Document ID: SEC-2012-1813-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2012-11-08T05:00Z

[Federal Register Volume 77, Number 217 (Thursday, November 8, 2012)]
[Notices]
[Pages 67053-67055]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27289]

[[Page 67053]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68143; File No. SR-NYSE-2012-44]

 Self-Regulatory Organizations; New York Stock Exchange LLC; 
Order Granting Approval of Proposed Rule Change Amending Section 907.00 
of the Listed Company Manual, Which Describes Certain Complimentary 
Products and Services That Are Offered to Certain Issuers

November 2, 2012.

I. Introduction

    On August 30, 2012, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Section 907.00 of the Listed Company 
Manual (``Manual''), which describes certain complimentary products and 
services that are offered to certain issuers. The proposed rule change 
was published in the Federal Register on September 18, 2012.\3\ The 
Commission did not receive any comments on the proposal. This order 
grants approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 67846 (September 12, 
2012), 77 FR 57625 (``Notice).
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II. Description of the Proposal

    Section 907.00 of the Manual sets forth certain complimentary 
products and services that are offered to certain currently and newly 
listed issuers. According to the Exchange, these products and services 
are developed or delivered by NYSE or by a third party for use by NYSE-
listed companies. All listed issuers receive some complimentary 
products and services through the NYSE Market Access Center. Certain 
tiers of currently listed issuers and newly listed issuers receive 
additional products and services.
    Under Section 907.00, a newly listed issuer is defined as a U.S. 
issuer conducting an initial public offering (``IPO'') or an issuer 
emerging from a bankruptcy, spinoff (where a company lists new shares 
in the absence of a public offering), or carve-out (where a company 
carves out a business line or division, which then conducts a separate 
IPO), but does not include an issuer that transfers its listing from 
another U.S. exchange.\4\
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    \4\ See Securities Exchange Act Release No. 65127 (Aug. 12, 
2011), 76 FR 51449, 51450 n. 13 (Aug. 18, 2011) (SR-NYSE-2011-20) 
(``Approval Order'').
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    The Exchange proposes to broaden the definition of newly listed 
issuer to mean any U.S. company listing common stock on the Exchange 
for the first time, and any non-U.S. company \5\ listing an equity 
security \6\ on the Exchange under Section 102.01 or 103.00 of the 
Manual for the first time, regardless of whether such U.S. or non-U.S. 
company conducts an offering; the definition would continue to exclude 
any issuer that transfers its listing from another U.S. securities 
exchange.\7\ Under the proposed rule change, the definition of ``newly 
listed issuer'' also would mean any U.S. or non-U.S. company emerging 
from a bankruptcy, spinoff (where a company lists new shares in the 
absence of a public offering), and carve-out (where a company carves 
out a business line or division, which then conducts a separate initial 
public offering).
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    \5\ The Exchange also proposes to amend the text of Section 
907.00 to refer to ``non-U.S. companies'' rather than ``Foreign 
Private Issuers.'' According to the Exchange, this change is non-
substantive. See Notice, supra note 3.
    \6\ The Exchange proposes to define the term ``equity security'' 
to mean common stock or common share equivalents such as ordinary 
shares, New York shares (a type of share used by Canadian 
companies), global shares, American Depository Receipts (``ADRs''), 
or Global Depository Receipts, and to amend the text of Section 
907.00 throughout to change specific references to ADRs to the 
broader term ``equity security.'' In its filing, the Exchange noted 
that each of these types of securities in the definition of equity 
security has been used by non-U.S. companies when listing on the 
Exchange.
    \7\ The current text of Section 907.00 states that the 
definition of ``newly listed issuer'' excludes an issuer that 
transfers its listing from another exchange. In a prior filing, the 
Exchange stated that the exclusion applied to transfers from a 
national securities exchange, i.e., another U.S. securities 
exchange. See supra note 4. According to the Exchange, for purposes 
of greater clarity, the text of the Section 907.00 would be amended 
to provide specifically that a transfer from a U.S. securities 
exchange would be excluded from the definition of newly listed 
issuers.
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    Under the existing rules, the Exchange uses global market value 
based on the public offering price for determining the types of 
services a newly listed issuer would qualify for. Because the rules 
will no longer require an offering to qualify as a newly listed issuer, 
the Exchange proposes to amend the text that refers to global market 
value based on public offering price. The Exchange proposes to add text 
to Section 907.00 that would provide that if a newly listed issuer does 
not conduct a public offering, then its global market value will be 
determined by the Exchange at the time of listing for purposes of 
determining whether the issuer qualifies for Tier A or B.
    The Exchange also proposes to make changes to rules relating to the 
products and services available to currently listed issuers. Under 
existing rules, the Exchange has two tiers of products and services 
that are available to currently listed issuers. Under Tier One, the 
Exchange offers market surveillance and Web-hosting products and 
services to U.S. issuers that have 270 million or more total shares of 
common stock issued and outstanding in all share classes, including and 
in addition to Treasury shares, and Foreign Private Issuers that have 
270 million or more in ADRs issued and outstanding, each calculated 
annually as of December 31 of the preceding year. Under Tier Two, at 
each such issuer's election, the Exchange offers either market 
analytics or Web-hosting products and services to U.S. issuers that 
have 160 million to 269,999,999 total shares of common stock issued and 
outstanding in all share classes, including and in addition to Treasury 
shares. Tier Two products and services also are offered to Foreign 
Private Issuers that have 160 million to 269,999,999 in ADRs issued and 
outstanding, each calculated annually as of December 31 of the 
preceding year.
    In its filing, the Exchange noted that using December 31 as the 
date of qualification is not optimal because it provides issuers with 
too little notice of their qualification for Tier One or Tier Two 
products and services. It is therefore proposing to amend the rule to 
make the date to determine issuers' qualifications as of September 30 
of the preceding year. Under the proposal, shortly after September 30, 
2012, the Exchange would run the calculations for each issuer and 
determine which are eligible for Tier One or Tier Two for calendar year 
2013, and so notify the qualifying issuers. According to the Exchange, 
this is beneficial because qualifying issuers then would have nearly 
three months to select from the available services in their tier for 
the following calendar year, and non-qualifying issuers would have 
additional time to budget and plan for obtaining the services elsewhere 
should they so wish.
    As described above, the Exchange proposes to update references to 
ADRs throughout the text of Rule 907.00 to reflect the broader term 
``equity security.'' \8\ Thus, the Exchange would use shares of an 
equity security issued and outstanding in the U.S. in lieu of ADRs for 
non-U.S. companies in determining whether the Tier One and Tier Two 
thresholds have been satisfied.
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    \8\ See supra note 6.

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[[Page 67054]]

    Furthermore, with respect to Tier One offerings, the Exchange 
proposes to permit a Tier One issuer to choose market analytics 
products and services as an alternative to market surveillance products 
and services. Web-hosting products and services would continue to be 
offered to Tier One issuers.
    The Exchange also proposes changes to the products and services 
available to newly listed issuers. Tiers A and B describe the products 
and services available to newly listed issuers. Under existing rules, 
Tier A includes issuers with a global market value of $400 million or 
more based on the public offering price and Tier B includes issuers 
with a global market value of less than $400 million based on the 
public offering price.
    With one exception, the specified products and services for newly 
listed issuers are offered for 24 months after listing, at which time 
the issuers may be eligible for the Tier One or Tier Two products and 
services offered to existing issuers. The exception is market 
surveillance products and services, which currently are offered to Tier 
A issuers for the initial 12 months after listing. Under the current 
Manual, those issuers would not be eligible to receive the market 
surveillance products and services for the next 12 months, until they 
qualified for Tier One status at the end of the 24-month period 
following listing. The Exchange proposes to eliminate that 12-month gap 
by amending Section 907.00 to provide that if, at the end of the 12-
month period following a new listing, an issuer that has selected 
market surveillance products and services meets the qualifications of a 
Tier One issuer, then such issuer may continue to receive such services 
for an additional 12 months.

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act.\9\ Specifically, the Commission believes it is consistent with the 
provisions of Sections 6(b)(4) and (5) of the Act,\10\ in particular, 
in that it is designed to provide for the equitable allocation of 
reasonable dues, fees, and other charges among Exchange members, 
issuers, and other persons using the Exchange's facilities, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. Moreover, the Commission believes that the 
proposed rule change is consistent with Section 6(b)(8) of the Act \11\ 
in that it does not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.
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    \9\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
    \11\ 15 U.S.C. 78f(b)(8).
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    According to the Exchange, a non-U.S. company that is listing an 
equity security for the first time on the Exchange, or is emerging from 
a bankruptcy, spinoff, or carve-out, is similarly situated to a U.S. 
issuer conducting an IPO or emerging from a bankruptcy, spinoff, or 
carve-out, and should be eligible to receive the same products and 
services from the NYSE Market Access Center as those U.S. issuers do. 
Moreover, the Exchange has further represented that (i) referring to 
listing on the Exchange for the first time, rather than the specific 
offerings that may occur in conjunction with the listing, and (ii) 
using the term ``equity security'' rather than ADRs for a non-U.S. 
company, should make the coverage of the Section sufficiently broad to 
account for different types of offerings and securities that may occur 
with a new listing.\12\ Further, under Section 907, the term ``equity 
security'' for purposes of currently listed non-U.S. companies eligible 
for products and services would be defined only to include common stock 
or common share equivalents, such as ordinary shares, New York shares, 
global shares, ADRs, or Global Depository Receipts, which is consistent 
with the type of security, common stock, used for currently listed U.S. 
companies receiving products and services under Section 907.\13\ 
Accordingly, the Commission believes that it is consistent with the Act 
to treat U.S. and non-U.S. issuers similarly and that the products and 
services are equitably allocated among issuers consistent with Section 
6(b)(4) and do not unfairly discriminate between issuers consistent 
with Section 6(b)(5) of the Act.
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    \12\ The Commission notes that the Exchange is also proposing to 
amend its reference to global market value based on public offering 
price to reflect that some listed companies may not conduct a public 
offering in connection with a listing. Section 907 would be amended 
so that if there is no public offering in connection with a listing 
on the Exchange, the Exchange will determine the issuer's global 
market value. The Commission believes this change is consistent with 
the other changes proposed by the Exchange and approved by the 
Commission in this order, consistent with the Act.
    \13\ See also supra note 6.
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    The Commission also believes that it is consistent with the Act for 
the Exchange to give issuers under Tier One the option of receiving 
market analytics products and services in addition to market 
surveillance services, as well as allow qualifying issuers under Tier A 
to continue to receive surveillance products and services for an 
additional twelve months. The Exchange has represented that it faces 
competition in the market for listing services, and it competes in part 
by improving the quality of the services that it offers to listed 
companies. According to the Exchange, by offering products and services 
on a complimentary basis and ensuring that it is offering the services 
most valued by its listed issuers, it improves the quality of the 
services that listed companies receive.\14\ Accordingly, the Commission 
believes that NYSE's proposal reflects the current competitive 
environment for exchange listings among national securities exchanges 
and is appropriate and consistent with Section 6(b)(8). Moreover, with 
respect to the change to Tier A, the Commission notes that by offering 
market surveillance products and services throughout the 24-month 
period following listing, rather than just the initial 12 months, the 
Exchange should eliminate the interruption in service that would 
otherwise occur for issuers that would qualify for Tier One status as 
existing issuers at the end of the 24-month period. Further, as to the 
additional choice of market analytics products and services for issuers 
qualifying under Tier One, the Commission notes that such services are 
already permitted for newly listed issuers under Tier A and currently 
listed issuers under Tier Two. Therefore, it appears reasonable to 
allow such issuers to receive those services if they qualify as a Tier 
One issuer. Further, all issuers, both U.S. and non-U.S., that qualify 
for services under Tier A and Tier One will be able to avail themselves 
of the changes to the products and services being offered under these 
tiers.\15\
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    \14\ The NYSE has also represented that it does not have 
exclusive agreements or arrangements with the vendors providing the 
products and services, and NYSE may use multiple vendors for the 
same type of product or service. Moreover, currently listed and 
newly listed companies would not be required to accept the offered 
products and services from NYSE, and an issuer's receipt of an NYSE 
listing is not conditioned on the issuer's acceptance of such 
products and services. Further, the Exchange has represented that, 
from time to time, issuers elect to purchase products and services 
from other vendors at their own expense instead of accepting the 
products and services described above offered by the Exchange.
    \15\ See Approval Order, supra note 4, finding that the existing 
tiers are consistent with the Act. In particular, the Approval Order 
states that while not all issuers receive the same level of 
services, NYSE has stated that trading volume and market activity 
are related to the level of services that the listed companies would 
use in the absence of complimentary arrangements. The Commission 
found, among other things, that ``* * * the products and services 
and their commercial value are equitably allocated among issuers 
consistent with Section 6(b)(4) of the Act, and the rule does not 
unfairly discriminate between issuers consistent with Section 
6(b)(5) of the Act.''

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[[Page 67055]]

    The Commission also believes that it is consistent with the Act for 
the Exchange to use September 30, instead of December 31, for 
determining whether an issuer qualifies for complimentary products and 
services under Tier One and Tier Two. The Commission believes that this 
change should provide issuers with additional time to either select the 
services and products, if any, it qualifies for, as well as provide 
sufficient time to select another vendor if the issuer so chooses. The 
Commission also notes that certain other proposed changes are merely 
technical in nature, such as specifically excluding transfers from 
other U.S. exchanges from the definition of a newly listed issuer and 
replacing the term ``Foreign Private Issuer'' with ``non-U.S. 
companies.'' With respect to excluding transfers from other U.S. 
exchanges, the Commission notes that the Exchange, in a prior filing, 
had specifically excluded transfers from another national securities 
exchange from its definition of ``newly listed issuers,\16\ but did not 
codify the exclusion in Section 907. The Commission believes that 
codifying this exclusion should make the NYSE's rule more transparent.
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    \16\ See supra note 4.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSE-2012-44) be, and it 
hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27289 Filed 11-7-12; 8:45 am]
BILLING CODE 8011-01-P