[Federal Register Volume 70, Number 121 (Friday, June 24, 2005)]
[Notices]
[Pages 36683-36685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3284]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51872; File No. SR-NYSE-2005-42]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to a Specialist Marketing and Investor Education Fee for 
Investment Company Units

June 17, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on June 13, 2005, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II, below, which Items have been prepared by the Exchange. The proposed 
rule change has been filed by the Exchange as establishing or changing 
a due, fee, or other charge, pursuant to Section 19(b)(3)(A)(ii) of the 
Act,\3\ and Rule 19b-4(f)(2)\4\ thereunder, which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to charge a fee to specialists allocated 
listed Investment Company Units (``ICUs'') in circumstances where the 
Exchange undertakes to provide funds to a third party for marketing and 
investor education in connection with the listing of those ICUs. Below 
is the text of the

[[Page 36684]]

proposed rule change. Proposed new language is in italics.
* * * * *

2005 Price List

* * * * *
Facility and Equipment Fees
* * * * *
    Specialist Marketing and Investor Education Fee--payment by the 
specialist unit allocated an issue of Investment Company Units of any 
amount payable by the Exchange to a third party for marketing and 
investor education expenses in connection with trading on the 
Exchange--billed quarterly.** Five-sixths (83.33%) of the amount 
payable by the Exchange.


    Notes: 

* * * * *
    **The amount paid by a specialist unit will be apportioned each 
calendar quarter among the specialist units allocated ICUs subject 
to an Exchange payment to a third party. Such amount will be 
apportioned to a specialist unit based on the specialist unit's 
share of the ``Notional NYSE ADV'' for the ICUs subject to the 
payment. Notional NYSE ADV is defined as the average daily share 
volume on the NYSE for the quarter for an ICU multiplied by the 
average consolidated closing price for the quarter for such ICU.

    The following hypothetical demonstrates how the apportionment will 
operate. Assume three ICUs with a Notional NYSE ADV for the preceding 
calendar quarter of 50,000, 100,000 and 150,000, respectively. The 
three ICUs are allocated to Specialist Units A, B and C, respectively. 
Specialist Units A, B and C would be billed 16.67%, 33.33% and 50% of 
the amount apportioned to the specialist units for the quarter (i.e., 
in the aggregate, five-sixths of the amount payable by the Exchange). 
Each calendar quarter, the Exchange will notify each specialist unit of 
the amount payable for the preceding quarter.
* * * * *

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
    The Exchange anticipates that it may undertake in the future to 
provide funds to third parties for marketing and investor education 
with respect to certain listings of ICUs, also known as Exchange Traded 
Funds. In such circumstances, the Exchange believes it is appropriate 
for the specialists allocated those listed ICUs to participate in the 
provision of such funds to the relevant third party. The Exchange 
therefore proposes to implement a Specialist Marketing and Investor 
Education Fee to be imposed in connection with payments made to third 
parties in connection with the listing of any ICUs subject to such 
third party payments. This fee would be separate from the current 
Specialist License Fee.\5\ The Exchange believes that the fee would be 
imposed in a fair and equitable manner on all specialists trading the 
securities subject to a third party fee or payment.
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    \5\ See Securities Exchange Act Release No. 50109 (July 28, 
2004), 69 FR 47192 (August 4, 2004) (File No. SR-NYSE-2004-35)
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    The amount paid by the specialists would be calculated and 
apportioned following each calendar quarter among the specialist units 
allocated ICUs that are subject to an Exchange payment to third 
parties. This amount would represent five-sixths (83.33%) of the annual 
amount payable by the Exchange, as apportioned for the quarter. Such 
amount would be apportioned to specialist units for each ICU that is 
subject to the fee, calculated based on the ``Notional NYSE ADV'' for 
each relevant ICU. Notional NYSE ADV would be defined as the average 
daily share volume on the NYSE for the calendar quarter for the 
particular ICU multiplied by the average consolidated closing price for 
the quarter for such ICU.
    The following hypothetical demonstrates how the apportionment would 
operate. Assume three ICUs with a Notional NYSE ADV for the preceding 
calendar quarter of 50,000, 100,000, and 150,000, respectively. Also 
assume that the three ICUs are allocated to Specialist Units A, B, and 
C, respectively. Specialist Units A, B, and C would be billed 16.67%, 
33.33% and 50% of the amount apportioned to the specialist units for 
the quarter (i.e., in the aggregate, five-sixths of the amount payable 
by the Exchange). Each calendar quarter, the Exchange would notify each 
specialist unit of the amount payable, if any, under the Specialist 
Marketing and Investor Education Fee for the preceding quarter.
    The Exchange believes that the Notional NYSE ADV is an appropriate 
mechanism for allocating the fee among the specialists as it takes into 
account both trading volume and share price. Therefore, a relatively 
high-priced ICU with a relatively low share volume might be subject to 
a fee comparable to a relatively low-priced ICU with relatively high 
share volume. According to the Exchange, the proposed manner of 
apportioning the fee among specialist units attempts to equalize the 
fee among ICUs with different trading characteristics, instead of 
apportioning the fee based on a single characteristic (e.g., NYSE share 
volume).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act,\7\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 will 
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 foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act,\8\ and Rule 19b-4(f)(2)\9\ 
thereunder, because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. 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,

[[Page 36685]]

or otherwise in furtherance of the purposes of the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(f)(2).
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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-2005-42 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NYSE-2005-42. 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 Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. 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-2005-42 and should be 
submitted on or before July 15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3284 Filed 6-23-05; 8:45 am]
BILLING CODE 8010-01-P