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Federal Register / Vol. 86, No. 103 / Tuesday, June 1, 2021 / Notices
A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
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1. Purpose As part of this proposal, the Exchange proposes to 1 adopt a new definition for Derivative Security under proposed Rule 1.5dd; 2 move the definition of unlisted trading privileges UTP
Derivative Security 5 from Rule 14.11j to Exchange Rule 1.5ee; and 3 amend Exchange Rule 14.11j applicable to UTP Derivative Securities. The Exchange also proposes to make ministerial changes to update numbering, lettering, Rule references, and provide clarifying text to Rules 1.5, 3.21, and 14.11. As discussed in further detail below, all of the proposed substantive changes are substantially similar to other exchange rules.
1 Proposal To Define Derivative Security in Exchange Rule 1.5dd and UTP Derivative Security in Exchange Rule 1.5ee The Exchange proposes to define Derivative Security in proposed Rule 1.5dd and amend existing Rule 1.5ee to include the definition of UTP
Derivative Security. Derivative Security would be a new definition and would mean a security that meets the definition of new derivative securities product in Rule 19b4e under the Act. UTP Derivative Security would refer to any one of a list of Derivative Securities that trades on the Exchange pursuant to unlisted trading privileges. The list of proposed Derivative Securities that may meet the definition of UTP Derivative Security are as follows: Equity Linked Notes;
Index Fund Shares listed pursuant to Exchange Rule 14.11c or Nasdaq Stock Market LLC Nasdaq Rule 5705b and Investment Company Units listed pursuant to NYSE Arca, Inc. NYSE
Arca Rule 5.2Ej3; Index-Linked Exchangeable Notes; Equity Gold Shares; Equity Index-Linked Securities;
Commodity-Linked Securities;
Currency-Linked Securities; Fixed Income Index-Linked Securities;
Futures-Linked Securities; Multifactor Index-Linked Securities; Trust Certificates; Currency and Index Warrants; Portfolio Depository Receipts;
Trust Issued Receipts; CommodityBased Trust Shares; Currency Trust Shares; Commodity Index Trust Shares;
Commodity Futures Trust Shares;
Partnership Units; Paired Trust Shares;
Trust Units; Managed Fund Shares;
5 See Rule 14.11j and proposed amendments to Rule 1.5ee.

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Managed Trust Securities; Managed Portfolio Shares; Tracking Fund Shares listed pursuant to Exchange Rule 14.11m, Active Proxy Portfolio Shares listed pursuant to NYSE Arca Rule 8.601E, and Proxy Portfolio Shares listed pursuant to Nasdaq Stock Market LLC Rule 5750; Selected Equity-linked Debt Securities SEEDS; and Exchange-Traded Fund Shares.6 The proposal is substantially similar to NYSE National, Inc. NYSE National Rule 1.1m, but the list of Derivative Securities that may be UTP Derivative Securities includes two additional Derivative Securities, SEEDS and Exchange-Traded Fund Shares. While SEEDS and Exchange-Traded Fund Shares are not included in NYSE
National Rule 1.1m, they are Derivative Securities set forth not only in Exchange Rules 14.11e12 and 14.11l, respectively, but also in section 5700 of the Nasdaq Rules.
The Exchange also proposes to reletter existing Rules 1.5dd through ee to allow for the addition of proposed Rule 1.5dd. Further, the Exchange proposes to amend Rule 3.21 to reference the proposed definition of UTP Derivative Securities in Rule 1.5ee.
2 Proposal To Amend the Exchanges Rule Applicable to UTP Derivative Securities First, the Exchange proposes to rename Rule 14.11j to UTP Derivative Securities so that it is consistent with the proposed definition set forth in Rule 1.5ee. The Exchange also proposes to amend the preamble to Rule 14.11j to refer to the defined term UTP Derivative Security, as proposed in Exchange Rule 1.5ee.
The Exchange also proposes to eliminate existing Rule 14.11j1, which provides that the Exchange shall file with the Commission a Form 19b 4e with respect to each UTP Derivative Security. The Exchange believes that it should not be necessary to file a Form 19b4e with the Commission if it begins trading a UTP Derivative Security because Rule 19b4e under the Act refers to the listing and trading of a new derivative securities product. The Exchange believes that the requirements of Rule 19b4e refer to when an exchange lists and trades a Derivative Security, and not when an exchange seeks only to trade such product on a UTP basis pursuant to Rule 12f2 under the Act.7 The proposal is 6 For inclusiveness, all Derivative Securities that are subject to unlisted trading privileges have been identified in the list of proposed UTP Derivative Securities.
7 17 CFR 240.12f2.

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substantially identical to rule amendments made by other exchanges.8
The Exchange proposes to amend proposed Rule 14.11j1 to replace the term new derivative securities product with the defined term Derivative Security as provided in proposed Rule 1.5dd. Additionally, the Exchange proposes to clarify that the Early Trading Session is from 7:00 a.m.
to 8:00 a.m. Eastern Time in order to consistently reference the relevant time zone throughout the paragraph.
The Exchange also proposes to add additional explanatory language to paragraph j3 that states nothing in the Rule will limit the power of the Exchange under the Rules or procedures of the Exchange with respect to the Exchanges ability to suspend trading in any securities if such suspension is necessary for the protection of investors or in the public interest. The proposed text is identical to that included in NYSE National Rule 5.1a2C.
Further, the proposed text reinforces existing Exchange Rule 11.18d.
Lastly, based on the proposal to eliminate Rule 14.11j1, the Exchange proposes to renumber existing paragraphs j2 through j6
accordingly.
2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6b of the Act. Specifically, the Exchange believes the proposed rule change is consistent with the Section 6b5 9 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is consistent with the Section 6b5 10 requirement that the rules of an exchange not be designed 8 See Securities Exchange Act No. 83289 May 17, 2018 83 FR 23968 May 23, 2018 SRNYSENAT
201802. See also Securities Exchange Act No.
84546 November 7, 2018 83 FR 56888 November 14, 2018 SRBX2018051.
9 15 U.S.C. 78fb5.
10 Id.

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