[Federal Register Volume 89, Number 147 (Wednesday, July 31, 2024)]
[Notices]
[Pages 61557-61560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16804]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100597; File No. SR-NYSEARCA-2024-61]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1.1 
and Rule 5.2-E(j)(6)

July 25, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on July 15, 2024, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to (1) amend Rule 1.1 to include Exchange-
Traded Fund Shares in the definition of ``UTP Derivative Securities 
Product,'' and (2) amend Rule 5.2-E(j)(6) to exclude Exchange-Traded 
Fund Shares when applying the quantitative generic listing criteria 
applicable to Equity Index-Linked Securities. 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.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Rule 1.1
    The Exchange proposes to amend Rule 1.1, which sets forth 
definitions of terms used in Exchange rules, including the meanings of 
``Derivative Securities Product'' and ``UTP Derivative Securities 
Product.''
    Specifically, the Exchange proposes to amend the definition of 
``UTP Derivative Securities Product'' to include Exchange-Traded Fund 
Shares listed pursuant to NYSE Arca, Inc. (``NYSE Arca'') Rule 5.2-
E(j)(8), Exchange-Traded Fund Shares listed pursuant to New York Stock 
Exchange LLC (``NYSE'') Rule 5.2(j)(8), Exchange-Traded Fund Shares 
listed pursuant to Cboe BZX Exchange, Inc. (``BZX'') Rule 14.11(l), and 
Exchange Traded Fund Shares listed pursuant to Nasdaq Stock Market LLC 
(``Nasdaq'') Rule 5704 as additional types of Exchange Traded Product 
(``ETPs'') that may trade on the Exchange pursuant to unlisted trading 
privileges (``UTP'').\4\
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    \4\ Exchange-Traded Fund Shares and Exchange Traded Fund Shares 
are substantially similar products that generally refer to shares of 
exchange-traded funds eligible to operate in reliance on Rule 6c-11 
under the Investment Company Act of 1940. See Securities Exchange 
Act Release Nos. 88625 (April 13, 2020), 85 FR 21479 (April 17, 
2020) (SR-NYSEArca-2019-81) (order approving NYSE Arca Rule 5.2-
E(j)(8) governing the listing and trading of Exchange-Traded Fund 
Shares); 91029 (February 1, 2021), 86 FR 8420 (February 5, 2021) 
(SR-NYSE-2020-86) (order approving NYSE Rule 5.2(j)(8) governing the 
listing and trading of Exchange-Traded Fund Shares); 88566 (April 6, 
2020), 85 FR 20312 (April 10, 2020) (SR-CboeBZX-2019-097) (order 
approving BZX Rule 14.11(l) governing the listing and trading of 
Exchange-Traded Fund Shares); 88561 (April 3, 2020), 85 FR 19984 
(April 9, 2020) (SR-NASDAQ-2019-090) (order approving Nasdaq Rule 
5704 governing the listing and trading of Exchange Traded Fund 
Shares).

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[[Page 61558]]

    To effect this change, the Exchange proposes to add a bullet point 
listing ``Exchange-Traded Fund Shares listed pursuant to NYSE Arca, 
Inc. Rule 5.2-E(j)(8), New York Stock Exchange LLC Rule 5.2(j)(8), or 
Cboe BZX Exchange, Inc. Rule 14.11(l) and Exchange Traded Fund Shares 
listed pursuant to Nasdaq Stock Market LLC Rule 5704'' in Rule 1.1 to 
include them in the enumerated list of Derivative Securities Products 
that may trade on the Exchange on a UTP basis. The Exchange also 
proposes non-substantive changes to accommodate the addition of this 
bullet point as the final item in the bulleted list in Rule 1.1.
    The Exchange believes that the proposed change would ensure that 
the definition of ``UTP Derivative Securities Product'' in Rule 1.1 
reflects a complete list of Derivative Securities Products that may 
trade on the Exchange pursuant to UTP, thereby improving the clarity 
and transparency of Exchange Rules.
Rule 5.2-E(j)(6)
    Rule 5.2-E(j)(6) sets forth criteria applicable to Exchange listing 
of equity index-linked securities (``Equity Index-Linked Securities''), 
commodity-linked securities, currency-linked securities, fixed income 
index-linked securities, futures-linked securities, and multifactor 
index-linked securities.
    As defined in Rule 5.2-E(j)(6)(B)(I)(1), 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,\5\ and/or Investment Company Units. In addition to certain other 
generic listing criteria, Equity Index-Linked Securities must satisfy 
the generic quantitative initial and continued listing criteria under 
Rule 5.2-E(j)(6)(B)(I) in order to become, and continue to be, listed 
and traded on the Exchange. Certain of the applicable quantitative 
criteria specify minimum or maximum thresholds that must be satisfied 
with respect to, for example, market value, trading volume, and dollar 
weight of an index represented by a single component or groups of 
components.
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    \5\ 15 U.S.C. 80-1.
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    Currently, Rule 5.2-E(j)(6)(B)(I)(1)(a) provides that each 
underlying index of an Equity Index-Linked Security is required to have 
at least ten component securities, provided, however, that there shall 
be no minimum number of component securities if one or more issues of 
Derivative Securities Products (i.e., Investment Company Units (as 
described in Rule 5.2-E(j)(3)) and securities described in Section 2 of 
Rule 8) or Index-Linked Securities (as described in Rule 5.2-E(j)(6)), 
constitute, at least in part, component securities underlying an issue 
of Equity Index-Linked Securities. The Exchange proposes to amend Rule 
5.2-E(j)(6)(B)(I)(1)(a) to include Exchange-Traded Fund Shares, as 
described in Rule 5.2-E(j)(8), in the group of Derivative Securities 
Products to which the ten component security minimum would not apply. 
The Exchange also proposes to exclude Derivative Securities Products, 
consistent with this proposed change to the description of Derivative 
Securities Products in Rule 5.2-E(j)(6)(B)(I)(1)(a), from consideration 
when determining whether the applicable quantitative generic thresholds 
have been satisfied under the initial listing standards specified in 
Rules 5.2-E(j)(6)(B)(I)(1)(b)(i) through (iv) and the continued listing 
standards specified in Rules 5.2-E(j)(6)(B)(I)(2)(a)(i) and (ii). Thus, 
for example, when determining compliance with Rule 5.2-
E(j)(6)(B)(I)(1)(b)(ii), component stocks, excluding Derivative 
Securities Products (which would, as proposed, include Exchange-Traded 
Fund Shares) or Index-Linked Securities, that in the aggregate account 
for at least 90% of the remaining index weight, excluding any 
Derivative Securities Products (including, as proposed, Exchange-Traded 
Fund Shares) or Index-Linked Securities, would be required to 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.
    In addition, Rule 5.2-E(j)(6)(B)(I)(1)(a) currently provides that 
the securities described in Rule 5.2-E(j)(3), Section 2 of Rule 8, and 
Rule 5.2-E(j)(6), as referenced in Rule 5.2-E(j)(6)(B)(I)(1)(b)(2) and 
Rule 5.2-E(j)(6)(B)(I)(2)(a), shall include securities listed on 
another national securities exchange pursuant to substantially 
equivalent listing rules. The Exchange proposes to update this list to 
include a reference to Rule 5.2-E(j)(8), consistent with the proposed 
change described above. The Exchange also proposes non-substantive 
changes in two places in Rule 5.2-E(j)(6)(B)(I)(1)(a) to refer to 
``Section 2 of Rule 8-E'' (instead of ``Section 2 of Rule 8'') to 
reflect the current NYSE Arca rule numbering convention. Finally, the 
Exchange proposes non-substantive changes to delete the extra spaces 
that appear in the term ``Index-Linked Securities'' in Rules 5.2-
E(j)(6)(B)(I)(1)(b)(ii), 5.2-E(j)(6)(B)(I)(2)(a)(i), and 5.2-
E(j)(6)(B)(I)(2)(a)(ii).
    The Exchange notes that the inclusion of Exchange-Traded Fund 
Shares in the group of Derivative Securities Products that are excepted 
from the generic listing and continued listing criteria specified above 
for Equity Index-Linked Securities would align the Exchange's rules 
with the listing criteria for Equity Index-Linked Securities on at 
least one other equity exchange.\6\
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    \6\ See, e.g., BZX Rule 14.11(d)(2)(K)(i)(a) (describing listing 
criteria for Equity Index-Linked Securities, including that ``each 
underlying index is required to have at least ten (10) component 
securities; provided, however, that there shall be no minimum number 
of component securities if one or more issues of Derivative 
Securities Products (which are defined in Rule 
14.11(c)(3)(A)(i)(a)). . .constitute, at least in part, component 
securities underlying an issue of Equity Index-Linked Securities''); 
BZX Rule 14.11(c)(3)(A)(i)(a) (defining ``Derivative Securities 
Products'' to include Index Fund Shares, Portfolio Depositary 
Receipts, Trust Issued Receipts, ETF Shares, and Managed Fund 
Shares); and BZX 14.11(l) (defining Exchange-Traded Fund Shares or 
ETF Shares). Cf. Nasdaq Rule 5705(b)(3)(A)(i)(a) (describing listing 
criteria for Index Fund Shares, including that ``Component stocks 
(excluding ``Derivative Securities Products'' as defined in this 
subsection a.) that in the aggregate account for at least 90% of the 
weight of the U.S. Component Stocks portion of the index or 
portfolio (excluding Derivative Securities Products) each shall have 
a minimum market value of at least $75 million'' and defining 
``Derivative Securities Products'' as including Exchange Traded Fund 
Shares listed under Nasdaq Rule 5704).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ in particular, because it 
is designed to remove impediments to and perfect the mechanism of a 
free and open market, to promote just and equitable principles of 
trade, and, in general, to protect investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4) & (5).
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    The proposed rule change with respect to the definition of ``UTP 
Derivative Securities Products'' in Rule 1.1 is designed to remove 
impediments to and perfect the mechanism of a free and open market, 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest because it modifies Rule

[[Page 61559]]

1.1 to state the complete list of Derivative Securities Products that 
may trade on a UTP basis on the Exchange, providing specificity, 
clarity, and transparency in the Exchange's rules. Moreover, the 
proposed rule change would facilitate the trading of additional types 
of Derivative Securities Products on the Exchange pursuant to UTP, 
thereby enhancing competition among market participants for the benefit 
of investors and the marketplace.
    The Exchange believes that the proposed change with respect to Rule 
5.2-E(j)(6) is designed to remove impediments to and perfect the 
mechanism of a free and open market, promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest because including Exchange-Traded Fund Shares as 
Derivative Securities Products excepted from certain generic listing 
and continued listing criteria for Equity Index-Linked Securities would 
facilitate the listing and trading of additional types of Equity Index-
Linked Securities. The Exchange further believes the proposed change 
would remove impediments to and perfect the mechanism of a free and 
open market and promote competition, to the benefit of investors and 
the marketplace, because the proposed change would amend the Exchange's 
rules to be consistent with the listing criteria for Equity Index-
Linked Securities on at least one other equity exchange.\9\
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    \9\ See note 6, supra.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change would 
provide the public and investors with up-to-date information about the 
types of Derivative Securities Products that can trade on the Exchange 
on a UTP basis and would promote competition by providing for 
additional types of Derivative Securities Products that may trade on 
the Exchange pursuant to UTP. The Exchange also believes that the 
proposed change would encourage competition by enabling additional 
types of Equity Index-Linked Securities to be listed on the Exchange.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) \11\ thereunder, the Exchange has designated this proposal as 
one that effects a change that: (i) does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ In addition, Rule 19b-4(f)(6) requires a self-regulatory 
organization to give the Commission written notice of its intent to 
file the proposed rule change at least five business days prior to 
the date of filing of the proposed rule change, or such shorter time 
as designated by the Commission. The Exchange has satisfied this 
requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The proposed 
rule change, which adds Exchange-Traded Fund Shares (or Exchange Traded 
Fund Shares, as the case may be) to the definition of ``UTP Derivative 
Securities Product'' in NYSE Arca Rule 1.1 and modifies certain listing 
standards applicable to Equity Index-Linked Securities, conforms to 
substantially similar rules of other exchanges \14\ and raises no 
unique or novel legal or regulatory issues. Therefore, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposed rule change operative upon filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ See, e.g., BZX Rule 1.5(ee) (incorporating ``Exchange-
Traded Fund Shares'' in the definition of UTP Derivative 
Securities); and BZX Rule 14.11(d)(2)(K)(i)(a) and (b) (setting 
forth the initial and continued listing standards for Equity Index-
Linked Securities).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSEARCA-2024-61 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-NYSEARCA-2024-61. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the

[[Page 61560]]

Exchange. Do not include personal identifiable information in 
submissions; you should submit only information that you wish to make 
available publicly. We may redact in part or withhold entirely from 
publication submitted material that is obscene or subject to copyright 
protection. All submissions should refer to file number SR-NYSEARCA-
2024-61 and should be submitted on or before August 21, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-16804 Filed 7-30-24; 8:45 am]
BILLING CODE 8011-01-P