Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 51449 

16 15 U.S.C. 78s(b)(3)(A). 

17 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 

19b–4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

prior to the filing of the proposed rule change, or 

such shorter time as designated by the Commission. 

The Commission is waiving the five day written 

notice requirement in this case. Therefore, the 

Commission notes that the Exchange has satisfied 

this requirement. 

18For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 64506 

(May 17, 2011), 76 FR 29806 (‘‘Notice’’). 

4See Letters to the Commission, from Ronald 

Russo, GLX, Inc., dated May 18, 2011 (‘‘GLX 

Letter’’); Bryan Degnan, Taylor Rafferty Associates, 

dated May 19, 2011 (‘‘Rafferty Letter’’); Jennifer 

Kaminsky, dated May 19, 2011; Anonymous, dated 

May 19, 2011 (‘‘Anonymous Letter’’); Todd Allen, 

dated May 19, 2011 (‘‘Allen Letter’’); Brian Rivel, 

President, Rivel Research Group, dated May 20, 

2011 (‘‘Rivel Letter’’); Jerry Falkner, May 22, 2011 

(‘‘Falkner Letter’’); Enzo Villani, President, MZ 

North America, dated June 6, 2011 (‘‘MZ Letter’’); 

John Fairir, dated June 7, 2011 (‘‘Fairir Letter’’); 

Michael Pepe, CEO, PrecisionIR Group, dated June 

7, 2011 (‘‘PrecisionIR Letter’’); Michael O’Connell, 

Director IR Solutions, SNL Financial, dated June 10, 

2011 (‘‘SNL Letter’’); Dominic Jones, President, IR 

Web Reporting International, Inc., dated June 15, 

2011 (‘‘IR Web Reporting Letter’’); Darrell Heaps, 

CEO, Q4 Web System, dated June 16, 2011 (‘‘Q4 

Letter’’); Dominic Jones, President, IR Web 

Reporting International, Inc., dated June 29, 2011 

(‘‘IR Web Reporting Letter 2’’); e-mails to Robert 

Cook, Director, Division of Trading and Markets 

and David Shillman, Associate Director, Division of 

Trading and Markets, from Patrick Healy, CEO, 

Issuer Advisory Group, LLC, dated June 26, 2011 

and June 28, 2011 (both e-mails indicating that the 

Issuer Advisory Group would be filing a comment 

letter to the proposed rule change); and letter from 

Patrick Healy, CEO, Issuer Advisory Group, LLC, 

dated June 30, 2011 (‘‘Issuer Advisory Letter’’). 

5See Letter to Elizabeth M. Murphy, Secretary, 

Commission, from Janet L. McGinness, Senior Vice 

President—Legal and Corporate Secretary, NYSE, 

Continued 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 16 and Rule 19b– 

4(f)(6)(iii) thereunder.17 The Exchange 

has asked the Commission to waive the 

30-day operative delay so that the 

proposal may become operative 

immediately upon filing. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest because such waiver will 

allow the clearly erroneous rules to 

continue to operate as they did prior to 

the effectiveness of the Pause Pilot 

expansion to Phase III Securities so that 

similarly situated member firms are 

provided the same opportunity of a 

clearly erroneous review. Accordingly, 

the Commission waives the 30-day 

operative delay requirement and 

designates the proposed rule change as 

operative upon filing with the 

Commission.18

At any time within 60 days of the 

filing of the 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. 

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 rulecomments@sec.gov. Please include File 

Number SR–CHX–2011–22 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CHX–2011–22. 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 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 

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; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

publicly available. All submissions 

should refer to File Number SR–CHX– 

2011–22 and should be submitted on or 

before September 8, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21026 Filed 8–17–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65127; File No. SR–NYSE– 

2011–20] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Granting Approval of Proposed Rule 

Change To Add New Section 907.00 to 

the Listed Company Manual that Sets 

Forth Certain Complimentary Products 

and Services That Are Offered to 

Currently and Newly Listed Issuers 

August 12, 2011. 

I. Introduction 

On May 5, 2011, the New York Stock 

Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend the Listed Company 

Manual (‘‘Manual’’) setting forth certain 

complimentary products and services 

offered to currently and newly listed 

issuers. The proposed rule change was 

published in the Federal Register on 

May 23, 2011.3 The Commission 

received seventeen comments from 14 

commenters on the proposal.4 NYSE 

submitted a letter in response to the 

comments.5 On July 5, 2011, the 

Commission extended the time period 

mstockstill on DSK4VPTVN1PROD with NOTICES

51450 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 

dated June 27, 2011 (‘‘NYSE Response Letter’’). 

NYSE’s Response Letter is in response to those 

comments submitted prior to June 27, 2011. See 

note 4, supra for a list of those letters. 

6See Securities Exchange Act Release No. 64809 

(July 5, 2011), 76 FR 40758 (July 11, 2011). 

7See e-mail from Theodore Lazo, General 

Counsel, NYSE to Sharon Lawson, Senior Special 

Counsel, Division of Trading and Markets and Arisa 

Tinaves, Special Counsel, Division of Trading and 

Markets on August 2, 2011. 

8See Notice, supra note 3. 

9 In the Notice, the Exchange provided examples 

of the products and services offered by the NYSE 

Market Access Center and noted that a description 

of all offerings is available on the Exchange’s Web 

site. See Notice, supra note 3. 

10See supra note 7. 

11All share classes issued include, for example, 

where a company has two classes of common stock, 

such as Class A and Class B common shares. 

12See Notice, supra note 3. 

13 ‘‘Newly listed issuers’’ means U.S. issuers 

conducting an initial public offering (‘‘IPO’’), 

issuers emerging from bankruptcy, spinoffs (where 

a company lists new shares in the absence of a 

public offering), and carve-outs (where a company 

carves out a business line or division, which then 

conducts a separate IPO). Newly listed issuers do 

not include issuers that transfer their listings from 

another national securities exchange; rather, 

transferring issuers are eligible for the services 

available to currently listed issuers. See proposed 

Rule 907.00 in the Manual. 

14The Exchange provided a description of all 

products and services offered to the Tiers. See 

Notice, supra note 3. 

15See supra note 4. 

16See Rafferty Letter, Allen Letter, Rivel Letter, 

Falkner Letter, MZ Letter, Fairir Letter, PrecisionIR 

Letter, SNL Letter, and IR Web Reporting Letter. See 

also, Issuer Advisory Letter (stating that the 

proposed rule change restricts competition for 

listings). 

in which to either approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change, to August 21, 

2011.6 This order grants approval of the 

proposed rule change. 

II. Description of the Proposal 

In its filing, NYSE is proposing to 

amend the Manual by adding a new 

Section 907.00 that sets forth a practice 

of offering certain complimentary 

products and services to currently and 

newly listed issuers. NYSE offers the 

complimentary products and services as 

described below to respond to 

competitive pressures in the market for 

listings to attract new listings and retain 

existing listings.7 These products and 

services are developed or delivered by 

NYSE or by a third-party for use by 

NYSE listed companies. Some of these 

products are commercially available by 

such third-party vendors. According to 

NYSE, all listed issuers receive the same 

complimentary products and services 

through the NYSE Market Access 

Center, while certain tiers of listed 

issuers receive additional products and 

services. As discussed in more detail 

below, the additional services an issuer 

receives is based, for currently listed 

issuers, on total shares of common stock 

or American Depository Receipts 

(‘‘ADRs’’) issued and outstanding and, 

for newly listed issuers, on total global 

market value based on a public offering 

price. 

A. NYSE Market Access Center 

NYSE developed a market 

information analytics platform that is 

available for free to all NYSE listed 

issuers, called the NYSE Market Access 

Center. In the rule filing, NYSE states 

that the NYSE’s Market Access Center 

was created to ‘‘provide issuers with 

better market insight and information 

across all exchange and trading 

venues.’’ 8 The NYSE Market Access 

Center includes products and services 

that were either a) developed by NYSE 

using proprietary data and/or 

intellectual property or b) built by a 

third-party expressly for NYSE-listed 

companies. According to NYSE, within 

this platform, all issuers have access to 

tools and information related to market 

intelligence, education, investor 

outreach, media visibility, corporate 

governance, and advocacy initiatives.9

Additionally, the NYSE Market Access 

Center provides all issuers with access 

to discounted products and services 

from the same third-party vendors. All 

issuers listed on the Exchange have 

access to the NYSE Market Access 

Center on the same basis. At the time of 

its filing with the Commission, NYSE 

noted that the products and services 

currently available through the NYSE 

Market Access Center have a 

commercial value of approximately 

$50,000 annually.10

B. Tiered Products and Services Offered 

to Certain Companies 

In addition to the NYSE Market 

Access Center, NYSE offers products 

and services to certain currently listed 

and newly listed issuers on a tiered 

basis. Currently listed issuers are 

categorized into two tiers, Tier One and 

Tier Two. Under NYSE’s proposal, Tier 

One issuers are U.S. issuers that have 

270 million or more total shares of 

common stock issued and outstanding 

in all share classes, including and in 

addition to Treasury shares, and Foreign 

Private Issuers that have 270 million or 

more in ADRs issued and outstanding, 

each calculated annually as of December 

31 of the preceding year.11 Tier Two 

issuers are categorized as those U.S. 

issuers that have 160 million to 

269,999,999 total shares of common 

stock issued and outstanding in all 

share classes, including and in addition 

to Treasury shares, and Foreign Private 

Issuers that have 160 million to 

269,999,999 in ADRs issued and 

outstanding, each calculated annually as 

of December 31 of the preceding year.12

In addition to the NYSE Market Access 

Center products and services, Tier One 

issuers receive market surveillance 

products and services, which NYSE 

states have a commercial value of 

$45,000 annually, and web-hosting 

products and services, which NYSE 

states have a commercial value of 

approximately $12,000 to $16,000 

annually. Tier Two issuers can choose 

to receive either web-hosting products 

and services at the values noted above, 

or market analytics products and 

services, with a commercial value 

according to NYSE of $20,000 annually. 

Newly listed issuers similarly are 

categorized into two tiers, Tier A and 

Tier B.13 Tier A includes issuers with a 

global market value of $400 million or 

more based on the public offering price. 

Tier B includes issuers with a global 

market value of less than $400 million 

based on the public offering price. In 

addition to the NYSE Market Access 

Center products and services, Tier A 

issuers receive either market 

surveillance products and services for a 

period of 12 calendar months from the 

date of listing or market analytics 

products and services for a period of 24 

calendar months from the date of listing, 

at the issuer’s election. The commercial 

value for these services is the same as 

those described above for Tier One or 

Tier Two issuers. Additionally, Tier A 

companies receive web-hosting, the 

value of which is noted above, and news 

distribution products and services, with 

a commercial value of $10,000 annually, 

for a period of 24 calendar months from 

the date of listing. Tier B companies 

receive web-hosting and news 

distribution products and services for a 

period of 24 calendar months from the 

date of listing. At the expiration of the 

24-month period, Tier A or Tier B 

issuers that meet the qualifications of 

Tier One or Tier Two based on total 

shares or total ADRs issued and 

outstanding receive either Tier One or 

Tier Two products and services.14

III. Summary of Comments and NYSE 

Response to Comments 

Fourteen commenters raised 

objections to the proposal.15 Generally, 

commenters expressed concern that the 

NYSE’s practice of offering 

complimentary services harms 

competing suppliers of those services or 

adversely affects competition in affected 

markets.16 Specifically, several 

commenters expressed concern about 

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Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 51451 

17See Allen Letter, Falkner Letter, Fairir Letter, 

and Rivel Letter. See also, Anonymous Letter 

(noting that there are already obstacles for smaller 

businesses). 

18See Fairir Letter (arguing that NYSE is trying 

to justify its high listing cost). 

19See GLX Letter, MZ Letter, Fairir Letter, 

PrecisionIR Letter, IR Web Reporting Letter, and Q4 

Letter. See also, Falkner Letter (noting the smaller 

providers provide innovative and often times better 

value). 

20See Rafferty Letter, Rivel Letter, Fairir Letter, 

PrecisionIR Letter, and IR Web Reporting Letter. See 

also, SNL Letter (noting that the proposal could 

reasonably be viewed as an endorsement by the 

NYSE and Commission of specific vendors) and IR 

Web Reporting Letter 2 (noting that issuers may 

conclude that certain vendors will enable issuers to 

comply with the Exchange’s listing requirement 

given the NYSE’s endorsement). 

21See Fairir Letter, Precision IR Letter, and IR 

Web Reporting Letter. 

22See Q4 Letter. 

23See Issuer Advisory Letter. 

24See MZ Letter, Fairir Letter, IR Web Reporting 

Letter, Q4 Letter, and IR Web Reporting Letter 2. 

See also, Issuer Advisory Letter (noting that the 

NYSE’s proposal restricts issuers by forcing them to 

select from a narrow list of providers). 

25See MZ Letter. See also, IR Web Reporting 

Letter (noting that a subsidy or credit would serve 

the NYSE’s objective of attracting listings). 

26See MZ Letter. 

27See Issuer Advisory Letter. 

28 Id. 

29 Id. 

30See IR Web Reporting Letter. 

31 Id. 

32 Id. 

33 Id. 

34See supra note 5. 

35See NYSE Response Letter. 

36 Id. 

37See IR Web Reporting Letter 2. 

38 Id. 

39See NYSE Response Letter. 

40 15 U.S.C. 78f. In approving this proposed rule 

change, the Commission has considered the 

Continued 

adverse effects arising from the 

‘‘strategic partnership’’ with ThomsonReuters and Ipreo. The concern is that 

offering complimentary services 

disadvantages smaller businesses 

providing investor relations services.17

One commenter noted that the NYSE’s 

complimentary offering of these services 

makes it ‘‘too difficult to compete’’ with 

Thomson-Reuters and Ipreo.’’ 18

Commenters also believed that the 

proposal, by endorsing certain vendors, 

would discourage new vendors from 

entering markets for vendor services or 

stifle innovation.19

Commenters believed that the 

proposal would require issuers to use 

the specific vendor offered by NYSE or 

create the impression that listed 

companies must use the preferred 

vendor.20 Additionally, three 

commenters believed that although 

issuers are not required to use the 

services and providers offered by NYSE, 

providers of competing products are 

still disadvantaged because they would 

have to convince issuers to pay for a 

similar service that the issuers are able 

to receive for no cost from the 

Exchange.21 However, one vendor who 

commented stated that in the last 

several months, its service has replaced 

an NYSE complimentary service, 

specifically web-hosting, for a number 

of NYSE issuers.22 Additionally, 

another commenter stated that 

numerous issuers have continued to use 

their existing preferred service 

providers at an additional cost to the 

issuers, instead of taking advantage of 

the complimentary products and 

services provided by NYSE.23

Four commenters suggested that 

instead of offering complimentary 

products and services of certain 

vendors, NYSE should instead offer 

issuers a subsidy or credit, which would 

allow them to use any service 

provider.24 One commenter argued that 

such credit would benefit the Exchange 

by allowing it to continue to provide 

such products and services to issuers, 

but through a vendor of the issuers’ own 

choosing.25 This commenter believed 

that such an approach would ultimately 

benefit competition by leveling the 

playing field and allowing all vendors, 

both large and small to compete.26

Another commenter recommended 

disapproving the proposed rule change 

and having the exchanges consider free 

listings or alternatively, having the 

Commission require increased 

disclosure regarding listing benefit 

packages provided to issuers, which 

would address transparency concerns.27

Additionally, the commenter suggested 

that the Commission appoint an 

independent task force comprised of 

issuers to recommend a model that 

would permit the exchanges to provide 

services while not limiting value-added 

service offerings.28 The commenter 

argued that NYSE’s proposal would 

result in the equivalent of a maximum 

service cap and that the Commission’s 

approval of the proposal will be used by 

the Exchange as a justification for 

limiting their service offerings.29

One commenter noted that the 

proposal is not clear on the fee 

arrangements between the Exchange and 

the product and service vendors and 

questioned whether issuers pay for 

services over and above the services 

provided by NYSE and if the vendors 

share revenues with the Exchange or if 

the services are competitively priced.30

The commenter also asked if NYSE 

receives payment from its preferred 

providers.31

Lastly, this commenter raised the 

issue of whether a for-profit exchange 

should be in the investor relations 

services business at all.32 According to 

the commenter, there is a conflict of 

interest between the exchange’s role as 

a service provider or endorser of service 

providers and its role as a selfregulatory organization that sets and 

enforces disclosure requirements for its 

listed companies.33

In the NYSE Response Letter, NYSE 

responded to the issues raised by the 

commenters.34 The NYSE Response 

Letter clarified that no issuer is forced 

or required to utilize the complimentary 

products or services as a condition of 

listing and consequently, can continue 

to use alternative products and services 

of their choice.35

Further, the Exchange represented 

that it provides the third-party products 

and services to listed companies 

through non-exclusive arrangements 

with vendors. Accordingly, the 

Exchange is willing to consider entering 

into such arrangements with other thirdparty vendors that provide ‘‘highquality’’ products and services. NYSE 

further stated that it does not endorse, 

nor require the use of, any particular 

vendor or any particular products and 

services.36

In response to the NYSE Response 

Letter, one commenter questioned the 

Exchange’s willingness to enter into 

arrangements with other third-party 

vendors, stating that upon performing 

its own research, the commenter was 

unable to ‘‘find any information 

provided by NYSE outlining the process 

that vendors must follow to have their 

services added or reviewed.’’ 37 Further, 

the commenter questioned whether the 

Exchange’s current vendor that offers 

web-hosting and wire services is of 

‘‘high quality’’, asserting that the vendor 

lacked distribution to a popular website 

for investors to which all of its 

competitors provide distribution 

services.38

Finally, in response to the conflict of 

interest issue that was raised, the 

Exchange disagreed that there is any 

conflict of interest with respect to its 

offerings of products and services 

because such product and services are 

offered on a complimentary basis and 

the arrangements with the vendors are 

non-exclusive. NYSE also reiterated that 

issuers are not required to accept or use 

the products or services to satisfy their 

obligations under the Exchange’s listing 

standards.39

IV. Discussion and Commission’s 

Findings 

The Commission has carefully 

reviewed the proposed rule change and 

finds that it is consistent with the 

requirements of Section 6 of the Act.40

mstockstill on DSK4VPTVN1PROD with NOTICES

51452 Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

41 15 U.S.C. 78f(b)(4). 

42 15 U.S.C. 78f(b)(5). 

43 15 U.S.C. 78f(b)(8). 

44See Notice, supra note 3. 

45See Q4 Letter. 

46See Issuer Advisory Letter. 

47See supra note 7. 

48 15 U.S.C. 78f(b)(8). 

49See e-mail from Theodore Lazo, General 

Counsel, NYSE Regulation to Sharon Lawson, 

Senior Special Counsel, Division of Trading and 

Markets on August 5, 2011. See also, telephone 

conversation between Joseph Mecane, Executive 

Vice President, NYSE, Theresa Molloy, Vice 

President, NYSE, Holly Kulka, Senior Vice 

President, NYSE, Theodore Lazo, General Counsel, 

NYSE Regulation and Sharon Lawson, Senior 

Special Counsel and Arisa Tinaves, Special 

Counsel, Division of Trading and Markets, 

Commission and Amy K. Edwards, Assistant 

Director and Cindy Alexander, Assistant Chief 

Economist, Division of Risk, Strategy, and Financial 

Information, Commission. 

50 Id. 

Specifically, the Commission finds that 

the proposal is consistent with Sections 

6(b)(4),41 6(b)(5),42 and 6(b)(8)43 in that 

the proposal is designed to provide for 

the equitable allocation of reasonable 

dues, fees, and other charges among 

exchange members and issuers and 

other persons using its facilities and 

among other things, that the Exchange’s 

rule is designed to promote just and 

equitable principles of trade, and is not 

designed to permit unfair 

discrimination between issuers, and that 

the rules of the Exchange do not impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

The Commission believes that the 

proposed rule change, which would 

permit the NYSE to provide 

complimentary products and services to 

all listed companies and additional 

products and services to certain 

companies based on (i) total shares or 

total ADRs issued and outstanding for 

currently listed issuers or (ii) global 

market value based on a public offering 

price for newly listed issuers, is 

appropriate and consistent with the Act. 

The Commission also believes that by 

describing in the Manual the products 

and services available to issuers and the 

values of the products and services, the 

Exchange is adding greater transparency 

to its rules and the fees applicable to 

issuers. 

The Commission notes that the NYSE 

has represented that the various tiers are 

designed so that qualifying issuers with 

increased trading volumes and market 

activity have enhanced access to 

products and services that the listed 

companies would use in the absence of 

the complimentary services 

arrangement. The NYSE has further 

represented that all issuers receive some 

level of free services and that the 

requirements to qualify for a higher 

level of free services and products are 

transparent and set forth clearly in the 

language being adopted in new Section 

907.00 of the Manual. This language 

also includes the commercial value of 

the free services in each tier. While not 

all issuers receive the same level of 

services, NYSE has stated that trading 

volume and market activity are related 

to the level of services that the listed 

companies would use in the absence of 

the complimentary services 

arrangements.44 Further, the criteria for 

satisfying the tiers are the same for all 

issuers. Accordingly, based on the 

factors noted above, the Commission 

believes that the proposed rule changes 

to the Manual are consistent with the 

requirements of the Act and, in 

particular, that the products and 

services and their commercial value are 

equitably allocated among issuers 

consistent with Section 6(b)(4) of the 

Act, and the rule does not unfairly 

discriminate between issuers consistent 

with Section 6(b)(5) of the Act. 

The NYSE Response Letter clarified 

and responded to many of the questions 

and concerns raised by commenters. 

Specifically, NYSE represented that 

issuers are not forced or required to 

utilize the complimentary products and 

services as a condition of listing. 

Furthermore, the third-party products 

and services are provided through nonexclusive arrangements with vendors 

and the Exchange does not expressly 

endorse any particular vendor or any 

product or services provided by any 

particular vendor. In fact, one vendor 

noted that it has replaced the NYSE’s 

complimentary web-hosting vendor 

with its web system for a number of 

NYSE listed issuers.45 Another 

commenter stated that issuers use other 

service providers despite incurring 

additional costs.46

The Commission recognizes, however, 

that the proposed rule change may affect 

the purchase decisions of some listed 

issuers. The effect of offering the 

services of some vendors on a 

complimentary basis is to provide 

issuers with the services of those 

vendors at a price that is lower in 

relative terms than what other vendors 

charge. A reduction in a vendor’s 

relative price will generally cause some 

issuers to substitute their business 

toward that vendor. Accordingly, the 

Commission believes that the NYSE’s 

offering of selected vendors’ products 

and services on a complimentary basis 

will, by lowering their relative price, 

likely cause some listed issuers to 

substitute their business away from 

other vendors and toward the selected 

vendors. The Commission believes, 

however, that the impact of this 

substitution would be mitigated for the 

reasons discussed below. 

The Commission believes that the 

NYSE is responding to competitive 

pressures in the market for listing in 

making this proposal. Specifically, the 

NYSE is offering complimentary 

products and services to attract new 

listings, retain currently-listed issuers, 

and respond to competitive pressures.47

The Commission understands that the 

NYSE faces competition in the market 

for listing services, and that it competes 

in part by improving the quality of the 

services that it offers listed companies. 

By offering products and services on a 

complimentary basis and ensuring that 

it is offering the services most valued by 

its listed issuers, the NYSE will improve 

the quality of the services that listed 

companies receive. Accordingly, the 

Commission believes that NYSE’s 

proposal reflects the current competitive 

environment for exchange listings 

among national securities exchanges, 

and is appropriate and consistent with 

Section 6(b)(8) in furtherance of the 

purposes of the Act.48

The Commission also recognizes that 

to ensure quality to its listed issuers, the 

NYSE represented that it selects only 

vendors with the capacity to service all 

their eligible listed companies without 

sacrificing quality.49 Thus, some small 

service vendors may be placed at a 

disadvantage. Nonetheless, the 

Commission does not believe that the 

proposal harms the market for the 

complimentary products and services in 

a way that constitutes an inappropriate 

burden on competition or an inequitable 

allocation of fees, or fails to promote 

just and equitable principles of trade, in 

a manner inconsistent with the Act. As 

noted above, issuers are not forced or 

required to utilize the complimentary 

products and services and some issuers 

have selected competing products and 

services. The NYSE’s consideration of 

quality and the needs of its listed 

issuers in selecting the vendors and its 

willingness to change vendors is 

consistent with competition for vendor 

services. The Commission also 

understands that the NYSE selected its 

current service providers substantially 

based on the service providers that 

many NYSE listed issuers were using at 

the time of the selection.50 The approval 

of the rule proposal, will, however, help 

ensure that individual issuers are not 

given specially negotiated packages for 

products and services to list or remain 

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Federal Register / Vol. 76, No. 160 / Thursday, August 18, 2011 / Notices 51453 

51 15 U.S.C. 78f(b) and 15 U.S.C. 78s(b). 

52 Id. 

53 15 U.S.C. 78s(b)(2). 

54 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

listed which would raise unfair 

discrimination issues under the Act. 

While some commenters have argued 

that the Commission’s approval of the 

NYSE’s proposal will mean the 

Commission has implicitly approved 

the particular service providers NYSE 

currently uses, the Commission 

disagrees. The Commission, in 

approving the Exchange’s proposal, is 

not endorsing, specifically or implicitly, 

any party with which the NYSE has 

chosen to do business. 

The Commission has carefully 

considered the comment letters. 

Although some of the alternative 

proposals by the commenters might also 

satisfy the standards under Sections 6(b) 

and 19(b) of the Act51 depending on the 

facts and circumstances, those proposals 

are not before us, and the Commission 

believes that the NYSE’s proposal is 

consistent with these standards and, 

therefore, should be approved. Other 

commenters raised certain issues 

beyond the scope of the Commission’s 

review of this rule proposal, such as the 

fee arrangements between the NYSE and 

the providers of the services described 

in this order. The Commission has 

carefully considered these comments 

but believes that the proposal before the 

Commission satisfies the requirements 

for approval under Sections 6(b) and 

19(b) of the Act52 for the reasons 

discussed above. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,53 that the 

proposed rule change (SR–NYSE–2011– 

20) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.54

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21035 Filed 8–17–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65125; File No. SR– 

NASDAQ–2011–105] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

Establish an Acceptable Trade Range 

for Quotes and Orders Entered on the 

NASDAQ Options Market 

August 12, 2011. 

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 2, 

2011, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’) 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 NASDAQ. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

NASDAQ proposes to establish an 

Acceptable Trade Range for quotes and 

orders entered on the NASDAQ Options 

Market (‘‘NOM’’). Similar mechanisms 

are used successfully on other 

exchanges to protect investors and 

members by limiting volatility and 

obvious errors. 

The text of the proposed rule change 

is available at http:// 

NASDAQ.cchwallstreet.com/, at 

NASDAQ’s principal office, 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, 

NASDAQ 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. 

NASDAQ 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 

Background. In the current highspeed electronic market environment, 

various trading centers grapple with 

issues associated with thinly traded 

securities such as price dislocations, 

wide quotes, and erroneous executions 

that can result in trade cancellations. 

Though these situations are not overly 

prevalent, they can produce confusion 

and frustration among market 

participants. As a custodian and 

operator of several U.S. exchanges, 

NASDAQ believes that it is always 

prudent and appropriate to consider 

system enhancements that will preclude 

potential future issues with or 

unforeseen gaps in the existing structure 

of its trading systems. 

Accordingly, NASDAQ is proposing 

to adopt a mechanism that will prevent 

the NOM trading system (‘‘System’’) 

from experiencing dramatic price 

swings. This circumstance can exist if, 

for example, a market order or 

aggressively priced limit order is 

entered that is larger than the total 

volume of contracts quoted at the topof-book across all U.S. options 

exchanges. Currently, without any 

protections in place, this could result in 

options executing at prices that have 

little or no relation to the theoretical 

price of the option. 

For example, in a thinly traded 

option: 

Away Exchange Quotes: 

Exchange Bid size Bid price Offer price Offer size 

PHLX ................................................................................................................ 10 $1.00 $1.05 10 

NYSE Arca ....................................................................................................... 10 1.00 1.05 10

NYSE Amex ..................................................................................................... 10 1.00 1.10 10 

BOX ................................................................................................................. 10 1.00 1.15 10 

NOM Price Levels: 

Exchange Bid size Bid price Offer price Offer size 

NOM ................................................................................................................. 10 $1.00 $1.05 10 

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