Document ID: SEC-2019-0268-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2019-03-12T04:00Z

[Federal Register Volume 84, Number 48 (Tuesday, March 12, 2019)]
[Notices]
[Pages 8919-8920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04424]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85252; File No. SR-NYSE-2019-04]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adjust Its Annual Fee Requirements for Listed Companies for Any 
Calendar Year in Which a Listed Company Consummates a Reverse Stock 
Split

March 6, 2019.
    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 February 22, 2019, 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 adjust its annual fee requirements for 
listed companies for any calendar year in which a listed company 
consummates a reverse stock split. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adjust its annual fee requirements for 
listed companies for any calendar year in which a listed company 
consummates a reverse stock split.
    Sections 902.02 and 902.03 of the Manual set forth the Exchange's 
requirements with respect to the payment of annual fees by listed 
companies. Listed companies are billed annual fees on a per share basis 
(currently at a rate of $0.0011 per share) based on the number of 
shares issued and outstanding (including treasury shares) on December 
31 of the prior calendar year.\4\ The Exchange believes this is 
generally an appropriate approach, as it is unusual for listed 
companies to significantly reduce the number of shares outstanding 
during the course of the year and, in fact, companies often issue 
significant additional shares during the course of a year and they are 
not charged annual fees for those shares in the first partial year 
after their issuance (although companies are charged initial listing 
fees on any additional shares issued during the course of the year).
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    \4\ At the beginning of each calendar year, the Exchange 
invoices issuers for annual fees applicable to that year.
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    However, there may be a small number of listed companies each year 
that consummate reverse stock splits. A reverse stock split results in 
a significant reduction in the number of shares outstanding, usually 
resulting in the post-split shares outstanding representing a small 
percentage of the number of shares outstanding pre-split. One 
consequence of this is that the listed company's annual fees will 
reflect shares that are not outstanding for a portion of that year. The 
Exchange believes it is appropriate to address this anomaly, 
particularly in light of the fact that a listed company generally only 
consummates a reverse stock split to address a low trading price and, 
in many cases, may be required to take the action to bring the company 
into compliance with Exchange continued listing standards.
    For the foregoing reasons, the Exchange proposes to amend Section 
902.02 of the Manual to include a new subsection providing that, 
notwithstanding any other provision of Section 902.02 with respect to 
the calculation of annual fees, in any calendar year in which a listed 
company consummates a reverse stock split, such company will be charged 
prorated annual fees for the period prior to such consummation based on 
the shares outstanding on December 31 of the immediately preceding year 
(``Original Shares Outstanding''). With respect to the remainder of 
that year, such company will be charged annual fees on a prorated basis 
based on the Original Shares Outstanding as adjusted by the reverse 
split ratio. The Exchange will make any appropriate adjustments to its 
billing procedures to implement this provision.
    The Exchange notes that there are typically only a small number of 
reverse stock splits consummated by listed companies in the course of a 
year. Consequently, the proposed rule change would not affect the 
Exchange's

[[Page 8920]]

commitment of resources to its regulatory oversight of the listing 
process or its regulatory programs.
    The Exchange also proposes to remove from Section 902.03 several 
references to fee provisions that are no longer relevant, as those fee 
rates are no longer applicable.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Section 6(b)(4) \6\ 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,\7\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that it is not unfairly discriminatory and 
represents an equitable allocation of reasonable fees to adopt the 
proposed provision adjusting annual fees for companies that consummate 
reverse stock splits, as those companies would otherwise be paying 
annual fees on the basis of a far larger number of shares outstanding 
than is actually the case for a portion of the applicable calendar 
year. In addition, a listed company generally consummates a reverse 
stock split because it has a low stock price, including in many cases a 
stock price that is below Exchange continued listing requirements, so 
it is reasonable to encourage companies to take this action by reducing 
their fee burden. The Exchange will make any appropriate adjustments to 
its billing procedures to implement the proposed new provision.
    The amendments to Section 902.03 simply remove outdated text and 
have no substantive effect.

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) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \10\ 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-2019-04 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2019-04. 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 a.m. and 3 p.m. 
Copies of such 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-2019-04, and should be submitted on or before April 2, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04424 Filed 3-11-19; 8:45 am]
BILLING CODE 8011-01-P