[Federal Register Volume 81, Number 201 (Tuesday, October 18, 2016)]
[Notices]
[Pages 71771-71772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25083]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79085; File No. SR-NYSE-2016-44]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change, as Modified by Amendments No. 1 and 2, Allowing 
the Exchange To Trade Pursuant to Unlisted Trading Privileges Any NMS 
Stock Listed on Another National Securities Exchange; Establishing 
Listing and Trading Requirements for Exchange Traded Products; and 
Adopting New Equity Trading Rules Relating to Trading Halts of 
Securities Traded Pursuant to UTP on the Pillar Platform

October 12, 2016.
    On June 30, 2016, New York Stock Exchange LLC (``Exchange'' or 
``NYSE'') 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 (1) allow the Exchange to 
trade pursuant to unlisted trading privileges (``UTP'') any NMS Stock 
listed on another national securities exchange; (2) establish listing 
and trading requirements for exchange-traded products (``ETPs'' or 
``Exchange Traded Products''); and (3) adopt new equity trading rules 
relating to trading halts of securities traded pursuant to UTP on the 
Exchange's Pillar trading platform. The proposed rule change was 
published for comment in the Federal Register on July 14, 2016.\3\
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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. 78263 (Jul. 8, 
2016), 81 FR 45580 (``Notice'').
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    On July 26, 2016, the Exchange filed Amendment No. 1 to the 
proposed rule change.\4\ On August 23, 2016, 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 26, 2016, the 
Exchange filed Amendment No. 2 to the proposed rule change.\7\ The 
Commission has received no comments on the proposed rule change.
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    \4\ In Amendment No. 1, the Exchange: (1) Added a bullet point 
stating that ``[b]ecause the Exchange's rules regarding the 
production of books and records are described in Rule 440, the 
Exchange is proposing to refer to Rule 440 in its proposed rules 
wherever NYSE Arca Equities Rule 4.4 is referenced in the rules of 
NYSE Arca Equities proposed in this filing;'' (2) deleted the 
sentence stating, ``If an exchange has approved trading rules, 
procedures and listing standards in place that have been approved by 
the Commission for the product class that would include a new 
derivative securities product, the listing and trading of such `new 
derivative securities product,' does not require a proposed rule 
change under Section 19b-4 of the Act'' and made conforming changes 
to the rest of that paragraph; (3) deleted the bullet point that 
stated, ``Correction of a typographical error in NYSE Arca Equities 
Rule 8.400(a) so that proposed Rule 8.400(a) reads `as such terms 
are used in Rule 5.1(b)' in the last sentence, rather than `as such 
terms are used in the Rule 5.1(b)' as is currently drafted in NYSE 
Arca Equities Rule 8.400(a)''; (4) noted that ``for new ETPs to be 
traded pursuant to UTP, which are listed and traded on another 
exchange pursuant to Rule 19b-4(e), the Exchange would be required 
to file Form 19b-4(e) with the Commission in accordance with the 
requirements therein.'' Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nyse-2016-44/nyse201644-1.pdf. Because 
Amendment No. 1 to the proposed rule change does not materially 
alter the substance of the proposed rule change or raise unique or 
novel regulatory issues, Amendment No. 1 is not subject to notice 
and comment.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 78641, 81 FR 59259 
(Aug. 29, 2016). The Commission designated October 12, 2016, as the 
date by which it should approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.
    \7\ In Amendment No. 2, the Exchange: (1) Added the clause 
``pursuant to UTP'' at the end of the sentence that states, ``The 
Exchange would have to file a Form 19b-4(e) with the Commission to 
trade these ETPs;'' (2) in the first footnote that follows that 
sentence, deleted the clause ``pursuant to Rule 19b-4(e);'' and (3) 
at the end of that same footnote, added the reference, ``See 
proposed Rule 5.1(a)(2); supra note 19 and accompanying text.'' 
Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nyse-2016-44/nyse201644-2.pdf. Because Amendment No. 2 to the 
proposed rule change does not materially alter the substance of the 
proposed rule change or raise unique or novel regulatory issues, 
Amendment No. 2 is not subject to notice and comment.
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    This order institutes proceedings under Section 19(b)(2)(B) of the 
Act \8\ to determine whether to approve or disapprove the proposed rule 
change, as modified by Amendments No. 1 and 2.
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    \8\ 15 U.S.C. 78s(b)(2)(B).
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I. Summary of the Proposed Rule Change \9\
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    \9\ The Commission notes that additional statements and 
information describing the specific proposed changes to the 
Exchange's rules, among other things, can be found in the Notice and 
Amendments No. 1 and 2 to the proposed rule change. See Notice and 
Amendments No. 1 and 2 to the proposed rule change, supra notes 3, 
4, and 7, respectively.
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    The Exchange states that it does not currently trade any securities 
on a UTP basis. The Exchange proposes new rules to trade all Tape B and 
Tape C symbols, on a UTP basis, on its new trading platform, 
Pillar.\10\ In addition, the Exchange proposes to adopt rules for the 
listing and trading of the following types of Exchange Traded Products: 
\11\ Equity Linked Notes; Investment Company Units; Index-Linked 
Exchangeable Notes; Equity Gold Shares; Equity Index-Linked Securities; 
Commodity-Linked Securities; Currency-Linked Securities; Fixed-Income 
Index-Linked Securities; Futures-Linked Securities; Multifactor-Index-
Linked Securities; Trust Certificates; Currency and Index Warrants; 
Portfolio Depositary Receipts; Trust Issued Receipts; Commodity-Based 
Trust Shares; Currency Trust Shares; Commodity Index Trust Shares; 
Commodity Futures Trust Shares; Partnership Units; Paired Trust Shares; 
Trust Units; Managed Fund Shares; and Managed Trust Securities.\12\
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    \10\ According to the Exchange, on January 29, 2015, the 
Exchange announced the implementation of Pillar, which is an 
integrated trading technology platform designed to use a single 
specification for connecting to the equities and options markets 
operated by the Exchange and its affiliates, NYSE Arca, Inc. (``NYSE 
Arca'') and NYSE MKT LLC. See Trader Update dated January 29, 2015, 
available at: http://www1.nyse.com/pdfs/Pillar_Trader_Update_Jan_2015.pdf.
    \11\ The Exchange is proposing to define the term ``Exchange 
Traded Product'' to mean a security that meets the definition of 
``derivative securities product'' in Rule 19b-4(e) under the 
Exchange Act. This proposed definition is identical to the 
definition of ``Derivatives Securities Product'' in NYSE Arca 
Equities Rule 1.1(bbb).
    \12\ See Notice, supra note 3.
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    The Exchange represents that the proposed rules for these ETPs are 
substantially identical (other than with respect to certain non-
substantive and technical amendments) to the rules of the NYSE Arca 
Equities exchange for the qualification, listing, and trading of these 
ETPs.\13\
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    \13\ See Notice, supra note 3, at 45580-45581, n.7 (citing NYSE 
Equities Rules 5 (Listings) and 8 (Trading of Certain Equities 
Derivatives)).
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    According to the Exchange, it will trade securities pursuant to UTP 
only on its Pillar platform, not on its current trading platform. 
Further, at this time, the Exchange states that it does not intend to 
list ETPs pursuant to the proposed rules. The Exchange does not 
proposing to change any of the current rules of the Exchange pertaining 
to the listing and trading of ETPs in the NYSE Listed Company Manual or 
in its other rules.

II. Proceedings To Determine Whether To Approve or Disapprove SR-NYSE-
2016-44 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \14\ to determine whether the proposed rule 
change, as modified by Amendments No. 1 and 2, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the

[[Page 71772]]

legal and policy issues raised by the proposed rule change, as modified 
by Amendments No. 1 and 2. Institution of proceedings does not indicate 
that the Commission has reached any conclusions with respect to any of 
the issues involved. Rather, as described below, the Commission seeks 
and encourages interested persons to provide comments on the proposed 
rule change, as modified by Amendments No. 1 and 2.
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    \14\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\15\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change's consistency with Section 6(b)(5) 
of the Act, which requires, among other things, that the rules of a 
national securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \16\
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    \15\ Id.
    \16\ 15 U.S.C. 78f(b)(5).
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III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\17\
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    \17\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by November 8, 2016. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
November 22, 2016. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, 
which are set forth in the Notice,\18\ in addition to any other 
comments they may wish to submit about the proposed rule change, as 
modified by Amendments No. 1 and 2.\19\
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    \18\ See Notice, supra note 3.
    \19\ See Amendments No. 1 and 2 to the proposed rule change, 
supra notes 4 and 7, respectively.
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    In particular, the Commission seeks comment on whether the proposed 
rules regarding ETPs, which would not expressly apply on a continuing 
basis, are consistent with the Act.\20\ The Commission notes that, 
while the Exchange represents that it ``does not intend to list ETPs on 
its Pillar platform,'' \21\ the proposed rule text contains no such 
limitation, and the Exchange's Form 19b-4 filing also describes the 
standards being proposed as governing the ``listing and trading'' of 
ETPs.\22\
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    \20\ The Commission's orders approving the generic listing and 
trading of actively managed ETFs relied upon the listing exchange's 
representation that the listing criteria would apply on a continuing 
basis. See, e.g., Securities Exchange Act Releases No. 78396 (July 
22, 2016), 81 FR 49698, 49701 (July 28, 2016) (File No. SR-BATS-
2015-100); No. 78397 (July 22, 2016), 81 FR 49320, 49324 (July 27, 
2016) (File No. SR-NYSEArca-2015-110); and No. 78918 (Sept. 23, 
2016), 81 FR 67033, 67035 (Sept. 29, 2016) (File No. SR-NASDAQ-2016-
104). Recent Commission orders approving the listing and trading of 
individual ETPs have similarly relied upon representations by the 
listing exchange that all statements and representations made 
regarding (a) the description of the portfolio, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
exchange rules and surveillance procedures shall constitute 
continued listing requirements. See, e.g., Securities Exchange Act 
Release No. 77920 (May 25, 2016), 81 FR 35086, 35090 (June 1, 2016) 
(SR-NYSEArca-2016-46; approving listing and trading of shares of the 
AdvisorShares Cornerstone Small Cap ETF); No. 78847 (Sept. 15, 
2016), 81 FR 64560, 64562 (Sept. 20, 2016) (File No. SR-BATS-2016-
34; approving listing and trading of shares of the ProShares Crude 
Oil Strategy ETF).
    \21\ See Notice, supra note 3, at 45581.
    \22\ See, e.g., Notice, supra note 3, at 45580, 45583 (emphasis 
added).
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    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 [email protected]. Please include 
File Number SR-NYSE-2016-44 on the subject line.

Paper Comments

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

All submissions should refer to File Numbers SR-NYSE-2016-44. 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 these filings 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-NYSE-2016-44 and should be 
submitted on or before November 8, 2016. Rebuttal comments should be 
submitted by November 22, 2016.
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    \23\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-25083 Filed 10-17-16; 8:45 am]
 BILLING CODE 8011-01-P