[Federal Register Volume 68, Number 7 (Friday, January 10, 2003)]
[Notices]
[Pages 1495-1497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-497]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47115; File No. SR-NYSE-2002-62]


Self-Regulatory Organizations; Order Granting Accelerated 
Approval to Proposed Rule Change and Notice of Filing and Order 
Granting Accelerated Approval to Amendment No. 1 to the Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Initial Fees 
and Continuing Annual Fees for Domestic and Non-U.S. Issuers, Technical 
Original Listing Fees, and Supplemental Listing Applications Fees

December 31, 2002.

I. Introduction

    On November 20, 2002, the New York Stock Exchange, Inc. (``NYSE'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934\1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to increase and simplify the continuing annual listing fee 
pricing for all listed companies (excluding closed-end funds), and to 
increase the fee for technical original listings and supplemental 
listing applications. The NYSE also proposes to make permanent an 
overall $1 million per-issuer fee cap that has been in effect on a 
pilot basis and is scheduled to expire on December 31, 2002.\3\ Notice 
of the proposed rule change was published for comment in the Federal 
Register on December 16, 2002.\4\ On December 30, 2002, the NYSE filed 
Amendment No. 1 to the proposed rule change.\5\ This order approves the 
NYSE's proposed rule change on an accelerated basis, publishes notice 
of Amendment No. 1, and grants accelerated approval to Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 43163 (August 16, 
2000), 65 FR 51389 (August 23, 2000) (SR-NYSE-00-16).
    \4\ See Securities Exchange Act Release No. 46960 (December 6, 
2002), 67 FR 77124 (December 16, 2002) (SR-NYSE-2002-62). The 15-day 
comment period expired on December 31, 2002.
    \5\ See Letter from Darla Stuckey, Corporate Secretary, NYSE, to 
Nancy Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated December 27, 2002 (``Amendment No. 1''). In 
Amendment No. 1, the NYSE requested that the Commission either 
approve the proposed rule change after thirty days following 
publication in the Federal Register with retroactive effectiveness 
to January 1, 2003, or find good cause pursuant to Section 19(b)(2) 
of the Act for approving the proposed rule change prior to the 
thirtieth day after publication in the Federal Register. In 
addition, the NYSE provided the Commission with copies of four 
letters from issuers responding to correspondence from the NYSE in 
early October that announced the NYSE's intention to implement the 
new fee schedule. (The Commission also received a copy of one of the 
letters following publication of the notice in the Federal 
Register.) Furthermore, the NYSE set forth its view as to why it 
believed the Commission had good cause to accelerate the 
effectiveness of the proposed rule change prior to the thirtieth day 
after publication of the notice in the Federal Register.
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II. Description

A. Background

    As noted above, the proposed rule change would increase the fees 
the NYSE charges to issuers that are listed on the NYSE and simplify 
the fee schedule that provides for such fees. The NYSE proposes to make 
the fees effective as of January 1, 2003.

B. Changes to the Fee Schedule

    The NYSE proposes to increase the ``technical original'' listing 
fee. Currently, Section 902.02B of the NYSE Listed Company Manual 
provides for a ``reduced initial fee'' of $5,300 when a company makes a 
technical change in the nature of the company without substantively 
affecting the equity position or rights of its common shareholders. 
This fee, often referred to as a ``technical original'' listing fee, 
applies when, for example, a company changes its state of incorporation 
or reincorporates, forms a holding company which replaces the listed 
company, or does a reverse split. The NYSE proposes to increase this 
fee from $5,300 to $15,000.
    Section 902.02B of the NYSE Listed Company Manual also specifies 
that the minimum fee for the consideration of any listing application 
is $1,500. When shares are being issued concurrently with the 
application, the company is charged the greatest of the per-share rate, 
this minimum fee, or the ``technical original'' listing fee described 
in the immediately preceding paragraph. The NYSE is proposing to 
increase the minimum initial fee from $1,500 to $2,500.
    The NYSE proposes to amend Section 902.02C of the NYSE Listed 
Company Manual, which relates to the continuing annual listing fee.\6\ 
Continuing annual fees for each issuer are based on the number of its 
securities listed (including American Depositary Securities represented 
by American Depositary Receipts), and there is a schedule of per-share 
rates set forth in Section 902.02C (Section 902.04C for non-U.S. 
companies) of the NYSE Listed Company Manual. Currently, that schedule 
is tiered, with a per-share rate of $1,650 per million shares for the 
first and second million shares, and a per-share rate of $830 per 
million shares for additional shares beyond two million. Likewise, the 
minimum fee that an issuer pays to continue to be listed on the NYSE is 
subject to a tiered structure, whereby an issuer is subject to a 
variable annual fee minimum based upon the number of shares it lists. 
The NYSE is proposing to eliminate the tiers, so that the per-share 
rate will be $930 per million shares subject to a minimum continuing 
annual fee of $35,000, as provided for in Section 902.04C of the 
proposed rule change to the NYSE Listed Company Manual.
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    \6\ At this time, the NYSE is not proposing to change the 
continuing annual fees as applied to closed-end funds listed on the 
NYSE, which continue to be subject to the fee schedule currently in 
effect. The Commission notes, however, that the NYSE is in the 
process of developing a revised fee schedule for closed-end fund 
issuers. Telephone conversation between Annmarie Tierny, Senior 
Counsel, Office of General Counsel, NYSE and Tim Fox, Law Clerk, 
Division of Market Regulation, December 5, 2002. In addition, no 
changes are being proposed to the several specific pricing 
provisions provided in Section 902.02C for ``fund families'' with a 
number of funds listed on the NYSE.
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    The impact of these proposed changes to the continuing annual fee 
as described below will be capped for each issuer at $75,000 for 
calendar 2003, and at $150,000 for calendar 2004.\7\ For a company 
hitting both those caps, the full impact of these price changes would 
not be borne until calendar year 2005.
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    \7\ The Commission notes that the NYSE communicated these fee 
caps to issuers in correspondence sent to the issuers dated in early 
October of 2002. See Amendment No. 1.
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    Continuing annual fees, which are set forth in Section 902.02C and 
Section 902.04C of the NYSE Listed Company

[[Page 1496]]

Manual, are assessed separately on each class of security issued. 
Because some companies have more than one class of common stock listed 
on the NYSE, the NYSE currently provides that if one class pays the 
$35,000 minimum fee, the other class(es) are subject to lower minima 
(ranging from $16,170 to $32,320) depending on the number of shares 
listed. To simplify this structure, the NYSE is proposing to amend 
Sections 902.02C and 902.04C of the NYSE Listed Company Manual so that 
when a company has multiple classes of common stock listed on the NYSE, 
the class with the greatest number of shares outstanding will be 
subject to the $35,000 minimum, and each additional class of common 
stock will be subject to a minimum fee of $20,000 per class.
    Under Section 902.02C of the NYSE Listed Company Manual, classes of 
securities other than common stock are currently subject to the same 
continuing annual fee rate schedule as common stock, but with a lower 
minimum fee of $3,600, rather than $35,000. Accordingly, the NYSE 
proposes that the new rate schedule of $930 per million shares will 
apply to these securities, and the applicable minimum will be raised 
from $3,600 to $5,000. In the case of a company with listed preferred 
stock that does not have common stock listed at the NYSE, the original 
listed preferred issue will be subject to the $35,000 minimum annual 
fee, although other classes listed will be subject to the $5,000 
minimum.
    Section 902.03B of the NYSE Listed Company Manual currently 
provides for a special set of ``range minima'' applicable to short-term 
securities, that subjects such issues to higher minimum continuing 
annual fees than are otherwise applied to non-common stock securities 
as described in the preceding paragraph. To eliminate this anomaly, the 
NYSE proposes to amend Section 902.03B of the NYSE Listed Company 
Manual to apply to such ``short term securities'' the new rate schedule 
of $930 per million shares, and to also apply the same $5,000 annual 
minimum as is applicable to other non-common stock securities.
    Section 902.02C of the NYSE Listed Company Manual currently removes 
from the calculation of continuing annual fees any shares that have 
been listed for a period of 15 years or more. This policy results in 
companies having disparate continuing annual fees despite having a 
similar number of stocks listed on the NYSE. The NYSE proposes to 
eliminate this policy for all listed companies with the exception of 
closed-end funds.
    Finally, the NYSE proposes to make permanent a $1 million per-
issuer fee cap that was implemented starting with the 2000 calendar 
year.\8\ That cap, codified in Section 902.02 of the NYSE Listed 
Company Manual, by its terms was put into effect on a pilot basis 
through calendar 2002. The NYSE believes that the cap avoids 
overburdening any particular company in an unusual year. Accordingly, 
the NYSE proposes to make the pilot permanent.
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    \8\ See Securities Exchange Act Release No. 43163 (August 16, 
2000), 65 FR 51389 (August 23, 2000) (SR-NYSE-00-16).
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C. Amendment No. 1

    In Amendment No. 1, the NYSE provided the Commission with copies of 
four letters from issuers responding to correspondence from the NYSE 
sent in early October that announced the NYSE's intention to implement 
the new fee schedule.\9\ A copy of one of those letters was submitted 
to the Commission as a comment letter responding to the proposed rule 
change.\10\ In general, the four letters criticized the magnitude of 
the percentage increase to which they would be subject, citing the down 
economy as a poor time to impose additional fees.
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    \9\ See letter from M. Michele Burns, Executive Vice President 
and Chief Financial Officer, Delta Air Lines, Inc. to Catherine R. 
Kinney, President and Co-Chief Operating Officer, NYSE, dated 
October 29, 2002, letter from Dennis J. Broderick, Senior Vice 
President, General Counsel and Secretary, Federated Department 
Stores, Inc. to Catherine R. Kinney, President and Co-Chief 
Operating Officer, NYSE, dated November 7, 2002, letter from Edward 
E. Thiele, Senior Vice President, Rowan Companies, Inc to Catherine 
R. Kinney, President and Co-Chief Operating Officer, NYSE, dated 
November 14, 2002, and letter from Jeffrey C. Cambpell, Senior Vice 
President and Chief Financial Officer, AMR Corporation to Catherine 
R. Kinney, President and Co-Chief Operating Officer, NYSE, dated 
December 2, 2002.
    \10\ See letter from M. Michele Burns, Executive Vice President 
and Chief Financial Officer, Delta Air Lines, Inc. to Catherine R. 
Kinney, President and Co-Chief Operating Officer, NYSE, dated 
October 29, 2002, which the Commission received on December 26, 
2002.
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    In responding to the concerns that the letters addressed, the NYSE 
suggested that those issuers who would be most adversely affected by 
the proposed rule change, would be those issuers affected by the 
discontinuance of the ``15 year policy,'' which represents 
approximately 8% of the NYSE's list. The NYSE stated that it 
discontinued the 15-year policy because, in part, the policy resulted 
in disparate annual fees for companies with similar amounts of stock 
listed on the NYSE.
    The NYSE also pointed out that it lengthened the phase-in period of 
the proposed fee schedule so that increases for any single issuer would 
be capped at $75,000 for calendar 2003, and at $150,000 for calendar 
2004. For a company hitting both those caps, the full impact of these 
price changes would not be borne until calendar 2005. The NYSE 
represented that this phase-in of the proposed rule change was designed 
to impose the fee increases in as fair a manner as possible

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended is consistent with Section 6(b) of the Act \11\ in 
general and furthers the objectives of Section 6(b)(4).\12\ The 
Commission believes that the proposal is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its issuers.\13\
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
    \13\ In approving this rule, the Commission notes that it has 
considered the proposal's impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes that the NYSE's proposed rule change should 
help to ensure that the NYSE will have adequate revenue to satisfy the 
increasing costs for operations, technology, regulation and 
infrastructure. The Commission notes that the NYSE will receive higher 
initial fees from equity issuers as a result of the proposed rule 
change, and that the NYSE believes that it will receive more revenue as 
a result of the modification to the continuing annual fee that it 
proposes. Moreover, the Commission believes that the proposed rule 
change should simplify the fee schedule for NYSE issuers. For example, 
the NYSE proposes to eliminate the tiered structure of Sections 
902.02C,\14\ 902.03B and 902.04C of the NYSE Listed Company Manual 
(Continuing Annual Fees), whereby an issuer pays certain rates and is 
subject to particular minima, based upon the number of shares it lists 
on the NYSE. In its place, the NYSE proposes to impose a single per-
share rate ($930 per million shares), and a simplified minimum fee 
structure.
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    \14\ The Commission notes that the NYSE proposes to maintain the 
tiered structure in Section 902.02C of the NYSE Listed Company 
Manual so that closed-end fund issuers continue to pay a variable 
continuing listing fee, based upon the number of shares they list on 
the NYSE.
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    The Commission believes that the NYSE's proposal to make permanent 
the $1 million per-issuer cap on listing fees in any given calendar 
year should help to ensure that a particular issuer will not be 
overburdened by listing fees in an unusual year.
    The Commission believes that discontinuance of the ``15-year 
policy,''

[[Page 1497]]

\15\ pursuant to which shares listed for a continuous period of 15 
years or more were eliminated from the calculation of continuing annual 
fees, should eliminate disparities in annual fees for companies with 
similar amounts of stock listed on the NYSE. Moreover, the Commission 
notes the NYSE's belief that only a limited percentage of listed 
companies --8%-- will be affected by the discontinuance of the 15-year 
policy. Finally, the Commission believes that the phase-in of the 
proposed fee schedule over a three-year period should mitigate the 
impact of the proposed fee schedule on issuers
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    \15\ The Commission notes that the NYSE proposes to maintain the 
15 year policy in Section 902.02C of the NYSE Listed Company Manual 
for closed-end fund issuers.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice in the Federal Register, and prior to the expiration of the 
public comment period, ending December 31, 2002.\16\ The Commission 
believes that good cause exists to justify accelerated effectiveness of 
the proposed rule change, in part, because the pilot program of Section 
902.02 of the NYSE Listed Company Manual, which currently institutes 
the $1 million per-issuer fee cap on a pilot basis is due to expire on 
December 31, 2002. In finding good cause to accelerate effectiveness on 
this basis, the Commission notes that the NYSE has represented to the 
Commission that the expiration of the pilot program at any time before 
the effective date of this proposed rule change could lead to 
significant operational and billing problems.\17\
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    \16\ The Commission notes that it had received one letter 
regarding the proposed rule change as of the close of business, 
December 31, 2002. See note 10, supra.
    \17\ See Item 7, Amendment No. 1.
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    Finally, the accelerated approval of the proposed rule change will 
enable the new fee schedule to be in effect on January 1, 2003, the 
date which the NYSE wishes to make the new fees applicable. Therefore, 
the Commission finds that granting accelerated approval to the proposed 
rule change, as amended, is appropriate and consistent with Section 
19(b)(2) of the Act.\18\
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    \18\ 15 U.S.C. 78s(b)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 1, including whether the proposed 
amendment is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW, Washington, 
DC 20549-0609. 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 inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the NYSE. All submissions should refer to File No. 
SR-NYSE-2002-62 and should be submitted by January 31, 2003.

V. Order Granting Accelerated Approval

    The original rule proposal was published for public comment on 
December 16, 2002.\19\ The NYSE submitted Amendment No. 1 to the 
proposed rule on December 30, 2002 in order to respond to four letters, 
which it had received prior to the filing of the proposed rule change, 
in which four issuers expressed their views opposing the proposed 
increase in listing fees.\20\ For the foregoing reasons, the Commission 
finds that the proposed rule change, as amended, is consistent with the 
requirements of the Act and the rules and regulations thereunder. 
Moreover, the Commission finds that there is good cause to grant 
accelerated approval to the proposed rule change and Amendment No. 1, 
thereto.
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    \19\ See Securities Exchange Act Release No. 46960 (December 6, 
2002), 67 FR 77124 (December 16, 2002) (SR-NYSE-2002-62).
    \20\ In Amendment No. 1, the NYSE also requested accelerated 
approval and articulated its view as to why the Commission should 
find good cause to accelerate the effectiveness of the proposed rule 
change.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change and Amendment No. 1 thereto (SR-
NYSE-2002-62) are approved on an accelerated basis.

    \21\ 15 U.S.C. 78s(b)(2).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-497 Filed 1-9-03; 8:45 am]
BILLING CODE 8010-01-P