82 FR 26964 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend its Listing Standards for Closed-end Funds

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 111 (June 12, 2017)

[Federal Register Volume 82, Number 111 (Monday, June 12, 2017)]
[Notices]
[Pages 26964-26966]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-12040]



[[Page 26964]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80867; File No. SR-NYSE-2017-08]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Amend its Listing Standards 
for Closed-end Funds

June 6, 2017.
    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 May 24, 2017, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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 its listing standards for closed-end 
funds. 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 its listing standards for closed-end 
funds to conform them to those of NYSE MKT LLC (``NYSE MKT'').
    Paragraph A of Section 102.04 of the NYSE Listed Company Manual 
(the ``Manual'') currently permits the listing of a closed-end 
management investment company registered under the Investment Company 
Act of 1940 (a ``Fund'') that meets the distribution requirements of 
Section 102.01A of the Manual and the stock price and market value of 
publicly-held shares requirement of Section 102.01B of the Manual, 
provided that the required market value of publicly held shares for 
Funds is $60 million regardless of whether it is an IPO or an existing 
Fund. Notwithstanding the foregoing requirement for market value of 
publicly held shares of $60 million, the Exchange will generally 
authorize the listing of all the Funds in a group of Funds listed 
concurrently with a common investment adviser or investment advisers 
who are ``affiliated persons'', as defined in Section 2(a)(3) of the 
Investment Company Act of 1940, as amended, if:
     Total group market value of publicly held shares equals in 
the aggregate at least $200 million;
     The group market value of publicly held shares averages at 
least $45 million per Fund; and
     No one Fund in the group has market value of publicly held 
shares of less than $30 million.
    Section 802.01B of the Manual provides that the Exchange will 
promptly initiate suspension and delisting procedures with respect to a 
Fund if the average market capitalization of the entity over 30 
consecutive trading days is below $15 million. In addition, the 
Exchange will promptly initiate suspension and delisting procedures 
with respect to a Fund if it ceases to maintain its closed-end status. 
The Exchange will notify the Fund if the average market capitalization 
falls below $25 million and will advise the Fund of the delisting 
standard. Funds are not eligible to follow the cure procedures outlined 
in Sections 802.02 and 802.03 of the Manual.
    The Exchange proposes to amend Paragraph A of Section 102.04 and 
Section 802.01B to eliminate their current requirements with respect to 
the initial and continued listing of Funds and replace them with 
listing requirements substantively identical to those under the current 
NYSE MKT listing standards for Funds. The proposed amended standards 
would include requirements with respect to a Fund's net asset value. 
The net asset value (or ``NAV'') of a Fund is the value of all Fund 
assets (less liabilities) divided by the number of shares outstanding. 
All Funds disclose NAV on at least a quarterly basis and many disclose 
it more frequently. While Funds typically trade at either a premium or 
discount to NAV, their share price generally maintains a close 
relationship to NAV. As a consequence, the market price of a Fund is 
less reliant on the price discovery mechanism of a liquid trading 
market than is the case with operating companies. As Exchange listing 
requirements with respect to publicly held shares are generally 
intended to facilitate a liquid trading market for operating companies, 
the role of a Fund's NAV in determining the market price of its 
securities makes publicly held shares requirements less important for 
Funds than for operating companies. Therefore, the Exchange believes 
that NAV is an appropriate additional or alternative measure of the 
suitability of Funds for initial and continued listing.
    As proposed, a Fund would be qualified for listing on a stand-alone 
basis if it has a market value of publicly held shares or net assets of 
at least $20 million. As further proposed, Funds would be eligible to 
be listed concurrently with a common investment adviser or investment 
advisers who are ``affiliated persons'', as defined in Section 2(a)(3) 
of the Investment Company Act of 1940, as amended, if:
     The group has a total market value of publicly held shares 
or net assets of at least $75 million;
     The Funds in the group have an average market value of 
publicly held shares or net assets of at least $15 million; and
     Each Fund in the group has a market value of publicly held 
shares or net assets of at least $10 million.
    These proposed initial listing standards are based on Section 
101(g) of the NYSE MKT Company Guide without any substantive 
differences.
    The continued listing standards for Funds set forth in Section 
802.01B currently provide that a Fund is subject to delisting if its 
average market capitalization is less than $15 million over 30 trading 
days. The Exchange proposes to replace this requirement with a new 
continued listing standard providing that a Fund would be subject to 
delisting if the total market value of publicly held shares and net 
assets are each less than $5 million for more than 60 consecutive 
calendar days. These proposed continued listing standards are based on 
Section 1003(b)(v) of the NYSE MKT Company Guide without

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any substantive differences.\4\ The Exchange further proposes to lower 
the threshold for when the Exchange would advise the Fund of the 
delisting standard. Because the market capitalization component of the 
delisting standard would be $5 million of total market value of 
publicly held shares over 60 calendar days instead of an average of $15 
million of market capitalization over 30 trading days as is currently 
the case, the Exchange proposes to similarly reduce the notification 
threshold from an average market capitalization of $25 million to a 
total market value of publicly held shares over a 60 calendar day 
period of $10 million.
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    \4\ The Exchange would monitor compliance on an ongoing basis 
with the proposed amended total market value of publicly held shares 
requirement. The Exchange would communicate with any Fund whose 
total market value of publicly held shares fell below $5 million 
over 60 calendar days to enable the Fund to provide evidence that 
its net assets had exceeded $5 million over the required period. The 
Exchange would promptly initiate suspension and delisting procedures 
with respect to any such Fund that was unable at that time to 
display compliance with the net asset requirement. The Exchange 
notes that no Fund listed on the NYSE is currently below compliance 
with its continued listing standards.
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    The Exchange also proposes to conform its distribution standards 
for continued listing of Funds to those of NYSE MKT. Common stocks of 
Funds are currently subject to the distribution requirements for the 
common stocks of operating companies set forth in Section 802.01A of 
the Manual.\5\ The Exchange proposes to replace those requirements for 
Funds with distribution standards substantively identical to those 
applied to Funds by NYSE MKT under Section 1003(b)(i) of the NYSE MKT 
Company Guide. Under the proposed amendment, the Exchange would 
normally give consideration to the prompt initiation of suspension and 
delisting procedures with respect to the common stock of a Fund if:
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    \5\ Under Section 802.01A, a Fund is below compliance if (i) its 
total number of stockholders is less than 400; (ii) the number of 
total stockholders is less than 1,200 and the average monthly 
trading volume is less than100,000 shares (for the most recent 12 
months); or (iii) the number of publicly-held shares is less than 
600,000.
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    (A) The number of shares publicly held \6\ (is less than 200,000; 
or
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    \6\ Shares held by directors, officers, or their immediate 
families and other concentrated holdings of 10 percent or more will 
be excluded in calculating the number of publicly-held shares and 
number of public shareholders for purposes of the proposed continued 
listing standards. The definition of publicly-held shares in the 
NYSE MKT rule is worded differently but is applied in exactly the 
same way that the proposed NYSE provision would be applied.
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    (B) the total number of public shareholders is less than 300; or
    (C) the total market value of shares publicly held is less than 
$1,000,000 for more than 90 calendar consecutive days.
    The Exchange and NYSE MKT are under common ownership and issuers 
listed on both markets are subject to oversight by the same regulatory 
staff. Therefore, the staff of NYSE Regulation responsible for 
regulation of both markets has observed over time the application of 
the NYSE MKT listing rules for Funds. In the staff's experience, Funds 
listed under the NYSE MKT Fund listing standards rarely become 
unsuitable over time for continued exchange trading. Consequently, the 
Exchange believes that, in adopting listing standards for Funds that 
are substantially similar to those of NYSE MKT, its proposed initial 
and continued listing standards for Funds would be consistent with the 
protection of investors.
    The Exchange is also proposing to correct a typographical error in 
Section 802.01B.
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) \8\ of the Act, in particular in that it 
is designed 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 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The proposed amendment is consistent with Section 6(b)(5) of the 
Act, as the initial and continued listing criteria set forth in the 
proposed rules are designed to protect investors and the public 
interest. As noted above, the Exchange's proposed amended listing 
requirements for Funds are substantively identical to those of NYSE 
MKT. The Exchange and NYSE MKT are under common ownership and issuers 
listed on both markets are subject to oversight by the same regulatory 
staff. Therefore, the staff of NYSE Regulation which is responsible for 
regulation of both the Exchange and NYSE MKT has observed over an 
extended period of time the application of the NYSE MKT listing rules 
for Funds. Over this extended period, the staff's experience has been 
that the application of the NYSE MKT Fund listing standards has 
resulted in the listing of Funds that have generally been suitable on 
an ongoing basis for exchange trading. Consequently, based on this 
experience, the Exchange believes that, by adopting amended initial and 
continued listing standards for Funds that are substantially the same 
as those of NYSE MKT, the Exchange would continue to have listing 
standards which would ensure that listed Funds are suitable for 
exchange trading. Consequently, the Exchange believes that the proposed 
rule change is consistent with the protection of investors and the 
public interest.
    The modification of the market capitalization level at which the 
Exchange provides an early warning to an issuer from $25 million of 
average market capitalization over 30 trading days to $10 million of 
market value of publicly held shares over 60 calendar days is 
consistent with the proposed amendment to the substantive continued 
listing standard. It would provide issuers with sufficient warning of 
any potential noncompliance and is therefore consistent with the 
protection of investors and the public interest.
    The Exchange believes that the proposed amendment would facilitate 
the listing and trading of a greater number of Funds on the Exchange, 
enhancing competition among market participants, to the benefit of 
investors and the marketplace.

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 rule change is 
designed to harmonize the Exchange's rules with those of NYSE MKT. As 
such, it is intended to promote competition for the listing of Funds by 
providing them with a greater number of listing venue alternatives.

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

    Within 45 days of the date of publication of this notice in the 
Federal

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Register or 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 the 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-NYSE-2017-08 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-NYSE-2017-08. 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 such 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-2017-08, and should be 
submitted on or before July 3, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2017-12040 Filed 6-9-17; 8:45 am]
 BILLING CODE 8011-01-P