[Federal Register Volume 81, Number 162 (Monday, August 22, 2016)]
[Notices]
[Pages 56720-56722]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19894]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78586; File No. SR-NYSEMKT-2016-62]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Section 146 of the NYSE MKT Company Guide 
To Adjust the Entitlement to Services of Special Purpose Acquisition 
Companies

August 16, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 2, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 146 of the NYSE MKT Company 
Guide (the ``Company Guide'') to adjust the entitlement to services of 
special purpose acquisition companies. The proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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 self-regulatory organization 
included statements concerning the purpose of,

[[Page 56721]]

and basis for, the proposed rule change and discussed any comments it 
received on the proposed rule change. The text of those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to amend Section 146 of the Company Guide to 
adjust the service entitlements of special purpose acquisition 
companies (``SPACs'') under that rule.
    The Exchange offers complimentary products and services for a 
period of 24 calendar months from the date of initial listing to a 
category of listed companies defined as Eligible New Listings. Eligible 
New Listings include: (i) any U.S. company that lists common stock on 
the Exchange for the first time and any non-U.S. company that lists an 
equity security on the Exchange under Section 101 or 110 of the Company 
Guide for the first time, regardless of whether such U.S. or non-U.S. 
company conducts an offering, (ii) any U.S. or non-U.S. company that 
transfers its listing of common stock or equity securities, 
respectively, to the Exchange from another national securities exchange 
or (iii) any U.S. or non-U.S. company emerging from a bankruptcy, 
spinoff (where a company lists new shares in the absence of a public 
offering), and carve-out (where a company carves out a business line or 
division, which then conducts a separate initial public offering).
    Eligible New Listings are entitled to receive Web-hosting products 
and services (with a commercial value of approximately $16,000 
annually), web-casting services (with a commercial value of 
approximately $6,500 annually), whistleblower hotline services (with a 
commercial value of approximately $4,000 annually), news distribution 
products and services (with a commercial value of approximately $20,000 
annually) and corporate governance tools (with a commercial value of 
approximately $15,000 annually) for a period of 24 calendar months from 
the date of initial listing on the Exchange. Notwithstanding the 
foregoing, however, if an Eligible New Listing begins to use a 
particular product or service provided for under Section 146 within 30 
days of its initial listing date, the complimentary period will begin 
on the date of first use.
    A SPAC is a special purpose company formed for the purpose of 
effecting a merger, capital stock exchange, asset acquisition, stock 
purchase, reorganization or similar business combination with one or 
more operating businesses or assets. To qualify for initial listing a 
SPAC must meet one of the quantitative standards in Section 101 or 102 
and also the SPAC-specific requirements of Section 119. At least 90% of 
the gross proceeds from the SPAC's initial public offering and any 
concurrent sale by the company of equity securities must be deposited 
in a trust account maintained by an independent trustee, an escrow 
account maintained by an ``insured depository institution'', as that 
term is defined in Section 3(c)(2) of the Federal Deposit Insurance 
Act, or in a separate bank account established by a registered broker 
or dealer (collectively, a ``deposit account''). Under Section 119(b), 
within 36 months of the effectiveness of a SPAC's initial public 
offering registration statement, or such shorter period that the 
company specifies in its registration statement, the company must 
complete one or more business combinations having an aggregate fair 
market value of at least 80% of the value of the deposit account 
(excluding any deferred underwriter's fees and taxes payable on the 
income earned on the deposit account) at the time of the agreement to 
enter into the initial combination (the ``Business Combination 
Condition'').
    The Exchange now proposes to amend Section 146 to exclude newly-
listed SPACs from the definition of Eligible New Listings. In lieu of 
receiving these services at the time of initial listing, the proposed 
amended rule would treat a SPAC that remains listed after meeting the 
Business Combination Condition as an Eligible New Listing and would 
provide the services to which that status would entitle it for 24 
months from the date of meeting the Business Combination Condition.
    The Exchange believes this approach is appropriate in light of the 
special characteristics of a SPAC. SPACs raise money on a one-time 
basis and typically trade at a price that is very close to their 
liquidation value. As such, SPAC managements are typically not focused 
on their stock price and investor relations to the same degree as 
operating companies are. As the services provided to Eligible New 
Listings are targeted in large part on those market-driven concerns of 
newly-listed operating companies, they are less useful to SPACs. A SPAC 
that has met the Business Combination Condition, on the other hand, is 
similarly situated to a newly-formed publicly-traded operating company 
and the Exchange believes that the services provided to Eligible New 
Listings will be as relevant and attractive to a SPAC that has met the 
Business Combination Condition as to the newly-listed operating 
companies that are generally eligible for those services.
    The Exchange believes that companies will often require a period of 
time after meeting the Business Combination Condition to complete the 
contracting and training process with vendors providing the 
complimentary products and services. Therefore, many companies may not 
be able to begin using the suite of products offered to them 
immediately on becoming eligible. To address this issue, the Exchange 
proposes to specify in Section 146 that if a SPAC that has met the 
Business Combination Condition begins using a particular service within 
30 days after the date of it met [sic] the Business Combination 
Condition, the complimentary period begins on such date of first use. 
In all other instances, the complimentary period will begin on the date 
the SPAC meets the Business Combination Condition.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act, \4\ in general, and furthers the 
objectives of Sections 6(b)(4) \5\ of the Act, in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members and issuers and other 
persons using its facilities. The Exchange also believes that the 
proposed rule change is consistent with Section 6(b)(5) \6\ of the Act 
in that it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to offer complimentary 
products and services to attract and retain listings and respond to 
competitive pressures. As SPACs are unlikely to utilize the services 
available to them currently at the time of initial listing but would 
likely find those services useful if they remain listed after they meet 
the Business Combination Condition, the Exchange believes it is 
reasonable to shift the time when SPACs are eligible for the services 
available to Eligible New Listings to the period

[[Page 56722]]

immediately after meeting the Business Combination Condition.
    The Exchange believes that it is not unfairly discriminatory to 
provide SPACs with the applicable services only if and when they meet 
the Business Combination Condition. The Exchange recognizes that not 
all SPACs will meet the Business Combination Condition and that some 
listed SPACs will therefore never become eligible for the services that 
would be provided to an otherwise similarly qualified operating 
company. However, given the specific characteristics of the SPAC 
structure, these services are generally not of any particular value to 
a SPAC prior to meeting the Business Combination Condition and the 
Exchange therefore believes that those SPACs that never qualify for the 
services will not suffer any meaningful detriment as a consequence.
    Allowing SPACs up to 30 days after meeting the Business Combination 
Condition to start using the complimentary products and services is a 
reflection of the Exchange's experience that it can take companies a 
period of time to review and complete necessary contracts and training 
for services following their becoming eligible for those services. 
Allowing this modest 30 day period, if the company needs it, helps 
ensure that the company will have the benefit of the full period 
permitted under the rule to actually use the services, thus giving 
companies the full intended benefit.

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. In many cases, SPACs will 
consider transferring to a new listing venue at the time they meet the 
Business Combination Condition. The proposed rule change enables the 
Exchange to compete for the retention of these companies by offering 
them a package of complimentary products and services that assist their 
transition to being a publicly listed operating company for the first 
time. All similarly situated companies are eligible for the same 
package of services. Therefore, the proposed creation of Section 146 of 
the Company Guide will increase competition by enabling the Exchange to 
more effectively compete for listings.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 email to [email protected]. Please include 
File Number SR-NYSEMKT-2016-62 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2016-62. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the 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-NYSEMKT-2016-62 and should 
be submitted on or before September 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19894 Filed 8-19-16; 8:45 am]
 BILLING CODE 8011-01-P