Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change To Adopt NYSE Rule 5.2(j)(8) Governing the Listing and Trading of Exchange-Traded Fund Shares, 8420-8424 [2021-02397]
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
notification about sub-advisory changes
and enhanced Board oversight to protect
the interests of the Sub-Advised Fund’s
shareholders.
4. Section 6(c) of the Act provides that
the Commission may exempt any
person, security, or transaction or any
class or classes of persons, securities, or
transactions from any provisions of the
Act, or any rule thereunder, if such
relief is necessary or appropriate in the
public interest and consistent with the
protection of investors and purposes
fairly intended by the policy and
provisions of the Act. Applicants
believe that the requested relief meets
this standard because, as further
explained in the application, the
Investment Management Agreements
will remain subject to shareholder
approval while the role of the SubAdvisers is substantially equivalent to
that of individual portfolio managers, so
that requiring shareholder approval of
Sub-Advisory Agreements would
impose unnecessary delays and
expenses on the Sub-Advised Funds.
Applicants believe that the requested
relief from the Disclosure Requirements
meets this standard because it will
improve the Adviser’s ability to
negotiate fees paid to the Sub-Advisers
that are more advantageous for the SubAdvised Funds.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02372 Filed 2–4–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91025; File No. SR–NYSE–
2020–96]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Amend Its Rules
Establishing Maximum Fee Rates To
Be Charged by Member Organizations
for Forwarding Proxy and Other
Materials to Beneficial Owners
jbell on DSKJLSW7X2PROD with NOTICES
February 1, 2021.
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
18:53 Feb 04, 2021
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02400 Filed 2–4–21; 8:45 am]
BILLING CODE 8011–01–P
On December 2, 2020, New York
Stock Exchange LLC (‘‘NYSE’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and rule
19b–4 thereunder,2 a proposed rule
1 15
change to delete the maximum fee rates
for processing and forwarding proxy
and other materials to beneficial owners
of stock set forth in NYSE Rules 451 and
465 and Section 402.10 of the NYSE
Listed Company Manual, and establish
in their place a requirement for member
organizations to comply with any
schedule of approved charges set forth
in the rules of any other national
securities organization or association of
which such member organization is a
member. The proposed rule change was
published for comment in the Federal
Register on December 21, 2020.3
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is February 4,
2021. The Commission is extending this
45-day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposal so that it has sufficient time to
consider the proposed rule change and
the comments received. Accordingly,
the Commission, pursuant to Section
19(b)(2) of the Act,5 designates March
21, 2021, as the date by which the
Commission shall either approve or
disapprove, or institute proceedings to
determine whether to disapprove, the
proposed rule change (File No. SR–
NYSE–2020–96).
Jkt 253001
3 See Securities Exchange Act Release No. 90677
(December 15, 2020), 85 FR 83119. Comments
received on the proposed rule change are available
at: https://www.sec.gov/comments/sr-nyse-2020-96/
srnyse202096.htm.
4 15 U.S.C. 78s(b)(2).
5 Id.
6 17 CFR 200.30–3(a)(31).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91029; File No. SR–NYSE–
2020–86]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving a Proposed Rule Change To
Adopt NYSE Rule 5.2(j)(8) Governing
the Listing and Trading of ExchangeTraded Fund Shares
February 1, 2021.
I. Introduction
On December 18, 2020, New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to, among other things, adopt
new NYSE Rule 5.2(j)(8) to permit the
generic listing and trading of ExchangeTraded Fund Shares. The proposed rule
change was published for comment in
the Federal Register on December 30,
2020.3 The Commission has received no
comments on the proposed rule change.
The Commission is approving the
proposed rule change.
II. Exchange’s Description of the
Proposed Rule Change
Under the proposal, the Exchange
states that the Commission recently
adopted Rule 6c–11 under the
Investment Company Act of 1940
(‘‘1940 Act’’) 4 to permit Exchange
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90775
(December 22, 2020), 85 FR 86584 (‘‘Notice’’).
4 According to the Exchange, NYSE currently
trades securities, including ETPs, on its Pillar
trading platform on an unlisted trading privileges
(‘‘UTP’’) basis, subject to NYSE Pillar Platform
Rules 1P—13P. ‘‘UTP Security’’ is defined as a
security that is listed on a national securities
exchange other than the Exchange and that trades
on the Exchange pursuant to unlisted trading
privileges. See NYSE Rule 1.1. ETPs traded on a
UTP basis on the Exchange are not assigned to a
Designated Market Maker (‘‘DMM’’) but are
available for Floor brokers to trade in Floor-based
crossing transactions. See Securities Exchange Act
Release No. 82945 (March 26, 2018), 83 FR 13553,
13568 (March 29, 2018) (SR–NYSE–2017–36)
(approving Exchange rules to trade securities on a
UTP basis on the Pillar trading platform). The
Exchange states that its rules permit it to list ETPs
under NYSE Rules 5P and 8P. Specifically, NYSE
Rules 5P (Securities Traded) and 8P (Trading of
Certain Exchange-Traded Products) provide for the
listing of certain ETPs on the Exchange that (1) meet
the applicable requirements set forth in those rules,
and (2) do not have any component NMS Stock that
is listed on the Exchange or is based on, or
represents an interest in, an underlying index or
reference asset that includes an NMS Stock listed
on the Exchange. According to the Exchange, ETPs
listed under NYSE Rules 5P and 8P would be ‘‘Tape
2 17
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
Traded Products (‘‘ETPs’’) 5 that are
exchange-traded funds (‘‘ETF’’) 6 shares
(‘‘Exchange-Traded Fund Shares’’) 7 and
that satisfy certain conditions to operate
without obtaining an exemptive order
from the Commission under the 1940
Act.8 According to the Exchange, the
regulatory framework provided in Rule
6c–11 streamlines procedures and
reduces the costs and timeframes
associated with bringing ETFs to
market, thereby enhancing competition
among ETF issuers and reducing costs
for investors. The Exchange proposes to
adopt new NYSE Rule 5.2(j)(8) to
establish generic listing standards
allowing the Exchange to list and trade
Exchange-Traded Fund Shares in a
manner consistent with Rule 6c–11
under the 1940 Act. The Exchange
represents that proposed NYSE Rule
5.2(j)(8) is based on NYSE Arca, Inc.
(‘‘NYSE Arca’’) Rule 5.2–E(j)(8).9 In
addition, the Exchange proposes to
adopt new NYSE Rule 7.18(d)(2) based
on NYSE Arca Rule 7.18–E(d)(2) that
would govern trading halts for listed
ETPs (which would include ExchangeTraded Fund Shares).
jbell on DSKJLSW7X2PROD with NOTICES
Proposed NYSE Rule 5.2(j)(8)
The Exchange proposes standards that
would pertain to Exchange-Traded Fund
A’’ listings and traded pursuant to the rules
applicable to NYSE-listed securities. Accordingly,
once an ETP is listed, it would be assigned to a
DMM pursuant to NYSE Rule 103B and the
assigned DMM would have obligations vis-a`-vis
such securities as specified in NYSE Rule 104,
including facilitating the opening, reopening, and
closing of such securities. See Securities Exchange
Act Release No. 87056 (September 23, 2019), 84 FR
51205 (September 27, 2019) (SR–NYSE–2019–34)
(order approving amendments to NYSE Rule 104 to
specify DMM requirements for ETPs listed on the
Exchange pursuant to NYSE Rules 5P and 8P).
5 NYSE Rule 1.1(k) defines ‘‘Exchange Traded
Product’’ as a security that meets the definition of
‘‘derivative securities product’’ in Rule 19b–4(e)
under the Act. According to the Exchange, ETPs
include, for example, securities listed and traded on
NYSE pursuant to the following rules: NYSE Rule
5.2(j)(3) (Investment Company Units); NYSE Rule
5.2(j)(5) (Equity Gold Shares); NYSE Rule 5.2
(j)(6)(Index-Linked Securities); NYSE Rule 8.100
(Portfolio Depositary Receipts); NYSE Rule 8.200
(Trust Issued Receipts); NYSE Rule 8.201
(Commodity-Based Trust Shares); NYSE Rule 8.202
(Currency Trust Shares); NYSE Rule 8.203
(Commodity Index Trust Shares); NYSE Rule 8.204
(Commodity Futures Trust Shares); NYSE Rule
8.600 (Managed Fund Shares); and NYSE Rule
8.700 (Managed Trust Securities).
6 See infra note 10.
7 See infra note 11.
8 See Release Nos. 33–10695; IC–33646; File No.
S7–15–18 (ETFs) (September 25, 2019), 84 FR
57162 (October 24, 2019).
9 See Securities Exchange Act Release No. 88625
(April 13, 2020), 85 FR 21479 (April 17, 2020) (SR–
NYSEArca–2019–81) (Notice of filing of
Amendment No. 2 and Order granting accelerated
approval of proposed rule change, as modified by
Amendment No. 2, to adopt NYSE Arca Rule 5.2–
E(j)(8) establishing generic listing standards for
Exchange-Traded Fund Shares).
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Shares to qualify for listing and trading
pursuant to Rule 19b–4(e) under the
Act, as follows:
Proposed NYSE Rule 5.2(j)(8)(a)
would provide that the Exchange would
consider for trading, whether by listing
or on a UTP basis, Exchange-Traded
Fund Shares that meet the criteria of
proposed NYSE Rule 5.2(j)(8). Proposed
NYSE Rule 5.2(j)(8)(a) is based on NYSE
Arca Rule 5.2–E(j)(8)(a) without any
differences.
Proposed NYSE Rule 5.2(j)(8)(b)
would specify applicability of proposed
NYSE Rule 5.2(j)(8) and would provide
that it is applicable only to ExchangeTraded Fund Shares. Proposed NYSE
Rule 5.2(j)(8)(b) would further provide
that, except to the extent inconsistent
with proposed NYSE Rule 5.2(j)(8) or
unless the context otherwise requires,
Exchange rules would be applicable to
the trading on the Exchange of such
securities and that Exchange-Traded
Fund Shares would be included within
the definition of NMS Stock as defined
in NYSE Rule 1.1. Proposed NYSE Rule
5.2(j)(8)(b) is based on NYSE Arca Rule
5.2–E(j)(8)(b) without any differences.
Proposed NYSE Rule 5.2(j)(8)(c)
would set forth the proposed rule’s
applicable definitions, which are based
on NYSE Arca Rule 5.2–E(j)(8)(c)
without any differences, as follows:
• Proposed NYSE Rule 5.2(j)(8)(c)(1)
would define the term ‘‘1940 Act’’ to
mean the Investment Company Act of
1940, as amended.
• Proposed NYSE Rule 5.2(j)(8)(c)(2)
would define the term ‘‘ExchangeTraded Fund’’ as having the same
meaning as the term ‘‘exchange-traded
fund’’ as defined in Rule 6c–11(a)(1)
under the 1940 Act.10
• Proposed NYSE Rule 5.2(j)(8)(c)(3)
would define the term ‘‘ExchangeTraded Fund Share’’ to mean a share of
stock issued by an Exchange-Traded
Fund.11
• Proposed NYSE Rule 5.2(j)(8)(c)(4)
would define the term ‘‘Reporting
Authority’’ to mean with respect to a
particular series of Exchange-Traded
Fund Shares, the Exchange, an
institution, or a reporting service
designated by the Exchange or by the
10 Rule 6c–11(a)(1) defines ‘‘exchange-traded
fund’’ as a registered open-end management
company: (i) That issues (and redeems) creation
units to (and from) authorized participants in
exchange for a basket and a cash balancing amount
if any; and (ii) Whose shares are listed on a national
securities exchange and traded at marketdetermined prices. The terms ‘‘authorized
participant,’’ ‘‘basket’’ and ‘‘creation unit’’ are
defined in Rule 6c–11(a).
11 The definition of Exchange-Traded Fund
Shares is the same as the definition of ‘‘exchangetraded fund shares’’ in Rule 6c–11(a) under the
1940 Act.
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8421
exchange that lists a particular series of
Exchange-Traded Fund Shares (if the
Exchange is trading such series
pursuant to unlisted trading privileges)
as the official source for calculating and
reporting information relating to such
series, including, but not limited to, any
current index or portfolio value, the
current value of the portfolio of any
securities required to be deposited in
connection with issuance of ExchangeTraded Fund Shares, the amount of any
dividend equivalent payment or cash
distribution to holders of ExchangeTraded Fund Shares, net asset value, or
other information relating to the
issuance, redemption or trading of
Exchange-Traded Fund Shares. A series
of Exchange-Traded Fund Shares may
have more than one Reporting
Authority, each having different
functions.
Proposed NYSE Rule 5.2(j)(8)(d)
would specify the limitations on
Exchange liability and relates to
limitations of the Exchange, the
Reporting Authority, or any agent of the
Exchange as a result of specified events
and conditions. Specifying such
limitations of liability is standard in the
Exchange’s rules governing the listing of
Exchange-Traded Products and the
proposed rule text is substantively
identical to NYSE Rules 5.2(j)(3)(D),
8.100(f), 8.201(f), 8.200(f), 8.202(f),
8.203(f), 8.204(g), 8.300(f), 8.400(f),
8.500(e), 8.600(e), and 8.700(g).
Proposed NYSE Rule 5.2(j)(8)(d) is
based on NYSE Arca Rule 5.2–E(j)(8)(d)
without any differences.
Proposed NYSE Rule 5.2(j)(8)(e)
would provide that the Exchange may
approve Exchange-Traded Fund Shares
for listing and/or trading (including on
a UTP basis) pursuant to Rule 19b–4(e)
under the Exchange Act provided that
each series of Exchange-Traded Fund
Shares must be eligible to operate in
reliance on Rule 6c–11 under the 1940
Act and must satisfy the requirements of
proposed NYSE Rule 5.2(j)(8)(as
described below) upon initial listing
and, except for subparagraph (1)(A) of
proposed Rule NYSE 5.2(j)(8)(e), on a
continuing basis. As further proposed,
an issuer of such securities must notify
the Exchange of any failure to comply
with such requirements. Proposed
NYSE Rule 5.2(j)(8)(e) is based on NYSE
Arca Rule 5.2–E(j)(8)(e) without any
differences.
Proposed NYSE Rule 5.2(j)(8)(e)(1)
sets forth the initial and continued
listing standards for Exchange-Traded
Fund Shares to be listed on the NYSE
and would provide that ExchangeTraded Fund Shares will be listed and
traded on the Exchange subject to the
requirement that the investment
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
company issuing a series of ExchangeTraded Fund Shares is eligible to
operate in reliance on the requirements
of Rule 6c–11(c) on an initial and
continued listing basis. Proposed NYSE
Rule 5.2(j)(8)(e)(1) is based on NYSE
Arca Rule 5.2–E(j)(8)(e)(1) without any
differences.
Proposed NYSE Rule 5.2(j)(8)(e)(1)(A)
provides that, for each series of
Exchange-Traded Fund Shares, the
Exchange will establish a minimum
number of Exchange-Traded Fund
Shares required to be outstanding at the
time of commencement of trading on the
Exchange. Proposed NYSE Rule
5.2(j)(8)(e)(1)(A) is based on NYSE Arca
Rule 5.2–E(j)(8)(e)(1)(A) without any
differences.
Proposed NYSE Rule 5.2(j)(8)(e)(2)
would set forth the standards for
suspension of trading or removal of
Exchange-Traded Fund Shares from
listing on the Exchange and would
provide that the Exchange will consider
the suspension of trading in, and will
commence delisting proceedings under
NYSE Rule 5.5(m) of, a series of
Exchange-Traded Fund Shares under
any of the following circumstances:
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(A) If the Exchange becomes aware that the
investment company is no longer eligible to
operate in reliance on Rule 6c–11;
(B) if the investment company no longer
complies with the requirements set forth in
NYSE Rule 5.2(j)(8);
(C) if, following the initial twelve-month
period after commencement of trading on the
Exchange of a series of Exchange-Traded
Fund Shares, there are fewer than 50
beneficial holders of such series of ExchangeTraded Fund Shares; or
(D) if such other event shall occur or
condition exists which, in the opinion of the
Exchange, makes further dealings on the
Exchange inadvisable (see proposed NYSE
Rule 5.2(j)(8)(e)(2)(D)).
Proposed NYSE Rule 5.2(j)(8)(e)(2) is
based on NYSE Arca Rule 5.2–
E(j)(8)(e)(2) without any differences.
Proposed NYSE Rule 5.2(j)(8)(f)
would provide that transactions in
Exchange-Traded Fund Shares would
occur during the trading hours specified
in Rule 7.34(a) for Exchange-listed
securities. Proposed NYSE Rule
5.2(j)(8)(f) is based on NYSE Arca Rule
5.2–E(j)(8)(f) with a difference to cross
reference the Exchange’s rule governing
the hours of trading. In addition, unlike
NYSE Arca, Exchange-listed securities
trade on the Exchange only during Core
Trading Hours.
Proposed NYSE Rule 5.2(j)(8)(g)
would provide that the Exchange would
implement and maintain written
surveillance procedures for ExchangeTraded Fund Shares. This proposed rule
is based, for example, on Commentary
.01(f) to NYSE Rule 5.2(j)(3) (for
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Jkt 253001
Investment Company Units);
Commentary .03 to NYSE Rule 8.600
(for Managed Fund Shares); and
Commentary .04 to NYSE Rule 8.700
(for Managed Trust Securities).
Proposed NYSE Rule 5.2(j)(8)(g) is based
on NYSE Arca Rule 5.2–E(j)(8)(g)
without any differences.
Proposed NYSE Rule 5.2(j)(8)(h)
would provide that, upon termination of
an investment company issuing
Exchange-Traded Fund Shares, the
Exchange would require that ExchangeTraded Fund Shares issued in
connection with such entity be removed
from Exchange listing. Proposed NYSE
Rule 5.2(j)(8)(h) is based on NYSE Arca
Rule 5.2–E(j)(8)(h) without any
differences.
Proposed Commentary .01 to NYSE
Rule 5.2(j)(8) would provide that a
security that has previously been
approved for listing on the Exchange
pursuant to the generic listing
requirements specified in NYSE Rule
5.2(j)(3) or Commentary .01 to NYSE
Rule 8.600, or pursuant to a proposed
rule change approved or subject to a
notice of effectiveness by the
Commission, may be considered
approved for listing solely under NYSE
Rule 5.2(j)(8) if such security is eligible
to operate in reliance on Rule 6c–11
under the 1940 Act. Once so approved
for listing, the continued listing
requirements applicable to such
previously-listed security will be those
specified in paragraph (e) of NYSE Rule
5.2(j)(8). Any requirements for listing as
specified in NYSE Rule 5.2(j)(3) or
Commentary .01 to NYSE Rule 8.600, or
an approval order or notice of
effectiveness of a separate proposed rule
change that differ from the requirements
of NYSE Rule 5.2(j)(8) will no longer be
applicable to such security.
Commentary .01 to proposed NYSE Rule
5.2(j)(8) is based on Commentary .01 to
NYSE Arca Rule 5.2–E(j)(8) without any
differences.12
Proposed Commentary .02 to NYSE
Rule 5.2(j)(8) is based on Commentary
.02 to NYSE Arca Rule 5.2–E(j)(8)(a)
without any differences, and would
establish the following requirements
that each series of Exchange-Traded
Fund Shares based on an index would
be required to meet on an initial and
continued listing basis:
(1) If the underlying index is
maintained by a broker-dealer or fund
adviser, the broker-dealer or fund
adviser will erect and maintain a ‘‘fire
wall’’ around the personnel who have
12 NYSE represents that there are currently no
securities listed on the Exchange that would be
eligible for approval under proposed Commentary
.01 to NYSE Rule 5.2(j)(8).
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access to information concerning
changes and adjustments to the index
and the index will be calculated by a
third party who is not a broker-dealer or
fund adviser, and
(2) Any advisory committee,
supervisory board, or similar entity that
advises a Reporting Authority or that
makes decisions on the index
composition, methodology and related
matters, must implement and maintain,
or be subject to, procedures designed to
prevent the use and dissemination of
material non-public information
regarding the applicable index.13
In addition, with respect to series of
Exchange-Traded Fund Shares that are
actively managed, if the investment
adviser to the investment company
issuing Exchange-Traded Fund Shares is
affiliated with a broker-dealer, such
investment adviser will erect and
maintain a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such portfolio.
Personnel who make decisions on the
portfolio composition must be subject to
procedures designed to prevent the use
and dissemination of material
nonpublic information regarding the
applicable portfolio. The Reporting
Authority that provides information
relating to the portfolio of a series of
Exchange-Traded Fund Shares must
implement and maintain, or be subject
to, procedures designed to prevent the
use and dissemination of material nonpublic information regarding the actual
components of such portfolio.14
The Exchange represents that
Exchange-Traded Fund Shares will be
subject to all Exchange rules applicable
to equities trading. With respect to
Exchange-Traded Fund Shares, all
obligations relating to product
description and prospectus delivery
requirements will continue to apply in
accordance with Exchange rules and
federal securities laws, and the
Exchange and the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
will continue to monitor Exchange
members for compliance with such
requirements, which are not changing as
a result of Rule 6c–11 under the 1940
Act.
With respect to trading halts, the
Exchange represents that it may
consider all relevant factors in
13 See proposed Commentary .02(a) to NYSE Rule
5.2(j)(8)). Proposed Commentary .02(a) is based on
Commentary .01(b)(1) to NYSE Rule 5.2(j)(3) and
Commentary .02(b)(1) and (b)(3) to NYSE Rule
5.2(j)(3).
14 See proposed Commentary .02(b) to NYSE Rule
5.2(j)(8)). Proposed Commentary .02(b) is based in
part on Commentary .06 to NYSE Rule 8.600.
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
exercising its discretion to halt or
suspend trading in a series of ExchangeTraded Fund Shares.15 Trading in
Exchange-Traded Fund Shares will be
halted if the circuit breaker parameters
in NYSE Rule 7.12 have been reached.
Trading also may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in Exchange-Traded Fund Shares
inadvisable. These may include: (1) The
extent to which certain information
about the Exchange-Traded Fund Shares
that is required to be disclosed under
Rule 6c11(c) of the 1940 Act is not being
made available, or (2) whether other
unusual conditions or circumstances
detrimental to the maintenance of a fair
and orderly market are present.
Proposed NYSE Rule 7.18(d)(2)
The Exchange proposes to adopt new
NYSE Rule 7.18(d)(2) modeled on NYSE
Arca Rule 7.18–E(d)(2) that would
govern trading halts for listed ETPs
(which would include Exchange-Traded
Fund Shares). Proposed NYSE Rule
7.18(d)(2) would provide that, with
respect to an ETP listed on the Exchange
for which a Net Asset Value (‘‘NAV’’)
(and in the case of Managed Fund
Shares under NYSE Rule 8.600 and
Managed Trust Securities under NYSE
Rule 8.700, a Disclosed Portfolio) is
disseminated, if the Exchange becomes
aware that the NAV (or in the case of
Managed Fund Shares or Managed Trust
Securities, the Disclosed Portfolio) is
not being disseminated to all market
participants at the same time, it will halt
trading in the affected Exchange Traded
Product on the NYSE until such time as
the NAV (or in the case of Managed
Fund Shares or Managed Trust
Securities, the Disclosed Portfolio, as
applicable) is available to all market
participants.16
Surveillance
The Exchange represents that its
surveillance procedures are adequate to
properly monitor the trading of the
Exchange-Traded Fund Shares in all
trading sessions and to deter and detect
violations of Exchange rules.
Specifically, the Exchange will
implement and maintain written
surveillance procedures to monitor
trading in Exchange-Traded Fund
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15 See
NYSE Rule 7.12.
16 In addition, the Exchange states that it may halt
trading in ETPs if there is an interruption or
disruption in the dissemination of an underlying
index value, if applicable, if there are major
interruptions in securities trading in U.S. or global
markets, or in the presence of other unusual
conditions or circumstances detrimental to the
maintenance of a fair and orderly market.
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18:53 Feb 04, 2021
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Shares on the NYSE.17 The Exchange or
FINRA, on behalf of the Exchange, will
communicate as needed regarding
trading in Exchange-Traded Fund
Shares and certain of their applicable
underlying components with other
markets that are members of the
Intermarket Surveillance Group (‘‘ISG’’)
or with which the Exchange has in place
a comprehensive surveillance sharing
agreement. In addition, the Exchange
may obtain information regarding
trading in Exchange-Traded Fund
Shares and certain of their applicable
underlying components from markets
and other entities that are members of
ISG or with which the Exchange has in
place a comprehensive surveillance
sharing agreement. Additionally,
FINRA, on behalf of the Exchange, is
able to access, as needed, trade
information for certain fixed income
securities that may be held by a series
of Exchange-Traded Fund Shares
reported to FINRA’s TRACE. FINRA
also can access data obtained from the
Municipal Securities Rulemaking
Board’s Electronic Municipal Market
Access (‘‘EMMA’’) system relating to
municipal bond trading activity for
surveillance purposes in connection
with trading in a series of ExchangeTraded Fund Shares, to the extent that
a series of Exchange-Traded Fund
Shares holds municipal securities. As
noted below, the issuer of a series of
Exchange-Traded Fund Shares will be
required to comply with Rule 10A–3
under the Act for the initial and
continued listing of Exchange-Traded
Fund Shares, as provided under NYSE
Rule 5.2.
Pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange
will monitor for compliance with the
continued listing requirements. As
provided for under proposed NYSE Rule
5.2(j)(8)(e)(2), if the investment
company or series of Exchange-Traded
Fund Shares is not in compliance with
the applicable listing requirements, the
Exchange will commence delisting
procedures under Rule 5.5(m).
The Exchange will implement and
maintain written surveillance
procedures to monitor issuer
compliance with the requirements of
proposed NYSE Rule 5.2(j)(8) for
Exchange-Traded Funds on the NYSE.
For example, the Exchange will use
intraday alerts that will notify Exchange
personnel of trading activity throughout
the day that may indicate that certain
17 The Exchange represents that the surveillance
procedures applicable to Exchange-Traded Fund
Shares on the NYSE would be substantially similar
to those in place for Investment Company Units,
Exchange-Traded Fund Shares, and Managed Fund
Shares, among other product types, on NYSE Arca.
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Sfmt 4703
8423
disclosures are not being made
accurately or that other unusual
conditions or circumstances are present
that could be detrimental to the
maintenance of a fair and orderly
market. The Exchange will require
periodic certification from the issuer of
a series of Exchange-Traded Fund
Shares that it is in compliance with
Rule 6c–11 and the requirements of
NYSE Rule 5.2(j)(8).
Proposed NYSE Rule 5.2(j)(8)(e)(2)(i)
provides that the Exchange will
consider the suspension of trading in,
and will commence delisting
proceedings under NYSE Rule 5.5(m) of,
a series of Exchange-Traded Fund
Shares if the Exchange becomes aware
that the investment company is no
longer eligible to operate in reliance on
Rule 6c–11. The Exchange’s awareness
for purposes of determining whether to
suspend trading or delist a series of
Exchange-Traded Fund Shares may
result from notification by the
investment company or by the Exchange
learning, through its own efforts, of noncompliance with NYSE Rule 5.2(j)(8).18
In addition, the Exchange will
periodically review issuer websites to
monitor whether disclosures are being
made for a series of Exchange-Traded
Fund Shares as required by Rule 6c–
11(c)(1). The Exchange also notes that
proposed NYSE Rule 5.2(j)(8)(e) would
require an issuer of Exchange-Traded
Fund Shares to notify the Exchange that
it is no longer eligible to operate in
reliance on Rule 6c–11 or that it does
not comply with the requirements of
proposed NYSE Rule 5.2(j)(8). The
Exchange will rely on the foregoing
procedures to become aware of any noncompliance with the requirements of
NYSE Rule 5.2(j)(8). Proposed NYSE
Rule 5.2(j)(8)(e)(2)(i) is based on NYSE
Arca Rule 5.2–E(j)(8)(e)(2)(i) without
any differences.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the Act and rules and
regulations thereunder applicable to a
national securities exchange.19 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,20 which
18 As proposed, NYSE Rule 5.2(j)(8) does not
impose index dissemination requirements, the
Exchange does not plan to conduct a specific index
dissemination surveillance for securities listed
pursuant to such rule.
19 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
20 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
requires, among other things, that the
Exchange’s rules be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Exchange proposes to adopt new
NYSE Rule 5.2(j)(8) to establish generic
listing standards pursuant to Rule 19b–
4(e) under the Act 21 that would permit
the Exchange to list and trade ExchangeTraded Fund Shares in a manner
consistent with Rule 6c–11 under the
1940 Act. The Exchange represents that
proposed NYSE Rule 5.2(j)(8) is based
on recently adopted NYSE Arca Rule
5.2–E(j)(8).22 The Commission believes
that NYSE’s proposed Rule 5.2(j)(8) is
substantively identical to proposals that
the Commission has previously
approved relating to the listing and
trading of Exchange-Traded Fund
Shares that are permitted to operate in
reliance on Rule 6c–11 under the 1940
Act.23 Accordingly, for the reasons
discussed in the Prior Rule 6c–11
Generic Listing Orders, the Commission
finds that this proposed rule change is
consistent with Section 6(b)(5) of the
Act 24 and the rules and regulations
thereunder applicable to a national
securities exchange.25
21 Rule 19b–4(e)(1) under the Act states that ‘‘[t]he
listing and trading of a new derivative securities
product by a self-regulatory organization shall not
be deemed a proposed rule change, pursuant to
paragraph (c)(1) of this section, if the Commission
has approved, pursuant to section 19(b) of the Act
(15 U.S.C. 78s(b)), the self-regulatory organization’s
trading rules, procedures and listing standards for
the product class that would include the new
derivative securities product and the self-regulatory
organization has a surveillance program for the
product class.’’ 17 CFR 240.19b–4(e)(1). ‘‘New
derivative securities product’’ is defined as ‘‘any
type of option, warrant, hybrid securities product
or any other security, other than a single equity
option or a security futures product, whose value
is based, in whole or in part, upon the performance
of, or interest in, an underlying instrument.’’ 17
CFR 240.19b–4(e).
22 See supra note 9 and accompanying text.
23 See Securities Exchange Act Release Nos.
88625 (April 13, 2020), 85 FR 21479 (April 17,
2020) (SR–NYSEArca–2019–81); 88566 (April 6,
2020), 85 FR 20312 (April 10, 2020) (SR–CboeBZX–
2019–097); and 88561 (April 3, 2020), 85 FR 19984
(April 9, 2020) (SR–NASDAQ–2019–090). These
releases are referred to collectively as the ‘‘Prior
Rule 6c–11 Generic Listing Orders.’’
24 15 U.S.C. 78f(b)(5).
25 When relying on Rule 19b–4(e) under the Act
to list and trade a new derivative securities product,
the Commission notes that NYSE must submit Form
19b–4(e) (17 CFR 249.820) to the Commission
within five business days after commencement of
trading the new derivative securities product. See
17 CFR 240.19b–4(e)(2)(ii). See also 17 CFR
240.19b–4(e)(2)(i) (setting forth NYSE’s
recordkeeping requirements relating to all relevant
records and information pertaining to each new
VerDate Sep<11>2014
18:53 Feb 04, 2021
Jkt 253001
In addition, as stated above, the
Exchange represents that proposed
NYSE Rule 7.18(d)(2) governing trading
halts for NYSE-listed ETPs (which
would include Exchange-Traded Fund
Shares), is based on NYSE Arca Rule
7.18–E(d)(2). The Commission believes
that NYSE’s proposed Rule 7.18(d)(2) is
substantively identical to NYSE Arca
Rule 7.18–E(d)(2) and concludes that
this proposed rule does not present any
novel or unique regulatory issues. The
Commission therefore finds that this
proposed rule change relating to trading
halts is consistent with Section 6(b)(5)
of the Act 26 and the rules and
regulations thereunder applicable to a
national securities exchange.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice, including the Exchange’s
representations relating to its
surveillance procedures. Specifically,
the Exchange represents, among other
things, that its surveillance procedures
are adequate to properly monitor the
trading of the Exchange-Traded Fund
Shares in all trading sessions and to
deter and detect violations of Exchange
rules, and that the Exchange will
implement and maintain written
surveillance procedures to monitor
trading in Exchange-Traded Fund
Shares on the NYSE.27
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 28 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,29 that the
proposed rule change (SR–NYSE–2020–
86) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02397 Filed 2–4–21; 8:45 am]
BILLING CODE 8011–01–P
derivative securities product traded pursuant to
Rule 19b–4(e)).
26 15 U.S.C. 78f(b)(5).
27 See supra note 17 and accompanying text. See
also supra note 21 (citing to Rule 19b–4(e)(1) under
the Act requiring the self-regulatory organization to
have a surveillance program for the product class
of a new derivative securities product).
28 15 U.S.C. 78f(b)(5).
29 15 U.S.C. 78f(b)(2).
30 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91037; File No. SR–
NYSENAT–2021–01]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing of
Proposed Rule Change To Amend its
Schedule of Fees and Rebates Related
to Co-Location Services
February 1, 2021.
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 January
19, 2021, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Schedule of Fees and Rebates (‘‘Fee
Schedule’’) related to co-location
services to add two Partial Cabinet
Solution bundles. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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]]>Agencies
[Federal Register Volume 86, Number 23 (Friday, February 5, 2021)]
[Notices]
[Pages 8420-8424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02397]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91029; File No. SR-NYSE-2020-86]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving a Proposed Rule Change To Adopt NYSE Rule 5.2(j)(8) Governing
the Listing and Trading of Exchange-Traded Fund Shares
February 1, 2021.
I. Introduction
On December 18, 2020, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to, among other things, adopt new
NYSE Rule 5.2(j)(8) to permit the generic listing and trading of
Exchange-Traded Fund Shares. The proposed rule change was published for
comment in the Federal Register on December 30, 2020.\3\ The Commission
has received no comments on the proposed rule change. The Commission is
approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 90775 (December 22,
2020), 85 FR 86584 (``Notice'').
---------------------------------------------------------------------------
II. Exchange's Description of the Proposed Rule Change
Under the proposal, the Exchange states that the Commission
recently adopted Rule 6c-11 under the Investment Company Act of 1940
(``1940 Act'') \4\ to permit Exchange
[[Page 8421]]
Traded Products (``ETPs'') \5\ that are exchange-traded funds (``ETF'')
\6\ shares (``Exchange-Traded Fund Shares'') \7\ and that satisfy
certain conditions to operate without obtaining an exemptive order from
the Commission under the 1940 Act.\8\ According to the Exchange, the
regulatory framework provided in Rule 6c-11 streamlines procedures and
reduces the costs and timeframes associated with bringing ETFs to
market, thereby enhancing competition among ETF issuers and reducing
costs for investors. The Exchange proposes to adopt new NYSE Rule
5.2(j)(8) to establish generic listing standards allowing the Exchange
to list and trade Exchange-Traded Fund Shares in a manner consistent
with Rule 6c-11 under the 1940 Act. The Exchange represents that
proposed NYSE Rule 5.2(j)(8) is based on NYSE Arca, Inc. (``NYSE
Arca'') Rule 5.2-E(j)(8).\9\ In addition, the Exchange proposes to
adopt new NYSE Rule 7.18(d)(2) based on NYSE Arca Rule 7.18-E(d)(2)
that would govern trading halts for listed ETPs (which would include
Exchange-Traded Fund Shares).
---------------------------------------------------------------------------
\4\ According to the Exchange, NYSE currently trades securities,
including ETPs, on its Pillar trading platform on an unlisted
trading privileges (``UTP'') basis, subject to NYSE Pillar Platform
Rules 1P--13P. ``UTP Security'' is defined as a security that is
listed on a national securities exchange other than the Exchange and
that trades on the Exchange pursuant to unlisted trading privileges.
See NYSE Rule 1.1. ETPs traded on a UTP basis on the Exchange are
not assigned to a Designated Market Maker (``DMM'') but are
available for Floor brokers to trade in Floor-based crossing
transactions. See Securities Exchange Act Release No. 82945 (March
26, 2018), 83 FR 13553, 13568 (March 29, 2018) (SR-NYSE-2017-36)
(approving Exchange rules to trade securities on a UTP basis on the
Pillar trading platform). The Exchange states that its rules permit
it to list ETPs under NYSE Rules 5P and 8P. Specifically, NYSE Rules
5P (Securities Traded) and 8P (Trading of Certain Exchange-Traded
Products) provide for the listing of certain ETPs on the Exchange
that (1) meet the applicable requirements set forth in those rules,
and (2) do not have any component NMS Stock that is listed on the
Exchange or is based on, or represents an interest in, an underlying
index or reference asset that includes an NMS Stock listed on the
Exchange. According to the Exchange, ETPs listed under NYSE Rules 5P
and 8P would be ``Tape A'' listings and traded pursuant to the rules
applicable to NYSE-listed securities. Accordingly, once an ETP is
listed, it would be assigned to a DMM pursuant to NYSE Rule 103B and
the assigned DMM would have obligations vis-[agrave]-vis such
securities as specified in NYSE Rule 104, including facilitating the
opening, reopening, and closing of such securities. See Securities
Exchange Act Release No. 87056 (September 23, 2019), 84 FR 51205
(September 27, 2019) (SR-NYSE-2019-34) (order approving amendments
to NYSE Rule 104 to specify DMM requirements for ETPs listed on the
Exchange pursuant to NYSE Rules 5P and 8P).
\5\ NYSE Rule 1.1(k) defines ``Exchange Traded Product'' as a
security that meets the definition of ``derivative securities
product'' in Rule 19b-4(e) under the Act. According to the Exchange,
ETPs include, for example, securities listed and traded on NYSE
pursuant to the following rules: NYSE Rule 5.2(j)(3) (Investment
Company Units); NYSE Rule 5.2(j)(5) (Equity Gold Shares); NYSE Rule
5.2 (j)(6)(Index-Linked Securities); NYSE Rule 8.100 (Portfolio
Depositary Receipts); NYSE Rule 8.200 (Trust Issued Receipts); NYSE
Rule 8.201 (Commodity-Based Trust Shares); NYSE Rule 8.202 (Currency
Trust Shares); NYSE Rule 8.203 (Commodity Index Trust Shares); NYSE
Rule 8.204 (Commodity Futures Trust Shares); NYSE Rule 8.600
(Managed Fund Shares); and NYSE Rule 8.700 (Managed Trust
Securities).
\6\ See infra note 10.
\7\ See infra note 11.
\8\ See Release Nos. 33-10695; IC-33646; File No. S7-15-18
(ETFs) (September 25, 2019), 84 FR 57162 (October 24, 2019).
\9\ See Securities Exchange Act Release No. 88625 (April 13,
2020), 85 FR 21479 (April 17, 2020) (SR-NYSEArca-2019-81) (Notice of
filing of Amendment No. 2 and Order granting accelerated approval of
proposed rule change, as modified by Amendment No. 2, to adopt NYSE
Arca Rule 5.2-E(j)(8) establishing generic listing standards for
Exchange-Traded Fund Shares).
---------------------------------------------------------------------------
Proposed NYSE Rule 5.2(j)(8)
The Exchange proposes standards that would pertain to Exchange-
Traded Fund Shares to qualify for listing and trading pursuant to Rule
19b-4(e) under the Act, as follows:
Proposed NYSE Rule 5.2(j)(8)(a) would provide that the Exchange
would consider for trading, whether by listing or on a UTP basis,
Exchange-Traded Fund Shares that meet the criteria of proposed NYSE
Rule 5.2(j)(8). Proposed NYSE Rule 5.2(j)(8)(a) is based on NYSE Arca
Rule 5.2-E(j)(8)(a) without any differences.
Proposed NYSE Rule 5.2(j)(8)(b) would specify applicability of
proposed NYSE Rule 5.2(j)(8) and would provide that it is applicable
only to Exchange-Traded Fund Shares. Proposed NYSE Rule 5.2(j)(8)(b)
would further provide that, except to the extent inconsistent with
proposed NYSE Rule 5.2(j)(8) or unless the context otherwise requires,
Exchange rules would be applicable to the trading on the Exchange of
such securities and that Exchange-Traded Fund Shares would be included
within the definition of NMS Stock as defined in NYSE Rule 1.1.
Proposed NYSE Rule 5.2(j)(8)(b) is based on NYSE Arca Rule 5.2-
E(j)(8)(b) without any differences.
Proposed NYSE Rule 5.2(j)(8)(c) would set forth the proposed rule's
applicable definitions, which are based on NYSE Arca Rule 5.2-
E(j)(8)(c) without any differences, as follows:
Proposed NYSE Rule 5.2(j)(8)(c)(1) would define the term
``1940 Act'' to mean the Investment Company Act of 1940, as amended.
Proposed NYSE Rule 5.2(j)(8)(c)(2) would define the term
``Exchange-Traded Fund'' as having the same meaning as the term
``exchange-traded fund'' as defined in Rule 6c-11(a)(1) under the 1940
Act.\10\
---------------------------------------------------------------------------
\10\ Rule 6c-11(a)(1) defines ``exchange-traded fund'' as a
registered open-end management company: (i) That issues (and
redeems) creation units to (and from) authorized participants in
exchange for a basket and a cash balancing amount if any; and (ii)
Whose shares are listed on a national securities exchange and traded
at market-determined prices. The terms ``authorized participant,''
``basket'' and ``creation unit'' are defined in Rule 6c-11(a).
---------------------------------------------------------------------------
Proposed NYSE Rule 5.2(j)(8)(c)(3) would define the term
``Exchange-Traded Fund Share'' to mean a share of stock issued by an
Exchange-Traded Fund.\11\
---------------------------------------------------------------------------
\11\ The definition of Exchange-Traded Fund Shares is the same
as the definition of ``exchange-traded fund shares'' in Rule 6c-
11(a) under the 1940 Act.
---------------------------------------------------------------------------
Proposed NYSE Rule 5.2(j)(8)(c)(4) would define the term
``Reporting Authority'' to mean with respect to a particular series of
Exchange-Traded Fund Shares, the Exchange, an institution, or a
reporting service designated by the Exchange or by the exchange that
lists a particular series of Exchange-Traded Fund Shares (if the
Exchange is trading such series pursuant to unlisted trading
privileges) as the official source for calculating and reporting
information relating to such series, including, but not limited to, any
current index or portfolio value, the current value of the portfolio of
any securities required to be deposited in connection with issuance of
Exchange-Traded Fund Shares, the amount of any dividend equivalent
payment or cash distribution to holders of Exchange-Traded Fund Shares,
net asset value, or other information relating to the issuance,
redemption or trading of Exchange-Traded Fund Shares. A series of
Exchange-Traded Fund Shares may have more than one Reporting Authority,
each having different functions.
Proposed NYSE Rule 5.2(j)(8)(d) would specify the limitations on
Exchange liability and relates to limitations of the Exchange, the
Reporting Authority, or any agent of the Exchange as a result of
specified events and conditions. Specifying such limitations of
liability is standard in the Exchange's rules governing the listing of
Exchange-Traded Products and the proposed rule text is substantively
identical to NYSE Rules 5.2(j)(3)(D), 8.100(f), 8.201(f), 8.200(f),
8.202(f), 8.203(f), 8.204(g), 8.300(f), 8.400(f), 8.500(e), 8.600(e),
and 8.700(g). Proposed NYSE Rule 5.2(j)(8)(d) is based on NYSE Arca
Rule 5.2-E(j)(8)(d) without any differences.
Proposed NYSE Rule 5.2(j)(8)(e) would provide that the Exchange may
approve Exchange-Traded Fund Shares for listing and/or trading
(including on a UTP basis) pursuant to Rule 19b-4(e) under the Exchange
Act provided that each series of Exchange-Traded Fund Shares must be
eligible to operate in reliance on Rule 6c-11 under the 1940 Act and
must satisfy the requirements of proposed NYSE Rule 5.2(j)(8)(as
described below) upon initial listing and, except for subparagraph
(1)(A) of proposed Rule NYSE 5.2(j)(8)(e), on a continuing basis. As
further proposed, an issuer of such securities must notify the Exchange
of any failure to comply with such requirements. Proposed NYSE Rule
5.2(j)(8)(e) is based on NYSE Arca Rule 5.2-E(j)(8)(e) without any
differences.
Proposed NYSE Rule 5.2(j)(8)(e)(1) sets forth the initial and
continued listing standards for Exchange-Traded Fund Shares to be
listed on the NYSE and would provide that Exchange-Traded Fund Shares
will be listed and traded on the Exchange subject to the requirement
that the investment
[[Page 8422]]
company issuing a series of Exchange-Traded Fund Shares is eligible to
operate in reliance on the requirements of Rule 6c-11(c) on an initial
and continued listing basis. Proposed NYSE Rule 5.2(j)(8)(e)(1) is
based on NYSE Arca Rule 5.2-E(j)(8)(e)(1) without any differences.
Proposed NYSE Rule 5.2(j)(8)(e)(1)(A) provides that, for each
series of Exchange-Traded Fund Shares, the Exchange will establish a
minimum number of Exchange-Traded Fund Shares required to be
outstanding at the time of commencement of trading on the Exchange.
Proposed NYSE Rule 5.2(j)(8)(e)(1)(A) is based on NYSE Arca Rule 5.2-
E(j)(8)(e)(1)(A) without any differences.
Proposed NYSE Rule 5.2(j)(8)(e)(2) would set forth the standards
for suspension of trading or removal of Exchange-Traded Fund Shares
from listing on the Exchange and would provide that the Exchange will
consider the suspension of trading in, and will commence delisting
proceedings under NYSE Rule 5.5(m) of, a series of Exchange-Traded Fund
Shares under any of the following circumstances:
(A) If the Exchange becomes aware that the investment company is
no longer eligible to operate in reliance on Rule 6c-11;
(B) if the investment company no longer complies with the
requirements set forth in NYSE Rule 5.2(j)(8);
(C) if, following the initial twelve-month period after
commencement of trading on the Exchange of a series of Exchange-
Traded Fund Shares, there are fewer than 50 beneficial holders of
such series of Exchange-Traded Fund Shares; or
(D) if such other event shall occur or condition exists which,
in the opinion of the Exchange, makes further dealings on the
Exchange inadvisable (see proposed NYSE Rule 5.2(j)(8)(e)(2)(D)).
Proposed NYSE Rule 5.2(j)(8)(e)(2) is based on NYSE Arca Rule 5.2-
E(j)(8)(e)(2) without any differences.
Proposed NYSE Rule 5.2(j)(8)(f) would provide that transactions in
Exchange-Traded Fund Shares would occur during the trading hours
specified in Rule 7.34(a) for Exchange-listed securities. Proposed NYSE
Rule 5.2(j)(8)(f) is based on NYSE Arca Rule 5.2-E(j)(8)(f) with a
difference to cross reference the Exchange's rule governing the hours
of trading. In addition, unlike NYSE Arca, Exchange-listed securities
trade on the Exchange only during Core Trading Hours.
Proposed NYSE Rule 5.2(j)(8)(g) would provide that the Exchange
would implement and maintain written surveillance procedures for
Exchange-Traded Fund Shares. This proposed rule is based, for example,
on Commentary .01(f) to NYSE Rule 5.2(j)(3) (for Investment Company
Units); Commentary .03 to NYSE Rule 8.600 (for Managed Fund Shares);
and Commentary .04 to NYSE Rule 8.700 (for Managed Trust Securities).
Proposed NYSE Rule 5.2(j)(8)(g) is based on NYSE Arca Rule 5.2-
E(j)(8)(g) without any differences.
Proposed NYSE Rule 5.2(j)(8)(h) would provide that, upon
termination of an investment company issuing Exchange-Traded Fund
Shares, the Exchange would require that Exchange-Traded Fund Shares
issued in connection with such entity be removed from Exchange listing.
Proposed NYSE Rule 5.2(j)(8)(h) is based on NYSE Arca Rule 5.2-
E(j)(8)(h) without any differences.
Proposed Commentary .01 to NYSE Rule 5.2(j)(8) would provide that a
security that has previously been approved for listing on the Exchange
pursuant to the generic listing requirements specified in NYSE Rule
5.2(j)(3) or Commentary .01 to NYSE Rule 8.600, or pursuant to a
proposed rule change approved or subject to a notice of effectiveness
by the Commission, may be considered approved for listing solely under
NYSE Rule 5.2(j)(8) if such security is eligible to operate in reliance
on Rule 6c-11 under the 1940 Act. Once so approved for listing, the
continued listing requirements applicable to such previously-listed
security will be those specified in paragraph (e) of NYSE Rule
5.2(j)(8). Any requirements for listing as specified in NYSE Rule
5.2(j)(3) or Commentary .01 to NYSE Rule 8.600, or an approval order or
notice of effectiveness of a separate proposed rule change that differ
from the requirements of NYSE Rule 5.2(j)(8) will no longer be
applicable to such security. Commentary .01 to proposed NYSE Rule
5.2(j)(8) is based on Commentary .01 to NYSE Arca Rule 5.2-E(j)(8)
without any differences.\12\
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\12\ NYSE represents that there are currently no securities
listed on the Exchange that would be eligible for approval under
proposed Commentary .01 to NYSE Rule 5.2(j)(8).
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Proposed Commentary .02 to NYSE Rule 5.2(j)(8) is based on
Commentary .02 to NYSE Arca Rule 5.2-E(j)(8)(a) without any
differences, and would establish the following requirements that each
series of Exchange-Traded Fund Shares based on an index would be
required to meet on an initial and continued listing basis:
(1) If the underlying index is maintained by a broker-dealer or
fund adviser, the broker-dealer or fund adviser will erect and maintain
a ``fire wall'' around the personnel who have access to information
concerning changes and adjustments to the index and the index will be
calculated by a third party who is not a broker-dealer or fund adviser,
and
(2) Any advisory committee, supervisory board, or similar entity
that advises a Reporting Authority or that makes decisions on the index
composition, methodology and related matters, must implement and
maintain, or be subject to, procedures designed to prevent the use and
dissemination of material non-public information regarding the
applicable index.\13\
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\13\ See proposed Commentary .02(a) to NYSE Rule 5.2(j)(8)).
Proposed Commentary .02(a) is based on Commentary .01(b)(1) to NYSE
Rule 5.2(j)(3) and Commentary .02(b)(1) and (b)(3) to NYSE Rule
5.2(j)(3).
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In addition, with respect to series of Exchange-Traded Fund Shares
that are actively managed, if the investment adviser to the investment
company issuing Exchange-Traded Fund Shares is affiliated with a
broker-dealer, such investment adviser will erect and maintain a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such portfolio. Personnel who make decisions on the
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material nonpublic information regarding
the applicable portfolio. The Reporting Authority that provides
information relating to the portfolio of a series of Exchange-Traded
Fund Shares must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material non-public
information regarding the actual components of such portfolio.\14\
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\14\ See proposed Commentary .02(b) to NYSE Rule 5.2(j)(8)).
Proposed Commentary .02(b) is based in part on Commentary .06 to
NYSE Rule 8.600.
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The Exchange represents that Exchange-Traded Fund Shares will be
subject to all Exchange rules applicable to equities trading. With
respect to Exchange-Traded Fund Shares, all obligations relating to
product description and prospectus delivery requirements will continue
to apply in accordance with Exchange rules and federal securities laws,
and the Exchange and the Financial Industry Regulatory Authority, Inc.
(``FINRA'') will continue to monitor Exchange members for compliance
with such requirements, which are not changing as a result of Rule 6c-
11 under the 1940 Act.
With respect to trading halts, the Exchange represents that it may
consider all relevant factors in
[[Page 8423]]
exercising its discretion to halt or suspend trading in a series of
Exchange-Traded Fund Shares.\15\ Trading in Exchange-Traded Fund Shares
will be halted if the circuit breaker parameters in NYSE Rule 7.12 have
been reached. Trading also may be halted because of market conditions
or for reasons that, in the view of the Exchange, make trading in
Exchange-Traded Fund Shares inadvisable. These may include: (1) The
extent to which certain information about the Exchange-Traded Fund
Shares that is required to be disclosed under Rule 6c11(c) of the 1940
Act is not being made available, or (2) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present.
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\15\ See NYSE Rule 7.12.
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Proposed NYSE Rule 7.18(d)(2)
The Exchange proposes to adopt new NYSE Rule 7.18(d)(2) modeled on
NYSE Arca Rule 7.18-E(d)(2) that would govern trading halts for listed
ETPs (which would include Exchange-Traded Fund Shares). Proposed NYSE
Rule 7.18(d)(2) would provide that, with respect to an ETP listed on
the Exchange for which a Net Asset Value (``NAV'') (and in the case of
Managed Fund Shares under NYSE Rule 8.600 and Managed Trust Securities
under NYSE Rule 8.700, a Disclosed Portfolio) is disseminated, if the
Exchange becomes aware that the NAV (or in the case of Managed Fund
Shares or Managed Trust Securities, the Disclosed Portfolio) is not
being disseminated to all market participants at the same time, it will
halt trading in the affected Exchange Traded Product on the NYSE until
such time as the NAV (or in the case of Managed Fund Shares or Managed
Trust Securities, the Disclosed Portfolio, as applicable) is available
to all market participants.\16\
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\16\ In addition, the Exchange states that it may halt trading
in ETPs if there is an interruption or disruption in the
dissemination of an underlying index value, if applicable, if there
are major interruptions in securities trading in U.S. or global
markets, or in the presence of other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market.
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Surveillance
The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Exchange-Traded Fund
Shares in all trading sessions and to deter and detect violations of
Exchange rules. Specifically, the Exchange will implement and maintain
written surveillance procedures to monitor trading in Exchange-Traded
Fund Shares on the NYSE.\17\ The Exchange or FINRA, on behalf of the
Exchange, will communicate as needed regarding trading in Exchange-
Traded Fund Shares and certain of their applicable underlying
components with other markets that are members of the Intermarket
Surveillance Group (``ISG'') or with which the Exchange has in place a
comprehensive surveillance sharing agreement. In addition, the Exchange
may obtain information regarding trading in Exchange-Traded Fund Shares
and certain of their applicable underlying components from markets and
other entities that are members of ISG or with which the Exchange has
in place a comprehensive surveillance sharing agreement. Additionally,
FINRA, on behalf of the Exchange, is able to access, as needed, trade
information for certain fixed income securities that may be held by a
series of Exchange-Traded Fund Shares reported to FINRA's TRACE. FINRA
also can access data obtained from the Municipal Securities Rulemaking
Board's Electronic Municipal Market Access (``EMMA'') system relating
to municipal bond trading activity for surveillance purposes in
connection with trading in a series of Exchange-Traded Fund Shares, to
the extent that a series of Exchange-Traded Fund Shares holds municipal
securities. As noted below, the issuer of a series of Exchange-Traded
Fund Shares will be required to comply with Rule 10A-3 under the Act
for the initial and continued listing of Exchange-Traded Fund Shares,
as provided under NYSE Rule 5.2.
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\17\ The Exchange represents that the surveillance procedures
applicable to Exchange-Traded Fund Shares on the NYSE would be
substantially similar to those in place for Investment Company
Units, Exchange-Traded Fund Shares, and Managed Fund Shares, among
other product types, on NYSE Arca.
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Pursuant to its obligations under Section 19(g)(1) of the Act, the
Exchange will monitor for compliance with the continued listing
requirements. As provided for under proposed NYSE Rule 5.2(j)(8)(e)(2),
if the investment company or series of Exchange-Traded Fund Shares is
not in compliance with the applicable listing requirements, the
Exchange will commence delisting procedures under Rule 5.5(m).
The Exchange will implement and maintain written surveillance
procedures to monitor issuer compliance with the requirements of
proposed NYSE Rule 5.2(j)(8) for Exchange-Traded Funds on the NYSE. For
example, the Exchange will use intraday alerts that will notify
Exchange personnel of trading activity throughout the day that may
indicate that certain disclosures are not being made accurately or that
other unusual conditions or circumstances are present that could be
detrimental to the maintenance of a fair and orderly market. The
Exchange will require periodic certification from the issuer of a
series of Exchange-Traded Fund Shares that it is in compliance with
Rule 6c-11 and the requirements of NYSE Rule 5.2(j)(8).
Proposed NYSE Rule 5.2(j)(8)(e)(2)(i) provides that the Exchange
will consider the suspension of trading in, and will commence delisting
proceedings under NYSE Rule 5.5(m) of, a series of Exchange-Traded Fund
Shares if the Exchange becomes aware that the investment company is no
longer eligible to operate in reliance on Rule 6c-11. The Exchange's
awareness for purposes of determining whether to suspend trading or
delist a series of Exchange-Traded Fund Shares may result from
notification by the investment company or by the Exchange learning,
through its own efforts, of non-compliance with NYSE Rule
5.2(j)(8).\18\ In addition, the Exchange will periodically review
issuer websites to monitor whether disclosures are being made for a
series of Exchange-Traded Fund Shares as required by Rule 6c-11(c)(1).
The Exchange also notes that proposed NYSE Rule 5.2(j)(8)(e) would
require an issuer of Exchange-Traded Fund Shares to notify the Exchange
that it is no longer eligible to operate in reliance on Rule 6c-11 or
that it does not comply with the requirements of proposed NYSE Rule
5.2(j)(8). The Exchange will rely on the foregoing procedures to become
aware of any non-compliance with the requirements of NYSE Rule
5.2(j)(8). Proposed NYSE Rule 5.2(j)(8)(e)(2)(i) is based on NYSE Arca
Rule 5.2-E(j)(8)(e)(2)(i) without any differences.
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\18\ As proposed, NYSE Rule 5.2(j)(8) does not impose index
dissemination requirements, the Exchange does not plan to conduct a
specific index dissemination surveillance for securities listed
pursuant to such rule.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the Act and rules and regulations thereunder
applicable to a national securities exchange.\19\ In particular, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\20\ which
[[Page 8424]]
requires, among other things, that the Exchange's rules be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest.
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\19\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange proposes to adopt new NYSE Rule 5.2(j)(8) to establish
generic listing standards pursuant to Rule 19b-4(e) under the Act \21\
that would permit the Exchange to list and trade Exchange-Traded Fund
Shares in a manner consistent with Rule 6c-11 under the 1940 Act. The
Exchange represents that proposed NYSE Rule 5.2(j)(8) is based on
recently adopted NYSE Arca Rule 5.2-E(j)(8).\22\ The Commission
believes that NYSE's proposed Rule 5.2(j)(8) is substantively identical
to proposals that the Commission has previously approved relating to
the listing and trading of Exchange-Traded Fund Shares that are
permitted to operate in reliance on Rule 6c-11 under the 1940 Act.\23\
Accordingly, for the reasons discussed in the Prior Rule 6c-11 Generic
Listing Orders, the Commission finds that this proposed rule change is
consistent with Section 6(b)(5) of the Act \24\ and the rules and
regulations thereunder applicable to a national securities
exchange.\25\
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\21\ Rule 19b-4(e)(1) under the Act states that ``[t]he listing
and trading of a new derivative securities product by a self-
regulatory organization shall not be deemed a proposed rule change,
pursuant to paragraph (c)(1) of this section, if the Commission has
approved, pursuant to section 19(b) of the Act (15 U.S.C. 78s(b)),
the self-regulatory organization's trading rules, procedures and
listing standards for the product class that would include the new
derivative securities product and the self-regulatory organization
has a surveillance program for the product class.'' 17 CFR 240.19b-
4(e)(1). ``New derivative securities product'' is defined as ``any
type of option, warrant, hybrid securities product or any other
security, other than a single equity option or a security futures
product, whose value is based, in whole or in part, upon the
performance of, or interest in, an underlying instrument.'' 17 CFR
240.19b-4(e).
\22\ See supra note 9 and accompanying text.
\23\ See Securities Exchange Act Release Nos. 88625 (April 13,
2020), 85 FR 21479 (April 17, 2020) (SR-NYSEArca-2019-81); 88566
(April 6, 2020), 85 FR 20312 (April 10, 2020) (SR-CboeBZX-2019-097);
and 88561 (April 3, 2020), 85 FR 19984 (April 9, 2020) (SR-NASDAQ-
2019-090). These releases are referred to collectively as the
``Prior Rule 6c-11 Generic Listing Orders.''
\24\ 15 U.S.C. 78f(b)(5).
\25\ When relying on Rule 19b-4(e) under the Act to list and
trade a new derivative securities product, the Commission notes that
NYSE must submit Form 19b-4(e) (17 CFR 249.820) to the Commission
within five business days after commencement of trading the new
derivative securities product. See 17 CFR 240.19b-4(e)(2)(ii). See
also 17 CFR 240.19b-4(e)(2)(i) (setting forth NYSE's recordkeeping
requirements relating to all relevant records and information
pertaining to each new derivative securities product traded pursuant
to Rule 19b-4(e)).
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In addition, as stated above, the Exchange represents that proposed
NYSE Rule 7.18(d)(2) governing trading halts for NYSE-listed ETPs
(which would include Exchange-Traded Fund Shares), is based on NYSE
Arca Rule 7.18-E(d)(2). The Commission believes that NYSE's proposed
Rule 7.18(d)(2) is substantively identical to NYSE Arca Rule 7.18-
E(d)(2) and concludes that this proposed rule does not present any
novel or unique regulatory issues. The Commission therefore finds that
this proposed rule change relating to trading halts is consistent with
Section 6(b)(5) of the Act \26\ and the rules and regulations
thereunder applicable to a national securities exchange.
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\26\ 15 U.S.C. 78f(b)(5).
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This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice,
including the Exchange's representations relating to its surveillance
procedures. Specifically, the Exchange represents, among other things,
that its surveillance procedures are adequate to properly monitor the
trading of the Exchange-Traded Fund Shares in all trading sessions and
to deter and detect violations of Exchange rules, and that the Exchange
will implement and maintain written surveillance procedures to monitor
trading in Exchange-Traded Fund Shares on the NYSE.\27\
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\27\ See supra note 17 and accompanying text. See also supra
note 21 (citing to Rule 19b-4(e)(1) under the Act requiring the
self-regulatory organization to have a surveillance program for the
product class of a new derivative securities product).
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For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \28\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\28\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\29\ that the proposed rule change (SR-NYSE-2020-86) be, and it
hereby is, approved.
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\29\ 15 U.S.C. 78f(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02397 Filed 2-4-21; 8:45 am]
BILLING CODE 8011-01-P
