[Federal Register Volume 69, Number 181 (Monday, September 20, 2004)]
[Notices]
[Pages 56257-56259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2235]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50357; File No. SR-NYSE-2004-45]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. To Rescind Advice Previously Provided Regarding the Calculation of 
Transaction Fees

September 13, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 16, 2004, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the NYSE. 
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\ 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

    The NYSE hereby proposes to amend Exchange Rule 440H to include an 
interpretation that would rescind advice the Exchange had previously 
provided to members and member organizations regarding the calculation 
of transaction fees.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 these statements may be examined at the places specified in 
Item IV below. The Exchange 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 of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Summary
    On June 28, 2004, the Commission adopted new Rule 31 under the 
Act,\3\ regarding the calculation, payment, and collection of fees 
prescribed by Section 31 of the Act.\4\ New Rule 31, and the SEC's 
commentary in the Rule 31 Adopting Release, have rendered the 
instructions in the ``Calculation of Fees--Rounding Up'' section of 
NYSE Information Memo No. 01-51, dated December 28, 2001, inapplicable, 
because Exchange members and member organizations will no longer be 
making such calculations for purposes of determining the amounts that 
they owe the Exchange pursuant to NYSE Rule 440H. The Exchange is 
proposing to add Interpretation /01 to NYSE Rule 440H that would 
instruct Exchange members and member organizations to disregard the 
``Calculation of Fees--Rounding Up'' section of NYSE Information Memo 
No. 01-51.
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    \3\ 17 CFR 240.31.
    \4\ 15 U.S.C. 78ee. See Securities Exchange Act Release No. 
49928 (June 28, 2004), 69 FR 41059 (July 7, 2004) (File No. S7-05-
04) (``Rule 31 Adopting Release'').
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    Background
    Exchange Rule 440H requires each Exchange member or member 
organization engaged in clearing or settling transactions effected upon 
the Exchange to pay to the Exchange as a ``Transaction Fee'' a sum 
equal to the dollar amount as prescribed in Section 31 of the Act based 
on the total aggregate dollar sales volume the member or member 
organization has reported monthly on its Form 120-A. Historically, the 
funds collected by the Exchange from members and member organizations 
pursuant to Rule 440H were remitted in their entirety to the 
Commission. NYSE Information Memo No. 01-51 instructs each member or 
member organization to use a specific ``rounding up'' formula to 
calculate the fee relative to each transaction.\5\
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    \5\ NYSE Information Memo No. 01-51 states that ``[i]n 
calculating the new fee for a transaction, one should multiply the 
sale or principal amount of the transaction by the fee rate, which 
will be truncated at the seventh place after the decimal point. The 
resulting figure should then be truncated at the fifth place after 
the decimal point and rounded up to the next cent (if there is any 
remainder you should round up).''
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    In the Rule 31 Adopting Release, the Commission established new 
procedures governing the calculation, payment, and collection of fees 
and assessments on securities transactions owed by national securities 
exchanges and national securities associations (collectively, ``self-
regulatory organizations'' or ``SROs'') to the Commission pursuant to 
Section 31 of the Act.\6\ New Rule 31, Form R31, and

[[Page 56258]]

temporary Rule 31T establish procedures for the calculation and 
collection of Section 31 fees and assessments. Under the new 
procedures, each SRO must provide the Commission with data on its 
securities transactions. The Commission will then calculate the amount 
of fees and assessments due based on the volume of these transactions, 
and bill the SROs that amount.
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    \6\ Section 31 of the Act provides that the Exchange and other 
national securities exchanges' fees will be based on the aggregate 
dollar amount of sales of securities transacted on the exchange 
(Section 31(b)), that national securities associations' fees will be 
based on the aggregate dollar amount of sales of securities 
transacted by or through any member of the association otherwise 
than on a national securities exchange (Section 31(c)), and that 
national securities exchanges are assessed for each ``round turn 
transaction'' in a security future (Section 31(d)). See 15 U.S.C. 
78ee(b)-(d).
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    In the Rule 31 Adopting Release, the Commission noted that, in 
practice, SROs obtain the funds to pay Section 31 fees and assessments 
by assessing charges on their members, and the members in turn pass 
these charges to their customers.\7\ The Commission stressed that 
Section 31 ``does not address the manner or extent to which covered 
SROs may seek to recover the costs of their Section 31 obligations from 
their members. Nor does Section 31 address the manner or extent to 
which members of covered SROs may seek to pass any such charges on to 
their customers.'' \8\
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    \7\ See Rule 31 Adopting Release, Section IV.
    \8\ Id.
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    Need for Proposed Interpretation
    The Exchange believes that the new Section 31 procedures have 
rendered the instructions in the ``Calculation of Fees--Rounding Up'' 
section of NYSE Information Memo No. 01-51 inapplicable. NYSE Rule 440H 
does not dictate whether or how members or member organizations should 
charge customers to recover amounts paid to the Exchange. Therefore, 
members and member organizations should be relieved of any obligation 
to follow the rounding up and other calculation procedures described in 
the ``Calculation of Fees--Rounding Up'' section of NYSE Information 
Memo No. 01-51. Proposed Interpretation /01 to NYSE Rule 440H achieves 
this purpose.
2. Statutory Basis
    The Exchange believes that the statutory basis for this proposed 
rule change is Section 6(b)(4) of the Act \9\ which permits the rules 
of an Exchange to provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members, and issuers and other 
persons using its facilities.
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    \9\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange asserts that the foregoing proposed rule change has 
become effective upon filing pursuant to Section 19(b)(3)(A) of the Act 
\10\ and Rule 19b-4(f)(6) thereunder \11\ because it does not:
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date of filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest; provided that the 
self-regulatory organization has given the Commission written notice of 
its intent to file the proposed rule change at least five business days 
prior to the filing date of the proposed rule change.
    The NYSE has requested that the Commission waive the five business-
day pre-filing notice requirement and the 30-day pre-operative period, 
which would make the rule change operative immediately. The Commission 
believes that it is consistent with the protection of investors and the 
public interest to waive the 30-day pre-operative period in this 
case.\12\ Allowing the rule change to become operative immediately 
should provide Exchange members and member organizations with 
appropriate instructions regarding the calculation of transaction fees. 
The Commission also has determined to waive the five business-day pre-
filing notice requirement in this case.
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    \12\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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 e-mail to [email protected]. Please include 
File Number SR-NYSE-2004-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NYSE-2004-45. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site 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 inspection 
and copying in the Commission's Public Reference Room, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
NYSE. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2004-45 and should be submitted on or before October 12, 2004.


[[Page 56259]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-2235 Filed 9-17-04; 8:45 am]
BILLING CODE 8010-01-P