Document ID: SEC-2008-1724-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-12-29T05:00Z

[Federal Register: December 29, 2008 (Volume 73, Number 249)]
[Notices]               
[Page 79531-79533]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de08-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59106; File No. SR-NYSE-2008-112]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change to Discontinue Policy of 
Prohibiting Transfer Agents from Charging Fees for Issuing Stock 
Certificates

December 16, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 30, 2008, New York 
Stock Exchange, LLC (``NYSE'') filed with the Securities and Exchange 
Commission (``Commission'') proposed rule change No. SR-NYSE-2008-112. 
The

[[Page 79532]]

Commission is publishing this notice to solicit comments from 
interested parties on the proposed rule change as described in Items I, 
II, and III below, which items have been prepared primarily by the 
NYSE.\2\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The exact text of the NYSE's proposed rule change can be 
found at http://www.nyse.com.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE proposes to discontinue its policy of prohibiting transfer 
agents for listed companies from charging fees for the issuance of 
stock certificates.

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 NYSE 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. NYSE has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\3\
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    \3\ The Commission has modified portions of the text of the 
summaries prepared by the NYSE.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE proposes to discontinue its long-standing, unwritten policy of 
prohibiting transfer agents of NYSE listed companies from charging for 
the issuance of stock certificates.
    The securities industry is moving towards eliminating the use of 
physical certificates (i.e., dematerialization) by encouraging 
investors to hold securities positions in book-entry form either in 
street name at a broker-dealer or through the Direct Registration 
System (``DRS''). DRS allows investors to have securities directly 
registered in book-entry form on the records of the issuer or its 
transfer agent without having a certificate issued. DRS also allows 
those securities positions to be electronically transferred to a 
broker-dealer in order to effect a transaction without the risk and 
delay associated with the use of paper certificates. Since March 31, 
2008, Section 501.00 of NYSE's Listed Company Manual has required that 
all securities listed on the NYSE must be eligible for participation in 
DRS.\4\ Approximately 2,428 NYSE listed securities currently 
participate in DRS.
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    \4\ Section 501.00 requires listed securities to be eligible for 
a direct registration system operated by a clearing agency, as 
defined in Section 3(a)(23) of the Act, that is registered with the 
Commission pursuant to Section 17A(b)(2) of the Act. While currently 
the DRS administered by The Depository Trust Company is the only 
direct registration system offered by a registered clearing agency, 
Section 501.00 provides issuers with the option of using another 
qualified direct registration system if one should exist in the 
future. Section 501.00 does not extend to securities which are 
specifically permitted under that chapter to be and which are book-
entry only. NYSE will waive the application of Section 501.00 to any 
listed company that is a foreign private issuer that submits to NYSE 
a letter from an independent home country counsel certifying that a 
home country law or regulation prohibits such compliance.
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    To further the industry's efforts to dematerialize, the Securities 
Industry and Financial Markets Association (``SIFMA''), which is one of 
the leaders in the movement towards dematerialization, recently sent a 
letter to the NYSE requesting that the NYSE discontinue its prohibition 
of charging fees in connection with the issuance of securities 
certificates (``SIFMA Letter'').\5\ SIFMA noted that almost 75% of 
physical certificates deposited by broker-dealers and bank custodians 
at The Depository Trust Company (``DTC''), a registered clearing agency 
that is the primary custodian of securities traded in the United 
States, were issued within the last six months. SIFMA believes that 
these recent deposits indicate that DTC participants (i.e., broker-
dealers and banks) are providing physical certificates to their 
customers only to have the securities moved back into street name in a 
short period of time. In SIFMA's view, this activity results in 
unnecessary expense and in inherent risk that the certificates may be 
lost, destroyed, or stolen. A SIFMA survey concluded that more than 1.2 
million certificates need to be replaced because of loss, destruction, 
or theft each year at an approximate cost to the transfer agents of $65 
million.\6\
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    \5\ Letter to Stephen Walsh, Vice President, NYSE Euronext, from 
Lawrence Morillo, SIFMA Operations Legal & Regulatory Sub-Committee 
Chair (August 26, 2008).
    \6\ ``Securities Industry Immobilization & Dematerialization 
Implementation Guide--The Phase-Out of the Stock Certificate'' 
(SIFMA, 2008).
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    NYSE believes that securityholders derive no apparent benefit from 
continuing to hold their securities in certificated form rather than in 
uncertificated form in street name or through DRS and that the 
inability of the transfer agents to charge for the issuance of 
securities certificates imposes a considerable cost on issuers and 
transfer agents. Therefore, NYSE proposes to discontinue its 
prohibition of charging fees for the issuance of new certificates. 
Allowing transfer agents to charge for the issuance of certificates 
should not only shift the cost of the issuance of certificates from the 
issuers and transfer agents to the requesting securityholders but 
should also have the added effect of encouraging more securityholders 
to hold their securities in street name or through DRS. This should 
further the movement to dematerialization. NYSE listed companies that 
want their investors to continue to have access to the free issuance of 
new certificates will be able to ensure the continuation of this 
practice by modifying their contractual arrangements with their 
transfer agents.
    NYSE believes that the proposal will help make the securities 
markets more safe and efficient by encouraging the dematerialization of 
securities. NYSE also believes that the proposal is consistent with the 
protection of investors and the public interest because holding a 
securities position in street name or through DRS provides investors 
with the ability to hold their securities in a safe and cost-effective 
manner without incurring the fees associated with the issuance and 
processing of securities certificates.
2. Statutory Basis
    NYSE believes that the proposed rule change is consistent with 
Section 6(b) of the Act,\7\ in general, and particularly furthers the 
objectives of Section 6(b)(5) of the Act \8\ in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. In 
particular, NYSE believes that the proposal removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system in that it encourages the dematerialization of securities, which 
should improve the process of transferring securities in the public 
markets. NYSE also believes that the proposal is consistent with the 
protection of investors and the public interest in that holding 
securities in or through street name and DRS provides a better 
alternative to holding securities in certificated form by providing 
investors with the ability to hold their securities in a safe and cost-
effective manner without incurring the fees

[[Page 79533]]

associated with the issuance of certificates.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    NYSE does not believe that the proposed rule change will 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

    NYSE has neither solicited nor received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period: (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2008-112 in the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2008-112. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3:30 p.m. Copies of such filings also will be available 
for inspection and copying at the principal office of NYSE and on the 
NYSE's Web site, http://www.nyse.com. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2008-112 and should be submitted on 
or before January 20, 2009. For the Commission by the Division of 
Trading and Markets, pursuant to delegated authority.\9\

Florence E. Harmon,
Acting Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-30784 Filed 12-24-08; 8:45 am]

BILLING CODE 8011-01-P