Document ID: SEC-2019-0014-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2018-12-31T05:00Z

[Federal Register Volume 83, Number 249 (Monday, December 31, 2018)]
[Notices]
[Pages 67775-67777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28389]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84935; File No. SR-NYSE-2018-64]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Chapter 9 of the NYSE Listed Company Manual Relating to Fees for 
Business Development Companies

December 21, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 20, 2018, New York Stock Exchange LLC (``NYSE'' 
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 self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Chapter 9 of the NYSE Listed Company 
Manual (the ``Manual'') to provide that business development companies 
will be subject to the same fee schedule as domestic operating 
companies and no longer treated as closed-end funds for fee purposes. 
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 902.04 of the Manual sets forth listing fees applicable to 
all listed closed-end funds. Along with all other closed-end funds, 
these fees are applied to any closed-end fund that elects to be taxed 
as a business development company (``BDC'') and is listed under Section 
102.04B of the Manual.
    The purpose and operation of a business development company is very 
different from that of a non-BDC closed-end fund. A non-BDC closed-end 
fund is a vehicle for the passive investment in securities and the role 
of its management is limited to choosing when to buy and sell 
securities in the fund's portfolio. By contrast, a condition to 
obtaining and retaining business development company status is that the 
business development company must make available management assistance 
to the companies in which it has made investments. As such, in the 
Exchange's opinion, the purpose and operation of a business development 
company is therefore more analogous to that of an

[[Page 67776]]

operating company than to a non-BDC closed-end fund.
    In light of the Exchange's opinion that BDCs function more like 
operating companies than they do like other closed-end funds, the 
Exchange believes it would be more consistent to subject them to the 
same fee requirements as are applied to domestic operating companies 
than to continue to apply to them the fees applicable to closed-end 
funds.\4\ Consequently, the Exchange proposes to amend Sections 902.02, 
902.03 and 903.04 of the Manual to state that BDCs will not be subject 
to the closed-end fund fee schedule in Section 902.04, but rather, that 
for all purposes in Chapter 9, BDCs listed under Section 102.04B will 
be treated the same as domestic operating companies (including the fees 
applicable to domestic operating companies set forth in Section 902.03) 
and will not be subject to the fees for closed-end funds as set forth 
in Section 902.04.
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    \4\ All listed BDCs are domestic companies, as only domestic 
entities can register under the Investment Company Act.
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    Under Section 902.04, a BDC is charged initial listing fees when it 
first lists a class of common stock, or first lists a class of 
preferred stock in a case where common stock is not already listed, 
according to a tiered schedule. Under this tiered schedule, a BDC pays 
$20,000 (for up to and including 10 million shares), $30,000 (for over 
10 million up to and including 20 million shares) or $40,000 (for over 
20 million shares). By comparison, under the operating company fee 
schedule, a BDC will pay listing fees the first time it lists a class 
of common shares at a rate of $0.004 per share. The first time that an 
issuer lists a class of common shares, the issuer is also subject to a 
one-time special charge of $50,000, in addition to fees calculated 
according to the Listing Fee schedule.\5\ The minimum and maximum 
listing fees applicable the first time an issuer lists a class of 
common shares under the operating company fee schedule are $150,000 and 
$295,000, respectively, which amounts include the special charge of 
$50,000. In light of the minimum payment of $150,000, newly-listed BDCs 
will in all instances be subject to higher initial listing fees under 
the amended fee schedule than under the closed-end fund schedule as 
currently in effect. The Exchange believes it is reasonable to bill 
BDCs under the operating company initial listing fee schedule rather 
than the closed-end fund initial listing fee schedule because: (i) In 
the Exchange's opinion, BDCs function more like operating companies 
than like other closed-end funds; and (ii) BDCs are generally subject 
to the same corporate governance requirements as operating companies, 
so the Exchange expends regulatory resources in determining the initial 
listing qualification of a BDC that are comparable to the effort 
involved in listing an operating company and significantly greater than 
in the case of a closed-end fund.
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    \5\ A BDC will also be charged $0.004 per share:
    At the time it first lists, an issuer lists one or more classes 
of preferred stock or warrants, whether or not common shares are 
also listed at that time;
    Once listed, an issuer lists a new class of preferred stock or 
warrants.
    These types of listings are not subject to the special charge or 
to the minimum or maximum Listing Fees applicable to an initial 
listing of common shares.
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    Under Section 902.04, BDCs are currently subject to annual fees at 
a rate of $0.001025 per share, subject to a $25,000 minimum fee. Other 
than a fund family discount for which BDCs are not typically qualified 
(as they are not generally part of a family of at least three listed 
funds), Section 902.04 does not include a limit on an issuer's annual 
fee obligations. By comparison, under the operating company fee 
schedule, BDCs will be charged $0.0011 per share for common shares, 
preferred shares and warrants, subject to a $68,000 minimum for the 
primary class of common shares or primary class of preferred stock (if 
there is no class of common shares listed), a $20,000 minimum for any 
additional class of common shares, and a $5,000 minimum for any class 
of warrants or preferred shares. In addition to these minimum payments, 
BDCs will benefit from the $500,000 cap imposed on annual fees and 
listing fees set forth in Section 902.02. As a consequence of the 
higher minimum annual fee requirements and per share rates applicable 
to operating companies, BDCs with smaller numbers of shares outstanding 
will generally pay somewhat higher fees as a result of the proposed 
rule change. The Exchange believes this is reasonable in light of the 
fact that BDCs are subject to the same corporate governance 
requirements as operating companies and require the Exchange to expend 
comparable levels of regulatory resources. However, the application of 
the $500,000 fee cap may result in certain larger BDCs paying less in 
annual fees than would be the case under the closed-end fund schedule, 
as the closed-end fund fee schedule does not include a cap on annual 
fees. The Exchange believes this fee limitation is reasonable due to 
the economies of scale involved in dealing with large issuers.
    The Exchange does not anticipate any reduction in revenues 
associated with the proposed amendments and does not expect them to 
have any effect on its ability to appropriately fund its regulatory 
program.
    The proposed rule change will take effect as of January 1, 2019.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(4) \7\ of the Act, in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges. The Exchange also believes that the proposed 
rule change is consistent with 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 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes it is reasonable to bill BDCs under the 
operating company initial listing fee schedule rather than the closed-
end fund initial listing fee schedule because: (i) In the Exchange's 
opinion, BDCs function more like operating companies than like other 
closed-end funds; and (ii) BDCs are generally subject to the same 
corporate governance requirements as operating companies, so the 
Exchange expends regulatory resources in determining the initial 
listing qualification of a BDC that are comparable to the effort 
involved in listing an operating company and significantly greater than 
in the case of a closed-end fund.
    The Exchange believes that it is not unfairly discriminatory and 
represents an equitable allocation of reasonable fees to charge BDCs 
the same fees as domestic operating companies rather than charge them 
the closed-end fund fee schedule, as the Exchange believes that the 
purpose and operation of a BDC are more analogous to those of an 
operating company than to a non-BDC closed end fund and it is therefore 
more consistent to charge BDCs the same fees as are paid by domestic 
operating companies.
    As a consequence of the higher minimum annual fee requirements and 
per share rates applicable to operating

[[Page 67777]]

companies, BDCs with smaller numbers of shares outstanding will 
generally pay somewhat higher fees as a result of the proposed rule 
change. The Exchange believes this is reasonable in light of the fact 
that BDCs are subject to the same corporate governance requirements as 
operating companies and require the Exchange to expend comparable 
levels of regulatory resources. However, the application of the 
$500,000 fee cap may result in certain larger BDCs paying less in 
annual fees than would be the case under the closed-end fund schedule, 
as the closed-end fund fee schedule does not include a cap on annual 
fees. The Exchange believes this fee limitation is reasonable due to 
the economies of scale involved in dealing with large issuers.
    The Exchange does not anticipate any reduction in revenues 
associated with the proposed amendments and does not expect them to 
have any effect on its ability to appropriately fund its regulatory 
program.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. The proposed rule change is 
designed to ensure that the fees charged by the Exchange accurately 
reflect the services provided and benefits realized by listed 
companies. The market for listing services is extremely competitive. 
Each listing exchange has a different fee schedule that applies to 
issuers seeking to list securities on its exchange. Issuers have the 
option to list their securities on these alternative venues based on 
the fees charged and the value provided by each listing. Because 
issuers have a choice to list their securities on a different national 
securities exchange, the Exchange does not believe that the proposed 
fee changes impose a burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSE-2018-64 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-NYSE-2018-64. 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-NYSE-2018-64 and should be submitted on 
or before January 22, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2018-28389 Filed 12-28-18; 8:45 am]
 BILLING CODE 8011-01-P