Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices 83731 

23 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3As proposed, fees for connectivity services 

would be assessed based on each active 

connectivity service product at the close of business 

on the first day of each month. If a product is 

canceled prior to such fee being assessed, then the 

Member will not be obligated to pay the applicable 

product fee. 

All submissions should refer to file 

number SR–CboeBZX–2024–094. 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 (https://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 the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2024–094 and should be 

submitted on or before November 7, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–23901 Filed 10–16–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101320; File No. SR–LTSE– 

2024–07] 

Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Amend 

the Fee Schedule To Adopt Certain 

Connectivity Fees 

October 11, 2024. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on October 

1, 2024, Long-Term Stock Exchange, 

Inc. (‘‘LTSE’’ 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 selfregulatory organization. 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 Substance of 

the Proposed Rule Change 

The Exchange is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

to amend the LTSE Fee Schedule (the 

‘‘Fee Schedule’’) to adopt certain 

connectivity fees effective October 1, 

2024. The text of the proposed rule 

change is available at the Exchange’s 

website at https://

longtermstockexchange.com/, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement on 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 

self-regulatory organization 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 is proposing to 

establish a new section (C. Connectivity) 

in the Long-Term Stock Exchange Fee 

Schedule and adopt fees for CrossConnect (Primary), Cross-Connect 

(Disaster Recovery), Cross-Connect (Test 

Environment) and Logical Connectivity 

(all Environments) that will apply to all 

market participants connecting to the 

Exchange.3

Cross-Connect Fees 

The Exchange proposes to offer to 

both Members and non-Members the 

choice of a 10 Gigabit (‘‘Gb’’) ultra-low 

latency (‘‘ULL’’) fiber cross-connection 

to the Exchange’s Primary and Disaster 

Recovery facilities, as well as a 10Gb 

cross-connection to the Test 

Environment facility. The Exchange 

proposes to establish a Cross-Connect 

fee of $5,500 per 10Gb physical 

interface per month that will be 

assessed to Members and non-Members 

for connecting to the Primary facility. 

The Exchange proposes to establish a 

Cross-Connect fee of $2,750 per 10Gb 

physical interface per month that will 

be assessed to Members and nonMembers for connecting to both the 

Disaster Recovery facility or the Test 

Environment. 

Monthly network connectivity fees for 

Members and non-Members for 

connectivity will be assessed in any 

month the Member or non-Member is 

credentialed to use any of the LTSE 

Application Programming Interfaces 

(‘‘APIs’’) in either the Primary, Disaster 

Recovery or test environments. 

Port Fees 

The Exchange proposes to establish a 

$450 fee for all Logical Connectivity 

sessions. These application sessions, 

commonly known as ports, are utilized 

to perform a particular function on the 

Exchange, such as order entry or order 

cancellation, receipt of drop copies, 

proprietary market data dissemination, 

or requesting data to be backfilled (i.e., 

‘‘gap ports’’). All market participants 

(members and non-members) will be 

charged per session per month. The 

Exchange will waive the fees for three 

sessions per month per market 

participant. 

In proposing to charge fees for 

connectivity to LTSE, the Exchange has 

sought to be especially diligent in 

assessing those fees in a transparent way 

against its own aggregate costs of 

providing the related services, and also 

carefully and transparently assessing the 

impact on Members—both generally and 

in relation to other Members, i.e., to 

assure the fee will not create a financial 

burden on any participant and will not 

have an undue impact in particular on 

smaller Members and competition 

among Members in general. The 

Exchange believes that this level 

diligence and transparency is called for 

by the requirements of Section 19(b)(1) 


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83732 Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices 

4 15 U.S.C. 78s(b)(1). 

5 17 CFR 240.19b–4. 

6 15 U.S.C.78f(b). 

7 15 U.S.C. 78f(b)(4). 

8 15 U.S.C. 78(b)(5). 

9 15 U.S.C. 78f(b)(8). 

10 In 2019, Commission staff published guidance 

suggesting the types of information that SROs may 

use to demonstrate that their fee filings comply 

with the standards of the Exchange Act (‘‘Fee 

Guidance’’). While LTSE understands that the Fee 

Guidance does not create new legal obligations on 

SROs, the Fee Guidance is consistent with LTSE’s 

view about the type and level of transparency that 

exchanges should meet to demonstrate compliance 

with their existing obligations when they seek to 

charge new fees. See Staff Guidance on SRO Rule 

Filings Relating to Fees (May 21, 2019). 

11The Exchange and MEMX Technologies 

executed a Development, License and Services 

Agreement on January 23, 2024, with accompanying 

Schedules (collectively, the ‘‘DLSA’’). MEMX 

Technologies, an affiliate of the MEMX Exchange, 

is in the business of developing technology systems 

for use in the financial industry. See SR–LTSE– 

2024–03. 

12See SR–MEMX–2022–26. 

13Types of market participants that obtain 

connectivity services from the Exchange but are not 

Members include service bureaus and extranets. 

Service bureaus offer technology-based services to 

other companies for a fee, including order entry 

services to Members, and thus, may access 

application sessions on behalf of one or more 

Members. Extranets offer physical connectivity 

services to Members and non-Members. 

under the Act,4 and Rule 19b–4 

thereunder,5 with respect to the types of 

information self-regulatory 

organizations (‘‘SROs’’) should provide 

when filing fee changes, and Section 

6(b) of the Act,6 which requires, among 

other things, that exchange fees be 

reasonable and equitably allocated,7 not 

designed to permit unfair 

discrimination,8 and that they not 

impose a burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.9 This rule 

change proposal addresses those 

requirements, and the analysis and data 

in each of the sections that follow are 

designed to clearly and 

comprehensively show how they are 

met.10

Cost Analysis 

The Exchange notes it operates a 

unique model where the LTSE trading 

system and services are provided on an 

outsourced basis by MEMX 

Technologies LLC.11 As such, most of 

the Exchange’s technology costs, 

including those related to Connectivity, 

are incorporated into the overall fees 

that the Exchange pays MEMX 

Technologies as part of its multi-year 

arrangement to provide a trading system 

and associated services. Because of this 

arrangement, the Exchange does not 

possess the same level of specificity for 

cost drivers related to Connectivity as 

other exchanges have detailed within 

their own similar filings. However, the 

Exchange recognizes that the costs 

associated with building out and 

maintaining a state-of-the-art network 

infrastructure for LTSE were extensive 

and in line with the costs that MEMX 

LLC, an exchange that also uses the 

trading system and associated services 

of MEMX Technologies, outlined in its 

own filing establishing connectivity fees 

for Members and Non-Members.12

These include costs associated with 

maintaining and expanding a team of 

highly-skilled network engineers, fees 

charged by the third-party data center 

operator, costs associated with projects 

and initiatives designed to improve 

overall network performance and 

stability, and costs associated with 

fully-supporting advances in 

infrastructure and expansion of network 

level services, including customer 

monitoring, alerting and reporting. 

There are also significant technology 

expenses related to establishing and 

maintaining Information Security 

services, enhanced network monitoring 

and customer reporting, as well as 

Regulation SCI mandated processes, 

associated with the MEMX 

Technologies network technology. 

Because of this structure, the Exchange 

is unable to separate out its expense by 

connectivity alternative, as all 

connectivity alternatives are intricately 

combined in its DSLA with MEMX 

Technologies. 

Further, while the Exchange has been 

operating since September 2020, it only 

entered the DLSA with MEMX 

Technologies LLC in January of this year 

and launched the new trading system in 

September 2024. Therefore, the 

Exchange’s most recent publicly 

available financial statement (2023 

Audited Unconsolidated Financial 

Statement) is not an accurate reflection 

of the total annual costs associated with 

the development and operation of 

Connectivity on LTSE. Accordingly, the 

Exchange believes it is more appropriate 

to justify its fees using cost figures that 

are isolated specifically for LTSE on an 

annualized basis, and utilizing a recent 

monthly billing cycle and extrapolated 

annualized costs on a going-forward 

basis. 

LTSE recently calculated its aggregate 

monthly costs for providing 

Connectivity to the Exchange at 

$193,637 beginning October 1, 2024. 

Because LTSE offered all connectivity 

free of charge from its launch in 

September 2020 until October of this 

year, LTSE has borne 100% of all 

connectivity costs. Now, in order to 

cover some of the aggregate costs of 

providing connectivity to market 

participants (both Members and nonMembers) 13 the Exchange is proposing 

to modify its Fee Schedule and charge 

the Connectivity fees detailed above. 

In order to determine the Exchange’s 

costs for providing the services 

associated with the Connectivity Fees, 

the Exchange conducted an extensive 

review in which the Exchange analyzed 

every expense item in the Exchange’s 

general expense ledger to determine 

whether each such expense relates to 

the services associated with the 

Connectivity Fees, and, if such expense 

did so relate, what portion (or 

percentage) of such expense actually 

supports those services. The sum of all 

such portions of expenses represents the 

total cost of the Exchange to provide the 

services associated with the 

Connectivity Fees. For the avoidance of 

doubt, no expense amount was allocated 

twice. The Exchange is also providing 

detailed information regarding the 

Exchange’s cost allocation 

methodology—namely, information that 

explains the Exchange’s rationale for 

determining that it was reasonable to 

allocate certain expenses described in 

this filing towards the total cost to the 

Exchange to provide Connectivity. 

The Exchange believes that the 

Connectivity Fees are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit, when comparing the 

total annual expense that the Exchange 

projects to incur in connection with 

providing the services associated with 

the proposed Connectivity Fees versus 

the total annual revenue of the 

Exchange projects to collect in 

connection with providing those 

services. For 2024, the total annual 

expense for providing the services 

associated with the Connectivity Fees is 

projected to be approximately $4.5 

million. The $4.5 million in expense 

includes expenses associated with 

providing all ports and all connectivity 

alternatives. 

Costs Related to Offering Connectivity 

The following chart details the 

individual line-item costs considered by 

LTSE to be related to offering 

connectivity as well as the percentage of 

the Exchange’s overall costs per year 

such costs represent for such area (e.g., 

as set forth below, the Exchange 

allocated approximately 10% of its 

overall Human Resources cost to 

offering connectivity). 

Cost drivers Yearly 

costs 

% of 

all 

Third-Party Expenses ... $3,228,630 32 

Human Resources ........ 1,120,500 10 


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Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices 83733 

Cost drivers Yearly 

costs 

% of 

all 

Data Center .................. 158,040 30 

Total ....................... 4,507,170 ........

Below are additional details regarding 

each of the line-item costs considered 

by LTSE to be related to offering 

connectivity. 

Third-Party Expenses 

As discussed above, LTSE has 

undertaken a unique model where it has 

outsourced its technology to a thirdparty technology provider. As such the 

costs associated with connectivity for 

this provider include (1) costs for the 

technology used to complete 

connections to the Exchange and to 

connect to external markets, (2) costs 

the third-party provider incurs to 

provide physical connectivity in the 

data centers where it maintains its 

equipment—such as dedicated space, 

security services, cooling and power, (3) 

charges from the third-party provider for 

use of physical ports and logical ports, 

and (3) depreciation of physical assets 

and software, which also includes assets 

used for testing and monitoring of 

infrastructure. 

Human Resources 

For personnel costs (Human 

Resources), LTSE calculated an 

allocation of LTSE employee time for 

employees whose functions include 

providing and maintaining connectivity 

and performance thereof (technical 

operations personnel, market operations 

personnel, and software engineering 

personnel). The Exchange also allocated 

Human Resources costs to provide 

connectivity to a limited subset of 

personnel with ancillary functions 

related to establishing and maintaining 

such connectivity (such as information 

security and finance personnel), for 

which the Exchange allocated cost on an 

employee-by-employee basis (i.e., only 

including those personnel who do 

support functions related to providing 

connectivity) and then applied a smaller 

allocation to such employees. The 

Exchange notes that it has fewer than 

fifty (50) employees and each 

department leader has direct knowledge 

of the time spent by each employee with 

respect to the various tasks necessary to 

operate the Exchange. The estimates of 

Human Resources cost were therefore 

determined by consulting with such 

department leaders, determining which 

employees are involved in tasks related 

to providing connectivity, and 

confirming that the proposed allocations 

were reasonable based on an 

understanding of the percentage of their 

time such employees devote to tasks 

related to providing connectivity. The 

Exchange notes that senior level 

executives were only allocated Human 

Resources costs to the extent the 

Exchange believed they are involved in 

overseeing tasks related to providing 

connectivity. The Human Resources 

cost was calculated using a blended rate 

of compensation reflecting salary, equity 

and bonus compensation, benefits, 

payroll taxes, and 401(k) matching 

contributions. 

Data Center 

Data Center costs include an 

allocation of the costs the Exchange 

incurs to monitor its trading platform in 

third-party data centers where it 

maintains its equipment as well as 

related costs (the Exchange does not 

own the Primary Data Center or the 

Secondary Data Center, but instead, 

leases space in data centers operated by 

third parties). 

Physical Connectivity Fees 

LTSE offers its Members the ability to 

connect to the Exchange in order to 

transmit orders to and receive 

information from the Exchange. 

Members can also choose to connect to 

LTSE indirectly through physical 

connectivity maintained by a third-party 

extranet. Extranet physical connections 

may provide access to one or multiple 

Members on a single connection. Users 

of LTSE physical connectivity services 

(both Members and non-Members) 

seeking to establish one or more 

connections with the Exchange submit a 

request directly to Exchange personnel. 

Upon receipt of the completed 

instructions, LTSE establishes the 

physical connections requested by the 

User. The number of physical 

connections assigned to each User as of 

September 30, 2024, ranges from one to 

three, depending on the scope and scale 

of the Member’s trading activity on the 

Exchange as determined by the Member, 

including the Member’s determination 

of the need for redundant connectivity. 

The Exchange notes that 58% of its 

Members do not maintain a physical 

connection directly with the Exchange 

in the Primary Data Center (though 

many such Members have connectivity 

through a third-party provider) and 

another 41% have either one or two 

physical connections to the Exchange in 

the Primary Data Center. 

As described above, to cover the 

aggregate costs of providing physical 

connectivity to Users and make a 

modest profit, as described below, the 

Exchange is proposing to charge a fee of 

$5,500 per month for each physical 

connection in the Primary Data Center 

and a fee of $2,750 per month for each 

physical connection in the Disaster 

Recovery Data Center and Test 

Environment. There is no requirement 

that any Member maintain a specific 

number of physical connections and a 

Member may choose to maintain as 

many or as few of such connections as 

each Member deems appropriate. The 

Exchange notes, however, that pursuant 

to Rule 2.250 (Mandatory Participation 

in Testing of Backup Systems), the 

Exchange does require a small number 

of Members to connect and participate 

in functional and performance testing as 

announced by the Exchange, which 

occurs at least once every 12 months. 

Specifically, Members that have been 

determined by the Exchange to 

contribute a meaningful percentage of 

the Exchange’s overall volume must 

participate in mandatory testing of the 

Exchange’s backup systems (i.e., such 

Members must connect to the Disaster 

Recovery Data Center). The Exchange 

notes that Members that have been 

designated are still able to use thirdparty providers of connectivity to access 

the Exchange at its Disaster Recovery 

Data Center, and that four of the 

designated Members use a third-party 

provider instead of connecting directly 

to the Disaster Recovery Data Center 

through connectivity provided by the 

Exchange. Nonetheless, because some 

Members are required to connect to the 

Disaster Recovery Data Center pursuant 

to Rule 2.250 and to encourage 

Exchange Members to connect to the 

Disaster Recovery Data Center generally, 

the Exchange has proposed to charge 

one-half of the fee for a physical 

connection in the Primary Data Center. 

The Exchange believes that charging a 

higher fee for physical connections at 

the Disaster Recovery Data Center 

would be inconsistent with its objective 

of encouraging Members to connect at 

such data center and is inconsistent 

with the fees charged by other 

exchanges, which also provide 

connectivity for disaster recovery 

purposes at a discounted rate. 

The proposed fee will not apply 

differently based upon the size or type 

of the market participant, but rather 

based upon the number of physical 

connections a User requests, based upon 

factors deemed relevant by each User 

(either a Member, service bureau or 

extranet). The Exchange believes these 

factors include the costs to maintain 

connectivity, business model and 

choices. The proposed fee of $5,500 per 

month for physical connections at the 

Primary Data Center is designed to 

permit the Exchange to cover a portion 


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I I 
83734 Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices 

14See, e.g., Cboe US Options BOE Specification, 

available at: https://cdn.cboe.com/resources/ 

membership/US_Options_BOE_Specification.pdf 

(describing a 5,000 message per second Port Order 

Rate Threshold on Cboe BOE ports). 

of costs allocated to providing 

connectivity services, which would also 

help fund future expenditures 

(increased costs, improvements, etc.). 

The Exchange believes it is appropriate 

to charge fees that represent a 

reasonable markup over cost given the 

other factors discussed above and the 

need for the Exchange to maintain a 

highly performant and stable platform to 

allow Members to transact with 

determinism. The Exchange also 

reiterates that the Exchange did not 

charge any fees for connectivity services 

prior to October 2024, and its allocation 

of costs to physical connections was 

part of a holistic allocation that also 

allocated costs to other core services 

without double-counting any expenses. 

As noted above, the Exchange proposes 

a discounted rate of $2,750 per month 

for physical connections at its Disaster 

Recovery Center and Test Environment. 

The Exchange has proposed this 

discounted rate for Disaster Recovery 

Center and Test Environment 

connectivity in order to encourage 

Members to establish and maintain such 

connections. Also, as noted above, a 

small number of Members are required 

pursuant to Rule 2.4 to connect and 

participate in testing of the Exchange’s 

backup systems, and the Exchange 

believes it is appropriate to provide a 

discounted rate for physical connections 

at the Disaster Recovery Center given 

this requirement. The Exchange notes 

that this rate is well below the cost of 

providing such services and the 

Exchange will operate its network and 

systems at the Disaster Recovery Center 

without recouping the full amount of 

such cost through connectivity services. 

Logical Connectivity Fees 

Similar to other exchanges, LTSE 

offers its Members application sessions, 

also known as logical ports, for order 

entry and receipt of trade execution 

reports and order messages. Members 

can also choose to connect to LTSE 

indirectly through a session maintained 

by a third-party service bureau. Service 

bureau sessions may provide access to 

one or multiple Members on a single 

session. Users of LTSE connectivity 

services (both Members and nonMembers) seeking to establish one or 

more application sessions with the 

Exchange shall submit a request to the 

Exchange via the LTSE User Portal or 

directly to Exchange personnel. Upon 

receipt of the completed instructions, 

LTSE assigns the User the number of 

sessions requested by the User. The 

number of sessions assigned to each 

User as of September 30, 2024, ranges 

from one (1) to more than 58 depending 

on the scope and scale of the Member’s 

trading activity on the Exchange (either 

through a direct connection or through 

a service bureau) as determined by the 

Member. For example, by using 

multiple sessions, Members can 

segregate order flow from different 

internal desks, business lines, or 

customers. The Exchange does not 

impose any minimum or maximum 

requirements for how many application 

sessions a Member or service bureau can 

maintain, and it is not proposing to 

impose any minimum or maximum 

session requirements for its Members or 

their service bureaus. 

As described above, to cover the 

aggregate costs of providing application 

sessions to Users and to make a modest 

profit, as described below, the Exchange 

is proposing to charge a fee of $450 per 

session per month. The Exchange notes 

that it is proposing to waive the fees for 

Members and Non-Members their first 

three sessions, so that market 

participants can have no cost to connect 

to the Disaster Recovery Center or a Test 

Environment port. The Exchange 

believes that providing three free 

sessions will encourage Members to 

connect to the Exchange’s backup 

trading systems and to conduct 

appropriate testing of their use of the 

Exchange. 

The proposed fee of $450 per month 

for each Logical Connectivity session is 

designed to permit the Exchange to 

cover some of the costs allocated to 

providing application sessions, which 

would also help fund future 

expenditures (increased costs, 

improvements, etc.). 

The proposed fee is also designed to 

encourage Users to be efficient with 

their application session usage, thereby 

resulting in a corresponding increase in 

the efficiency that the Exchange would 

be able to realize in managing its 

aggregate costs for providing 

connectivity services. There is no 

requirement that any Member maintain 

a specific number of application 

sessions and a Member may choose to 

maintain as many or as few of such 

ports as each Member deems 

appropriate. The platform has been 

designed such that Order Entry Ports 

can handle a significant amount of 

message traffic (i.e., over 50,000 orders 

per second), and has no application 

flow control or order throttling. In 

contrast, other exchanges maintain 

certain thresholds that limit the amount 

of message traffic that a single logical 

port can handle.14 As such, while 

several Members maintain a relatively 

high number of ports because that is 

consistent with their usage on other 

exchanges and is preferable for their 

own reasons, the Exchange believes that 

it has designed a system capable of 

allowing such Members to significantly 

reduce the number of application 

sessions maintained. 

The proposed fee will not apply 

differently based upon the size or type 

of the market participant, but rather 

based upon the number of application 

sessions a User requests, based upon 

factors deemed relevant by each User 

(either a Member or service bureau on 

behalf of a Member). The Exchange 

believes these factors include the costs 

to maintain connectivity and choices 

Members make in how to segment or 

allocate their order flow. 

Proposed Fees—Additional Discussion 

As discussed above, the proposed fees 

for connectivity services do not by 

design apply differently to different 

types or sizes of Members. As discussed 

in more detail in the Statutory Basis 

section, the Exchange believes that the 

likelihood of higher fees for certain 

Members subscribing to connectivity 

services usage than others is not 

unfairly discriminatory because it is 

based on objective differences in usage 

of connectivity services among different 

Members. The Exchange’s incremental 

aggregate costs for all connectivity 

services are disproportionately related 

to Members with higher message traffic 

and/or Members with more complicated 

connections established with the 

Exchange, as such Members: (1) 

consume the most bandwidth and 

resources of the network; (2) transact the 

vast majority of the volume on the 

Exchange; and (3) require the hightouch network support services 

provided by the Exchange and its 

technology service provider, including 

network monitoring, reporting and 

support services, resulting in a much 

higher cost to the Exchange to provide 

such connectivity services. For these 

reasons, LTSE believes it is not unfairly 

discriminatory for the Members with 

higher message traffic and/or Members 

with more complicated connections to 

pay a higher share of the total 

connectivity services fees. While 

Members with a business model that 

results in higher relative inbound 

message activity or more complicated 

connections are projected to pay higher 

fees, the level of such fees is based 

solely on the number of physical 

connections and/or application sessions 

deemed necessary by the Member and 

not on the Member’s business model or 

type of Member. The Exchange notes 


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15 17 CFR 242.1000–1007. 

16 17 CFR 242.1001(a). 

17While some Members might directly connect to 

the Disaster Recovery Center and incur the 

proposed $2,750 per month fee, there are other 

ways to connect to the Exchange, such as through 

a service bureau or extranet, and because the 

Exchange is waiving fees for the first three logical 

connectivity sessions, a Member connecting 

through another method would not incur any fees 

charged directly by the Exchange. However, the 

Exchange notes that a third-party service provider 

providing connectivity to the Exchange likely 

would charge a fee for providing such connectivity; 

such fees are not set by or shared in by the 

Exchange. 

18As stated above, the Exchange launched its new 

trading platform on September 23, 2024. This 

expected revenue is based on a model for Q4 2024. 

that the correlation between message 

traffic and usage of connectivity services 

is not completely aligned because 

Members individually determine how 

many physical connections and 

application sessions to request, and 

Members may make different decisions 

on the appropriate ways based on facts 

unique to their individual businesses. 

Based on the Exchange’s architecture, as 

described above, the Exchange believes 

that a Member even with high message 

traffic would be able to conduct 

business on the Exchange with a 

relatively small connectivity services 

footprint. 

Finally, the fees for connectivity 

services will help to encourage 

connectivity services usage in a way 

that aligns with the Exchange’s 

regulatory obligations. As a national 

securities exchange, the Exchange is 

subject to Regulation Systems 

Compliance and Integrity (‘‘Reg SCI’’).15

Reg SCI Rule 1001(a) requires that the 

Exchange establish, maintain, and 

enforce written policies and procedures 

reasonably designed to ensure (among 

other things) that its Reg SCI systems 

have levels of capacity adequate to 

maintain the Exchange’s operational 

capability and promote the maintenance 

of fair and orderly markets.16 By 

encouraging Users to be efficient with 

their usage of connectivity services, the 

proposed fee will support the 

Exchange’s Reg SCI obligations in this 

regard by ensuring that unused 

application sessions are available to be 

allocated based on individual User 

needs and as the Exchange’s overall 

order and trade volumes increase. 

Additionally, because the Exchange will 

charge a lower rate for a physical 

connection to the Disaster Recovery 

Center and Test Environment and will 

waive the first three logical connectivity 

sessions each month, the proposed fee 

structure will further support the 

Exchange’s Reg SCI compliance by 

reducing the potential impact of a 

disruption should the Exchange be 

required to switch to its Disaster 

Recovery Facility and encouraging 

Members to engage in any necessary 

system testing with low or no cost 

imposed by the Exchange.17

2. Statutory Basis 

The Exchange believes that the 

proposed fees for connectivity services 

to LTSE are reasonable, equitable and 

not unfairly discriminatory because, as 

described above, the proposed pricing 

for connectivity services is directly 

related to the relative costs to the 

Exchange to provide those respective 

services and does not impose a barrier 

to entry to smaller participants. 

The Exchange recognizes that there 

are various business models and varying 

sizes of market participants conducting 

business on the Exchange. The 

Exchange’s incremental aggregate costs 

for all connectivity services are 

disproportionately related to Members 

with higher message traffic and/or 

Members with more complicated 

connections established with the 

Exchange, as such Members: (1) 

consume the most bandwidth and 

resources of the network; (2) transact the 

vast majority of the volume on the 

Exchange; and (3) require the hightouch network support services 

provided by the Exchange and its staff, 

including network monitoring, reporting 

and support services, resulting in a 

much higher cost to the Exchange to 

provide such connectivity services. 

Accordingly, the Exchange believes the 

allocation of the proposed fees that 

increase based on the number of 

physical connections or application 

sessions is reasonable based on the 

resources consumed by the respective 

type of market participant (i.e., lowest 

resource consuming Members will pay 

the least, and highest resource 

consuming Members will pay the most), 

particularly since higher resource 

consumption translates directly to 

higher costs to the Exchange. 

With regard to reasonableness, the 

Exchange understands that when 

appropriate given the context of a 

proposal the Commission has taken a 

market-based approach to examine 

whether the SRO making the proposal 

was subject to significant competitive 

forces in setting the terms of the 

proposal. In looking at this question, the 

Commission considers whether the SRO 

has demonstrated in its filing that: (i) 

there are reasonable substitutes for the 

product or service; (ii) ‘‘platform’’ 

competition constrains the ability to set 

the fee; and/or (iii) revenue and cost 

analysis shows the fee would not result 

in the SRO taking supra-competitive 

profits. If the SRO demonstrates that the 

fee is subject to significant competitive 

forces, the Commission will next 

consider whether there is any 

substantial countervailing basis to 

suggest the fee’s terms fail to meet one 

or more standards under the Exchange 

Act. If the filing fails to demonstrate that 

the fee is constrained by competitive 

forces, the SRO must provide a 

substantial basis, other than 

competition, to show that it is 

consistent with the Exchange Act, 

which may include production of 

relevant revenue and cost data 

pertaining to the product or service. 

LTSE believes the proposed fees for 

connectivity services are fair and 

reasonable as a form of cost recovery for 

the Exchange’s aggregate costs of 

offering connectivity services to 

Members and non-Members. The 

proposed fees are expected to generate 

monthly revenue of approximately 

$120,000 18 providing cost recovery to 

the Exchange for the aggregate costs of 

offering connectivity services, based on 

a methodology that narrowly limits the 

cost drivers that are allocated to those 

closely and directly related to the 

particular service. In addition, this 

revenue will allow the Exchange to 

continue to offer, to enhance, and to 

continually refresh its infrastructure as 

necessary to offer a state-of-the-art 

trading platform. The Exchange believes 

that, consistent with the Act, it is 

appropriate to charge fees that represent 

a reasonable markup over cost given the 

other factors discussed above. The 

Exchange also believes the proposed fee 

is a reasonable means of encouraging 

Users to be efficient in the connectivity 

services they reserve for use, with the 

benefits to overall system efficiency to 

the extent Members and non-Members 

consolidate their usage of connectivity 

services or discontinue subscriptions to 

unused physical connectivity. 

The Exchange further believes that the 

proposed fees, as they pertain to 

purchasers of each type of connectivity 

alternative, constitute an equitable 

allocation of reasonable fees charged to 

the Exchange’s Members and nonMembers and are allocated fairly 

amongst the types of market participants 

using the facilities of the Exchange. 

As described above, the Exchange 

believes the proposed fees are equitably 

allocated because the Exchange’s 

incremental aggregate costs for all 

connectivity services are 

disproportionately related to Members 

with higher message traffic and/or 

Members with more complicated 

connections established with the 

Exchange, as such Members: (1) 


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19See Fee Guidance, supra note 13. 

20One significant differentiation between the 

Exchanges is that while it offers different types of 

physical connections, including 10Gb, 25Gb, 40Gb, 

and 100Gb connections, the Exchange does not 

propose to charge different prices for such 

connections. In contrast, most of the Exchange’s 

competitors provide scaled pricing that increases 

depending on the size of the physical connection. 

The Exchange does not believe that its costs 

increase incrementally based on the size of a 

physical connection but instead, that individual 

connections and the number of such separate and 

disparate connections are the primary drivers of 

cost for the Exchange. 

21 Including Nasdaq PHLX (‘‘PHLX’’), Nasdaq 

Options Market (‘‘NOM’’), Nasdaq BX Options 

(‘‘BX’’), Nasdaq ISE (‘‘ISE’’), Nasdaq GEMX 

(‘‘GEMX’’), and Nasdaq MRX (‘‘MRX’’). 

22See the MIAX fee schedule, available at:http:// 

www.miaxglobal.com/sites/default/files/ 

fee_schedule-files/MIAX_Pearl_Options_Options_

Fee_Schedule_09122023.pdf; the MIAX Emerald fee 

schedule, available at: https://

www.miaxglobal.com/sites/default/files/fee_

schedule-files/MIAX_Pearl_Options_

Options_Fee_Schedule_10122023_3.pdf; the Nasdaq 

Options markets fee schedule, at http://

www.nasdaqtrader.com/trader.aspx?id=

pricelisttrading2; the NYSE Connectivity fee 

schedule, at: https://www.nyse.com/publicdocs/ 

wireless_Connectivity_Fees_and_Charges.pdf; the 

Cboe fee schedule, available at: https://cboe.com/ 

us/options/membership/fee_schedule/bzx/; the 

EDGX Options fee schedule, at: https://cboe.com/ 

us/options/membership/fee_schedule/edgx/, and 

the BOX Options fee schedule, available at: https:// 

boxoptions.com/fee-schedule/. This range is based 

on a review of the fees charged for 10–40Gb 

connections at each of these exchanges and relates 

solely to the physical port fee or connection charge, 

excluding co-location fees and other fees assessed 

by these exchanges. The Exchange notes that it does 

not offer physical connections with lower 

bandwidth than 10Gb and that Members and nonmembers with lower bandwidth than 10Gb and that 

Members and non-members with lower bandwidth 

requirements typically access the Exchange through 

third-party extranets or service bureaus. 

23See id. 

24See id. 

25As noted above, all physical connections 

offered by LTSE are at least 10Gb capable and 

physical connections provided with larger 

bandwidth capabilities will be provided at the same 

rate as such connections. The Exchange also 

reiterates that LTSE application sessions are 

capable of handling significant amount of message 

consume the most bandwidth and 

resources of the network; (2) transact the 

vast majority of the volume on the 

Exchange; and (3) require the hightouch network support services 

provided by the Exchange and its staff, 

including network monitoring, reporting 

and support services, resulting in a 

much higher cost to the Exchange to 

provide such connectivity services. 

Commission staff previously noted 

that the generation of supra-competitive 

profits is one of several potential factors 

in considering whether an exchange’s 

proposed fees are consistent with the 

Act.19 As described in the Fee 

Guidance, the term ‘‘supra-competitive 

profits’’ refers to profits that exceed the 

profits that can be obtained in a 

competitive market. The proposed fee 

structure would not result in excessive 

pricing or supra-competitive profits for 

the Exchange. The proposed fee 

structure is merely designed to permit 

the Exchange to cover some of the costs 

allocated to providing connectivity 

services, which would also help fund 

future expenditures (increased costs, 

improvements, etc.). While the Fee 

Guidance did not establish a guideline 

as to what constitutes supra-competitive 

pricing through analyzing margin (nor 

does the Exchange believe it should 

have), the Exchange does not believe 

that it would be reasonable to consider 

the aforementioned margins to 

constitute supra-competitive pricing. Of 

course, should the Exchange find 

opportunities to dramatically reduce 

costs or increase revenues such that it 

believes the cost it is charging for 

physical connections or applications 

sessions is inconsistent with the cost of 

providing such connectivity or resulting 

in unreasonable margin, the Exchange 

will seek to lower its fees in order to 

pass savings on to its constituents. 

Thus, the Exchange believes that its 

proposed pricing for Connectivity Fees 

is fair, reasonable, and equitable. 

Further, the Exchange notes that certain 

of its competitors have connectivity fees 

that were approved without the 

presentation of a cost-based analysis, 

but it is reasonable to assume that 

certain of those competitors with 

significantly higher fees also operate 

with significantly higher profit margins. 

Accordingly, the Exchange believes that 

its proposal is consistent with Section 

6(b)(4)40 of the Act because the 

proposed fees will permit recovery of 

the Exchange’s costs and will not result 

in excessive pricing or supracompetitive profit. 

The proposed fees for connectivity 

services will allow the Exchange to 

cover certain costs incurred by the 

Exchange’s technology provider 

associated with providing and 

maintaining necessary hardware and 

other network infrastructure as well as 

network monitoring and support 

services; without such hardware, 

infrastructure, monitoring and support 

the Exchange would be unable to offer 

the connectivity services. The Exchange 

routinely works with its technology 

provider to improve the performance of 

the network’s hardware and software. 

The costs associated with maintaining 

and enhancing a state-of-the-art 

exchange network is a significant 

portion of the overall expense of the 

technology provider’s services, and thus 

the Exchange believes that it is 

reasonable and appropriate to help 

offset those costs by adopting fees for 

connectivity services. The Exchange’s 

Cost Analysis estimates the monthly 

costs to provide connectivity services at 

$375,597. Based on current connectivity 

services usage, the Exchange would 

generate monthly revenues for the rest 

of 2024 of approximately $120,000. 

Even if the Exchange earns that amount 

or incrementally more, the Exchange 

believes the proposed fees for 

connectivity services are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit, when comparing the 

total expense of LTSE associated with 

providing connectivity services versus 

the total projected revenue of the 

Exchange associated with network 

connectivity services. 

The Exchange notes that other 

exchanges offer similar connectivity 

options to market participants and that 

the Exchange’s fees are a discount as 

compared to the majority of such fees.20

With respect to physical connections, 

MIAX Options (‘‘MIAX’’), MIAX Pearl, 

LLC (‘‘MIAX Pearl’’), MIAX Emerald, 

LLC (‘‘MIAX Emerald’’), each of the 

Nasdaq Stock Market LLC (‘‘Nasdaq’’) 

options exchanges,21 NYSE American 

Options (‘‘NYSE American’’), NYSE 

Arca Options (‘‘NYSE Arca’’), Cboe 

Exchange, Inc. (‘‘Cboe Options’’), Cboe 

BZX Options (‘‘BZX Options’’), and 

Cboe EDGX Options (‘‘EDGX Options’’) 

charge between $7,000–$22,750 per 

month for physical connectivity at their 

primary data centers that is comparable 

to that offered by the Exchange.22

Nasdaq, NYSE American and NYSE 

Arca also charge installation fees, which 

are not proposed to be charged by the 

Exchange. With respect to application 

sessions, BX,PHLX, GEMX, MRX, BOX 

Options (‘‘BOX’’), Cboe Options, BZX 

Options and EDGX charge between 

$500–$800 per month for order entry 

and drop ports.23 The Exchange further 

notes that several of these exchanges 

each charge for other logical ports that 

the Exchange will continue to provide 

for free, such as application sessions for 

testing and disaster recovery 

purposes.24 While the Exchange’s 

proposed Options Connectivity Fees are 

lower than certain of the fees charged by 

the Nasdaq options exchanges, MIAX 

Options, MIAX Pearl, MIAX Emerald, 

NYSE American, NYSE Arca, BOX, 

Cboe, BZX and EDGX, MEMX believes 

that it offers significant value to 

Members over these other exchanges in 

terms of bandwidth available over such 

connectivity services, which the 

Exchange believes is a competitive 

advantage, and differentiates its 

connectivity versus connectivity to 

other exchanges.25 Additionally, the 


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Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices 83737 

traffic (i.e., over 50,000 orders per second), and 

have no application flow control or order throttling, 

in contrast to competitors that have imposed 

message rate thresholds. 

26See supra note 22. 

27 15 U.S.C. 78f(b)(4) and (5). 

28 15 U.S.C. 78f(b)(8). 29See supra notes 21–24 and accompanying text. 

30 15 U.S.C. 78s(b)(3)(A)(ii). 

31 17 CFR 240.19b–4(f)(2). 

Exchange’s proposed Connectivity Fees 

to its disaster recovery facility are 

within the range of the fees charged by 

other exchanges for similar connectivity 

alternatives.26

In conclusion, the Exchange submits 

that its proposed fee structure satisfies 

the requirements of Sections 6(b)(4) and 

6(b)(5) of the Act 27 for the reasons 

discussed above in that it provides for 

the equitable allocation of reasonable 

dues, fees and other charges among its 

Members and other persons using its 

facilities, does not permit unfair 

discrimination between customers, 

issuers, brokers, or dealers, and is 

designed to promote just and equitable 

principles of trade, 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, particularly as the 

proposal neither targets nor will it have 

a disparate impact on any particular 

category of market participant. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

In accordance with Section 6(b)(8) of 

the Act,28 the Exchange does not believe 

that the proposed rule change would 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

Intramarket Competition 

The Exchange does not believe that 

the proposed rule change to apply 

Connectivity Fees to Users would place 

certain market participants at the 

Exchange at a relative disadvantage 

compared to other market participants 

because the proposed connectivity 

pricing is associated with relative usage 

of the Exchange by each market 

participant and does not impose a 

barrier to entry to smaller participants. 

The Exchange believes its proposed 

pricing is reasonable and lower than 

what other exchanges charge and, when 

coupled with the availability of thirdparty providers that also offer 

connectivity solutions, that 

participation on the Exchange is 

affordable for all market participants, 

including smaller trading firms. 

Therefore, the fees may stimulate 

intramarket competition by attracting 

additional firms to become Members of 

LTSE. As described above, the 

connectivity services purchased by 

market participants typically increase 

based on their additional message traffic 

and/or the complexity of their 

operations. The market participants that 

utilize more connectivity services 

typically utilize the most bandwidth, 

and those are the participants that 

consume the most resources from the 

network. Accordingly, the proposed fees 

for connectivity services do not favor 

certain categories of market participants 

in a manner that would impose a 

burden on competition; rather, the 

allocation of the proposed Connectivity 

Fees reflects the network resources 

consumed by the various size of market 

participants and the costs to the 

Exchange of providing such 

connectivity services. 

As it relates to the reorganization of 

the fee schedule, as discussed above, the 

Exchange does not believe that the 

proposed change would impose any 

burden on competition because such 

change serves to create an easier to read 

fee schedule to avoid any Member 

confusion. 

Intermarket Competition 

The Exchange does not believe the 

proposed fees for Connectivity to LTSE 

places an undue burden on competition 

on other SROs that is not necessary or 

appropriate. Additionally, other 

exchanges have similar connectivity 

alternatives for their participants, but 

with higher rates to connect.29 The 

Exchange is also unaware of any 

assertion that the proposed fees for 

connectivity services would somehow 

unduly impair its competition with 

other exchanges. As a participant in an 

already highly competitive environment 

for equity trading, LTSE does not have 

the market power necessary to set prices 

for services that are unreasonable or 

unfairly discriminatory in violation of 

the Exchange Act. In sum, LTSE’s 

proposed Connectivity Fees for 

Members are comparable to and 

generally lower than fees charged by 

other exchanges for the same or similar 

services. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

This proposed rule change establishes 

dues, fees or other charges among its 

members and, as such, may take effect 

upon filing with the Commission 

pursuant to Section 19(b)(3)(A)(ii) of the 

Act 30 and paragraph (f)(2) of Rule 19b– 

4 thereunder.31 Accordingly, the 

proposed rule change would take effect 

upon filing with the Commission. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend the rule change if 

it appears to the Commission that the 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or would otherwise further 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or 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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

LTSE–2024–07 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–LTSE–2024–07. 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 (https://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 


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83738 Federal Register / Vol. 89, No. 201 / Thursday, October 17, 2024 / Notices 

32 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4For the avoidance of doubt, the proposed rule 

would apply to a company even if the company was 

in compliance with the Price Criteria at the time of 

its prior reverse stock split. 

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 the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–LTSE–2024–07 and should be 

submitted on or before November 7, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–23981 Filed 10–16–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101306; File No. SR–NYSE– 

2024–48] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Amend Section 802.01C of the NYSE 

Listed Company Manual (Price Criteria 

for Capital or Common Stock) To Limit 

the Use of Reverse Stock Splits To 

Regain Compliance With the Price 

Criteria in Certain Circumstances 

October 10, 2024. 

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 

September 30, 2024, New York Stock 

Exchange LLC (‘‘NYSE’’ or the 

‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Section 802.01C (‘‘Price Criteria for 

Capital or Common Stock’’) of the NYSE 

Listed Company Manual to modify the 

implications of a reverse stock split for 

an issuer that falls below compliance 

with the price criteria set forth in that 

rule. 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 802.01C (‘‘Price Criteria for 

Capital or Common Stock’’) of the NYSE 

Listed Company Manual (the ‘‘Manual’’) 

provides that a listed company will be 

considered to be below compliance 

standards if the average closing price of 

a security as reported on the 

consolidated tape is less than $1.00 over 

a consecutive 30 trading-day period (the 

‘‘Price Criteria’’). While the term ‘‘Price 

Criteria’’ is used as a defined term in 

Section 802.01C, the current rule does 

not actually provide a definition for the 

term. Consequently, the Exchange 

proposes to define the term in the rule 

using the definition set forth in the 

immediately preceding sentence. 

Once notified that it has fallen below 

the Price Criteria, the company must 

bring its share price and average share 

price back above $1.00 by six months 

following receipt of the notification. A 

company is not eligible to follow the 

procedures outlined in Sections 802.02 

and 802.03 of the Manual with respect 

to this criteria. The company must, 

however, notify the Exchange, within 10 

business days of receipt of the 

notification, of its intent to cure this 

deficiency or be subject to suspension 

and delisting procedures as set forth in 

Section 804.00 of the Manual. The 

company can regain compliance at any 

time during the six-month cure period 

if on the last trading day of any calendar 

month during the cure period the 

company has a closing share price of at 

least $1.00 and an average closing share 

price of at least $1.00 over the 30 

trading-day period ending on the last 

trading day of that month. In the event 

that at the expiration of the six-month 

cure period, both a $1.00 closing share 

price on the last trading day of the cure 

period and a $1.00 average closing share 

price over the 30 trading-day period 

ending on the last trading day of the 

cure period are not attained, the 

Exchange will commence suspension 

and delisting procedures as set forth in 

Section 804.00. 

Notwithstanding the foregoing, if a 

company determines that, if necessary, 

it will cure the price condition by taking 

an action that will require approval of 

its shareholders, it must so inform the 

Exchange in the above referenced 

notification, must obtain the 

shareholder approval by no later than its 

next annual meeting, and must 

implement the action promptly 

thereafter. The company will be deemed 

to have regained compliance with the 

Price Criteria if the price promptly 

exceeds $1.00 per share, and the price 

remains above the level for at least the 

following 30 trading days. The action 

taken by a company to cure its 

noncompliance with the Price Criteria 

that is subject to shareholder approval is 

generally a reverse stock split. 

The Exchange proposes to amend 

Section 802.01C to limit the 

circumstances under which a listed 

company may utilize a reverse stock 

split to regain compliance with the Price 

Criteria. Specifically, the Exchange 

proposes that, notwithstanding the 

general ability of a company to utilize 

a reverse stock split as a mechanism for 

regaining compliance with the Price 

Criteria if a company’s security fails to 

meet the Price Criteria and (i) the 

company has effected a reverse stock 

split over the prior one-year period 4 or 

(ii) has effected one or more reverse 

stock splits over the prior two-year 

period with a cumulative ratio of 200 

shares or more to one, then the company 

shall not be eligible for any compliance 

period specified in Section 802.01C and 

the Exchange will immediately 

commence suspension and delisting 

procedures with respect to such security 


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