FR 2021-02397

The document from the Federal Register details a new rule approved by the Securities and Exchange Commission (SEC) related to the New York Stock Exchange (NYSE). This rule, NYSE Rule 5.2(j)(8), establishes criteria for listing and trading Exchange-Traded Fund (ETF) shares on the NYSE. Additionally, the SEC has approved NYSE Rule 7.18(d)(2) to manage trading halts for exchange-traded products.

General Summary

The primary focus of the rule is to create a streamlined and standardized framework for the listing of ETF shares on the NYSE. This move aligns with existing regulations under Rule 6c-11 of the Investment Company Act of 1940. By doing so, the SEC aims to simplify procedures, cut down costs, and promote competition among ETF issuers. Ultimately, this should result in reduced costs for investors and a more dynamic market for exchange-traded funds.

Significant Issues or Concerns

The document’s dense and technical language poses a challenge to readers who are not familiar with securities regulation. Frequent cross-references to other rules and regulations, particularly those of the NYSE Arca, can make it difficult to follow without continuously checking the footnotes and referenced documents. This complexity might obscure the rule’s significance for those without specialized legal or financial knowledge. Furthermore, the repetitive language in some sections could detract from a clear understanding of the rule's purpose and effect.

Impact on the Public Broadly

For the general public, this rule has the potential to enhance access to ETFs, a popular investment vehicle. By reducing costs associated with bringing ETFs to the market, individual investors might benefit from more competitive pricing. This should particularly help those who are investing in ETFs for long-term savings like retirement accounts.

Impact on Specific Stakeholders

• Investors: They stand to gain from lower costs and diversified options due to increased competition among ETF issuers. The streamlined process could lead to faster introduction of new ETFs, offering investors a broader choice.

• ETF Issuers: The rule reduces regulatory burdens, such as the need for obtaining specific exemptive orders from the SEC. This can result in quicker time-to-market for new ETFs and possibly increased innovation in fund offerings.

• Securities Exchanges: Aligning NYSE rules with those of NYSE Arca simplifies regulatory compliance across different trading platforms. It may also encourage competitive practices among exchanges to list the most attractive ETFs.

• Market Regulators: Though the rules lessen administrative hurdles, they require rigorous surveillance and monitoring to ensure compliance and protect market integrity. This change demands a proactive approach to overseeing market activities to mitigate risks of market manipulation.

Overall, while the document presents technical challenges for everyday readers, its core aim is to enhance market efficiency and benefit investors through reduced costs and increased competition. The changes are poised to impact various stakeholders, emphasizing the balance between regulation and innovation in financial markets.