Document ID: SEC-2021-0069-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2021-01-15T05:00Z

[Federal Register Volume 86, Number 10 (Friday, January 15, 2021)]
[Notices]
[Pages 4154-4156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00812]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90890; File No. SR-NYSE-2020-103]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Section 902.02 of the NYSE Listed Company Manual

January 11, 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 December 28, 2020, New York Stock Exchange LLC (``NYSE'' or the 
``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 902.02 of the NYSE Listed 
Company Manual (the ``Manual'') to modify the terms of the Investment 
Management Entity Group Fee Discount. 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,

[[Page 4155]]

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
    Pursuant to Section 902.02 of the Manual, the Exchange provides a 
fee discount applicable only to an Investment Management Entity and its 
Eligible Portfolio Companies (the ``Investment Management Entity Group 
Fee Discount''). For purposes of Section 902.02, an Investment 
Management Entity is a listed company that manages private investment 
vehicles not registered under the Investment Company Act. An ``Eligible 
Portfolio Company'' of an Investment Management Entity is a company in 
which the Investment Management Entity has owned at least 20% of the 
common stock on a continuous basis since prior to that portfolio 
company's initial listing. The Investment Management Entity Group Fee 
Discount is (i) limited to annual fees and (ii) represents a 50% 
discount on all annual fees of an Investment Management Entity and each 
of its Eligible Portfolio Companies in any year in which the Investment 
Management Entity has one or more Eligible Portfolio Companies. As 
currently applied, the Investment Management Entity Group Fee Discount 
is subject to a maximum aggregate discount of $500,000 in any given 
year (the ``Maximum Discount'') distributed among the Investment 
Management Entity and each of its Eligible Portfolio Companies in 
proportion to their respective eligible fee obligations in such 
year.\3\
---------------------------------------------------------------------------

    \3\ In addition to benefiting from the Investment Management 
Entity Group Fee Discount, the Investment Management Entity and each 
of the Eligible Portfolio Companies each continue to have its fees 
capped by the applicable company's individual total maximum fee of 
$500,000 per annum.
---------------------------------------------------------------------------

    The Exchange proposes to eliminate the Maximum Discount limitation 
on the Investment Management Entity Group Fee Discount with effect from 
the calendar year commencing January 1, 2021. Consequently, the 
Investment Management Entity and each Eligible Portfolio Company would 
receive a discount from each company's annual fee bill equal to 50% of 
such company's annual fees, without any limitation imposed by the 
application of the Maximum Discount. The purpose of this proposal is to 
remove the arbitrary differences the application of the Maximum 
Discount imposes on the benefits companies receive from the Investment 
Management Entity Group Fee Discount.
    The following is an illustrative example:
    Scenario One: An Investment Management Entity incurs $500,000 in 
annual fees before the discount and has two Eligible Portfolio 
Companies, each of which incurs $250,000 in annual fees before the 
discount. Applying the Maximum Discount on a prorated basis, the 
Investment Management Entity would receive a discount of $250,000 (and 
pay $250,000 in annual fees), while each of the two Eligible Portfolio 
Companies would receive a discount of $125,000 (and each pay $125,000 
in annual fees).
    Scenario Two: An Investment Management Entity incurs $500,000 in 
annual fees before the discount and has four Eligible Portfolio 
Companies, each of which incurs $250,000 in annual fees before the 
discount. Applying the Maximum Discount on a prorated basis, the 
Investment Management Entity would receive a discount of $166,666.67 
(and pay $333,333.33 in annual fees), while each of the four Eligible 
Portfolio Companies would receive a discount of $83,333.33 (and each 
pay $166,666.67 in annual fees).
    In both these scenarios, the Investment Management Entity has the 
same annual fee bill before the application of the Investment 
Management Entity Group Fee Discount ($500,000) and each Eligible 
Portfolio Company also has the same annual fee bill prior to the 
application of the discount ($250,000). However, as a result of the 
limitation imposed by the Maximum Discount, the Investment Management 
Entity in Scenario One pays $250,000 in annual fees, while the 
Investment Management Entity in Scenario Two pays $333,333.33 in annual 
fees. Similarly, in both scenarios, all of the Eligible Portfolio 
Companies have the same annual fee obligation of $250,000 prior to 
application of the discount, but the limitation imposed by the Maximum 
Discount causes the Eligible Portfolio Companies in Scenario One to pay 
$125,000 in annual fees after application of the discount, while the 
Eligible Portfolio Companies in Scenario Two each pay $166,666.67 in 
annual fees. This proposal would eliminate this discrepancy in the 
treatment of companies that are the same size and would otherwise be 
subject to identical treatment for annual fee billing purposes.
    The Exchange notes that the elimination of the Maximum Discount 
would result in reduction in revenue as the overall discount to annual 
fees that companies can claim pursuant to the Investment Management 
Entity Group Fee Discount would increase. Because only a small 
percentage of listed companies qualify for the Investment Management 
Entity Group Fee Discount, the proposed rule change would not affect 
the Exchange's commitment of resources to its regulatory programs.
    The Exchange also proposes to make some nonsubstantive changes to 
Section 902.02 to remove provisions that are no longer needed, as they 
do not apply by their terms to any calendar year starting after January 
1, 2019.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Section 6(b)(4) \5\ 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,\6\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive marketplace for the 
listing of equity securities. The Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets.
    The Exchange believes that the ever shifting market share among the 
exchanges with respect to new listings and the transfer of existing 
listings between competitor exchanges demonstrates that issuers can 
choose different listing markets in response to fee changes. 
Accordingly, competitive forces constrain exchange listing fees. Stated 
otherwise, changes to exchange listing fees can have a direct effect on 
the ability of an exchange to compete for new listings and retain 
existing listings.
    The Exchange believes that the proposed amendment is equitable and 
is

[[Page 4156]]

not unfairly discriminatory as it being implemented solely to avoid 
arbitrarily different annual fee billing outcomes for companies based 
solely on the impact of the Maximum Discount.
    Only a small percentage of listed companies qualify for the 
Investment Management Entity Group Fee Discount. Consequently, the 
proposed rule change would not affect the Exchange's commitment of 
resources to its regulatory programs.
    The changes the Exchange proposes to make to Section 902.02 to 
remove provisions that are no longer needed, as they do not apply by 
their terms to any calendar year starting after January 1, 2019, are 
nonsubstantive in nature.

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.
Intramarket Competition.
    The purpose of the proposed amendment is to eliminate the arbitrary 
effects of the of the [sic] Maximum Discount in the application of the 
Investment Management Entity Group Fee Discount. As only a small 
percentage of listed companies qualify for the Investment Management 
Entity Group Fee Discount and the proposal makes the application of the 
discount more consistent across that small category of listed issuers, 
the Exchange does not believe that the proposed rule change will have 
any meaningful effect on the competition among issuers listed on the 
Exchange.
Intermarket Competition.
    The Exchange operates in a highly competitive market in which 
issuers can readily choose to list new securities on other exchanges 
and transfer listings to other exchanges if they deem fee levels at 
those other venues to be more favorable. Because competitors are free 
to modify their own fees in response, and because issuers may change 
their listing venue, the Exchange does not believe its proposed fee 
change can impose any burden on intermarket 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) \7\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \8\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) \9\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2020-103 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-2020-103. 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-2020-103, and should be submitted 
on or before February 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00812 Filed 1-14-21; 8:45 am]
BILLING CODE 8011-01-P