[Federal Register Volume 84, Number 48 (Tuesday, March 12, 2019)]
[Notices]
[Pages 8919-8920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04424]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85252; File No. SR-NYSE-2019-04]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adjust Its Annual Fee Requirements for Listed Companies for Any
Calendar Year in Which a Listed Company Consummates a Reverse Stock
Split
March 6, 2019.
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 February 22, 2019, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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 Exchange proposes to adjust its annual fee requirements for
listed companies for any calendar year in which a listed company
consummates a reverse stock split. The proposed rule change is
available on the Exchange's website 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, 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adjust its annual fee requirements for
listed companies for any calendar year in which a listed company
consummates a reverse stock split.
Sections 902.02 and 902.03 of the Manual set forth the Exchange's
requirements with respect to the payment of annual fees by listed
companies. Listed companies are billed annual fees on a per share basis
(currently at a rate of $0.0011 per share) based on the number of
shares issued and outstanding (including treasury shares) on December
31 of the prior calendar year.\4\ The Exchange believes this is
generally an appropriate approach, as it is unusual for listed
companies to significantly reduce the number of shares outstanding
during the course of the year and, in fact, companies often issue
significant additional shares during the course of a year and they are
not charged annual fees for those shares in the first partial year
after their issuance (although companies are charged initial listing
fees on any additional shares issued during the course of the year).
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\4\ At the beginning of each calendar year, the Exchange
invoices issuers for annual fees applicable to that year.
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However, there may be a small number of listed companies each year
that consummate reverse stock splits. A reverse stock split results in
a significant reduction in the number of shares outstanding, usually
resulting in the post-split shares outstanding representing a small
percentage of the number of shares outstanding pre-split. One
consequence of this is that the listed company's annual fees will
reflect shares that are not outstanding for a portion of that year. The
Exchange believes it is appropriate to address this anomaly,
particularly in light of the fact that a listed company generally only
consummates a reverse stock split to address a low trading price and,
in many cases, may be required to take the action to bring the company
into compliance with Exchange continued listing standards.
For the foregoing reasons, the Exchange proposes to amend Section
902.02 of the Manual to include a new subsection providing that,
notwithstanding any other provision of Section 902.02 with respect to
the calculation of annual fees, in any calendar year in which a listed
company consummates a reverse stock split, such company will be charged
prorated annual fees for the period prior to such consummation based on
the shares outstanding on December 31 of the immediately preceding year
(``Original Shares Outstanding''). With respect to the remainder of
that year, such company will be charged annual fees on a prorated basis
based on the Original Shares Outstanding as adjusted by the reverse
split ratio. The Exchange will make any appropriate adjustments to its
billing procedures to implement this provision.
The Exchange notes that there are typically only a small number of
reverse stock splits consummated by listed companies in the course of a
year. Consequently, the proposed rule change would not affect the
Exchange's
[[Page 8920]]
commitment of resources to its regulatory oversight of the listing
process or its regulatory programs.
The Exchange also proposes to remove from Section 902.03 several
references to fee provisions that are no longer relevant, as those fee
rates are no longer applicable.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Section 6(b)(4) \6\ of the Act, in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges. The Exchange also believes that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\7\ in that
it is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that it is not unfairly discriminatory and
represents an equitable allocation of reasonable fees to adopt the
proposed provision adjusting annual fees for companies that consummate
reverse stock splits, as those companies would otherwise be paying
annual fees on the basis of a far larger number of shares outstanding
than is actually the case for a portion of the applicable calendar
year. In addition, a listed company generally consummates a reverse
stock split because it has a low stock price, including in many cases a
stock price that is below Exchange continued listing requirements, so
it is reasonable to encourage companies to take this action by reducing
their fee burden. The Exchange will make any appropriate adjustments to
its billing procedures to implement the proposed new provision.
The amendments to Section 902.03 simply remove outdated text and
have no substantive effect.
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. The proposed rule change is
designed to ensure that the fees charged by the Exchange accurately
reflect the services provided and benefits realized by listed
companies. The market for listing services is extremely competitive.
Each listing exchange has a different fee schedule that applies to
issuers seeking to list securities on its exchange. Issuers have the
option to list their securities on these alternative venues based on
the fees charged and the value provided by each listing. Because
issuers have a choice to list their securities on a different national
securities exchange, the Exchange does not believe that the proposed
fee changes impose a burden on competition.
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
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \10\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\10\ 15 U.S.C. 78s(b)(2)(B).
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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 email to [email protected]. Please include
File Number SR-NYSE-2019-04 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-NYSE-2019-04. 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 website (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 website 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 a.m. and 3 p.m.
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. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSE-2019-04, and should be submitted on or before April 2, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04424 Filed 3-11-19; 8:45 am]
BILLING CODE 8011-01-P