82 FR 36054 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Its Listing Standards for Closed-End Funds

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 147 (August 2, 2017)

[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 36054-36056]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-16207]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81226; File No. SR-NYSE-2017-08]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Amendment No. 1, To 
Amend Its Listing Standards for Closed-End Funds

July 27, 2017.

I. Introduction

    On May 24, 2017, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its listing standards for closed-end 
funds. The proposed rule change was published for comment in the

[[Page 36055]]

Federal Register on June 12, 2017.\3\ On June 29, 2017, NYSE filed 
Amendment No. 1 to the proposal.\4\ The Commission received no comments 
on the proposed rule change. The Commission is publishing this notice 
to solicit comment on Amendment No. 1 to the proposed rule change from 
interested persons, and is approving the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80867 (June 6, 
2017), 82 FR 26964 (``Notice'').
    \4\ Amendment No. 1 revised the proposal to insert additional 
rule text to clarify the definition of public stockholders for 
purposes of determining adherence to the continued listing 
requirements for closed-end funds and to make conforming changes. 
Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nyse-2017-08/nyse201708-1832561-154372.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    The Exchange has proposed to modify its listing standards 
applicable to a closed-end management investment company registered 
under the Investment Company Act of 1940 (a ``Fund''). In its filing, 
the Exchange explained that this proposal would conform its initial and 
continued listing standards for Funds to the listing standards for 
Funds utilized by NYSE MKT LLC (``NYSE MKT'').\5\
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    \5\ See Notice, supra note 3, at 26964.
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    Currently, the Exchange will generally authorize the listing of a 
Fund that meets the distribution and publicly held shares requirements 
contained in Sections 102.01A and 102.01B of the NYSE Listed Company 
Manual, respectively, if the Fund's market value of publicly held 
shares is $60,000,000, regardless of whether the listing concerns an 
initial public offering or an existing Fund.\6\ Notwithstanding the 
requirement for market value of publicly held shares of $60,000,000, 
the Exchange will generally authorize the listing of all of 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: (i) Total group market value of publicly held shares 
equals in the aggregate at least $200,000,000; (ii) the group market 
value of publicly held shares averages at least $45,000,000 per Fund; 
and (iii) no one Fund in the group has a market value of publicly held 
shares of less than $30,000,000.\7\
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    \6\ See NYSE Listed Company Manual, Section 102.04A.
    \7\ See id.
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    Under the proposal, the Exchange would generally authorize the 
listing of a Fund that has a market value of publicly held shares or 
net assets of $20,000,000.\8\ Alternatively, the Exchange would 
generally authorize the listing of a group of Funds if: (i) Total group 
market value of publicly held shares or net assets equals in the 
aggregate at least $75,000,000; (ii) the group market value of publicly 
held shares or net assets averages at least $15,000,000 per Fund; and 
(iii) each Fund in the group has a market value of publicly held shares 
or net assets of at least $10,000,000.\9\ With respect to the 
introduction of requirements concerning a Fund's net asset value 
(``NAV''),\10\ the Exchange explained that Funds disclose NAV on at 
least a quarterly basis, and often more frequently, and that a Fund's 
share price typically trades at a premium or discount to NAV, with 
share price and NAV generally maintaining a close relationship.\11\ 
According to the Exchange, this relationship between share price and 
NAV makes the market price of a Fund less reliant on the price 
discovery mechanism of a liquid trading market than is the case with 
operating companies, and therefore the Exchange believes that NAV is an 
appropriate additional or alternative measure of suitability for 
listing.\12\ The Exchange explained that these revisions to the initial 
listing standards for Funds are based on the rules of NYSE MKT.\13\
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    \8\ See proposed NYSE Listed Company Manual, Section 102.04A.
    \9\ See id.
    \10\ The Exchange explained that the NAV of a Fund is the value 
of all Fund assets less liabilities, divided by the number of shares 
outstanding. See Notice, supra note 3, at 26964.
    \11\ See id. The Commission notes that most closed-end funds 
calculate NAV on a daily basis.
    \12\ See id.
    \13\ See id. (citing NYSE MKT Company Guide, Section 101(g)).
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    Under current continued listing standards, 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 $15,000,000 or the Fund ceases to 
maintain its closed-end status.\14\ The Exchange has proposed to 
replace the existing average market capitalization continued listing 
standard with a requirement that Funds not fall below $5,000,000 in 
both total market value of publicly held shares and net assets over any 
60 consecutive calendar day period.\15\ Shares held by directors, 
officers, or their immediate families and other concentrated holdings 
of 10 percent or more would be excluded in calculating the number of 
publicly held shares.\16\ The Exchange explained that these changes to 
the continued listing standards for Funds are based on the rules of 
NYSE MKT.\17\ According to the Exchange, it would monitor compliance 
with the publicly held shares requirement on an ongoing basis and ask 
any Fund whose total market value of publicly held shares fell below 
$5,000,000 over 60 calendar days to provide evidence that its net 
assets had exceeded $5,000,000 over the required period.\18\ The 
Exchange explained that it would promptly initiate suspension and 
delisting procedures with respect to any Fund that could not 
demonstrate compliance with the net asset requirement at such time.\19\
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    \14\ See NYSE Listed Company Manual, Section 802.01B.
    \15\ See proposed NYSE Listed Company Manual, Section 802.01B. 
The Exchange also has proposed to fix a typographical error in 
Section 802.01B of the NYSE Listed Company Manual. See Notice, supra 
note 3, at 26965.
    \16\ See proposed NYSE Listed Company Manual, Section 802.01B; 
Amendment No. 1, supra note 4, at 7. Similarly, for purposes of the 
public stockholder requirement, as discussed below, ``public 
stockholders'' would exclude holders that are directors, officers, 
or their immediate families and holders of other concentrated 
holdings of 10 percent or more. See proposed NYSE Listed Company 
Manual, Section 802.01B; Amendment No. 1, supra note 4, at 7. The 
Exchange represented that it relies primarily on the beneficial 
ownership disclosure included in the issuers' registration 
statements and annual meeting proxy statements in calculating 
publicly held shares and public stockholders, but also refers to 
other Commission filings where appropriate and its determinations 
are made in accordance with Rule 13d-3 under the Act. The Exchange 
stated that this is its practice under all of its rules where these 
calculations must be made. The Exchange also stated that this is the 
practice of NYSE MKT and the Exchange believes that its approach is 
generally consistent with that of the NASDAQ Stock Market. See 
Amendment No. 1, supra note 4, at 3.
    \17\ See Notice, supra note 3, at 26964-65 (citing NYSE MKT 
Company Guide, Section 1003(b)(v)).
    \18\ See Notice, supra note 3, at 26965 n. 4.
    \19\ See id. According to the Exchange, no listed Fund is 
currently below compliance with the Exchange's continued listing 
standards. See id.
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    In addition, current Exchange rules provide that the Exchange will 
notify the Fund if the average market capitalization falls below 
$25,000,000 and will advise the Fund of the delisting standard.\20\ The 
Exchange has proposed to update this notification requirement, 
according to the Exchange, to reflect the reduced market capitalization 
component of the delisting standard and thus provide that the Exchange 
will notify a Fund if the total market value of publicly held shares 
over a 60

[[Page 36056]]

calendar day period falls below $10,000,000.\21\
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    \20\ See NYSE Listed Company Manual, Section 802.01B. Funds are 
not eligible to utilize the follow-up procedures in Sections 802.02 
and 802.03 of the NYSE Listed Company Manual that can be used by 
companies that are below the Exchange's continued listing criteria. 
See id.
    \21\ See proposed NYSE Listed Company Manual, Section 802.01B; 
see also Notice, supra note 3, at 26965.
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    Further, the Exchange would specify that the distribution standards 
for common stocks of operating companies set forth in Section 802.01A 
of the NYSE Listed Company Manual do not apply to Funds.\22\ The 
Exchange is proposing new continued listing standards that apply only 
to Funds. Under the proposal, 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: (i) The 
number of shares publicly held is less than 200,000; (ii) the total 
number of public stockholders is less than 300; \23\ or (iii) the total 
market value of shares publicly held is less than $1,000,000 for more 
than 90 consecutive calendar days.\24\
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    \22\ See proposed NYSE Listed Company Manual, Section 802.01B.
    \23\ The current distribution standards require 400 total 
stockholders, which calculation does not exclude public 
stockholders. See NYSE Listed Company Manual, Section 802.01A.
    \24\ See proposed NYSE Listed Company Manual, Section 802.01B; 
Amendment No. 1, supra note 4, at 7; supra note 16 and accompanying 
text. In Amendment No. 1, the Exchange amended the rule language to 
make clear that the definitions of publicly held shares and public 
stockholders, as described above, apply to these sections as 
appropriate.
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II. 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.\25\ In particular, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\26\ 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 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. Section 6(b)(5) of the Act 
\27\ also requires that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \25\ 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).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ Id.
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    The Commission notes that the proposed initial and continued 
listing standards are consistent with those listing standards currently 
utilized by NYSE MKT \28\ and that the Commission received no comments 
on the Exchange's proposed rule change. The Commission believes that 
the adjustment of the threshold for total market value of publicly held 
shares below which the Exchange will notify a Fund of the delisting 
standard is consistent with the adjustment to the continued listing 
standards in this proposed rule change. Based on the foregoing, the 
Commission believes that the proposed rule change presents no novel 
regulatory issues and therefore finds the proposed rule change to be 
consistent with the Act.
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    \28\ See supra notes 13 and 17 and accompanying text.
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 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 August 23, 2017.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of the notice of Amendment No. 1 in the 
Federal Register. The Commission believes that the proposed changes to 
the description of the Exchange's method of calculating publicly held 
shares and public stockholders add clarity to the process. Accordingly, 
for the reasons noted above, the Commission finds good cause for 
approving the proposed rule change, as modified by Amendment No. 1, on 
an accelerated basis, pursuant to Section 19(b)(2) of the Act.\29\
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    \29\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19b(2) of the Act,\30\ 
that the proposed rule change (SR-NYSE-2017-08), as modified by 
Amendment No. 1 thereto, be, and hereby is, approved on an accelerated 
basis.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16207 Filed 8-1-17; 8:45 am]
 BILLING CODE 8011-01-P