[Federal Register Volume 84, Number 246 (Monday, December 23, 2019)]
[Notices]
[Pages 70582-70584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27588]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87773; File No. SR-LTSE-2019-04]
Self-Regulatory Organizations; Long-Term Stock Exchange; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Dual Listing
December 17, 2019.
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 5, 2019, Long-Term Stock Exchange (``LTSE'' 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
LTSE proposes to add two definitions to Rule 1.160 to clarify the
meaning of two amended terms--LTSE-Primary-Listed Security and Non-
LTSE-Primary-Listed Security--in the Rule 11 Series (Trading Rules) in
the context of an exchange that provides for dually-listed securities.
The text of the proposed rule change is available at the Exchange's
website at https://longtermstockexchange.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement on 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 those statements 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 on the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The rules of the Exchange provide for dual listings.\4\ The concept
of dual listing is not new. Companies have dually listed their
securities on NYSE and Nasdaq,\5\ and more recently, companies dual
list their securities on a foreign and U.S. exchange.\6\ One of the
reasons a company may dual list is to commit to comply with a more
stringent regulatory regime, such as an exchange's listing
standards.\7\ The Commission recently approved LTSE Rule 14.425, in
which the Exchange enhanced its listing standards to require companies
that list with the Exchange to adopt and publish a Long-Term
Stakeholder Policy, a Long-Term Strategy Policy, a Long-Term
[[Page 70583]]
Compensation Policy, a Long-Term Board Policy and a Long-Term Investor
Policy (collectively, ``Long-Term Policies'').\8\
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\4\ See Rule 14.210 (Dually-Listed Securities).
\5\ See Craig Karmin, Nasdaq Draws 6 Dual Listings, Including H-
P and Schwab, Wall St. J. (Jan. 13, 2004), https://www.wsj.com/articles/SB107391401136003100.
\6\ Dual listing in the United States and a foreign jurisdiction
allows a company to more easily reach a global set of investors and
benefit from a multitude of trading venues. See International
Investing, Sec. & Exch. Comm'n (Dec. 7, 2016), available at https://www.sec.gov/reportspubs/investor-publications/investorpubsininvesthtm.html (``Although most foreign stocks trade
in the U.S. markets as ADRs, some foreign companies list their stock
directly here as well as in their local market. For example, some
Canadian stocks that are listed and trade on Canadian markets are
also listed and trade directly in U.S. markets, rather than as ADRs.
Some foreign companies list their securities in multiple markets,
which may include U.S. markets.'').
\7\ See Securities Exchange Act Release No. 50741 (Nov. 29,
2004), 69 FR 70296, 70298 (Dec. 3, 2004) (``Nasdaq believes issuers
that become dually listed voluntarily undertake a second set of
regulations and therefore demonstrate their commitment to regulatory
excellence.''). See generally Cecilia Caglio, et al., Going Public
Abroad 3 (DERA, Working Paper, Nov. 2013), available at https://www.sec.gov/files/rsfi-wp2013-01.pdf (``[G]oing public in a market
with more stringent securities laws can also maximize proceeds by
enabling the issuing firm to credibly commit to greater ongoing
disclosure.'').
\8\ See Securities Exchange Act Release No. 86722 (Aug. 21,
2019), 84 FR 44952 (Aug. 27, 2019).
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Dually-Listed Securities as defined in the Exchange Rule 14.210
refers to securities that also are listed on another national
securities exchange registered with the Commission under Section 6(a)
of the Act. Inasmuch as Dually-Listed Securities, by virtue of already
being listed on another national securities exchange are eligible to
trade on each of the registered national securities exchanges under
Unlisted Trading Privileges (``UTP''), the primary benefit to an issuer
from such a dual listing flows from its commitment to adhere to the
Exchange's differentiated listing standards, e.g., the Long-Term
Policies. The Long-Term Policies are intended to better enable
companies to focus on long-term value creation, potentially enhancing
opportunities for capital formation, including capital from long-term
focused institutional investors and index funds that have established
long-term focused mandates.
The decision to offer companies the option of dually listing is not
aimed at displacing the role of the primary listing market in the
opening and closing auctions. Indeed, the Commission recently noted the
role of the primary listing market in working with the Nasdaq and NYSE
to provide transparency on how a closing price would be determined if a
systems or technical issue prevented normal exchange operations.\9\ In
that approval order, the Commission noted ``that the primary listing
market's closing price for a security is relied upon by market
participants for a variety of reasons, including, but not limited to,
calculation of index values, calculation of the net asset value of
mutual funds and exchange-traded products, and the price of derivatives
that are based on the security.'' \10\
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\9\ See Securities Exchange Act Release No. 78014 (June 8,
2016), 81 FR 38755 (June 14, 2016).
\10\ Id. at 38757. See also Research Note: Equity Market
Volatility on August 24, 2015, Sec. & Exch. Comm'n (Dec. 2015),
available at https://www.sec.gov/marketstructure/research/equity_market_volatility.pdf (discussing the impact of the opening
and re-opening process at the primary listing market, noting that
S&P Dow Jones Indices LLP (``S&P DJI'') generally uses prices from
only the primary listing exchange for calculating index values,
including the S&P 500 Index that provides the reference for
triggering market-wide circuit breakers and the that the price of
the opening cross on the primary listing exchange (if it occurs
before 9:35) is used as a reference price for calculation of the
first Limit Up-Limit Down price bands of a trading day).
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To maintain the status quo and ensure that dual listings do not
interfere with the primary listing market in various market operations,
including managing the opening and closing auctions as well as
addressing intra-day auctions as a result of market pauses or halts,
the Exchange proposes to amend the term ``LTSE-listed security'' as
used throughout the Rule 11 Series to ``LTSE-Primary-Listed Security''
and define it in Rule 1.160 (Definitions) to mean ``a class of
securities listed on the Exchange for which the Exchange is the primary
listing market.'' Likewise, the Exchange proposes to amend the term
``non-LTSE-listed security'' as used throughout the Rule 11 Series to
``Non-LTSE-Primary-Listed Security'' and define it in Rule 1.160 to
mean ``(i) any UTP Security; and (ii) any Dually-Listed Securities, as
provided for in Rule 14.210, which are not LTSE-Primary-Listed
Securities.'' \11\ These proposed clarifications are already
implemented in part in the supplementary material to Rule 14.210, which
excludes the applicability of various provisions in Rule 11.282
(Regulatory Trading Halts) to Dually-Listed Securities where LTSE is
not the primary listing market. In reviewing the Rule 11 Series, the
Exchange observed that there are other provisions in the Rule 11 Series
that would benefit from similar clarity in the context of dual
listings. In particular, the provisions applicable to a Market Maker's
request to withdraw quotations in a security and terminate its
registration in a security as contained in Rules 11.152(c)(1) and
(e)(3), and in Rule 11.153(a), pertain to activity for LTSE-Primary-
Listed Securities and are proposed to be amended accordingly.
Additionally, the provisions in Rule 11.190 describing the handling of
market orders submitted before the open of the Regular Market Session
are proposed to be amended in paragraphs (a)(2)(E)(ii) and (f)(1) to
distinguish between the Auction process provided for in Rule 11.350,
which applies to LTSE-Primary-Listed Securities, and the Opening
Process provided for in Rule 11.231, which applies to Non-LTSE-Primary-
Listed Securities.\12\
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\11\ ``UTP Security'' is defined in Rule 1.160 as ``any security
that is not listed on the Exchange, but is traded on the Exchange
pursuant to unlisted trading privileges.'' ``Dually-Listed
Securities,'' as provided for in Rule 14.210, means ``a class of
securities that has been approved for listing on another national
securities exchange registered with the Commission pursuant to
Section 6(a) of the Act.''
\12\ The proposed rule change also would amend the title of Rule
11.231.
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Although Supplementary Material .01 to Rule 14.210 states that the
Exchange shall continue to honor the trade halt authority of the
primary listing market under the CQ and CTA Plans or the UTP Plan, as
applicable, the proposed rule change would amend Rule 11.281(a)(8) to
use the new proposed definitions in place of the more generic LTSE-
listed and non-LTSE-listed securities rule text. Similar amendments are
proposed to Rule 11.282(a)(1) and (a)(4) with respect to Regulatory
Trading Halts, with the latter addressing, in addition, American
Depository Receipts (``ADRs'') that are LTSE-Primary-Listed Securities.
Rule 11.330 describes various data products to be offered by the
Exchange, and the proposed rule change would amend paragraph (a)(1) to
clarify that the Auction Information to be provided via the LTSE Web
Platform pertains to LTSE-Primary-Listed Securities. Lastly, as
previously noted above, Rule 11.350 governs how auctions are conducted
on the Exchange. To clarify that these provisions apply to primary
listed securities, the term ``LTSE-listed security'' is proposed to be
replaced with ``LTSE-Primary-Listed Security'' in Rule 11.350
paragraphs (a)(1)(E)(i), (a)(10)-(13), (c)(2), (c)(2)(B), (c)(2)(D),
(c)(2)(E), (c)(2)(F), (d)(2), (d)(2)(B), (d)(2)(D), (e), (e)(2)(C),
(f), (f)(1)(A), (f)(2)(C)(iii), (f)(2)(E), (f)(3), (f)(3)(B)(ii), and
Supplementary Material .02.
In creating these two new definitions, the Exchange desires to
maintain the definitions in Rule 1.160 in alphabetical order. However,
to maintain flexibility to add or delete defined terms in the future,
the Exchange proposes to remove specific cross-references to defined
terms throughout the rule book, while keeping the cross-references to
Rule 1.160, more generally.\13\ These proposed changes would remove the
cross-reference to ``Rule 1.160(m)'' in Rule 14.202(h), and the 26
cross-references to ``Rule 1.160(qq)'' in Rules 14.207(b)(1)-(2),
14.501(c), and 14.505(k), and in the Supplementary Material to Rule
14.207.
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\13\ Very few of the definitions are cross-referenced to Rule
1.160, and even fewer are done at the paragraph or subparagraph
level.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\14\ 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, 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 mechanisms of a free and open market
[[Page 70584]]
and a national market system and, in general, to protect investors and
the public interest. In this respect, the proposed rule change would
help ensure that issuers, investors and the public more easily
understand the meaning and operation of the Exchange's trading rules as
applied to dually-listed securities.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(5).
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act.
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 prior to
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 \16\ and Rule 19b-4(f)(6)
thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and 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.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \18\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\18\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please include
File Number SR-LTSE-2019-04 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-LTSE-2019-04. 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-LTSE-2019-04 and should be submitted on
or before January 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27588 Filed 12-20-19; 8:45 am]
BILLING CODE 8011-01-P