81 FR 74847 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 497

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 208 (October 27, 2016)

[Federal Register Volume 81, Number 208 (Thursday, October 27, 2016)]
[Notices]
[Pages 74847-74849]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-25937]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79130; File No. SR-NYSE-2016-67]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Rule 497

October 21, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on October 13, 2016, New York Stock Exchange LLC (``NYSE'' 
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 amend Rule 497 regarding the requirements 
for the listing of securities that are issued by the Exchange or any of 
its affiliates. The proposed rule change is available on the Exchange's 
Web site 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
    The Exchange proposes to amend Rule 497 (Additional Requirements 
for Listed Securities Issued by Intercontinental Exchange, Inc. or its 
Affiliates) regarding the requirements for the listing of securities 
that are issued by the Exchange or any of its affiliates. Rule 497 sets 
forth certain requirements that securities issued by the Exchange's 
ultimate parent, Intercontinental Exchange, Inc. (``ICE''), or its 
affiliates, must meet before they can be listed on the Exchange, 
including certain pre-listing approvals and post-listing monitoring 
requirements.
    Specifically, the Exchange is proposing to make the following 
changes to Rule 497: (i) Expand the definition of Affiliate Security 
under Rule 497(a)(2); (ii) require that the annual review required 
under Rule 497(c)(2) be forwarded to the Exchange's Regulatory 
Oversight Committee (``ROC''); and (iii) make non-substantive 
typographical changes.
    Rule 497(a)(2) currently defines ``Affiliate Security'' as ``any 
security issued by an ICE Affiliate, with the exception of Investment 
Company Units as defined in Para. 703.16 of the Listed Company 
Manual.'' \4\ The Exchange proposes to expand the definition of 
Affiliate Security to include any Exchange-listed option on any 
security issued by an ICE Affiliate. As a consequence, under Rule 
497(b), prior to listing any new class of options on a security issued 
by an ICE Affiliate, Exchange regulatory staff would be required to 
make a finding that the option class satisfies the Exchange's rules for 
listing, and the ROC would be required to approve such finding. 
Likewise, throughout the continued listing of such option class on the 
Exchange, it would be covered by the reporting requirements of Rule 
497(c). In a non-substantive grammatical change to Rule 497(a)(2), the 
Exchange also proposes to replace the ``a'' before ``ICE Affiliate'' 
with ``an.''
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    \4\ For purposes of Rule 497, an ``ICE Affiliate'' is ``ICE and 
any entity that directly or indirectly, through one or more 
intermediaries, controls, is controlled by, or is under common 
control with ICE, where `control' means that one entity possesses, 
directly or indirectly, voting control of the other entity either 
through ownership of capital stock or other equity securities or 
through majority representation on the board of directors or other 
management body of such entity.'' Rule 497(a)(1).
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    In the event that an ICE Affiliate lists an Affiliate Security, 
Rule 497(c)(2) requires that, throughout the continued listing of the 
Affiliate Security on the Exchange, an independent accounting firm will 
review the listing standards for the Affiliate Security and a copy of 
the report shall be forwarded promptly to the Securities and Exchange 
Commission (``Commission''). The Exchange proposes to expand Rule 
497(c)(2) to require that such report also be forwarded to the ROC.
    The Exchange proposes to make the following additional, non-
substantive changes to Rule 497(c):
     It proposes to move ``the Exchange shall'' from the end of 
Rule 497(c) to the start of Rule 497(c)(1), as the text only applies to 
Rule 497(c)(1), and not sub-paragraphs (2) or (3), and change ``shall'' 
to ``will.''
     It proposes to add ``and trading'' after ``Throughout the 
continued listing'' in Rule 497(c), as Rule 497 (c)(1)

[[Page 74848]]

references the listing of Affiliate Securities, as well as their 
trading.
     The Exchange proposes to delete an extraneous ``that'' 
from the final clause of Rule 497(c)(1)(b), so that it reads as 
follows:
    Exchange regulatory staff's monitoring of the trading of the 
Affiliate Security including summaries of all related surveillance 
alerts, complaints, regulatory referrals, adjusted trades, 
investigations, examinations, formal and informal disciplinary actions, 
exception reports and trading data used to ensure the Affiliate 
Security's compliance with the Exchange's listing and trading rules.
    The Exchange notes that the proposed amendments would be consistent 
with recent changes to the Bats BZX Exchange, Inc. (``BZX'') Rule 14.3 
regarding requirements for the listing of securities listed by BZX or 
any of its affiliates.\5\
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    \5\ See Securities Exchange Act Release No. 77639 (April 18, 
2016), 81 FR 23768 (April 22, 2016) (SR-BatsBZX-2016-08).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act \6\ in general, and Section 
6(b)(5) \7\ in particular, in that it because it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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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    Specifically, the Exchange believes that the proposed rule change, 
by requiring heightened reporting by the Exchange to the Commission and 
the ROC with respect to oversight of the listing and trading on the 
Exchange of Affiliate Securities, will continue to help protect against 
concerns that the Exchange will not effectively enforce its rules with 
respect to the listing and trading of these securities. By adding 
Exchange-listed options on any security issued by an ICE Affiliate to 
the definition of ``Affiliate Securities,'' the proposed changes would 
expand the scope of Rule 497. The Exchange accordingly believes that 
the proposed amendments to Rule 497 would continue to eliminate any 
perception of a potential conflict of interest if an ICE Affiliate 
seeks to list a security on the Exchange.
    Lastly, the Exchange believes that the proposed non-substantive 
grammatical changes would promote just and equitable principles of 
trade and remove impediments to a free and open market by providing 
greater clarity in the Exchange's rules.

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 Exchange Act. The proposed rule 
change is not intended to address competitive issues but rather provide 
market participants with additional specificity and transparency 
regarding the Exchange's controls that are in place to address the 
potential conflicts of interest that may arise in the listing of 
Affiliate Securities 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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest as it will 
allow the Exchange to implement the proposed changes to Rule 497 
without delay. Therefore, the Commission hereby waives the operative 
delay and designates the proposal operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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-NYSE-2016-67 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-NYSE-2016-67. 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

[[Page 74849]]

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-NYSE-2016-67, and should be 
submitted on or before November 17, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-25937 Filed 10-26-16; 8:45 am]
 BILLING CODE 8011-01-P