Federal Register / Vol. 83, No. 247 / Thursday, December 27, 2018 / Notices 66787 

for, and the requested relief will not apply to, 

transactions where a Fund could be deemed an 

Affiliated Person, or a Second-Tier Affiliate, of a 

Fund of Funds because an investment adviser to the 

Funds is also an investment adviser to a Fund of 

Funds. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 84279 

(Sept. 25, 2018), 83 FR 49437 (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 84576, 

83 FR 58315 (Nov. 19, 2018). The Commission 

designated December 30, 2018, as the date by which 

it should approve, disapprove, or institute 

proceedings to determine whether to disapprove the 

proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

7The Commission notes that additional aspects 

and information regarding the proposal can be 

found in the Notice. See Notice, supra note 3. 

8Equity Index-Linked Securities are securities 

that provide for the payment at maturity based on 

the performance of an underlying index or indexes 

of equity securities, securities of closed-end 

management investment companies registered 

under the Investment Company Act of 1940 (‘‘1940 

Act’’), and/or Investment Company Units (as 

described in NYSE Arca Rule 5.2–E(j)(3)). In the 

proposal, the Exchange also refers to these 

securities as ‘‘Exchange-Traded Notes’’ or ‘‘ETNs.’’ 

9NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(b)(v) 

provides that all component securities shall be 

either: (A) Securities (other than foreign country 

securities and American Depository Receipts 

(‘‘ADRs’’)) that are (x) issued by a 1934 Act 

reporting company or by an investment company 

registered under the 1940 Act, which in each case 

is listed on a national securities exchange, and (y) 

an ‘‘NMS stock’’ (as defined in Rule 600 of SEC 

Regulation NMS); or (B) Foreign country securities 

or ADRs, provided that foreign country securities or 

foreign country securities underlying ADRs having 

their primary trading market outside the United 

States on foreign trading markets that are not 

members of the Intermarket Surveillance Group 

(‘‘ISG’’) or parties to comprehensive surveillance 

sharing agreements with the Exchange will not in 

the aggregate represent more than 50% of the dollar 

weight of the index, and provided further that: (i) 

The securities of any one such market do not 

represent more than 20% of the dollar weight of the 

index; and (ii) the securities of any two such 

markets do not represent more than 33% of the 

dollar weight of the index. 

10NYSE Arca Rule 5.2–E(j)(3) provides that the 

term ‘‘US Component Stock’’ shall mean 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. 

11NYSE Arca Rule 5.2–E(j)(3) provides that the 

term ‘‘Non-US Component Stock’’ shall mean 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 (REITS) and income 

trusts, but excluding investment trusts, unit trusts, 

mutual funds, and derivatives). 

12The text of proposed NYSE Arca Rule 5.2– 

E(j)(6)(B)(I)(1)(b)(v)(1) is comparable to the 

requirement for US Component Stocks in 

Commentary .01(a)(A)(5) to NYSE Arca Rule 5.2– 

E(j)(3). The text of proposed NYSE Arca Rule 5.2– 

E(j)(6)(B)(I)(1)(b)(v)(2) is comparable to the 

Continued 

The purchase of Creation Units by a 

Fund of Funds directly from a Fund will 

be accomplished in accordance with the 

policies of the Fund of Funds and will 

be based on the NAVs of the Funds. 

9. Applicants also request relief to 

permit a Feeder Fund to acquire shares 

of another registered investment 

company managed by the Adviser 

having substantially the same 

investment objectives as the Feeder 

Fund (‘‘Master Fund’’) beyond the 

limitations in section 12(d)(1)(A) and 

permit the Master Fund, and any 

principal underwriter for the Master 

Fund, to sell shares of the Master Fund 

to the Feeder Fund beyond the 

limitations in section 12(d)(1)(B). 

10. Section 6(c) of the Act permits the 

Commission to exempt any persons or 

transactions from any provision of the 

Act if such exemption is necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

the Act. Section 12(d)(1)(J) of the Act 

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities, or transactions, from 

any provision of section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

Section 17(b) of the Act authorizes the 

Commission to grant an order 

permitting a transaction otherwise 

prohibited by section 17(a) if it finds 

that (a) the terms of the proposed 

transaction are fair and reasonable and 

do not involve overreaching on the part 

of any person concerned; (b) the 

proposed transaction is consistent with 

the policies of each registered 

investment company involved; and (c) 

the proposed transaction is consistent 

with the general purposes of the Act. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–27984 Filed 12–26–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84863; File No. SR– 

NYSEArca–2018–67] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To Amend NYSE Arca 

Rule 5.2–E(j)(6) Relating to Equity 

Index-Linked Securities Listing 

Standards Set Forth in NYSE Arca Rule 

5.2–E(j)(6)(B)(I) 

December 19, 2018. 

On September 10, 2018, NYSE Arca, 

Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’ or 

‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend listing standards set forth in 

NYSE Arca Rule 5.2–E(j)(6)(B)(I) relating 

to criteria applicable to components of 

an index underlying an issue of Equity 

Index-Linked Securities. The proposed 

rule change was published for comment 

in the Federal Register on October 1, 

2018.3

On November 13, 2018, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.5 The Commission 

has received no comment letters on the 

proposed rule change. This order 

institutes proceedings under Section 

19(b)(2)(B) of the Act 6 to determine 

whether to approve or disapprove the 

proposed rule change. 

I. Summary of the Proposal 7

NYSE Arca Rule 5.2–E(j)(6)(B)(I) sets 

forth the listing standards applicable to 

Equity Index-Linked Securities.8 The 

Exchange proposes to amend NYSE 

Arca Rule 5.2–E(j)(6)(B)(I) relating to 

criteria applicable to components of an 

index underlying an issue of Equity 

Index-Linked Securities, as described 

below.9

Proposed Amendments to NYSE Arca 

Rule 5.2–E(j)(6)(B)(I)(1)(b)(v) 

The Exchange proposes to amend 

NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(b)(v) 

to provide that all component securities 

of an index underlying an issue of 

Equity Index-Linked Securities shall be 

either (1) U.S. Component Stocks (as 

described in NYSE Arca Rule 5.2– 

E(j)(3)) 10 that are listed on a national 

securities exchange and are NMS Stocks 

as defined in Rule 600 of Regulation 

NMS under the Exchange Act; or (2) 

Non-U.S. Component Stocks (as 

described in NYSE Arca Rule 5.2– 

E(j)(3)) 11 that are listed and traded on 

an exchange that has last-sale 

reporting.12 The proposed amendment, 


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66788 Federal Register / Vol. 83, No. 247 / Thursday, December 27, 2018 / Notices 

requirement for Non-US Component Stocks in 

Commentary .01(a)(B)(5) to NYSE Arca Rule 5.2– 

E(j)(3). 13NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(a) provides 

that each underlying index is required to have at 

least ten (10) component securities; provided, 

however, that there shall be no minimum number 

of component securities if one or more issues of 

Derivative Securities Products (i.e., Investment 

Company Units (as described in Rule 5.2–E(j)(3)) 

and securities described in Section 2 of Rule 8) or 

Index-Linked Securities (as described in Rule 5.2– 

E(j)(6)), constitute, at least in part, component 

securities underlying an issue of Equity IndexLinked Securities. 

14See Commentary .01(a)(B)(4) to NYSE Arca 

Rule 5.2–E(j)(3). See also Commentary .01(a)(2)(D) 

to NYSE Arca Rule 8.600–E, which provides that, 

where the equity portion of the portfolio includes 

Non-U.S. Component Stocks, the equity portion of 

the portfolio shall include a minimum of 20 

component stocks; provided, however, that there 

shall be no minimum number of component stocks 

if (i) one or more series of Derivative Securities 

Products or Index-Linked Securities constitute, at 

least in part, components underlying a series of 

Managed Fund Shares, or (ii) one or more series of 

Derivative Securities Products or Index-Linked 

Securities account for 100% of the equity weight of 

the portfolio of a series of Managed Fund Shares. 

15Commentary .01 to NYSE Arca Rule 5.2–E(j)(3) 

and Commentary .01(a) to NYSE Arca Rule 8.600– 

E provide generic initial and continued listing 

criteria applicable to an equity index or portfolio 

underlying Investment Company Units and 

Managed Fund Shares, respectively. 

16 15 U.S.C. 78s(b)(2)(B). 

17 Id. 

18 15 U.S.C. 78f(b)(5). 

therefore, would delete from Rule 5.2– 

E (j)(6)(B)(I)(1)(b)(v) the requirement 

that foreign country securities or foreign 

country securities underlying ADRs in 

an index satisfy requirements that a 

specified percentage of the dollar weight 

of the index have primary trading 

markets that are members of ISG or 

primary trading markets that are parties 

to comprehensive surveillance sharing 

agreements with the Exchange. 

According to the Exchange, the 

proposed amendment would eliminate a 

requirement for Equity Index-Linked 

Securities that is not applicable to 

Investment Company Units and 

Managed Fund Shares with respect to 

Non-U.S. Component Stock index 

components or holdings of Non-U.S. 

Component Stocks. The Exchange states 

that the amendment, therefore, would 

afford greater flexibility to ETN issuers 

to list securities that include foreign 

stocks and to better compete with 

issuers of Investment Company Units 

and Managed Fund Shares, which are 

not subject to this requirement. 

Proposed Amendments to NYSE Arca 

Rule 5.2–E(j)(6)(B)(I)(1)(a) 

The Exchange also proposes to amend 

NYSE Arca Rule 5.2–E(j)(6)(B)(I)(1)(a) by 

increasing the required minimum 

number of components in an index 

underlying Equity Index-Linked 

Securities that includes Non-U.S. 

Component Stocks.13 The Exchange 

proposes that an underlying index 

consisting only of U.S. Component 

Stocks (as described in Rule 5.2–E(j)(3)) 

that are listed on a national securities 

exchange and are NMS Stocks as 

defined in Rule 600 of Regulation NMS 

under the Exchange Act would be 

required to have at least ten (10) 

component securities; and an 

underlying index consisting of (a) only 

Non-U.S. Component Stocks (as 

described in Rule 5.2–E(j)(3)), or (b) 

both U.S. Component Stocks and NonU.S. Component Stocks, would be 

required to have at least twenty (20) 

component securities. According to the 

Exchange, an increase in the required 

minimum number of components in an 

index that includes Non-U.S. 

Component Stocks would be 

comparable to the requirement 

applicable to equity indexes underlying 

series of Investment Company Units 

listed under Commentary .01 to NYSE 

Arca Rule 5.2–E(j)(3), and would 

provide for greater diversification 

among index components.14

The Exchange reasons that the 

proposed amendments to the generic 

listing rules for Equity Index-Linked 

Securities should help ensure that index 

components of the applicable reference 

asset are adequately capitalized, 

sufficiently liquid, and diversified, and 

that these proposed requirements 

should significantly minimize the 

potential for manipulation. The 

Exchange believes the amendments are 

appropriate and in the public interest in 

that Equity Index-Linked Securities 

would continue to be subject to 

numerical criteria for index components 

underlying Equity Index-Linked 

Securities that are comparable in 

significant respects to the criteria for 

U.S. Component Stocks and Non-U.S. 

Component Stocks in Commentary .01 

to NYSE Arca Rule 5.2–E(j)(3) for 

Investment Company Units and 

Commentary .01(a) to NYSE Arca Rule 

8.600–E for Managed Fund Shares.15

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

NYSEArca–2018–67 and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act16 to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of such proceedings is 

appropriate at this time in view of the 

legal and policy issues raised by the 

proposed rule change. Institution of 

proceedings does not indicate that the 

Commission has reached any 

conclusions with respect to any of the 

issues involved. Rather, as described 

below, the Commission seeks and 

encourages interested persons to 

provide comments on the proposed rule 

change. 

Pursuant to Section 19(b)(2)(B) of the 

Act,17 the Commission is providing 

notice of the grounds for disapproval 

under consideration, as discussed 

below. The Commission is instituting 

proceedings to allow for additional 

analysis of the proposed rule change’s 

consistency with Section 6(b)(5) of the 

Act, 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,’’ and ‘‘to 

protect investors and the public 

interest.’’ 18

Under the proposal, the Exchange 

would eliminate from NYSE Arca Rule 

5.2–E (j)(6)(B)(I)(1)(b)(v) the requirement 

that foreign country securities or foreign 

country securities underlying ADRs in 

an index satisfy requirements that a 

specified percentage of the dollar weight 

of the index have primary trading 

markets that are members of ISG or 

primary trading markets that are parties 

to comprehensive surveillance sharing 

agreements with the Exchange. 

According to the Exchange, the 

proposed amendment would eliminate a 

requirement for Equity Index-Linked 

Securities that is not applicable to 

Investment Company Units and 

Managed Fund Shares with respect to 

Non-U.S. Component Stock index 

components or holdings of Non-U.S. 

Component Stocks. The Exchange 

asserts that the amendment to NYSE 

Arca Rule 5.2–E (j)(6)(B)(I)(1)(b)(v) 

would afford greater flexibility to ETN 

issuers to list securities that include 

foreign stocks and to better compete 

with issuers of Investment Company 

Units and Managed Fund Shares, which 

are not subject to this requirement. In 

making this assertion, the Exchange 

compares the listing standards of Equity 

Index-Linked Securities to the standards 

of Investment Company Units and 

Managed Fund Shares. Based on the 

differences between ETNs and 

Investment Company Units and 

Managed Fund Shares, what are 

commenters’ views on the applicability 

of the Exchange’s comparisons in 

justifying the proposed amendments? 

Based on the unique structure of ETNs, 

which, unlike Investment Company 

Units and Managed Fund Shares, are 

not governed by the requirements of the 

1940 Act and the rules thereunder, what 

are commenters’ views on the 


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Federal Register / Vol. 83, No. 247 / Thursday, December 27, 2018 / Notices 66789 

19Section 19(b)(2) of the Act, as amended by the 

Securities Act Amendments of 1975, Public Law 

94–29 (June 4, 1975), grants the Commission 

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Act Amendments of 

1975, Senate Comm. on Banking, Housing & Urban 

Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 

(1975). 20See Notice, supra note 3. 

21 17 CFR 200.30–3(a)(57). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

Exchange’s proposal to eliminate the 

requirement that a minimum percentage 

of component foreign country securities 

or foreign country securities underlying 

ADRs in an index be traded primarily 

on markets that are members of ISG or 

on markets that are parties to 

comprehensive surveillance sharing 

agreements with the Exchange? In light 

of the proposed amendment to NYSE 

Arca Rule 5.2–E (j)(6)(B)(I)(1)(b)(v) that 

would eliminate the requirement that a 

minimum percentage of component 

foreign country securities or foreign 

country securities underlying ADRs in 

an index be traded primarily on markets 

that are members of ISG or on markets 

that are parties to comprehensive 

surveillance sharing agreements with 

the Exchange, what are commenters’ 

views about whether the Exchange has 

met its burden in demonstrating that the 

proposal is consistent with Section 

6(b)(5) of the Act, which requires the 

rules of the Exchange be designed to, 

among other things, prevent fraudulent 

and manipulative acts and practices? 

The Commission requests any comment, 

data, or analysis that commenters think 

may be relevant to the Commission’s 

consideration of the Exchange’s 

proposal. 

III. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposal is consistent with Section 

6(b)(5) or any other provision of the Act, 

or the rules and regulations thereunder. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4, any 

request for an opportunity to make an 

oral presentation.19

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by January 17, 2019. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by January 31, 2019. The 

Commission asks that commenters 

address the sufficiency of the 

Exchange’s statements in support of the 

proposal, which are set forth in the 

Notice,20 in addition to any other 

comments they may wish to submit 

about the proposed rule change. 

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 rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2018–67 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2018–67. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2018–67 and 

should be submitted by January 17, 

2019. Rebuttal comments should be 

submitted by January 31, 2019. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–27999 Filed 12–26–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84871; File No. SR– 

NYSEAMER–2018–57] 

Self-Regulatory Organizations; NYSE 

American LLC.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change to Amend Commentary 

.02 to Rule 960NY in Order to Extend 

the Penny Pilot in Options Classes in 

Certain Issues Through June 30, 2019 

December 19, 2018. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on December 

18, 2018, NYSE American LLC (the 

‘‘Exchange’’ or ‘‘NYSE American’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Commentary .02 to Rule 960NY in order 

to extend the Penny Pilot in options 

classes in certain issues (‘‘Pilot 

Program’’) previously approved by the 

Securities and Exchange Commission 

(‘‘Commission’’) through June 30, 2019. 

The Pilot Program is currently 

scheduled to expire on December 31, 

2018. The proposed rule change is 

available on the Exchange’s website at 

www.nyse.com, at the principal office of 

the Exchange, and at the Commission’s 

Public Reference Room. 


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