clarity with respect to the current and
proposed application of the ATR for
routed away orders. Accordingly, the
Commission finds good cause, pursuant
to Section 19(b)(2) of the Exchange
Act,26 to approve the proposed rule
change, as modified by Amendment No.
1 on an accelerated basis.
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VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,27
that the proposed rule change (SR–ISE–
2018–16), as modified by Amendment
No. 1 thereto, be, and it hereby is,
approved on an accelerated basis.
26 15
27 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
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[FR Doc. 2018–10978 Filed 5–22–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83289; File No. SR–
NYSENAT–2018–02]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Amended by
Amendment No. 1, To Support the ReLaunch of NYSE National, Inc. on the
Pillar Trading Platform
I. Introduction
On February 21, 2018, NYSE
National, Inc. (‘‘NYSE National’’ or
‘‘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 in
connection with the re-launch of the
Exchange on the Pillar trading platform.
The proposed rule change was
published for comment in the Federal
Register on March 13, 2018.3 The
Commission received no comments on
the proposed rule change. On April 25,
2018, pursuant to Section 19(b)(2) of the
Act,4 the Commission designated a
longer 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.5 On May 16, 2018, the
Exchange filed Amendment No. 1 to the
proposed rule change, which supersedes
and replaces the original filing in its
entirety.6 The Commission is approving
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 82819
(March 7, 2018), 83 FR 11098 (March 13, 2018)
(‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No.83100
(April 25, 2018), 83 FR 19127 (May 1, 2018).
6 In Amendment No. 1, the Exchange proposes,
among other things, to: (i) Delete proposed Rule 8
and modify proposed Rule 5 to include only those
rules that would support the trading on an unlisted
trading privileges (‘‘UTP’’) basis of all NMS Stocks
and the trading on a UTP basis of UTP Exchange
Traded Products; (ii) revise the proposed definition
of the term ‘‘UTP Exchange Traded Product’’; (iii)
propose a grace period of 30 calendar days for ETP
1 15
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the proposed rule change, as modified
by Amendment No. 1, on an accelerated
basis, and is soliciting comments on
Amendment No. 1.
II. Description of the Proposal
On February 1, 2017, the Exchange
ceased trading operations.7 The
Exchange proposes to re-launch trading
operations on Pillar, which is an
integrated trading technology platform
designed to use a single specification for
connecting to the equities and options
markets operated by the Exchange and
its affiliates, NYSE Arca, Inc. (‘‘NYSE
Arca’’), NYSE American LLC (‘‘NYSE
American’’), and New York Stock
Exchange LLC (‘‘NYSE’’).
Currently, NYSE Arca’s cash equities
market,8 NYSE American’s cash equities
market,9 and NYSE securities that trade
on an unlisted trading privileges basis 10
trade on Pillar. NYSE Arca, NYSE
American, and NYSE have trading rules
that are substantially similar and that
are based on the rule numbering
framework of NYSE Arca.11
Holders that are eligible for the expedited process
for reinstatement under the proposal to register
their Associated Persons with the Exchange; (iv)
commit to working with Commission staff to update
its membership rules and to file a separate filing
relating to its membership rules within 90 days of
any approval of the instant proposal; (v) identify
which of the proposed Rules are based on the rules
of NYSE American, as opposed to those based on
the rules of NYSE Arca; (vi) add provisions, based
on rules of other self-regulatory organizations
(‘‘SROs’’), that were not included in the original
filing; (vii) add a rule relating to the requirements
for listed securities issued by Intercontinental
Exchange, Inc. (‘‘ICE’’) or its affiliates; (viii)
specifically incorporate by reference certain rules of
the Financial Industry Regulatory Authority, Inc.
(‘‘FINRA’’) that were only cited in the original
version of the filing; (ix) add clarifying language to
proposed rule text and the narrative describing the
proposal; and (x) correct various technical errors.
The proposed revisions of the proposal made in
Amendment No. 1 are incorporated in the
Description of the Proposal herein. Amendment No.
1 is available at: https://www.sec.gov/comments/srnysenat-2018-02/nysenat201802-3653908162416.pdf.
7 See Securities Exchange Act Release No. 80018
(February 10, 2017), 82 FR 10947 (February 16,
2017) (SR–NSX–2017–04) (‘‘Termination Filing’’).
On January 31, 2017, ICE, through its wholly-owned
subsidiary, NYSE Group, acquired all of the
outstanding capital stock of the Exchange (the
‘‘Acquisition’’). See Securities Exchange Act
Release No. 79902 (January 30, 2017), 82 FR 9258
(February 3, 2017) (SR–NSX–2016–16). Prior to the
Acquisition, the Exchange was named ‘‘National
Stock Exchange, Inc.’’ and was referred to as
‘‘NSX.’’
8 For a history of the implementation of Pillar on
NYSE Arca, see Notice, supra note 3, at footnote 6.
9 For a history of the implementation of Pillar on
NYSE American, see Notice, supra note 3, at
footnote 7.
10 For a history of the implementation of Pillar on
NYSE, see Notice, supra note 3, at footnote 8.
11 According to the Exchange, NYSE American
and NYSE proposed specific differences to certain
trading rules with respect to NYSE Arca to
differentiate their respective trading models, noting,
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The Exchange proposes to re-launch
trading on Pillar in all Tape A, Tape B,
and Tape C securities on a UTP basis on
a fully automated price-time priority
allocation model. Unlike its affiliated
exchanges, the Exchange does not
propose to be a listing venue. Because
the Exchange would trade securities on
a UTP basis only, the Exchange
proposes to operate in the same manner
as its affiliated exchanges, NYSE Arca,
NYSE American, and NYSE, with
respect to securities that trade on a UTP
basis on those exchanges. For example,
the Exchange does not propose to
operate any auctions and therefore does
not propose rules to provide for auction
functionality on the Exchange.12 In
addition, because the Exchange would
not be a listing venue, the Exchange
would not provide for either ‘‘lead’’ or
‘‘designated’’ market makers, which are
available on NYSE Arca, NYSE, and
NYSE American, respectively, for
securities listed on those exchanges. As
with NYSE Arca and NYSE American,
the Exchange proposes rules that would
provide that ETP Holders may register
as market makers in securities that trade
on a UTP basis on the Exchange. And,
as with NYSE Arca and NYSE
American, the Exchange proposes not to
require that there be a market maker in
a particular security on the Exchange for
that security to trade on a UTP basis on
the Exchange. Similar to NYSE
American and to how NYSE trades
securities on an unlisted trading
privileges basis on Pillar, the Exchange
also does not propose to operate a retail
liquidity program.
While the Exchange proposes trading
rules for the re-launch based on the
for example, that NYSE American has a delay
mechanism and does not offer specified order types.
See id. The Exchange states that it does not propose
to offer a trading model that is differentiated from
NYSE Arca. It does propose, however, certain
differences in some of the details of its rules, as
further discussed below. In addition, in preparation
for the re-launch of trading, the Exchange adopted
the rule numbering framework of the NYSE Arca
rules, which at that time were organized in 14
Rules. See Securities Exchange Act Release No.
81782 (September 29, 2017), 82 FR 81782 (October
5, 2017) (SR–NYSENat–2017–04) (Notice of Filing
and Immediate Effectiveness).
12 However, the Exchange would make available
certain order types that currently exist on NYSE
Arca, NYSE American, and NYSE for securities that
trade on a UTP basis, which provide for routing
directly to the primary listing market. In addition,
similar to NYSE Rule 7.31(c), the Exchange would
offer ‘‘Auction-only Orders,’’ which are orders
designated to participate in an auction on the
primary listing market. The Exchange would route
all such orders to the primary listing market. The
proposed rules governing such order types on the
Exchange are based on the recently-approved rules
governing trading on Pillar on the NYSE. See
Securities Exchange Act Release No. 82945 (March
26, 2018), 83 FR 13553 (March 29, 2018) (SR–
NYSE–2017–36).
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rules of its affiliated exchanges, it also
proposes to retain and renumber certain
of its existing rules relating to
membership and ETP Holder conduct.
In certain cases, the Exchange proposes
to replace an existing rule with a rule
harmonized with conduct rules of other
SROs.
Because the Exchange is not
proposing new or different rules to
qualify as a member of the Exchange for
the re-launch, the Exchange proposes to
reinstate ETP Holder status 13 using the
existing process described in
Interpretation and Policies .01 to current
Rule 2.5, which sets forth an expedited
process for reinstatement as an ETP
Holder and to register Associated
Persons established when the Exchange
re-launched operations in 2015.14 In
Amendment No. 1, the Exchange
proposes new Commentary .01 to
proposed Rule 2.5, which would
provide those ETP Holders reinstated
pursuant to the expedited process 30
calendar days in which to register their
Associated Persons with the
Exchange.15 Further, in Amendment No.
1, the Exchange represents that it
understands that the rules set forth in
Chapter II of the current rule book may
not reflect certain harmonized standards
for membership rules of other SROs.
While the Exchange proposes to retain
its existing membership rules, subject to
the changes discussed below, for
purposes of the re-launch, the Exchange
represents that it commits to working
with Commission staff to update its
membership rules and will file a
separate filing relating to its
membership rules within 90 days of any
approval of its proposed rule change.16
In addition, the Exchange proposes to
amend Article V, Sections 5.1 and 5.8 of
the Exchange’s Bylaws by revising
references to ‘‘Appeals Committee’’ to
‘‘Committee for Review.’’ Because the
existing NYSE National rulebook would
be replaced with both new and
renumbered rules under the new
framework, the Exchange also proposes
to delete Chapters I–XVI of the current
13 When the Exchange ceased operations, the
Exchange terminated the ETP status of all ETP
Holders as of the close of business on February 1,
2017. See Termination Filing, supra note 7.
14 See Securities Exchange Act Release No. 75098
(June 3, 2015), 80 FR 32644 (June 9, 2015) (Notice
of filing and immediate effectiveness of proposed
rule change to establish expedited process to
reinstate ETP Holder status). Pursuant to that rule,
approved ETP Holders that were in good standing
as of the close of business on May 30, 2014, when
the Exchange previously ceased trading operations,
had their ETP Holder status reinstated and
Associated Persons registered pursuant to an
expedited process.
15 See Amendment No. 1, supra note 6.
16 Id.
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23969
rulebook and the rules contained
therein.
The following is a brief overview of
each rule section 17 that would be
included in the Exchange’s rulebook, as
proposed to be revised, and that would
incorporate proposed changes to
individual sections, as reflected in
Amendment No. 1.18
Rule 0—Regulation of the Exchange and
ETP Holders
Proposed Rule 0 would establish the
framework for the regulation of the
Exchange and its ETP Holders. Proposed
Rule 0 acknowledges that the Exchange
and FINRA are parties to a regulatory
services agreement in which FINRA will
perform certain functions on behalf of
the Exchange, with the Exchange
retaining ultimate legal responsibility
for, and control of, such functions.
Rule 1—Definitions
Proposed Rule 1 would contain
definitions applicable to trading on the
Exchange’s Pillar platform.19 In
Amendment No. 1, the Exchange
proposes to modify Rule 1.1(m) from the
initial filing to define the term ‘‘UTP
Exchange Traded Product’’ to mean one
of a list of specified classes of Exchange
Traded Products that the Exchange
intends to trade pursuant to unlisted
trading privileges. The enumerated
Exchange Traded Products that would
be eligible to trade on the Exchange
pursuant to unlisted trading privileges
would include the following: Equity
Linked Notes, Investment Company
Units, Index-Linked Exchangeable
Notes, Equity Gold Shares, Equity
Index-Linked Securities, CommodityLinked Securities, Currency-Linked
Securities, Fixed-Income Index-Linked
Securities, Futures-Linked Securities,
Multifactor-Index-Linked Securities,
Trust Certificates, Currency and Index
Warrants, Portfolio Depository Receipts,
Trust Issued Receipts, CommodityBased Trust Shares, Currency Trust
Shares, Commodity Index Trust Shares,
Commodity Futures Trust Shares,
Partnership Units, Paired Trust Shares,
Trust Units, Managed Fund Shares and
Managed Trust Shares.
Rule 2—Trading Permits
Proposed Rule 2 would set forth the
membership rules for the Exchange,
including the eligibility requirements,20
17 Rules 4, 8, and 9 are proposed to be
‘‘Reserved.’’
18 See Amendment No. 1, supra note 6.
19 The proposed definitions are based on the rules
of NYSE Arca, NYSE American, and NSX.
20 See proposed Rules 2.2, 2.3, and 2.4.
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continuing education requirements,21
and application requirements 22 to
become an ETP Holder. It also would set
forth rules relating to revocation,23
voluntary termination,24 and transfer
and sale 25 of an ETP.26 Proposed Rule
2 would provide jurisdiction 27 to the
Exchange to discipline ETP Holders 28
and Persons Associated with ETP
Holders for violations of, among other
things, the Act and the rules
thereunder.29 It also would provide the
Exchange the ability to prescribe
reasonable dues, assessments, and
charges 30 and would include rules
concerning the mandatory testing of the
Exchange’s business continuity and
disaster recovery plans.31 In
Amendment No. 1, the Exchange
represents that there are no categories of
persons on the Exchange that would fall
outside of the membership categories
and requirements set forth in proposed
Rule 2.32
The proposed rules are based on the
Exchange’s existing membership rules
with the following substantive
differences: (1) The Exchange proposes
to delete Rule 2.10, as proposed Rule 3.9
would cover the relationship between
ETP Holders and Exchange affiliates; (2)
Archipelago Securities LLC would
replace NSX Securities LLC as the
routing broker for the Exchange, so the
Exchange proposes to delete current
Rules 2.11 and 2.12,33 and instead adopt
proposed Rule 7.45,34 which is based on
NYSE Arca Rule 7.45–E, to cover the
Exchange’s routing function.
NYSE National also proposes an
expedited process for reinstating ETP
Holders. The ETP Holder would be able
to submit a short form application to
reinstate its status as an ETP Holder and
to register Persons Associated with the
ETP Holder if the ETP Holder was in
good standing at the close of business
on February 1, 2017, is a member of
another SRO, and each proposed Person
Associated with such ETP Holder holds
an active and recognized securities
21 See
proposed Rule 2.2.
proposed Rule 2.5.
23 See proposed Rule 2.6.
24 See proposed Rule 2.7.
25 See proposed Rule 2.8.
26 See proposed Rule 1.1(h) (defining ‘‘ETP’’).
27 See proposed Rule 2.2(a).
28 See proposed Rule 1.1(i) (defining ‘‘ETP
Holder’’).
29 Rules 2.10, 2.11, and 2.12 are marked
‘‘Reserved.’’
30 See proposed Rule 2.9.
31 See proposed Rule 2.13.
32 See Amendment No. 1, supra note 6.
33 By its terms, NSX Rule 2.12 expired on
September 30, 2008. See current Rule 2.12.
34 See proposed Rule 7.45.
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22 See
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industry registration and meets the
requirements of proposed Rule 2.2(b).35
In Amendment No. 1, the Exchange
proposes a grace period of 30 calendar
days from the effective date of proposed
Rule 2.5 for ETP Holders that are
eligible for the expedited process for
reinstatement to register Persons
Associated with the ETP Holder with
the Exchange.36 According to the
Exchange, to be eligible for the
expedited process and the temporary
grace period, the ETP Holder already
must have Persons Associated with the
ETP Holder registered in the FINRA
Central Registration Depository System
(‘‘CRD’’).37 ETP Holders that take
advantage of the proposed grace period
would be able to begin trading on the
Exchange before they complete
registering their Persons Associated
with the Exchange.
As noted above, the Exchange
proposes to retain its existing rules
relating to membership, which may not
reflect certain harmonized standards for
membership rules of other SROs.
However, in Amendment No. 1, the
Exchange commits to working with
Commission staff to update its
membership rules and to file a separate
filing relating to its membership rules
within 90 days of any approval of the
Exchange’s proposed rule change.38
Proposed Rule 2.3, as a prerequisite to
membership, would require an ETP
Holder to be a member of a registered
national securities association or of a
registered national securities exchange.
As a member of two or more SROs, an
ETP Holder would be required to
comply with whichever rules impose a
higher standard.
Rule 3—Organization and
Administration
Proposed Rule 3 would include rules
relating to: (1) The potential actions the
Exchange may take for ETP Holder’s
failure to pay any assessments, dues or
other changes to the Exchange within 45
days after they become payable; (2) a
prohibition on an ETP Holder being
affiliated with NYSE Group, Inc.; (3)
prompt written notification to the
Exchange whenever an ETP Holder is
expelled or suspended from any SRO,
encounters financial difficulty or
operating inadequacies, fails to perform
contracts or becomes insolvent; and (4)
requirements for fingerprint-based
background checks of Exchange
employees and others. In Amendment
35 See
36 See
Commentary .01 to proposed Rule 2.5.
id.; see also Amendment No. 1, supra note
6.
37 See Commentary .01 to proposed Rule 2.5; see
also Amendment No. 1, supra note 6.
38 See Amendment No. 1, supra note 6.
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No. 1, the Exchange proposes to add a
rule relating to additional requirements
to be undertaken by the Exchange if
securities issued by ICE or its affiliates
are traded on the Exchange.39
Rule 5—Trading on an Unlisted Trading
Privileges Basis
Proposed Rule 5 would provide for
rules to trade all Tape A, Tape B, and
Tape C securities, including Exchange
Traded Products (also referred to herein
as ‘‘ETPs’’), on a UTP basis.40 In
Amendment No. 1, the Exchange states
that it does not believe that it is
necessary for an exchange that trades
securities only on a UTP basis to have
listing rules for ETPs.41 The Exchange
further states that, as a non-listing
venue, the Exchange would not have a
relationship with any ETP issuers; thus,
to the extent ETP listing rules include
initial and continued listing standards,
the Exchange would not be in a position
to evaluate issuer compliance with such
rules.42 Similarly, the Exchange states
its belief that it should not be necessary
for a non-listing venue to file with the
Commission a Form 19b–4(e) if it begins
trading an ETP on a UTP basis, because
Rule 19b–4(e)(1) under the Act refers to
the ‘‘listing and trading’’ of a ‘‘new
derivative securities product.’’ 43 The
Exchange therefore believes that the
requirements of that rule refer to when
an exchange lists and trades an ETP,
and not when an exchange seeks only to
trade such product on a UTP basis
pursuant to Rule 12f–2 under the Act.44
Accordingly, the proposal, as amended
by Amendment No. 1, contains only
those rules that would support the
trading on a UTP basis of all NMS
Stocks, and the trading on a UTP basis
for UTP Exchange Trading Products,
which are set forth in proposed Rule
5.1. Further, the Exchange does not
propose rules other than Rule 5.1 or any
of the provisions it previously had
39 Id.
40 In the Notice, the Exchange proposed both
Rules 5 and 8 to establish listing rules for Exchange
Traded Products that are based on NYSE American
Rules 5E and 8E and NYSE Rules 5P and 8P. See
Notice, supra note 3. Because the Exchange would
not be a listing venue, in Amendment No. 1, the
Exchange proposes to modify its proposal to
eliminate the listing rules contained in Rules 5 and
8. See Amendment No. 1, supra note 6. In
particular, in Amendment No. 1, the Exchange
proposes to delete proposed Rule 8 and modify
proposed Rule 5 to include only those rules that
would support the trading on a UTP basis of all
NMS Stocks, and the trading on a UTP basis of UTP
Exchange Traded Products.
41 See Amendment No. 1, supra note 6.
42 Id.
43 17 CFR 240.19b–4(e). See Amendment No. 1,
supra note 6.
44 17 CFR 240.12f–2. See Amendment No. 1,
supra note 6.
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proposed in Rule 8, which would be
designated as Reserved.45
Proposed Rule 5.1 would establish the
Exchange’s authority to trade securities
on a UTP basis. Proposed Rule 5.1(a)(1)
would provide that the Exchange may
extend UTP to any security that is an
NMS Stock that is listed on another
national securities exchange or with
respect to which UTP may otherwise be
extended in accordance with Section
12(f) of the Exchange Act.46
Proposed Rule 5.1(a)(1) would further
provide that any such security would be
subject to all Exchange rules applicable
to trading on the Exchange, unless
otherwise noted. The Exchange notes
that this proposed rule text is based in
part on NYSE Arca Rule 5.1–E(a) and
EDGA Rule 14.1, but with a proposed
difference to refer generally to Exchange
rules, and not limit such reference to
Exchange trading rules. This would
make clear that all Exchange rules
would be applicable to the trading of
securities on a UTP basis on the
Exchange, including business conduct
and sales practice rules set forth in
proposed Rule 11.
Proposed Rule 5.1(a)(2) would
establish additional rules for trading of
UTP Exchange Traded Products, which
are defined in Rule 1.1 (described
above).47 Specifically, the requirements
in subparagraphs (A)–(E) of proposed
Rule 5.1(a)(2) would apply to UTP
Exchange Traded Products traded on the
Exchange. Because the Exchange is not
proposing that the Exchange would file
with the Commission a Form 19b–4(e)
with respect to each UTP Exchange
Traded Product within five business
days after commencement of trading,
the Exchange does not propose rule text
based on NYSE American Rule
5.1E(a)(2)(A) or NYSE Rule 5.1(a)(2)(A).
Proposed Rule 5.1(a)(2)(A) would
provide that the Exchange would
distribute an information circular prior
to the commencement of trading in an
Exchange Traded Product that generally
would include the same information as
the information circular provided by the
listing exchange, including (a) the
45 See note 41, supra. In Amendment No. 1, the
Exchange states its belief that its proposed rule text
in Rule 5, together with the proposed definition of
UTP Exchange Traded Products in proposed Rule
1.1, which would enumerate the classes of
Exchange Traded Products that the Exchange
proposes to trade on a UTP basis, would satisfy the
requirements of Rule 12f–5 under the Act, 17 CFR
240.12f–5, for a national securities exchange to have
a rule or rules providing for transactions in a class
or type of security to which the Exchange extends
unlisted trading privileges. See Amendment No. 1,
supra note 6.
46 15 U.S.C. 78l(f). See also 17 CFR 242.600. The
term ‘‘NMS Stock’’ is defined in proposed Rule
1.1(u).
47 See Proposed Rule 1.1(m).
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special risks of trading the Exchange
Traded Product, (b) the Exchange’s rules
that will apply to the Exchange Traded
Product and (c) information about the
dissemination of value of the underlying
assets or indices. Under proposed Rule
5.1(a)(2)(C), the Exchange would halt
trading in a UTP Exchange Traded
Product as provided for in proposed
Rule 7.18.
Proposed Rule 5.1(a)(2)(E) would
provide that the Exchange’s surveillance
procedures for Exchange Traded
Products traded on the Exchange
pursuant to UTP would be similar to the
procedures used for equity securities
traded on the Exchange and would
incorporate and rely upon existing
Exchange surveillance systems.
Proposed Rules 5.1(a)(2)(B) and (D)
would establish the following
requirements for ETP Holders that have
customers that trade UTP Exchange
Traded Products:
• Prospectus Delivery Requirements.
Proposed Rule 5.1(a)(2)(B)(i) would
remind ETP Holders that they are
subject to the prospectus delivery
requirements under the Securities Act of
1933, as amended (the ‘‘Securities
Act’’), unless the Exchange Traded
Product is the subject of an order by the
Commission exempting the product
from certain prospectus delivery
requirements under Section 24(d) of the
Investment Company Act of 1940, as
amended (the ‘‘1940 Act’’), and the
product is not otherwise subject to
prospectus delivery requirements under
the Securities Act. ETP Holders would
also be required to provide a prospectus
to a customer requesting a prospectus.48
• Written Description of Terms and
Conditions. Proposed Rule
5.1(a)(2)(B)(ii) would require ETP
Holders to provide a written description
of the terms and characteristics of UTP
Exchange Traded Products to
purchasers of such securities, not later
than the time of confirmation of the first
transaction, and with any sales
materials relating to UTP Exchange
Traded Products.
• Market Maker Restrictions.
Proposed Rule 5.1(a)(2)(D) would
establish certain restrictions for any ETP
Holder registered as a market maker in
an UTP Exchange Traded Product that
derives its value from one or more
currencies, commodities, or derivatives
based on one or more currencies or
commodities, or is based on a basket or
index composed of currencies or
commodities (collectively, ‘‘Reference
Assets’’). Specifically, such an ETP
Holder must file with the Exchange and
keep current a list identifying all
48 Proposed
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accounts for trading the underlying
physical asset or commodity, related
futures or options on futures, or any
other related derivatives (collectively
with Reference Assets, ‘‘Related
Instruments’’), which the ETP Holder
acting as registered market maker may
have or over which it may exercise
investment discretion.49 If an account in
which an ETP Holder acting as a
registered market maker, directly or
indirectly, controls trading activities, or
has a direct interest in the profits or
losses thereof, has not been reported to
the Exchange as required by this Rule,
an ETP Holder acting as registered
market maker in the UTP Exchange
Traded Product would not be permitted
to trade in the underlying physical asset
or commodity, related futures or options
on futures, or any other related
derivatives. Finally, a market maker
could not use any material nonpublic
information in connection with trading
a Related Instrument. According to the
Exchange, proposed Rule 5.1(a)(2)(D) is
based in part on BZX Rule 14.11(j)(5).50
Rule 6—Consolidated Audit Trail and
Order Audit Trail System
Proposed Rule 6 would incorporate
the Exchange’s existing rules relating to
the Consolidated Audit Trail National
Market System Plan (‘‘CAT NMS Plan’’)
without any substantive changes.
Proposed Rule 6 would include 12 rules
covering the following areas: (1)
Definitions; (2) Clock Synchronization;
(3) Industry Member Data Reporting; (4)
Customer Information Reporting; (5)
Industry Member Information
Reporting; (6) Time Stamps; (7) Clock
Synchronization Rule Violation; (8)
Connectivity and Data Transmission; (9)
Development and Testing; (10)
Recordkeeping; (11) Timely, Accurate
and Complete Data; and (12)
Compliance Dates. Proposed Rule
6.6900 would establish procedures for
resolving potential disputes related to
CAT Fees charged to Industry Members.
Proposed Rule 6.7400 would contain
a series of rules that implement Order
Audit Trail rules relating to definitions;
applicability; synchronization of ETP
Holder business clocks; recording of
49 The proposed rule would also, more
specifically, require a market maker to file with the
Exchange and keep current a list identifying any
accounts (‘‘Related Instrument Trading Accounts’’)
for which related instruments are traded (1) in
which the market maker holds an interest, (2) over
which it has investment discretion, or (3) in which
it shares in the profits and/or losses. In addition,
a market maker would not be permitted to have an
interest in, exercise investment discretion over, or
share in the profits and/or losses of a Related
Instrument Trading Account that has not been
reported to the Exchange as required by the
proposed rule.
50 See Amendment No. 1, supra note 6.
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order information; order data
transmission requirements; violation of
order audit trail system rules; and
exemption to the order recording and
data transmission requirements.51
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Rule 7—Equities Trading
Rule 7 establishes the rules for trading
on the Exchange. As noted above, the
Exchange proposes to re-launch on the
same trading platform as the cash
equities trading platform of NYSE Arca.
Thus, the provisions of proposed Rule 7
are, in large part, based on equivalent
rules of NYSE Arca for this platform. In
some instances, however, the proposed
trading rules reflect a choice to adopt
the version of a particular provision
used by NYSE American and NYSE.52
Proposed Rule 7 is divided into six
sections. Section 1, ‘‘General
Provisions,’’ 53 includes provisions
relating to hours of business on the
Exchange and holidays when it will not
be open; responsibilities of ETP Holders
and associated persons with respect to
their roles in transactions and their
charging of commissions; ex-dividend
and ex-rights dates; units of trading;
trading differentials; anonymity of bids
and offers; settlement terms; binding
prices; clearly erroneous executions;
Exchange compliance with the Limit
Up-Limit Down National Market System
Plan; trading halts and suspensions;
clearance and settlement; stock option
transactions of market makers; short
sales; and firmness of quotes.
Section 2 of proposed Rule 7, ‘‘Market
Makers,’’ 54 includes provisions relating
to registration of Market Makers. The
section also includes proposed rules
51 The Exchange notes that at the time that it
ceased operations, it did not require its ETP Holders
to maintain order information pursuant to an order
tracking system and, therefore, did not have the
proposed OATS rules or similar rules in its
rulebook. According to the Exchange, requiring ETP
Holders to comply with the proposed OATS
requirements in connection with its re-launch of
trading would not impose an undue burden on such
ETP Holders or their associated persons because
nearly all ETP Holders are expected to be members
of another SRO that requires compliance with
OATS requirements and because order information
pursuant to the OATS rules need only be submitted
upon request.
52 The Exchange has identified which of its
proposed rules are based on the rules of NYSE
American, as opposed to those based on the rules
of NYSE Arca. See Amendment No. 1, supra note
6. The Exchange also has identified certain trading
rules of NYSE Arca and NYSE American that it is
not proposing to adopt. For example, the Exchange
states that, because it would not be a listing venue,
it is not proposing to adopt rules relating to lead
or designated market makers. The Exchange also
states that it would not operate auctions, and
therefore is not proposing rules pertaining to
auction procedures.
53 Section 1 comprises proposed Rules 7.1
through 7.18.
54 Section 2 comprises proposed Rules 7.19
through 7.28.
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pertaining to access to quotations,
private linkages, and compliance with
Regulation NMS under the Act.
Section 3 of proposed Rule 7,
‘‘Exchange Trading,’’ 55 after setting
forth provisions regarding authorized
access to the Exchange, establishes rules
relating to the kinds of order types
available on the Exchange and how they
are designed to trade. Section 3 of
proposed Rule 7 also would set forth the
rules of the Exchange relating to order
entry; the codes by which the ETP
Holder submitting an order must
indicate whether it is acting in a
principal, agency, or riskless principal
capacity; and the three trading sessions
for which the Exchange will be open
(early, core, and late), including the
securities that may be traded in each
and the disclosures that ETP Holders
must make to non-ETP Holders that
send orders to them for trading in the
early or late session regarding, among
other things, the risks that may apply to
such orders.56
Further, Section 3 of proposed Rule 7
would establish rules relating to the
display and non-display of various
order types, the ranking of orders in the
Exchange book with respect to
execution priority, and the role of price
and time in determining such priority.57
The section also includes proposed
rules that pertain to routing of orders to
away markets; the prohibition of trading
through protected quotations and
exceptions thereto; and compliance
with other aspects of Regulation NMS
under the Act.58 It also lists the data
feeds that the Exchange proposes to use
for the handling, execution, and routing
of orders, as well as regulatory
compliance.59 Additional proposed
rules in Section 3 relate to odd lot and
mixed lot trading on the Exchange; trade
execution and reporting; and clearance
and settlement of trades.60
Section 4 of proposed Rule 7,
‘‘Operation of Routing Broker,’’ would
define ‘‘routing broker’’ as ‘‘the brokerdealer affiliate of the Exchange and/or
any other non-affiliate third-party
broker-dealer that acts as a facility of the
Exchange for routing orders entered into
Exchange systems to other market
centers for execution whenever such
55 Section 3 comprises proposed Rules 7.29
through 7.41 (with Rules 7.42 through 7.44 reserved
for future use).
56 See proposed Rules 7.32 (Order Entry); 7.33
(Capacity Codes); and 7.34 (Trading Sessions).
57 See proposed Rules 7.36 (Order Ranking and
Display).
58 See proposed Rules 7.37 (Order Execution and
Routing).
59 Id.
60 See proposed Rules 7.38, 7.40, and 7.41,
respectively. (Rule 7.39 is reserved for future use,
as are Rules 7.42, 7.43, and 7.44.)
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routing is required by Exchange rules or
the federal securities laws,’’ and would
set forth rules regarding the outbound
routing function.61
Section 4 also would provide that, for
so long as the Exchange is affiliated
with NYSE American, NYSE Arca, and
NYSE, and Archipelago Securities LLC
(‘‘Arca Securities) in its capacity as a
facility of those exchanges is utilized by
those affiliated exchanges for the
routing of any approved types of orders
from those exchanges to NYSE National,
Arca Securities may provide inbound
routing services to NYSE National from
those affiliated exchanges.62 This
provision is contingent on the Exchange
maintaining an agreement pursuant to
Rule 17d–2 under the Act 63 with a nonaffiliated SRO and establishing controls
and procedures to prevent Arca
Securities from benefitting from or
acting on non-public information
obtained as a result of the affiliation.64
Section 5 of proposed Rule 7, ‘‘Plan
to Implement a Tick Size Pilot
Program’’ 65 would establish
requirements relating to the Tick Size
Pilot Program adopted as a joint
industry plan under Regulation NMS
under the Act, and is based on the
similar rule of NYSE Arca.66
Section 6 of proposed Rule 7,
‘‘Contracts in Securities,’’ 67 would
provide that contracts in municipal
securities be compared, settled, and
cleared in accordance with regulations
of the Municipal Securities Rulemaking
Board; set forth requirements relating to
ETP contracts of an ETP Holder with
another ETP Holder; and establish
requirements relating to the book entry
settlement of transactions.68
Rule 10—Disciplinary Proceedings,
Other Hearings, and Appeals
Proposed Rule 10 consists of
proposed Rule 10.8000, Investigations
and Sanctions, and proposed Rule
10.9000, Code of Procedure, (‘‘Rule
61 See proposed Rule 7.45, which comprises the
whole of Section 4.
62 Proposed Rule 3.9 would provide that, unless
approved by the Commission, neither NYSE Group,
Inc., nor any of its affiliates (as such term is defined
in Rule 12b–2 under the Act) shall hold, directly
or indirectly, an ownership interest in any ETP
Holder. Arca Securities would be covered by this
provision.
63 17 CFR 240.17d–2.
64 See id. Proposed Rule 7.45 also includes
provisions regarding cancellation of orders and
error accounts in connection with the arrangement
of the Exchange with Arca Securities.
65 Section 5 is comprised solely of proposed Rule
7.46.
66 See NYSE Arca 7.46–E.
67 Section 6 would include proposed Rules 7.60
through 7.62.
68 See proposed Rules 7.61, 7.62, and 7.63,
respectively.
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10.8000 and Rule 10.9000 Series’’),
which are based on NYSE American
Rule 8000 and Rule 9000 Series of the
Office Rules, with certain
modifications.69 Together, the rules
would be the Exchange’s Disciplinary
rules. Other than the differences
specified in Amendment No. 1, the
proposed Rule 10.8000 and 10.9000
Series are based on the individual
counterpart NYSE American Rule 8000
and 9000 Series.70 Given the different
membership structures, lack of a
physical trading floor,71 and differences
in terminology throughout the rules, the
proposed Rule 10.8000 and Rule
10.9000 Series would differ from the
NYSE American rules as follows:
• The term ‘‘ETP Holder’’ is used
rather than ‘‘member and member
organization’’ or ‘‘member organization
or ATP Holder’’;
• the terms ‘‘Associated Person’’ and
‘‘Person Associated with an ETP
Holder,’’ which are defined terms on the
Exchange are used rather than the term
‘‘covered person’’;
• not adopt NYSE American Rules
8001 and 9001, which describe the
effective date of the NYSE American
rules;
• not retain the text of NYSE
American’s legacy minor rules;
• add the following sentence, from
NYSE Arca Rule 10.2(a), to Rule
10.8210(a): ‘‘No member of the Board of
Directors or non-Regulatory Staff may
interfere with or attempt to influence
the process or resolution of any pending
investigation or disciplinary
proceeding’’;
• exclude the definition of the
following terms in Rule 10.9120: ‘‘Board
of Directors,’’ ‘‘covered person,’’
‘‘Exchange,’’ and ‘‘Floor-Based
Panelist,’’ because they are defined
elsewhere in the rules or are not
applicable to the Exchange, and would
mark those paragraphs as ‘‘Reserved’’;
• add the following sentence to
proposed Rule 10.9120(v)’s definition of
‘‘Panelist’’: ‘‘Hearing Panel members
will be drawn from the Exchange
Business Conduct Committee (‘BCC’)’’;
69 NYSE American Rule 8000 and Rule 9000
Series are substantially the same as the Rule 8000
and Rule 9000 Series of NYSE and of FINRA. See
Securities Exchange Act Release No. 77241
(February 26, 2016), 81 FR 11311 (March 3, 2016)
(SR–NYSEMKT–2016–30). See also Securities
Exchange Act Release No. 78959 (September 28,
2016), 81 FR 68481 (October 4, 2016) (SR–
NYSEMKT–2016–71). The NYSE American
disciplinary rules were implemented on April 15,
2016. See NYSE American Information
Memorandum 16–02 (March 14, 2016).
70 See Amendment No. 1, supra note 6.
71 Because the Exchange would not have a floor,
it would not have Floor-Based Panelists. See NYSE
American Rules 9120(q), 9212(a)(2)(B), 9221(a)(3),
9231(b)(2) and (c)(2), and 9232(c).
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• merge the current Rule 8.15 and
NYSE American Rule 9217 to create
proposed Rule 10.9217, which sets forth
the Exchange’s Minor Rule Violation
Plan; 72
• replace the phrase ‘‘an ETP Holder
that is an affiliate’’ from NYSE
American Rule 9268(e)(2) with ‘‘an
affiliate of the Exchange as such term is
defined in Rule 12b–2 under the
Exchange Act,’’ in proposed Rules
10.9268 and 10.9310(a)(1); and
• propose non-substantive
grammatical differences in specified
rules, as needed, and update internal
cross references to the appropriate
Exchange rule.
Rule 11—Business Conduct
The Exchange proposes to maintain
certain current NYSE National rules
regarding rules of fair practice, books
and records, supervisions, extensions of
credit, and trading practices and
relocate these rules to proposed Rule 11.
The Exchange also proposes to adopt
conduct rules that are based on FINRA
rules and to incorporate certain FINRA
rules by reference.73
Section 1 of proposed Rule 11 would
be designated as Rules of Fair Practice
and the preamble thereto would state
that ‘‘References to the term ETP Holder
in Section 1 to Rule 11 also mean
Associated Persons of ETP Holders.’’
The rules in Section 1 to proposed Rule
11 relate to Business Conduct of ETP
Holders,74 Violations Prohibited,75 Use
of Fraudulent Devices,76 False
Statements,77 Advertising Practices,78
Fair Dealing with Customers,79 The
Prompt Receipt and Delivery of
Securities,80 Charges for Services
Performed,81 Use of Information,82
Publication of Transactions and
Quotations,83 Offers at Stated Prices,84
Payment Designed to Influence Market
Prices, Other than Paid Advertising,85
72 See Amendment No. 1, supra note 6. The
Minor Rule Violation Plan provides an alternative
method for the Exchange to address a violation of
its rules. The Exchange is always free to pursue
formal disciplinary action against a member that
violates its rules.
73 See Amendment No. 1, supra note 6. In
Amendment No. 1, the Exchange proposes to revise
or relocate certain rules in Rule 11 that were
included in the original proposed rule change.
74 Proposed Rule 11.3.1.
75 Proposed Rule 11.3.2.
76 Proposed Rule 11.3.3.
77 Proposed Rule 11.3.4.
78 Proposed Rule 11.3.5.
79 Proposed Rule 11.3.6.
80 Proposed Rule 11.3.8.
81 Proposed Rule 11.3.9.
82 Proposed Rule 11.3.10.
83 Proposed Rule 11.3.11.
84 Proposed Rule 11.13.12.
85 Proposed Rule 11.13.13.
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Disclosure of Control,86 Discretionary
Accounts,87 Customer’s Securities or
Funds,88 Prohibition Against
Guarantees,89 Sharing in Accounts;
Extent Permissible,90 and Telephone
Solicitation.91
Section 2 of proposed Rule 11 would
be designated as Books and Records and
the rules thereunder would relate to
Requirements,92 Furnishing of
Records,93 Record of Written
Complaints,94 and Disclosure of
Financial Condition.95
Section 3 of proposed Rule 11 would
be designated as Supervision and the
rules thereunder would relate to Written
Procedures,96 Responsibility of ETP
Holders,97 Records,98 Review of
Activities and Annual Inspection,99
Prevention of the Misuse of Material,
Nonpublic Information,100 and Annual
Certification of Compliance and
Supervisory Processes.101
Section 4 of proposed Rule 11 would
be designated as Extensions of Credit
and the rules thereunder would relate to
Extensions of Credit—Prohibitions and
Exemptions 102 and Day Trading
Margin.103
Section 5 of proposed Rule 11 would
be designated as Trading Practice Rules
and the preamble thereto would state
that ‘‘References to the term ETP Holder
in Section 5 to Rule 11 also mean
Associated Persons of ETP Holders.’’
The rules in Section 5 of proposed Rule
11 relate to Market Manipulation,104
Fictitious Transactions,105 Excessive
Sales by an ETP Holder,106
Manipulative Transactions,107
Dissemination of False Information,108
Joint Activity,109 Influencing the
Consolidated Tape,110 Options,111 Best
86 Proposed
Rule 11.13.15.
Rule 11.13.16.
88 Proposed Rule 11.13.17.
89 Proposed Rule 11.13.18.
90 Proposed Rule 11.13.19.
91 Proposed Rule 11.13.21.
92 Proposed Rule 11.4.1.
93 Proposed Rule 11.4.2.
94 Proposed Rule 11.4.3.
95 Proposed Rule 11.4.4.
96 Proposed Rule 11.5.1.
97 Proposed Rule 11.5.2.
98 Proposed Rule 11.5.3.
99 Proposed Rule 11.5.4.
100 Proposed Rule 11.5.5.
101 Proposed Rule 11.5.7.
102 Proposed Rule 11.6.1.
103 Proposed Rule 11.6.2.
104 Proposed Rule 11.12.1.
105 Proposed Rule 11.12.2.
106 Proposed Rule 11.12.3.
107 Proposed Rule 11.12.4.
108 Proposed Rule 11.12.5.
109 Proposed Rule 11.12.7.
110 Proposed Rule 11.12.8.
111 Proposed Rule 11.12.9.
87 Proposed
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Execution,112 and Prearranged
Trades.113
The Exchange proposes to adopt new
conduct rules in Section 6 of proposed
Rule 11 (Harmonized Conduct Rules).
The rules in Section 6 of proposed Rule
11 relate to Suitability,114
Communications with the Public,115
Customer Confirmations,116 Anti-Money
Laundering Compliance Program,117
Disruptive Quoting and Trading
Activity Prohibited,118 and Prohibition
Against Trading Ahead of Customer
Orders.119 Other than proposed Rule
11.5220, relating to Disruptive Quoting
and Trading Activity Prohibited, the
Section 6 rules would incorporate by
reference a specific FINRA rule or, in
the case of proposed Rule 11.5320,
would set forth the complete rule and
also incorporate by reference the
relevant FINRA rule.120
Rule 12—Arbitration
The Exchange proposes new Rule 12
(Arbitration) to replace rules set forth in
Chapter IX relating to arbitration.
Proposed Rule 12 would incorporate by
reference the Rule 12000 Series and the
Rules 13000 Series of the FINRA
Manual (Code of Arbitration Procedures
for Customer Disputes and Code of
Arbitration for Industry Disputes) (the
‘‘FINRA Code of Arbitration’’).121
Proposed Rule 12 would govern
jurisdiction and the circumstances
under which disputes may be
arbitrated; 122 pre-dispute arbitration
agreements between ETP Holders and
their customers, which would
incorporate by reference FINRA Rule
2268; 123 arbitrators’ referrals to the
Exchange; 124 any failures to honor an
arbitrator’s award; 125 and the effect of
arbitration on the Exchange’s rights as
an SRO.126
112 Proposed
Rule 11.12.10.
Rule 11.12.11.
114 Proposed Rule 11.2111.
115 Proposed Rule 11.2210.
116 Proposed Rule 11.2232.
117 Proposed Rule 11.3310.
118 Proposed Rule 11.5220.
119 Proposed Rule 11.5320.
120 In its proposed rule change, as amended, the
Exchange states that it proposes to file a request that
the Commission exercise its authority under
Section 36 of the Act and Rule 0–12 thereunder,
and grant the Exchange an exemption from the rule
filing requirements of Section 19(b) of the Act for
changes to Exchange rules that will be effected by
a cross-reference to a FINRA rule, including FINRA
rules designated as NASD rules.
121 See Amendment No. 1, supra note 6.
122 Proposed Rule 12(b).
123 Proposed Rule 12(c).
124 Proposed Rule 12(d).
125 Proposed Rule 12(e).
126 Proposed Rule 12(f).
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113 Proposed
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Rule 13—Liability of Directors and
Exchange
The Exchange proposes new Rule 13,
which would set forth the rules
governing the liability of its Directors
and the Exchange. Proposed Rules 13.1
and 13.2 would set forth limitations on
liability of the Directors and the
Exchange, respectively.127 Proposed
Rule 13.3 would limit legal proceedings
against any Directors, officer, employee,
agent or other official of the Exchange
or any subsidiary of the Exchange.128
Proposed Rule 13.4 relates to
responsibility for the Exchange’s costs
in defending a legal proceeding brought
against the Exchange.129
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act and rules and regulations
thereunder applicable to a national
securities exchange.130 In particular, the
Commission finds that the amended
proposed rule change is consistent with
Section 6(b)(5) of the Act,131 which
requires, among other things, that the
rules of a national securities exchange
be designed to promote just and
equitable principles of trade, 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 are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission further finds that the
amended proposed rule change is
consistent with Section 6(b)(7) of the
Act,132 which requires, among other
things, that the rules of a national
securities exchange provide a fair
procedure for the disciplining of
members and persons associated with
members.
1. Re-Launch of the Exchange on the
Pillar Trading Platform
The Exchange’s proposal would relaunch the Exchange on the Pillar
platform as a fully-automated cash
equities trading market with a pricetime priority allocation model. As
discussed at length in Amendment No.
1, the re-launched Exchange would
127 Proposed
Rule 13.1 and 13.2.
Rule 13.3.
129 Proposed Rule 13.4.
130 In approving the proposed rule changes, the
Commission has considered their impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
131 15 U.S.C. 78f(b)(5).
132 15 U.S.C. 78f(b)(7).
128 Proposed
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neither list securities nor operate an
auction and instead, would trade
securities solely on a UTP basis.
The Commission notes that the
Exchange’s amended proposal, in
addition to retaining certain of the
Exchange’s existing rules, would
establish new rules that are based on,
and are substantially similar to, the
rules of its affiliated exchanges and
FINRA, which were filed and approved
by the Commission (or which became
immediately effective) pursuant to
Section 19(b) of the Act.133 Several of its
affiliated exchanges currently operate
using the Pillar trading platform, and a
number of other national securities
exchanges operate fully electronic
markets. Accordingly, the Commission
finds that the amended proposal raises
no novel regulatory issues, that it is
reasonably designed to protect investors
and the public interest, and that it is
consistent with the requirements of the
Act. The Commission highlights below
its views on certain of the more
significant aspects of the Exchange’s
proposal.
Rule 2—Trading Permits
As noted above, the Exchange
proposes to retain its existing
membership rules,134 which may not
reflect certain harmonized standards in
the membership rules of other SROs.
The Commission notes that the
Exchange commits to working with
Commission staff to update its
membership rules and to file a separate
filing relating to its membership rules
within 90 days of any approval of the
Exchange’s proposed rule change.135
Also, an ETP Holder, as a prerequisite
to membership, would be required to be
a member of a registered national
securities association or of a registered
national securities exchange.136 As a
member of two or more SROs, an ETP
Holder would be required to comply
with whichever rules impose a higher
standard.
In Amendment No. 1, the Exchange
proposes a grace period of 30 calendar
days for ETP Holders eligible for the
expedited reinstatement process 137 to
register Persons Associated with the
ETP Holder with the Exchange. ETP
Holders who take advantage of the grace
period would be able to begin trading on
the Exchange before completing the
133 See
78 U.S.C 78s(b).
Commission notes the Exchange
represents that there are no categories of persons on
the Exchange that would fall outside of the
membership categories and requirements set forth
in proposed Rule 2. See supra note 31.
135 See supra note 37.
136 See proposed Rule 2.3.
137 See Commentary .01 to proposed Rule 2.5.
134 The
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registration of Persons Associated with
the Exchange. The Commission notes
that, based on the requirements of the
expedited process for reinstatement,
such ETP Holders would be required to
already have Persons Associated with
the ETP Holder registered on CRD. The
Commission believes that the grace
period would remove impediments to
and perfect the mechanism of a free and
open market and a national market
system by allowing ETP Holders to
begin trading on the Exchange
immediately, without completing the
manual process of entering into CRD an
additional registration for their
Associated Persons, as of the Exchange’s
re-launch of trading.
Based on the fact that ETP Holders are
currently subject to the registration
requirements of the other exchange or
association of which they are members,
as well as on the Commission’s
expectation that the Exchange will file
a proposal within 90 days to conform its
membership rules to the membership
rules of other SROs, the Commission
finds that the Exchange’s proposed
membership rules are consistent with
the requirements of the Act.
The Commission notes that proposed
Rule 3.9 provides that, without prior
Commission approval, no ETP Holder
shall be affiliated with NYSE Group,
Inc. or any of its affiliated entities.138
The Commission finds that it is
consistent with the Act to permit Arca
Securities to become affiliated with the
Exchange for the purposes of providing
routing services for the Exchange,
subject to conditions described in
proposed Rule 7.45.
Rule 5—Trading on an Unlisted Trading
Privileges Basis
As discussed above, in Amendment
No. 1 the Exchange states that it does
not believe that it is necessary for an
exchange that trades securities only on
a UTP basis to have listing rules for
ETPs.139 Similarly, the Exchange states
its belief that it should not be necessary
for a non-listing venue to file a Form
19b–4(e) if it begins trading an ETP on
a UTP basis, because Rule 19b–4(e)(1)
under the Act refers to the ‘‘listing and
trading’’ of a ‘‘new derivative securities
product.’’ 140 Accordingly, the Exchange
proposes to adopt only those rules that
would support the trading on a UTP
basis of all NMS Stocks, and the trading
on a UTP basis for UTP Exchange
Trading Products.141
138 See
proposed Rule 3.9(a). See also supra note
62.
139 See
Amendment No. 1, supra note 6.
CFR 240.19b–4(e). See Amendment No. 1,
supra note 6.
141 See supra note 41.
140 17
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Proposed Rule 5.1 would establish the
Exchange’s authority to trade securities
on a UTP basis. Proposed Rule 5.1(a)(1)
would provide that the Exchange may
extend UTP to any security that is an
NMS Stock that is listed on another
national securities exchange or with
respect to which UTP may otherwise be
extended in accordance with Section
12(f) of the Act.142 Proposed Rule
5.1(a)(1) further would provide that any
such security would be subject to all
Exchange rules applicable to trading on
the Exchange, unless otherwise noted.
Proposed Rule 5.1(a)(2) would
establish additional rules for trading of
UTP Exchange Traded Products, which
are defined in Rule 1.1 (described
above). Proposed Rule 5.1(a)(2)(A)
would provide that the Exchange would
distribute an information circular prior
to the commencement of trading in an
Exchange Traded Product that generally
would include the same information as
the information circular provided by the
listing exchange, including (a) the
special risks of trading the Exchange
Traded Product, (b) the Exchange’s rules
that would apply to the Exchange
Traded Product and (c) information
about the dissemination of value of the
underlying assets or indices. Proposed
Rule 5.1(a)(2)(E) would provide that the
Exchange’s surveillance procedures for
Exchange Traded Products traded on the
Exchange pursuant to UTP would be
similar to the procedures used for equity
securities traded on the Exchange and
would incorporate and rely upon
existing Exchange surveillance systems.
Proposed Rules 5.1(a)(2)(B) and (D)
would establish certain requirements for
ETP Holders that have customers that
trade UTP Exchange Traded
Products.143
142 15
U.S.C. 781(f).
Rule 5.1(a)(2)(B)(i) would remind
ETP Holders that they are subject to the prospectus
delivery requirements under the Securities Act,
unless the Exchange Traded Product is the subject
of an order by the Commission exempting the
product from certain prospectus delivery
requirements under Section 24(d) of the 1940 Act,
and the product is not otherwise subject to
prospectus delivery requirements under the
Securities Act. ETP Holders also would be required
to provide a prospectus to a customer requesting a
prospectus. Proposed Rule 5.1(a)(2)(B)(ii) would
require ETP Holders to provide a written
description of the terms and characteristics of UTP
Exchange Traded Products to purchasers of such
securities, not later than the time of confirmation
of the first transaction, and with any sales materials
relating to UTP Exchange Traded Products.
Proposed Rule 5.1(a)(2)(D) also would establish
certain requirements for any ETP Holder registered
as a market maker in an UTP Exchange Traded
Product that derives its value from one or more
currencies, commodities, or derivatives based on
one or more currencies or commodities, or is based
on a basket or index composed of currencies or
commodities.
143 Proposed
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23975
The Commission finds that the
Exchange’s proposed approach to the
trading of securities on a UTP basis, as
set forth in proposed Rule 5, as
amended by Amendment No. 1, is
consistent with Section 6(b)(5) of the
Act.144 The Commission notes that the
provisions in proposed Rule 5 are based
upon existing rules of other
exchanges.145 Proposed Rule 5.1
includes a provision that any security
traded UTP on the Exchange ‘‘shall be
subject to all Exchange rules applicable
to trading on the Exchange, unless
otherwise noted.’’ Importantly, the
Exchange notes that this language is
intended to make clear that all Exchange
rules would be applicable to the trading
of UTP on the Exchange, including
business conduct and sales practice
rules set forth in proposed Rule 11.146
The Commission notes that, in
Amendment No. 1, the Exchange would
delete and reserve Rule 8, which it had
previously proposed to include listing
standards and related provisions for the
trading of certain exchange derivatives
on the Exchange.147 The Commission
believes that Rule 8, as previously
proposed, is not necessary insofar as
proposed Rules 5 and 11 would cover
all categories of securities traded on the
Exchange on a UTP basis.
In sum, the Commission believes that
the changes proposed by the Exchange
in Amendment No. 1, including the
proposed revisions to Rule 5 and the
addition of the definitions of ‘‘Exchange
Traded Product’’ and ‘‘UTP Exchange
Traded Product’’ that enumerate the
classes of Exchange Traded Products to
be traded on a UTP basis,148 as well as
the proposed requirement to distribute
an information circular prior to the
commencement of trading, the business
conduct and sales practice rules set
forth in Rule 11 (which apply to all
securities traded UTP on the Exchange),
and the proposed deletion of Rule 8,
taken together, establish an appropriate
framework for the trading of Exchange
Traded Products on a UTP basis on the
Exchange.149 Accordingly, for these
reasons, the Commission finds that the
144 15
U.S.C. 78f(b)(5).
discussion of proposed Rule 5 in Section
II., supra.
146 See Amendment No. 1, supra note 6.
147 Id.
148 See Amendment No. 1, supra note 6. As noted
in the description of Rule 1 above, the Exchange
proposes a definition of UTP Exchange Traded
Products, which would enumerate in proposed Rule
1.1 the classes of Exchange Traded Products that
the Exchange proposes to trade on a UTP basis. See
Proposed Rule 1.1(m).
149 In addition, the Commission believes that the
filing of a Form 19b–4(e) is not required when an
Exchange is trading a new derivative securities
product on a UTP basis only.
145 See
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proposed rules governing trading on a
UTP basis on the Exchange are
consistent with Section 6(b)(5) of the
Act.
Rule 10—Disciplinary Proceedings,
Other Hearings and Appeals
The Exchange states that it is
proposing to adopt the current
disciplinary rules of NYSE American,
which are substantially similar to those
of NYSE and FINRA.150 The Exchange
indicates in Amendment No. 1, as
discussed above, where proposed Rule
10 differs from the NYSE American
disciplinary rules.151 The Exchange
proposes disciplinary rules substantially
similar to those of the NYSE American
in order to harmonize the rules among
the different NYSE Group exchanges
and minimize any potential regulatory
burden on members arising from
differing processes. The Exchange
represents that all but one of its ETP
Holders are also members of FINRA,
NYSE Arca, NYSE American, NYSE, or
Nasdaq, and thus they would be familiar
with the proposed rules.152 The
Commission believes that the proposed
Rule 10.8000 and Rule 10.9000 Series
furthers the objectives of Section 6(b)(7)
of the Act,153 in that it provides fair
procedures for the disciplining of ETP
Holders and persons associated with an
ETP Holder, the denial of membership
to any person seeking membership
therein, and the barring of any person
from becoming a person associated with
an ETP Holder. For the reasons
discussed above, the Commission finds
that the proposed changes are consistent
with Section 6(b)(7) of the Act.
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2. Section 11(a) of the Act
Section 11(a)(1) of the Act 154
prohibits a member of a national
securities exchange from effecting
transactions on that exchange for its
own account, the account of an
150 See Amendment No. 1, supra note 6. See also
Securities Exchange Act Release Nos. 68678
(January 16, 2013), 78 FR 5213 (January 24, 2013)
(SR–NYSE–2013–02) (NYSE disciplinary rule
notice), 69045 (March 5, 2013), 78 FR 15394 (March
11, 2013) (NYSE–2013–02) (NYSE disciplinary rule
approval order), 69963 (July 10, 2013), 78 FR 42573
(July 16, 2013) (SR–NYSE–2013–49), and 58643
(September 25, 2008), 73 FR 57174 (October 1,
2008) (order approving NASD disciplinary rules).
151 See Amendment No. 1, supra note 6.
152 See Amendment No. 1, supra note 6, fn. 51.
See also Securities Exchange Act Release No. 56204
(August 3, 2007), 72 FR 45288 (August 13, 2007)
(NASDAQ–2007–070) (‘‘To ensure that FINRA
members did not incur significant regulatory
burdens as a result of Nasdaq separating from
FINRA and registering as a national securities
exchange, Nasdaq based its rules governing
regulatory standards and disciplinary processes on
FINRA rules, to a significant extent.’’).
153 See 15 U.S.C. 78f(b)(7).
154 15 U.S.C. 78k(a)(1).
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associated person, or an account over
which it or its associated person
exercises investment discretion
(collectively, ‘‘covered accounts’’)
unless an exception applies. Rule 11a2–
2(T) under the Act,155 known as the
‘‘effect versus execute’’ rule, provides
exchange members with an exemption
from the Section 11(a)(1) prohibition.
Rule 11a2–2(T) permits an exchange
member, subject to certain conditions,
to effect transactions for covered
accounts by arranging for an unaffiliated
member to execute transactions on the
exchange. To comply with Rule 11a2–
2(T)’s conditions, a member: (i) Must
transmit the order from off the exchange
floor; (ii) may not participate in the
execution of the transaction once the
order has been transmitted to the
member performing the execution; 156
(iii) may not be affiliated with the
executing member; and (iv) with respect
to an account over which the member or
an associated person has investment
discretion, neither the member nor an
associated person may retain any
compensation in connection with
effecting the transaction except as
provided in the Rule. For the reasons set
forth below, the Commission believes
that ETP Holders entering orders into
the Exchange’s Pillar trading system
would satisfy the requirements of Rule
11a2–2(T).
Rule 11a2–2(T)’s first requirement is
that orders for covered accounts be
transmitted from off the exchange floor.
The Exchange represents that it will not
have a physical trading floor when it relaunches trading and the Exchange’s
Pillar trading system will receive orders
from members electronically through
remote terminals or computer-tocomputer interfaces.157 In the context of
other automated trading systems, the
Commission has found that the off-floor
transmission requirement is met if a
covered account is transmitted from a
remote location directly to an
exchange’s floor by electronic means.158
155 17
CFR 240.11a2–2(T).
prohibition also applies to associated
persons of the initiating member. The member may,
however, participate in clearing and settling the
transaction.
157 See Amendment No. 1, supra note 6.
158 In the context of other all-electronic systems,
the Commission has similarly found that the offfloor transmission requirement is met if the system
receives orders electronically through remote
terminals or computer-to-computer interfaces. See,
e.g., Securities Exchange Act Release Nos. 61419
(January 26, 2010), 75 FR 5157 (February 1, 2010)
(SR–BATS–2009–031) (approving BATS options
trading); 59154 (December 23, 2008), 73 FR 80468
(December 31, 2008) (SR–BSE–2008–48) (approving
equity securities listing and trading on BSE); 57478
(March 12, 2008), 73 FR 14521 (March 18, 2008)
(SR–NASDAQ–2007–004 and SR–NASDAQ–2007–
080) (approving NOM options trading); 53128
156 This
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Because the Pillar trading system
receives orders electronically through
remote terminals or computer-tocomputer interfaces, the Commission
believes that the Pillar trading system
would satisfy this off-floor transmission
requirement.
Second, Rule 11a2–2(T) requires that
neither the initiating member nor an
associated person of the initiating
member participate in the execution of
the transaction at any time after the
order for the transaction has been
transmitted. The Exchange represents
that the Pillar trading system would at
no time following the submission of an
order allow an ETP Holder or an
associated person of the ETP Holder to
acquire control or influence over the
result or timing of the order’s
execution.159 According to the
Exchange, the execution of an ETP
Holder’s order would be determined
solely by the quotes and orders that are
present in the system at the time the
member submits the order and by the
order priority under the Exchange
rules.160 Accordingly, the Commission
believes that an Exchange member and
its associated persons would not
participate in the execution of an order
submitted to the Pillar trading system.
Third, Rule 11a2–2(T) requires that
the order be executed by an exchange
member that is not associated with the
member initiating the order. The
Commission has stated that this
requirement is satisfied when
automated exchange facilities are used,
as long as the design of these systems
ensures that members do not possess
any special or unique trading
advantages in handling their orders after
(January 13, 2006), 71 FR 3550 (January 23, 2006)
(File No. 10–131) (granting the application of The
Nasdaq Stock Market LLC for registration as a
national securities exchange); and 44983 (October
25, 2001), 66 FR 55225 (November 1, 2001) (SR–
PCX–00–25) (approving the establishment of the
Archipelago Exchange as the equities trading
facility of PCX Equities, Inc., a subsidiary of the
Pacific Exchange, Inc.).
159 See Amendment No. 1, supra note 6.
160 See id. The Exchange notes that Rule 11a2–
2(T) does not preclude a member from cancelling
or modifying orders, or from modifying the
instructions for executing orders, after they have
been transmitted, provided that such cancellations
or modifications are transmitted from off an
exchange floor. See id. The Commission has stated
that the non-participation requirement is satisfied
under such circumstances so long as the
modifications or cancellations are also transmitted
from off the floor. See Securities Exchange Act
Release No. 14563 (March 14, 1978), 43 FR 11542
(March 17, 1978) (‘‘1978 Release’’) (stating that the
‘‘non-participation requirement does not prevent
initiating members from canceling or modifying
orders (or the instructions pursuant to which the
initiating member wishes orders to be executed)
after the orders have been transmitted to the
executing member, provided that any such
instructions are also transmitted from off the
floor’’).
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transmitting them to the exchange.161
The Exchange represents that the design
of the Pillar trading system ensures that
no ETP Holder has any special or
unique trading advantage in the
handling of its orders after transmitting
its orders to the Exchange.162 Based on
the Exchange’s representation, the
Commission believes that the Pillar
trading system would satisfy this
requirement.
Fourth, in the case of a transaction
effected for an account with respect to
which the initiating member or an
associated person thereof exercises
investment discretion, neither the
initiating member nor any associated
person may retain any compensation in
connection with effecting the
transaction, unless the person
authorized to transact business for the
account has expressly provided
otherwise by written contract referring
to Section 11(a) of the Act and Rule
11a2–2(T) thereunder.163 ETP Holders
trading for covered accounts over which
they exercise investment discretion
must comply with this condition in
order to rely on the rule’s exemption.164
161 In considering the operation of automated
execution systems operated by an exchange, the
Commission noted that, while there is not an
independent executing exchange member, the
execution of an order is automatic once it has been
transmitted into the system. Because the design of
these systems ensures that members do not possess
any special or unique trading advantages in
handling their orders after transmitting them to the
exchange, the Commission has stated that
executions obtained through these systems satisfy
the independent execution requirement of Rule
11a2–2(T). See Securities Exchange Act Release No.
15533 (January 29, 1979), 44 FR 6084 (January 31,
1979).
162 See Amendment No. 1, supra note 6.
163 In addition, Rule 11a2–2(T)(d) requires that, if
a member or associated person is authorized by
written contract to retain compensation in
connection with effecting transactions for covered
accounts over which the member or associated
person thereof exercises investment discretion, the
member or associated person must furnish at least
annually to the person authorized to transact
business for the account a statement setting forth
the total amount of compensation retained by the
member or any associated person thereof in
connection with effecting transactions for the
account during the period covered by the statement.
See 17 CFR 240.11a2–2(T)(d). See also 1978
Release, supra note 107 (‘‘The contractual and
disclosure requirements are designed to assure that
accounts electing to permit transaction-related
compensation do so only after deciding that such
arrangements are suitable to their interests’’).
164 The Exchange represents that it will advise its
membership through the issuance of a Regulatory
Bulletin that those ETP Holders trading for covered
accounts over which they exercise investment
discretion must comply with this condition in order
to rely on the exemption in Rule 11a2–2(T). See
Amendment No. 1, supra note 6.
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IV. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
V. Accelerated Approval of Proposed
Rule Change, as Modified by
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:
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. As discussed above, in
Amendment No. 1, the Exchange
proposes, among other things, to: (i)
Delete proposed Rule 8 and modify
proposed Rule 5 to include only those
rules that would support the trading on
a UTP basis of all NMS Stocks and the
trading on a UTP basis of UTP Exchange
Traded Products; (ii) revise the
proposed definition of the term ‘‘UTP
Exchange Traded Product’’; (iii) propose
a grace period of thirty days for ETP
Holders that are eligible for the
expedited process for reinstatement
under the proposal to register their
Associated Persons with the Exchange;
(iv) commit to working with
Commission staff to update its
membership rules and to file a separate
filing relating to its membership rules
within 90 days of any approval of the
instant proposal; (v) identify which of
the proposed Rules are based on the
rules of NYSE American, as opposed to
those based on the rules of NYSE Arca;
(vi) add provisions, based on rules of
other SROs, that were not included in
the original filing; (vii) add a rule
relating to the requirements for listed
securities issued by ICE or its affiliates;
(viii) specifically incorporate by
reference certain FINRA rules that were
only cited in the original version of the
filing; (ix) add clarifying language to
proposed rule text and the narrative
describing the proposal; and (x) correct
various technical errors.
The Commission notes that the
proposed changes in Amendment No. 1
provide clarifying details, harmonize
certain proposed rules with rules of
other exchanges, incorporate certain
other SRO rules by reference, and
otherwise streamline the Exchange’s
proposed rulebook. The proposed
changes do not introduce any rules that
differ in any substantive manner from
rules that previously have been
approved by the Commission, or that
have become immediately effective,
pursuant to Section 19(b) of the Act.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,165 to approve the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis so that the
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–
NYSENAT–2018–02 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–NYSENAT–2018–02. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSENAT–2018–02 and
should be submitted on or before June
13, 2018.
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165 15
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Exchange can re-commence operating
without unnecessary delay.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,166 that the
proposed rule change (SR–NYSENAT–
2018–02), as modified by Amendment
No. 1, be and hereby is approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.167
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–10986 Filed 5–22–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83271; File No. SR–
BatsBZX–2017–72]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change,
as Modified by Amendment No. 1
Thereto, To List and Trade Shares of
the Innovator S&P 500 Buffer ETF
Series, Innovator S&P 500 Power
Buffer ETF Series, Innovator S&P 500
Enhance and Buffer ETF Series, and
Innovator S&P 500 Ultra ETF Series
Under Rule 14.11(i)
May 17, 2018.
On November 7, 2017, Cboe BZX
Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’)
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 list and trade shares of the
Innovator S&P 500 15% Shield Strategy
ETF Series, Innovator S&P 500 ¥5% to
¥35% Shield Stratey ETF Series,
Innovator S&P 500 Enhance and 10%
Shield Strategy ETF Series, and
Innovator S&P 500 Ultra Strategy ETF
Series under BZX Rule 14.11(i)
(collectively, the ‘‘Funds’’).3 The
proposed rule change was published for
166 Id.
167 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 On April 4, 2018, the Exchange filed
Amendment No. 1 to the proposed rule change
which, among other things, changed the names of
the Funds to Innovator S&P 500 Buffer ETF Series,
Innovator S&P 500 Power Buffer ETF Series,
Innovator S&P 500 Enhance and Buffer ETF Series,
and Innovator S&P 500 Ultra ETF Series. See infra
note 7.
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1 15
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comment in the Federal Register on
November 22, 2017.4 On December 21,
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.5 On February 20, 2018, the
Commission initiated proceedings to
determine whether to disapprove the
proposed rule change.6 On April 4,
2018, the Exchange filed Amendment
No. 1 to the proposed rule change,
which amended and superseded the
proposed rule change as originally
filed.7 The Commission has received no
comments on the proposed rule change.
Section 19(b)(2) of the Act 8 provides
that, after initiating disapproval
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of the filing of the proposed rule
change. The Commission may extend
the period for issuing an order
approving or disapproving the proposed
rule change, however, by not more than
60 days if the Commission determines
that a longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for notice and
comment in the Federal Register on
November 22, 2017. May 21, 2018 is 180
days from that date, and July 20, 2018
is 240 days from that date.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change, as modified
by Amendment No. 1. Accordingly,
pursuant to Section 19(b)(2) of the Act,9
the Commission designates July 20,
2018 as the date by which the
Commission shall either approve or
disapprove the proposed rule change
(File No. SR–BatsBZX–2017–72), as
modified by Amendment No. 1.
4 See Securities Exchange Act Release No. 82097
(November 16, 2017), 82 FR 55689.
5 See Securities Exchange Act Release No. 82387,
82 FR 61613 (December 28, 2017). The Commission
designated February 20, 2018 as the date by which
the Commission shall approve, disapprove, or
institute proceedings to determine whether to
approve or disapprove, the proposed rule change.
6 See Securities Exchange Act Release No. 82739,
83 FR 8309 (February 26, 2018).
7 Amendment No. 1 to the proposed rule change
is available at: https://www.sec.gov/comments/srbatsbzx-2017-72/batsbzx201772-3385594162153.pdf.
8 15 U.S.C. 78s(b)(2).
9 15 U.S.C. 78s(b)(2).
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Fmt 4703
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–10972 Filed 5–22–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83272; File No. SR–
NASDAQ–2018–038]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend Rule 4702(b)(14) To Establish a
Price Improvement Only Variation on
the Midpoint Extended Life Order
May 17, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 4,
2018, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 4702(b)(14) to establish a price
improvement only variation on the
Midpoint Extended Life Order.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.cchwallstreet.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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
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
10 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\23MYN1.SGM
23MYN1
]]>Agencies
[Federal Register Volume 83, Number 100 (Wednesday, May 23, 2018)]
[Notices]
[Pages 23968-23978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10986]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83289; File No. SR-NYSENAT-2018-02]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Amended by Amendment No. 1, To Support the Re-
Launch of NYSE National, Inc. on the Pillar Trading Platform
May 17, 2018.
I. Introduction
On February 21, 2018, NYSE National, Inc. (``NYSE National'' or
``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 in connection with the re-launch of the Exchange
on the Pillar trading platform. The proposed rule change was published
for comment in the Federal Register on March 13, 2018.\3\ The
Commission received no comments on the proposed rule change. On April
25, 2018, pursuant to Section 19(b)(2) of the Act,\4\ the Commission
designated a longer 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.\5\ On May 16, 2018, the Exchange filed Amendment No. 1 to the
proposed rule change, which supersedes and replaces the original filing
in its entirety.\6\ The Commission is approving the proposed rule
change, as modified by Amendment No. 1, on an accelerated basis, and is
soliciting comments on Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 82819 (March 7,
2018), 83 FR 11098 (March 13, 2018) (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No.83100 (April 25,
2018), 83 FR 19127 (May 1, 2018).
\6\ In Amendment No. 1, the Exchange proposes, among other
things, to: (i) Delete proposed Rule 8 and modify proposed Rule 5 to
include only those rules that would support the trading on an
unlisted trading privileges (``UTP'') basis of all NMS Stocks and
the trading on a UTP basis of UTP Exchange Traded Products; (ii)
revise the proposed definition of the term ``UTP Exchange Traded
Product''; (iii) propose a grace period of 30 calendar days for ETP
Holders that are eligible for the expedited process for
reinstatement under the proposal to register their Associated
Persons with the Exchange; (iv) commit to working with Commission
staff to update its membership rules and to file a separate filing
relating to its membership rules within 90 days of any approval of
the instant proposal; (v) identify which of the proposed Rules are
based on the rules of NYSE American, as opposed to those based on
the rules of NYSE Arca; (vi) add provisions, based on rules of other
self-regulatory organizations (``SROs''), that were not included in
the original filing; (vii) add a rule relating to the requirements
for listed securities issued by Intercontinental Exchange, Inc.
(``ICE'') or its affiliates; (viii) specifically incorporate by
reference certain rules of the Financial Industry Regulatory
Authority, Inc. (``FINRA'') that were only cited in the original
version of the filing; (ix) add clarifying language to proposed rule
text and the narrative describing the proposal; and (x) correct
various technical errors. The proposed revisions of the proposal
made in Amendment No. 1 are incorporated in the Description of the
Proposal herein. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysenat-2018-02/nysenat201802-3653908-162416.pdf.
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II. Description of the Proposal
On February 1, 2017, the Exchange ceased trading operations.\7\ The
Exchange proposes to re-launch trading operations on Pillar, which is
an integrated trading technology platform designed to use a single
specification for connecting to the equities and options markets
operated by the Exchange and its affiliates, NYSE Arca, Inc. (``NYSE
Arca''), NYSE American LLC (``NYSE American''), and New York Stock
Exchange LLC (``NYSE'').
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\7\ See Securities Exchange Act Release No. 80018 (February 10,
2017), 82 FR 10947 (February 16, 2017) (SR-NSX-2017-04)
(``Termination Filing''). On January 31, 2017, ICE, through its
wholly-owned subsidiary, NYSE Group, acquired all of the outstanding
capital stock of the Exchange (the ``Acquisition''). See Securities
Exchange Act Release No. 79902 (January 30, 2017), 82 FR 9258
(February 3, 2017) (SR-NSX-2016-16). Prior to the Acquisition, the
Exchange was named ``National Stock Exchange, Inc.'' and was
referred to as ``NSX.''
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Currently, NYSE Arca's cash equities market,\8\ NYSE American's
cash equities market,\9\ and NYSE securities that trade on an unlisted
trading privileges basis \10\ trade on Pillar. NYSE Arca, NYSE
American, and NYSE have trading rules that are substantially similar
and that are based on the rule numbering framework of NYSE Arca.\11\
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\8\ For a history of the implementation of Pillar on NYSE Arca,
see Notice, supra note 3, at footnote 6.
\9\ For a history of the implementation of Pillar on NYSE
American, see Notice, supra note 3, at footnote 7.
\10\ For a history of the implementation of Pillar on NYSE, see
Notice, supra note 3, at footnote 8.
\11\ According to the Exchange, NYSE American and NYSE proposed
specific differences to certain trading rules with respect to NYSE
Arca to differentiate their respective trading models, noting, for
example, that NYSE American has a delay mechanism and does not offer
specified order types. See id. The Exchange states that it does not
propose to offer a trading model that is differentiated from NYSE
Arca. It does propose, however, certain differences in some of the
details of its rules, as further discussed below. In addition, in
preparation for the re-launch of trading, the Exchange adopted the
rule numbering framework of the NYSE Arca rules, which at that time
were organized in 14 Rules. See Securities Exchange Act Release No.
81782 (September 29, 2017), 82 FR 81782 (October 5, 2017) (SR-
NYSENat-2017-04) (Notice of Filing and Immediate Effectiveness).
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[[Page 23969]]
The Exchange proposes to re-launch trading on Pillar in all Tape A,
Tape B, and Tape C securities on a UTP basis on a fully automated
price-time priority allocation model. Unlike its affiliated exchanges,
the Exchange does not propose to be a listing venue. Because the
Exchange would trade securities on a UTP basis only, the Exchange
proposes to operate in the same manner as its affiliated exchanges,
NYSE Arca, NYSE American, and NYSE, with respect to securities that
trade on a UTP basis on those exchanges. For example, the Exchange does
not propose to operate any auctions and therefore does not propose
rules to provide for auction functionality on the Exchange.\12\ In
addition, because the Exchange would not be a listing venue, the
Exchange would not provide for either ``lead'' or ``designated'' market
makers, which are available on NYSE Arca, NYSE, and NYSE American,
respectively, for securities listed on those exchanges. As with NYSE
Arca and NYSE American, the Exchange proposes rules that would provide
that ETP Holders may register as market makers in securities that trade
on a UTP basis on the Exchange. And, as with NYSE Arca and NYSE
American, the Exchange proposes not to require that there be a market
maker in a particular security on the Exchange for that security to
trade on a UTP basis on the Exchange. Similar to NYSE American and to
how NYSE trades securities on an unlisted trading privileges basis on
Pillar, the Exchange also does not propose to operate a retail
liquidity program.
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\12\ However, the Exchange would make available certain order
types that currently exist on NYSE Arca, NYSE American, and NYSE for
securities that trade on a UTP basis, which provide for routing
directly to the primary listing market. In addition, similar to NYSE
Rule 7.31(c), the Exchange would offer ``Auction-only Orders,''
which are orders designated to participate in an auction on the
primary listing market. The Exchange would route all such orders to
the primary listing market. The proposed rules governing such order
types on the Exchange are based on the recently-approved rules
governing trading on Pillar on the NYSE. See Securities Exchange Act
Release No. 82945 (March 26, 2018), 83 FR 13553 (March 29, 2018)
(SR-NYSE-2017-36).
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While the Exchange proposes trading rules for the re-launch based
on the rules of its affiliated exchanges, it also proposes to retain
and renumber certain of its existing rules relating to membership and
ETP Holder conduct. In certain cases, the Exchange proposes to replace
an existing rule with a rule harmonized with conduct rules of other
SROs.
Because the Exchange is not proposing new or different rules to
qualify as a member of the Exchange for the re-launch, the Exchange
proposes to reinstate ETP Holder status \13\ using the existing process
described in Interpretation and Policies .01 to current Rule 2.5, which
sets forth an expedited process for reinstatement as an ETP Holder and
to register Associated Persons established when the Exchange re-
launched operations in 2015.\14\ In Amendment No. 1, the Exchange
proposes new Commentary .01 to proposed Rule 2.5, which would provide
those ETP Holders reinstated pursuant to the expedited process 30
calendar days in which to register their Associated Persons with the
Exchange.\15\ Further, in Amendment No. 1, the Exchange represents that
it understands that the rules set forth in Chapter II of the current
rule book may not reflect certain harmonized standards for membership
rules of other SROs. While the Exchange proposes to retain its existing
membership rules, subject to the changes discussed below, for purposes
of the re-launch, the Exchange represents that it commits to working
with Commission staff to update its membership rules and will file a
separate filing relating to its membership rules within 90 days of any
approval of its proposed rule change.\16\
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\13\ When the Exchange ceased operations, the Exchange
terminated the ETP status of all ETP Holders as of the close of
business on February 1, 2017. See Termination Filing, supra note 7.
\14\ See Securities Exchange Act Release No. 75098 (June 3,
2015), 80 FR 32644 (June 9, 2015) (Notice of filing and immediate
effectiveness of proposed rule change to establish expedited process
to reinstate ETP Holder status). Pursuant to that rule, approved ETP
Holders that were in good standing as of the close of business on
May 30, 2014, when the Exchange previously ceased trading
operations, had their ETP Holder status reinstated and Associated
Persons registered pursuant to an expedited process.
\15\ See Amendment No. 1, supra note 6.
\16\ Id.
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In addition, the Exchange proposes to amend Article V, Sections 5.1
and 5.8 of the Exchange's Bylaws by revising references to ``Appeals
Committee'' to ``Committee for Review.'' Because the existing NYSE
National rulebook would be replaced with both new and renumbered rules
under the new framework, the Exchange also proposes to delete Chapters
I-XVI of the current rulebook and the rules contained therein.
The following is a brief overview of each rule section \17\ that
would be included in the Exchange's rulebook, as proposed to be
revised, and that would incorporate proposed changes to individual
sections, as reflected in Amendment No. 1.\18\
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\17\ Rules 4, 8, and 9 are proposed to be ``Reserved.''
\18\ See Amendment No. 1, supra note 6.
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Rule 0--Regulation of the Exchange and ETP Holders
Proposed Rule 0 would establish the framework for the regulation of
the Exchange and its ETP Holders. Proposed Rule 0 acknowledges that the
Exchange and FINRA are parties to a regulatory services agreement in
which FINRA will perform certain functions on behalf of the Exchange,
with the Exchange retaining ultimate legal responsibility for, and
control of, such functions.
Rule 1--Definitions
Proposed Rule 1 would contain definitions applicable to trading on
the Exchange's Pillar platform.\19\ In Amendment No. 1, the Exchange
proposes to modify Rule 1.1(m) from the initial filing to define the
term ``UTP Exchange Traded Product'' to mean one of a list of specified
classes of Exchange Traded Products that the Exchange intends to trade
pursuant to unlisted trading privileges. The enumerated Exchange Traded
Products that would be eligible to trade on the Exchange pursuant to
unlisted trading privileges would include the following: Equity Linked
Notes, Investment Company Units, Index-Linked Exchangeable Notes,
Equity Gold Shares, Equity Index-Linked Securities, Commodity-Linked
Securities, Currency-Linked Securities, Fixed-Income Index-Linked
Securities, Futures-Linked Securities, Multifactor-Index-Linked
Securities, Trust Certificates, Currency and Index Warrants, Portfolio
Depository Receipts, Trust Issued Receipts, Commodity-Based Trust
Shares, Currency Trust Shares, Commodity Index Trust Shares, Commodity
Futures Trust Shares, Partnership Units, Paired Trust Shares, Trust
Units, Managed Fund Shares and Managed Trust Shares.
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\19\ The proposed definitions are based on the rules of NYSE
Arca, NYSE American, and NSX.
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Rule 2--Trading Permits
Proposed Rule 2 would set forth the membership rules for the
Exchange, including the eligibility requirements,\20\
[[Page 23970]]
continuing education requirements,\21\ and application requirements
\22\ to become an ETP Holder. It also would set forth rules relating to
revocation,\23\ voluntary termination,\24\ and transfer and sale \25\
of an ETP.\26\ Proposed Rule 2 would provide jurisdiction \27\ to the
Exchange to discipline ETP Holders \28\ and Persons Associated with ETP
Holders for violations of, among other things, the Act and the rules
thereunder.\29\ It also would provide the Exchange the ability to
prescribe reasonable dues, assessments, and charges \30\ and would
include rules concerning the mandatory testing of the Exchange's
business continuity and disaster recovery plans.\31\ In Amendment No.
1, the Exchange represents that there are no categories of persons on
the Exchange that would fall outside of the membership categories and
requirements set forth in proposed Rule 2.\32\
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\20\ See proposed Rules 2.2, 2.3, and 2.4.
\21\ See proposed Rule 2.2.
\22\ See proposed Rule 2.5.
\23\ See proposed Rule 2.6.
\24\ See proposed Rule 2.7.
\25\ See proposed Rule 2.8.
\26\ See proposed Rule 1.1(h) (defining ``ETP'').
\27\ See proposed Rule 2.2(a).
\28\ See proposed Rule 1.1(i) (defining ``ETP Holder'').
\29\ Rules 2.10, 2.11, and 2.12 are marked ``Reserved.''
\30\ See proposed Rule 2.9.
\31\ See proposed Rule 2.13.
\32\ See Amendment No. 1, supra note 6.
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The proposed rules are based on the Exchange's existing membership
rules with the following substantive differences: (1) The Exchange
proposes to delete Rule 2.10, as proposed Rule 3.9 would cover the
relationship between ETP Holders and Exchange affiliates; (2)
Archipelago Securities LLC would replace NSX Securities LLC as the
routing broker for the Exchange, so the Exchange proposes to delete
current Rules 2.11 and 2.12,\33\ and instead adopt proposed Rule
7.45,\34\ which is based on NYSE Arca Rule 7.45-E, to cover the
Exchange's routing function.
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\33\ By its terms, NSX Rule 2.12 expired on September 30, 2008.
See current Rule 2.12.
\34\ See proposed Rule 7.45.
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NYSE National also proposes an expedited process for reinstating
ETP Holders. The ETP Holder would be able to submit a short form
application to reinstate its status as an ETP Holder and to register
Persons Associated with the ETP Holder if the ETP Holder was in good
standing at the close of business on February 1, 2017, is a member of
another SRO, and each proposed Person Associated with such ETP Holder
holds an active and recognized securities industry registration and
meets the requirements of proposed Rule 2.2(b).\35\
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\35\ See Commentary .01 to proposed Rule 2.5.
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In Amendment No. 1, the Exchange proposes a grace period of 30
calendar days from the effective date of proposed Rule 2.5 for ETP
Holders that are eligible for the expedited process for reinstatement
to register Persons Associated with the ETP Holder with the
Exchange.\36\ According to the Exchange, to be eligible for the
expedited process and the temporary grace period, the ETP Holder
already must have Persons Associated with the ETP Holder registered in
the FINRA Central Registration Depository System (``CRD'').\37\ ETP
Holders that take advantage of the proposed grace period would be able
to begin trading on the Exchange before they complete registering their
Persons Associated with the Exchange.
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\36\ See id.; see also Amendment No. 1, supra note 6.
\37\ See Commentary .01 to proposed Rule 2.5; see also Amendment
No. 1, supra note 6.
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As noted above, the Exchange proposes to retain its existing rules
relating to membership, which may not reflect certain harmonized
standards for membership rules of other SROs. However, in Amendment No.
1, the Exchange commits to working with Commission staff to update its
membership rules and to file a separate filing relating to its
membership rules within 90 days of any approval of the Exchange's
proposed rule change.\38\
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\38\ See Amendment No. 1, supra note 6.
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Proposed Rule 2.3, as a prerequisite to membership, would require
an ETP Holder to be a member of a registered national securities
association or of a registered national securities exchange. As a
member of two or more SROs, an ETP Holder would be required to comply
with whichever rules impose a higher standard.
Rule 3--Organization and Administration
Proposed Rule 3 would include rules relating to: (1) The potential
actions the Exchange may take for ETP Holder's failure to pay any
assessments, dues or other changes to the Exchange within 45 days after
they become payable; (2) a prohibition on an ETP Holder being
affiliated with NYSE Group, Inc.; (3) prompt written notification to
the Exchange whenever an ETP Holder is expelled or suspended from any
SRO, encounters financial difficulty or operating inadequacies, fails
to perform contracts or becomes insolvent; and (4) requirements for
fingerprint-based background checks of Exchange employees and others.
In Amendment No. 1, the Exchange proposes to add a rule relating to
additional requirements to be undertaken by the Exchange if securities
issued by ICE or its affiliates are traded on the Exchange.\39\
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\39\ Id.
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Rule 5--Trading on an Unlisted Trading Privileges Basis
Proposed Rule 5 would provide for rules to trade all Tape A, Tape
B, and Tape C securities, including Exchange Traded Products (also
referred to herein as ``ETPs''), on a UTP basis.\40\ In Amendment No.
1, the Exchange states that it does not believe that it is necessary
for an exchange that trades securities only on a UTP basis to have
listing rules for ETPs.\41\ The Exchange further states that, as a non-
listing venue, the Exchange would not have a relationship with any ETP
issuers; thus, to the extent ETP listing rules include initial and
continued listing standards, the Exchange would not be in a position to
evaluate issuer compliance with such rules.\42\ Similarly, the Exchange
states its belief that it should not be necessary for a non-listing
venue to file with the Commission a Form 19b-4(e) if it begins trading
an ETP on a UTP basis, because Rule 19b-4(e)(1) under the Act refers to
the ``listing and trading'' of a ``new derivative securities product.''
\43\ The Exchange therefore believes that the requirements of that rule
refer to when an exchange lists and trades an ETP, and not when an
exchange seeks only to trade such product on a UTP basis pursuant to
Rule 12f-2 under the Act.\44\ Accordingly, the proposal, as amended by
Amendment No. 1, contains only those rules that would support the
trading on a UTP basis of all NMS Stocks, and the trading on a UTP
basis for UTP Exchange Trading Products, which are set forth in
proposed Rule 5.1. Further, the Exchange does not propose rules other
than Rule 5.1 or any of the provisions it previously had
[[Page 23971]]
proposed in Rule 8, which would be designated as Reserved.\45\
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\40\ In the Notice, the Exchange proposed both Rules 5 and 8 to
establish listing rules for Exchange Traded Products that are based
on NYSE American Rules 5E and 8E and NYSE Rules 5P and 8P. See
Notice, supra note 3. Because the Exchange would not be a listing
venue, in Amendment No. 1, the Exchange proposes to modify its
proposal to eliminate the listing rules contained in Rules 5 and 8.
See Amendment No. 1, supra note 6. In particular, in Amendment No.
1, the Exchange proposes to delete proposed Rule 8 and modify
proposed Rule 5 to include only those rules that would support the
trading on a UTP basis of all NMS Stocks, and the trading on a UTP
basis of UTP Exchange Traded Products.
\41\ See Amendment No. 1, supra note 6.
\42\ Id.
\43\ 17 CFR 240.19b-4(e). See Amendment No. 1, supra note 6.
\44\ 17 CFR 240.12f-2. See Amendment No. 1, supra note 6.
\45\ See note 41, supra. In Amendment No. 1, the Exchange states
its belief that its proposed rule text in Rule 5, together with the
proposed definition of UTP Exchange Traded Products in proposed Rule
1.1, which would enumerate the classes of Exchange Traded Products
that the Exchange proposes to trade on a UTP basis, would satisfy
the requirements of Rule 12f-5 under the Act, 17 CFR 240.12f-5, for
a national securities exchange to have a rule or rules providing for
transactions in a class or type of security to which the Exchange
extends unlisted trading privileges. See Amendment No. 1, supra note
6.
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Proposed Rule 5.1 would establish the Exchange's authority to trade
securities on a UTP basis. Proposed Rule 5.1(a)(1) would provide that
the Exchange may extend UTP to any security that is an NMS Stock that
is listed on another national securities exchange or with respect to
which UTP may otherwise be extended in accordance with Section 12(f) of
the Exchange Act.\46\
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\46\ 15 U.S.C. 78l(f). See also 17 CFR 242.600. The term ``NMS
Stock'' is defined in proposed Rule 1.1(u).
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Proposed Rule 5.1(a)(1) would further provide that any such
security would be subject to all Exchange rules applicable to trading
on the Exchange, unless otherwise noted. The Exchange notes that this
proposed rule text is based in part on NYSE Arca Rule 5.1-E(a) and EDGA
Rule 14.1, but with a proposed difference to refer generally to
Exchange rules, and not limit such reference to Exchange trading rules.
This would make clear that all Exchange rules would be applicable to
the trading of securities on a UTP basis on the Exchange, including
business conduct and sales practice rules set forth in proposed Rule
11.
Proposed Rule 5.1(a)(2) would establish additional rules for
trading of UTP Exchange Traded Products, which are defined in Rule 1.1
(described above).\47\ Specifically, the requirements in subparagraphs
(A)-(E) of proposed Rule 5.1(a)(2) would apply to UTP Exchange Traded
Products traded on the Exchange. Because the Exchange is not proposing
that the Exchange would file with the Commission a Form 19b-4(e) with
respect to each UTP Exchange Traded Product within five business days
after commencement of trading, the Exchange does not propose rule text
based on NYSE American Rule 5.1E(a)(2)(A) or NYSE Rule 5.1(a)(2)(A).
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\47\ See Proposed Rule 1.1(m).
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Proposed Rule 5.1(a)(2)(A) would provide that the Exchange would
distribute an information circular prior to the commencement of trading
in an Exchange Traded Product that generally would include the same
information as the information circular provided by the listing
exchange, including (a) the special risks of trading the Exchange
Traded Product, (b) the Exchange's rules that will apply to the
Exchange Traded Product and (c) information about the dissemination of
value of the underlying assets or indices. Under proposed Rule
5.1(a)(2)(C), the Exchange would halt trading in a UTP Exchange Traded
Product as provided for in proposed Rule 7.18.
Proposed Rule 5.1(a)(2)(E) would provide that the Exchange's
surveillance procedures for Exchange Traded Products traded on the
Exchange pursuant to UTP would be similar to the procedures used for
equity securities traded on the Exchange and would incorporate and rely
upon existing Exchange surveillance systems.
Proposed Rules 5.1(a)(2)(B) and (D) would establish the following
requirements for ETP Holders that have customers that trade UTP
Exchange Traded Products:
Prospectus Delivery Requirements. Proposed Rule
5.1(a)(2)(B)(i) would remind ETP Holders that they are subject to the
prospectus delivery requirements under the Securities Act of 1933, as
amended (the ``Securities Act''), unless the Exchange Traded Product is
the subject of an order by the Commission exempting the product from
certain prospectus delivery requirements under Section 24(d) of the
Investment Company Act of 1940, as amended (the ``1940 Act''), and the
product is not otherwise subject to prospectus delivery requirements
under the Securities Act. ETP Holders would also be required to provide
a prospectus to a customer requesting a prospectus.\48\
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\48\ Proposed Rule 5.1(a)(2)(B)(iii).
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Written Description of Terms and Conditions. Proposed Rule
5.1(a)(2)(B)(ii) would require ETP Holders to provide a written
description of the terms and characteristics of UTP Exchange Traded
Products to purchasers of such securities, not later than the time of
confirmation of the first transaction, and with any sales materials
relating to UTP Exchange Traded Products.
Market Maker Restrictions. Proposed Rule 5.1(a)(2)(D)
would establish certain restrictions for any ETP Holder registered as a
market maker in an UTP Exchange Traded Product that derives its value
from one or more currencies, commodities, or derivatives based on one
or more currencies or commodities, or is based on a basket or index
composed of currencies or commodities (collectively, ``Reference
Assets''). Specifically, such an ETP Holder must file with the Exchange
and keep current a list identifying all accounts for trading the
underlying physical asset or commodity, related futures or options on
futures, or any other related derivatives (collectively with Reference
Assets, ``Related Instruments''), which the ETP Holder acting as
registered market maker may have or over which it may exercise
investment discretion.\49\ If an account in which an ETP Holder acting
as a registered market maker, directly or indirectly, controls trading
activities, or has a direct interest in the profits or losses thereof,
has not been reported to the Exchange as required by this Rule, an ETP
Holder acting as registered market maker in the UTP Exchange Traded
Product would not be permitted to trade in the underlying physical
asset or commodity, related futures or options on futures, or any other
related derivatives. Finally, a market maker could not use any material
nonpublic information in connection with trading a Related Instrument.
According to the Exchange, proposed Rule 5.1(a)(2)(D) is based in part
on BZX Rule 14.11(j)(5).\50\
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\49\ The proposed rule would also, more specifically, require a
market maker to file with the Exchange and keep current a list
identifying any accounts (``Related Instrument Trading Accounts'')
for which related instruments are traded (1) in which the market
maker holds an interest, (2) over which it has investment
discretion, or (3) in which it shares in the profits and/or losses.
In addition, a market maker would not be permitted to have an
interest in, exercise investment discretion over, or share in the
profits and/or losses of a Related Instrument Trading Account that
has not been reported to the Exchange as required by the proposed
rule.
\50\ See Amendment No. 1, supra note 6.
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Rule 6--Consolidated Audit Trail and Order Audit Trail System
Proposed Rule 6 would incorporate the Exchange's existing rules
relating to the Consolidated Audit Trail National Market System Plan
(``CAT NMS Plan'') without any substantive changes. Proposed Rule 6
would include 12 rules covering the following areas: (1) Definitions;
(2) Clock Synchronization; (3) Industry Member Data Reporting; (4)
Customer Information Reporting; (5) Industry Member Information
Reporting; (6) Time Stamps; (7) Clock Synchronization Rule Violation;
(8) Connectivity and Data Transmission; (9) Development and Testing;
(10) Recordkeeping; (11) Timely, Accurate and Complete Data; and (12)
Compliance Dates. Proposed Rule 6.6900 would establish procedures for
resolving potential disputes related to CAT Fees charged to Industry
Members.
Proposed Rule 6.7400 would contain a series of rules that implement
Order Audit Trail rules relating to definitions; applicability;
synchronization of ETP Holder business clocks; recording of
[[Page 23972]]
order information; order data transmission requirements; violation of
order audit trail system rules; and exemption to the order recording
and data transmission requirements.\51\
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\51\ The Exchange notes that at the time that it ceased
operations, it did not require its ETP Holders to maintain order
information pursuant to an order tracking system and, therefore, did
not have the proposed OATS rules or similar rules in its rulebook.
According to the Exchange, requiring ETP Holders to comply with the
proposed OATS requirements in connection with its re-launch of
trading would not impose an undue burden on such ETP Holders or
their associated persons because nearly all ETP Holders are expected
to be members of another SRO that requires compliance with OATS
requirements and because order information pursuant to the OATS
rules need only be submitted upon request.
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Rule 7--Equities Trading
Rule 7 establishes the rules for trading on the Exchange. As noted
above, the Exchange proposes to re-launch on the same trading platform
as the cash equities trading platform of NYSE Arca. Thus, the
provisions of proposed Rule 7 are, in large part, based on equivalent
rules of NYSE Arca for this platform. In some instances, however, the
proposed trading rules reflect a choice to adopt the version of a
particular provision used by NYSE American and NYSE.\52\
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\52\ The Exchange has identified which of its proposed rules are
based on the rules of NYSE American, as opposed to those based on
the rules of NYSE Arca. See Amendment No. 1, supra note 6. The
Exchange also has identified certain trading rules of NYSE Arca and
NYSE American that it is not proposing to adopt. For example, the
Exchange states that, because it would not be a listing venue, it is
not proposing to adopt rules relating to lead or designated market
makers. The Exchange also states that it would not operate auctions,
and therefore is not proposing rules pertaining to auction
procedures.
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Proposed Rule 7 is divided into six sections. Section 1, ``General
Provisions,'' \53\ includes provisions relating to hours of business on
the Exchange and holidays when it will not be open; responsibilities of
ETP Holders and associated persons with respect to their roles in
transactions and their charging of commissions; ex-dividend and ex-
rights dates; units of trading; trading differentials; anonymity of
bids and offers; settlement terms; binding prices; clearly erroneous
executions; Exchange compliance with the Limit Up-Limit Down National
Market System Plan; trading halts and suspensions; clearance and
settlement; stock option transactions of market makers; short sales;
and firmness of quotes.
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\53\ Section 1 comprises proposed Rules 7.1 through 7.18.
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Section 2 of proposed Rule 7, ``Market Makers,'' \54\ includes
provisions relating to registration of Market Makers. The section also
includes proposed rules pertaining to access to quotations, private
linkages, and compliance with Regulation NMS under the Act.
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\54\ Section 2 comprises proposed Rules 7.19 through 7.28.
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Section 3 of proposed Rule 7, ``Exchange Trading,'' \55\ after
setting forth provisions regarding authorized access to the Exchange,
establishes rules relating to the kinds of order types available on the
Exchange and how they are designed to trade. Section 3 of proposed Rule
7 also would set forth the rules of the Exchange relating to order
entry; the codes by which the ETP Holder submitting an order must
indicate whether it is acting in a principal, agency, or riskless
principal capacity; and the three trading sessions for which the
Exchange will be open (early, core, and late), including the securities
that may be traded in each and the disclosures that ETP Holders must
make to non-ETP Holders that send orders to them for trading in the
early or late session regarding, among other things, the risks that may
apply to such orders.\56\
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\55\ Section 3 comprises proposed Rules 7.29 through 7.41 (with
Rules 7.42 through 7.44 reserved for future use).
\56\ See proposed Rules 7.32 (Order Entry); 7.33 (Capacity
Codes); and 7.34 (Trading Sessions).
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Further, Section 3 of proposed Rule 7 would establish rules
relating to the display and non-display of various order types, the
ranking of orders in the Exchange book with respect to execution
priority, and the role of price and time in determining such
priority.\57\ The section also includes proposed rules that pertain to
routing of orders to away markets; the prohibition of trading through
protected quotations and exceptions thereto; and compliance with other
aspects of Regulation NMS under the Act.\58\ It also lists the data
feeds that the Exchange proposes to use for the handling, execution,
and routing of orders, as well as regulatory compliance.\59\ Additional
proposed rules in Section 3 relate to odd lot and mixed lot trading on
the Exchange; trade execution and reporting; and clearance and
settlement of trades.\60\
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\57\ See proposed Rules 7.36 (Order Ranking and Display).
\58\ See proposed Rules 7.37 (Order Execution and Routing).
\59\ Id.
\60\ See proposed Rules 7.38, 7.40, and 7.41, respectively.
(Rule 7.39 is reserved for future use, as are Rules 7.42, 7.43, and
7.44.)
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Section 4 of proposed Rule 7, ``Operation of Routing Broker,''
would define ``routing broker'' as ``the broker-dealer affiliate of the
Exchange and/or any other non-affiliate third-party broker-dealer that
acts as a facility of the Exchange for routing orders entered into
Exchange systems to other market centers for execution whenever such
routing is required by Exchange rules or the federal securities laws,''
and would set forth rules regarding the outbound routing function.\61\
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\61\ See proposed Rule 7.45, which comprises the whole of
Section 4.
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Section 4 also would provide that, for so long as the Exchange is
affiliated with NYSE American, NYSE Arca, and NYSE, and Archipelago
Securities LLC (``Arca Securities) in its capacity as a facility of
those exchanges is utilized by those affiliated exchanges for the
routing of any approved types of orders from those exchanges to NYSE
National, Arca Securities may provide inbound routing services to NYSE
National from those affiliated exchanges.\62\ This provision is
contingent on the Exchange maintaining an agreement pursuant to Rule
17d-2 under the Act \63\ with a non-affiliated SRO and establishing
controls and procedures to prevent Arca Securities from benefitting
from or acting on non-public information obtained as a result of the
affiliation.\64\
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\62\ Proposed Rule 3.9 would provide that, unless approved by
the Commission, neither NYSE Group, Inc., nor any of its affiliates
(as such term is defined in Rule 12b-2 under the Act) shall hold,
directly or indirectly, an ownership interest in any ETP Holder.
Arca Securities would be covered by this provision.
\63\ 17 CFR 240.17d-2.
\64\ See id. Proposed Rule 7.45 also includes provisions
regarding cancellation of orders and error accounts in connection
with the arrangement of the Exchange with Arca Securities.
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Section 5 of proposed Rule 7, ``Plan to Implement a Tick Size Pilot
Program'' \65\ would establish requirements relating to the Tick Size
Pilot Program adopted as a joint industry plan under Regulation NMS
under the Act, and is based on the similar rule of NYSE Arca.\66\
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\65\ Section 5 is comprised solely of proposed Rule 7.46.
\66\ See NYSE Arca 7.46-E.
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Section 6 of proposed Rule 7, ``Contracts in Securities,'' \67\
would provide that contracts in municipal securities be compared,
settled, and cleared in accordance with regulations of the Municipal
Securities Rulemaking Board; set forth requirements relating to ETP
contracts of an ETP Holder with another ETP Holder; and establish
requirements relating to the book entry settlement of transactions.\68\
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\67\ Section 6 would include proposed Rules 7.60 through 7.62.
\68\ See proposed Rules 7.61, 7.62, and 7.63, respectively.
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Rule 10--Disciplinary Proceedings, Other Hearings, and Appeals
Proposed Rule 10 consists of proposed Rule 10.8000, Investigations
and Sanctions, and proposed Rule 10.9000, Code of Procedure, (``Rule
[[Page 23973]]
10.8000 and Rule 10.9000 Series''), which are based on NYSE American
Rule 8000 and Rule 9000 Series of the Office Rules, with certain
modifications.\69\ Together, the rules would be the Exchange's
Disciplinary rules. Other than the differences specified in Amendment
No. 1, the proposed Rule 10.8000 and 10.9000 Series are based on the
individual counterpart NYSE American Rule 8000 and 9000 Series.\70\
Given the different membership structures, lack of a physical trading
floor,\71\ and differences in terminology throughout the rules, the
proposed Rule 10.8000 and Rule 10.9000 Series would differ from the
NYSE American rules as follows:
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\69\ NYSE American Rule 8000 and Rule 9000 Series are
substantially the same as the Rule 8000 and Rule 9000 Series of NYSE
and of FINRA. See Securities Exchange Act Release No. 77241
(February 26, 2016), 81 FR 11311 (March 3, 2016) (SR-NYSEMKT-2016-
30). See also Securities Exchange Act Release No. 78959 (September
28, 2016), 81 FR 68481 (October 4, 2016) (SR-NYSEMKT-2016-71). The
NYSE American disciplinary rules were implemented on April 15, 2016.
See NYSE American Information Memorandum 16-02 (March 14, 2016).
\70\ See Amendment No. 1, supra note 6.
\71\ Because the Exchange would not have a floor, it would not
have Floor-Based Panelists. See NYSE American Rules 9120(q),
9212(a)(2)(B), 9221(a)(3), 9231(b)(2) and (c)(2), and 9232(c).
---------------------------------------------------------------------------
The term ``ETP Holder'' is used rather than ``member and
member organization'' or ``member organization or ATP Holder'';
the terms ``Associated Person'' and ``Person Associated
with an ETP Holder,'' which are defined terms on the Exchange are used
rather than the term ``covered person'';
not adopt NYSE American Rules 8001 and 9001, which
describe the effective date of the NYSE American rules;
not retain the text of NYSE American's legacy minor rules;
add the following sentence, from NYSE Arca Rule 10.2(a),
to Rule 10.8210(a): ``No member of the Board of Directors or non-
Regulatory Staff may interfere with or attempt to influence the process
or resolution of any pending investigation or disciplinary
proceeding'';
exclude the definition of the following terms in Rule
10.9120: ``Board of Directors,'' ``covered person,'' ``Exchange,'' and
``Floor-Based Panelist,'' because they are defined elsewhere in the
rules or are not applicable to the Exchange, and would mark those
paragraphs as ``Reserved'';
add the following sentence to proposed Rule 10.9120(v)'s
definition of ``Panelist'': ``Hearing Panel members will be drawn from
the Exchange Business Conduct Committee (`BCC')'';
merge the current Rule 8.15 and NYSE American Rule 9217 to
create proposed Rule 10.9217, which sets forth the Exchange's Minor
Rule Violation Plan; \72\
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\72\ See Amendment No. 1, supra note 6. The Minor Rule Violation
Plan provides an alternative method for the Exchange to address a
violation of its rules. The Exchange is always free to pursue formal
disciplinary action against a member that violates its rules.
---------------------------------------------------------------------------
replace the phrase ``an ETP Holder that is an affiliate''
from NYSE American Rule 9268(e)(2) with ``an affiliate of the Exchange
as such term is defined in Rule 12b-2 under the Exchange Act,'' in
proposed Rules 10.9268 and 10.9310(a)(1); and
propose non-substantive grammatical differences in
specified rules, as needed, and update internal cross references to the
appropriate Exchange rule.
Rule 11--Business Conduct
The Exchange proposes to maintain certain current NYSE National
rules regarding rules of fair practice, books and records,
supervisions, extensions of credit, and trading practices and relocate
these rules to proposed Rule 11. The Exchange also proposes to adopt
conduct rules that are based on FINRA rules and to incorporate certain
FINRA rules by reference.\73\
---------------------------------------------------------------------------
\73\ See Amendment No. 1, supra note 6. In Amendment No. 1, the
Exchange proposes to revise or relocate certain rules in Rule 11
that were included in the original proposed rule change.
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Section 1 of proposed Rule 11 would be designated as Rules of Fair
Practice and the preamble thereto would state that ``References to the
term ETP Holder in Section 1 to Rule 11 also mean Associated Persons of
ETP Holders.'' The rules in Section 1 to proposed Rule 11 relate to
Business Conduct of ETP Holders,\74\ Violations Prohibited,\75\ Use of
Fraudulent Devices,\76\ False Statements,\77\ Advertising
Practices,\78\ Fair Dealing with Customers,\79\ The Prompt Receipt and
Delivery of Securities,\80\ Charges for Services Performed,\81\ Use of
Information,\82\ Publication of Transactions and Quotations,\83\ Offers
at Stated Prices,\84\ Payment Designed to Influence Market Prices,
Other than Paid Advertising,\85\ Disclosure of Control,\86\
Discretionary Accounts,\87\ Customer's Securities or Funds,\88\
Prohibition Against Guarantees,\89\ Sharing in Accounts; Extent
Permissible,\90\ and Telephone Solicitation.\91\
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\74\ Proposed Rule 11.3.1.
\75\ Proposed Rule 11.3.2.
\76\ Proposed Rule 11.3.3.
\77\ Proposed Rule 11.3.4.
\78\ Proposed Rule 11.3.5.
\79\ Proposed Rule 11.3.6.
\80\ Proposed Rule 11.3.8.
\81\ Proposed Rule 11.3.9.
\82\ Proposed Rule 11.3.10.
\83\ Proposed Rule 11.3.11.
\84\ Proposed Rule 11.13.12.
\85\ Proposed Rule 11.13.13.
\86\ Proposed Rule 11.13.15.
\87\ Proposed Rule 11.13.16.
\88\ Proposed Rule 11.13.17.
\89\ Proposed Rule 11.13.18.
\90\ Proposed Rule 11.13.19.
\91\ Proposed Rule 11.13.21.
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Section 2 of proposed Rule 11 would be designated as Books and
Records and the rules thereunder would relate to Requirements,\92\
Furnishing of Records,\93\ Record of Written Complaints,\94\ and
Disclosure of Financial Condition.\95\
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\92\ Proposed Rule 11.4.1.
\93\ Proposed Rule 11.4.2.
\94\ Proposed Rule 11.4.3.
\95\ Proposed Rule 11.4.4.
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Section 3 of proposed Rule 11 would be designated as Supervision
and the rules thereunder would relate to Written Procedures,\96\
Responsibility of ETP Holders,\97\ Records,\98\ Review of Activities
and Annual Inspection,\99\ Prevention of the Misuse of Material,
Nonpublic Information,\100\ and Annual Certification of Compliance and
Supervisory Processes.\101\
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\96\ Proposed Rule 11.5.1.
\97\ Proposed Rule 11.5.2.
\98\ Proposed Rule 11.5.3.
\99\ Proposed Rule 11.5.4.
\100\ Proposed Rule 11.5.5.
\101\ Proposed Rule 11.5.7.
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Section 4 of proposed Rule 11 would be designated as Extensions of
Credit and the rules thereunder would relate to Extensions of Credit--
Prohibitions and Exemptions \102\ and Day Trading Margin.\103\
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\102\ Proposed Rule 11.6.1.
\103\ Proposed Rule 11.6.2.
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Section 5 of proposed Rule 11 would be designated as Trading
Practice Rules and the preamble thereto would state that ``References
to the term ETP Holder in Section 5 to Rule 11 also mean Associated
Persons of ETP Holders.'' The rules in Section 5 of proposed Rule 11
relate to Market Manipulation,\104\ Fictitious Transactions,\105\
Excessive Sales by an ETP Holder,\106\ Manipulative Transactions,\107\
Dissemination of False Information,\108\ Joint Activity,\109\
Influencing the Consolidated Tape,\110\ Options,\111\ Best
[[Page 23974]]
Execution,\112\ and Prearranged Trades.\113\
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\104\ Proposed Rule 11.12.1.
\105\ Proposed Rule 11.12.2.
\106\ Proposed Rule 11.12.3.
\107\ Proposed Rule 11.12.4.
\108\ Proposed Rule 11.12.5.
\109\ Proposed Rule 11.12.7.
\110\ Proposed Rule 11.12.8.
\111\ Proposed Rule 11.12.9.
\112\ Proposed Rule 11.12.10.
\113\ Proposed Rule 11.12.11.
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The Exchange proposes to adopt new conduct rules in Section 6 of
proposed Rule 11 (Harmonized Conduct Rules). The rules in Section 6 of
proposed Rule 11 relate to Suitability,\114\ Communications with the
Public,\115\ Customer Confirmations,\116\ Anti-Money Laundering
Compliance Program,\117\ Disruptive Quoting and Trading Activity
Prohibited,\118\ and Prohibition Against Trading Ahead of Customer
Orders.\119\ Other than proposed Rule 11.5220, relating to Disruptive
Quoting and Trading Activity Prohibited, the Section 6 rules would
incorporate by reference a specific FINRA rule or, in the case of
proposed Rule 11.5320, would set forth the complete rule and also
incorporate by reference the relevant FINRA rule.\120\
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\114\ Proposed Rule 11.2111.
\115\ Proposed Rule 11.2210.
\116\ Proposed Rule 11.2232.
\117\ Proposed Rule 11.3310.
\118\ Proposed Rule 11.5220.
\119\ Proposed Rule 11.5320.
\120\ In its proposed rule change, as amended, the Exchange
states that it proposes to file a request that the Commission
exercise its authority under Section 36 of the Act and Rule 0-12
thereunder, and grant the Exchange an exemption from the rule filing
requirements of Section 19(b) of the Act for changes to Exchange
rules that will be effected by a cross-reference to a FINRA rule,
including FINRA rules designated as NASD rules.
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Rule 12--Arbitration
The Exchange proposes new Rule 12 (Arbitration) to replace rules
set forth in Chapter IX relating to arbitration. Proposed Rule 12 would
incorporate by reference the Rule 12000 Series and the Rules 13000
Series of the FINRA Manual (Code of Arbitration Procedures for Customer
Disputes and Code of Arbitration for Industry Disputes) (the ``FINRA
Code of Arbitration'').\121\ Proposed Rule 12 would govern jurisdiction
and the circumstances under which disputes may be arbitrated; \122\
pre-dispute arbitration agreements between ETP Holders and their
customers, which would incorporate by reference FINRA Rule 2268; \123\
arbitrators' referrals to the Exchange; \124\ any failures to honor an
arbitrator's award; \125\ and the effect of arbitration on the
Exchange's rights as an SRO.\126\
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\121\ See Amendment No. 1, supra note 6.
\122\ Proposed Rule 12(b).
\123\ Proposed Rule 12(c).
\124\ Proposed Rule 12(d).
\125\ Proposed Rule 12(e).
\126\ Proposed Rule 12(f).
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Rule 13--Liability of Directors and Exchange
The Exchange proposes new Rule 13, which would set forth the rules
governing the liability of its Directors and the Exchange. Proposed
Rules 13.1 and 13.2 would set forth limitations on liability of the
Directors and the Exchange, respectively.\127\ Proposed Rule 13.3 would
limit legal proceedings against any Directors, officer, employee, agent
or other official of the Exchange or any subsidiary of the
Exchange.\128\ Proposed Rule 13.4 relates to responsibility for the
Exchange's costs in defending a legal proceeding brought against the
Exchange.\129\
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\127\ Proposed Rule 13.1 and 13.2.
\128\ Proposed Rule 13.3.
\129\ Proposed Rule 13.4.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and rules and regulations thereunder applicable
to a national securities exchange.\130\ In particular, the Commission
finds that the amended proposed rule change is consistent with Section
6(b)(5) of the Act,\131\ which requires, among other things, that the
rules of a national securities exchange be designed to promote just and
equitable principles of trade, 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 are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Commission further finds that the amended
proposed rule change is consistent with Section 6(b)(7) of the
Act,\132\ which requires, among other things, that the rules of a
national securities exchange provide a fair procedure for the
disciplining of members and persons associated with members.
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\130\ In approving the proposed rule changes, the Commission has
considered their impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\131\ 15 U.S.C. 78f(b)(5).
\132\ 15 U.S.C. 78f(b)(7).
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1. Re-Launch of the Exchange on the Pillar Trading Platform
The Exchange's proposal would re-launch the Exchange on the Pillar
platform as a fully-automated cash equities trading market with a
price-time priority allocation model. As discussed at length in
Amendment No. 1, the re-launched Exchange would neither list securities
nor operate an auction and instead, would trade securities solely on a
UTP basis.
The Commission notes that the Exchange's amended proposal, in
addition to retaining certain of the Exchange's existing rules, would
establish new rules that are based on, and are substantially similar
to, the rules of its affiliated exchanges and FINRA, which were filed
and approved by the Commission (or which became immediately effective)
pursuant to Section 19(b) of the Act.\133\ Several of its affiliated
exchanges currently operate using the Pillar trading platform, and a
number of other national securities exchanges operate fully electronic
markets. Accordingly, the Commission finds that the amended proposal
raises no novel regulatory issues, that it is reasonably designed to
protect investors and the public interest, and that it is consistent
with the requirements of the Act. The Commission highlights below its
views on certain of the more significant aspects of the Exchange's
proposal.
---------------------------------------------------------------------------
\133\ See 78 U.S.C 78s(b).
---------------------------------------------------------------------------
Rule 2--Trading Permits
As noted above, the Exchange proposes to retain its existing
membership rules,\134\ which may not reflect certain harmonized
standards in the membership rules of other SROs. The Commission notes
that the Exchange commits to working with Commission staff to update
its membership rules and to file a separate filing relating to its
membership rules within 90 days of any approval of the Exchange's
proposed rule change.\135\ Also, an ETP Holder, as a prerequisite to
membership, would be required to be a member of a registered national
securities association or of a registered national securities
exchange.\136\ As a member of two or more SROs, an ETP Holder would be
required to comply with whichever rules impose a higher standard.
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\134\ The Commission notes the Exchange represents that there
are no categories of persons on the Exchange that would fall outside
of the membership categories and requirements set forth in proposed
Rule 2. See supra note 31.
\135\ See supra note 37.
\136\ See proposed Rule 2.3.
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In Amendment No. 1, the Exchange proposes a grace period of 30
calendar days for ETP Holders eligible for the expedited reinstatement
process \137\ to register Persons Associated with the ETP Holder with
the Exchange. ETP Holders who take advantage of the grace period would
be able to begin trading on the Exchange before completing the
[[Page 23975]]
registration of Persons Associated with the Exchange. The Commission
notes that, based on the requirements of the expedited process for
reinstatement, such ETP Holders would be required to already have
Persons Associated with the ETP Holder registered on CRD. The
Commission believes that the grace period would remove impediments to
and perfect the mechanism of a free and open market and a national
market system by allowing ETP Holders to begin trading on the Exchange
immediately, without completing the manual process of entering into CRD
an additional registration for their Associated Persons, as of the
Exchange's re-launch of trading.
---------------------------------------------------------------------------
\137\ See Commentary .01 to proposed Rule 2.5.
---------------------------------------------------------------------------
Based on the fact that ETP Holders are currently subject to the
registration requirements of the other exchange or association of which
they are members, as well as on the Commission's expectation that the
Exchange will file a proposal within 90 days to conform its membership
rules to the membership rules of other SROs, the Commission finds that
the Exchange's proposed membership rules are consistent with the
requirements of the Act.
The Commission notes that proposed Rule 3.9 provides that, without
prior Commission approval, no ETP Holder shall be affiliated with NYSE
Group, Inc. or any of its affiliated entities.\138\ The Commission
finds that it is consistent with the Act to permit Arca Securities to
become affiliated with the Exchange for the purposes of providing
routing services for the Exchange, subject to conditions described in
proposed Rule 7.45.
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\138\ See proposed Rule 3.9(a). See also supra note 62.
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Rule 5--Trading on an Unlisted Trading Privileges Basis
As discussed above, in Amendment No. 1 the Exchange states that it
does not believe that it is necessary for an exchange that trades
securities only on a UTP basis to have listing rules for ETPs.\139\
Similarly, the Exchange states its belief that it should not be
necessary for a non-listing venue to file a Form 19b-4(e) if it begins
trading an ETP on a UTP basis, because Rule 19b-4(e)(1) under the Act
refers to the ``listing and trading'' of a ``new derivative securities
product.'' \140\ Accordingly, the Exchange proposes to adopt only those
rules that would support the trading on a UTP basis of all NMS Stocks,
and the trading on a UTP basis for UTP Exchange Trading Products.\141\
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\139\ See Amendment No. 1, supra note 6.
\140\ 17 CFR 240.19b-4(e). See Amendment No. 1, supra note 6.
\141\ See supra note 41.
---------------------------------------------------------------------------
Proposed Rule 5.1 would establish the Exchange's authority to trade
securities on a UTP basis. Proposed Rule 5.1(a)(1) would provide that
the Exchange may extend UTP to any security that is an NMS Stock that
is listed on another national securities exchange or with respect to
which UTP may otherwise be extended in accordance with Section 12(f) of
the Act.\142\ Proposed Rule 5.1(a)(1) further would provide that any
such security would be subject to all Exchange rules applicable to
trading on the Exchange, unless otherwise noted.
---------------------------------------------------------------------------
\142\ 15 U.S.C. 781(f).
---------------------------------------------------------------------------
Proposed Rule 5.1(a)(2) would establish additional rules for
trading of UTP Exchange Traded Products, which are defined in Rule 1.1
(described above). Proposed Rule 5.1(a)(2)(A) would provide that the
Exchange would distribute an information circular prior to the
commencement of trading in an Exchange Traded Product that generally
would include the same information as the information circular provided
by the listing exchange, including (a) the special risks of trading the
Exchange Traded Product, (b) the Exchange's rules that would apply to
the Exchange Traded Product and (c) information about the dissemination
of value of the underlying assets or indices. Proposed Rule
5.1(a)(2)(E) would provide that the Exchange's surveillance procedures
for Exchange Traded Products traded on the Exchange pursuant to UTP
would be similar to the procedures used for equity securities traded on
the Exchange and would incorporate and rely upon existing Exchange
surveillance systems. Proposed Rules 5.1(a)(2)(B) and (D) would
establish certain requirements for ETP Holders that have customers that
trade UTP Exchange Traded Products.\143\
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\143\ Proposed Rule 5.1(a)(2)(B)(i) would remind ETP Holders
that they are subject to the prospectus delivery requirements under
the Securities Act, unless the Exchange Traded Product is the
subject of an order by the Commission exempting the product from
certain prospectus delivery requirements under Section 24(d) of the
1940 Act, and the product is not otherwise subject to prospectus
delivery requirements under the Securities Act. ETP Holders also
would be required to provide a prospectus to a customer requesting a
prospectus. Proposed Rule 5.1(a)(2)(B)(ii) would require ETP Holders
to provide a written description of the terms and characteristics of
UTP Exchange Traded Products to purchasers of such securities, not
later than the time of confirmation of the first transaction, and
with any sales materials relating to UTP Exchange Traded Products.
Proposed Rule 5.1(a)(2)(D) also would establish certain requirements
for any ETP Holder registered as a market maker in an UTP Exchange
Traded Product that derives its value from one or more currencies,
commodities, or derivatives based on one or more currencies or
commodities, or is based on a basket or index composed of currencies
or commodities.
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The Commission finds that the Exchange's proposed approach to the
trading of securities on a UTP basis, as set forth in proposed Rule 5,
as amended by Amendment No. 1, is consistent with Section 6(b)(5) of
the Act.\144\ The Commission notes that the provisions in proposed Rule
5 are based upon existing rules of other exchanges.\145\ Proposed Rule
5.1 includes a provision that any security traded UTP on the Exchange
``shall be subject to all Exchange rules applicable to trading on the
Exchange, unless otherwise noted.'' Importantly, the Exchange notes
that this language is intended to make clear that all Exchange rules
would be applicable to the trading of UTP on the Exchange, including
business conduct and sales practice rules set forth in proposed Rule
11.\146\ The Commission notes that, in Amendment No. 1, the Exchange
would delete and reserve Rule 8, which it had previously proposed to
include listing standards and related provisions for the trading of
certain exchange derivatives on the Exchange.\147\ The Commission
believes that Rule 8, as previously proposed, is not necessary insofar
as proposed Rules 5 and 11 would cover all categories of securities
traded on the Exchange on a UTP basis.
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\144\ 15 U.S.C. 78f(b)(5).
\145\ See discussion of proposed Rule 5 in Section II., supra.
\146\ See Amendment No. 1, supra note 6.
\147\ Id.
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In sum, the Commission believes that the changes proposed by the
Exchange in Amendment No. 1, including the proposed revisions to Rule 5
and the addition of the definitions of ``Exchange Traded Product'' and
``UTP Exchange Traded Product'' that enumerate the classes of Exchange
Traded Products to be traded on a UTP basis,\148\ as well as the
proposed requirement to distribute an information circular prior to the
commencement of trading, the business conduct and sales practice rules
set forth in Rule 11 (which apply to all securities traded UTP on the
Exchange), and the proposed deletion of Rule 8, taken together,
establish an appropriate framework for the trading of Exchange Traded
Products on a UTP basis on the Exchange.\149\ Accordingly, for these
reasons, the Commission finds that the
[[Page 23976]]
proposed rules governing trading on a UTP basis on the Exchange are
consistent with Section 6(b)(5) of the Act.
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\148\ See Amendment No. 1, supra note 6. As noted in the
description of Rule 1 above, the Exchange proposes a definition of
UTP Exchange Traded Products, which would enumerate in proposed Rule
1.1 the classes of Exchange Traded Products that the Exchange
proposes to trade on a UTP basis. See Proposed Rule 1.1(m).
\149\ In addition, the Commission believes that the filing of a
Form 19b-4(e) is not required when an Exchange is trading a new
derivative securities product on a UTP basis only.
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Rule 10--Disciplinary Proceedings, Other Hearings and Appeals
The Exchange states that it is proposing to adopt the current
disciplinary rules of NYSE American, which are substantially similar to
those of NYSE and FINRA.\150\ The Exchange indicates in Amendment No.
1, as discussed above, where proposed Rule 10 differs from the NYSE
American disciplinary rules.\151\ The Exchange proposes disciplinary
rules substantially similar to those of the NYSE American in order to
harmonize the rules among the different NYSE Group exchanges and
minimize any potential regulatory burden on members arising from
differing processes. The Exchange represents that all but one of its
ETP Holders are also members of FINRA, NYSE Arca, NYSE American, NYSE,
or Nasdaq, and thus they would be familiar with the proposed
rules.\152\ The Commission believes that the proposed Rule 10.8000 and
Rule 10.9000 Series furthers the objectives of Section 6(b)(7) of the
Act,\153\ in that it provides fair procedures for the disciplining of
ETP Holders and persons associated with an ETP Holder, the denial of
membership to any person seeking membership therein, and the barring of
any person from becoming a person associated with an ETP Holder. For
the reasons discussed above, the Commission finds that the proposed
changes are consistent with Section 6(b)(7) of the Act.
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\150\ See Amendment No. 1, supra note 6. See also Securities
Exchange Act Release Nos. 68678 (January 16, 2013), 78 FR 5213
(January 24, 2013) (SR-NYSE-2013-02) (NYSE disciplinary rule
notice), 69045 (March 5, 2013), 78 FR 15394 (March 11, 2013) (NYSE-
2013-02) (NYSE disciplinary rule approval order), 69963 (July 10,
2013), 78 FR 42573 (July 16, 2013) (SR-NYSE-2013-49), and 58643
(September 25, 2008), 73 FR 57174 (October 1, 2008) (order approving
NASD disciplinary rules).
\151\ See Amendment No. 1, supra note 6.
\152\ See Amendment No. 1, supra note 6, fn. 51. See also
Securities Exchange Act Release No. 56204 (August 3, 2007), 72 FR
45288 (August 13, 2007) (NASDAQ-2007-070) (``To ensure that FINRA
members did not incur significant regulatory burdens as a result of
Nasdaq separating from FINRA and registering as a national
securities exchange, Nasdaq based its rules governing regulatory
standards and disciplinary processes on FINRA rules, to a
significant extent.'').
\153\ See 15 U.S.C. 78f(b)(7).
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2. Section 11(a) of the Act
Section 11(a)(1) of the Act \154\ prohibits a member of a national
securities exchange from effecting transactions on that exchange for
its own account, the account of an associated person, or an account
over which it or its associated person exercises investment discretion
(collectively, ``covered accounts'') unless an exception applies. Rule
11a2-2(T) under the Act,\155\ known as the ``effect versus execute''
rule, provides exchange members with an exemption from the Section
11(a)(1) prohibition. Rule 11a2-2(T) permits an exchange member,
subject to certain conditions, to effect transactions for covered
accounts by arranging for an unaffiliated member to execute
transactions on the exchange. To comply with Rule 11a2-2(T)'s
conditions, a member: (i) Must transmit the order from off the exchange
floor; (ii) may not participate in the execution of the transaction
once the order has been transmitted to the member performing the
execution; \156\ (iii) may not be affiliated with the executing member;
and (iv) with respect to an account over which the member or an
associated person has investment discretion, neither the member nor an
associated person may retain any compensation in connection with
effecting the transaction except as provided in the Rule. For the
reasons set forth below, the Commission believes that ETP Holders
entering orders into the Exchange's Pillar trading system would satisfy
the requirements of Rule 11a2-2(T).
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\154\ 15 U.S.C. 78k(a)(1).
\155\ 17 CFR 240.11a2-2(T).
\156\ This prohibition also applies to associated persons of the
initiating member. The member may, however, participate in clearing
and settling the transaction.
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Rule 11a2-2(T)'s first requirement is that orders for covered
accounts be transmitted from off the exchange floor. The Exchange
represents that it will not have a physical trading floor when it re-
launches trading and the Exchange's Pillar trading system will receive
orders from members electronically through remote terminals or
computer-to-computer interfaces.\157\ In the context of other automated
trading systems, the Commission has found that the off-floor
transmission requirement is met if a covered account is transmitted
from a remote location directly to an exchange's floor by electronic
means.\158\ Because the Pillar trading system receives orders
electronically through remote terminals or computer-to-computer
interfaces, the Commission believes that the Pillar trading system
would satisfy this off-floor transmission requirement.
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\157\ See Amendment No. 1, supra note 6.
\158\ In the context of other all-electronic systems, the
Commission has similarly found that the off-floor transmission
requirement is met if the system receives orders electronically
through remote terminals or computer-to-computer interfaces. See,
e.g., Securities Exchange Act Release Nos. 61419 (January 26, 2010),
75 FR 5157 (February 1, 2010) (SR-BATS-2009-031) (approving BATS
options trading); 59154 (December 23, 2008), 73 FR 80468 (December
31, 2008) (SR-BSE-2008-48) (approving equity securities listing and
trading on BSE); 57478 (March 12, 2008), 73 FR 14521 (March 18,
2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-080) (approving NOM
options trading); 53128 (January 13, 2006), 71 FR 3550 (January 23,
2006) (File No. 10-131) (granting the application of The Nasdaq
Stock Market LLC for registration as a national securities
exchange); and 44983 (October 25, 2001), 66 FR 55225 (November 1,
2001) (SR-PCX-00-25) (approving the establishment of the Archipelago
Exchange as the equities trading facility of PCX Equities, Inc., a
subsidiary of the Pacific Exchange, Inc.).
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Second, Rule 11a2-2(T) requires that neither the initiating member
nor an associated person of the initiating member participate in the
execution of the transaction at any time after the order for the
transaction has been transmitted. The Exchange represents that the
Pillar trading system would at no time following the submission of an
order allow an ETP Holder or an associated person of the ETP Holder to
acquire control or influence over the result or timing of the order's
execution.\159\ According to the Exchange, the execution of an ETP
Holder's order would be determined solely by the quotes and orders that
are present in the system at the time the member submits the order and
by the order priority under the Exchange rules.\160\ Accordingly, the
Commission believes that an Exchange member and its associated persons
would not participate in the execution of an order submitted to the
Pillar trading system.
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\159\ See Amendment No. 1, supra note 6.
\160\ See id. The Exchange notes that Rule 11a2-2(T) does not
preclude a member from cancelling or modifying orders, or from
modifying the instructions for executing orders, after they have
been transmitted, provided that such cancellations or modifications
are transmitted from off an exchange floor. See id. The Commission
has stated that the non-participation requirement is satisfied under
such circumstances so long as the modifications or cancellations are
also transmitted from off the floor. See Securities Exchange Act
Release No. 14563 (March 14, 1978), 43 FR 11542 (March 17, 1978)
(``1978 Release'') (stating that the ``non-participation requirement
does not prevent initiating members from canceling or modifying
orders (or the instructions pursuant to which the initiating member
wishes orders to be executed) after the orders have been transmitted
to the executing member, provided that any such instructions are
also transmitted from off the floor'').
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Third, Rule 11a2-2(T) requires that the order be executed by an
exchange member that is not associated with the member initiating the
order. The Commission has stated that this requirement is satisfied
when automated exchange facilities are used, as long as the design of
these systems ensures that members do not possess any special or unique
trading advantages in handling their orders after
[[Page 23977]]
transmitting them to the exchange.\161\ The Exchange represents that
the design of the Pillar trading system ensures that no ETP Holder has
any special or unique trading advantage in the handling of its orders
after transmitting its orders to the Exchange.\162\ Based on the
Exchange's representation, the Commission believes that the Pillar
trading system would satisfy this requirement.
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\161\ In considering the operation of automated execution
systems operated by an exchange, the Commission noted that, while
there is not an independent executing exchange member, the execution
of an order is automatic once it has been transmitted into the
system. Because the design of these systems ensures that members do
not possess any special or unique trading advantages in handling
their orders after transmitting them to the exchange, the Commission
has stated that executions obtained through these systems satisfy
the independent execution requirement of Rule 11a2-2(T). See
Securities Exchange Act Release No. 15533 (January 29, 1979), 44 FR
6084 (January 31, 1979).
\162\ See Amendment No. 1, supra note 6.
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Fourth, in the case of a transaction effected for an account with
respect to which the initiating member or an associated person thereof
exercises investment discretion, neither the initiating member nor any
associated person may retain any compensation in connection with
effecting the transaction, unless the person authorized to transact
business for the account has expressly provided otherwise by written
contract referring to Section 11(a) of the Act and Rule 11a2-2(T)
thereunder.\163\ ETP Holders trading for covered accounts over which
they exercise investment discretion must comply with this condition in
order to rely on the rule's exemption.\164\
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\163\ In addition, Rule 11a2-2(T)(d) requires that, if a member
or associated person is authorized by written contract to retain
compensation in connection with effecting transactions for covered
accounts over which the member or associated person thereof
exercises investment discretion, the member or associated person
must furnish at least annually to the person authorized to transact
business for the account a statement setting forth the total amount
of compensation retained by the member or any associated person
thereof in connection with effecting transactions for the account
during the period covered by the statement. See 17 CFR 240.11a2-
2(T)(d). See also 1978 Release, supra note 107 (``The contractual
and disclosure requirements are designed to assure that accounts
electing to permit transaction-related compensation do so only after
deciding that such arrangements are suitable to their interests'').
\164\ The Exchange represents that it will advise its membership
through the issuance of a Regulatory Bulletin that those ETP Holders
trading for covered accounts over which they exercise investment
discretion must comply with this condition in order to rely on the
exemption in Rule 11a2-2(T). See Amendment No. 1, supra note 6.
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IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
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
Send an email to [email protected]. Please include
File Number SR-NYSENAT-2018-02 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-NYSENAT-2018-02. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSENAT-2018-02 and should be submitted
on or before June 13, 2018.
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 thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. As discussed above, in Amendment No. 1, the
Exchange proposes, among other things, to: (i) Delete proposed Rule 8
and modify proposed Rule 5 to include only those rules that would
support the trading on a UTP basis of all NMS Stocks and the trading on
a UTP basis of UTP Exchange Traded Products; (ii) revise the proposed
definition of the term ``UTP Exchange Traded Product''; (iii) propose a
grace period of thirty days for ETP Holders that are eligible for the
expedited process for reinstatement under the proposal to register
their Associated Persons with the Exchange; (iv) commit to working with
Commission staff to update its membership rules and to file a separate
filing relating to its membership rules within 90 days of any approval
of the instant proposal; (v) identify which of the proposed Rules are
based on the rules of NYSE American, as opposed to those based on the
rules of NYSE Arca; (vi) add provisions, based on rules of other SROs,
that were not included in the original filing; (vii) add a rule
relating to the requirements for listed securities issued by ICE or its
affiliates; (viii) specifically incorporate by reference certain FINRA
rules that were only cited in the original version of the filing; (ix)
add clarifying language to proposed rule text and the narrative
describing the proposal; and (x) correct various technical errors.
The Commission notes that the proposed changes in Amendment No. 1
provide clarifying details, harmonize certain proposed rules with rules
of other exchanges, incorporate certain other SRO rules by reference,
and otherwise streamline the Exchange's proposed rulebook. The proposed
changes do not introduce any rules that differ in any substantive
manner from rules that previously have been approved by the Commission,
or that have become immediately effective, pursuant to Section 19(b) of
the Act. Accordingly, the Commission finds good cause, pursuant to
Section 19(b)(2) of the Act,\165\ to approve the proposed rule change,
as modified by Amendment No. 1, on an accelerated basis so that the
[[Page 23978]]
Exchange can re-commence operating without unnecessary delay.
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\165\ 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,\166\ that the proposed rule change (SR-NYSENAT-2018-02), as
modified by Amendment No. 1, be and hereby is approved on an
accelerated basis.
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\166\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\167\
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\167\ 17 CFR 200.30-3(a)(31).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10986 Filed 5-22-18; 8:45 am]
BILLING CODE 8011-01-P
