82 FR 25378 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend Commentary .01 and Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3) To Provide for the Inclusion of Cash in an Index Underlying a Series of Investment Company Units

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 104 (June 1, 2017)

[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25378-25379]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11255]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80777; File No. SR-NYSEArca-2017-30]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend 
Commentary .01 and Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3) 
To Provide for the Inclusion of Cash in an Index Underlying a Series of 
Investment Company Units

May 25, 2017.

I. Introduction

    On March 29, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a 
proposed rule change to amend Commentary .01 and Commentary .02 to NYSE 
Arca Equities Rule 5.2(j)(3) to provide for the inclusion of cash in an 
index underlying a series of Investment Company Units. The proposed 
rule change was published for comment in the Federal Register on April 
14, 2017.\4\ On May 10, 2017, the Exchange filed Amendment No. 1 to the 
proposed rule change.\5\ The Commission received no comments on the 
proposed rule change. This order approves the proposed rule change, as 
modified by Amendment No. 1 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 80415 (April 10, 
2017), 82 FR 18067.
    \5\ In Amendment No. 1, which amended and replaced the proposed 
rule change in its entirety, the Exchange made a technical change to 
the proposed rule text. Amendment No. 1 to the proposed rule change 
is available at: https://www.sec.gov/comments/sr-nysearca-2017-30/nysearca201730-1749397-151677.pdf. Amendment No. 1 is not subject to 
notice and comment because it is a technical amendment that does not 
materially alter the described substance of the proposed rule change 
or raise any novel regulatory issues.
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II. Description of the Proposal

    Commentary .01(a)(A), Commentary .01 (a)(B), and Commentary .02 to 
NYSE Arca Equities Rule 5.2(j)(3) permit the Exchange to generically 
list Investment Company Units (``Units'') that overlie an index or 
portfolio of US Component Stocks,\6\ Non-US Component Stocks,\7\ US 
Component Stocks and Non-US Component Stocks, and Fixed Income 
Securities \8\ that meets specified criteria. While ``Investment 
Companies,'' \9\ like mutual funds, may hold cash, currently, the 
generic listing criteria of NYSE Arca Equities Rule 5.2(j)(3) do not 
contemplate the generic listing Units overlying an index or portfolio 
with a cash component.
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    \6\ ``US Component Stock'' is defined in NYSE Arca Equities Rule 
5.2(j)(3) as an equity security that is registered under Sections 
12(b) or 12(g) of the Securities Exchange Act of 1934 or an American 
Depositary Receipt, the underlying equity security of which is 
registered under Sections 12(b) or 12(g) of the Securities Exchange 
Act of 1934.
    \7\ ``Non-US Component Stock'' is defined in NYSE Arca Equities 
Rule 5.2(j)(3) as an equity security that is not registered under 
Sections 12(b) or 12(g) of the Securities Exchange Act of 1934 and 
that is issued by an entity that (a) is not organized, domiciled or 
incorporated in the United States, and (b) is an operating company 
(including Real Estate Investment Trusts and income trusts, but 
excluding investment trusts, unit trusts, mutual funds, and 
derivatives).
    \8\ Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3) defines 
Fixed Income Securities as debt securities that are notes, bonds, 
debentures or evidence of indebtedness that include, but are not 
limited to, U.S. Department of Treasury securities, government-
sponsored entity securities, municipal securities, trust preferred 
securities, supranational debt and debt of a foreign country or a 
subdivision thereof.
    \9\ The term ``Investment Company'' is defined in NYSE Arca 
Equities Rule 5.2(j)(3).
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    The Exchange proposes to amend Commentary .01 and Commentary .02 to 
NYSE Arca Equities Rule 5.2(j)(3) to permit the generic listing and 
trading of Units overlying an index or portfolio of cash and: (1) US 
Component Stocks; (2) Non-US Component Stocks; (3) US Component Stocks 
and Non-US Component Stocks; and (4) Fixed Income Securities. 
Additionally, the Exchange is not proposing to otherwise amend the 
applicable generic listing criteria, except to specify that the 
following generic listing criteria will not apply to the cash portion 
of the index or portfolio:
     Under proposed Commentary .01(a)(A)(1) through (4) to NYSE 
Arca Equities Rule 5.2(j)(3), the percentage weighting requirements 
would apply only to the US Component Stocks portion of the underlying 
index or portfolio.
     Under proposed Commentary .01 (a)(B)(1) through (4) to 
NYSE Arca Equities Rule 5.2(j)(3), the percentage weighting 
requirements would not apply to the cash component of the underlying 
index or portfolio.
     Under proposed Commentary .02(a)(2), (a)(4), and (a)(6) to 
NYSE Arca Equities Rule 5.2(j)(3) the percentage weighting requirements 
would apply only to the Fixed Income Securities portion of the 
underlying index or portfolio.

The Exchange does not propose any limit to the weighting of cash in an 
index or portfolio underlying a series of Units.\10\ The Commission 
notes that, under a provision of its current rule, the Exchange may 
generically list Units overlying a combination of indexes so long as 
each index satisfies the generic listing criteria.\11\
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    \10\ See Amendment No. 1, supra note 5, at 6.
    \11\ See Commentary .03 to NYSE Arca Equities Rule 5.2(j)(3).
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\12\ In particular, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\13\ 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, 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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    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that permitting the Exchange to generically 
list Units that overlie an index or portfolio with a cash component may 
enhance competition among generically listed Units, to the benefit of 
investors and the marketplace. Additionally, the Commission believes 
that the generic listing criteria referenced above, applicable only to 
the non-cash portion(s) of the index or portfolio will neither dilute 
the generic listing criteria nor render the indexes or portfolios 
underlying generically listed Units more susceptible to 
manipulation.\14\
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    \14\ The Commission also notes that the Exchange represents that 
it has in place surveillance procedures that are adequate to 
properly monitor trading in Units in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. See Amendment No. 1, supra note 5, at 7.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment

[[Page 25379]]

No. 1 thereto, is consistent with Section 6(b)(5) of the Act \15\ and 
the rules and regulations thereunder applicable to a national 
securities exchange.
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    \15\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\16\ that the proposed rule change (SR-NYSEArca-2017-30), 
as modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11255 Filed 5-31-17; 8:45 am]
BILLING CODE 8011-01-P