[Federal Register Volume 69, Number 54 (Friday, March 19, 2004)]
[Notices]
[Pages 13078-13080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6189]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49414; File No. SR-NYSE-2003-33]


Self-Regulatory Organizations; Order Granting Approval to a 
Proposed Rule Change and Amendment No. 1 and Notice of Filing and Order 
Granting Accelerated Approval of Amendment No. 2 Thereto by the New 
York Stock Exchange, Inc., Relating to Exchange Fees for Closed-End 
Funds

March 12, 2004.
    On October 20, 2003, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule

[[Page 13079]]

change as described in Items I, II and III below, which Items have been 
prepared by the NYSE. On November 24, 2003, the NYSE filed Amendment 
No. 1 to the proposed rule change.\1\ The proposed rule change, as 
amended, was published for comment in the Federal Register on December 
3, 2003.\2\ The Commission received one comment letter on the proposed 
rule change.\3\ On February 20, 2004, the NYSE filed Amendment No. 2 to 
the proposed rule change.\4\ This order approves the proposed rule 
change, as amended.
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    \1\ See letter from Darla Stuckey, Corporate Secretary, NYSE, to 
Nancy J. Sanow, Assistant Director, Division of Market Regulation, 
Commission, dated November 24, 2003 (``Amendment No. 1''). In 
Amendment No. 1, the Exchange clarified the effect of the proposed 
rule change on the fees payable by closed-end funds, particularly 
closed-end funds not part of a fund family.
    \2\ See Securities Exchange Act Release No. 48833 (December 3, 
2003), 68 FR 67717 (SR-NYSE-2003-33).
    \3\ See Letter to Jonathan G. Katz, Secretary, Commission, from 
Lawrence J. Hooper, Jr., Vice President, Secretary and General 
Counsel, The Adams Express Company, dated December 23, 2003 (``Adams 
Letter'').
    \4\ Amendment No. 2 replaces the originally filed Form 19b-4 in 
its entirety. (``Amendment No. 2''). In Amendment No. 2, the 
Exchange amended its original proposal to include a two-year phase 
in for the fees resulting from the elimination of the 15-year 
exclusion.
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I. Description of the Proposed Rule Change

    In August 2003, the Exchange reduced the original listing fees 
applicable to closed-end funds,\5\ and in October 2003, the Exchange 
capped at $75,000 the original listing fees applicable to two or more 
funds from the same fund family listing at the same time.\6\
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    \5\ See Securities Exchange Act Release No. 48360 (August 18, 
2003), 68 FR 51045 (August 25, 2003) (SR-NYSE-2003-22).
    \6\ See Securities Exchange Act Release No. 48685 (October 23, 
2003), 68 FR 61710 (October 29, 2003) (SR-NYSE-2003-32).
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    The Exchange is now proposing to amend the continuing annual 
listing fees applicable to closed-end funds by establishing a new 
continuing fee structure with increased fund family discounts and a new 
per million share base rate applicable to all closed-end funds.
    In establishing a new base rate applicable to all closed-end funds, 
the Exchange will no longer apply the existing five-tiered continued 
listing fee structure and, instead, closed-end funds will pay at a rate 
of $930 per million shares, subject to a minimum annual fee of $25,000. 
To clarify the applicability of the $25,000 minimum, that amount would 
actually cover funds with up to 26,881,720 shares outstanding. It is 
only beyond that size that the multiplication of the per share rate 
($930/million) by the shares outstanding would produce a fee in excess 
of the $25,000 minimum.
    The Exchange also proposes to increase and expand the availability 
of the discounts applicable to fund families with multiple funds 
listed. As proposed, fund families with between 3 and 14 closed-end 
funds listed will receive a 5% discount off the calculated continuing 
annual fee for each fund listed, and those with more than 14 listed 
closed-end funds will receive a discount of 15%. Currently, fund 
families with between 5 and 15 closed-end funds listed receive a 5% 
discount off the calculated continuing annual fee for each fund listed, 
and those with 16 or more listed closed-end funds receive a discount of 
10%.
    In a previous filing revising listing fees generally,\7\ the 
Exchange eliminated the fee policy under which shares subject to 
continuing annual fees for a period of 15 consecutive years became 
exempt from further fees. At the time, the Exchange noted that it was 
continuing the 15-year exemption policy for closed-end funds pending 
further study and revision of the fees charged to closed-end funds 
generally. Given the new fee structure implemented for closed-end funds 
under this proposal and the other filings referred to herein, the 
Exchange has concluded that it is now appropriate to eliminate the 15-
year exemption policy for closed-end funds consistent with the 
amendments made with respect to listed operating companies in December 
2002. The Exchange is phasing-in increases in fees for closed-end funds 
that were previously eligible for the 15-year exemption so that closed-
end funds that are affected by the elimination will pay only 50% of 
increased fees in fiscal year 2004 and 100% in fiscal year 2005 and 
afterwards.
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    \7\ See Securities Exchange Act Release No. 47115 (December 31, 
2002), 68 FR 1495 (January 10, 2003) (SR-NYSE-2002-62).
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    The impact of the proposed continuing annual fee changes in their 
entirety on an individual fund will vary depending on a fund's shares 
outstanding and other circumstances. First of all, the Exchange states 
that its rule has, and will continue to have, an overall fund family 
fee cap of $1 million per year. Of the 407 listed closed end funds, the 
Exchange states that 118 are in fund families covered by the $1 million 
fee cap. Of the remaining 289 funds, factoring in the net effect of the 
change to the new per share rate from the existing five-tiered formula, 
the elimination of the 15-year exemption policy, and the increases in 
the fund family discounts, the Exchange's analysis (based on the 
information it currently has on fund shares outstanding) is that 55 
funds would experience an increase in continuing annual fees, 150 would 
experience a decrease, and 84 would experience no net change. Of those 
that can be expected to experience an increase, the Exchange expects 
that the average increase would be 15.6% and the median increase 8.2%. 
The Exchange expects that the maximum increase for any one fund would 
be 73% (in that case, $44,700). Of the 150 funds the Exchange expects 
to experience a decrease, the average decrease would be 25.4% and the 
median decrease would be 28.6%. The maximum decrease for any one fund 
would be 36% (in that case, $12,000). While some funds would experience 
an increase in continuing annual fees and others a decrease, the 
overall impact on the Exchange would be a net decrease in continuing 
annual fees of approximately $900,000.

II. Summary of Comments

    The Commission received one comment letter on the proposal.\8\ 
There were several issues raised by the commenter. First, the commenter 
\9\ observed that as a long-standing fund not part of a large fund 
complex, the NYSE's proposed rule change would significantly increase 
the continuing annual fees that the commenter would be required to pay. 
Although the commenter did not object to the NYSE's increase in the 
per-million share rate, the commenter observed that eliminating the 15-
year exemption policy would increase the continuing annual fee for the 
commenter by 57%, and further observed that while this was within the 
range described by the NYSE, it was significantly above the average and 
median increases projected by the Exchange. The commenter requested a 
three-year phase in period for the elimination of the 15-year exemption 
policy in order to cushion the effect of the fee increase.
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    \8\ See note 3, supra.
    \9\ See Adams Letter.
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    In response to the commenter's concerns, the Exchange responded 
that the increase in the commenter's fees were consistent with the 
Exchange's estimates of the range of fee increases. The Exchange also 
noted that the elimination of the 15-year exemption policy was 
consistent with recent changes to the Exchange's fee structure. 
Although the Exchange considered a three-year phase in period for the 
elimination of the 15-year exemption policy unnecessary, the Exchange

[[Page 13080]]

proposed a two-year phase in period instead. The Exchange's proposal 
would therefore result in a company's paying 50% of the fee increase 
during the first year and 100% of the increase in the second year.

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\10\ In particular, the Commission finds the proposal is 
consistent with Section 6(b)(4) of the Act \11\ that an Exchange have 
rules that provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and issuers and other persons 
using its facilities.\12\ The Commission believes that the NYSE's 
proposal to increase the listing fees applicable to closed-end funds is 
consistent with the Act because it is consistent with the Exchange's 
recent revisions to their fees generally and further provides for a net 
decrease in fees applicable to funds generally.
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    \10\ In approving this rule, the Commission has considered its 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78o-3(b)(6).
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    After careful consideration of the commenter's concerns about the 
increases in the fees applicable to the commenter, the Commission finds 
that the NYSE's determination to phase in the increase in fees over a 
two-year period is responsive to the commenter's observations that its 
fees would increase significantly as a result of the elimination of the 
15-year exemption policy for closed-end funds. The Commission has also 
carefully considered the commenters' concerns about the fee increase 
applicable to closed-end funds that are not part of a larger fund 
family. The Commission finds that although the commenter's fees will 
increase by 57%, the increase is within the range identified by the 
Exchange, and that the fee increases for closed-end funds are 
commensurate with the Exchange's recent amendments to the fees 
applicable to listed operating companies, consistent with Section 
6(b)(4) of the Act.\13\
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    \13\ 15 U.S.C. 78f(b)(4).
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IV. Amendment No. 2

    The Commission finds good cause for approving Amendment No. 2 prior 
to the thirtieth day after notice of the publication in the Federal 
Register. The Exchange wishes to begin applying the proposed fee 
changes effective no later than January 1, 2004. The Commission finds 
that good cause exists to justify accelerated effectiveness to enable 
the fee change to be imposed no later than at the beginning of the new 
calendar year. The Commission believes that it is not necessary to 
separately solicit comment on Amendment 2 prior to approving this 
proposal because it finds that these changes to the proposed rule 
language respond to and incorporate suggestions made by the Commission 
and the commenter to the original proposal. The Commission therefore 
finds that acceleration of Amendment No. 2 is appropriate.

V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2, including whether the proposed 
amendments are 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.
    Comments may also be submitted electronically at the following e-
mail address: [email protected]. All comment letters should refer 
to File No. SR-NYSE-2003-33. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in hard 
copy or by e-mail, but not by both methods. Copies of the submission, 
all subsequent amendments, all written statements with respect to the 
proposed amendments that are filed with the Commission, and all written 
communications relating to the amendments 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 at the Commission's Public Reference Room. 
Copies of such filing also will be available for inspection and copying 
at the principal office of the NASD.
    All submissions should refer to File No. SR-NYSE-2003-33 and should 
be submitted by April 9, 2004.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change and Amendment No. 1 (SR-NYSE-
2003-33), is approved, and Amendment No. 2 is approved on an 
accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-6189 Filed 3-18-04; 8:45 am]
BILLING CODE 8010-01-P