Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Adopt Rule 14.425, Which Would Require Companies Listed on the Exchange To Develop and Publish Certain Long-Term Policies, 33293-33296 [2019-14813]

Download as PDF Federal Register / Vol. 84, No. 134 / Friday, July 12, 2019 / Notices 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–CBOE–2019–032 and should be submitted on or before August 2, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–14815 Filed 7–11–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86327; File No. SR–LTSE– 2019–01] Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Adopt Rule 14.425, Which Would Require Companies Listed on the Exchange To Develop and Publish Certain Long-Term Policies July 8, 2019. jbell on DSK3GLQ082PROD with NOTICES 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 June 25, 2019, the Long-Term Stock Exchange, Inc. (‘‘LTSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, 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 Pursuant to the provisions of Section 19(b)(1) under the Securities Exchange Act of 1934 (‘‘Act’’),3 and Rule 19b–4 thereunder,4 the Exchange is filing with the Commission a proposed rule change to adopt new Rule 14.425 (Long-Term Policies), which would require companies listed on the Exchange to develop and publish certain policies that the Exchange believes will facilitate long-term focus and value creation. The text of the proposed rule change is available at the Exchange’s website at 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(1). 4 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 16:55 Jul 11, 2019 Jkt 247001 www.longtermstockexchange.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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization 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 on the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On May 10, 2019, the Commission granted the Exchange’s application for registration as a national securities exchange under Section 6 of the Act,5 including approval of rules applicable to the qualification, listing and delisting of companies on the Exchange. The Exchange is proposing to enhance its listing requirements by requiring companies listed on the Exchange (‘‘LTSE-Listed Issuers’’) to adopt and publish the following policies: A LongTerm Stakeholder Policy, a Long-Term Strategy Policy, a Long-Term Compensation Policy, a Long-Term Board Policy and a Long-Term Investor Policy, as described further below. These policies must be consistent with the set of principles described below. Background Many academics, commentators, market participants,6 as well as current 5 See Securities Exchange Act Release No. 85828 (May 10, 2019), 84 FR 21841 (May 15, 2019). 6 See, e.g., McKinsey & Company, McKinsey Global Institute, Measuring the Economic Impact of Short-Termism (February 2017), available at https:// www.mckinsey.com/∼/media/mckinsey/ global%20themes/long%20term%20capitalism/ where%20companies%20with%20a%20long%20 term%20view%20outperform%20their%20peers/ measuring-the-economic-impact-of-shorttermism.ashx (‘‘Our findings show that companies we classify as ‘long term’ outperform their shorterterm peers on a range of key economic and financial metrics.’’); Aspen Institute, American Prosperity Project (December 2016), available at https://assets. aspeninstitute.org/content/uploads/2017/01/ American-Prosperity-Project_Policy-Framework_ FINAL-1.3.17.pdf (‘‘Perverse incentives in our corporate governance system undermine the health of capitalism itself. Short-termism is baked into our tax system and is evident in the decisions, PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 33293 members of the Commission 7 have regulations and rules that govern corporations and capital markets. Changes to the rules of the game are a necessary step to rebuild the public’s trust in our economic system.’’); Martin Lipton, The New Paradigm (January 11, 2017), available at https:// www.wlrk.com/docs/thenewparadigm.pdf (‘‘The economic impact of a short-term myopic approach to managing and investing in businesses has become abundantly clear and has been generating rising levels of concern across a broad spectrum of stakeholders, including corporations, investors, policymakers and academics. The proposition that short-term financial activists and reactive corporate behavior spur sustainable improvements in corporate performance, and thereby systemically increase rather than undermine long-term economic prosperity and social welfare, has been overwhelmingly disproved by the real world experience of corporate decision-makers as well as a growing body of academic research.’’); Chief Justice Leo Strine, Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System (April 2017), available at https://ssrn.com/ abstract=2921901 (‘‘Rather, human investors would see great benefit from reforms encouraging the agents responsible for their money to adopt the long-term horizon held by their principals, i.e., human investors.’’); CECP and KKS Advisors, The Economic Significance of Long-Term Plans (November 2018), available at https://cecp.co/wpcontent/uploads/2018/11/Economic-SignificanceFinal-Report.pdf (‘‘Short-termism in capital markets has increasingly become a concern for both companies and the investor community’’ and explaining that the authors of the report ‘‘find evidence that better quality disclosure on themes like corporate purpose and competitive positioning is linked to larger capital market reactions’’); Travis Baratko, A Times-Mirror Conversation With Sen. Mark Warner, The Loudoun Times-Mirror (July 27, 2015), available at https://www.loudountimes.com/ news/article/a_loudoun_times_mirror_ conversation_with_sen._mark_warner432 (quoting Senator Mark Warner as noting that ‘‘[P]eople being investors who are only focused on short-termism, too often you can squeeze a quarterly profit out at the expense of a long-term value proposition.’’). 7 See, e.g., Chairman Jay Clayton, Statement Announcing SEC Staff Roundtable on Short-Term/ Long-Term Management of Public Companies, Our Periodic Reporting System and Regulatory Requirements (May 20, 2019), available at https:// www.sec.gov/news/public-statement/claytonannouncement-short-long-term-managementroundtable (‘‘An undue focus on short-term results among companies may lead to inefficient allocation of capital, reduce long-term returns for Main Street investors, and encumber economic growth’’; ‘‘As a result of increased life expectancy and a shift from defined benefit plans (e.g., pensions) to defined contribution plans (e.g., 401(k)s and IRAs), the investing interests and needs of our Main Street investors have changed. Put simply, our Main Street investors are more than ever focused on long-term results.’’); Chairman Jay Clayton, Statement on Investing in America for the Long Term (Aug. 17, 2018), available at https://www.sec.gov/news/ public-statement/statement-clayton-081718 (‘‘The President has highlighted a key consideration for American companies and, importantly, American investors and their families—encouraging long-term investment in our country. Many investors and market participants share this perspective on the importance of long-term investing. Recently, the SEC has implemented—and continues to consider— a variety of regulatory changes that encourage longterm capital formation while preserving and, in many instances, enhancing key investor protections.’’); SEC, Press Release, SEC Solicits Public Comment on Earnings Releases and Quarterly Reports (Dec. 18, 2018), available at E:\FR\FM\12JYN1.SGM Continued 12JYN1 33294 Federal Register / Vol. 84, No. 134 / Friday, July 12, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES voiced concerns regarding ‘‘shorttermism’’ and the risk that some investors’ focus on short-term results could put pressure on companies to sacrifice long-term value creation in order to reach quarterly or other shortterm expectations. In addition, some commenters believe that short-term pressures placed on companies have discouraged some newer companies from conducting initial public offerings 8 and have led some public companies to go private.9 Indeed, even when companies do undertake initial public offerings, in recent years, many have sought to do so in a way that limits the public market’s short-term pressures, by going public much later in https://www.sec.gov/news/press-release/2018-287 (quoting Chairman Jay Clayton, ‘‘Our markets thirst for high-quality, timely information regarding company performance and material corporate events. We recognize the importance of this information to well-functioning and fair capital markets. We also recognize the need for companies and investors to plan for the long term. Our rules should reflect these realities.’’); Commissioner Robert J. Jackson Jr., Stock Buybacks and Corporate Cashouts (June 11, 2018), available at https:// www.sec.gov/news/speech/speech-jackson-061118 (‘‘The increasingly rapid cycling of capital at American public companies has had real costs for American workers and families. We need our corporations to create the kind of long-term, sustainable value that leads to the stable jobs American families count on to build their futures.’’) 8 Avi Steinlauf, The Case for Staying Private (and Why IPOs Are Overrated), Inc., available at https:// www.inc.com/avi-steinlauf/why-we-are-stayingprivate.html (arguing that public companies are subject to ‘‘short-term market players [that] have no vested long-term interest’’ in the company, while ‘‘private organizations can preserve their focus on what is truly best for the organization’s overall success’’); Maureen Farrell, America’s Roster of Public Companies Is Shrinking Before Our Eyes, Wall Street Journal (January 6, 2017), available at https://www.wsj.com/articles/americas-roster-ofpublic-companies-is-shrinking-before-our-eyes1483545879 (citing University of Michigan Ross School of Business professor Jerry Davis, who believes that ‘‘[t]he dangers of being a public company are really evident,’’ among them, ‘‘having an investor base that clamors for short-term stock gains’’); Jonathan Macey, As IPOs Decline, the Market is Becoming More Elitist, L.A. Times (January 10, 2017), available at https:// www.latimes.com/opinion/op-ed/la-oe-macey-ipodemocracy-20170110-story.html (Op-Ed by professor Macey noting, among other things, that ‘‘[o]ne drawback to going public is shareholders’ sometimes excessive focus on short-term stock price fluctuations’’). 9 See, e.g., John Kell, Why Panera Bread Founder Ron Shaich Sold His Company, Fortune (April 5, 2017) (‘‘‘‘I spend about 20% of my time explaining what I do and what I’m about to do,’’ he said. ‘‘I think being private, for Panera, doesn’t give us anything other than it frees us up’’ and, on selling to a private investment firm, ‘‘They are thinking about centuries, not decades,’’ he said. ‘‘They are very committed to long term decision making’’; Michael Dell, Going Private is Paying Off for Dell, Wall Street Journal (November 24, 2014) (‘‘As a private company, Dell now has the freedom to take a long-term view. No more pulling R&D and growth investments to make in-quarter numbers . . . No more trade-offs between what’s best for a short-term return and what’s best for the long-term success of our customers’’). VerDate Sep<11>2014 16:55 Jul 11, 2019 Jkt 247001 their lifecycle 10 or retaining for the founders much of the voting control.11 In order to help combat these trends, the Exchange and its affiliates engaged in a multiyear effort to understand the principles that promote long-term value creation. LTSE’s analysis found that certain investors are eager to have more relevant information about long-term policies and certain long-term focused companies wish to provide such information to investors to increase transparency and enable their focus to be understood and appreciated. As a result, the Exchange believes that the proposed rules will begin to introduce a differentiated choice for issuers and investors that prefer listing standards explicitly designed to promote longterm focus and value creation.12 • Long-term focused companies should engage with their long-term shareholders. LTSE believes that the Principles help to identify what policies are most relevant to long-term value creation. LTSE-Listed Issuers will have flexibility in developing what they believe to be appropriate policies for their businesses; however, each of the required policies must include certain minimum elements, as described further below, and must be consistent with the Principles. The Exchange will enforce these provisions by ensuring that each LTSE-Listed Issuer has addressed all of the elements enumerated in each of the policies outlined below, consistent with the Principles, and made the policies publicly available without cost. Long-Term Policies (A) Long-Term Stakeholder Policy Proposed Rule 14.425(a)(1) would require that each LTSE-Listed Issuer adopt and publish a Long-Term Stakeholder policy explaining how the issuer operates its business to consider all of the stakeholders critical to its long-term success. At a minimum, this policy must include a discussion of (i) the stakeholder groups the LTSE-Listed Issuer considers critical to long-term success, (ii) the LTSE-Listed Issuer’s impact on the environment and its community, (iii) the LTSE-Listed Issuer’s approach to diversity and inclusion, (iv) the LTSE-Listed Issuer’s approach to investing in its employees, and (v) the LTSE-Listed Issuer’s approach to rewarding its employees and other stakeholders for contributing to the LTSE-Listed Issuer’s long-term success. The Exchange believes that companies committed to success over decades and generations recognize that they must invest in their employees, consider their impact on the communities in which they operate, and reward their employees and other stakeholders in order to achieve their goals. The Exchange also believes that effective long-term planning is enhanced when companies consider their impact on various stakeholders and the sustainability of their business, and that long-term investors generally value such information. The proposed rules are based on the belief that transparency of information relevant to long-term value creation will be valued by both investors and companies. As a result, the proposed rules would require LTSE-Listed Issuers to adopt and publish policies that are consistent with the following long-term principles (collectively, the ‘‘Principles’’): • Long-term focused companies should consider a broader group of stakeholders and the critical role they play in one another’s success; • Long-term focused companies should measure success in years and decades and prioritize long-term decision-making; • Long-term focused companies should align executive compensation and board compensation with long-term performance; • Boards of directors of long-term focused companies should be engaged in and have explicit oversight of longterm strategy; and 10 See, e.g., Jay R. Ritter, Initial Public Offerings: Median Age of IPOs Through 2017 (June 13, 2018) available at https://site.warrington.ufl.edu/ritter/ files/2018/07/IPOs2017Age.pdf; Gwynn Guilford, US startups don’t want to go public anymore. That’s bad news for Americans (February 1, 2018) available at https://qz.com/1192972/us-startupsare-shunning-ipos-thats-bad-news-for-americans/. 11 See, e.g. Jay R. Ritter, Initial Public Offerings: Dual Class IPOs (December 31, 2018) available at https://site.warrington.ufl.edu/ritter/files/2019/04/ IPOs2018DualClass.pdf; Wall Street Journal Business Blog, The Big Number (August 17, 2015), available at https://www.wsj.com/articles/the-bignumber-1439865699. 12 The Exchange intends to separately propose additional changes to its listing requirements in the future that the Exchange believes will further incentivize companies and investors to adopt a long-term perspective. Any future changes are not a part of this filing, nor does the mention of such changes serve as notice to the SEC about any such future filings. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 (B) Long-Term Strategy Policy Proposed Rule 14.425(a)(2) would require that each LTSE-Listed Issuer adopt and publish a Long-Term Strategy Policy explaining how the LTSE-Listed Issuer prioritizes long-term strategic decision-making and long-term success. The Exchange believes that companies should measure success by years, decades, and generations rather than E:\FR\FM\12JYN1.SGM 12JYN1 Federal Register / Vol. 84, No. 134 / Friday, July 12, 2019 / Notices quarter-by-quarter, and this approach should be integrated into strategic planning and decision-making throughout the organization. The LongTerm Strategy Policy must define the LTSE-Listed Issuer’s long-term time horizon, and include a discussion of how this time horizon relates to the LTSE-Listed Issuer’s strategic plans, how the LTSE-Listed Issuer aligns success metrics with that horizon, and how it implements long-term prioritization throughout the organization. The disclosure of this policy is designed to increase transparency for shareholders on the strategic goals of the company’s managers and provide for greater alignment and accountability between a company’s long-term vision and investor expectations. The Exchange believes that long-term investors value additional transparency enabling them to better understand how LTSE-Listed Issuers implement their commitment to long-term focus. (C) Long-Term Compensation Policy jbell on DSK3GLQ082PROD with NOTICES Proposed 14.425(a)(3) would require that each LTSE-Listed Issuer adopt and publish a policy explaining the LTSEListed Issuer’s alignment of executive financial and non-financial compensation and of board compensation with the LTSE-Listed Issuer’s long-term success and long-term success metrics. The Exchange believes that long-term focused companies seek to align the compensation of their executive officers with the long-term performance of the company. In addition, the Exchange believes that since the boards of such companies play an active role in long-term strategy, these companies seek to align the compensation of their boards to longterm performance as well. Investors should be able to understand the LTSEListed Issuer’s approach to ensuring this alignment. The Exchange recognizes that much of the information that would need to be disclosed under proposed Rule 14.425(a)(3) would already be disclosed by the issuer pursuant to Rule 402 of Regulation S–K.13 However, the 13 This rule requires each SEC registrant to disclose in its annual proxy statement all material elements of the registrant’s compensation, awarded to, earned by, or paid to named executive officers (the ‘‘CD&A’’). The CD&A must describe, among other things, the objectives of the registrant’s compensation program and what it is designed to reward. In addition, Rule 402(b)(2) of Regulation S–K provides that the CD&A may include ‘‘[t]he policies for allocating between long-term and currently paid out compensation’’ and ‘‘[f]or longterm compensation, the basis for allocating compensation to each different form of award (such as relationship of the award to the achievement of VerDate Sep<11>2014 16:55 Jul 11, 2019 Jkt 247001 Exchange believes that requiring LTSEListed Issuers to publish a Long-Term Compensation Policy would still be helpful to long-term investors, as it would ensure that they have access to a policy that extracts and possibly expands upon the aspects of an LTSEListed Issuer’s long-term compensation program from the CD&A that are most relevant to a long-term focus. (D) Long-Term Board Policy Proposed 14.425(a)(4) would require that each LTSE-Listed Issuer adopt and publish a policy explaining the engagement of the LTSE-Listed Issuer’s board of directors in the LTSE-Listed Issuer’s long-term focus, including discussion of whether the board and/or which board committee(s), if any, have explicit oversight of and responsibility for long-term strategy and success metrics. The Exchange believes the boards of directors should be engaged with the LTSE-Listed Issuer’s forwardlooking, long-term strategy, rather than serving primarily an audit function and looking backwards, as many boards seem to today. The Exchange also believes that investors will find this information useful. (E) Long-Term Investor Policy Proposed 14.425(a)(5) would require that each LTSE-Listed Issuer adopt and publish a policy explaining how the LTSE-Listed Issuer engages with longterm investors. The Exchange believes that forward-thinking companies value long-term investor input and consider their perspective on company governance as important to the development of the company’s longterm strategy. In addition, based on the Exchange’s conversations with longterm investors, the Exchange believes that such investors are better able to support a company’s long-term approach when they have sufficient information about it and appropriate engagement with the company. (F) Location of Disclosure Proposed Rule 14.425(c) would require that each LTSE-Listed Issuer review the policies required by proposed Rule 14.425(a) at least annually and make such policies available publicly and free of charge on or through its website. In addition, each LTSE-Listed Issuer would be required to disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form 10–K (or if a foreign private issuer, Form the registrant’s long-term goals, management’s exposure to downside equity performance risk, correlation between cost to registrant and expected benefits to the registrant).’’ PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 33295 20–F) filed with the SEC, that these policies are available on or through its website and provide the website address. These requirements are intended to ensure that investors are aware of and have access to the policies required by the proposed rule. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act in general,14 and further the objectives of Section 6(b)(5) of the Act,15 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. As discussed in detail in the Purpose section above, the Exchange believes that there is growing concern among market observers that pressures to meet short-term expectations have resulted in negative consequences for companies, investors and the economy as a whole. The Exchange believes that the proposed rules would remove impediments to a free and open market and protect investors and the public interest by providing the marketplace with a differentiated listing venue choice that seeks to encourage greater transparency and focus by companies and investors on long-term issues. Specifically, the proposed rules are intended to better enable companies to focus on long-term value creation, potentially enhancing opportunities for capital formation. The proposed rules are also intended to foster transparency, which would protect investors and the public interest, particularly those investors with a long-term focus. The Exchange will enforce these provisions by ensuring that each LTSEListed Issuer has addressed all of the elements enumerated in each of the policies, consistent with the Principles, thereby preventing fraudulent and manipulative acts and practices and promoting just and equitable principles of trade. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance 14 15 15 15 E:\FR\FM\12JYN1.SGM U.S.C. 78f. U.S.C. 78f(b)(5). 12JYN1 jbell on DSK3GLQ082PROD with NOTICES 33296 Federal Register / Vol. 84, No. 134 / Friday, July 12, 2019 / Notices of the purposes of the Act. To the contrary, the Exchange believes that the proposed rule change will enhance competition between exchange listing markets in furtherance of Section 11A(a)(1)(C)(ii) of the Act 16 and consistent with Section 6(b)(8) of the Act 17 because it will provide issuers with a differentiated offering as compared to the other listing rules existing on other national securities exchanges. Moreover, as a new listing venue, the Exchange expects to face intense competition from existing exchanges. Consequently, the degree to which the proposed listing standards could impose any burden on intermarket competition is extremely limited because other national securities exchanges may propose similar listing standards and issuers are able to list on other national securities exchanges. The Exchange does not believe that such requirements would impose any burden on competing venues that is not necessary or appropriate in furtherance of the purposes of the Act. Further, issuers that do not wish to meet the Exchange’s listing standards are able to list on other national securities exchanges, and their securities may still trade on the Exchange through unlisted trading privileges.18 Conversely, other national securities exchanges that do not maintain similar listing rules would still be able to compete with the Exchange to execute transactions in securities listed on the Exchange, which would trade on such other national securities exchanges through unlisted trading privileges. To the extent the Exchange is successful in attracting issuers to the list on the Exchange, other exchanges or potential new entrants could respond by adopting their own rules that are designed to foster long-term value creation. The Exchange also does not believe that the proposal will impose any burden on competition between LTSEListed Issuers that is not necessary or appropriate in furtherance of the purposes of the Act because all companies electing to list on the Exchange will be subject to the same standards, and subject to the same surveillance and enforcement of these standards. To the extent that LTSEListed Issuers choose to compete by providing more complete or effective descriptions and policies in response to this filing, this will provide further transparency and information to the market and investors. 16 15 U.S.C. 78k–1(a)(1)(C)(ii). U.S.C. 78f(b)(8). 18 15 U.S.C. 78l(f); 17 CFR 240.12f–2. 17 15 VerDate Sep<11>2014 16:55 Jul 11, 2019 Jkt 247001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. 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– LTSE–2019–049 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–LTSE–2019–01. 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 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 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–LTSE–2019–01 and should be submitted on or before August 2, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Eduardo Aleman, Deputy Secretary. [FR Doc. 2019–14813 Filed 7–11–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86323; File No. SR– CboeEDGX–2019–041] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Update Its Rules Related to Complex Orders and Trading Halts Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 24, 2019, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 19 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 1 15 E:\FR\FM\12JYN1.SGM 12JYN1

Agencies

[Federal Register Volume 84, Number 134 (Friday, July 12, 2019)]
[Notices]
[Pages 33293-33296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14813]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86327; File No. SR-LTSE-2019-01]


Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Adopt Rule 14.425, Which 
Would Require Companies Listed on the Exchange To Develop and Publish 
Certain Long-Term Policies

 July 8, 2019.
    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 June 25, 2019, the Long-Term Stock Exchange, Inc. (``LTSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''),\3\ and Rule 19b-4 thereunder,\4\ the 
Exchange is filing with the Commission a proposed rule change to adopt 
new Rule 14.425 (Long-Term Policies), which would require companies 
listed on the Exchange to develop and publish certain policies that the 
Exchange believes will facilitate long-term focus and value creation. 
The text of the proposed rule change is available at the Exchange's 
website at www.longtermstockexchange.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
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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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 on the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On May 10, 2019, the Commission granted the Exchange's application 
for registration as a national securities exchange under Section 6 of 
the Act,\5\ including approval of rules applicable to the 
qualification, listing and delisting of companies on the Exchange. The 
Exchange is proposing to enhance its listing requirements by requiring 
companies listed on the Exchange (``LTSE-Listed Issuers'') to adopt and 
publish the following policies: A Long-Term Stakeholder Policy, a Long-
Term Strategy Policy, a Long-Term Compensation Policy, a Long-Term 
Board Policy and a Long-Term Investor Policy, as described further 
below. These policies must be consistent with the set of principles 
described below.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 85828 (May 10, 
2019), 84 FR 21841 (May 15, 2019).
---------------------------------------------------------------------------

Background
    Many academics, commentators, market participants,\6\ as well as 
current members of the Commission \7\ have

[[Page 33294]]

voiced concerns regarding ``short-termism'' and the risk that some 
investors' focus on short-term results could put pressure on companies 
to sacrifice long-term value creation in order to reach quarterly or 
other short-term expectations. In addition, some commenters believe 
that short-term pressures placed on companies have discouraged some 
newer companies from conducting initial public offerings \8\ and have 
led some public companies to go private.\9\ Indeed, even when companies 
do undertake initial public offerings, in recent years, many have 
sought to do so in a way that limits the public market's short-term 
pressures, by going public much later in their lifecycle \10\ or 
retaining for the founders much of the voting control.\11\
---------------------------------------------------------------------------

    \6\ See, e.g., McKinsey & Company, McKinsey Global Institute, 
Measuring the Economic Impact of Short-Termism (February 2017), 
available at https://www.mckinsey.com/~/media/mckinsey/
global%20themes/long%20term%20capitalism/
where%20companies%20with%20a%20long%20term%20view%20outperform%20thei
r%20peers/measuring-the-economic-impact-of-short-termism.ashx (``Our 
findings show that companies we classify as `long term' outperform 
their shorter-term peers on a range of key economic and financial 
metrics.''); Aspen Institute, American Prosperity Project (December 
2016), available at https://assets.aspeninstitute.org/content/uploads/2017/01/American-Prosperity-Project_Policy-Framework_FINAL-1.3.17.pdf (``Perverse incentives in our corporate governance system 
undermine the health of capitalism itself. Short-termism is baked 
into our tax system and is evident in the decisions, regulations and 
rules that govern corporations and capital markets. Changes to the 
rules of the game are a necessary step to rebuild the public's trust 
in our economic system.''); Martin Lipton, The New Paradigm (January 
11, 2017), available at https://www.wlrk.com/docs/thenewparadigm.pdf 
(``The economic impact of a short-term myopic approach to managing 
and investing in businesses has become abundantly clear and has been 
generating rising levels of concern across a broad spectrum of 
stakeholders, including corporations, investors, policymakers and 
academics. The proposition that short-term financial activists and 
reactive corporate behavior spur sustainable improvements in 
corporate performance, and thereby systemically increase rather than 
undermine long-term economic prosperity and social welfare, has been 
overwhelmingly disproved by the real world experience of corporate 
decision-makers as well as a growing body of academic research.''); 
Chief Justice Leo Strine, Who Bleeds When the Wolves Bite? A Flesh-
and-Blood Perspective on Hedge Fund Activism and Our Strange 
Corporate Governance System (April 2017), available at https://ssrn.com/abstract=2921901 (``Rather, human investors would see great 
benefit from reforms encouraging the agents responsible for their 
money to adopt the long-term horizon held by their principals, i.e., 
human investors.''); CECP and KKS Advisors, The Economic 
Significance of Long-Term Plans (November 2018), available at https://cecp.co/wp-content/uploads/2018/11/Economic-Significance-Final-Report.pdf (``Short-termism in capital markets has increasingly 
become a concern for both companies and the investor community'' and 
explaining that the authors of the report ``find evidence that 
better quality disclosure on themes like corporate purpose and 
competitive positioning is linked to larger capital market 
reactions''); Travis Baratko, A Times-Mirror Conversation With Sen. 
Mark Warner, The Loudoun Times-Mirror (July 27, 2015), available at 
https://www.loudountimes.com/news/article/a_loudoun_times_mirror_conversation_with_sen._mark_warner432 
(quoting Senator Mark Warner as noting that ``[P]eople being 
investors who are only focused on short-termism, too often you can 
squeeze a quarterly profit out at the expense of a long-term value 
proposition.'').
    \7\ See, e.g., Chairman Jay Clayton, Statement Announcing SEC 
Staff Roundtable on Short-Term/Long-Term Management of Public 
Companies, Our Periodic Reporting System and Regulatory Requirements 
(May 20, 2019), available at https://www.sec.gov/news/public-statement/clayton-announcement-short-long-term-management-roundtable 
(``An undue focus on short-term results among companies may lead to 
inefficient allocation of capital, reduce long-term returns for Main 
Street investors, and encumber economic growth''; ``As a result of 
increased life expectancy and a shift from defined benefit plans 
(e.g., pensions) to defined contribution plans (e.g., 401(k)s and 
IRAs), the investing interests and needs of our Main Street 
investors have changed. Put simply, our Main Street investors are 
more than ever focused on long-term results.''); Chairman Jay 
Clayton, Statement on Investing in America for the Long Term (Aug. 
17, 2018), available at https://www.sec.gov/news/public-statement/statement-clayton-081718 (``The President has highlighted a key 
consideration for American companies and, importantly, American 
investors and their families--encouraging long-term investment in 
our country. Many investors and market participants share this 
perspective on the importance of long-term investing. Recently, the 
SEC has implemented--and continues to consider--a variety of 
regulatory changes that encourage long-term capital formation while 
preserving and, in many instances, enhancing key investor 
protections.''); SEC, Press Release, SEC Solicits Public Comment on 
Earnings Releases and Quarterly Reports (Dec. 18, 2018), available 
at https://www.sec.gov/news/press-release/2018-287 (quoting Chairman 
Jay Clayton, ``Our markets thirst for high-quality, timely 
information regarding company performance and material corporate 
events. We recognize the importance of this information to well-
functioning and fair capital markets. We also recognize the need for 
companies and investors to plan for the long term. Our rules should 
reflect these realities.''); Commissioner Robert J. Jackson Jr., 
Stock Buybacks and Corporate Cashouts (June 11, 2018), available at 
https://www.sec.gov/news/speech/speech-jackson-061118 (``The 
increasingly rapid cycling of capital at American public companies 
has had real costs for American workers and families. We need our 
corporations to create the kind of long-term, sustainable value that 
leads to the stable jobs American families count on to build their 
futures.'')
    \8\ Avi Steinlauf, The Case for Staying Private (and Why IPOs 
Are Overrated), Inc., available at https://www.inc.com/avi-steinlauf/why-we-are-staying-private.html (arguing that public 
companies are subject to ``short-term market players [that] have no 
vested long-term interest'' in the company, while ``private 
organizations can preserve their focus on what is truly best for the 
organization's overall success''); Maureen Farrell, America's Roster 
of Public Companies Is Shrinking Before Our Eyes, Wall Street 
Journal (January 6, 2017), available at https://www.wsj.com/articles/americas-roster-of-public-companies-is-shrinking-before-our-eyes-1483545879 (citing University of Michigan Ross School of 
Business professor Jerry Davis, who believes that ``[t]he dangers of 
being a public company are really evident,'' among them, ``having an 
investor base that clamors for short-term stock gains''); Jonathan 
Macey, As IPOs Decline, the Market is Becoming More Elitist, L.A. 
Times (January 10, 2017), available at https://www.latimes.com/opinion/op-ed/la-oe-macey-ipo-democracy-20170110-story.html (Op-Ed 
by professor Macey noting, among other things, that ``[o]ne drawback 
to going public is shareholders' sometimes excessive focus on short-
term stock price fluctuations'').
    \9\ See, e.g., John Kell, Why Panera Bread Founder Ron Shaich 
Sold His Company, Fortune (April 5, 2017) (````I spend about 20% of 
my time explaining what I do and what I'm about to do,'' he said. 
``I think being private, for Panera, doesn't give us anything other 
than it frees us up'' and, on selling to a private investment firm, 
``They are thinking about centuries, not decades,'' he said. ``They 
are very committed to long term decision making''; Michael Dell, 
Going Private is Paying Off for Dell, Wall Street Journal (November 
24, 2014) (``As a private company, Dell now has the freedom to take 
a long-term view. No more pulling R&D and growth investments to make 
in-quarter numbers . . . No more trade-offs between what's best for 
a short-term return and what's best for the long-term success of our 
customers'').
    \10\ See, e.g., Jay R. Ritter, Initial Public Offerings: Median 
Age of IPOs Through 2017 (June 13, 2018) available at https://site.warrington.ufl.edu/ritter/files/2018/07/IPOs2017Age.pdf; Gwynn 
Guilford, US startups don't want to go public anymore. That's bad 
news for Americans (February 1, 2018) available at https://qz.com/1192972/us-startups-are-shunning-ipos-thats-bad-news-for-americans/.
    \11\ See, e.g. Jay R. Ritter, Initial Public Offerings: Dual 
Class IPOs (December 31, 2018) available at https://site.warrington.ufl.edu/ritter/files/2019/04/IPOs2018DualClass.pdf; 
Wall Street Journal Business Blog, The Big Number (August 17, 2015), 
available at https://www.wsj.com/articles/the-big-number-1439865699.
---------------------------------------------------------------------------

    In order to help combat these trends, the Exchange and its 
affiliates engaged in a multiyear effort to understand the principles 
that promote long-term value creation. LTSE's analysis found that 
certain investors are eager to have more relevant information about 
long-term policies and certain long-term focused companies wish to 
provide such information to investors to increase transparency and 
enable their focus to be understood and appreciated. As a result, the 
Exchange believes that the proposed rules will begin to introduce a 
differentiated choice for issuers and investors that prefer listing 
standards explicitly designed to promote long-term focus and value 
creation.\12\
---------------------------------------------------------------------------

    \12\ The Exchange intends to separately propose additional 
changes to its listing requirements in the future that the Exchange 
believes will further incentivize companies and investors to adopt a 
long-term perspective. Any future changes are not a part of this 
filing, nor does the mention of such changes serve as notice to the 
SEC about any such future filings.
---------------------------------------------------------------------------

Long-Term Policies
    The proposed rules are based on the belief that transparency of 
information relevant to long-term value creation will be valued by both 
investors and companies. As a result, the proposed rules would require 
LTSE-Listed Issuers to adopt and publish policies that are consistent 
with the following long-term principles (collectively, the 
``Principles''):
     Long-term focused companies should consider a broader 
group of stakeholders and the critical role they play in one another's 
success;
     Long-term focused companies should measure success in 
years and decades and prioritize long-term decision-making;
     Long-term focused companies should align executive 
compensation and board compensation with long-term performance;
     Boards of directors of long-term focused companies should 
be engaged in and have explicit oversight of long-term strategy; and
     Long-term focused companies should engage with their long-
term shareholders.
    LTSE believes that the Principles help to identify what policies 
are most relevant to long-term value creation.
    LTSE-Listed Issuers will have flexibility in developing what they 
believe to be appropriate policies for their businesses; however, each 
of the required policies must include certain minimum elements, as 
described further below, and must be consistent with the Principles. 
The Exchange will enforce these provisions by ensuring that each LTSE-
Listed Issuer has addressed all of the elements enumerated in each of 
the policies outlined below, consistent with the Principles, and made 
the policies publicly available without cost.
(A) Long-Term Stakeholder Policy
    Proposed Rule 14.425(a)(1) would require that each LTSE-Listed 
Issuer adopt and publish a Long-Term Stakeholder policy explaining how 
the issuer operates its business to consider all of the stakeholders 
critical to its long-term success. At a minimum, this policy must 
include a discussion of (i) the stakeholder groups the LTSE-Listed 
Issuer considers critical to long-term success, (ii) the LTSE-Listed 
Issuer's impact on the environment and its community, (iii) the LTSE-
Listed Issuer's approach to diversity and inclusion, (iv) the LTSE-
Listed Issuer's approach to investing in its employees, and (v) the 
LTSE-Listed Issuer's approach to rewarding its employees and other 
stakeholders for contributing to the LTSE-Listed Issuer's long-term 
success.
    The Exchange believes that companies committed to success over 
decades and generations recognize that they must invest in their 
employees, consider their impact on the communities in which they 
operate, and reward their employees and other stakeholders in order to 
achieve their goals. The Exchange also believes that effective long-
term planning is enhanced when companies consider their impact on 
various stakeholders and the sustainability of their business, and that 
long-term investors generally value such information.
(B) Long-Term Strategy Policy
    Proposed Rule 14.425(a)(2) would require that each LTSE-Listed 
Issuer adopt and publish a Long-Term Strategy Policy explaining how the 
LTSE-Listed Issuer prioritizes long-term strategic decision-making and 
long-term success. The Exchange believes that companies should measure 
success by years, decades, and generations rather than

[[Page 33295]]

quarter-by-quarter, and this approach should be integrated into 
strategic planning and decision-making throughout the organization. The 
Long-Term Strategy Policy must define the LTSE-Listed Issuer's long-
term time horizon, and include a discussion of how this time horizon 
relates to the LTSE-Listed Issuer's strategic plans, how the LTSE-
Listed Issuer aligns success metrics with that horizon, and how it 
implements long-term prioritization throughout the organization. The 
disclosure of this policy is designed to increase transparency for 
shareholders on the strategic goals of the company's managers and 
provide for greater alignment and accountability between a company's 
long-term vision and investor expectations. The Exchange believes that 
long-term investors value additional transparency enabling them to 
better understand how LTSE-Listed Issuers implement their commitment to 
long-term focus.
(C) Long-Term Compensation Policy
    Proposed 14.425(a)(3) would require that each LTSE-Listed Issuer 
adopt and publish a policy explaining the LTSE-Listed Issuer's 
alignment of executive financial and non-financial compensation and of 
board compensation with the LTSE-Listed Issuer's long-term success and 
long-term success metrics. The Exchange believes that long-term focused 
companies seek to align the compensation of their executive officers 
with the long-term performance of the company. In addition, the 
Exchange believes that since the boards of such companies play an 
active role in long-term strategy, these companies seek to align the 
compensation of their boards to long-term performance as well. 
Investors should be able to understand the LTSE-Listed Issuer's 
approach to ensuring this alignment.
    The Exchange recognizes that much of the information that would 
need to be disclosed under proposed Rule 14.425(a)(3) would already be 
disclosed by the issuer pursuant to Rule 402 of Regulation S-K.\13\ 
However, the Exchange believes that requiring LTSE-Listed Issuers to 
publish a Long-Term Compensation Policy would still be helpful to long-
term investors, as it would ensure that they have access to a policy 
that extracts and possibly expands upon the aspects of an LTSE-Listed 
Issuer's long-term compensation program from the CD&A that are most 
relevant to a long-term focus.
---------------------------------------------------------------------------

    \13\ This rule requires each SEC registrant to disclose in its 
annual proxy statement all material elements of the registrant's 
compensation, awarded to, earned by, or paid to named executive 
officers (the ``CD&A''). The CD&A must describe, among other things, 
the objectives of the registrant's compensation program and what it 
is designed to reward. In addition, Rule 402(b)(2) of Regulation S-K 
provides that the CD&A may include ``[t]he policies for allocating 
between long-term and currently paid out compensation'' and ``[f]or 
long-term compensation, the basis for allocating compensation to 
each different form of award (such as relationship of the award to 
the achievement of the registrant's long-term goals, management's 
exposure to downside equity performance risk, correlation between 
cost to registrant and expected benefits to the registrant).''
---------------------------------------------------------------------------

(D) Long-Term Board Policy
    Proposed 14.425(a)(4) would require that each LTSE-Listed Issuer 
adopt and publish a policy explaining the engagement of the LTSE-Listed 
Issuer's board of directors in the LTSE-Listed Issuer's long-term 
focus, including discussion of whether the board and/or which board 
committee(s), if any, have explicit oversight of and responsibility for 
long-term strategy and success metrics. The Exchange believes the 
boards of directors should be engaged with the LTSE-Listed Issuer's 
forward-looking, long-term strategy, rather than serving primarily an 
audit function and looking backwards, as many boards seem to today. The 
Exchange also believes that investors will find this information 
useful.
(E) Long-Term Investor Policy
    Proposed 14.425(a)(5) would require that each LTSE-Listed Issuer 
adopt and publish a policy explaining how the LTSE-Listed Issuer 
engages with long-term investors. The Exchange believes that forward-
thinking companies value long-term investor input and consider their 
perspective on company governance as important to the development of 
the company's long-term strategy. In addition, based on the Exchange's 
conversations with long-term investors, the Exchange believes that such 
investors are better able to support a company's long-term approach 
when they have sufficient information about it and appropriate 
engagement with the company.
(F) Location of Disclosure
    Proposed Rule 14.425(c) would require that each LTSE-Listed Issuer 
review the policies required by proposed Rule 14.425(a) at least 
annually and make such policies available publicly and free of charge 
on or through its website. In addition, each LTSE-Listed Issuer would 
be required to disclose in its annual proxy statement or, if it does 
not file an annual proxy statement, in its annual report on Form 10-K 
(or if a foreign private issuer, Form 20-F) filed with the SEC, that 
these policies are available on or through its website and provide the 
website address. These requirements are intended to ensure that 
investors are aware of and have access to the policies required by the 
proposed rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act in general,\14\ and further the objectives of 
Section 6(b)(5) of the Act,\15\ in particular, because it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As discussed in detail in the Purpose section above, the Exchange 
believes that there is growing concern among market observers that 
pressures to meet short-term expectations have resulted in negative 
consequences for companies, investors and the economy as a whole. The 
Exchange believes that the proposed rules would remove impediments to a 
free and open market and protect investors and the public interest by 
providing the marketplace with a differentiated listing venue choice 
that seeks to encourage greater transparency and focus by companies and 
investors on long-term issues. Specifically, the proposed rules are 
intended to better enable companies to focus on long-term value 
creation, potentially enhancing opportunities for capital formation. 
The proposed rules are also intended to foster transparency, which 
would protect investors and the public interest, particularly those 
investors with a long-term focus.
    The Exchange will enforce these provisions by ensuring that each 
LTSE-Listed Issuer has addressed all of the elements enumerated in each 
of the policies, consistent with the Principles, thereby preventing 
fraudulent and manipulative acts and practices and promoting just and 
equitable principles of trade.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance

[[Page 33296]]

of the purposes of the Act. To the contrary, the Exchange believes that 
the proposed rule change will enhance competition between exchange 
listing markets in furtherance of Section 11A(a)(1)(C)(ii) of the Act 
\16\ and consistent with Section 6(b)(8) of the Act \17\ because it 
will provide issuers with a differentiated offering as compared to the 
other listing rules existing on other national securities exchanges. 
Moreover, as a new listing venue, the Exchange expects to face intense 
competition from existing exchanges. Consequently, the degree to which 
the proposed listing standards could impose any burden on intermarket 
competition is extremely limited because other national securities 
exchanges may propose similar listing standards and issuers are able to 
list on other national securities exchanges. The Exchange does not 
believe that such requirements would impose any burden on competing 
venues that is not necessary or appropriate in furtherance of the 
purposes of the Act. Further, issuers that do not wish to meet the 
Exchange's listing standards are able to list on other national 
securities exchanges, and their securities may still trade on the 
Exchange through unlisted trading privileges.\18\ Conversely, other 
national securities exchanges that do not maintain similar listing 
rules would still be able to compete with the Exchange to execute 
transactions in securities listed on the Exchange, which would trade on 
such other national securities exchanges through unlisted trading 
privileges.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78k-1(a)(1)(C)(ii).
    \17\ 15 U.S.C. 78f(b)(8).
    \18\ 15 U.S.C. 78l(f); 17 CFR 240.12f-2.
---------------------------------------------------------------------------

    To the extent the Exchange is successful in attracting issuers to 
the list on the Exchange, other exchanges or potential new entrants 
could respond by adopting their own rules that are designed to foster 
long-term value creation.
    The Exchange also does not believe that the proposal will impose 
any burden on competition between LTSE-Listed Issuers that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because all companies electing to list on the Exchange will be subject 
to the same standards, and subject to the same surveillance and 
enforcement of these standards. To the extent that LTSE-Listed Issuers 
choose to compete by providing more complete or effective descriptions 
and policies in response to this filing, this will provide further 
transparency and information to the market and investors.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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-LTSE-2019-049 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-LTSE-2019-01. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly.
    All submissions should refer to File Number SR-LTSE-2019-01 and 
should be submitted on or before August 2, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo Aleman,
Deputy Secretary.
[FR Doc. 2019-14813 Filed 7-11-19; 8:45 am]
 BILLING CODE 8011-01-P
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