82 FR 48296 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Listed Company Manual To Adopt Initial and Continued Listing Standards for Subscription Receipts
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 199 (October 17, 2017)
Federal Register Volume 82, Issue 199 (October 17, 2017)
| Page Range | 48296-48300 | |
| FR Document | 2017-22408 |
[Federal Register Volume 82, Number 199 (Tuesday, October 17, 2017)] [Notices] [Pages 48296-48300] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-22408] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81856; File No. SR-NYSE-2017-31] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Listed Company Manual To Adopt Initial and Continued Listing Standards for Subscription Receipts October 11, 2017. I. Introduction On June 26, 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 the NYSE Listed Company Manual (``Manual'') to adopt initial and continued listing standards for Subscription Receipts. The proposed rule change was published for comment in the Federal Register on July 13, 2017.\3\ On October 3, 2017, the Exchange submitted Amendment No. 1 to the proposed rule change.\4\ The Commission is publishing this notice of Amendment No. 1 and approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 81102 (July 7, 2017), 82 FR 32413 (``Notice''). \4\ Amendment No. 1 amends the original filing to: (1) Correct a reference in the purpose section of the filing from a reference to Section 802.01 of the Manual to a reference to Sections 802.02 and 802.03 of the Manual; (2) change the proposed continued listing holder requirement from 100 total holders to 100 public holders; (3) provide that Subscription Receipts will be subject to immediate suspension and delisting proceedings (with no eligibility with respect to the procedures set forth in Sections 802.02 and 802.03 of the Manual) in the event that at any time there are fewer than 100,000 publicly-held shares or 100 public holders of the Subscription Receipts; and (4) make clear that Subscription Receipts convert into primary common stock of the listed company. When the Exchange filed Amendment No. 1 with the Commission, it also submitted Amendment No. 1 to the public comment file for SR-NYSE- 2017-31 (available at: https://www.sec.gov/comments/sr-nyse-2017-31/nyse201731.htm). --------------------------------------------------------------------------- II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 The Exchange has proposed to adopt initial and continued listing standards for the listing of Subscription Receipts. In its proposal, NYSE generally described the structure of Subscription Receipts and noted that Subscriptions Receipts have been used as a financing technique by Canadian public companies.\5\ According to the Exchange, Canadian companies typically use Subscription Receipts as a means of providing cash consideration in merger or acquisition transactions.\6\ Subscription Receipts are sold in a public offering that occurs after the execution of an acquisition agreement. The proceeds of the Subscription Receipt offering are held in a custody account and, if the related acquisition closes, the Subscription Receipt holders will have their Subscription Receipts converted into a specified number of shares of the primary listed class of common stock of the issuer.\7\ If the acquisition does not close, the Subscription Receipts are redeemed for their original purchase price plus any interest accrued on the custody account. --------------------------------------------------------------------------- \5\ See Notice, supra note 3, at 32413. \6\ See id. \7\ See Amendment No. 1. --------------------------------------------------------------------------- The Exchange stated in its proposal that Subscription Receipts provide a contingent form of financing for an issuer that only becomes permanent if the specified acquisition is completed.\8\ In contrast, the Exchange noted that a company financing the cash consideration for an acquisition by means of a traditional equity or debt [[Page 48297]] offering is at risk of having incurred unnecessary dilution of its shareholders or indebtedness if the related acquisition fails to close.\9\ The Exchange further noted that Subscription Receipts provide investors with flexibility to elect to invest in the post-merger company and not in the company in its pre-merger form. --------------------------------------------------------------------------- \8\ See Notice, supra note 3, at 32413. \9\ See id. --------------------------------------------------------------------------- The Exchange has proposed the following initial listing standards for Subscription Receipts: \10\ --------------------------------------------------------------------------- \10\ See id. --------------------------------------------------------------------------- (a) At the time of initial listing, the Subscription Receipts must have a price per share of at least $4.00, a minimum total market value of publicly-held shares of $100 million, 1,100,000 publicly-held shares,\11\ and 400 holders of round lots (i.e., 100 securities). --------------------------------------------------------------------------- \11\ For purposes of the initial and continued listing requirements for Subscription Receipts, shares held by directors, officers, or their immediate families and other concentrated holdings of 10 percent or more are excluded in calculating the number of publicly-held shares. See proposed Sections 102.08 and 802.01B of the Manual. --------------------------------------------------------------------------- (b) The issuer must be an NYSE listed company that is not currently non-compliant with any applicable continued listing standard. (c) The proceeds of the Subscription Receipts offering must be designated solely for use in connection with the consummation of a specified acquisition that is the subject of a binding acquisition agreement (the ``Specified Acquisition''). (d) The proceeds of the Subscription Receipts offering must be held in an interest-bearing custody account by an independent custodian. (e) The Subscription Receipts must promptly be redeemable for cash (i) at any time the Specified Acquisition is terminated, or (ii) if the Specified Acquisition does not close within twelve months from the date of issuance of the Subscription Receipts, or such earlier time as is specified in the operative agreements. If the Subscription Receipts are redeemed, the holders must receive cash payments equal to their proportionate share of the funds in the custody account, including any interest earned on those funds. (f) If the Specified Acquisition is consummated, the holders of the Subscription Receipts must receive the shares of common stock for which their Subscription Receipts are exchangeable. (g) The sale of the Subscription Receipts and the issuance of the common stock of the issuer in exchange for the Subscription Receipts must both be registered under the Securities Act of 1933.\12\ --------------------------------------------------------------------------- \12\ See 15 U.S.C. 77a et seq. --------------------------------------------------------------------------- The Exchange has also proposed to amend Section 802.01B of the Manual to include continued listing standards applicable to Subscription Receipts listed under proposed Section 102.08 of the Manual. In its filing, as modified by Amendment No. 1, the Exchange proposed to immediately initiate suspension and delisting procedures when: (i) The number of publicly-held shares is less than 100,000; (ii) the number of public holders is less than 100; \13\ (iii) the total market capitalization of the Subscription Receipts is below $15 million over 30 consecutive trading days; (iv) the related common equity security ceases to be listed; or (v) the issuer announces that the Specified Acquisition has been terminated. --------------------------------------------------------------------------- \13\ In adopting a continued listing requirement of 100 public holders, the Exchange notes that this is similar to other exchange continued listing standards. See, e.g., NASDAQ Marketplace Rule 5460(a)(4). See also Section 802.01D (providing continued listing standards for warrants, among other specialized securities). For purposes of the continued listing requirements for Subscription Receipts, ``public holders'' exclude holders that are directors, officers, or their immediate families and holders of other concentrated holdings of 10% or more. See proposed Section 802.01B of the Manual. --------------------------------------------------------------------------- An issuer of Subscription Receipts will not be eligible to follow the procedures outlined in Sections 802.02 and 802.03 of the Manual with respect to these criteria,\14\ and any such security will be subject to delisting procedures as set forth in Section 804 of the Manual.\15\ The Exchange also stated that Subscription Receipts will be subject to potential delisting for all of the reasons generally applicable to operating companies under Section 802.01 of the Manual.\16\ The Exchange further noted in its proposal that an issuer of Subscription Receipts may be subject to delisting at the time of closing of the related acquisition pursuant to the ``backdoor listing'' provisions of Section 703.08(E) of the Manual.\17\ Further, if the Specified Acquisition is consummated, as noted above, the Subscription Receipts convert into the primary listed class of common stock of the issuer, which will thereafter be subject to all of the continued listing requirements applicable to a primary class of common stock listed on NYSE.\18\ --------------------------------------------------------------------------- \14\ Sections 802.02 and 802.03 of the Manual set forth procedures for listed companies to submit a plan, which must be approved by the Exchange, to bring the listed company into conformity with a continued listing standard within eighteen months of receiving a letter of non-compliance. As noted above, an issuer of Subscription Receipts will not be eligible to utilize the procedures in Sections 802.02 or 802.03 of the Manual to submit a plan of compliance and instead will be subject to the procedures in Section 804 of the Manual. \15\ Section 804 of the Manual sets forth the applicable due process procedures, including appeal rights, for the suspension and delisting of the securities of a listed company. \16\ See Notice, supra note 3, at 32414. \17\ See id. \18\ See Amendment No. 1. See also Section 802.01 of the Manual (providing the continued listing criteria for capital or common stock listed on NYSE). --------------------------------------------------------------------------- The Exchange also has proposed to amend Section 202.06 of the Manual to provide that whenever it halts trading in a security of a listed company pending dissemination of material news or implements any other required regulatory trading halt, the Exchange will also halt trading in any listed Subscription Receipt that is exchangeable by its terms into the common stock of such company.\19\ --------------------------------------------------------------------------- \19\ See Notice, supra note 3, at 32414. --------------------------------------------------------------------------- The Exchange represented that it will monitor activity in Subscription Receipts to identify and deter any potential improper trading activity in such securities and will adopt enhanced surveillance procedures to enable it to monitor Subscription Receipts alongside the common equity securities into which they are convertible.\20\ Additionally, the Exchange states that it will rely on its existing trading surveillances, administered by the Exchange or the Financial Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities law. --------------------------------------------------------------------------- \20\ See id. --------------------------------------------------------------------------- Finally, the Exchange has proposed to apply the listing fees for ``short-term'' securities (i.e., securities with a life of seven years or less), set forth in Section 902.06 of the Manual, to Subscription Receipts because these securities, as noted above, will be short-term securities that have a maximum term of twelve months.\21\ The Exchange has therefore proposed to amend Section 902.06 of the Manual to make it explicit that it will apply to Subscription Receipts. Finally, the Exchange proposes to amend Section 902.06 of the Manual to remove a reference to the annual fees charged prior to January 1, 2017, as that reference is now irrelevant. --------------------------------------------------------------------------- \21\ See id. --------------------------------------------------------------------------- III. Discussion and Commission Findings 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 and, in particular, the requirements of Section 6(b) of the Act and the rules and regulations [[Page 48298]] thereunder. Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,\22\ which requires that an exchange have rules designed to, among other things, promote just and equitable principles of trade, remove impediments to an perfect the mechanisms of a free and open market and a national market system, protect investors and the public interest, and not permit unfair discrimination between customers, issuers, brokers, or dealers.\23\ --------------------------------------------------------------------------- \22\ 15 U.S.C. 78f(b)(5). \23\ In approving this proposed rule change, the Commission notes that it has considered the proposed rules' impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). --------------------------------------------------------------------------- The development and enforcement of adequate standards governing the initial and continued listing of securities on an exchange is an activity of critical importance to financial markets and the investing public. Listing standards, among other things, serve as a means for an exchange to screen issuers and to provide listed status only to bona fide companies that have or will have sufficient public float, investor base, and trading interest to provide the depth and liquidity necessary to promote fair and orderly markets. Adequate standards are especially important given the expectations of investors regarding exchange trading and the imprimatur of listing on a particular market. Once a security has been approved for initial listing, maintenance criteria allow an exchange to monitor the status and trading characteristics of that issue to ensure that it continues to meet the exchange's standards for market depth and liquidity so that fair and orderly markets can be maintained. Subscription Receipts, as discussed by the Exchange in its proposal, are a financing technique to fund a Specified Acquisition. As NYSE noted in its filing, an issuer could sell equity securities to fund an acquisition, but if the acquisition doesn't close, investors will still experience dilution in their holdings. Subscription Receipts allow investors the right to invest in the common stock of the listed company upon consummation of a Specified Acquisition. If the deal is not consummated within a short time frame of 12 months or less, the Subscription Receipt holders receive their pro rata share of the offering proceeds plus interest. In this sense, Subscription Receipts could be viewed as a security with characteristics of both equity and debt and are similar, but not identical to, other contingent securities with a right to receive common stock, such as warrants. At the time investors purchase a Subscription Receipt they will also have information about the Specified Acquisition and are making a decision to purchase stock in the listed post-acquisition company. To address these unique characteristics, as discussed in more detail below, the Exchange has proposed to adopt new Section 102.08 to list Subscription Receipts, and specified continued listing standards. The proposed standards would permit NYSE to list, and continue to list, Subscription Receipts that meet specific criteria, including market value, distribution, and price requirements, which should help to ensure that the Subscription Receipts have sufficient public float, investor base, and liquidity to promote fair and orderly markets. In addition, issuers of Subscription Receipts would have to comply with other investor protection criteria in order to list Subscription Receipts, such as, among others, holding proceeds in a custodial account controlled by an independent custodian and providing shareholders with cash redemption rights should the Specified Acquisition be terminated or not close within 12 months. The Commission believes that the proposed initial and continued listing standards for Subscription Receipts are consistent with the requirements of the Act, including the protection of investors and the promotion of fair and orderly markets. At the time of initial listing, the Subscription Receipts must have a price per share of at least $4.00, a minimum total market value of publicly-held shares of $100 million, 1,100,000 publicly-held shares,\24\ and 400 holders of round lots (i.e., 100 securities). The Commission notes that the distribution criteria is the same that currently applies to the listing of common stock in connection with an initial public offering under NYSE listing rules and that the $100 million market value of publicly-held shares requirement is similar to the requirements for other initial listing of securities on the Exchange.\25\ The Commission believes that these standards should help ensure that a sufficient market, with adequate depth and liquidity, exists for the initial listing of Subscription Receipts.\26\ --------------------------------------------------------------------------- \24\ For purposes of the initial and continued listing requirements for Subscription Receipts, shares held by directors, officers, or their immediate families and other concentrated holdings of 10 percent or more are excluded in calculating the number of publicly-held shares. See proposed Sections 102.08 and 802.01B of the Manual. \25\ See Sections 102.01A and 102.01B of the Manual. \26\ Because the issuer of the Subscription Receipt is already listing its primary common stock on the Exchange, it must comply with the continued listing standards for capital and common stock as well as the corporate governance requirements applicable to listed companies. --------------------------------------------------------------------------- Similarly, the Commission believes the Exchange's proposed continued listing standards for Subscription Receipts are consistent with the requirements of the Act and the protection of investors. Under the amended proposal, the Exchange will immediately initiate suspension and delisting procedures when (i) the number of publicly-held shares is less than 100,000, (ii) the number of public holders is less than 100,\27\ (iii) the total market capitalization of the Subscription Receipts is below $15 million over 30 consecutive trading days, (iv) the related common equity security ceases to be listed, or (v) the issuer announces that the Specified Acquisition has been terminated.\28\ In addition, Subscription Receipts will be subject to potential delisting for all of the reasons generally applicable to operating companies, including those outlined in Section 802.01D of the Manual, which discusses the factors and criteria that may result in delisting, and may also be subject to delisting at the time of closing of the related acquisition pursuant to the backdoor listing provisions of Section 703.08 of the Manual. The Commission notes the application of the backdoor listing provision will help to ensure that companies that would not otherwise qualify for original listing on the Exchange could not list, for example, by merging with a listed company. --------------------------------------------------------------------------- \27\ For purposes of the continued listing requirements for Subscription Receipts, ``public holders'' exclude holders that are directors, officers, or their immediate families and holders of other concentrated holdings of 10% or more. See proposed Section 802.01B of the Manual. \28\ The Commission notes that an issuer of Subscription Receipts will not be eligible to follow the evaluation and follow-up procedures outlined in Sections 802.02 and 802.03 of the Manual with respect to these criteria, and any such security will be subject to delisting procedures as set forth in Section 804 of the Manual. --------------------------------------------------------------------------- The Commission believes that these standards, taken together, should help ensure that a sufficient market, with adequate depth and liquidity, exists for the continued listing of Subscription Receipts and are similar to the continued listing standards for other securities that have similar characteristics.\29\ The Commission also notes that once the Specified [[Page 48299]] Acquisition has occurred and a Subscription Receipt is converted to common stock, that common stock is subject to the continued listing requirements for capital or common stock in Section 802.01of the Manual.\30\ --------------------------------------------------------------------------- \29\ See, e.g., Section 802.01D of the Manual (providing the continued listing standards for certain types of specialized securities, including warrants). \30\ See Section 802.01 of the Manual. See also Amendment No. 1. --------------------------------------------------------------------------- In addition to the quantitative listing requirements proposed for Subscription Receipts, the proposed initial and continued listing standards also include additional protections for Subscription Receipt holders. For example, the issuer of Subscription Receipts must be an NYSE listed company that is not currently non-compliant with any applicable continued listing standard and must continue to be listed on the Exchange throughout the time the Subscription Receipts are traded on the Exchange. The proposed rules also provide that whenever the Exchange halts trading in a security of a listed company pending dissemination of material news or implements any other required regulatory trading halt, the Exchange will also halt trading in any listed Subscription Receipt that is exchangeable by its terms into the common stock of such company. The Commission believes that these additional requirements should protect investors and the public interest, consistent with Section 6(b)(5) of the Act, by assuring that information with respect to the listed company issuing the Subscription Receipts is publicly available and that the issuing company is meeting all continued listing standards, including corporate governance requirements, of the Exchange. In addition, these requirements should help assure that the Exchange has a listing relationship with, and direct access to information from, the issuer of the Subscription Receipts. Among other things, this direct relationship the Exchange has with the listed company issuing the Subscription Receipts will help to ensure that the Exchange will receive information in a timely manner to halt trading in the Subscription Receipts when there is a material news, or other regulatory, trading halt imposed on the common stock, and other securities, of the listed company. There are additional protections for investors in the proposed standards. These include that all the proceeds of the Subscription Receipts offering must be designated solely for use in connection with the consummation of a Specified Acquisition pursuant to a definitive acquisition agreement, the material terms of which would be subject to disclosure. Additionally, the proceeds of the Subscription Receipts offering must also be held in an interest-bearing custody account by an independent custodian and holders will promptly redeem the Subscription Receipts for cash, equal to the holder's proportionate share of the funds in the custody account plus any interest earned, at any time the Specified Acquisition is terminated or if the Specified Acquisition does not close within twelve months from the date of issuance of the Subscription Receipts (or such earlier time as specified in the operative agreements). If the Specified Acquisition is consummated, the holders of the Subscription Receipts will receive the shares of common stock for which their Subscription Receipts are exchangeable. Finally, the listing standards specifically state and remind issuers that the sale of Subscription Receipts and the issuance of the common stock of the issuer in exchange for the Subscription Receipts must both be registered under the Securities Act of 1933.\31\ This is important because shareholders, at the time they purchase a Subscription Receipt, are making an investment decision to also purchase the common stock of the merged listed company should the Specified Acquisition be consummated, within twelve months or such shorter specified time period. Therefore, it is important to have registration and disclosure under the Securities Act of both the Subscription Receipt and the related common stock. Based on the above, the Commission believes that specifically setting forth the Securities Act registration requirements in the NYSE rules for listing Subscription Receipts is consistent with the requirements of Section 6(b)(5) of the Act to further investor protection and the public interest. --------------------------------------------------------------------------- \31\ See 15 U.S.C. 77a et seq. --------------------------------------------------------------------------- The Exchange will also monitor activity in Subscription Receipts to identify and deter any potential improper trading activity in such securities and will adopt enhanced surveillance procedures to enable it to monitor Subscription Receipts alongside the common equity securities into which they are convertible. Since the Subscription Receipts are related to, and represent an interest in, the common stock of the post- acquisition listed company, this enhanced surveillance should help to monitor the trading activity in both the issuer's listed common stock and the Subscription Receipts.\32\ --------------------------------------------------------------------------- \32\ As noted above, the Exchange will also rely on its existing trading surveillances, administered by the Exchange or FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. --------------------------------------------------------------------------- The Commission believes that these safeguards and standards should help to ensure that the listing, and continued listing, of any Subscription Receipts on NYSE will be consistent with investor protection, the public interest, and the maintenance of fair and orderly markets. In this regard, the Commission expects NYSE to thoroughly review any potential listing of Subscription Receipts to ensure that its listing standards have been met and continue to be met, as well as to monitor trading in the Subscription Receipts and related common stock of the issuer. Based on the foregoing, the Commission finds that the proposed initial and continued listing standards are consistent with the Act. Finally, the Commission believes that the proposed fees set forth in Section 902.06 of the Manual are consistent with Section 6(b)(4) of the Act,\33\ in particular, in that they are designed to provide for the equitable allocation of reasonable dues, fees, and other charges, and are not designed to permit unfair discrimination among the Exchange's members, issuers, and other persons using its facilities. The Commission notes that the proposed fees are the same as the fees applicable to similar short term securities under Rule 902.06 of the Manual. --------------------------------------------------------------------------- \33\ 15 U.S.C. 78f(b)(4). --------------------------------------------------------------------------- Based on the above, the Commission believes the proposed rule change, as amended, is reasonable and should provide for the listing of Subscription Receipts, with baseline investor protection and other standards. The Commission believes, as discussed above, that NYSE has developed sufficient standards to allow the listing of Subscription Receipts on the Exchange, and finds the proposal consistent with the requirements set forth under the Act, and in particular, Sections (6)(b)(4) and 6(b)(5).\34\ --------------------------------------------------------------------------- \34\ 15 U.S.C. 78s(b)(4) and (b)(5). --------------------------------------------------------------------------- IV. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 1 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or [[Page 48300]] Send an email to [email protected]. Please include File Number SR-NYSE-2017-31 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-2017-31. 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 will also 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 publicly available. All submissions should refer to File Number SR-NYSE-2017-31 and should be submitted on or before November 7, 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 30th day after the date of publication of the notice of Amendment No. 1 in the Federal Register. As noted above, in Amendment No. 1, the Exchange amended the original filing to correct an incorrect reference to the Manual in the purpose section of the filing, replace the proposed continued listing standard of 100 total holders with 100 public holders, add two additional continued listing standards--the 100,000 publicly-held shares requirement and the 100 public holder requirement--to the immediate suspension and delisting proceeding provisions of Section 804 of the Manual, and provide a clarification that all Subscription Receipts convert into primary common stock of the issuer. The Commission notes that the revisions in Amendment No. 1 provide additional clarity and specificity to the proposal and do not raise any novel regulatory concerns. In addition, the changes to the continued listing standards strengthen the proposal and are consistent with investor protection. Finally, the Commission notes that the majority of the original proposal was not modified and was subject to a full notice-and-comment period, and no comments were received. Accordingly, the Commission finds that good cause exists to approve the proposal, as modified by Amendment No. 1, on an accelerated basis, pursuant to Section 19(b)(2) of the Act.\35\ --------------------------------------------------------------------------- \35\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\36\ that the proposed rule change (SR-NYSE-2017-31), as modified by Amendment No. 1 thereto, be, and hereby is, approved on an accelerated basis. --------------------------------------------------------------------------- \36\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\37\ --------------------------------------------------------------------------- \37\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-22408 Filed 10-16-17; 8:45 am] BILLING CODE 8011-01-P
![48296 Federal Register / Vol. 82, No. 199 / Tuesday, October 17, 2017 / Notices
Exchanges will be subject to The Commission finds that these to the proposed rule change.4 The
confidentiality restrictions.73 proposed rule changes are consistent Commission is publishing this notice of
The Commission finds that the with the Act in that they are necessary Amendment No. 1 and approving the
proposed process regarding to update cross-references and certain proposed rule change, as modified by
amendments to the Proposed defined terms in the rules and would Amendment No. 1, on an accelerated
Certificates and Proposed Bylaws is assist Exchange Members and the public basis.
consistent with Section 6(b)(1) of the in understanding the Exchanges’ rules.
Act, because it reflects the obligation of II. Description of the Proposed Rule
the Board to ensure compliance with the IV. Conclusion Change, as Modified by Amendment
rule filing requirements under the Act. It is therefore ordered, pursuant to No. 1
Additionally, the Commission finds Section 19(b)(2) of the Act,80 that the The Exchange has proposed to adopt
these changes to be consistent with proposed rule changes (SR–BatsBYX– initial and continued listing standards
Section 19(b)(1) of the Act and Rule 2017–19; SR–BatsBZX–2017–55; SR– for the listing of Subscription Receipts.
19b–4 thereunder,74 which require that BatsEDGA–2017–22; and SR– In its proposal, NYSE generally
a self-regulatory organization file with BatsEDGX–2017–35), each as modified described the structure of Subscription
the Commission all proposed rules, as by its respective Amendment No. 1, be, Receipts and noted that Subscriptions
well as all proposed changes in, and hereby are, approved. Receipts have been used as a financing
additions to, and deletions of its For the Commission, by the Division of technique by Canadian public
existing rules. These provisions clarify Trading and Markets, pursuant to delegated companies.5 According to the Exchange,
that amendments to the Proposed authority.81 Canadian companies typically use
Certificates and Proposed Bylaws Eduardo A. Aleman, Subscription Receipts as a means of
constitute proposed rule changes within Assistant Secretary. providing cash consideration in merger
the meaning of Section 19(b)(2) of the [FR Doc. 2017–22387 Filed 10–16–17; 8:45 am] or acquisition transactions.6
Act and Rule 19b–4 thereunder, and are BILLING CODE 8011–01–P
Subscription Receipts are sold in a
subject to the filing requirements of public offering that occurs after the
Section 19 of the Act and the rules and execution of an acquisition agreement.
regulations thereunder. SECURITIES AND EXCHANGE The proceeds of the Subscription
The Commission also finds that the COMMISSION Receipt offering are held in a custody
prohibition on the use of regulatory fees account and, if the related acquisition
or fines to fund non-regulatory purposes [Release No. 34–81856; File No. SR–NYSE–
closes, the Subscription Receipt holders
or to make distributions to the 2017–31]
will have their Subscription Receipts
stockholder is consistent with Section Self-Regulatory Organizations; New converted into a specified number of
6(b)(1) of the Act,75 because it is York Stock Exchange LLC; Notice of shares of the primary listed class of
designed to further each Exchange’s Filing of Amendment No. 1 and Order common stock of the issuer.7 If the
ability to effectively comply with its Granting Accelerated Approval of a acquisition does not close, the
statutory obligations and is designed to Subscription Receipts are redeemed for
Proposed Rule Change, as Modified by
ensure that the regulatory authority of their original purchase price plus any
Amendment No. 1, To Amend the
the Exchange is not improperly used.76 interest accrued on the custody account.
Listed Company Manual To Adopt
This restriction on the use of regulatory The Exchange stated in its proposal
Initial and Continued Listing Standards
funds is intended to preclude each that Subscription Receipts provide a
for Subscription Receipts
Exchange from using its authority to contingent form of financing for an
raise regulatory funds for the purpose of October 11, 2017. issuer that only becomes permanent if
benefiting its stockholder.77 the specified acquisition is completed.8
I. Introduction
C. Related Rule Amendments In contrast, the Exchange noted that a
On June 26, 2017, New York Stock company financing the cash
Each Exchange proposes to amend its Exchange LLC (‘‘NYSE’’ or the consideration for an acquisition by
rules in conjunction with the changes in ‘‘Exchange’’) filed with the Securities means of a traditional equity or debt
the Proposed Bylaws.78 Specifically, and Exchange Commission
each Exchange proposes to update (‘‘Commission’’) pursuant to Section 4 Amendment No. 1 amends the original filing to:
certain cross-references to the bylaws in 19(b)(1) of the Securities Exchange Act (1) Correct a reference in the purpose section of the
its rules and to move certain definitions of 1934 (‘‘Act’’) 1 and Rule 19b–4 filing from a reference to Section 802.01 of the
from the bylaws to the rules.79 Manual to a reference to Sections 802.02 and 802.03
thereunder,2 a proposed rule change to of the Manual; (2) change the proposed continued
amend the NYSE Listed Company listing holder requirement from 100 total holders to
73 See Transaction Order, 81 FR at 93991–92. Manual (‘‘Manual’’) to adopt initial and 100 public holders; (3) provide that Subscription
74 15 U.S.C. 78f(b)(1); 17 CFR 240.19b–4. continued listing standards for Receipts will be subject to immediate suspension
75 15 U.S.C. 78f(b)(1). and delisting proceedings (with no eligibility with
76 See, e.g., ISE Order, 82 FR at 36505 (approving
Subscription Receipts. The proposed respect to the procedures set forth in Sections
a prohibition on the use of regulatory fines, fees, or rule change was published for comment 802.02 and 802.03 of the Manual) in the event that
penalties to pay dividends). See also CBOE in the Federal Register on July 13, at any time there are fewer than 100,000 publicly-
Demutualization Order, 75 FR at 30089 (approving 2017.3 On October 3, 2017, the held shares or 100 public holders of the
CBOE Rule 2.51). Subscription Receipts; and (4) make clear that
Exchange submitted Amendment No. 1 Subscription Receipts convert into primary
77 See BYX Notice, 82 FR at 42138; BZX Notice,
82 FR at 42192; EDGA Notice, 82 FR at 42217; common stock of the listed company. When the
sradovich on DSK3GMQ082PROD with NOTICES
EDGX Notice, 82 FR at 42164. regulatory revenues for non-regulatory purposes Exchange filed Amendment No. 1 with the
78 See BYX Notice, 82 FR at 42139; BZX Notice, from the Current Bylaws to the rules. See supra Commission, it also submitted Amendment No. 1 to
note 70 and accompanying text. the public comment file for SR–NYSE–2017–31
82 FR at 42192–93; EDGA Notice, 82 FR at 42218; 80 15 U.S.C. 78s(b)(2).
EDGX Notice, 82 FR at 42165. (available at: https://www.sec.gov/comments/sr-
79 See proposed BYX Rules 1.1, 2.10, and 8.6;
81 17 CFR 200.30–3(a)(12). nyse-2017-31/nyse201731.htm).
1 15 U.S.C. 78s(b)(1). 5 See Notice, supra note 3, at 32413.
proposed BZX Rules 1.1, 2.10, and 8.6; proposed
2 17 CFR 240.19b–4. 6 See id.
EDGA Rules 1.1, 2.10, and 8.6; proposed EDGX
7 See Amendment No. 1.
Rules 1.1, 2.10, and 8.6. The Exchanges also 3 See Securities Exchange Act Release No. 81102
propose to move the prohibition on the use of (July 7, 2017), 82 FR 32413 (‘‘Notice’’). 8 See Notice, supra note 3, at 32413.
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![48300 Federal Register / Vol. 82, No. 199 / Tuesday, October 17, 2017 / Notices
• Send an email to rule-comments@ suspension and delisting proceeding thereunder,2 a proposed rule change to
sec.gov. Please include File Number SR– provisions of Section 804 of the Manual, amend Interpretation and Policy .07 of
NYSE–2017–31 on the subject line. and provide a clarification that all Exchange Rule 4.11, Position Limits, to
Subscription Receipts convert into increase the position limits for options
Paper Comments
primary common stock of the issuer. on the following exchange traded funds
• Send paper comments in triplicate The Commission notes that the and exchange traded notes: iShares
to Brent J. Fields, Secretary, Securities revisions in Amendment No. 1 provide China Large-Cap ETF, iShares MSCI
and Exchange Commission, 100 F Street additional clarity and specificity to the EAFE ETF, iShares MSCI Emerging
NE., Washington, DC 20549–1090. proposal and do not raise any novel Markets ETF, iShares Russell 2000 ETF,
All submissions should refer to File regulatory concerns. In addition, the iShares MSCI Brazil Capped ETF,
Number SR–NYSE–2017–31. This file changes to the continued listing iShares 20+ Year Treasury Bond Fund
number should be included on the standards strengthen the proposal and ETF, iPath S&P 500 VIX Short-Term
subject line if email is used. To help the are consistent with investor protection. Futures ETN, PowerShares QQQ Trust,
Commission process and review your Finally, the Commission notes that the and iShares MSCI Japan ETF. The
comments more efficiently, please use majority of the original proposal was not proposed rule change was published for
only one method. The Commission will modified and was subject to a full comment in the Federal Register on
post all comments on the Commission’s notice-and-comment period, and no August 31, 2017.3 The Commission
Internet Web site (http://www.sec.gov/ comments were received. Accordingly, received no comments regarding the
rules/sro.shtml). Copies of the the Commission finds that good cause proposal.
submission, all subsequent exists to approve the proposal, as
amendments, all written statements Section 19(b)(2) of the Act 4 provides
modified by Amendment No. 1, on an that within 45 days of the publication of
with respect to the proposed rule accelerated basis, pursuant to Section
change that are filed with the notice of the filing of a proposed rule
19(b)(2) of the Act.35 change, or within such longer period up
Commission, and all written
communications relating to the VI. Conclusion to 90 days as the Commission may
proposed rule change between the designate if it finds such longer period
It is therefore ordered, pursuant to to be appropriate and publishes its
Commission and any person, other than Section 19(b)(2) of the Act,36 that the
those that may be withheld from the reasons for so finding or as to which the
proposed rule change (SR–NYSE–2017– self-regulatory organization consents,
public in accordance with the 31), as modified by Amendment No. 1
provisions of 5 U.S.C. 552, will be the Commission shall either approve the
thereto, be, and hereby is, approved on proposed rule change, disapprove the
available for Web site viewing and an accelerated basis.
printing in the Commission’s Public proposed rule change, or institute
For the Commission, by the Division of proceedings to determine whether the
Reference Room, 100 F Street NE.,
Trading and Markets, pursuant to delegated proposed rule change should be
Washington, DC 20549, on official authority.37
business days between the hours of disapproved. The 45th day for this filing
Eduardo A. Aleman, is October 15, 2017.
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for Assistant Secretary.
The Commission is extending the 45-
inspection and copying at the principal [FR Doc. 2017–22408 Filed 10–16–17; 8:45 am] day time period for Commission action
office of the Exchange. All comments BILLING CODE 8011–01–P on the proposed rule change. The
received will be posted without change; Commission finds that it is appropriate
the Commission does not edit personal to designate a longer period within
identifying information from SECURITIES AND EXCHANGE which to take action on the proposed
submissions. You should submit only COMMISSION rule change so that it has sufficient time
information that you wish to make to consider the proposed rule change.
[Release No. 34–81853; File No. SR–CBOE–
publicly available. All submissions 2017–057] Accordingly, pursuant to Section
should refer to File Number SR–NYSE– 19(b)(2) of the Act 5 and for the reasons
2017–31 and should be submitted on or Self-Regulatory Organizations; stated above, the Commission
before November 7, 2017. Chicago Board Options Exchange, designates November 29, 2017, as the
V. Accelerated Approval of Proposed Incorporated; Notice of Designation of date by which the Commission should
Rule Change, as Modified by Longer Period for Commission Action either approve or disapprove, or
Amendment No. 1 on Proposed Rule Change To Amend institute proceedings to determine
Interpretation and Policy .07 of whether to disapprove, the proposed
The Commission finds good cause to Exchange Rule 4.11, Position Limits,
approve the proposed rule change, as rule change (File No. SR–CBOE–2017–
To Increase the Position Limits for 057).
modified by Amendment No. 1, prior to Options on Certain ETFs
the 30th day after the date of For the Commission, by the Division of
publication of the notice of Amendment October 11, 2017. Trading and Markets, pursuant to delegated
No. 1 in the Federal Register. As noted On August 15, 2017, Chicago Board authority.6
above, in Amendment No. 1, the Options Exchange, Incorporated (the Eduardo A. Aleman,
Exchange amended the original filing to ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Assistant Secretary.
correct an incorrect reference to the Securities and Exchange Commission [FR Doc. 2017–22390 Filed 10–16–17; 8:45 am]
Manual in the purpose section of the
sradovich on DSK3GMQ082PROD with NOTICES
(‘‘Commission’’), pursuant to Section BILLING CODE 8011–01–P
filing, replace the proposed continued 19(b)(1) of the Securities Exchange Act
listing standard of 100 total holders of 1934 (‘‘Act’’) 1 and Rule 19b–4 2 17 CFR 240.19b–4.
with 100 public holders, add two 3 See Securities Exchange Act Release No. 81483
additional continued listing standards— 35 15 U.S.C. 78s(b)(2). (August 25, 2017), 82 FR 41457.
the 100,000 publicly-held shares 36 15 U.S.C. 78s(b)(2). 4 15 U.S.C. 78s(b)(2).
requirement and the 100 public holder 37 17 CFR 200.30–3(a)(12). 5 15 U.S.C. 78s(b)(2).
requirement—to the immediate 1 15 U.S.C. 78s(b)(1). 6 17 CFR 200.30–3(a)(31).
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Document Created: 2017-10-17 01:11:28
Document Modified: 2017-10-17 01:11:28
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 48296 |
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