[Federal Register Volume 86, Number 22 (Thursday, February 4, 2021)]
[Notices]
[Pages 8240-8242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02265]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91012; File No. SR-NYSE-2021-06]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending Sections 902.02 and 902.11 of the NYSE Listed Company Manual
To Defer the Billing of Initial Listing Fees Payable by Acquisition
Companies
January 29, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on January 21, 2021, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 amend Sections 902.02 and 902.11 of the
NYSE Listed Company Manual (the ``Manual'') to defer the billing of
initial listing fees payable by Acquisition Companies. The text of the.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 102.06 sets forth listing requirements applicable to any
company with a business plan is to complete an initial public offering
and engage in a merger or acquisition with one or more unidentified
companies within a specific period (``Acquisition Company''). Section
902.11 provides that an Acquisition Company is subject to a flat
initial listing fee of $85,000 at the time of initial listing. Based on
experience listing these companies, the Exchange proposes to defer the
billing and payment of initial listing fees until one year from the
date of an Acquisition Company's initial listing on the Exchange. For
the avoidance of doubt, such fee is owed to the Exchange at the time of
initial listing based on the fee schedule in effect on the date of
listing but will be billed by the Exchange and become payable on the
first anniversary of the date of listing. The Exchange notes that the
Nasdaq Stock Market (``Nasdaq'') is the Exchange's primary competitor
in the market for the listing of Acquisition Companies and that Nasdaq
has a deferral provision comparable to the deferral the Exchange
proposes.\4\
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\4\ See Securities Exchange Act Release No. 89403 (July 31, 2020
[sic]), 85 FR 46198 (July 31, 2008 [sic]) (SR-NASDAQ-2020-038).
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Acquisition Companies are formed to raise capital in an initial
public offering (``IPO'') with the purpose of using the proceeds to
acquire one or more unspecified businesses or assets to be identified
after the IPO. However, unlike other types of listed companies that
have pre-existing operations or that fund their operations by proceeds
raised from the IPO, following the IPO, an Acquisition Company funds a
trust account with an amount typically equal to 100% of the gross
proceeds of the IPO.\5\ As such, operating expenses are typically borne
by the Acquisition Company's sponsor, particularly during the initial
post-IPO period. The Acquisition Company's sponsor is the entity or
management team that forms the Acquisition Company and, typically, runs
the operations of the Acquisition Company until an appropriate target
company is identified and the business combination is consummated. The
funds in the trust account are typically invested in short-term U.S.
government securities or held as cash, earning interest over time.
Thus, the unique structure of an Acquisition Company results in the
sponsor's extreme fee sensitivity, particularly during the initial
post-IPO period before any substantial amount of interest is earned
from the trust account. The Exchange believes that the market practice
of depositing 100% of the gross proceeds of the IPO in a trust account
(rather than the minimum of 90% required by Section 102.06) benefits
shareholders and is consistent with investor protection because it
assures that shareholders choosing to exercise their right to redeem
shares for a pro rata share of the trust account will receive the full
IPO price paid, rather than a lesser amount guaranteed by Exchange
rules. Accordingly, to encourage this market practice the Exchange
believes it is appropriate to defer the payment of the initial listing
fee owed by an Acquisition Company listed on the Exchange until the
first anniversary of the date of listing. The initial listing fee paid
at that time would be based on the fee schedule in effect at the time
of initial listing.
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\5\ Section 102.06 of the Manual provides that an Acquisition
Company could pay operating and other expenses, subject to a
limitation that 90% of the gross proceeds of the company's offering
must be retained in the trust account. However, the Exchange
understands that marketplace demands typically dictate that 100% of
the gross proceeds from the IPO be kept in the trust account and
that only interest earned on that account be used to pay taxes and a
limited amount of operating expenses.
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The Exchange believes that the proposed fee deferral would provide
an incentive to sponsors to list Acquisition Companies on the Exchange.
The Exchange also believes it is reasonable to balance its need to
remain competitive with other listing venues, while at the same time
ensuring
[[Page 8241]]
adequate revenue to meet is regulatory responsibilities. The Exchange
notes that the fee deferral will not cause any reduction to the
Exchange's revenue and no other company will be required to pay higher
fees as a result of the proposed amendments and represents that the
proposed fee deferral will have no impact on the resources available
for its regulatory programs.
The Exchange proposes to amend Section 902.02 to make it clear that
the statement in that section that initial listing fees are payable at
the time of listing will not be applicable to Acquisition Companies.
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) \7\ 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,\8\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
\8\ 15 U.S.C. 78f(b)(5).
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As a preliminary matter, the Exchange competes for listings with
other national securities exchanges and companies can easily choose to
list on, or transfer to, those alternative venues. As a result, the
fees the Exchange can charge listed companies are constrained by the
fees charged by its competitors and the Exchange cannot charge prices
in a manner that would be unreasonable, inequitable, or unfairly
discriminatory.
The Exchange believes that the proposed rule change to defer the
initial listing fees charged to Acquisition Companies as set forth in
Section 902.11 for one year from the date of listing is reasonable and
not unfairly discriminatory because it recognizes the unique structure
of Acquisition Companies that results in a sponsor's extreme fee
sensitivity, particularly during the initial post-IPO period before any
substantial amount of interest is earned from the trust account. Unlike
other companies, which have pre-existing operations and immediate
access to the IPO proceeds, Acquisition Companies are unique because at
least 90%, and typically 100%, of the IPO proceeds are held in trust
for the shareholders and are not available to fund the Acquisition
Company's operations. Acquisition Companies also do not have any prior
operations that generate cash that could be used to fund their
operations. The Exchange also believes that the proposed fee deferral
is reasonable in that it will create a commercial incentive for
sponsors to list Acquisition Companies on the Exchange. The Exchange
competes for listings, in part, by the level of its listing fees. As
Nasdaq has previously adopted a one year deferral of its entry fees for
Acquisition Companies, it is reasonable for the Exchange to adopt a
comparable deferral to enable it to remain competitive in the market
for the listing of Acquisition Companies.
The Exchange also notes that no other company will be required to
pay higher fees as a result of the proposed amendments. Therefore, the
Exchange believes that allowing an Acquisition Company to pay initial
listing fees on a deferred basis is reasonable and not inequitable or
unfairly discriminatory.
Finally, the Exchange believes that the proposal to defer such fees
is consistent with the investor protection objectives of Section
6(b)(5) of the Act in that they are designed to promote just and
equitable principles of trade, to remove impediments to a free and open
market and national market system, and in general to protect investors
and the public interest. Specifically, the amount of revenue deferred
by allowing Acquisition Companies to pay initial listing fees one year
from the date of listing is not substantial, and the fee deferral may
result in more Acquisition Companies listing on the Exchange, thereby
increasing the resources available for the Exchange's listing
compliance program, which helps assure that listing standards are
properly enforced and investors are protected. In addition, the
Exchange believes that the market practice of depositing 100% of the
gross proceeds of the IPO in a trust account for the benefit of
shareholders (rather than the required 90%) benefits those shareholders
and is consistent with the investor protection goals of the Act because
it helps assure that shareholders exercising their right to redeem
their shares for a pro rata share of the trust account will receive the
full IPO price paid, rather than a lesser amount guaranteed by NYSE
rules.
The Exchange believes that the potential impact on revenue from the
initial listing fee deferral, as proposed, will not hinder its ability
to fulfill its regulatory responsibilities.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
market for listing services is extremely competitive and listed
companies may freely choose alternative venues based on the aggregate
fees assessed, and the value provided by each listing. This rule
proposal does not burden competition with other listing venues, which
are similarly free to set their fees. The Exchange notes that Nasdaq is
its primary competitor for the listing of Acquisition Companies and
that Nasdaq has already adopted a deferral of its listing fees
comparable to the one the Exchange is proposing. For these reasons, the
Exchange does not believe that the proposed rule change will result in
any burden on competition 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
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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) \11\ of the Act to determine whether the proposed
rule
[[Page 8242]]
change should be approved or disapproved.
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\11\ 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-2021-06 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2021-06. 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 10:00 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. 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-2021-06 and should be submitted on
or before February 25, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02265 Filed 2-3-21; 8:45 am]
BILLING CODE 8011-01-P