Document ID: SEC-2016-0729-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2016-04-27T04:00Z

[Federal Register Volume 81, Number 81 (Wednesday, April 27, 2016)]
[Notices]
[Pages 24919-24922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09717]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77674; File No. SR-NYSE-2016-22)

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Adopting Initial and Continued 
Listing Standards for the Listing of Equity Investment Tracking Stocks 
and Adopting Listing Fees Specific to Equity Investment Tracking Stocks

April 21, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on April 7, 2016, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 adopt initial and continued listing 
standards for the listing of Equity Investment Tracking Stocks. The 
Exchange also proposes to adopt listing fees specific to Equity 
Investment Tracking Stocks. The proposed rule change is available on 
the Exchange's Web site 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
    The Exchange proposes to adopt initial and continued listing 
standards for the listing of Equity Investment Tracking Stocks. The 
Exchange also proposes to adopt listing fees specific to Equity 
Investment Tracking Stocks.
    For purposes of proposed new Section 102.07 of the Manual, an 
Equity Investment Tracking Stock refers to a class of common stock that 
is the listed company's sole class of common equity securities listed 
on the Exchange and that is designed solely to track the performance of 
an investment by the issuer in the common stock of another company 
listed on the Exchange.
    In order to qualify for initial listing under proposed Section 
102.07, an Equity Investment Tracking Stock will be required to meet 
the distribution and public float requirements currently applicable for 
initial public offerings set forth in Sections 102.01A and 102.01B

[[Page 24920]]

of the Manual, respectively, and the quantitative requirements set 
forth in Section 102.01C. As such, as required under Section 102.01A, 
an Equity Investment Tracking Stock, at the time of initial listing, 
will be required to have at least 400 holders of 100 shares or more and 
1,100,000 public held shares available for trading. Further, as 
required under Section 102.01B, an Equity Investment Tracking Stock 
must have an aggregated market value of publicly-held shares of 
$40,000,000 and a per share price of $4 at the time of initial listing. 
Under Section 102.01C, the issuer of an Equity Investment Tracking 
Stock will be required to meet either the Earnings Test or the Global 
Market Capitalization Test. Under the Earnings test, an issuer must 
have pre-tax earnings totaling (x) at least $10,000,000 in the 
aggregate for the last three fiscal years together with a minimum of 
$2,000,000 in each of the two most recent fiscal years, and positive 
amounts in all three years or (y) at least $12,000,000 in the aggregate 
for the last three fiscal years together with a minimum of $5,000,000 
in the most recent fiscal year and $2,000,000 in the next most recent 
fiscal year.\4\ Under the Global Market Capitalization Test, the issuer 
must have $200 million in global market capitalization at the time of 
initial listing.
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    \4\ A company that (i) qualifies as an emerging growth company 
as defined in Section 2(a)(19) of the Securities Act and Section 
3(a)(80) of the Exchange Act and (ii) avails itself of the 
provisions of the Securities Act and the Exchange Act permitting 
emerging growth companies to report only two years of audited 
financial statements, can qualify under the Earnings Test by meeting 
the following requirements: Pre-tax earnings totaling at least 
$10,000,000 in the aggregate for the last two fiscal years together 
with a minimum of $2,000,000 in both years.
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    The Exchange will not list an Equity Investment Tracking Stock if, 
at the time of the proposed listing, the issuer of the equity tracked 
by the Equity Investment Tracking Stock has been deemed below 
compliance with listing standards by the Exchange.
    The Exchange proposes to subject the issuer of an Equity Investment 
Tracking Stock to the same continued listing standards under Sections 
802.01A and 802.01B as are applicable to other companies listing common 
stocks on the Exchange. As such, these companies will be considered to 
be below compliance with Section 802.01A if (i) their number of total 
stockholders is less than 400 OR (ii) their number of total 
stockholders is less than 1,200 and their average monthly trading 
volume is less than 100,000 shares (for the most recent 12 months) OR 
(iii) their number of publicly-held shares is less than 600,000. Such 
companies will be deemed to be below compliance with Section 802.01B if 
their average global market capitalization over a consecutive 30 
trading-day period is less than $50,000,000 and, at the same time 
stockholders' equity is less than $50,000,000 and (will be subject to 
immediate delisting if they are determined to have average global 
market capitalization over a consecutive 30 trading-day period of less 
than $15,000,000. In addition, the Exchange will promptly initiate 
suspension and delisting proceedings with respect to an Equity 
Investment Tracking Stock if the underlying equity security whose value 
is tracked by the Equity Investment Tracking Stock ceases to be listed 
on one of (i) the Exchange, (ii) the Nasdaq Stock Market, (iii) NYSE 
MKT or (iv) one of the markets listed in SEC Rule 146(b) \5\ or is 
converted into or exchanged for another security that is not listed on 
one of the aforementioned markets.
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    \5\ 17 CFR 230.146(b).
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    The Exchange proposes to amend Sections 902.02 and 902.03 of the 
Manual to provide that, where an Equity Investment Tracking Stock is 
listed on the Exchange, listing and annual fees for such security will 
be subject to a single fee cap at the time of original listing and on 
an annual basis. The Exchange further proposes to amend Section 907.00 
of the Manual to limit the products and services provided to the issuer 
of an Equity Investment Tracking Stock. The proposed fees would apply 
to the initial and continued listing on the Exchange of an Equity 
Investment Tracking Stock and to the products and services provided to 
issuers of such security for as long as the Equity Investment Tracking 
Stock is the only class of security that is listed on the Exchange.
    Pursuant to Section 902.02 and 902.03 of the Manual, listed 
companies are charged an annual security fee for each class or series 
of security listed on the Exchange. The annual fee is calculated based 
on the number of shares issued and outstanding and is currently set at 
a rate of $0.001025 for the primary listed class of equity, subject to 
an annual minimum of $52,500. In its first year of listing, a company's 
annual fee is prorated from the date of initial listing through the 
year end. Listed companies also pay other fees to the Exchange, 
including fees associated with initial and supplemental listing 
applications. In any given calendar year, however, Section 902.02 of 
the Manual specifies that the total fees that the Exchange may bill a 
listed company are capped at $500,000 (the ``Total Maximum Fee''). For 
an Equity Investment Tracking Stock, the Exchange proposes to adopt a 
Total Maximum Fee of $200,000.
    Section 902.03 of the Manual currently provides, in part, for 
listing fees the first time an issuer lists a class of common shares, 
charged on a per share basis based on tiers set forth in the rule. 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. Once listed, if 
an issuer lists additional shares of a class of previously listed 
securities, the issuer is subject to listing fees for such additional 
shares. The minimum and maximum listing fees applicable the first time 
an issuer lists a class of common shares are $125,000 and $250,000, 
respectively, which amounts include the special charge of $50,000. In 
lieu of the foregoing, the Exchange proposes to establish for Equity 
Investment Tracking Stocks a fixed initial listing fee (inclusive of 
the one-time charge) of $100,000. Subject to the Total Maximum Fee of 
$200,000 per year described above, the Exchange proposes to charge the 
same per share annual fee for Equity Investment Tracking Stocks as for 
the primary class of equity of a listed operating company (i.e., 
currently $0.001025 per share).
    Finally, Section 907.00 of the Manual sets forth certain 
complimentary products and services that are offered to certain 
currently and newly listed issuers. These products and services are 
developed or delivered by NYSE or by a third party for use by NYSE-
listed companies. Some of these products are commercially available 
from such third-party vendors. All listed issuers receive some 
complimentary products and services through the NYSE Market Access 
Center. The Exchange proposes to exclude issuers of an Equity 
Investment Tracking Stock from receiving the products and services 
provided for under Section 907.00, with the exception that such issuers 
will receive the complimentary products and services and access to 
discounted third-party products and services through the NYSE Market 
Access Center available to all listed issuers.
    The Exchange proposes to limit the fees that would be payable for 
the listing on an Equity Investment Tracking Stock as an incentive for 
the issuer to list such security on the Exchange. As described below, 
the Exchange proposes to make the aforementioned fee changes to better 
reflect the Exchange's costs related to listing Equity Investment 
Tracking Stocks and the corresponding value of such listing to issuers.

[[Page 24921]]

    The Exchange proposes to make three other minor changes in this 
filing: (i) To remove from Section 902.03 references to the annual fee 
schedule applicable to years prior to 2016; (ii) to update the web link 
included in Section 907.00 and (iii) to delete the word ``four'' from 
Section 802.01B, as there are no longer four continued listing 
standards referred to in that rule.
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 Sections 6(b)(4) \7\ and 6(b)(5) \8\ of the Act, in 
particular.
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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 that the proposed initial and continued 
listing standards for Equity Investment Tracking Stocks further the 
objectives of Section 6(b)(5) of the Act,\9\ in particular in that they 
are 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. In particular, the proposed listing 
standards are designed to protect investors and the public interest by 
ensuring that Equity Investment Tracking Stocks listed on the Exchange 
meet stringent quantitative and qualitative listing standards to 
qualify for initial and continued listing.
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    \9\ 15 U.S.C. 78f(b)(5).
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    The proposed fee provisions further the objectives of Sections 
6(b)(4) in that they are designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities. The 
Exchange believes that the proposed fee provisions are consistent with 
Section 6(b)(5) of the Act in that they do not unfairly discriminate 
among listed companies because there is a reasonable justification for 
charging the issuer of an Equity Investment Tracking Stock different 
fees from those charged to other issuers as there are cost and 
regulatory efficiencies for the Exchange when the issuer of an Equity 
Investment Tracking Stock and the issuer of the underlying equity 
security are both listed on the Exchange. Under the Exchange's 
proposal, the issuer of an Equity Investment Tracking Stock would pay a 
fixed initial listing fee of $100,000, which is less than the minimum 
fee charged in connection with the listing of the primary class of 
equity of an operating company. In addition, Equity Investment Tracking 
Stocks would be billed annual fees at the same rate per share as the 
primary class of equity of an operating company, but subject to a lower 
annual fee cap that may cause an issuer of an Equity Investment 
Tracking Stock to be subject to a lower effective fee rate per share 
than if it were a regular operating company. Given the unique nature of 
an Equity Investment Tracking Stock, including especially the fact that 
its trading price will likely be primarily derivative of the trading 
price of the security of another company, most of the services provided 
by the Exchange under Section 907.00 would be of limited value and 
appeal to issuers of Equity Investment Tracking Stocks and the Exchange 
believes it is appropriate to exclude the issuers of Equity Investment 
Tracking Stocks from its services program. The Exchange believes that 
the fact that it will not provide these costly services makes it 
appropriate to charge lower fees. In addition, the Exchange believes 
there will be regulatory efficiencies when the same regulatory staff is 
responsible for oversight of an Equity Investment Tracking Stock and 
the underlying equity security. This would include, for example, the 
fact that news that is material to the issuer of the underlying 
security would also be material to an investment in the Equity 
Investment Tracking Stock.
    The Exchange does not expect many issuers will seek to list an 
Equity Investment Tracking Stock. Accordingly, the Exchange does not 
anticipate that it will experience any meaningful diminution in revenue 
as a result of the proposed lower fees and therefore does not believe 
that the proposed fees would in any way negatively affect its ability 
to continue to adequately fund its regulatory program or the services 
the Exchange provides to issuers

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 provide listing standards for Equity Investment Tracking 
Stocks that are appropriately protective of investors and is not 
designed to limit the ability of the issuers of those securities to 
list them on any other national securities exchange. 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 listing standards and 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
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 or disapprove the 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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2016-22 on the subject line.

[[Page 24922]]

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-2016-22. 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 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 Web site 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 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; 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-2016-22, and should be 
submitted on or before May 18, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-09717 Filed 4-26-16; 8:45 am]
BILLING CODE 8011-01-P