Request for Comments - Proposed Amendment to the Listing Manual - Neo Exchange Inc.
Introduction
Neo Exchange Inc. ("NEO Exchange" or "Exchange") is publishing a proposed public interest rule amendment (the "Public Interest Rule Amendment") to the NEO Exchange Listing Manual in accordance with Schedule 4 to its recognition order, as amended. The Public Interest Rule Amendment was filed with the Ontario Securities Commission ("OSC") and is being published for comment. A description of the Public Interest Rule Amendment is set out below and the text of the Public Interest Rule Amendment are attached hereto as Appendix A. Subject to any changes resulting from comments received, the Public Interest Rule Amendment will be effective upon publication of the notice of approval on the OSC's website.
Description of the Public Interest Rule Amendment
We propose to repeal subsections 2.05 (1) and 2.06 (1) of the Listing Manual, which sets out the Minimum Distribution requirements for Structured Products and Debt-Based Structured Products.
Expected Date of Implementation of the Public Interest Rule Amendment
NEO Exchange seeks to implement the Public Interest Rule Amendment in Q2 or early Q3 2021.
Rationale for the Public Interest Rule Amendment and Supporting Analysis
We are proposing to repeal the minimum distribution requirement for Structured Products to encourage issuers to consider this type of listing, and to align with TSX rules, which do not have the same requirement. All other minimum listing standards remain unchanged and consistent with TSX rules. Furthermore, debt-based Structured Products are generally denominated at $1,000 face value per security. The current language introduces the ambiguity because the requirement can be read as requiring a minimum of 1,000,000 securities at $1,000 per security face value for a total market value of $1,000,000,000 as the minimum standard. This is a prohibitive standard for any issuer seeking to list such products on NEO. Finally, in the context of Structured Products, including debt-based ones, the Minimum Public Float Value requirement of $1,000,000 is a sufficient proxy for the distribution requirement. Although NEO has not yet listed a structured product, we do not believe the imposition of a distinct minimum distribution requirement provides any additional protection to the investing public.
Expected Impact on Market Structure, Members, Investors, Issuers and Capital Markets
There is no anticipated impact on the market structure and a positive one on issuers and the capital markets generally, due to the positive impact on issuers' ability to raise capital and meet exchange requirements.
Impact on Exchange's Compliance with Ontario Securities Law and on Requirements for Fair Access and Maintenance of Fair and Orderly Markets
The proposed amendments will not adversely impact the Exchange's compliance with Ontario securities laws, including requirements for fair access and maintenance of fair and orderly markets.
Impact on the Systems of Members or Service Vendors
The Public Interest Rule Amendment does not impact members or service vendors.
New Rule
The Public Interest Rule Amendment does not introduce any new feature.
Comments
Comments should be provided, in writing, no later than June 26, 2021 to:
Dmitri SmidovichHead of RegulatoryNeo Exchange Inc.65 Queen Street West,Suite 1900Toronto, ON M5H 2M5
with a copy to:
Market Regulation BranchOntario Securities Commission20 Queen Street West, 22nd FloorToronto, ON M5H 3S8
Please note that, unless confidentiality is requested, all comments will be publicly available.
Appendix A
Text of the Public Interest Rule Amendment
NEO EXCHANGE LISTING MANUAL
PART II. INITIAL LISTING REQUIREMENTS
2.05 Minimum Listing Standards -- Structured Products
(1) Minimum Distribution -- Public Float of 1,000,000 securities together with a minimum of 300 Public Security Holders each holding at least a Board Lot.
Repealed.
2.06 Minimum Listing Standards -- Debt-Based Structured Products
(1) Minimum Distribution -- Public Float of 1,000,000 securities together with a minimum of 300 Public Security Holders each holding at least $1,000 of the debt-based Structured Product.
Repealed.