Document ID: SEC-2015-1672-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2015-10-16T04:00Z

[Federal Register Volume 80, Number 200 (Friday, October 16, 2015)]
[Notices]
[Pages 62584-62588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26336]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76127; File No. SR-NYSE-2015-36]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change, Amending Section 907.00 of the Listed 
Company Manual (the ``Manual'') To (i) Amend the Suite of Complimentary 
Products and Services That Are Offered to Certain Current and Newly 
Listed Companies, (ii) Update the Value of Complimentary Products and 
Services Offered to Listed Companies, and (iii) Provide That 
Complimentary Products and Services Would Also Be Offered to Companies 
That Transfer Their Listing to the Exchange From Another National 
Securities Exchange

October 9, 2015.

I. Introduction

    On August 11, 2015, 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'') to amend the suite of complimentary products and 
services that are offered to certain current and newly listed companies 
and update the value of complimentary products and services offered to 
listed companies. In addition, the proposal would separate companies 
that transfer their listing to the Exchange from another national 
securities exchange to a new category and expand the complimentary 
products and services offered to such transfer companies. The proposed 
rule change was published for comment in the Federal Register on August 
25, 2015.\3\ No comment letters were received in response to the 
Notice. This order approves 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. 75740 (August 19, 
2015), 80 FR 51617 (``Notice'').
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II. Description of the Proposed Rule Change

    In December 2013, the Exchange adopted a rule to expand the suite 
of complimentary products and services that it offers to certain 
current and newly listed companies on the Exchange.\4\ Under this rule, 
certain

[[Page 62585]]

companies currently listed on the Exchange (``Eligible Current 
Listings'') are offered a suite of complimentary products and services 
that vary depending on the number of shares of common stock or other 
equity security that a company has outstanding. The Exchange presently 
offers a suite of complimentary products and services to (i) any U.S. 
company that lists common stock on the Exchange for the first time and 
any non-U.S. company that lists an equity security 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 and (ii) 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), or carve-out (where a company carves out a business 
line or division, which then conducts a separate initial public 
offering) (collectively, ``Eligible New Listings''). Currently, 
companies that transfer their listing to the Exchange are offered 
complimentary products and services on the same terms as Eligible 
Current Listings.
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    \4\ See Securities Exchange Act Release No. 70971 (Dec. 3, 
2013), 78 FR 73905 (Dec. 9, 2013) (SR-NYSE-2013-68) (``December 2013 
Approval Order'').
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    The Exchange proposes to amend Section 907.00 of the Manual to (i) 
amend the suite of complimentary products and services that are offered 
to Eligible Current Listings and Eligible New Listings, (ii) update the 
value of complimentary products and services offered to such companies, 
and (iii) provide that any U.S. or non-U.S. company that transfers its 
listing of common stock or equity securities, respectively, to the 
Exchange from another national securities exchange (``Eligible Transfer 
Companies'') would be eligible to receive an enhanced package of 
complimentary products and services comparable to the package offered 
to Eligible New Listings, with the exception of corporate governance 
tools.\5\
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    \5\ Eligible transfers currently receive complimentary products 
and services, if eligible, under the ``currently listed issuers'' 
category.
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    The Exchange proposes to update the approximate commercial value of 
the following offerings to Eligible Current Listings, Eligible New 
Listings, and Eligible Transfer Companies: Market surveillance products 
and services from $45,000 to $55,000 per annum, corporate governance 
tools from $20,000 to $50,000 per annum, web-hosting products and 
services from a range of $12,000-16,000 to $16,000 per annum, market 
analytics products and services from $20,000 to $30,000 per annum, and 
news distribution products and services from $10,000 to $20,000 per 
annum. The Exchange also proposes to include web-casting services (with 
a commercial value of approximately $6,500 annually) as a separate 
category of complimentary products and services offered to certain 
issuers.\6\ In addition, the Exchange proposes to add whistleblower 
hotline services (with a commercial value of approximately $4,000 
annually) to the list of services that it offers to all listed 
companies for a period of 24 months. The whistleblower hotline services 
will replace data room services and virtual investor relation tools 
(with a commercial value of $15,000-$20,000) as complimentary products 
offered to all listed issuers.
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    \6\ The web-hosting product offered by the Exchange provides 
eligible issuers with a Web site containing business content that 
can be viewed by investors. Web-casting services enable companies to 
host interactive web-casts to communicate with investors. Eligible 
companies will receive four interactive web-casts each year.
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    Currently, all listed issuers receive some complimentary products 
and services through NYSE Market Access Center. The Exchange also 
offers Eligible Current Listings a suite of products and services, 
varying based on the number of shares such companies have issued and 
outstanding. Eligible Current Listings that have at least 270 million 
shares issued and outstanding (``Tier One Eligible Current Listing'') 
are presently offered (i) a choice of market surveillance, corporate 
governance tools and advisory services or market analytics products and 
services and (ii) web-hosting products and services, on a complimentary 
basis. Eligible Current Listings that have between 160 million and up 
to 270 million shares issued and outstanding (``Tier Two Eligible 
Current Listing'') are presently offered a choice of market analytics, 
corporate governance tools, or web-hosting products and services. The 
Exchange proposes to amend Section 907.00 to delete corporate 
governance tools and advisory services from the suite of products 
offered to a Tier One Eligible Current Listing and corporate governance 
tools from the suite of products offered to a Tier Two Eligible Current 
Listing. In both cases, the proposed rule replaces the deleted service 
with web-casting products and services.
    The Exchange currently offers Eligible New Listings different 
products and services based on such companies' global market value. 
Eligible New Listings with a global market value of $400 million or 
more (each a ``Tier A Eligible New Listing'') are presently offered 
web-hosting and news distribution products and services for a period of 
24 months and either (i) market surveillance products and services for 
a period of 12 calendar months from the date of listing or (ii) a 
choice of market analytics products and services or corporate 
governance tools for a period of 24 calendar months from the date of 
listing. Eligible New Listings with a global market value of less than 
$400 million (each a ``Tier B Eligible New Listing'') are presently 
offered web-hosting and news distribution products and services for a 
period of 24 months from the date of listing. The Exchange proposes to 
amend Section 907.00 to offer 24 months each of market analytics, 
market surveillance products, web-hosting, web-casting, corporate 
governance tools, and news distribution products and services to Tier A 
Eligible New Listings. Accordingly, the Exchange proposes to delete 
text from Section 907.00 that discusses providing market surveillance 
products and services for only 12 months, as well as the option for 
continuing such services at the end of the initial 12 month period. The 
proposed rule further amends Section 907.00 to offer 24 months of web-
casting, market analytics, and corporate governance tools to Tier B 
Eligible New Listings, in addition to the currently-offered web-hosting 
and news distribution products.
    Pursuant to the proposed rule change, Eligible Transfer Companies 
would be offered a package of complimentary products and services that 
are similar to Eligible New Listings, with one exception.\7\ The one 
difference between the packages is that the Exchange will not offer 
corporate governance tools to Eligible Transfer Companies, while 
Eligible New Listings will receive this service.
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    \7\ As noted above, the Exchange proposes to offer Eligible 
Transfer Companies a package of complimentary products and services 
comparable to the package that it offers to Eligible New Listings. 
Therefore, the Exchange proposes to utilize the same metric, i.e., 
global market value, to determine eligibility for each designation 
so as to avoid confusion. Currently, transfer companies may receive 
complimentary products and services if they qualify to be designated 
as an Eligible Current Listing, such designation being based on the 
number of outstanding shares of a company's equity securities. Under 
the proposed rule change, Eligible Transfer Companies with a global 
market value of $400 million or more will be eligible to receive a 
suite of complimentary products and services valued at $127,500 per 
year for two years and Eligible Transfer Companies with a global 
market value of less than $400 million will be eligible to receive a 
suite of complimentary products and services valued at $72,500 per 
year for two years.
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    Regarding the timing of complimentary products and services, the 
proposed rule amends Section 907.00 to specify that if an Eligible New 
Listing or Eligible Transfer Company

[[Page 62586]]

begins using a particular service within 30 days after the date of 
listing, the complimentary period begins on such date of first use. In 
all other instances, the complimentary period begins on the listing 
date.
    In addition to the foregoing, the Exchange proposes making several 
changes to its rule to reflect a change in terminology. The proposed 
rule change amends Section 907.00 to change the terms ``newly listed 
issuer'' and ``currently listed issuers'' to ``Eligible New Listing'' 
and ``Eligible Current Listings,'' respectively. The Exchange also 
proposes to amend Section 907.00 to include a definition of Eligible 
Transfer Companies.\8\ Accordingly, since Eligible Transfer Companies 
would be a separate category of issuer under the proposed rule, the 
Exchange stated in its filing that it does not believe there could be 
any inference that a transfer company would be included in the 
definition of an Eligible New Listing. Therefore, the Exchange proposes 
to delete the exception for companies that are transferring their 
listing from another national securities exchange from the current 
definition of newly listed issuers, which would be renamed Eligible New 
Listing under the proposed rule.
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    \8\ For purposes of this Section 907.00, the term ``Eligible 
Transfer Company'' means any U.S. or non-U.S. company that transfers 
its listing of common stock or equity securities, respectively, to 
the Exchange from another national securities exchange.
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    The Exchange also proposes to amend the first paragraph of Section 
907.00 of the Manual to specify that it will offer certain 
complimentary products and services, and access to discounted third-
party products and services through the NYSE Market Access Center to 
both currently and newly listed issuers, whereas previously it stated 
such services were only offered to currently listed issuers.
    While the Exchange will implement the proposed rule upon approval, 
any Eligible New Listing that listed on the Exchange prior to approval 
of the proposed rule will continue to receive services under the terms 
of the current rule. Therefore, for as long as any Eligible New Listing 
is receiving services under the terms of Section 907.00 of the Manual 
as currently in effect, the Exchange will maintain a link to such 
section in the Introductory Note to Section 907.00.
    With respect to Eligible Current Listings, to the extent that the 
Exchange has already paid a third-party provider (prior to approval) 
for corporate governance services to an Eligible Current Listing, such 
complimentary service will continue until the payments run out. Once 
any pre-approval payments run out, such services will be discontinued. 
The Exchange expects all corporate governance services to Eligible 
Current Listings to be completely discontinued no later than early 
2016.
    The specific products and services offered by the Exchange will be 
developed by the Exchange or by third-party vendors. In its filing, the 
Exchange represented that NYSE Governance Services \9\ will offer and 
develop the corporate governance tools, but will not provide any other 
service related to the proposed rule. NYSE Governance Services is an 
entity that is owned by the Exchange's parent company that provides 
corporate governance, risk and compliance services to its clients, 
including companies listed on the Exchange. According to the Exchange, 
companies that are offered these products are under no obligation to 
accept them and a company's listing on the Exchange is not conditioned 
upon acceptance of any product or service. Moreover, the Exchange 
represents that, from time to time, companies elect to purchase 
products and services from other vendors at their own expense rather 
than accepting comparable products and services offered by the 
Exchange.
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    \9\ In its filing, NYSE stated its belief that NYSE Governance 
Services is not a ``facility'' of the Exchange as defined in 15 
U.S.C. 78c(a)(2), and noted that its proposed rule change is being 
filed with the Commission under Section 19(b)(2) of the Act because 
it relates to services offered in connection with a listing on the 
Exchange. See Notice supra note 3. The Commission notes that the 
definition of a ``facility'' of an exchange is broad under the Act, 
and ``includes its premises, tangible or intangible property whether 
on the premises or not, any right to the use of such premises or 
property or any service thereof for the purpose of effecting or 
reporting a transaction on an exchange . . . and any right of the 
exchange to the use of any property or service.'' The Commission 
further notes that any determination as to whether a service or 
other product is a facility of an exchange requires an analysis of 
the particular facts and circumstances.
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III. Discussion and Commission 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.\10\ Specifically, the Commission finds that the proposal is 
consistent with Sections 6(b)(4) \11\ and (5) of the Act \12\ in 
particular, in that the proposed rule 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 6(b)(8) of 
the Act \13\ 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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    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(4) and (5).
    \13\ 15 U.S.C. 78f(b)(8).
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    As described above, the Exchange proposes to alter the 
complimentary products and services it offers companies. Specifically, 
the Exchange proposes to (i) remove corporate governance tools and 
advisory services for Tier One companies, (ii) remove corporate 
governance tools for Tier Two companies, (iii) expand the services 
provided to Tier A Eligible New Listings to include all of the services 
listed, as described above, for a period of 24 months, not just provide 
a choice of services, (iv) expand the services provided to Tier B 
Eligible New Listings to include market analytics and corporate 
governance tools, (v) offer Eligible Transfer Companies the same 
products and services offered to Eligible New Listings, except for 
corporate governance tools,\14\ (vi) provide web-casting to Tier One, 
Tier Two, Tier A, and Tier B companies, and (vii) replace data room 
services and virtual investor relation tools available to all issuers 
annually with a whistleblower hotline for a period of 24 months.
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    \14\ Because the Exchange is proposing to offer Eligible 
Transfer Companies a package of complimentary benefits similar to 
the benefits offered to Eligible New Listings, the Exchange also 
proposes using the same metric, i.e., global market value, to 
determine eligibility for certain products and services.
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    The Commission believes that it is consistent with the Act for the 
Exchange to revise the products and services it offers to companies. 
The Exchange has represented that the corporate governance services are 
not as helpful to more established companies as they are to newly 
listed companies and that web-casting may be more useful to them.\15\ 
According to the Exchange, the corporate governance products currently 
offered to Eligible Current Listings are in low demand. The Exchange 
believes replacing such offerings with web-casting would be more 
beneficial to listed companies who utilize this service in connection 
with quarterly earnings releases. The Commission believes that, based 
on NYSE's representations, replacing a little-

[[Page 62587]]

utilized service by companies already listed with one that could help 
companies communicate better with shareholders is reasonable and 
consistent with Section 6(b)(5) of the Act.
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    \15\ See Notice, supra note 3.
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    In addition, the Exchange believes that it is appropriate to expand 
the suite of complimentary products and services it offers to Tier A 
and Tier B Eligible New Listings, because such companies are listing on 
the Exchange for the first time and frequently have greater needs with 
respect to developing their corporate governance and shareholder 
outreach capabilities.\16\ Moreover, the Exchange has represented that 
it faces competition in the market for listing services.\17\ As part of 
this competition, the Exchange seeks to entice Nasdaq-listed companies 
to transfer their listing to the Exchange. The Exchange competes in 
part by improving the quality of the services that it offers to listed 
companies. NYSE believes that offering transfers from Nasdaq a similar 
package to that currently offered to NYSE listed companies transferring 
to Nasdaq, as well as new listings on Nasdaq, should enhance its 
ability to compete for listings. 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.\18\ 
Accordingly, the Commission believes that the proposed rule reflects 
the current competitive environment for exchange listings among 
national securities exchanges, and is appropriate and consistent with 
Section 6(b)(8) of the Act.\19\ Further, by extending the provision of 
certain complementary services (as listed above) to Tier A and Tier B 
Eligible New Listings to 24 months and by entitling Eligible Transfer 
Companies to receive these products and services, other than corporate 
governance tools, on similar terms as Eligible New Listings, the 
proposed change enables the Exchange to better compete for new 
listings.
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    \16\ See id.
    \17\ See id.
    \18\ See id.
    \19\ 15 U.S.C. 78f(b)(8).
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    Moreover, the Commission believes that it is appropriate for the 
Exchange to offer varying services to different categories of issuers. 
The Commission has previously found that the tiers originally 
established under the corporate products and services rule was 
consistent with the Act.\20\ The Commission further found that the 
changes approved in the December 2013 Approval Order expanding the 
complimentary products and services offered to some tiers but not 
others was also justified, in part, based on the different-sized 
companies within each tier and the amount of services they needed.\21\ 
According to the Exchange, the current proposal to expand the products 
and services available to Tier A and Tier B Eligible New Listings 
should ease the transition of companies becoming public for the first 
time.\22\ In addition, as stated by the Exchange, it competes with 
Nasdaq for listings and further, that Nasdaq offers similar products 
and services to new listings, including transfers.\23\
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    \20\ See Securities Exchange Act Release No. 65127 (Aug. 12, 
2011), 76 FR 51449 (Aug. 18, 2011) (SR-NYSE-2011-20) (``Approval 
Order''). 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.'' See 
Approval Order, 76 FR at 51452.
    \21\ See December 2013 Approval Order, supra note 4.
    \22\ See Notice, supra note 3.
    \23\ See id.
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    As noted above, under the proposal, while newly listed companies 
and transfers will receive similar services there is one exception 
involving corporate governance tools (valued at $50,000) which newly 
listed companies will receive but not transfers. NYSE argues that this 
approach is consistent with the changes being proposed for currently 
listed companies in that in the Exchange's experience these tools are 
not as useful for already established companies and as a result are in 
low demand by such listed companies. Based on these representations, 
the Commission does not believe that the exception for transfers 
violates the unfair discrimination standard under Section 6(b)(5) of 
the Act and appears to provide equal treatment among established 
companies, whether currently listed or transferring. The Commission 
notes that all listed companies will continue to receive some level of 
free services, including the addition of the whistleblower hotline 
services being approved in this order. The Commission also notes that 
within each tier all issuers receive the exact same package of 
services. The approval of this proposal, including the updated dollar 
values and specific services provided within each tier, will therefore 
help to ensure that individual listed companies are not given specially 
negotiated packages of products and services to list or remain listed 
which would raise unfair discrimination issues under the Act. The 
Commission also believes that it is reasonable, and in fact required by 
Section 19(b) of the Act, that the Exchange amend its rule to update 
the commercial values of the products it offers to Eligible Current 
Listings, Eligible Transfer Companies, and Eligible New Listings.\24\ 
This provides greater transparency to Exchange's rules and the fees, 
and the value of free products and services, applicable to listed 
companies.
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    \24\ We would expect the Exchange, consistent with Section 19(b) 
of the Act, to periodically update the value of products and 
services offered should they change. This would help to provide 
transparency to listed companies on the value of the free services 
they receive and the actual costs associated with listing on the 
Exchange.
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    The Commission also believes that it is consistent with the Act for 
the Exchange to allow the complimentary period for a particular service 
offered to Eligible New Listings and Eligible Transfer Companies to 
begin on the date of first use if a company begins to use the service 
within 30 days after the date of listing. According to the Exchange, 
companies listing on the Exchange for the first time often require a 
period of time after listing to complete the contracting and training 
process with vendors providing the complimentary products and 
services.\25\ Therefore, many companies are not able to begin using the 
suite of products offered to them immediately on the date of 
listing.\26\ The Commission notes that this proposed change is 
substantially similar to Nasdaq Rule IM-5900-7, which also allows a 
company to begin using services within 30 days of listing.\27\ As noted 
in the Nasdaq Order, the Commission believes that this change would 
provide only a short window of additional time to allow companies to 
finalize their contracts for the complimentary products and services, 
and that this additional time would only be available to companies that 
have already determined to list on the Exchange.\28\
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    \25\ See Notice, supra note 3.
    \26\ See id.
    \27\ See Securities Exchange Act Release No. 72669 (July 24, 
2014), 79 FR 44234 (July 30, 2014) (approving Nasdaq-2014-058) 
(``Nasdaq Order'').
    \28\ The Commission expects the Exchange to track the start (and 
end) date of each free service.
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    Based on the factors noted above, the Commission continues to 
believe that NYSE's products and services, and their commercial value, 
are equitably allocated among issuers, consistent with Section 6(b)(4) 
of the Act.\29\ The

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Commission also continues to believe that the rule does not unfairly 
discriminate between issuers, consistent with Section 6(b)(5) of the 
Act.\30\ Finally, the Commission believes that the proposal does not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, consistent with Section 6(b)(8) 
of the Act.\31\
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    \29\ 15 U.S.C. 78f(b)(4).
    \30\ 15 U.S.C. 78f(b)(5).
    \31\ 15 U.S.C. 78f(b)(8).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\32\ that the proposed rule change (SR-NYSE-2015-36), be, and 
hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-26336 Filed 10-15-15; 8:45 am]
 BILLING CODE 8011-01-P