Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Provide for the Listing of Exchange Traded Products With No Component NMS Stock Listed on the Exchange, Amend Its Rules Regarding Unlisted Trading Privileges, and Make Corresponding Changes, 31585-31589 [2018-14465]
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For the Commission, pursuant to delegated
authority.25
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–14469 Filed 7–5–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83560; File No. SR–NYSE–
2018–30]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Provide for the Listing of Exchange
Traded Products With No Component
NMS Stock Listed on the Exchange,
Amend Its Rules Regarding Unlisted
Trading Privileges, and Make
Corresponding Changes
daltland on DSKBBV9HB2PROD with NOTICES
June 29, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 15,
2018, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to to [sic]
amend its rules to (1) provide for the
listing of exchange traded products
(‘‘ETPs’’) that do not have any
component NMS Stock 4 that is listed on
the Exchange or that is based on, or
represents an interest in, an underlying
index or reference asset that includes an
NMS Stock listed on the Exchange; (2)
delete certain redundant listing rules
that would be superseded by these
initial and continued listing and trading
requirements for the listing of ETPs; and
(3) make changes to its unlisted trading
privileges (‘‘UTP’’) Rule 5.1(a)(2), as
well as certain supplementary changes
throughout Rules 5P and 8P, to conform
to the rules of the Exchange’s affiliate,
NYSE National, Inc. (‘‘NYSE National’’).
The proposed rule change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
rules to provide for the listing of
Exchange Traded Products (‘‘ETPs’’)
that do not have any component NMS
Stock that is listed on the Exchange or
that is based on, or represents an
interest in, an underlying index or
reference asset that includes an NMS
Stock listed on the Exchange; (2) delete
certain redundant listing rules that
would be superseded by these initial
and continued listing and trading
requirements for the listing of ETPs; and
(3) make changes to its unlisted trading
privileges (‘‘UTP’’) Rule 5.1(a)(2), as
1 15
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4 NMS Stock is defined in Rule 600 of Regulation
NMS, 17 CFR 242.600(b)(47).
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well as certain supplementary changes
throughout Rules 5P and 8P, to conform
to the rules of the Exchange’s affiliate,
NYSE National, Inc. (‘‘NYSE National’’).
Background
Currently, the Exchange trades ETPs
on an UTP basis only pursuant to Rules
5P and 8P.5 In the NYSE ETP Listing
Rules Filing, the Exchange represented
that Rules 5P and 8P would contain
initial and continued listing and trading
requirements for ETPs, but that they
would apply only to the trading
pursuant to UTP of ETPs on the
Exchange.6 Accordingly, the Exchange
included preambles to both Rules 5P
and 8P that provide that ‘‘the provisions
of this Rule [5P/8P] shall apply to the
trading pursuant to UTP of Exchange
Traded Products on the Exchange. This
Rule [5P/8P] shall not apply to the
listing of Exchange Traded Products on
the Exchange.’’ Rule 5.1(a)(1), which
was adopted in the NYSE ETP Listing
Rules Filing, further provides that ‘‘the
provisions of Rules 5P and 8P that
permit the listing of Exchange Traded
Products would not be effective until
the Exchange files a proposed rule
change to amend its rules to comply
with Rules 10A–3 and 10C–1 under the
Exchange Act and to incorporate
qualitative listing criteria, and such
proposed rule change is approved by the
Commission.’’ Because Rules 5P and 8P
were designed to support the trading of
ETPs on a UTP basis only, the Exchange
did not change any of its rules relating
to the listing of ETPs.
Proposed Rule Changes To Provide for
Listing of Certain ETPs
The Exchange is proposing to list
certain ETPs. Specifically, the Exchange
proposes to list ETPs that meet the
requirements of Rules 5P and 8P,
provided such ETPs do not have any
component NMS Stock that is listed on
the Exchange or that is based on, or
represents an interest in, an underlying
index or reference asset that includes an
5 See, Securities Exchange Act Release No. 80214
(March 10, 2017), 82 FR 14050 (March 16, 2017)
(SR–NYSE–2016–44) (Approval Order) (‘‘NYSE ETP
Listing Rules Filing’’). In connection with the
Exchange’s implementation of Pillar for Tape B and
C securities, NYSE filed several additional rule
changes. See Securities Exchange Act Release Nos.
76803 (December 30, 2015), 81 FR 536 (January 6,
2016) (SR–NYSE–2015–67) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change);
81225 (July 27, 2017), 82 FR 36033 (August 2, 2017)
(SR–NYSE–2017–35) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change);
and 82945 (March 26, 2018), 83 FR 13553 (March
29, 2018) (SR–NYSE–2017–36) (Approval Order)
(‘‘NYSE Trading Rules Filing’’).
6 See id. NYSE ETP Listing Rules Filing.
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NMS Stock listed on the Exchange.7
ETPs listed on the Exchange would be
a ‘‘Tape A’’ listing and would be traded
pursuant to the rules applicable to
NYSE-listed securities. To allow the
Exchange to list these ETPs, the
Exchange proposes the changes
described below.
To allow the listing of certain ETPs,
the Exchange proposes to delete the
preambles to Rules 5P and 8P, which
currently state that the rules shall apply
to the trading pursuant to UTP of ETPs
only, and that the Rules shall not apply
to the listing of ETPs on the Exchange.
By deleting these preambles, the
Exchange would be permitted to list
ETPs that meet the initial and continued
listing requirements in these Rules.
Further, the Exchange proposes to add
new preambles to Rules 5P and 8P that
would state that the Exchange would
not list any ETPs under either Rules 5P
or 8P ‘‘that have any component NMS
Stock that is listed on the Exchange or
that is based on, or represents an
interest in, an underlying index or
reference asset that includes an NMS
Stock listed on the Exchange.’’
In addition, because the Exchange
proposes to list certain ETPs, it proposes
to add text to the preamble to Rules 1P–
13P that provides that Rules 5P and 8P,
and related definitions in Rule 1P,
would be applicable to listing of ETPs
on the Exchange.
The Exchange also proposes to amend
Rule 5.1(a)(1), which is the Exchange’s
general rule that allows the Exchange to
extend UTP to any security that is an
NMS Stock, as follows:
• First, the Exchange proposes to
delete the following clause:
‘‘notwithstanding the requirements for
listing set forth in the Rules.’’ This
clause is no longer necessary because
the Exchange is proposing to list
securities under Rule 5P.8
• Second, because ETPs listed on the
Exchange would not be traded on the
Pillar platform at this time, the
Exchange is proposing to delete the
reference to ‘‘Pillar trading platform’’
and replace it with a reference to the
‘‘Exchange.’’ Accordingly, any security
listed or traded pursuant to UTP under
Rule 5P would be subject to all
7 The Exchange’s proposed rules for these
products are substantially identical (other than with
certain non-substantive and technical amendments)
as the rules of NYSE Arca, Inc. (‘‘NYSE Arca’’) and
the Exchange’s other affiliates, for the qualification,
listing and trading of such products. See NYSE ETP
Listing Rules Filing, supra note 5.
8 The rules of other exchanges that list ETPs do
not contain such a clause. See, e.g., NYSE Arca Rule
5.1–E(a) and Nasdaq Stock Market LLC Rule 5740.
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Exchange trading rules applicable to
securities trading on the Exchange.9
• Third, the Exchange proposes to
delete the sentence in Rule 5.1(a)(1) that
states that the Exchange may not list any
ETPs.
Finally, the Exchange proposes to add
the words ‘‘Unlisted Trading Privileges’’
to the title of Rule 5.1, to better describe
the provisions in that rule.
Compliance With Rules 10A–3 and
10C–1 Under the Act
Rule 5.1(a)(1) currently includes a
clause that states that the provisions of
Rules 5P and 8P that permit the listing
of Exchange Traded Products would not
be effective until the Exchange files a
proposed rule change to amend its rules
to comply with Rules 10A–3 and 10C–
1 under the Act and to incorporate
qualitative listing criteria, and such
proposed rule change is approved by the
Commission. These Commission rules
require exchanges to establish rules that
require their listed companies’ audit
and compensations committees meet
specified standards.
The Exchange implemented the
requirements of Rules 10A–3 and 10C–
1 under the Act by adding Section 303A
to the NYSE Listed Company Manual
(‘‘LCM’’).10 All NYSE-listed companies
must comply with Section 303A,
including any ETPs listed on the
Exchange. Consistent with the
requirements of the Sarbanes-Oxley Act
of 2002 and Rules 10A–3 and 10C–1 of
the Act, Section 303A does not apply to
some listed companies.11 The
Commission found that Section 303A of
the LCM was consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange.12 Accordingly, the
Exchange is proposing to delete the last
sentence of Rule 5.1(a)(1).
Deletion of Obsolete Listing Rules for
ETPs
The Exchange also proposes to delete
certain listing rules that would be
superseded by the ETP listing and
9 The Exchange also proposes to delete the
reference to Pillar Platform in the title of these
rules. As proposed, the title for these rules would
be ‘‘Rules 1P–13P.’’
10 NYSE Listed Company Manual, https://
nysemanual.nyse.com/LCM/Sections/.
11 See Rule 10C–1(b)(5) under the Act allows
national securities exchanges to exempt from the
requirements of Rule 10C–1 certain categories of
issuers, as the national securities exchange
determines is appropriate, taking into
consideration, among other relevant factors, the
potential impact of such requirements on smaller
reporting issuers.
12 See Securities Exchange Act Release No. 48745
(November 4, 2003), 68 FR 64154 (November 12,
2003) (SR–NYSE–2002–33).
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trading requirements in Rules 5P and
8P.
As discussed above, the Exchange is
proposing today to list certain ETPs
under Rules 5P and 8P. In connection
with this proposed change, the
Exchange is also proposing to delete
certain ETP listing rules that are not
currently used. Because the Exchange
only intends to list ETPs under Rules 5P
and 8P, it proposes to delete the
following rules:
• Rule 414 (Index and Currency
Warrants);
• Rule 1100 (Investment Company
Units);
• Rules 1200–1202 (Trust Issued
Receipts);
• Rules 1300–1301 (Gold Shares);
• Rules 1300A–1301A (Currency
Trust Shares); and
• Rules 1300B–1301B (Commodity
Trust Shares).
• LCM Section 703.15 (Foreign
Currency Warrants and Currency Index
Warrants);
• LCM Section 703.16 (Investment
Company Units);
• LCM Section 703.17 (Stock Index
Warrants Listing Standards);
• LCM Section 703.20 (Trust Issued
Receipts);
• LCM Section 703.21 (Equity-Linked
Debt Securities); and
• LCM Section 703.22 (Equity IndexLinked Securities, Commodity-Linked
Securities and Currency-Linked
Securities).
The Exchange is also proposing to
make the following cross-reference
changes to the rules of the Exchange to
correspond to the above deletions:
• First, the Exchange proposes to
amend cross-references in
Supplementary Material .30 to Rule 36
because the initial and continued listing
and trading standards and definitions
for (1) Investment Company Units
would now be described in Rule
5.2(j)(3), not in Section 703.16 of the
LCM and (2) Trust Issued Receipts
would now be described in Rule 8.200,
not in Rule 1200. Therefore, in
Supplementary Material .30 to Rule 36,
the Exchange is proposing to change the
cross-reference to Section 703.16 of the
LCM to Rule 5.2(j)(3), and the crossreference to Rule 1200 to Rule 8.200.
• Second, the Exchange proposes to
amend Rule 1400(2)(c) to reflect the
deletion of Section 703.21 of the LCM.
Rule 1400(2)(c) states that Debt
Securities 13 do not include securities
13 As used in Rule 1400, the term ‘‘Debt Security’’
or ‘‘Debt Securities’’ means any unlisted note, bond,
debenture or evidence of indebtedness that is:
(1) Statutorily exempt from the registration
requirements of Section 12(b) of the Act, or
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relevant ETP or the trading pursuant to
UTP of such ETP), be deleted. In
conjunction therewith, the Exchange
proposes to include the words ‘‘listing
and’’ before the word ‘‘trading’’ in each
of the rules from which such clauses are
deleted, so as to clarify that the rules
would apply to the listing and trading
of such relevant ETP on the Exchange
once that ETP is listed on the Exchange.
In addition, consistent with rules
approved for NYSE National in the
NYSE National Rule Filing, the
Exchange is proposing to delete Rule
5.1(a)(2)(A), which currently requires
the Exchange to 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.17 To account
for this deleted sub-paragraph, the
Exchange is also proposing to re-number
each of the sub-paragraphs in Rule
5.1(a)(2).
The Exchange believes that it is
unnecessary for an exchange to apply
initial and continued listing rules to
ETPs it trades pursuant to UTP. To the
Certain Changes To Conform Rules 5P
extent ETP listing rules include initial
and 8P to the Rules of NYSE National
and continued listing standards, the
Exchange would not be in a position to
To conform the Exchange’s rules to
that of its affiliate, NYSE National,15 the evaluate issuer compliance with such
rules. Because the Exchange would not
Exchange is proposing to delete all of
be in a position to enforce any ETP
the references in Rules 5P and 8P that
listing rules, the Exchange does not
would imply that the initial and
continued listing standards contained in believe it is necessary to have such
rules. Similarly, the Exchange does not
Rules 5P and 8P may apply to the
believe it is necessary for a non-listing
trading pursuant to UTP of such ETPs.
venue to file a Form 19b–4(e) if it begins
In the National Rule Filing, NYSE
trading an ETP on a UTP basis. Rule
National stated that it does not believe
19b–4(e)(1) under the Act refers to the
that it is necessary for an exchange that
‘‘listing and trading’’ of a ‘‘new
trades securities on a UTP basis to have
listing rules for ETPs.16 Accordingly, the derivative securities product.’’ 18 The
Exchange proposes that clauses in Rules Exchange therefore believes that the
requirements of that rule refer to when
5P and 8P that would make the initial
an exchange lists and trades an ETP,
and continued listing standards
and not when an exchange seeks to
contained in such rules apply not only
trade such product on a UTP basis
to the listing of such ETPs, but also to
pursuant to Rule 12f–2 under the Act.19
the trading of such ETPs pursuant to
UTP (such as the clause ‘‘whether by
Finally, the Exchange proposes to
listing or pursuant to unlisted trading
amend Rule 5.1(a)(2)(D) to conform to
privileges’’ when referencing that such
the comparable NYSE National rule.
rule would apply to the listing of the
Both NYSE National’s and the
Exchange’s rules pertaining to trading
(2) eligible to be traded absent registration under
halts are in Rule 7.18. Like NYSE
Section 12(b) of the Act pursuant to the order
National, the Exchange proposes to halt
granted by the Securities and Exchange
trading in a UTP Exchange Traded
Commission in Exchange Act Release Number 34–
54766 (November 16, 2006) (the ‘‘2006 Order’’).
Product as provided for in Rule 7.18.
14 Rule 1.1(bbb) defines the term ‘‘Exchange
Accordingly, the Exchange proposes to
Traded Product’’ to mean a security that meets the
delete the rule text in paragraph (D) of
definition of ‘‘derivative securities product’’ in Rule
Rule 5.1(a)(2) that is duplicative of
19b–4(e) under the Securities Exchange Act of 1934
trading halt authority in Rule 7.18. The
and a ‘‘UTP Exchange Traded Product to mean an
Exchange Traded Product that trades on the
Exchange also proposes to add a cross
Exchange pursuant to unlisted trading privileges.
reference stating that the Exchange
15
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that, if listed on the Exchange, would
have been listed under Section 703.21 of
the LCM (Equity-Linked Debt
Securities). Since the Exchange is
proposing to delete this section from the
LCM, it is also proposing to delete all
cross-references to it in Rule 1400(2)(c).
Further, to account for the deletion of
references to Section 703.21 of the LCM,
which pertains to equity-linked debt
securities, the Exchange proposes to
clarify in Rule 1400(2)(c) that Debt
Securities do not include equity-linked
debt securities listed under Rule 5P.
• Third, for the avoidance of doubt,
the Exchange is also proposing to
include the following introductory
preamble language at the beginning of
Section 7 of the LCM, which pertains to
Listing Applications and currently
includes the relevant ETP listing rules
of the manual that the Exchange is
proposing to delete:
‘‘See Exchange Rules 5P and 8P for
the initial and continued listing and
trading requirements for Exchange
Traded Products (as defined in Rule
1.1(bbb)).’’ 14
See, Securities Exchange Act Release No. 83289
(May 17, 2018), 83 FR 23968 (May 23, 2018) (SR–
NYSENat–2018–02) (the ‘‘NYSE National Rule
Filing’’).
16 Id.
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17 Id.
18 17
19 17
CFR 240.19b–4(e).
CFR 240.12f–2.
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31587
would halt trading in a UTP ETP as
provided for in Rule 7.18.20
Listing ETPs on the Exchange &
Surveillance
The Exchange represents that listed
ETPs would be subject to the existing
trading surveillances administered by
the Exchange for ETPs trading UTP, as
well as cross-market surveillances
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws. The Exchange
represents that these procedures are
adequate to properly monitor the
Exchange’s listing and trading of ETPs
in all trading sessions and to deter and
detect violations of Exchange rules and
federal securities laws applicable to
trading on the Exchange.21
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
relevant parties for relevant trading
violations.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in ETPs, as well as certain other
securities and financial instruments
underlying such ETPs, with other
markets and other entities that are
members of the Intermarket
Surveillance Group (‘‘ISG’’). The
Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading
information regarding trading in ETPs
and financial instruments from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in ETPs, as well as
certain other securities and financial
instruments underlying such ETPs from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement
(‘‘CSSA’’).
Further, the Exchange’s affiliate,
NYSE Arca, currently lists ETPs
pursuant to rules that are substantially
20 Paragraph (D) of Rule 5.1(a)(2) would become
paragraph (C) when paragraph (A) to Rule 5.1(a)(2)
is deleted, and all the sub-paragraphs of Rule
5.1(a)(2) are re-numbered accordingly, as described
above.
21 FINRA conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
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identical to Rules 5P and 8P.22 NYSE
Arca conducts initial and continued
listing reviews for ETPs listed on its
exchange. The Exchange represents that
the initial and continued listing reviews
of ETPs listed on the Exchange will be
conducted in the same manner as they
are on NYSE Arca.
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,23 in general, and furthers the
objectives of Section 6(b)(5) of the Act,24
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, 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 by providing for the
listing of Exchange Traded Products,
subject to consistent and reasonable
standards. Accordingly, the proposed
rule change would contribute to the
protection of investors and the public
interest because it may provide a better
listing and trading environment for
investors and, generally, encourage
greater competition between markets.
The Exchange believes that the
proposed rule change is consistent with
the above principles. By providing for
the listing of ETPs, the Exchange
believes its proposal would lead to the
addition of liquidity to the broader
market and to increased competition
among the existing group of liquidity
providers. The Exchange also believes
that, by so doing, the proposed rule
change would encourage the additional
utilization of, and interaction with, the
exchange market, and provide market
participants with improved price
discovery, increased liquidity, more
competitive quotes and greater price
improvement for listed ETPs.
The Exchange further believes that
listing ETPs would help raise investors’
confidence in the fairness of the market,
generally, and their transactions in
particular. As such, the listing of ETPs
would foster cooperation and
coordination with persons engaged in
facilitating securities transactions,
enhance the mechanism of a free and
open market, and promote fair and
orderly markets in securities on the
Exchange.
The proposal is also designed to
promote just and equitable principles of
22 See NYSE ETP Listing Rules Filing, supra note
5. Rules 5P and 8P are based on the rules of NYSE
Arca.
23 15 U.S.C. 78f(b).
24 15 U.S.C. 78f(b)(5).
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trade by way of initial and continued
listing standards which, if not
maintained, would result in the
discontinuation of trading in the
affected products. These requirements,
together with the applicable Exchange
trading rules (which apply to the
proposed products), ensure that no
investor would have an unfair
advantage over another respecting the
trading of the subject products. On the
contrary, all investors would have the
same access to, and use of, information
concerning the specific products and
trading in the specific products, all to
the benefit of public customers and the
marketplace as a whole.
Furthermore, the proposal is designed
to remove impediments to and perfect
the mechanism of a free and open
market and a national market system by
adopting rules that would lead
ultimately to the listing and trading of
new products on the Exchange. The
proposed changes do nothing more than
match Exchange rules with what is
currently available on other exchanges
for the listing of ETPs. The Exchange
believes that by allowing for listing
opportunities on the Exchange that are
already allowed by rule on another
market, the proposal would offer
another venue for listing ETPs and
thereby promote broader competition
among exchanges. The Exchange
believes that individuals and entities
permitted to list ETPs on the Exchange
should enhance competition within the
mechanism of a free and open market
and a national market system, and
customers and other investors in the
national market system should benefit
from more depth and liquidity in the
market for the ETPs.
The proposed change is not designed
to address any competitive issue, but
rather to allow the Exchange to list
ETPs. These rules are identical to the
rules of NYSE Arca (other than with
respects to certain non-substantive and
technical amendments described above),
which currently lists ETPs on its
exchange pursuant to these rules. These
proposed rules support competition by
allowing for ETP listings on the
Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Since Rules
5P and 8P are already adopted on the
Exchange pursuant to approval from the
Commission, the Exchange believes that
the proposed rule change to allow for
these rules to also apply to the listing of
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ETPs on the Exchange, would have no
impact on competition. To the contrary,
limiting Rules 5P and 8P to only apply
to the trading pursuant to UTP of ETPs,
limits competition in that there are
certain products that the Exchange
cannot list, while other exchanges, with
identical listing rules, can list such
products. Thus, approval of the
proposed rule change would promote
competition because it would allow the
Exchange to compete with other
national securities exchanges for the
listing and trading of ETPs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2018–30 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2018–30. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
E:\FR\FM\06JYN1.SGM
06JYN1
Federal Register / Vol. 83, No. 130 / Friday, July 6, 2018 / Notices
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–NYSE–2018–30 and should
be submitted on or before July 27, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–14465 Filed 7–5–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83559; File No. SR–FINRA–
2018–013]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, To Establish a
Second Trade Reporting Facility
daltland on DSKBBV9HB2PROD with NOTICES
June 29, 2018.
I. Introduction
On April 19, 2018, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) 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
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:25 Jul 05, 2018
Jkt 244001
proposed rule change to establish a
second Trade Reporting Facility
(‘‘TRF’’) to be operated in conjunction
with Nasdaq, Inc. (‘‘Nasdaq’’). The
proposed rule change was published for
comment in the Federal Register on
April 26, 2018.3 The Commission
received no comment letters on the
proposal. On June 21, 2018, FINRA filed
Amendment No. 1.4 This order approves
the proposed rule change, as modified
by Amendment No. 1.
II. Description of the Proposal
Background
31589
stocks in accordance with FINRA rules.9
As set forth in the Trade Reporting
Notice, a firm that routinely reports its
OTC trades in NMS stocks to one FINRA
Facility (‘‘primary facility’’) must
establish and maintain connectivity and
report to a second FINRA Facility
(‘‘secondary facility’’) if the firm intends
to continue to support OTC trading as
an executing broker while its primary
facility is experiencing a widespread
systems issue.10
Proposal
FINRA currently has three facilities
that allow its members to report overthe-counter (‘‘OTC’’) trades in NMS
stocks: 5 The FINRA/Nasdaq TRF, the
FINRA/NYSE TRF, and the Alternative
Display Facility (‘‘ADF’’) (collectively,
the ‘‘FINRA Facilities’’). For each TRF,
FINRA is the SRO Member and, as such,
it has sole regulatory responsibility for
the TRFs, including: Real-time
monitoring and T+1 surveillance,
development and enforcement of trade
reporting rules, and submission of
proposed rule changes to the
Commission. Nasdaq is the ‘‘Business
Member’’ of the FINRA/Nasdaq TRF.6 A
Business Member is primarily
responsible for the management of the
business affairs of its TRF.7 Among
other things, the Business Member
establishes pricing, is obligated to pay
the cost of regulation and is entitled to
the profits and responsible for the losses
derived from the operation of its TRF.8
In January 2016, FINRA published a
Trade Reporting Notice (‘‘Trade
Reporting Notice’’) that provided
guidance on the reporting obligations of
member firms regarding OTC equity
trades in the event of a systems issue
during the trading day that prevents
firms from reporting OTC trades in NMS
FINRA proposed to establish a second
FINRA/Nasdaq TRF (‘‘FINRA/Nasdaq
TRF Chicago’’), to provide FINRA
members an additional facility to which
to report trades in compliance with
FINRA rules and the Trade Reporting
Notice. The FINRA/Nasdaq TRF
Chicago would be governed by the rules
applicable to the existing FINRA/
Nasdaq Trade Reporting Facility
(‘‘FINRA/Nasdaq TRF Carteret’’).11 A
primary user of the FINRA/Nasdaq TRF
Carteret could report on a back-up basis
to the FINRA/Nasdaq TRF Chicago
pursuant to the same rules, pricing,
features and performance to which the
firm is accustomed as a user of the
FINRA/Nasdaq TRF Carteret—and vice
versa.12 FINRA/Nasdaq TRF Chicago
trade reports would be disseminated
with a modifier indicating the source of
the transactions that would distinguish
them from transactions executed on an
exchange or reported to another FINRA
Facility, including the FINRA/Nasdaq
TRF Carteret.
The proposed rule change would
establish the FINRA/Nasdaq TRF
Chicago on the same terms as the
FINRA/Nasdaq TRF Carteret. The
FINRA/Nasdaq TRF Chicago would be
built with the same technology, provide
3 See Securities Exchange Act Release No. 83082
(April 20, 2018), 83 FR 18379 (‘‘Notice’’). See also,
Securities Exchange Act Release No. 83398 (June 8,
2018), 83 FR 27807 (June 14, 2018) extending the
time for the Commission to act on the filing.
4 In Amendment No. 1, FINRA states that, if the
Commission approves the proposed rule change,
FINRA anticipates that the FINRA/Nasdaq TRF
Chicago will commence operation in September
2018, but in no event later than December 31, 2018.
Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-finra-2018-013/
finra2018013-3918682-166985.pdf. Because
Amendment No. 1 does not materially alter the
substance of the proposed rule change or raise
unique or novel regulatory issues, Amendment No.
1 is not subject to notice and comment.
5 See Rule 600(b) of Regulation NMS under the
Act.
6 NYSE is the Business Member of the FINRA/
NYSE TRF.
7 See Notice at 18381.
8 See id.
9 See Trade Reporting Notice, January 20, 2016
(OTC Equity Trading and Reporting in the Event of
Systems Issues).
10 As discussed in the Trade Reporting Notice, if
a firm chooses not to have connectivity to a
secondary facility, it should cease executing OTC
trades altogether when its primary trade reporting
facility is experiencing a widespread systems issue.
In that instance, the firm could route orders for
execution to an exchange or another FINRA
member (i.e., a member with connectivity and the
ability to report trades to a FINRA Facility that is
operational).
11 See Securities Exchange Act Release No. 54084
(June 30, 2006), 71 FR 38935 (July 10, 2006) (order
approving SR–NASD–2005–087); and Securities
Exchange Act Release No. 54798 (November 21,
2006), 71 FR 69156 (November 29, 2006) (order
approving SR–NASD–2006–104).
12 A FINRA member also has the option to report
some trades, on a primary basis, to the FINRA/
Nasdaq TRF Chicago, and some trades, on a primary
basis, to the FINRA/Nasdaq TRF Carteret.
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
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]]>Agencies
[Federal Register Volume 83, Number 130 (Friday, July 6, 2018)]
[Notices]
[Pages 31585-31589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14465]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83560; File No. SR-NYSE-2018-30]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change To Provide for the Listing of
Exchange Traded Products With No Component NMS Stock Listed on the
Exchange, Amend Its Rules Regarding Unlisted Trading Privileges, and
Make Corresponding Changes
June 29, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on June 15, 2018, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to to [sic] amend its rules to (1) provide
for the listing of exchange traded products (``ETPs'') that do not have
any component NMS Stock \4\ that is listed on the Exchange or that is
based on, or represents an interest in, an underlying index or
reference asset that includes an NMS Stock listed on the Exchange; (2)
delete certain redundant listing rules that would be superseded by
these initial and continued listing and trading requirements for the
listing of ETPs; and (3) make changes to its unlisted trading
privileges (``UTP'') Rule 5.1(a)(2), as well as certain supplementary
changes throughout Rules 5P and 8P, to conform to the rules of the
Exchange's affiliate, NYSE National, Inc. (``NYSE National''). The
proposed rule change is available on the Exchange's website at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
---------------------------------------------------------------------------
\4\ NMS Stock is defined in Rule 600 of Regulation NMS, 17 CFR
242.600(b)(47).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its rules to provide for the listing
of Exchange Traded Products (``ETPs'') that do not have any component
NMS Stock that is listed on the Exchange or that is based on, or
represents an interest in, an underlying index or reference asset that
includes an NMS Stock listed on the Exchange; (2) delete certain
redundant listing rules that would be superseded by these initial and
continued listing and trading requirements for the listing of ETPs; and
(3) make changes to its unlisted trading privileges (``UTP'') Rule
5.1(a)(2), as well as certain supplementary changes throughout Rules 5P
and 8P, to conform to the rules of the Exchange's affiliate, NYSE
National, Inc. (``NYSE National'').
Background
Currently, the Exchange trades ETPs on an UTP basis only pursuant
to Rules 5P and 8P.\5\ In the NYSE ETP Listing Rules Filing, the
Exchange represented that Rules 5P and 8P would contain initial and
continued listing and trading requirements for ETPs, but that they
would apply only to the trading pursuant to UTP of ETPs on the
Exchange.\6\ Accordingly, the Exchange included preambles to both Rules
5P and 8P that provide that ``the provisions of this Rule [5P/8P] shall
apply to the trading pursuant to UTP of Exchange Traded Products on the
Exchange. This Rule [5P/8P] shall not apply to the listing of Exchange
Traded Products on the Exchange.'' Rule 5.1(a)(1), which was adopted in
the NYSE ETP Listing Rules Filing, further provides that ``the
provisions of Rules 5P and 8P that permit the listing of Exchange
Traded Products would not be effective until the Exchange files a
proposed rule change to amend its rules to comply with Rules 10A-3 and
10C-1 under the Exchange Act and to incorporate qualitative listing
criteria, and such proposed rule change is approved by the
Commission.'' Because Rules 5P and 8P were designed to support the
trading of ETPs on a UTP basis only, the Exchange did not change any of
its rules relating to the listing of ETPs.
---------------------------------------------------------------------------
\5\ See, Securities Exchange Act Release No. 80214 (March 10,
2017), 82 FR 14050 (March 16, 2017) (SR-NYSE-2016-44) (Approval
Order) (``NYSE ETP Listing Rules Filing''). In connection with the
Exchange's implementation of Pillar for Tape B and C securities,
NYSE filed several additional rule changes. See Securities Exchange
Act Release Nos. 76803 (December 30, 2015), 81 FR 536 (January 6,
2016) (SR-NYSE-2015-67) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change); 81225 (July 27, 2017), 82 FR
36033 (August 2, 2017) (SR-NYSE-2017-35) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change); and 82945 (March
26, 2018), 83 FR 13553 (March 29, 2018) (SR-NYSE-2017-36) (Approval
Order) (``NYSE Trading Rules Filing'').
\6\ See id. NYSE ETP Listing Rules Filing.
---------------------------------------------------------------------------
Proposed Rule Changes To Provide for Listing of Certain ETPs
The Exchange is proposing to list certain ETPs. Specifically, the
Exchange proposes to list ETPs that meet the requirements of Rules 5P
and 8P, provided such ETPs do not have any component NMS Stock that is
listed on the Exchange or that is based on, or represents an interest
in, an underlying index or reference asset that includes an
[[Page 31586]]
NMS Stock listed on the Exchange.\7\ ETPs listed on the Exchange would
be a ``Tape A'' listing and would be traded pursuant to the rules
applicable to NYSE-listed securities. To allow the Exchange to list
these ETPs, the Exchange proposes the changes described below.
---------------------------------------------------------------------------
\7\ The Exchange's proposed rules for these products are
substantially identical (other than with certain non-substantive and
technical amendments) as the rules of NYSE Arca, Inc. (``NYSE
Arca'') and the Exchange's other affiliates, for the qualification,
listing and trading of such products. See NYSE ETP Listing Rules
Filing, supra note 5.
---------------------------------------------------------------------------
To allow the listing of certain ETPs, the Exchange proposes to
delete the preambles to Rules 5P and 8P, which currently state that the
rules shall apply to the trading pursuant to UTP of ETPs only, and that
the Rules shall not apply to the listing of ETPs on the Exchange. By
deleting these preambles, the Exchange would be permitted to list ETPs
that meet the initial and continued listing requirements in these
Rules. Further, the Exchange proposes to add new preambles to Rules 5P
and 8P that would state that the Exchange would not list any ETPs under
either Rules 5P or 8P ``that have any component NMS Stock that is
listed on the Exchange or that is based on, or represents an interest
in, an underlying index or reference asset that includes an NMS Stock
listed on the Exchange.''
In addition, because the Exchange proposes to list certain ETPs, it
proposes to add text to the preamble to Rules 1P-13P that provides that
Rules 5P and 8P, and related definitions in Rule 1P, would be
applicable to listing of ETPs on the Exchange.
The Exchange also proposes to amend Rule 5.1(a)(1), which is the
Exchange's general rule that allows the Exchange to extend UTP to any
security that is an NMS Stock, as follows:
First, the Exchange proposes to delete the following
clause: ``notwithstanding the requirements for listing set forth in the
Rules.'' This clause is no longer necessary because the Exchange is
proposing to list securities under Rule 5P.\8\
---------------------------------------------------------------------------
\8\ The rules of other exchanges that list ETPs do not contain
such a clause. See, e.g., NYSE Arca Rule 5.1-E(a) and Nasdaq Stock
Market LLC Rule 5740.
---------------------------------------------------------------------------
Second, because ETPs listed on the Exchange would not be
traded on the Pillar platform at this time, the Exchange is proposing
to delete the reference to ``Pillar trading platform'' and replace it
with a reference to the ``Exchange.'' Accordingly, any security listed
or traded pursuant to UTP under Rule 5P would be subject to all
Exchange trading rules applicable to securities trading on the
Exchange.\9\
---------------------------------------------------------------------------
\9\ The Exchange also proposes to delete the reference to Pillar
Platform in the title of these rules. As proposed, the title for
these rules would be ``Rules 1P-13P.''
---------------------------------------------------------------------------
Third, the Exchange proposes to delete the sentence in
Rule 5.1(a)(1) that states that the Exchange may not list any ETPs.
Finally, the Exchange proposes to add the words ``Unlisted Trading
Privileges'' to the title of Rule 5.1, to better describe the
provisions in that rule.
Compliance With Rules 10A-3 and 10C-1 Under the Act
Rule 5.1(a)(1) currently includes a clause that states that the
provisions of Rules 5P and 8P that permit the listing of Exchange
Traded Products would not be effective until the Exchange files a
proposed rule change to amend its rules to comply with Rules 10A-3 and
10C-1 under the Act and to incorporate qualitative listing criteria,
and such proposed rule change is approved by the Commission. These
Commission rules require exchanges to establish rules that require
their listed companies' audit and compensations committees meet
specified standards.
The Exchange implemented the requirements of Rules 10A-3 and 10C-1
under the Act by adding Section 303A to the NYSE Listed Company Manual
(``LCM'').\10\ All NYSE-listed companies must comply with Section 303A,
including any ETPs listed on the Exchange. Consistent with the
requirements of the Sarbanes-Oxley Act of 2002 and Rules 10A-3 and 10C-
1 of the Act, Section 303A does not apply to some listed companies.\11\
The Commission found that Section 303A of the LCM was consistent with
the Act and the rules and regulations thereunder applicable to a
national securities exchange.\12\ Accordingly, the Exchange is
proposing to delete the last sentence of Rule 5.1(a)(1).
---------------------------------------------------------------------------
\10\ NYSE Listed Company Manual, https://nysemanual.nyse.com/LCM/Sections/.
\11\ See Rule 10C-1(b)(5) under the Act allows national
securities exchanges to exempt from the requirements of Rule 10C-1
certain categories of issuers, as the national securities exchange
determines is appropriate, taking into consideration, among other
relevant factors, the potential impact of such requirements on
smaller reporting issuers.
\12\ See Securities Exchange Act Release No. 48745 (November 4,
2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33).
---------------------------------------------------------------------------
Deletion of Obsolete Listing Rules for ETPs
The Exchange also proposes to delete certain listing rules that
would be superseded by the ETP listing and trading requirements in
Rules 5P and 8P.
As discussed above, the Exchange is proposing today to list certain
ETPs under Rules 5P and 8P. In connection with this proposed change,
the Exchange is also proposing to delete certain ETP listing rules that
are not currently used. Because the Exchange only intends to list ETPs
under Rules 5P and 8P, it proposes to delete the following rules:
Rule 414 (Index and Currency Warrants);
Rule 1100 (Investment Company Units);
Rules 1200-1202 (Trust Issued Receipts);
Rules 1300-1301 (Gold Shares);
Rules 1300A-1301A (Currency Trust Shares); and
Rules 1300B-1301B (Commodity Trust Shares).
LCM Section 703.15 (Foreign Currency Warrants and Currency
Index Warrants);
LCM Section 703.16 (Investment Company Units);
LCM Section 703.17 (Stock Index Warrants Listing
Standards);
LCM Section 703.20 (Trust Issued Receipts);
LCM Section 703.21 (Equity-Linked Debt Securities); and
LCM Section 703.22 (Equity Index-Linked Securities,
Commodity-Linked Securities and Currency-Linked Securities).
The Exchange is also proposing to make the following cross-
reference changes to the rules of the Exchange to correspond to the
above deletions:
First, the Exchange proposes to amend cross-references in
Supplementary Material .30 to Rule 36 because the initial and continued
listing and trading standards and definitions for (1) Investment
Company Units would now be described in Rule 5.2(j)(3), not in Section
703.16 of the LCM and (2) Trust Issued Receipts would now be described
in Rule 8.200, not in Rule 1200. Therefore, in Supplementary Material
.30 to Rule 36, the Exchange is proposing to change the cross-reference
to Section 703.16 of the LCM to Rule 5.2(j)(3), and the cross-reference
to Rule 1200 to Rule 8.200.
Second, the Exchange proposes to amend Rule 1400(2)(c) to
reflect the deletion of Section 703.21 of the LCM. Rule 1400(2)(c)
states that Debt Securities \13\ do not include securities
[[Page 31587]]
that, if listed on the Exchange, would have been listed under Section
703.21 of the LCM (Equity-Linked Debt Securities). Since the Exchange
is proposing to delete this section from the LCM, it is also proposing
to delete all cross-references to it in Rule 1400(2)(c). Further, to
account for the deletion of references to Section 703.21 of the LCM,
which pertains to equity-linked debt securities, the Exchange proposes
to clarify in Rule 1400(2)(c) that Debt Securities do not include
equity-linked debt securities listed under Rule 5P.
---------------------------------------------------------------------------
\13\ As used in Rule 1400, the term ``Debt Security'' or ``Debt
Securities'' means any unlisted note, bond, debenture or evidence of
indebtedness that is:
(1) Statutorily exempt from the registration requirements of
Section 12(b) of the Act, or
(2) eligible to be traded absent registration under Section
12(b) of the Act pursuant to the order granted by the Securities and
Exchange Commission in Exchange Act Release Number 34-54766
(November 16, 2006) (the ``2006 Order'').
---------------------------------------------------------------------------
Third, for the avoidance of doubt, the Exchange is also
proposing to include the following introductory preamble language at
the beginning of Section 7 of the LCM, which pertains to Listing
Applications and currently includes the relevant ETP listing rules of
the manual that the Exchange is proposing to delete:
``See Exchange Rules 5P and 8P for the initial and continued
listing and trading requirements for Exchange Traded Products (as
defined in Rule 1.1(bbb)).'' \14\
---------------------------------------------------------------------------
\14\ Rule 1.1(bbb) defines the term ``Exchange Traded Product''
to mean a security that meets the definition of ``derivative
securities product'' in Rule 19b-4(e) under the Securities Exchange
Act of 1934 and a ``UTP Exchange Traded Product to mean an Exchange
Traded Product that trades on the Exchange pursuant to unlisted
trading privileges.
---------------------------------------------------------------------------
Certain Changes To Conform Rules 5P and 8P to the Rules of NYSE
National
To conform the Exchange's rules to that of its affiliate, NYSE
National,\15\ the Exchange is proposing to delete all of the references
in Rules 5P and 8P that would imply that the initial and continued
listing standards contained in Rules 5P and 8P may apply to the trading
pursuant to UTP of such ETPs. In the National Rule Filing, NYSE
National stated that it does not believe that it is necessary for an
exchange that trades securities on a UTP basis to have listing rules
for ETPs.\16\ Accordingly, the Exchange proposes that clauses in Rules
5P and 8P that would make the initial and continued listing standards
contained in such rules apply not only to the listing of such ETPs, but
also to the trading of such ETPs pursuant to UTP (such as the clause
``whether by listing or pursuant to unlisted trading privileges'' when
referencing that such rule would apply to the listing of the relevant
ETP or the trading pursuant to UTP of such ETP), be deleted. In
conjunction therewith, the Exchange proposes to include the words
``listing and'' before the word ``trading'' in each of the rules from
which such clauses are deleted, so as to clarify that the rules would
apply to the listing and trading of such relevant ETP on the Exchange
once that ETP is listed on the Exchange.
---------------------------------------------------------------------------
\15\ See, Securities Exchange Act Release No. 83289 (May 17,
2018), 83 FR 23968 (May 23, 2018) (SR-NYSENat-2018-02) (the ``NYSE
National Rule Filing'').
\16\ Id.
---------------------------------------------------------------------------
In addition, consistent with rules approved for NYSE National in
the NYSE National Rule Filing, the Exchange is proposing to delete Rule
5.1(a)(2)(A), which currently requires the Exchange to 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.\17\ To
account for this deleted sub-paragraph, the Exchange is also proposing
to re-number each of the sub-paragraphs in Rule 5.1(a)(2).
---------------------------------------------------------------------------
\17\ Id.
---------------------------------------------------------------------------
The Exchange believes that it is unnecessary for an exchange to
apply initial and continued listing rules to ETPs it trades pursuant to
UTP. 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. Because the Exchange would not be in
a position to enforce any ETP listing rules, the Exchange does not
believe it is necessary to have such rules. Similarly, the Exchange
does not believe it is necessary for a non-listing venue to file a Form
19b-4(e) if it begins trading an ETP on a UTP basis. Rule 19b-4(e)(1)
under the Act refers to the ``listing and trading'' of a ``new
derivative securities product.'' \18\ 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 to trade such product on
a UTP basis pursuant to Rule 12f-2 under the Act.\19\
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(e).
\19\ 17 CFR 240.12f-2.
---------------------------------------------------------------------------
Finally, the Exchange proposes to amend Rule 5.1(a)(2)(D) to
conform to the comparable NYSE National rule. Both NYSE National's and
the Exchange's rules pertaining to trading halts are in Rule 7.18. Like
NYSE National, the Exchange proposes to halt trading in a UTP Exchange
Traded Product as provided for in Rule 7.18. Accordingly, the Exchange
proposes to delete the rule text in paragraph (D) of Rule 5.1(a)(2)
that is duplicative of trading halt authority in Rule 7.18. The
Exchange also proposes to add a cross reference stating that the
Exchange would halt trading in a UTP ETP as provided for in Rule
7.18.\20\
---------------------------------------------------------------------------
\20\ Paragraph (D) of Rule 5.1(a)(2) would become paragraph (C)
when paragraph (A) to Rule 5.1(a)(2) is deleted, and all the sub-
paragraphs of Rule 5.1(a)(2) are re-numbered accordingly, as
described above.
---------------------------------------------------------------------------
Listing ETPs on the Exchange & Surveillance
The Exchange represents that listed ETPs would be subject to the
existing trading surveillances administered by the Exchange for ETPs
trading UTP, as well as cross-market surveillances administered by the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws. The Exchange represents that these
procedures are adequate to properly monitor the Exchange's listing and
trading of ETPs in all trading sessions and to deter and detect
violations of Exchange rules and federal securities laws applicable to
trading on the Exchange.\21\
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\21\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
relevant parties for relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in ETPs, as well as certain
other securities and financial instruments underlying such ETPs, with
other markets and other entities that are members of the Intermarket
Surveillance Group (``ISG''). The Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading information regarding trading in
ETPs and financial instruments from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in
ETPs, as well as certain other securities and financial instruments
underlying such ETPs from markets and other entities that are members
of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement (``CSSA'').
Further, the Exchange's affiliate, NYSE Arca, currently lists ETPs
pursuant to rules that are substantially
[[Page 31588]]
identical to Rules 5P and 8P.\22\ NYSE Arca conducts initial and
continued listing reviews for ETPs listed on its exchange. The Exchange
represents that the initial and continued listing reviews of ETPs
listed on the Exchange will be conducted in the same manner as they are
on NYSE Arca.
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\22\ See NYSE ETP Listing Rules Filing, supra note 5. Rules 5P
and 8P are based on the rules of NYSE Arca.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\23\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\24\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, 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 by
providing for the listing of Exchange Traded Products, subject to
consistent and reasonable standards. Accordingly, the proposed rule
change would contribute to the protection of investors and the public
interest because it may provide a better listing and trading
environment for investors and, generally, encourage greater competition
between markets.
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\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is consistent
with the above principles. By providing for the listing of ETPs, the
Exchange believes its proposal would lead to the addition of liquidity
to the broader market and to increased competition among the existing
group of liquidity providers. The Exchange also believes that, by so
doing, the proposed rule change would encourage the additional
utilization of, and interaction with, the exchange market, and provide
market participants with improved price discovery, increased liquidity,
more competitive quotes and greater price improvement for listed ETPs.
The Exchange further believes that listing ETPs would help raise
investors' confidence in the fairness of the market, generally, and
their transactions in particular. As such, the listing of ETPs would
foster cooperation and coordination with persons engaged in
facilitating securities transactions, enhance the mechanism of a free
and open market, and promote fair and orderly markets in securities on
the Exchange.
The proposal is also designed to promote just and equitable
principles of trade by way of initial and continued listing standards
which, if not maintained, would result in the discontinuation of
trading in the affected products. These requirements, together with the
applicable Exchange trading rules (which apply to the proposed
products), ensure that no investor would have an unfair advantage over
another respecting the trading of the subject products. On the
contrary, all investors would have the same access to, and use of,
information concerning the specific products and trading in the
specific products, all to the benefit of public customers and the
marketplace as a whole.
Furthermore, the proposal is designed to remove impediments to and
perfect the mechanism of a free and open market and a national market
system by adopting rules that would lead ultimately to the listing and
trading of new products on the Exchange. The proposed changes do
nothing more than match Exchange rules with what is currently available
on other exchanges for the listing of ETPs. The Exchange believes that
by allowing for listing opportunities on the Exchange that are already
allowed by rule on another market, the proposal would offer another
venue for listing ETPs and thereby promote broader competition among
exchanges. The Exchange believes that individuals and entities
permitted to list ETPs on the Exchange should enhance competition
within the mechanism of a free and open market and a national market
system, and customers and other investors in the national market system
should benefit from more depth and liquidity in the market for the
ETPs.
The proposed change is not designed to address any competitive
issue, but rather to allow the Exchange to list ETPs. These rules are
identical to the rules of NYSE Arca (other than with respects to
certain non-substantive and technical amendments described above),
which currently lists ETPs on its exchange pursuant to these rules.
These proposed rules support competition by allowing for ETP listings
on the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Since Rules 5P and 8P are
already adopted on the Exchange pursuant to approval from the
Commission, the Exchange believes that the proposed rule change to
allow for these rules to also apply to the listing of ETPs on the
Exchange, would have no impact on competition. To the contrary,
limiting Rules 5P and 8P to only apply to the trading pursuant to UTP
of ETPs, limits competition in that there are certain products that the
Exchange cannot list, while other exchanges, with identical listing
rules, can list such products. Thus, approval of the proposed rule
change would promote competition because it would allow the Exchange to
compete with other national securities exchanges for the listing and
trading of ETPs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2018-30 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2018-30. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use
[[Page 31589]]
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-NYSE-2018-30 and should be submitted on
or before July 27, 2018.
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\25\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14465 Filed 7-5-18; 8:45 am]
BILLING CODE 8011-01-P
