81 FR 71548 - Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Amend the Continued Listing Requirements for Exchange-Traded Products

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 200 (October 17, 2016)

[Federal Register Volume 81, Number 200 (Monday, October 17, 2016)]
[Notices]
[Pages 71548-71549]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-24979]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79081; File No. SR-NASDAQ-2016-135]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Amend the Continued Listing 
Requirements for Exchange-Traded Products

October 11, 2016
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 30, 2016, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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\ 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 amend the continued listing requirements 
for exchange-traded products (``ETPs'') in the Nasdaq Rule 5700 Series, 
as well as a related amendment to Nasdaq Rule 5810 (Notification of 
Deficiency by the Listing Qualifications Department). The Exchange is 
also making housekeeping changes throughout the Nasdaq Rule 5700 Series 
and in Nasdaq Rule 5810 for improved clarity.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.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 Exchange 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 these 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 aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend the listing rules for ETPs in the 
Nasdaq Rule 5700 Series (Other Securities) to add additional continued 
listing standards as well as a related amendment to Nasdaq Rule 5810 
(Notification of Deficiency by the Listing Qualifications Department). 
The Exchange is also making housekeeping changes throughout the Nasdaq 
Rule 5700 Series and in Nasdaq Rule 5810 (e.g., punctuation, 
formatting, capitalization and renumbering) for improved clarity.
    The proposed rule changes are being made in concert with 
discussions with the SEC. Citing their concern for potential 
manipulation of ETPs, staff (``Staff'') of the SEC's Office of Trading 
and Markets (``T&M'') requested that the Exchange adopt certain 
additional continued listing standards for ETPs.
    As a result, the proposed amended rules reflect the guidance 
provided by T&M Staff to clarify that most initial listing standards, 
as well as certain representations included in Exchange rule filings 
under SEC Rule 19b-4 \3\ to list an ETP (``Exchange Rule Filings''), 
are also considered continued listing standards. The Exchange Rule 
Filing representations that will also be required to be maintained on a 
continuous basis include: (a) The description of the fund; (b) the 
fund's investment restrictions; and (c) the applicability of Nasdaq 
rules and surveillance procedures.
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    \3\ 17 CFR 240.19b-4.
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    The proposed rule changes require that ETPs listed by the Exchange 
without an Exchange Rule Filing must maintain the initial index or 
reference asset criteria on a continued basis. For example, in the case 
of a domestic equity index, these criteria generally include: (a) 
Stocks with 90% of the weight of the index must have a minimum market 
value of at least $75 million; (b) stocks with 70% of the weight of the 
index must have a minimum monthly trading volume of at least 250,000 
shares; (c) the most heavily weighted component cannot exceed 30% of 
the weight of the index, and the five most heavily weighted stocks 
cannot exceed 65%; (d) there must be at least 13 stocks in the index; 
and (e) all securities in the index must be listed in the U.S. There 
are similar criteria for international indexes, fixed-income indexes 
and indexes with a combination of components.
    If an Exchange Rule Filing is made to list a specific ETP, the 
proposed rule change requires that the issuer of the security comply on 
a continuing basis with any statements or representations contained in 
the applicable rule proposal, including: (a) The description of the 
portfolio; (b) limitations on portfolio holdings or reference assets; 
and (c) the applicability of Nasdaq rules and surveillance procedures.
    The Nasdaq listing rules will also be modified to require that 
issuers of securities listed under the Nasdaq Rule 5700 Series must 
notify the Exchange regarding instances of non-compliance. In addition, 
while listed ETPs are currently subject to the delisting process in the 
Rule 5800 Series, the rules will be clarified to make this explicit.\4\ 
The Rule 5800 Series will also be clarified to make explicit that in 
cases where Listing Qualifications staff has notified an ETP that it is 
deficient under one or more listing standards, the ETP may submit a 
plan to regain compliance as set forth under the Listing Rules. In this 
regard, consistent with deficiencies from most other rules that allow 
issuers to submit a plan to regain compliance,\5\ Nasdaq proposes to 
allow issuers of ETPs 45 calendar days to submit such a plan. Nasdaq 
staff will review the plan and may grant a limited period of time for 
the ETP to regain compliance as permitted under the Listing Rules. If 
Nasdaq staff does not accept the plan, Nasdaq staff would issue a 
Delisting Determination, which the company could appeal to a Hearings 
Panel pursuant to Rule 5815.
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    \4\ ETPs are also subject to Nasdaq Rule 4120, which governs 
trading halts.
    \5\ Pursuant to Rule 5810(c)(2)(A), a company is provided 45 
days to submit a plan to regain compliance with Rules 5620(c) 
(Quorum), 5630 (Review of Related Party Transactions), 5635 
(Shareholder Approval), 5250(c)(3) (Auditor Registration), 5255(a) 
(Direct Registration Program), 5610 (Code of Conduct), 5615(a)(4)(E) 
(Quorum of Limited Partnerships), 5615(a)(4)(G) (Related Party 
Transactions of Limited Partnerships), and 5640 (Voting Rights). A 
company is generally provided 60 days to submit a plan to regain 
compliance with the requirement to timely file periodic reports 
contained in Rule 5250(c)(1).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b)

[[Page 71549]]

of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ in particular, in that it is designed 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The proposed rule changes accomplish these objectives by enhancing 
the current continued listing standards by clarifying that most initial 
listing standards, as well as certain representations included in 
Exchange Rule Filings to list an ETP, are considered continued listing 
standards. Additionally, the Nasdaq listing rules will be modified to 
require that issuers of securities listed under the Nasdaq Rule 5700 
Series must notify the Exchange regarding instances of non-compliance 
and to clarify that deficiencies will be subject to potential trade 
halts and the delisting process in the Rule 5800 Series. The Exchange 
believes that these amendments will enhance the Nasdaq listing rules, 
thereby serving to improve the national market system and protect 
investors and the public interest.
    The Exchange does not believe that the housekeeping changes have 
any impact on the reasonable and equitable and not unfairly 
discriminatory nature of the proposal.
    For these reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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 not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The Exchange 
believes that the proposed rule change to amend the listing rules for 
ETPs in the Nasdaq Rule 5700 Series and the notification requirement in 
Rule 5810 will have no impact on competition. Furthermore, since T&M 
Staff has provided the same guidance regarding ETP continued listing 
requirements to all exchanges, the Exchange believes that there will be 
no effect on competition.

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

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please 
include File Number SR-NASDAQ-2016-135 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2016-135. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-135 and should 
be submitted on or before November 7, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24979 Filed 10-14-16; 8:45 am]
 BILLING CODE 8011-01-P