Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend NYSE Arca Rule 5.2-E(j)(6) Relating to Equity Index-Linked Securities Listing Standards Set Forth in NYSE Arca Rule 5.2-E(j)(6)(B)(I), 49437-49440 [2018-21234]
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Federal Register / Vol. 83, No. 190 / Monday, October 1, 2018 / Notices
should be submitted on or before
October 22,2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–21231 Filed 9–28–18; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–84279; File No. SR–
NYSEARCA–2018–67]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Amend NYSE Arca
Rule 5.2–E(j)(6) Relating to Equity
Index-Linked Securities Listing
Standards Set Forth in NYSE Arca Rule
5.2–E(j)(6)(B)(I)
September 25, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 10, 2018, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Rule 5.2–E(j)(6) relating to
Equity Index-Linked Securities listing
standards set forth in NYSE Arca Rule
5.2–E(j)(6)(B)(I). The proposed 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
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
14 17
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.
NYSE Arca Rule 5.2–E(j)(6) relates to
listing and trading of Equity IndexLinked Securities, Commodity-Linked
Securities, Currency-Linked Securities,
Fixed Income Index-Linked Securities,
Futures-Linked Securities and
Multifactor Index-Linked Securities
(collectively, ‘‘Index-Linked
Securities’’). These securities are
frequently referred to as ‘‘ExchangeTraded Notes’’ or ‘‘ETNs.’’ NYSE Arca
Rule 5.2–E(j)(6)(B)(I) sets forth listing
standards applicable to Equity IndexLinked Securities.4
The Exchange proposes to amend
NYSE Arca Rule 5.2–E (j)(6)(B)(I)
relating to criteria applicable to
components of an index underlying an
issue of Equity Index-Linked Securities,
as described below.5
The Exchange proposes to amend
NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(b)(v)
to provide that all component securities
of an index underlying an issue of
Equity Index-Linked Securities shall be
either (1) U.S. Component Stocks (as
4 Equity Index-Linked Securities are securities
that provide for the payment at maturity based on
the performance of an underlying index or indexes
of equity securities, securities of closed-end
management investment companies registered
under the Investment Company Act of 1940 (‘‘1940
Act’’) and/or Investment Company Units (as
described in NYSE Arca Rule 5.2–E(j)(3)).
5 Rule 5.2–E(j)(6)(B)(I)(1)(b)(v) provides that all
component securities shall be either:
(A) Securities (other than foreign country
securities and American Depository Receipts
(‘‘ADRs’’)) that are (x) issued by a 1934 Act
reporting company or by an investment company
registered under the 1940 Act, which in each case
is listed on a national securities exchange, and (y)
an ‘‘NMS stock’’ (as defined in Rule 600 of SEC
Regulation NMS); or
(B) Foreign country securities or ADRs, provided
that foreign country securities or foreign country
securities underlying ADRs having their primary
trading market outside the United States on foreign
trading markets that are not members of the
Intermarket Surveillance Group (‘‘ISG’’) or parties
to comprehensive surveillance sharing agreements
with the Exchange will not in the aggregate
represent more than 50% of the dollar weight of the
index, and provided further that:
(i) the securities of any one such market do not
represent more than 20% of the dollar weight of the
index, and
(ii) the securities of any two such markets do not
represent more than 33% of the dollar weight of the
index.
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49437
described in Rule 5.2–E(j)(3)) 6 that are
listed on a national securities exchange
and are NMS Stocks as defined in Rule
600 of Regulation NMS under the
Exchange Act; 7 or (2) Non-U.S.
Component Stocks (as described in Rule
5.2–E(j)(3)) 8 that are listed and traded
on an exchange that has last-sale
reporting.9 The proposed amendment,
therefore, would delete from Rule 5.2–
E (j)(6)(B)(I)(1)(b)(v) the requirement
that foreign country securities or foreign
country securities underlying ADRs in
an index satisfy requirements that a
specified percentage of the dollar weight
of the index have primary trading
markets that are members of ISG or
primary trading markets that are parties
to comprehensive surveillance sharing
agreements with the Exchange.
The proposed amendment would
eliminate a requirement for Equity
Index-Linked Securities that is not
applicable to Investment Company
Units and Managed Fund Shares with
respect to Non-U.S. Component Stock
index components or holdings of NonU.S. Component Stocks. The
amendment, therefore, would afford
greater flexibility to ETN issuers to list
securities that include foreign stocks
and to better compete with issuers of
Investment Company Units and
Managed Fund Shares, which are not
subject to this requirement.
The Exchange also proposes to amend
NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(a) by
increasing the required minimum
number of components in an index
underlying Equity Index-Linked
Securities that includes Non-U.S.
Component Stocks.10 The Exchange
6 Rule 5.2–E(j)(3) provides that the term ‘‘US
Component Stock’’ shall mean an equity security
that is registered under Sections 12(b) or 12(g) of
the Securities Exchange Act of 1934 or an American
Depositary Receipt, the underlying equity security
of which is registered under Sections 12(b) or 12(g)
of the Securities Exchange Act of 1934.
7 The term ‘‘Exchange Act’’ is defined in Rule
1.1(q) to mean the Securities Exchange Act of 1934,
as amended.
8 Rule 5.2–E(j)(3) provides that the term ‘‘Non-US
Component Stock’’ shall mean an equity security
that is not registered under Sections 12(b) or 12(g)
of the Securities Exchange Act of 1934 and that is
issued by an entity that (a) is not organized,
domiciled or incorporated in the United States, and
(b) is an operating company (including Real Estate
Investment Trusts (REITS) and income trusts, but
excluding investment trusts, unit trusts, mutual
funds, and derivatives).
9 The text of proposed NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(b)(v)(1) is comparable to the
requirement for US Component Stocks in
Commentary .01(a)(A)(5) to NYSE Arca Rule 5.2–
E(j)(3). The text of proposed NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(b)(v)(2) is comparable to the
requirement for Non-US Component Stocks in
Commentary .01(a)(B)(5) to NYSE Arca Rule 5.2–
E(j)(3).
10 NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(a) provides
that each underlying index is required to have at
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proposes that an underlying index
consisting only of U.S. Component
Stocks (as described in Rule 5.2–E(j)(3))
that are listed on a national securities
exchange and are NMS Stocks as
defined in Rule 600 of Regulation NMS
under the Exchange Act is required to
have at least ten (10) component
securities; and an underlying index
consisting of (a) only Non-U.S.
Component Stocks (as described in Rule
5.2–E(j)(3)), or (b) both U.S. Component
Stocks and Non-U.S. Component Stocks,
is required to have at least twenty (20)
component securities.
The Exchange believes the
amendments are appropriate and in the
public interest in that Equity IndexLinked Securities would continue to be
subject to numerical criteria for index
components underlying Equity IndexLinked Securities that are comparable in
significant respects to the criteria for
U.S. Component Stocks and Non-U.S.
Component Stocks in Commentary .01
to NYSE Arca Rule 5.2–E(j)(3) for
Investment Company Units and
Commentary .01(a) to NYSE Arca Rule
8.600–E for Managed Fund Shares.11
For example, Rule 5.2–
E(j)(6)(B)(I)(1)(b)(ii) provides that
component stocks that in the aggregate
account for at least 90% of the weight
of the index each shall have a minimum
global monthly trading volume of
1,000,000 shares, or minimum global
notional volume traded per month of
$25,000,000, averaged over the last six
months.12 In comparison, Commentary
.01(a)(B)(2) to Rule 5.2–E(j)(3)
applicable to an international or global
index or portfolio provides that
component stocks (excluding Derivative
Securities Products) that in the
aggregate account for at least 70% of the
US and Non-US Component Stocks
portions of the weight of the index or
portfolio (excluding such Derivative
Securities Products) each shall have a
minimum global monthly trading
volume of 250,000 shares, or minimum
global notional volume traded per
least ten (10) component securities; provided,
however, that there shall be no minimum number
of component securities if one or more issues of
Derivative Securities Products (i.e., Investment
Company Units (as described in Rule 5.2–E(j)(3))
and securities described in Section 2 of Rule 8) or
Index-Linked Securities (as described in Rule 5.2–
E(j)(6)), constitute, at least in part, component
securities underlying an issue of Equity IndexLinked Securities.
11 Commentary .01 to NYSE Arca Rule 5.2–E(j)(3)
and Commentary .01(a) to NYSE Arca Rule 8.600–
E provide generic initial and continued listing
criteria applicable to an equity index or portfolio
underlying Investment Company Units and
Managed Fund Shares, respectively.
12 Rule 5.2–E(j)(6)(B)(I)(1)(b)(ii) excludes
Derivative Securities Products and Index-Linked
Securities from these provisions.
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month of $25,000,000, averaged over the
last six months.13
In addition, Rule 5.2–
E(j)(6)(B)(I)(1)(b)(iii) provides that no
underlying component security will
represent more than 25% of the dollar
weight of the index, and, to the extent
applicable, the five highest dollar
weighted component securities in the
index do not in the aggregate account
for more than 50% of the dollar weight
of the index (60% for an index
consisting of fewer than 25 component
securities).14 In comparison,
Commentary .01(a)(B)(3) to Rule 5.2–
E(j)(3) provides that the most heavily
weighted component stock (excluding
Derivative Securities Products) shall not
exceed 25% of the combined US and
Non-US Component Stocks portions of
the weight of the index or portfolio, and,
to the extent applicable, the five most
heavily weighted component stocks
(excluding Derivative Securities
Products) shall not exceed 60% of the
combined US and Non-US Component
Stocks portions of the weight of the
index or portfolio.15
With respect to the proposed
amendment to NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(a), an increase in the
required minimum number of
components in an index that includes
Non-U.S. Component Stocks is
comparable to the requirement
applicable to equity indexes underlying
series of Investment Company Units
listed under Commentary .01 to NYSE
Arca Rule 5.2–E(j)(3), and would
provide for greater diversification
among index components.16
The Exchange notes that, in originally
approving the generic listing criteria in
13 Commentary .01(a)(2) (B) to Rule 8.600–E
provides that Non-U.S. Component Stocks each
shall have a minimum global monthly trading
volume of 250,000 shares, or minimum global
notional volume traded per month of $25,000,000,
averaged over the last six months.
14 Rule 5.2–E(j)(6)(B)(I)(1)(b)(iii) excludes
Derivative Securities Products and Index-Linked
Securities from these provisions.
15 See also Commentary .01(a)(2)(C) to NYSE Arca
Rule 8.600–E, which provides that the most heavily
weighted Non-U.S. Component stock shall not
exceed 25% of the equity weight of the portfolio,
and, to the extent applicable, the five most heavily
weighted Non-U.S. Component Stocks shall not
exceed 60% of the equity weight of the portfolio.
16 See Commentary .01(a)(B)(4) to NYSE Arca
Rule 5.2–E(j)(3). See also Commentary .01(a)(2)(D)
to NYSE Arca Rule 8.600–E, which provides that,
where the equity portion of the portfolio includes
Non-U.S. Component Stocks, the equity portion of
the portfolio shall include a minimum of 20
component stocks; provided, however, that there
shall be no minimum number of component stocks
if (i) one or more series of Derivative Securities
Products or Index-Linked Securities constitute, at
least in part, components underlying a series of
Managed Fund Shares, or (ii) one or more series of
Derivative Securities Products or Index-Linked
Securities account for 100% of the equity weight of
the portfolio of a series of Managed Fund Shares.
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Commentary .01(a)(B) to NYSE Arca
Rule 5.2–E(j)(3) applicable to indexes
that include only non-U.S. Component
Stocks or both U.S. and Non-U.S.
Component Stocks in an index or
portfolio underlying a series of
Investment Company Units, the
Commission stated that ‘‘[t]hese
requirements are designed, among other
things, to require that components of an
index or portfolio underlying the ETF
are adequately capitalized and
sufficiently liquid, and that no one
security dominates the index.’’ 17 In
addition, in approving the Exchange’s
generic rules relating to listing of IndexLinked Securities, the Commission
found that the rules’ requirements
should help ensure that index
components of the applicable reference
asset are adequately capitalized,
sufficiently liquid, and diversified, and
that these requirements should
significantly minimize the potential for
manipulation.18
In addition to the above-referenced
weighting and trading volume criteria,
Rule 5.2–E(j)(6)(B)(I)(1)(b)(iv) provides
that 90% of the index’s numerical value
and at least 80% of the total number of
17 See Securities Exchange Act Release No. 55621
(April 12, 2007), 72 FR 19571 (April 18, 2007) (SR–
NYSEArca–2006–86) (Notice of Filing of Proposed
Rule Change and Amendments No. 1, 2, 3, and 4
Thereto and Order Granting Accelerated Approval
of the Proposed Rule Change as Modified by
Amendments No. 2 and 4 Thereto Adopting Generic
Listing Standards for Exchange-Traded Funds
Based on International or Global Indexes or Indexes
Described in Exchange Rules Previously Approved
by the Commission as Underlying Benchmarks for
Derivative Securities). See also Securities Exchange
Act Release Nos. 54739 (November 9, 2006), 71 FR
61811 (October 19, 2006) (SR–Amex–2006–78)
(Order Granting Accelerated Approval to Proposed
Rule Change and Amendment No. 1 Thereto and
Notice of Filing and Order Granting Accelerated
Approval to Amendment No. 2 Thereto Relating to
Generic Listing Standards for Series of Portfolio
Depositary Receipts and Index Fund Shares Based
on International or Global Indexes); 55113 (January
17, 2007), 72 FR 3179 (January 24, 2007) (SR–
NYSE–2006–101) (Notice of Filing and Order
Granting Accelerated Approval of a Proposed Rule
Change as Modified by Amendments No. 1 and 2
Thereto Adopting Generic Listing Standards for
Exchange-Traded Funds Based on International or
Global Indexes or Indexes Previously Approved by
the Commission as Underlying Benchmarks for
Derivative Securities).
18 See, e.g., Securities Exchange Act Release No.
52204 (August 3, 2005) 70 FR 46559 (August 10,
2005) (SR–PCX–2005–63) (Notice of Filing and
Order Granting Accelerated Approval of Proposed
Rule Change Relating to the Adoption of Generic
Listing Standards for Index-Linked Securities), in
which the Commission stated that ‘‘PCX’s proposed
listing criteria include minimum market
capitalization, monthly trading volume, and relative
weighting requirements for the Index Securities.
These requirements are designed to ensure that the
trading markets for index components underlying
Index Securities are adequately capitalized and
sufficiently liquid, and that no one stock dominates
the index. The Commission believes that these
requirements should significantly minimize the
potential for manipulation.’’
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Federal Register / Vol. 83, No. 190 / Monday, October 1, 2018 / Notices
component securities will meet the then
current criteria for standardized option
trading set forth in NYSE Arca Rule 5.3–
O.19 An index is not subject to this
requirement if (a) no underlying
component security represents more
than 10% of the dollar weight of the
index and (b) the index has a minimum
of 20 components.20
Like the requirements applicable to an
index or portfolio underlying
Investment Company Units noted above,
the proposed amendments to NYSE
Arca Rule 5.2–E(j)(6)(B)(I)(1)(b)(v)
would subject an index or indexes
underlying an issue of ETNs to specified
minimum liquidity and market value
requirements. Index components would
continue to be subject to the weighting
and diversification requirements of
NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(b)(iii), which prevent any
stock or small group of stocks from
dominating a fund’s portfolio. The
proposed amendments to NYSE Arca
Rule 5.2–E(j)(6)(B)(I)(1)(b)(v) would
provide additional flexibility to series of
Equity Index-Linked Securities based on
an index that includes Non-U.S.
Component Stocks while continuing to
apply substantial minimum criteria
relating to liquidity, market
capitalization and diversification.
The Exchange also proposes to amend
the phrase ‘‘Section 19(b)(2) of the Act’’
to ‘‘Section 19(b)(2) of the Exchange
Act’’ in NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(b)(1) in order to conform
to usage in NYSE Arca Rule 1.1(q).21
The Exchange proposes further to make
a grammatical change to NYSE Arca
Rule 5.2–E(j)(6)(B)(I)(1)(b)(2) by deleting
as repetitive the words ‘‘the index or
indexes.’’
Other than the changes proposed
above, no other changes are being
proposed to NYSE Arca Rule 5.2–E(j)(6)
and all other requirements applicable to
Index-Linked Securities will continue to
apply.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,22 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,23 in particular, because it is
designed to prevent fraudulent and
manipulative acts and practices, to
19 NYSE Arca Rule 5.3–O sets forth the criteria to
be met by underlying securities with respect to
which put or call option contracts are approved for
listing and trading on the Exchange.
20 Rule 5.2–E(j)(6)(B)(I)(1)(b)(iv) excludes
Derivative Securities Products and Index-Linked
Securities from these provisions.
21 See note 7, supra.
22 15 U.S.C. 78f(b).
23 15 U.S.C. 78f(b)(5).
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promote just and equitable principles of
trade, to remove impediments to, and
perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest.
The Exchange believes the
amendment is appropriate and in the
public interest in that Equity IndexLinked Securities would continue to be
subject to numerical criteria for index
components underlying Equity IndexLinked Securities that are comparable in
significant respects to the criteria for
U.S. Component Stocks and Non-U.S.
Component Stocks in Commentary .01
to NYSE Arca Rule 5.2–E(j)(3) for
Investment Company Units and
Commentary .01(a) to NYSE Arca Rule
8.600–E for Managed Fund Shares. Rule
5.2–E(j)(6)(B)(I)(1)(b)(ii) provides that
component stocks that in the aggregate
account for at least 90% of the weight
of the index each shall have a minimum
global monthly trading volume of
1,000,000 shares, or minimum global
notional volume traded per month of
$25,000,000, averaged over the last six
months. In addition, Rule 5.2–
E(j)(6)(B)(I)(1)(b)(iii) provides that no
underlying component security will
represent more than 25% of the dollar
weight of the index, and, to the extent
applicable, the five highest dollar
weighted component securities in the
index do not in the aggregate account
for more than 50% of the dollar weight
of the index (60% for an index
consisting of fewer than 25 component
securities). As noted above, the
Commission, in approving the
Exchange’s generic rules relating to
listing of Index-Linked Securities, found
that the rules’ requirements should help
ensure that index components of the
applicable reference asset are
adequately capitalized, sufficiently
liquid, and diversified, and that these
requirements should significantly
minimize the potential for
manipulation.24
The proposed amendment would
eliminate a requirement for Equity
Index-Linked Securities that is not
applicable to Investment Company
Units and Managed Fund Shares with
respect to Non-U.S. Component Stock
index components or holdings of NonU.S. Component Stocks. The
amendment, therefore, would afford
greater flexibility to ETN issuers to list
securities that include foreign stocks
and to better compete with issuers of
Investment Company Units and
Managed Fund Shares.
With respect to the proposed
amendment to NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(a), an increase in the
24 See
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note 17, supra.
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49439
required minimum number of
components in an index that includes
Non-U.S. Component Stocks is
comparable to the requirement
applicable to equity indexes underlying
series of Investment Company Units
listed under Commentary .01 to NYSE
Arca Rule 5.2–E(j)(3), and would
provide for greater diversification
among index components.25
The proposed amendment to change
the phrase ‘‘Section 19(b)(2) of the Act’’
to ‘‘Section 19(b)(2) of the Exchange
Act’’ in NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(b)(1) conforms to usage in
NYSE Arca Rule 1.1(q). The proposed
deletion of the words ‘‘the index or
indexes’’ in NYSE Arca Rule 5.2–
E(j)(6)(B)(I)(1)(b)(2) eliminates an
unnecessary repetition.
The Exchange represents that trading
in ETNs is subject to the existing trading
surveillances, administered by the
Financial Industry Regulatory Authority
(‘‘FINRA’’) on behalf of the Exchange, or
by regulatory staff 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 Exchange
trading of ETNs in all Exchange trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.26
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in Exchange-listed ETNs with
other markets and other entities that are
members of the ISG, and the Exchange
or FINRA, on behalf of the Exchange, or
both, may obtain trading information
regarding trading in ETNs from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in such securities and
financial instruments from markets and
other entities that are members of ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement.
For these reasons, the Exchange
believes that the proposal is consistent
with the Act.
25 See Commentary .01(a)(B)(4) to NYSE Arca
Rule 5.2–E(j)(3).
26 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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Federal Register / Vol. 83, No. 190 / Monday, October 1, 2018 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,27 the Exchange does not believe
that the proposed rule change will
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Instead, the Exchange believes that the
proposed change will encourage
competition by accommodating listing
and trading of additional issues of
Equity Index-Linked Securities and will
permit ETN issuers to better compete
with issuers of Investment Company
Units and Managed Fund Shares.
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 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 self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the 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:
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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
NYSEArca–2018–67 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 NYSEArca–2018–67. 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
a.m. and 3 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 NYSEArca–
2018–67, and should be submitted on or
before October 22, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–21234 Filed 9–28–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84283; File No. SR–GEMX–
2018–29]
Self-Regulatory Organizations; Nasdaq
GEMX, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Relocate the
Exchange’s Schedule of Fees
September 25, 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
September 12, 2018, Nasdaq GEMX,
LLC (‘‘GEMX’’ or ‘‘Exchange’’) filed
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
27 15
U.S.C. 78f(b)(8).
VerDate Sep<11>2014
17:50 Sep 28, 2018
Jkt 247001
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
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 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 (a) relocate
the GEMX Schedule of Fees and current
Rule 209 to the Exchange’s rulebook’s
(‘‘Rulebook’’) shell structure,3 and (b)
make conforming cross-reference
changes throughout the Rulebook.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqgemx.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
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to relocate the
entire GEMX Schedule of Fees and Rule
209 to the Exchange’s shell structure;
specifically, the Exchange will relocate
the aforementioned rules to the Options
7 (‘‘Pricing Schedule’’) section of the
shell. In addition, the Exchange will
make conforming cross-reference
changes throughout the Rulebook.
(a) Relocation of Rules
As indicated, the Exchange, as part of
its continued effort to promote
3 In 2017, the Exchange added a shell structure to
its Rulebook with the purpose of improving
efficiency and readability and to align its rules
closer to those of its five sister exchanges, The
Nasdaq Stock Market LLC; Nasdaq BX, Inc.; Nasdaq
PHLX LLC; Nasdaq ISE, LLC; and Nasdaq MRX,
LLC (‘‘Affiliated Exchanges’’). See Securities
Exchange Act Release No. 82171 (November 29,
2017), 82 FR 57516 (December 5, 2017) (SR–GEMX–
2017–54).
E:\FR\FM\01OCN1.SGM
01OCN1
]]>Agencies
[Federal Register Volume 83, Number 190 (Monday, October 1, 2018)]
[Notices]
[Pages 49437-49440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21234]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84279; File No. SR-NYSEARCA-2018-67]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend NYSE Arca Rule 5.2-E(j)(6) Relating to
Equity Index-Linked Securities Listing Standards Set Forth in NYSE Arca
Rule 5.2-E(j)(6)(B)(I)
September 25, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 10, 2018, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Rule 5.2-E(j)(6) relating
to Equity Index-Linked Securities listing standards set forth in NYSE
Arca Rule 5.2-E(j)(6)(B)(I). The proposed 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
NYSE Arca Rule 5.2-E(j)(6) relates to listing and trading of Equity
Index-Linked Securities, Commodity-Linked Securities, Currency-Linked
Securities, Fixed Income Index-Linked Securities, Futures-Linked
Securities and Multifactor Index-Linked Securities (collectively,
``Index-Linked Securities''). These securities are frequently referred
to as ``Exchange-Traded Notes'' or ``ETNs.'' NYSE Arca Rule 5.2-
E(j)(6)(B)(I) sets forth listing standards applicable to Equity Index-
Linked Securities.\4\
---------------------------------------------------------------------------
\4\ Equity Index-Linked Securities are securities that provide
for the payment at maturity based on the performance of an
underlying index or indexes of equity securities, securities of
closed-end management investment companies registered under the
Investment Company Act of 1940 (``1940 Act'') and/or Investment
Company Units (as described in NYSE Arca Rule 5.2-E(j)(3)).
---------------------------------------------------------------------------
The Exchange proposes to amend NYSE Arca Rule 5.2-E (j)(6)(B)(I)
relating to criteria applicable to components of an index underlying an
issue of Equity Index-Linked Securities, as described below.\5\
---------------------------------------------------------------------------
\5\ Rule 5.2-E(j)(6)(B)(I)(1)(b)(v) provides that all component
securities shall be either:
(A) Securities (other than foreign country securities and
American Depository Receipts (``ADRs'')) that are (x) issued by a
1934 Act reporting company or by an investment company registered
under the 1940 Act, which in each case is listed on a national
securities exchange, and (y) an ``NMS stock'' (as defined in Rule
600 of SEC Regulation NMS); or
(B) Foreign country securities or ADRs, provided that foreign
country securities or foreign country securities underlying ADRs
having their primary trading market outside the United States on
foreign trading markets that are not members of the Intermarket
Surveillance Group (``ISG'') or parties to comprehensive
surveillance sharing agreements with the Exchange will not in the
aggregate represent more than 50% of the dollar weight of the index,
and provided further that:
(i) the securities of any one such market do not represent more
than 20% of the dollar weight of the index, and
(ii) the securities of any two such markets do not represent
more than 33% of the dollar weight of the index.
---------------------------------------------------------------------------
The Exchange proposes to amend NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(b)(v) to provide that all component securities of an
index underlying an issue of Equity Index-Linked Securities shall be
either (1) U.S. Component Stocks (as described in Rule 5.2-E(j)(3)) \6\
that are listed on a national securities exchange and are NMS Stocks as
defined in Rule 600 of Regulation NMS under the Exchange Act; \7\ or
(2) Non-U.S. Component Stocks (as described in Rule 5.2-E(j)(3)) \8\
that are listed and traded on an exchange that has last-sale
reporting.\9\ The proposed amendment, therefore, would delete from Rule
5.2-E (j)(6)(B)(I)(1)(b)(v) the requirement that foreign country
securities or foreign country securities underlying ADRs in an index
satisfy requirements that a specified percentage of the dollar weight
of the index have primary trading markets that are members of ISG or
primary trading markets that are parties to comprehensive surveillance
sharing agreements with the Exchange.
---------------------------------------------------------------------------
\6\ Rule 5.2-E(j)(3) provides that the term ``US Component
Stock'' shall mean an equity security that is registered under
Sections 12(b) or 12(g) of the Securities Exchange Act of 1934 or an
American Depositary Receipt, the underlying equity security of which
is registered under Sections 12(b) or 12(g) of the Securities
Exchange Act of 1934.
\7\ The term ``Exchange Act'' is defined in Rule 1.1(q) to mean
the Securities Exchange Act of 1934, as amended.
\8\ Rule 5.2-E(j)(3) provides that the term ``Non-US Component
Stock'' shall mean an equity security that is not registered under
Sections 12(b) or 12(g) of the Securities Exchange Act of 1934 and
that is issued by an entity that (a) is not organized, domiciled or
incorporated in the United States, and (b) is an operating company
(including Real Estate Investment Trusts (REITS) and income trusts,
but excluding investment trusts, unit trusts, mutual funds, and
derivatives).
\9\ The text of proposed NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(b)(v)(1) is comparable to the requirement for US
Component Stocks in Commentary .01(a)(A)(5) to NYSE Arca Rule 5.2-
E(j)(3). The text of proposed NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(b)(v)(2) is comparable to the requirement for Non-
US Component Stocks in Commentary .01(a)(B)(5) to NYSE Arca Rule
5.2-E(j)(3).
---------------------------------------------------------------------------
The proposed amendment would eliminate a requirement for Equity
Index-Linked Securities that is not applicable to Investment Company
Units and Managed Fund Shares with respect to Non-U.S. Component Stock
index components or holdings of Non-U.S. Component Stocks. The
amendment, therefore, would afford greater flexibility to ETN issuers
to list securities that include foreign stocks and to better compete
with issuers of Investment Company Units and Managed Fund Shares, which
are not subject to this requirement.
The Exchange also proposes to amend NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(a) by increasing the required minimum number of
components in an index underlying Equity Index-Linked Securities that
includes Non-U.S. Component Stocks.\10\ The Exchange
[[Page 49438]]
proposes that an underlying index consisting only of U.S. Component
Stocks (as described in Rule 5.2-E(j)(3)) that are listed on a national
securities exchange and are NMS Stocks as defined in Rule 600 of
Regulation NMS under the Exchange Act is required to have at least ten
(10) component securities; and an underlying index consisting of (a)
only Non-U.S. Component Stocks (as described in Rule 5.2-E(j)(3)), or
(b) both U.S. Component Stocks and Non-U.S. Component Stocks, is
required to have at least twenty (20) component securities.
---------------------------------------------------------------------------
\10\ NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(a) provides that each
underlying index is required to have at least ten (10) component
securities; provided, however, that there shall be no minimum number
of component securities if one or more issues of Derivative
Securities Products (i.e., Investment Company Units (as described in
Rule 5.2-E(j)(3)) and securities described in Section 2 of Rule 8)
or Index-Linked Securities (as described in Rule 5.2-E(j)(6)),
constitute, at least in part, component securities underlying an
issue of Equity Index-Linked Securities.
---------------------------------------------------------------------------
The Exchange believes the amendments are appropriate and in the
public interest in that Equity Index-Linked Securities would continue
to be subject to numerical criteria for index components underlying
Equity Index-Linked Securities that are comparable in significant
respects to the criteria for U.S. Component Stocks and Non-U.S.
Component Stocks in Commentary .01 to NYSE Arca Rule 5.2-E(j)(3) for
Investment Company Units and Commentary .01(a) to NYSE Arca Rule 8.600-
E for Managed Fund Shares.\11\
---------------------------------------------------------------------------
\11\ Commentary .01 to NYSE Arca Rule 5.2-E(j)(3) and Commentary
.01(a) to NYSE Arca Rule 8.600-E provide generic initial and
continued listing criteria applicable to an equity index or
portfolio underlying Investment Company Units and Managed Fund
Shares, respectively.
---------------------------------------------------------------------------
For example, Rule 5.2-E(j)(6)(B)(I)(1)(b)(ii) provides that
component stocks that in the aggregate account for at least 90% of the
weight of the index each shall have a minimum global monthly trading
volume of 1,000,000 shares, or minimum global notional volume traded
per month of $25,000,000, averaged over the last six months.\12\ In
comparison, Commentary .01(a)(B)(2) to Rule 5.2-E(j)(3) applicable to
an international or global index or portfolio provides that component
stocks (excluding Derivative Securities Products) that in the aggregate
account for at least 70% of the US and Non-US Component Stocks portions
of the weight of the index or portfolio (excluding such Derivative
Securities Products) each shall have a minimum global monthly trading
volume of 250,000 shares, or minimum global notional volume traded per
month of $25,000,000, averaged over the last six months.\13\
---------------------------------------------------------------------------
\12\ Rule 5.2-E(j)(6)(B)(I)(1)(b)(ii) excludes Derivative
Securities Products and Index-Linked Securities from these
provisions.
\13\ Commentary .01(a)(2) (B) to Rule 8.600-E provides that Non-
U.S. Component Stocks each shall have a minimum global monthly
trading volume of 250,000 shares, or minimum global notional volume
traded per month of $25,000,000, averaged over the last six months.
---------------------------------------------------------------------------
In addition, Rule 5.2-E(j)(6)(B)(I)(1)(b)(iii) provides that no
underlying component security will represent more than 25% of the
dollar weight of the index, and, to the extent applicable, the five
highest dollar weighted component securities in the index do not in the
aggregate account for more than 50% of the dollar weight of the index
(60% for an index consisting of fewer than 25 component
securities).\14\ In comparison, Commentary .01(a)(B)(3) to Rule 5.2-
E(j)(3) provides that the most heavily weighted component stock
(excluding Derivative Securities Products) shall not exceed 25% of the
combined US and Non-US Component Stocks portions of the weight of the
index or portfolio, and, to the extent applicable, the five most
heavily weighted component stocks (excluding Derivative Securities
Products) shall not exceed 60% of the combined US and Non-US Component
Stocks portions of the weight of the index or portfolio.\15\
---------------------------------------------------------------------------
\14\ Rule 5.2-E(j)(6)(B)(I)(1)(b)(iii) excludes Derivative
Securities Products and Index-Linked Securities from these
provisions.
\15\ See also Commentary .01(a)(2)(C) to NYSE Arca Rule 8.600-E,
which provides that the most heavily weighted Non-U.S. Component
stock shall not exceed 25% of the equity weight of the portfolio,
and, to the extent applicable, the five most heavily weighted Non-
U.S. Component Stocks shall not exceed 60% of the equity weight of
the portfolio.
---------------------------------------------------------------------------
With respect to the proposed amendment to NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(a), an increase in the required minimum number of
components in an index that includes Non-U.S. Component Stocks is
comparable to the requirement applicable to equity indexes underlying
series of Investment Company Units listed under Commentary .01 to NYSE
Arca Rule 5.2-E(j)(3), and would provide for greater diversification
among index components.\16\
---------------------------------------------------------------------------
\16\ See Commentary .01(a)(B)(4) to NYSE Arca Rule 5.2-E(j)(3).
See also Commentary .01(a)(2)(D) to NYSE Arca Rule 8.600-E, which
provides that, where the equity portion of the portfolio includes
Non-U.S. Component Stocks, the equity portion of the portfolio shall
include a minimum of 20 component stocks; provided, however, that
there shall be no minimum number of component stocks if (i) one or
more series of Derivative Securities Products or Index-Linked
Securities constitute, at least in part, components underlying a
series of Managed Fund Shares, or (ii) one or more series of
Derivative Securities Products or Index-Linked Securities account
for 100% of the equity weight of the portfolio of a series of
Managed Fund Shares.
---------------------------------------------------------------------------
The Exchange notes that, in originally approving the generic
listing criteria in Commentary .01(a)(B) to NYSE Arca Rule 5.2-E(j)(3)
applicable to indexes that include only non-U.S. Component Stocks or
both U.S. and Non-U.S. Component Stocks in an index or portfolio
underlying a series of Investment Company Units, the Commission stated
that ``[t]hese requirements are designed, among other things, to
require that components of an index or portfolio underlying the ETF are
adequately capitalized and sufficiently liquid, and that no one
security dominates the index.'' \17\ In addition, in approving the
Exchange's generic rules relating to listing of Index-Linked
Securities, the Commission found that the rules' requirements should
help ensure that index components of the applicable reference asset are
adequately capitalized, sufficiently liquid, and diversified, and that
these requirements should significantly minimize the potential for
manipulation.\18\
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 55621 (April 12,
2007), 72 FR 19571 (April 18, 2007) (SR-NYSEArca-2006-86) (Notice of
Filing of Proposed Rule Change and Amendments No. 1, 2, 3, and 4
Thereto and Order Granting Accelerated Approval of the Proposed Rule
Change as Modified by Amendments No. 2 and 4 Thereto Adopting
Generic Listing Standards for Exchange-Traded Funds Based on
International or Global Indexes or Indexes Described in Exchange
Rules Previously Approved by the Commission as Underlying Benchmarks
for Derivative Securities). See also Securities Exchange Act Release
Nos. 54739 (November 9, 2006), 71 FR 61811 (October 19, 2006) (SR-
Amex-2006-78) (Order Granting Accelerated Approval to Proposed Rule
Change and Amendment No. 1 Thereto and Notice of Filing and Order
Granting Accelerated Approval to Amendment No. 2 Thereto Relating to
Generic Listing Standards for Series of Portfolio Depositary
Receipts and Index Fund Shares Based on International or Global
Indexes); 55113 (January 17, 2007), 72 FR 3179 (January 24, 2007)
(SR-NYSE-2006-101) (Notice of Filing and Order Granting Accelerated
Approval of a Proposed Rule Change as Modified by Amendments No. 1
and 2 Thereto Adopting Generic Listing Standards for Exchange-Traded
Funds Based on International or Global Indexes or Indexes Previously
Approved by the Commission as Underlying Benchmarks for Derivative
Securities).
\18\ See, e.g., Securities Exchange Act Release No. 52204
(August 3, 2005) 70 FR 46559 (August 10, 2005) (SR-PCX-2005-63)
(Notice of Filing and Order Granting Accelerated Approval of
Proposed Rule Change Relating to the Adoption of Generic Listing
Standards for Index-Linked Securities), in which the Commission
stated that ``PCX's proposed listing criteria include minimum market
capitalization, monthly trading volume, and relative weighting
requirements for the Index Securities. These requirements are
designed to ensure that the trading markets for index components
underlying Index Securities are adequately capitalized and
sufficiently liquid, and that no one stock dominates the index. The
Commission believes that these requirements should significantly
minimize the potential for manipulation.''
---------------------------------------------------------------------------
In addition to the above-referenced weighting and trading volume
criteria, Rule 5.2-E(j)(6)(B)(I)(1)(b)(iv) provides that 90% of the
index's numerical value and at least 80% of the total number of
[[Page 49439]]
component securities will meet the then current criteria for
standardized option trading set forth in NYSE Arca Rule 5.3-O.\19\ An
index is not subject to this requirement if (a) no underlying component
security represents more than 10% of the dollar weight of the index and
(b) the index has a minimum of 20 components.\20\
---------------------------------------------------------------------------
\19\ NYSE Arca Rule 5.3-O sets forth the criteria to be met by
underlying securities with respect to which put or call option
contracts are approved for listing and trading on the Exchange.
\20\ Rule 5.2-E(j)(6)(B)(I)(1)(b)(iv) excludes Derivative
Securities Products and Index-Linked Securities from these
provisions.
---------------------------------------------------------------------------
Like the requirements applicable to an index or portfolio
underlying Investment Company Units noted above, the proposed
amendments to NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(v) would subject
an index or indexes underlying an issue of ETNs to specified minimum
liquidity and market value requirements. Index components would
continue to be subject to the weighting and diversification
requirements of NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(iii), which
prevent any stock or small group of stocks from dominating a fund's
portfolio. The proposed amendments to NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(b)(v) would provide additional flexibility to series
of Equity Index-Linked Securities based on an index that includes Non-
U.S. Component Stocks while continuing to apply substantial minimum
criteria relating to liquidity, market capitalization and
diversification.
The Exchange also proposes to amend the phrase ``Section 19(b)(2)
of the Act'' to ``Section 19(b)(2) of the Exchange Act'' in NYSE Arca
Rule 5.2-E(j)(6)(B)(I)(1)(b)(1) in order to conform to usage in NYSE
Arca Rule 1.1(q).\21\ The Exchange proposes further to make a
grammatical change to NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(2) by
deleting as repetitive the words ``the index or indexes.''
---------------------------------------------------------------------------
\21\ See note 7, supra.
---------------------------------------------------------------------------
Other than the changes proposed above, no other changes are being
proposed to NYSE Arca Rule 5.2-E(j)(6) and all other requirements
applicable to Index-Linked Securities will continue to apply.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\22\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\23\ in particular, because 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, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes the amendment is appropriate and in the
public interest in that Equity Index-Linked Securities would continue
to be subject to numerical criteria for index components underlying
Equity Index-Linked Securities that are comparable in significant
respects to the criteria for U.S. Component Stocks and Non-U.S.
Component Stocks in Commentary .01 to NYSE Arca Rule 5.2-E(j)(3) for
Investment Company Units and Commentary .01(a) to NYSE Arca Rule 8.600-
E for Managed Fund Shares. Rule 5.2-E(j)(6)(B)(I)(1)(b)(ii) provides
that component stocks that in the aggregate account for at least 90% of
the weight of the index each shall have a minimum global monthly
trading volume of 1,000,000 shares, or minimum global notional volume
traded per month of $25,000,000, averaged over the last six months. In
addition, Rule 5.2-E(j)(6)(B)(I)(1)(b)(iii) provides that no underlying
component security will represent more than 25% of the dollar weight of
the index, and, to the extent applicable, the five highest dollar
weighted component securities in the index do not in the aggregate
account for more than 50% of the dollar weight of the index (60% for an
index consisting of fewer than 25 component securities). As noted
above, the Commission, in approving the Exchange's generic rules
relating to listing of Index-Linked Securities, found that the rules'
requirements should help ensure that index components of the applicable
reference asset are adequately capitalized, sufficiently liquid, and
diversified, and that these requirements should significantly minimize
the potential for manipulation.\24\
---------------------------------------------------------------------------
\24\ See note 17, supra.
---------------------------------------------------------------------------
The proposed amendment would eliminate a requirement for Equity
Index-Linked Securities that is not applicable to Investment Company
Units and Managed Fund Shares with respect to Non-U.S. Component Stock
index components or holdings of Non-U.S. Component Stocks. The
amendment, therefore, would afford greater flexibility to ETN issuers
to list securities that include foreign stocks and to better compete
with issuers of Investment Company Units and Managed Fund Shares.
With respect to the proposed amendment to NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(a), an increase in the required minimum number of
components in an index that includes Non-U.S. Component Stocks is
comparable to the requirement applicable to equity indexes underlying
series of Investment Company Units listed under Commentary .01 to NYSE
Arca Rule 5.2-E(j)(3), and would provide for greater diversification
among index components.\25\
---------------------------------------------------------------------------
\25\ See Commentary .01(a)(B)(4) to NYSE Arca Rule 5.2-E(j)(3).
---------------------------------------------------------------------------
The proposed amendment to change the phrase ``Section 19(b)(2) of
the Act'' to ``Section 19(b)(2) of the Exchange Act'' in NYSE Arca Rule
5.2-E(j)(6)(B)(I)(1)(b)(1) conforms to usage in NYSE Arca Rule 1.1(q).
The proposed deletion of the words ``the index or indexes'' in NYSE
Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(2) eliminates an unnecessary
repetition.
The Exchange represents that trading in ETNs is subject to the
existing trading surveillances, administered by the Financial Industry
Regulatory Authority (``FINRA'') on behalf of the Exchange, or by
regulatory staff 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 Exchange trading of ETNs in all Exchange trading sessions and
to deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange.\26\
---------------------------------------------------------------------------
\26\ 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.
---------------------------------------------------------------------------
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in Exchange-listed ETNs with
other markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in ETNs from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in such securities and financial instruments from
markets and other entities that are members of ISG or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
For these reasons, the Exchange believes that the proposal is
consistent with the Act.
[[Page 49440]]
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\27\ the Exchange
does not believe that the proposed rule change will impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act. Instead, the Exchange believes that the
proposed change will encourage competition by accommodating listing and
trading of additional issues of Equity Index-Linked Securities and will
permit ETN issuers to better compete with issuers of Investment Company
Units and Managed Fund Shares.
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\27\ 15 U.S.C. 78f(b)(8).
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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 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 self-regulatory
organization consents, the Commission will:
(A) By order approve or disapprove the 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 NYSEArca-2018-67 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 NYSEArca-2018-67. 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 a.m. and 3
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 NYSEArca-2018-67, and should be submitted
on or before October 22, 2018.
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\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21234 Filed 9-28-18; 8:45 am]
BILLING CODE 8011-01-P
