
[Federal Register Volume 82, Number 163 (Thursday, August 24, 2017)]
[Notices]
[Pages 40178-40180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-17920]


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SECURITIES AND EXCHANGE COMMISSION

[Release No 34-81442; File No. SR-NYSEArca-2017-54]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend the 
Generic Listing Criteria Applicable to Equity Index-Linked Securities

August 18, 2017.

I. Introduction

    On May 4, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
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 amend the generic listing criteria applicable 
to Equity Index-Linked Securities.\3\ The proposed rule change was 
published for comment in the Federal Register on May 23, 2017.\4\ On 
July 6, 2017, pursuant to Section 19(b)(2) of the Act,\5\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\6\ On August 17, 2017, the Exchange filed Amendment No. 1 to 
the proposed rule change, which replaced and superseded the original 
proposal in its entirety.\7\ The Commission received

[[Page 40179]]

no comments on the proposed rule change. The Commission is publishing 
this notice to solicit comments on Amendment No. 1 from interested 
persons, and is approving the proposed rule change, as modified by 
Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Equity Index-Linked Securities are securities that provide 
for the payment at maturity (or earlier redemption) based on the 
performance of an underlying index or indexes of equity securities, 
securities of closed-end management investment companies registered 
under the Investment Company Act of 1940 and/or Investment Company 
Units (``Units''). See NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1).
    \4\ See Securities Exchange Act Release No. 80707 (May 17, 
2017), 82 FR 23636.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 81081, 82 FR 32218 
(July 12, 2017).
    \7\ In Amendment No. 1 the Exchange: (1) Revised proposed NYSE 
Arca Rules-5.2-E(j)(6)(B)(I)(1)(b)(iii) and 5.2-
E(j)(6)(B)(I)(2)(a)(i) to provide that the index concentration limit 
applicable to the five highest dollar-weighted components would 
apply only to an index with five or more components that are not 
Derivative Securities Products or Index-Linked Securities (as those 
terms are defined below) and to provide that these securities would 
only be excluded from the numerator of the index concentration limit 
calculation; (2) modified proposed NYSE Arca Rule 5.2-
E(j)(6)(B)(I)(1)(a) to specify that Derivative Securities Products 
and Index-Linked Securities (as those terms are defined below) also 
include securities listed on another national securities exchange 
pursuant to substantially equivalent listing rules; and (3) made a 
technical correction to Rule 5.2-E(j)(6)(B)(I)(1)(b)(iv) to change 
its reference to ``NYSE Arca Rule 5.3'' to read ``NYSE Arca Rule 
5.3-O.'' Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2017-54/nysearca201754-2227310-160780.pdf. 
Amendment No. 1 also reflects numbering changes effected by the 
recently approved merger of NYSE Arca Equities and NYSE Arca Options 
rules. See Securities Exchange Act Release No. 81419 (August 17, 
2017) (SR-NYSEArca-2017-40).
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II. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 1

    The Exchange proposes to amend NYSE Arca Rule 5.2-E(j)(6) to 
exclude the following types of index components from certain generic 
listing requirements applicable to an index underlying Equity Index-
Linked Securities: (1) Investment Company Units (``Units''); \8\ (2) 
securities defined in Section 2 of NYSE Arca Rule 8-E (collectively 
with Units, ``Derivative Securities Products''); \9\ (3) Index-Linked 
Securities; and (4) securities listed on other national securities 
exchanges pursuant to rules that are substantially equivalent to NYSE 
Arca Rule 5.2-E(j)(3), NYSE Arca Rule 5.2-E(j)(6), and Section 2 of 
NYSE Arca Rule 8-E. Specifically, the Exchange proposes the following:
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    \8\ Units are securities that represent an interest in a 
registered investment company that could be organized as a unit 
investment trust, an open-end management investment company, or a 
similar entity, that holds securities comprising, or otherwise based 
on or representing an interest in, an index or portfolio of 
securities or securities in another registered investment company 
that holds such securities. See NYSE Arca Rule-5.2-E(j)(3).
    \9\ The following securities currently are included in Section 2 
of NYSE Arca Rule 8-E: Portfolio Depositary Receipts (Rule 8.100-E); 
Trust Issued Receipts (Rule 8.200-E); Commodity-Based Trust Shares 
(Rule 8.201-E); Currency Trust Shares (Rule 8.202-E); Commodity 
Index Trust Shares (Rule 8.203-E); Commodity Futures Trust Shares 
(Rule-8.204-E); Partnership Units (Rule 8.300-E); Paired Trust 
Shares (Rule-8.400-E);Trust Units (Rule 8.500-E); Managed Fund 
Shares (Rule 8.600-E); and Managed Trust Securities (Rule 8.700-E).
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     Currently, for an issue of Equity Index-Linked Securities 
to qualify for initial listing, each underlying index must have at 
least ten component securities. The Exchange would modify this 
requirement to reflect no minimum number of index components if one or 
more issues of Derivative Securities Products or Index-Linked 
Securities constitute, at least in part, component securities 
underlying an issue of Equity Index-Linked Securities.\10\
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    \10\ See proposed NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(a).
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     Currently, for an issue of Equity Index-Linked Securities 
to qualify for initial listing, each component security must have a 
minimum market value of at least $75 million, except that the market 
value for each of the lowest dollar-weighted component securities in 
the index that in the aggregate account for no more than 10% of the 
dollar weight of the index may be at least $50 million. The Exchange 
proposes to exclude Derivative Securities Products and Index-Linked 
Securities from those minimum market value requirements, as well as to 
exclude from the calculation of the aggregate dollar value of the index 
the market value(s) of all components that are Derivative Securities 
Products or Index-Linked Securities.\11\
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    \11\ See proposed NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(1).
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     Currently, for an issue of Equity Index-Linked Securities 
to qualify for initial listing, component stocks that in the aggregate 
account for at least 90% of the weight of the underlying index each 
must have a minimum global monthly trading volume of 1,000,000 shares 
or minimum global notional volume traded per month of $25,000,000, 
averaged over the last six months. The Exchange proposes to apply those 
requirements only to index components that are not Derivative 
Securities Products or Index-Linked Securities, and would exclude 
components that are Derivative Securities Products or Index-Linked 
Securities from the calculation of the index's weight.\12\
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    \12\ See proposed NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(2).
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     Currently, for an issue of Equity Index-Linked Securities 
to qualify for initial listing, no component security may represent 
more than 25% of the dollar weight of the index and the five highest 
dollar-weighted component securities in the index may not in the 
aggregate account for more than 50%, or 60% for an index consisting of 
fewer than 25 component securities, of the dollar weight of the 
index.\13\ The Exchange proposes to exclude Derivative Securities 
Products and Index-Linked Securities from these index concentration 
limits and would exclude Derivative Securities Products and Index-
Linked Securities from the dollar value of the index for purposes of 
calculating the total dollar value of the index components.\14\
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    \13\ Currently, these requirements must also be met whenever the 
index is rebalanced. See NYSE Arca Rule 5.2-E(j)(6)(B)(I)(2)(a)(i).
    \14\ See proposed NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(3). As 
discussed above, the Exchange also proposes that the index 
concentration limit applicable to the five highest dollar-weighted 
components would apply only to an index with five or more components 
that are not Derivative Securities Products or Index-Linked 
Securities. See supra note 7. Further, the Exchange proposes that 
these proposed index concentration limits be met whenever the index 
is rebalanced. See proposed NYSE Arca Rule-5.2-
E(j)(6)(B)(I)(2)(a)(i).
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     Currently, for an issue of Equity Index-Linked Securities 
to qualify for initial listing, 90% of the underlying index's numerical 
value, and at least 80% of the total number of component securities, 
must meet the then current criteria for standardized option trading set 
forth in NYSE Arca Rule 5.3-O; except that an index will not be subject 
to this requirement if (1) no underlying component security represents 
more than 10% of the dollar weight of the index, and (2) the index has 
a minimum of 20 components. The Exchange proposes to apply this 
requirement only to index components that are not Derivative Securities 
Products or Index-Linked Securities and, for purposes of this 
requirement would exclude all components that are a Derivative 
Securities Product or Index-Linked Security from the calculations of 
the index's numerical value, total number of components, and dollar 
value.\15\
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    \15\ See proposed NYSE Arca Rule 5.2-E(j)(6)(B)(I)(1)(b)(iv).
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     Currently, on a continuous basis, component stocks that in 
the aggregate account for at least 90% of the weight of the index each 
must have a minimum global monthly trading volume of 500,000 shares, or 
minimum global notional volume traded per month of $12,500,000, 
averaged over the last six months. The Exchange proposes to apply those 
requirements only to index components that are not Derivative 
Securities Products or Index-Linked Securities, and would exclude 
components that are Derivative Securities Products or Index-Linked 
Securities from the calculation of the index's total weight.\16\
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    \16\ See proposed NYSE Arca Rule 5.2-E(j)(6)(B)(I)(2)(a)(ii).
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    The Exchange also proposes non-substantive changes to the text of 
NYSE Arca Rule 5.2-E(j)(6).

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national

[[Page 40180]]

securities exchange.\17\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1 thereto, is 
consistent with Section 6(b)(5) of the Act,\18\ which 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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    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
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    In support of its proposal, the Exchange notes that Derivative 
Securities Products are excluded from consideration when determining 
whether the components of Units satisfy the applicable listing criteria 
in NYSE Arca Rule 5.2-E(j)(3),\19\ and both Derivative Securities 
Products and Index-Linked Securities are excluded from the applicable 
listing criteria for Managed Fund Shares holding equity securities in 
Commentary .01 to NYSE Arca Rule 8.600-E.\20\
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    \19\ See Commentary .01 to NYSE Arca Rule 5.2-E(j)(3). See also 
Securities Exchange Act Release No. 57751 (May 1, 2008), 73 FR 25818 
(May 7, 2008) (SR-NYSEArca-2008-29) (approving amendments to the 
eligibility criteria for components of an index underlying 
Investment Company Units).
    \20\ See Commentary .01 to NYSE Arca Rule 8.600-E. See also 
Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 
49320 (July 27, 2016) (SR-NYSEArca-2015-110) (approving the adoption 
of generic listing standards for Managed Fund Shares) (``MFS 
Order'').
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    Specifically, the Exchange states: ``both Derivative Securities 
Products and Index-Linked Securities are excluded from the applicable 
listing criteria for Managed Fund Shares holding equity securities in 
Commentary .01 to Rule 8.600-E.'' \21\ In approving the exclusion of 
Derivative Securities Products and Index-Linked Securities from certain 
generic listing requirements applicable to Managed Fund Shares, the 
Commission stated that such exclusions would not increase the 
susceptibility of Managed Fund Shares to manipulation because Index-
Linked Securities and Derivative Securities Products each: (1) Have 
asset-exposure concentration limits and requirements promoting price 
transparency within their own listing standards; (2) are listed and 
traded on national securities exchanges; and (3) provide trading and 
price information and other quantitative data for investors and other 
market participants.\22\ For these same reasons, the Commission 
believes that excluding Derivative Securities Products and Index-Linked 
Securities from the same type of generic listing requirements would not 
increase the susceptibility of Equity Index-Linked Securities to 
manipulation.
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    \21\ Amendment No. 1, supra note 7, at 9, text accompanying 
n.20.
    \22\ See MFS Order, supra note 20, at 49325.
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    Additionally, the Exchange represents that it has in place 
surveillance procedures that are adequate to properly monitor trading 
in Index-Linked Securities in all trading sessions and to deter and 
detect violations of Exchange rules and applicable federal securities 
laws.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1 thereto, is consistent with 
Section 6(b)(5) of the Act \23\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \23\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2017-54 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2017-54. 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 Web site (http://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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-54 and should 
be submitted on or before September 14, 2017.

V. Accelerated Approval of the Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of Amendment No. 1 in the Federal 
Register. As noted above, Amendment No. 1 modified proposed NYSE Arca 
Rules-5.2-E(j)(6)(B)(I)(1)(b)(iii) and 5.2-E(j)(6)(B)(I)(2)(a)(i) to 
provide that the index concentration limit applicable to the five 
highest dollar-weighted components would apply only to an index with 
five or more components that are not Derivative Securities Products or 
Index-Linked Securities. These provisions are consistent with 
Commentary .01(a)(1)(C) to NYSE Arca Rule 8.600-E, and therefore the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\24\ to approve the proposed rule change, as modified by Amendment 
No. 1, on an accelerated basis.
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    \24\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\25\ that the proposed rule change (SR-NYSEArca-2017-54), 
as modified by Amendment No. 1, be, and it hereby is, approved on an 
accelerated basis.
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    \25\ 15 U.S.C. 78s(b)(2).
    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2017-17920 Filed 8-23-17; 8:45 am]
 BILLING CODE 8011-01-P


