Document ID: SEC-2014-0078-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2014-01-15T05:00Z

[Federal Register Volume 79, Number 10 (Wednesday, January 15, 2014)]
[Notices]
[Pages 2702-2705]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00582]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71273; File No. SR-NYSE-2013-83]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Making Effective as of January 1, 2014 Recently Approved Changes to 
NYSE Rules 451 and 465, and the Related Provisions of Section 402.10 of 
the NYSE Listed Company Manual Concerning Charges by Member 
Organizations for Processing and Forwarding Proxy and Other Issuer 
Communications to Beneficial Owners, and Establishing a Fee Under 
Certain Conditions for an Enhanced Brokers' Internet Platform

January 9, 2014.
    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 31, 2013, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed

[[Page 2703]]

with the Securities and Exchange Commission (the ``Commission'') the 
proposed rule change as described in Items I and II 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 make effective as of January 1, 2014 
recently approved changes to NYSE Rules 451 and 465, and the related 
provisions of Section 402.10 of the NYSE Listed Company Manual, which 
(i) provide a schedule for the reimbursement of expenses by issuers to 
NYSE member organizations for the processing of proxy materials and 
other issuer communications provided to investors holding securities in 
street name, (ii) establish a supplemental fee for each account that 
elects or converts to electronic delivery while having access to an 
Enhanced Brokers' Internet Platform (``EBIP'') and (iii) set forth 
further conditions to collection of the EBIP fee. The text of 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Following a multi-year effort that began with the formation of the 
Exchange's Proxy Fee Advisory Committee in September 2010, the 
Securities and Exchange Commission by order dated October 18, 2013 
approved the proposed changes to the schedule for the reimbursement of 
expenses by issuers to NYSE member organizations for the processing of 
proxy materials and other issuer communications provided to investors 
holding securities in street name.\4\ Neither the Exchange's rule 
filing nor the SEC Approval Order made reference to a specific 
effective date for the new rules, which means that the amended rules 
took effect on the date of SEC approval. Representatives of the 
intermediaries that serve almost all the NYSE member organizations 
involved in effecting proxy distributions to street name shareholders 
have now brought to the Exchange's attention that they require some 
lead time in order to be able to prepare to meet the new requirements 
and implement the new price schedule contained in the amended rules. 
For the reasons explained more fully below, the Exchange proposes to 
specify that the rule amendments shall become effective on January 1, 
2014 and shall apply to shareholder communication and proxy 
distributions with respect to which the record date occurs on and after 
that date. In addition the Exchange proposes that the new supplemental 
fee of 99 cents for each new account that elects, and each full package 
recipient among a brokerage firm's accounts that converts to, 
electronic delivery while having access to an EBIP \5\ will be charged 
in relation to any such election or conversion occurring on or after 
January 1, 2014.\6\ The Exchange also proposes that the changes 
regarding fees for providing non-objecting beneficial owner information 
shall apply to requests with respect to record dates occurring on or 
after January 1, 2014.
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    \4\ Securities Exchange Act Release No. 70720, October 18, 2013, 
78 FR 63530 (``SEC Approval Order''), approving SR-NYSE-2013-07 
(``Proxy Fee Rule Filing'').
    \5\ The EBIP fee does not apply to electronic delivery consents 
captured by issuers. For additional restrictions on collection of 
the EBIP fee, see Part 7 of NYSE Rule 451 and Section 402.10 of the 
Listed Company Manual.
    \6\ The Exchange notes that the Proxy Fee Rule Filing contained 
a placeholder to specify the date on which the EBIP fee will cease 
to be in effect. The Exchange proposes to amend Rule 451 and Section 
402.10 to specify that the EBIP fee will cease to be in effect on 
December 31, 2018.
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    As noted in the Proxy Fee Rule Filing, a single intermediary, 
Broadridge Financial Solutions, Inc. (``Broadridge''), currently 
handles almost all proxy processing and distribution to street name 
shareholders in the U.S. Broadridge enters into contracts with NYSE 
member organizations to provide distribution and vote collection 
services to those firms, and acts as billing and collection agent for 
these NYSE member organizations in connection with reimbursements 
provided by the issuers whose materials are distributed. Subsequent to 
issuance of the SEC Approval Order, Broadridge informed the Exchange 
that the fee changes effected by the Proxy Fee Rule Filing will require 
significant changes to Broadridge's financial reporting, collection and 
billing systems. Broadridge estimates that these changes will require 
over 6100 hours of work, including testing and quality assurance.
    Specifically Broadridge has advised the Exchange that 
implementation of the new fee schedule will involve changes to 
invoicing applications and financial reporting systems to reflect all 
the multiple changes to the fee schedule, including changes in some 
twenty-five modules within the billing platform for invoicing, 
accruals, reporting and interfaces to front-end systems to source the 
data. This work is estimated to take approximately 1,200 hours. 
Additionally, systems work of approximately 2,250 hours will be needed 
regarding share range and voted/unvoted shares data to handle the 
change that permits issuers to request stratified NOBO lists. 
Broadridge also expects to implement a tracking system for broker 
clients with qualified EBIPs to identify eligible positions that may 
trigger the one-time EBIP fee and ensure that the fee is only charged 
one-time, and maintain five years of historical data, e-consent and 
vote participation records. Broadridge estimates that this work will 
require approximately 2,000 hours. Broadridge will also do development 
work on its client reporting systems, including incorporation of fee 
schedule changes for invoice presentment, and display of financial 
information for client and internal web-services, estimating that this 
will require approximately 700 hours.
    Broadridge also notes that its NYSE member organization clients 
will be required to program their systems to distinguish managed 
accounts of five shares or less and fractional shares in all accounts 
to support the rule change that requires that such accounts be 
processed at no charge to the issuer. Broadridge also notes that it 
will have to review its contracts with all its NYSE member organization 
clients to determine what amendments may be necessary, for example to 
update fee schedules that are included within the contracts.
    Broadridge notes that it will expect to test the system changes it 
is required to make to the same high standards it uses for all its 
systems conversions. The impact of Broadridge's systems is widespread, 
covering a significant number of member organizations that

[[Page 2704]]

are its clients, and the approximately 12,000 issuers whose materials 
are distributed.
    The Exchange did address the issue of whether to specify an 
effective date for the proxy fee rule changes in its response to 
comments dated May 17, 2013.\7\ It noted that it had requested 
Broadridge to specify whether they required a specific amount of lead 
time to implement the proposed changes, and that Broadridge had stated 
in their comment letter that ``Broadridge is prepared to implement the 
new fee structure soon after the proposal is approved by the SEC.'' \8\ 
Broadridge now indicates that it does in fact require lead time for the 
reasons noted herein.
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    \7\ See letter to Elizabeth M. Murphy, Secretary, Commission 
from Janet McGinnis, EVP & Corporate Secretary, NYSE Euronext, dated 
May 17, 2013 (``NYSE Letter'').
    \8\ In the NYSE Letter, the Exchange also noted that SIFMA, in a 
March 18, 2013 comment letter, had suggested an effective date in 
January 2014. The Exchange did not believe that such an extensive 
lead time would be necessary, given that Broadridge appeared able to 
be ready more quickly.
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    At the Exchange's request, Broadridge estimated the impact of a 
delay in the effective date on issuers.\9\ Looking at all corporate 
issuers that have (or are likely to have) record dates between October 
18, 2013 and December 31, 2013, Broadridge estimated there were 774 
issuers in this category, of whom 92% would experience a fee impact, up 
or down, of less than $1,000. Of the remaining 8% of issuers that 
Broadridge estimates would experience a fee impact, up or down, of more 
than $1,000, approximately 6.6%, (or 51 issuers) \10\ will pay higher 
fees as a result of the delay and 1.7% (or 13 issuers) \11\ will pay 
lower fees as a result of the delay.
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    \9\ Broadridge based its fee impact estimates on invoices from 
the prior year's proxy season.
    \10\ The impact on the 6.6% of issuers is that they will not 
benefit during this period from the new fee schedule which will 
result in their paying higher fees, in the aggregate, of 13.2%. The 
median percentage impact on this group will be higher fees of 13.0%.
    \11\ The fees of the 13 issuers whose fees will benefit from the 
delay will be a reduction of fees, in the aggregate, by 4.1%, with a 
median fee decrease of 5.0%.
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    The Exchange notes that a large majority of record dates will occur 
after the January 1, 2014 implementation date for meetings occurring 
during 2014 and that the impacted companies represent only a small 
minority of issuers that distribute proxies.
    In light of the foregoing, the Exchange believes that an effective 
date of January 1, 2014 would be suitable to allow time for industry 
development work needed to implement the new fees in an orderly manner, 
while still permitting the changes to go into effect promptly.
 2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act'') generally 
\12\ and Sections 6(b)(5) \13\ and 6(b)(8) \14\ of the Act in 
particular. Section 6(b)(5) \15\ requires, among other things, that 
exchange rules promote just and equitable principles of trade and that 
they are not designed to permit unfair discrimination between issuers, 
brokers or dealers. Section 6(b)(8) prohibits any exchange rule from 
imposing any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(8).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment is not designed 
to permit unfair discrimination within the meaning of Section 6(b)(5), 
as all issuers are subject to the same fee schedule and the Exchange 
attempted to estimate the impact of a short delay of the effectiveness 
of the new fees, and found that impact on the vast majority of issuers 
to be relatively minimal. Nor will member organizations and their 
agents derive any significant financial benefit from that delay. 
Rather, for member organizations the sole purpose and sole significant 
effect of the proposed delay in implementing the amended fees would be 
to provide such member organizations and their agents with an 
opportunity to accomplish the development work necessary to administer 
the new fees in an orderly fashion.
    The Exchange believes that the proposed amendment does not impose 
any unnecessary burden on competition within the meaning of Section 
6(b)(8). The short delay in effectiveness will provide all industry 
participants with time to prepare to operate under the new fees. 
Broadridge, as the largest of the intermediaries will have the largest 
number of clients impacted by the new fees, but presumably also has the 
significant resources needed to accomplish the work necessary. Other 
intermediaries have much smaller numbers of clients, and so presumably 
some greater ability to handle billing and client support in a more 
manual fashion for the time needed to transition their systems. For the 
foregoing reasons, the Exchange believes that its proposed fee schedule 
does not place any unnecessary burden on competition.

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. All of the NYSE member 
organizations and their service providers will benefit from the 
additional time to prepare for the implementation of the amended fees 
and none of them will derive any advantage from that delay in relation 
to any other market participant.

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) 
thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to Exchange give the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and the text of the proposed 
rule change, at least five business days prior to the date of filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\19\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest

[[Page 2705]]

because such waiver should help minimize the potential for investor 
confusion as to the applicable proxy fees as well as ensure that the 
rules are clear on which fees apply, and when. Therefore, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\20\
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    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the 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) \21\ of the Act to determine whether the proposed 
rule should be approved or disapproved.
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    \21\ 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-2013-83 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2013-83. 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 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; 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-2013-83 and should be 
submitted on or before February 5, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00582 Filed 1-14-14; 8:45 am]
BILLING CODE 8011-01-P