Document ID: SEC-2017-1648-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2017-10-05T04:00Z

[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)]
[Notices]
[Pages 46581-46583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21408]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81773; File No. SR-NASDAQ-2017-101

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Implementation Date for Certain Changes to the Rule 5700 
Series and Rule 5810

September 29, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 27, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the date on which certain changes 
concerning the continued listing requirements for exchange-traded 
products (``ETPs'') in the Nasdaq Rule 5700 Series, as well as a 
related amendment to Nasdaq Rule 5810 (Notification of Deficiency by 
the Listing Qualifications Department), are implemented.
    The Exchange proposes to delay the implementation date of these 
changes until January 1, 2018. Given the scope of the proposed rule 
changes, the Exchange believes that this will ensure that ETP issuers 
have adequate time to finish developing and put into operation the new 
processes and systems necessitated by them.

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 Exchange 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 statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    On September 30, 2016, the Exchange filed a proposed rule change, 
as subsequently amended by Amendments No. 1 and 2 thereto, and as 
supplemented by two clean-up filings \3\ (as amended and supplemented, 
collectively, the ``Proposed Rule Change''), to adopt certain changes 
to the Nasdaq Rule 5700 Series, as well as a related amendment to 
Nasdaq Rule

[[Page 46582]]

5810 (Notification of Deficiency by the Listing Qualifications 
Department), to add additional continued listing standards for ETPs, as 
well as clarify the procedures that the Exchange will undertake when an 
ETP is noncompliant with applicable rules.
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    \3\ See Securities Exchange Act Release No. 79081 (Oct. 11, 
2016), 81 FR 71548 (Oct. 17, 2016) (SR-NASDAQ-2016-135); see also 
Securities Exchange Act Release No. 80708 (May 17, 2017), 82 FR 
23690 (May 23, 2017) (SR-NASDAQ-2017-040); see also Securities 
Exchange Act Release No. 80810 (May 30, 2017), 82 FR 26205 (June 6, 
2017) (SR-NASDAQ-2017-052).
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    On May 3, 2017, the Exchange filed to extend the implementation 
date from August 1, 2017 until October 1, 2017.\4\ The Exchange now 
proposes to extend the implementation date of the amendments specified 
in the Proposed Rule Change to January 1, 2018.
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    \4\ See Securities Exchange Act Release No. 80708 (May 17, 
2017), 82 FR 23690 (May 23, 2017) (SR-NASDAQ-2017-040).
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    Since the Proposed Rule Change was approved, the Exchange has 
engaged in extensive conversations with issuers of listed ETPs, 
industry advocacy groups and index providers to discuss the new rule 
requirements and offer guidance on rule interpretation and 
application.\5\ As a result of these conversations, ETP issuers have 
expressed concern about their ability to finish and to have in place 
systems and procedures to ensure compliance by the current October 1, 
2017 implementation date. In particular, listed ETP issuers, and 
industry advocacy groups on their behalf, have explained that issuers 
will require time to design and test new compliance systems, as well as 
engage in discussions with third-party providers to source and track 
new data elements required for rule compliance.\6\ The Exchange's 
understanding is that some issuers have started to develop procedures, 
build systems and are testing new compliance systems. Also, that some 
issuers have begun discussions with third-party providers, including 
efforts to renegotiate existing license agreements. As of the date of 
this filing, issuers have said that they will not be ready by the 
current October 1, 2017 implementation date.
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    \5\ In addition to submitting the index components to the 
Exchange on a quarterly basis, the Exchange believes that it would 
be appropriate for issuers to review the index components for 
compliance with the continued listing requirements in connection 
with index rebalances, reconstitutions, or other material changes to 
the index components.
    \6\ See, for example, Letter, dated July 11, 2017, from Dorothy 
Donohue, Acting General Counsel, Investment Company Institute to 
Brent J. Fields, Secretary, Securities and Exchange Commission, 
available at https://www.sec.gov/comments/sr-nasdaq-2016-135/nasdaq2016135-1846208-155175.pdf.
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    In connection with the implementation of the new continued listing 
standards, Nasdaq has prepared a set of Frequently Asked Questions 
(``FAQs'') that address questions raised by issuers.\7\ Nasdaq is 
continuing to discuss the implementation of the continued listing 
standards with issuers and will continue to revise the FAQs where 
further interpretive guidance is necessary. Also, there are areas of 
interpretive guidance still being formulated. For example, interpretive 
guidance as to how issuers of exchange-traded funds (``ETFs'') should 
categorize securities into ``equity'' and ``fixed income'' buckets, 
particularly for assets like hybrid capital, preferred securities or 
convertible debt. Additionally, Nasdaq will maintain and continue 
communications with issuers during the implementation date extension 
period in order to understand the issuers' progress.
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    \7\ See https://listingcenter.nasdaq.com/Material_Search.aspx?mcd=LQ&cid=142⊂_cid=&years=2017,2016,2015,2017,2016,2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002&criteria=1&materials.
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    The Exchange believes it is appropriate to extend the 
implementation date of the Proposed Rule Change to January 1, 2018 to 
provide listed ETP issuers with the time needed to finish developing 
and testing their compliance procedures. In support of its proposal, 
the Exchange notes that the Proposed Rule Change imposes significant 
new compliance requirements on issuers that they have not been subject 
to previously. To meet these new requirements, issuers must develop 
additional internal systems, as well as coordinate with third-party 
service providers, such as index providers, to renegotiate existing 
license agreements and to develop procedures by which they can obtain 
essential data.\8\
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    \8\ It is the Exchange's understanding that issuers are updating 
and testing internal systems to process and monitor the index data 
for compliance with the new continued listing standards.
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    Listed issuers have informed the Exchange that they are unable to 
complete this extensive project by the pending October 1, 2017 
implementation date. The Exchange believes that it is critical for 
listed ETP issuers to have the appropriate procedures and systems in 
place to monitor and evidence ETP compliance with the new continued 
listing rules before such rules are implemented because this will help 
issuers preemptively identify issues and thereby avoid experiencing any 
disruptions in the trading of their products. Therefore, the Exchange 
proposes to extend the implementation date for the Proposed Rule Change 
until January 1, 2018.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is consistent 
with the protection of investors because it will enable listed issuers 
to have the systems and procedures needed to monitor and evidence 
compliance with the Proposed Rule Change prior to such rule being 
implemented because this will help issuers preemptively identify issues 
and thereby avoid experiencing any disruptions in the trading of their 
products. Issuers are still conducting systems testing and further 
developing procedures. In addition, there are areas of interpretive 
guidance still being formulated as discussed previously in this filing.
    Additionally, Nasdaq will maintain and continue communications with 
issuers during the implementation date extension period in order to 
understand the issuers' progress. Providing listed issuers with 
additional time to ensure that they have adequate compliance systems in 
place furthers the protection of investors and the public interest 
because it will enhance investor confidence that listed issuers are 
complying with Exchange rules and because it will reassure investors 
that issuers can properly monitor and preemptively identify issues and 
thereby avoid experiencing any disruptions in the trading of the 
issuers' products.
    For these reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The Exchange 
believes that the proposed rule change will facilitate listed issuer 
ability to monitor and evidence compliance with approved continued 
listing rules by providing

[[Page 46583]]

issuers with additional time to finish developing and testing their 
internal systems and procedures prior to the implementation date.

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

    The Exchange received a copy of a letter from the Investment 
Company Institute, on behalf of listed ETP issuers, to the SEC.\11\ As 
described in Item 3 [sic], above, the Investment Company Institute 
detailed challenges that listed ETF issuers are facing in developing 
compliance systems to address the amendments contained in the Proposed 
Rule Change and have requested that the implementation date for such 
amendments be extended.
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    \11\ See Footnote 6, supra.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\12\
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    \12\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4 (f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission notes that waiver of the operative delay will allow the 
Exchange to immediately extend the implementation date of the Proposed 
Rule Change, and avoid the potential confusion and disruption that 
could result if the extension did not become operative until after 
October 1, 2017. The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 
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-NASDAQ-2017-101 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-NASDAQ-2017-101. 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-NASDAQ-2017-101 and should 
be submitted on or before October 26, 2017.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21408 Filed 10-4-17; 8:45 am]
BILLING CODE 8011-01-P