[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]


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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 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.
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    \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'').
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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).
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    \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).
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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\
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    \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).
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     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\
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    \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.
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     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


