Notice2024-16804
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)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 31, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 147 (Wednesday, July 31, 2024)</title>
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[Federal Register Volume 89, Number 147 (Wednesday, July 31, 2024)]
[Notices]
[Pages 61557-61560]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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 <a href="http://www.nyse.com">www.nyse.com</a>, 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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3f4d4a535a125c5052525a514b4c7f4c5a5c11585049"><span class="__cf_email__" data-cfemail="186a6d747d357b7775757d766c6b586b7d7b367f776e">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-61 on the subject line.
Paper Comments
<bullet> 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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
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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
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