Document ID: SEC-2016-2301-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Investors Exchange, LLC
Posted Date: 2016-12-28T05:00Z

[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Notices]
[Pages 95664-95666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31311]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79652; File No. SR-IEX-2016-21]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Require 
That an Issuer of Securities Listed Under Chapter 16 Notify IEX About 
Certain Changes to the Index, Portfolio, or Reference Asset Underlying 
the Security

December 21, 2016.
    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 15, 2016, the Investors Exchange LLC (``IEX'' 
or the ``Exchange'') 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.
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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

    Pursuant to the provisions of Section 19(b)(1) under the Securities 
Exchange Act of 1934 (``Act''),\4\ and Rule 19b-4 thereunder,\5\ 
Investors Exchange LLC (``IEX'' or ``Exchange'') is filing with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') proposed 
rule changes to require that, among other things, an issuer of an ETP 
listed under Chapter 16 notify IEX about certain changes to the index, 
portfolio, or reference asset underlying the security. The Exchange has 
designated this proposal as non-controversial and provided the 
Commission with the notice required by Rule 19b-4(f)(6)(iii) under the 
Act.\6\
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    \4\ 15 U.S.C. 78s(b)(1).
    \5\ 17 CFR 240.19b-4.
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.iextrading.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 these statement [sic] may be examined 
at the places specified in Item IV below. The self-regulatory 
organization has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    IEX listing rules require issuers to notify IEX about substitution 
listing events. Specifically, Rule 14.002(a)(32) defines a 
``Substitution Listing Event'' \7\ as certain changes in the equity or 
legal structure of a company and Rule 14.207(e)(4) requires a listed 
company to provide notification to IEX about these events no later than 
15 days before implementation of the event. These events generally 
would require IEX to review the entity for compliance with the 
applicable listing requirements.
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    \7\ A ``Substitution Listing Event'' means: A reverse stock 
split, re-incorporation or a change in the Company's place of 
organization, the formation of a holding company that replaces a 
listed Company, reclassification or exchange of a Company's listed 
shares for another security, the listing of a new class of 
securities in substitution for a previously-listed class of 
securities or any technical change whereby the Shareholders of the 
original Company receive a share-for-share interest in the new 
Company without any change in their equity position or rights.
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    IEX proposes to expand the definition of a Substitution Listing 
Event to include cases where an issuer of securities listed under 
Chapter 16 replaces, or significantly modifies, the index, portfolio, 
or reference asset underlying its security (including, but not limited 
to, a significant modification to the index methodology, a change in 
the index provider, or a change in control of the index provider). This 
type of change would require IEX to review the changes to the index, 
portfolio, or

[[Page 95665]]

reference asset for compliance with the applicable listing requirements 
and may require IEX to make a rule filing with the Commission to 
continue listing the product with the revised index, portfolio, or 
reference asset.\8\
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    \8\ Other types of changes may also require IEX to make a rule 
filing with the Commission to continue listing the changed product.
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    IEX believes it is appropriate to require notification of these 
changes in the same manner as other Substitution Listing Events,\9\ 
which will increase to 15 days the time available to IEX to conduct its 
initial review of the revised index, portfolio, or reference asset 
underlying the security, evaluate compliance with the listing 
requirements, and determine if a rule filing is required.\10\
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    \9\ Listed companies would be required to provide notification 
of a Substitution Listing Event by filing the appropriate form as 
designated by the Exchange. See Rule 14.207(e)(4).
    \10\ Currently, at a minimum, IEX believes that an issuer must 
disclose such changes under Rule 14.207(b)(1), which requires public 
disclosure of any material information that would reasonably be 
expected to affect the value of its securities or influence 
investors' decisions, and must notify the Exchange's Regulation 
Department at least 10 minutes prior to such announcement.
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    IEX also proposes to modify Rule 16.101 to highlight that certain 
changes to the index, portfolio, or reference asset underlying a 
security is a Substitution Listing Event that requires 15 calendar 
days' notice. The new language also emphasizes that such a change may 
affect the company's compliance with the listing requirements and may 
require IEX to file a new rule filing pursuant to Section 19(b)(1) of 
the Act \11\ and for such rule filing to be approved by the SEC or 
otherwise take effect (as applicable), before the product can be listed 
or traded. The new rule language also indicates that IEX will halt 
trading if a company effectuates a change that requires such a filing 
before it is approved by the SEC or otherwise takes effect (as 
applicable). The new rule language would also indicate that IEX will 
commence delisting proceedings if a company effectuates a change in the 
case where IEX determines not to submit a rule filing or withdraws a 
rule filing, or where the SEC disapproves a rule filing.\12\ The 
proposed rule changes are substantially identical to recent changes to 
Nasdaq Stock Market LLC (``Nasdaq'') rules.\13\
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    \11\ 15 U.S.C. 78s(b)(1).
    \12\ The proposed rule change would also add language to Rule 
16.101 to encourage companies to consult with IEX staff sufficiently 
in advance of such changes to allow review and preparation of a rule 
filing and SEC approval, if necessary, and to clarify that IEX has 
sole discretion as to whether it chooses to submit a rule filing 
and, if submitted, whether to withdraw such rule filing.
    \13\ See Securities Exchange Act Release No. 77706 (April 26, 
2016), 81 FR 26275 (May 2, 2016) (SR-NASDAQ-2016-059).
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    The Exchange does not currently list any ETPs. The proposed rule 
changes would be applicable in the event IEX lists ETPs.
2. Statutory Basis
    IEX believes that the proposed rule change is consistent with 
Section 6(b) \14\ of the Act in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\15\ in particular, in that it is 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 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.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(5).
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    IEX believes that the proposed requirement that an issuer of 
securities that would be listed under Chapter 16 notify IEX 15 calendar 
days in advance of certain changes to the index, portfolio, or 
reference asset underlying the security is consistent with the investor 
protection objectives of Section 6(b)(5) of the Act. Specifically, the 
proposed change will help to ensure that IEX has sufficient time to 
review the revised index, portfolio, or reference asset and determine 
whether the product complies with IEX's listing requirements and 
whether a rule filing must be filed by IEX pursuant to Section 19(b)(1) 
of the Act and approved by the Commission or otherwise take effect (as 
applicable), which will help protect investors. Similarly, the 
provisions that provide that IEX will (i) halt trading if a company 
effectuates a change that requires such a filing before it is approved 
by the SEC or otherwise takes effect (as applicable); and (ii) commence 
delisting proceedings if a company effectuates a change in the case 
where IEX determines not to submit a rule filing or withdraws a rule 
filing, or where the SEC disapproves a rule filing are consistent with 
the public interest and the protection of investors because they is 
[sic] designed to enable the Exchange to ensure that the necessary rule 
filings regarding IEX listed ETPs are approved or otherwise take effect 
(as applicable).

B. Self-Regulatory Organization's Statement on Burden on Competition

    IEX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
    The proposed rule change is not based on competitive factors, but 
rather is designed to ensure that IEX staff would have adequate time to 
review a change to an index, portfolio, or reference asset for 
compliance with the listing requirements and to file and obtain 
approval or effectiveness of a rule change, if necessary. As such, the 
Exchange believes that the proposed change will have no impact on 
competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\16\
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    \16\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and

[[Page 95666]]

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 rule-comments@sec.gov. Please include 
File Number SR-IEX-2016-21 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-IEX-2016-21. 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 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-IEX-2016-21 and should be 
submitted on or before January 18, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31311 Filed 12-27-16; 8:45 am]
 BILLING CODE 8011-01-P