Federal Register / Vol. 86, No. 158 / Thursday, August 19, 2021 / Notices 46733 

27 15 U.S.C. 78s(b)(3)(A)(ii). 

28 17 CFR 240.19b–4(f)(2). 

29 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

a barrier to entry to smaller participants 

and notes that the proposed pricing 

structure for is associated with relative 

usage of the various market participants. 

Firms that are primarily order routers 

seeking best-execution do not utilize 

Limited Service MEI Ports on MIAX 

Emerald and therefore will not pay the 

fees associated with the tiered-pricing 

structure. Rather, the fees described in 

the proposed tiered-pricing structure 

will only be allocated to market making 

firms that engage in advanced trading 

strategies and typically request multiple 

Limited Service MEI Ports. Accordingly, 

the firms engaged in market making 

business generate higher costs by 

utilizing more of the Exchange’s 

resources. The market making firms that 

purchase higher amounts of Limited 

Service MEI Ports tend to have specific 

business oriented market making and 

taking strategies, as opposed to firms 

simply engaging in best-execution order 

routing business. Additionally, the use 

of such additional Limited Service MEI 

Ports is entirely voluntary. 

The Exchange also does not believe 

that the proposed rule change will result 

in any burden on inter-market 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. As discussed 

above, options market participants are 

not forced to access all options 

exchanges. The Exchange operates in a 

highly competitive environment, and as 

discussed above, its ability to price 

access and ports is constrained by 

competition among exchanges and third 

parties. There are other options markets 

of which market participants may access 

in order to trade options. There is also 

a possible range of alternative strategies, 

including routing to the exchange 

through another participant or market 

center or accessing the Exchange 

indirectly. For example, there are 15 

other U.S. options exchanges, which the 

Exchange must consider in its pricing 

discipline in order to compete for 

market participants. In this competitive 

environment, market participants are 

free to choose which competing 

exchange to use to satisfy their business 

needs. As a result, the Exchange 

believes this proposed rule change 

permits fair competition among national 

securities exchanges. Accordingly, the 

Exchange does not believe its proposed 

fee changes impose any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,27 and Rule 

19b–4(f)(2) 28 thereunder. 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. 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

EMERALD–2021–25 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–EMERALD–2021–25. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–EMERALD–2021–25 and 

should be submitted on or before 

September 9, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17759 Filed 8–18–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92667; File No. SR–NYSE– 

2020–98] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Granting Approval of Proposed Rule 

Change, as Modified by Amendment 

Nos. 2 and 3, To Amend Its Rules To 

Prohibit Member Organizations From 

Seeking Reimbursement, in Certain 

Circumstances, From Issuers for 

Forwarding Proxy and Other Materials 

to Beneficial Owners 

August 13, 2021. 

I. Introduction 

On November 30, 2020, New York 

Stock Exchange LLC (‘‘NYSE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘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 its rules to prohibit member 

organizations from seeking 

reimbursement, in certain 

circumstances, from issuers for 


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46734 Federal Register / Vol. 86, No. 158 / Thursday, August 19, 2021 / Notices 

3See Securities Exchange Act Release No. 90653 

(December 14, 2020), 85 FR 82539 (December 18, 

2020) (‘‘Original Notice’’). Comments received on 

the proposal are available on the Commission’s 

website at: https://www.sec.gov/comments/sr-nyse2020-98/srnyse202098.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 91011 

(January 29, 2021), 86 FR 8246 (February 4, 2021). 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 91343 

(March 17, 2021), 86 FR 15536 (March 23, 2021) 

(‘‘Order Instituting Proceedings’’). 

8See Securities Exchange Act Release No. 91663 

(April 23, 2021), 86 FR 22725 (April 29, 2021) 

(‘‘Amendment No. 2’’). 

9See Securities Exchange Act Release No. 92155 

(June 11, 2021), 86 FR 32302 (June 17, 2021). 

10 In Amendment No. 3, the Exchange stated that 

proposed Rule 451A, in specifically stating that no 

‘‘fee’’ shall be imposed, is meant to apply to the 

charges that are specified in Rule 451, and would 

not limit a member organization’s eligibility to 

receive reimbursement for other expenses that are 

not covered by the specified charges, namely (i) 

actual postage costs (including return postage at the 

lowest available rate); (ii) the actual cost of 

envelopes (provided they are not furnished by the 

person soliciting proxies); and (iii) any actual 

communication expenses (excluding overhead) 

incurred in receiving voting returns either 

telephonically or electronically. The Exchange 

further stated that this approach is consistent with 

the application of existing fee exclusions under 

Rule 451. Because Amendment No. 3 does not 

materially alter the substance of the proposed rule 

change, Amendment No. 3 is not subject to notice 

and comment. The full text of Amendment No. 3 

is available on the Commission’s website at: https:// 

www.sec.gov/comments/sr-nyse-2020-98/ 

srnyse202098-8944033-245707.pdf. 11See Rules 451 and 465; Amendment No. 2, 

supra note 8, 86 FR at 22726. The ownership of 

shares in street name means that a shareholder, or 

‘‘beneficial owner,’’ has purchased shares through 

a broker-dealer or bank, also known as a 

‘‘nominee.’’ In contrast to direct ownership, where 

shares are directly registered in the name of the 

shareholder, shares held in street name are 

registered in the name of the nominee, or in the 

nominee name of a depository, such as the 

Depository Trust Company. See Securities 

Exchange Act Release No. 70720 (October 18, 2013), 

78 FR 63530, 63531 n.14 (October 24, 2013) (order 

approving SR–NYSE–2013–07) (‘‘2013 Approval 

Order’’). 

12See Rules 451 and 465; 2013 Approval Order, 

supra note 11, 78 FR at 63531. 

13 17 CFR 240.14b–1; 17 CFR 240.14b–2. 

14See 17 CFR 240.14b–1 and 14b–2; see also 2013 

Approval Order, supra note 11, 78 FR at 63531. 

15See 17 CFR 240.14b–1 and 14b–2; see also 2013 

Approval Order, supra note 11, 78 FR at 63531. 

Currently, the Supplementary Material to Rule 451, 

which is cross-referenced by the Supplementary 

Material to Rule 465, establishes maximum rates at 

which a NYSE member organization may be 

reimbursed for expenses incurred in connection 

with distributing proxy and other materials to 

beneficial owners. 

16See proposed Rule 451A. None of the fees in 

the schedule in the Supplementary Material .90 to 

Rule 451 would be imposable on issuers in these 

circumstances, but issuers would still be 

responsible for reimbursing member organizations 

for any actual postage costs, envelope costs, and 

communication expenses (excluding overhead) 

incurred in receiving voting returns, which is 

consistent with what occurs currently in other 

contexts where no fees are imposed, i.e., a managed 

account that contains five or fewer shares or units 

of the security involved or an account that contains 

only a fractional share. See Amendment No. 3, 

supra note 10. Accordingly, references herein to the 

distribution costs or expenses for which member 

organizations are prohibited from seeking 

reimbursement from issuers under the proposal are 

meant to refer to the charges specified in 

Supplementary Material .90 to Rule 451. 

17See Amendment No. 2, supra note 8, 86 FR at 

22726. 

18See id.; see also, e.g., FINRA Rule 2251. 

19See Amendment No. 2, supra note 8, 86 FR at 

22726. 

20See id. 

21See id. 

forwarding proxy and other materials to 

beneficial owners. The proposed rule 

change was published for comment in 

the Federal Register on December 18, 

2020.3 On January 29, 2021, pursuant to 

Section 19(b)(2) of the Act,4 the 

Commission designated a longer period 

within 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.5

On March 17, 2021, the Commission 

instituted proceedings under Section 

19(b)(2)(B) of the Act 6 to determine 

whether to approve or disapprove the 

proposed rule change.7 On April 6, 

2021, the Exchange filed Amendment 

No. 1 to the proposed rule change; the 

Exchange withdrew that amendment on 

April 16, 2021. On April 16, 2021, the 

Exchange filed Amendment No. 2 to the 

proposed rule change, which 

superseded the proposed rule change as 

originally filed. The proposed rule 

change, as modified by Amendment No. 

2, was published for comment in the 

Federal Register on April 29, 2021.8 On 

June 11, 2021, the Commission 

designated a longer period for 

Commission action on proceedings to 

determine whether to approve or 

disapprove the proposed rule change.9

On June 22, 2021, the Exchange filed 

partial Amendment No. 3 to the 

proposed rule change.10 This order 

approves the proposed rule change, as 

modified by Amendment Nos. 2 and 3. 

II. Description of the Proposal, as 

Modified by Amendment Nos. 2 and 3 

NYSE Rules (‘‘Rule’’) 451 and 465 

require NYSE member organizations 

that hold securities for beneficial 

owners in street name to solicit proxies 

from, and deliver proxy and other 

materials to, beneficial owners on behalf 

of issuers.11 For this service, issuers 

reimburse NYSE member organizations 

for out-of-pocket, reasonable clerical, 

postage, and other expenses incurred for 

a particular distribution.12 This 

reimbursement structure stems from 

Rules 14b–1 and 14b–2 under the Act,13

which impose obligations on issuers 

and nominees to ensure that beneficial 

owners receive proxy materials. These 

rules require issuers to send their proxy 

materials to broker-dealers or banks that 

hold securities in street name, for 

forwarding to beneficial owners, and to 

pay nominees for reasonable expenses, 

both direct and indirect, incurred in 

providing proxy information to 

beneficial owners.14 The Commission’s 

rules do not specify the fees that 

nominees can charge issuers for proxy 

distribution; rather, they state that 

issuers must reimburse the nominees for 

‘‘reasonable expenses’’ incurred.15

The Exchange has proposed to adopt 

Rule 451A, pursuant to which, 

notwithstanding the applicable 

provisions of Rules 451 or 465 or what 

may be permitted by the rules of any 

other national securities exchange or 

national securities association of which 

a member organization is also a 

member, no fee shall be imposed for a 

nominee account that contains only 

shares or units of the securities involved 

that were transferred to the account 

holder by the member organization at no 

cost.16

According to the Exchange, the 

proposed rule is meant to address a 

recent practice in which retail brokers 

provide customers, without charge, a 

small number of shares with a very 

small dollar value as a commercial 

incentive (for example, upon opening a 

new account or referring a new 

customer to the broker).17 The Exchange 

stated that Rule 451 does not 

distinguish between these beneficial 

owners and beneficial owners that have 

paid for their shares, so brokers are 

required to solicit proxies from these 

accounts and are entitled to 

reimbursement of their expenses under 

NYSE and other self-regulatory 

organization rules.18 The Exchange 

further stated that, in certain cases, the 

issuer can experience a significant 

increase in its distribution 

reimbursement expenses solely due to 

its shares being included in these broker 

promotional schemes.19

The Exchange believes that it would 

be more appropriate for the broker to 

bear the proxy distribution costs in 

these circumstances.20 According to the 

Exchange, while the distribution of 

shares in these broker promotions may 

result in a significant increase in the 

number of beneficial owners of an 

issuer’s stock, the generally very small 

size of each of these positions means 

that they usually represent a very small 

percentage of the voting power.21 As 

such, according to the Exchange, the 

costs the issuer incurs in reimbursing 

the broker for distributing proxies to 

these accounts is disproportionate to the 


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22See id. 

23See id. 

24See id., 86 FR at 22727. 

25See id., 86 FR at 22726. 

26See id. Specifically, the Exchange stated that if 

a beneficial owner transferred shares received in 

this manner into an account at another broker, Rule 

451A would not preclude that other broker from 

claiming reimbursement under Rules 451 and 465. 

27See id. 

28 In approving this proposed rule change, as 

modified by Amendment Nos. 2 and 3, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

29 15 U.S.C. 78f(b)(4). 

30 15 U.S.C. 78f(b)(5). 

31 17 CFR 240.14b–1. 

32See Order Instituting Proceedings, supra note 7. 

33See Original Notice, supra note 3. 

34See Order Instituting Proceedings, supra note 7, 

86 FR at 15537. 

35See id., 86 FR at 15537–38. 

36See id., 86 FR at 15538. 

37See Amendment No. 2, supra note 8, 86 FR at 

22726. 

38See id., 86 FR at 22726–27. 

39See id., 86 FR at 22727. 

40 17 CFR 240.14b–1. 

41See Order Instituting Proceedings, supra note 7, 

86 FR at 15538. 

42See Amendment No. 2, supra note 8, 86 FR at 

22727. 

43See id. 

44See letters from: Paul Conn, President, Global 

Capital Markets, Computershare, dated January 11, 

2021 (‘‘First Computershare Letter’’), at 2–3; Niels 

Holch, Executive Director, Shareholder 

Communications Coalition, dated January 20, 2021 

(‘‘Coalition Letter’’), at 5 n.14; Paul Conn, President, 

Global Capital Markets, Computershare, dated April 

14, 2021 (‘‘Second Computershare Letter’’), at 4; 

Continued 

maximum potential vote such shares 

represent.22 The Exchange stated that, 

by contrast, the broker using such a 

scheme chooses to engage in it because 

it believes that it will result in a 

commercial benefit to the broker.23 In 

addition, the Exchange stated that 

recipients of shares without charge from 

the broker as part of such schemes 

typically will not be given any choice as 

to which shares they receive and are 

therefore not making any investment 

decision.24

The Exchange stated that proposed 

Rule 451A would not limit a broker’s 

right to reimbursement for distributions 

to any beneficial owner if any part of 

that beneficial owner’s position in an 

issuer’s securities was received by any 

means other than a transfer without 

charge from the broker.25 The Exchange 

also stated that proposed Rule 451A 

would not limit a broker’s right to 

receive reimbursement under Rules 451 

and 465 unless that broker itself 

transferred the issuer’s shares without 

charge into the account of the beneficial 

owner.26 The Exchange further stated 

that Rules 451 and 465 would continue 

to apply to all distributions, so the 

broker would continue to be fully 

obligated to solicit votes from, and make 

other distributions on behalf of issuers 

to, all beneficial owners 

notwithstanding the limitations on 

reimbursement of expenses imposed by 

proposed Rule 451A.27

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment Nos. 2 and 3, 

is consistent with the requirements of 

the Act and the rules and regulations 

thereunder.28 In particular, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

Nos. 2 and 3, is consistent with Section 

6(b)(4) of the Act,29 which requires that 

an exchange have rules that provide for 

the equitable allocation of reasonable 

dues, fees, and other charges among its 

members, issuers, and other persons 

using its facilities; and with Section 

6(b)(5) of the Act,30 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, 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, and 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. The 

Commission also believes that the 

proposal as modified is consistent with 

Rule 14b–1 under the Act.31

The Commission raised concerns 

about the proposal in the Order 

Instituting Proceedings,32 but the 

Commission believes that the Exchange 

has amended the proposal adequately to 

address those concerns. Originally, 

proposed Rule 451A would have 

prohibited an NYSE member 

organization from imposing distribution 

fees on an issuer in cases where the 

member provided the shares or units of 

the securities held in the beneficial 

owner’s account at no cost or at a price 

‘‘substantially less than the market 

price.’’ 33 In the Order Instituting 

Proceedings, the Commission stated that 

the Exchange did not explain how it 

would determine whether a price is 

‘‘substantially less than the market 

price’’ or otherwise provide guidance on 

the meaning of that term.34 In 

Amendment No. 2, the Exchange 

addressed the Commission’s concern by 

eliminating that term from the proposed 

rule, resulting in a rule with a more 

clearly defined application to nominee 

accounts that contain only shares or 

units of the securities involved that 

were transferred to the account holder 

by the member at no cost. 

The Commission also stated in the 

Order Instituting Proceedings that the 

initial proposal did not explain why it 

is consistent with the Act for the 

proposed reimbursement prohibition 

not to apply if a customer transferred its 

account to a new broker or held any 

shares of the issuer in its account other 

than those received through a belowmarket price transfer from the member 

seeking reimbursement.35 Additionally, 

the Commission stated that the initial 

proposal did not address the feasibility 

of tracking shares held by a particular 

beneficial owner where the eligibility 

for reimbursement may change over 

time.36 The Exchange addressed these 

concerns in Amendment No. 2 by 

clarifying that it would be impossible 

for the new broker in these 

circumstances to track whether the 

shares of a specific issuer transferred 

into its custody had all been received by 

the beneficial owner without charge 

from another broker.37 In addition, 

according to the Exchange, the new 

broker would not have received the 

same commercial benefit as the original 

broker that transferred the shares 

without charge to its customers.38 For 

these reasons, the Exchange stated that 

it is impracticable to extend the 

proposed reimbursement prohibition to 

the new broker and reasonable to limit 

its application to the original broker that 

transferred the shares without charge.39

Further, in the Order Instituting 

Proceedings, the Commission stated that 

the Exchange had not explained how 

the proposal would be consistent with 

Rule 14b–1 under the Act 40 in light of 

the fact that a broker-dealer would be 

required to distribute proxies or other 

materials but be precluded from seeking 

reimbursement of its expenses in the 

applicable circumstances.41 In 

Amendment No. 2, the Exchange stated 

that any broker that is prohibited from 

charging fees under the proposal would 

continue to be reimbursed for its 

aggregate expenses with respect to 

proxy distribution, as the prohibition on 

distribution fees would be limited to 

those accounts in which the only shares 

of the applicable issuer are shares 

received without charge from that 

broker.42 The Exchange stated that, as 

such, the effect of the proposal would be 

to reduce the overall reimbursement 

received by that broker for a 

distribution, but not to eliminate that 

reimbursement.43

Commenters broadly supported the 

proposal.44 One commenter stated that 


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Kim Warnica, Senior Vice President, General 

Counsel and Secretary, Marathon Oil Corporation, 

dated April 27, 2021 (‘‘Marathon Letter’’); Patrick J. 

McEnany, Chairman and CEO, Catalyst 

Pharmaceuticals, Inc., dated June 9, 2021 (‘‘Catalyst 

Letter’’). An additional commenter appears to 

suggest that member organizations should be 

reimbursed in certain circumstances that are not 

covered by the proposal or the rules the proposal 

is amending. See letter from David, dated June 14, 

2021. 

45See First Computershare Letter at 2–3. This 

commenter also stated that while it understood that 

the accounts that receive such ‘‘gifted’’ securities 

generally are set for electronic communications, as 

a technical matter, if a street-name holder of gifted 

securities receives hardcopy proxy communications 

rather than electronic delivery, the issuer will still 

bear increased costs from printing the materials to 

be disseminated by the broker. See id. Even if an 

issuer bears increased printing costs due to its 

shares being included in a broker promotional 

program, as discussed below, the Commission 

believes that the proposal is consistent with the Act 

because, among other things, the proposed rule’s 

prohibition against imposing fees on issuers would 

result in a more equitable and not unfairly 

discriminatory reallocation to brokers of significant 

costs typically associated with the distribution of 

proxies and other materials in the circumstances 

addressed by the proposal. 

46See Marathon Letter at 1–2; Catalyst Letter at 

2. One of these commenters stated that its 2020 

proxy distribution bill was 2,402 percent higher 

than the 2019 bill, representing distribution to 

3,051 percent more stockholders in 2020 than in 

2019. See Marathon Letter at 1. The commenter 

noted that as of its 2020 stockholder meeting date, 

80 percent of the stockholders that held the 

commenter’s shares through accounts at the 

particular retail broker held five shares or less. See 

id. The commenter believes that, for the vast 

majority of the accounts holding fewer than five 

shares, the shares were chosen by that retail broker, 

not the beneficial owners. See id. at 2. Similarly, 

the other issuer commenter stated that the number 

of holders of its common shares who hold their 

shares through that retail broker increased by more 

than 2,057 percent from 2019 to 2020, and its proxy 

distribution bill from the distribution platform that 

services that retail broker grew 1,779 percent from 

2019 to 2020 (from approximately $12,500 to 

approximately $234,000). See Catalyst Letter at 1– 

2. The commenter believes the increase in both 

shareholders and costs is directly attributable to the 

retail broker and its promotional activities. See id. 

at 2. 

47See Marathon Letter at 2; Catalyst Letter at 2. 

48See Coalition Letter at 5 n.14. 

49See supra note 25 and accompanying text. 

50See Coalition Letter at 5 n.14. See also Catalyst 

Letter at 2. 

51One commenter stated that, if, after receiving 

gifted shares, an investor subsequently chooses to 

increase its share ownership and makes an 

investment decision to buy additional shares, it 

would be appropriate to shift the cost of proxy 

distribution back to the issuer. See Marathon Letter 

at 2. As stated above, the Exchange’s proposal 

would affect accounts that only include shares that 

were transferred to the account holder by the broker 

at no cost, and accordingly, if a street name investor 

were to be induced to purchase or otherwise 

acquire any additional shares of the issuer as a 

result of being gifted shares by a broker, the issuer 

would then bear the proxy distribution costs for 

that investor’s account. See supra note 25 and 

accompanying text. 

52See Rule 451, Supplementary Material .90; 

2013 Approval Order, supra note 11, 78 FR at 63546 

(stating that this rule with respect to managed 

accounts was designed to provide reasonable 

reimbursement of the overall expenses of brokerdealers in the aggregate, and the extent of 

reimbursement of any individual firm would vary 

depending on the specifics of its account 

population). One commenter analogized the 

scenario presented by this proposal to the 

Exchange’s prior proposal to eliminate fees for 

distributing issuer materials to managed accounts 

with five or fewer shares of the issuer’s securities. 

See Marathon Letter at 2. 

53As clarified in Amendment No. 3, supra note 

10, issuers must reimburse brokers for any non-feerelated expenses—i.e., any actual, out-of-pocket 

postage, envelope, and communication expenses 

incurred in receiving voting returns— 

notwithstanding the proposed rule. 

the recent broker practice of gifting 

small amounts of securities to retail 

brokerage clients as a promotional 

measure has caused significant 

increases in proxy costs for some 

issuers, and expressed the view that the 

proposal would alleviate much of the 

cost impact to issuers from this broker 

practice, particularly for accounts 

defaulted to e-delivery.45 Two 

commenters are issuers that stated that 

they experienced dramatic increases in 

proxy distribution costs for the 2020 

proxy season, which they both 

attributed to the inclusion of their 

shares in a retail broker’s promotional 

free share program.46 Both commenters 

asserted that the issuer should not bear 

the proxy distribution costs that arise 

due to their shares being included in 

such a broker promotional program.47

Another commenter stated that the 

promotions the proposed rule change is 

designed to address provide commercial 

benefits to broker-dealers without 

providing any parallel benefits to public 

companies.48

The Commission believes that the 

proposal as modified is consistent with 

Sections 6(b)(4) and 6(b)(5) of the Act, 

as well as Rule 14b–1. The proposed 

rule would appropriately reallocate 

from an issuer to a broker the fee-related 

expense of distributing proxy and other 

materials to beneficial owners in the 

limited circumstance where the 

beneficial owner’s account contains 

only shares or units of the issuer’s 

securities that were transferred to the 

beneficial owner by the broker at no 

cost.49 This circumstance would appear 

to arise typically due to a broker 

promotional program that, as stated by 

the Exchange, the broker chooses to 

engage in because it believes it will 

result in a commercial benefit to the 

broker and, as noted by one 

commenter,50 provides commercial 

benefits to the broker without providing 

any parallel benefits to the issuer.51 The 

Commission therefore believes that the 

proposal is reasonably designed to 

result in a more equitable and not 

unfairly discriminatory allocation of the 

costs of the distribution of proxy and 

other materials, consistent with Sections 

6(b)(4) and 6(b)(5) of the Act. 

The Commission also believes that the 

proposal is consistent with the Section 

6(b)(5) goal of protecting investors and 

the public interest, and is consistent 

with Rule 14b–1, because the cost 

reallocation effectuated by the proposal 

would not diminish brokers’ obligations 

to distribute issuer materials to accounts 

in which securities are held in street 

name, including accounts covered by 

the proposal, i.e., that contain only 

shares or units of the securities involved 

that were transferred to the account 

holder by the member organization at no 

cost. Moreover, this cost reallocation 

does not preclude the broker from 

receiving assurance of reimbursement of 

its ‘‘reasonable expenses,’’ both direct 

and indirect, consistent with Rule 14b– 

1. In previously approving, in 2013, an 

Exchange proposal that, among other 

things, eliminated fees for distributing 

issuer materials to managed accounts 

with five or fewer shares of the issuer’s 

securities, the Commission 

acknowledged that any general rule 

setting forth an industry-wide fee 

schedule for the reimbursement of 

reasonable broker-dealer expenses 

necessarily will not precisely reimburse 

the actual expenses incurred by 

individual firms.52 Here, a broker with 

accounts covered by the proposal may 

not receive precise reimbursement for 

its expenses incurred for a distribution 

pertaining to the issuer whose shares it 

gave away at no cost, but the broker 

would continue to be reasonably 

reimbursed for its expenses, both direct 

and indirect, in the aggregate.53 The 

proposal would not eliminate a broker’s 

ability to charge reimbursement fees for 

distributing an issuer’s materials to 

accounts that hold any shares or units 

of the issuer’s securities that the 

beneficial owner purchased or acquired 

in any way other than from the broker 

at no cost. Nor would the proposal affect 

the broker’s ability to charge 

reimbursement fees for distributing 

materials on behalf of issuers whose 

shares it did not give away at no cost. 

Any shortfall in precise reimbursement 

of expenses experienced by the broker 

because of the proposal would be 

confined to fee-related expenses 

attributable to distributing an issuer’s 

materials to beneficial owners that 

receive those materials solely due to the 

broker’s own promotional efforts. 

Based on the foregoing, the 

Commission finds that the proposed 

rule change, as amended, is consistent 

with the Act and the rules and 

regulations thereunder. 


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Federal Register / Vol. 86, No. 158 / Thursday, August 19, 2021 / Notices 46737 

54 15 U.S.C. 78s(b)(2). 

55 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3MIAX Express Interface is a connection to MIAX 

systems that enables Market Makers to submit 

simple and complex electronic quotes to MIAX. See 

Fee Schedule, note 26. 

4The term ‘‘Market Makers’’ refers to Lead Market 

Makers (‘‘LMMs’’), Primary Lead Market Makers 

(‘‘PLMMs’’), and Registered Market Makers 

(‘‘RMMs’’) collectively. See Exchange Rule 100. 

5The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

6Full Service MEI Ports provide Market Makers 

with the ability to send Market Maker quotes, 

eQuotes, and quote purge messages to the MIAX 

System. Full Service MEI Ports are also capable of 

receiving administrative information. Market 

Makers are limited to two Full Service MEI Ports 

per matching engine. See Fee Schedule, Section 

5)d)ii), note 27. 

7Limited Service MEI Ports provide Market 

Makers with the ability to send eQuotes and quote 

purge messages only, but not Market Maker Quotes, 

to the MIAX System. Limited Service MEI Ports are 

also capable of receiving administrative 

information. Market Makers initially receive two 

Limited Service MEI Ports per matching engine. See 

Fee Schedule, Section 5)d)ii), note 28. 

8A ‘‘matching engine’’ is a part of the MIAX 

electronic system that processes options quotes and 

trades on a symbol-by-symbol basis. Some matching 

engines will process option classes with multiple 

root symbols, and other matching engines will be 

dedicated to one single option root symbol (for 

example, options on SPY will be processed by one 

single matching engine that is dedicated only to 

SPY). A particular root symbol may only be 

assigned to a single designated matching engine. A 

particular root symbol may not be assigned to 

multiple matching engines. See Fee Schedule, 

Section 5)d)ii), note 29. 

9See Securities Exchange Act Release No. 79666 

(December 22, 2016), 81 FR 96133 (December 29, 

2016) (SR–MIAX–2016–47). 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,54 that the 

proposed rule change (SR–NYSE–2020– 

98), as amended by Amendment Nos. 2 

and 3, be and hereby is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.55

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17760 Filed 8–18–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92661; File No. SR–MIAX– 

2021–37] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Its Fee Schedule To 

Adopt a Tiered-Pricing Structure for 

Additional Limited Service MIAX 

Express Interface Ports 

August 13, 2021. 

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, 

2021, Miami International Securities 

Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

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 a proposal to 

amend the MIAX Options Fee Schedule 

(the ‘‘Fee Schedule’’) to amend certain 

port fees. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings, at MIAX’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, 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 

Exchange 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 proposes to amend the 

Fee Schedule to adopt a tiered-pricing 

structure for additional Limited Service 

MIAX Express Interface (‘‘MEI’’) Ports 3

available to Market Makers.4 The 

Exchange believes a tiered-pricing 

structure will encourage Market Makers 

to be more efficient and economical 

when determining how to connect to the 

Exchange. This should also enable the 

Exchange to better monitor and provide 

access to the Exchange’s network to 

ensure sufficient capacity and headroom 

in the System.5

Additional Limited Service MEI Port 

Tiered-Pricing Structure 

The Exchange proposes to amend the 

fees for additional Limited Service MEI 

Ports. Currently, the Exchange allocates 

two (2) Full Service MEI Ports 6 and two 

(2) Limited Service MEI Ports 7 per 

matching engine 8 to which each Market 

Maker connects. Market Makers may 

also request additional Limited Service 

MEI Ports for each matching engine to 

which they connect. The Full Service 

MEI Ports, Limited Service MEI Ports 

and the additional Limited Service MEI 

Ports all include access to the 

Exchange’s primary and secondary data 

centers and its disaster recovery center. 

Market Makers may request additional 

Limited Service MEI Ports for which 

they are assessed a $100 monthly fee for 

each additional Limited Service MEI 

Port for each matching engine. This fee 

has been unchanged since 2016.9

The Exchange now proposes to move 

from a flat monthly fee per additional 

Limited Service MEI Port for each 

matching engine to a tiered-pricing 

structure per additional Limited Service 

MEI Ports for each matching engine 

under which the monthly fee would 

vary depending on the number of 

additional Limited Service MEI Ports 

the Market Maker elects to purchase. 

Specifically, the Exchange will continue 

to provide the first and second 

additional Limited Service MEI Ports for 

each matching engine free of charge, as 

described above, per the initial 

allocation of Limited Service MEI Ports 

that Market Makers receive. 

Specifically, (i) the third and fourth 

additional Limited Service MEI Ports for 

each matching engine will increase from 

the current flat monthly fee of $100 to 

$150 per port; (ii) the fifth and sixth 

additional Limited Service MEI Ports for 

engine matching engine will increase 

from the current flat monthly fee of 

$100 to $200 per port; and (iii) the 

seventh additional Limited Service MEI 

Port, and each Limited Service MEI Port 

for each matching engine purchased 

thereafter, will increase from the current 

monthly flat fee of $100 to $250 per port 

(collectively, the ‘‘Proposed Access 

Fees’’). 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 


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