Document ID: SEC-2018-1524-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2018-10-03T04:00Z

[Federal Register Volume 83, Number 192 (Wednesday, October 3, 2018)]
[Notices]
[Pages 49957-49959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21482]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84294; File No. SR-NYSE-2018-41]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Section 902.04 of the NYSE Listed Company Manual To Apply a 
$50,000 Fee Cap per Transaction for Issuances of Additional Shares by 
Closed End Funds

September 27, 2018.
    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 September 19, 2018, 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 amend Section 902.04 of the NYSE Listed 
Company Manual (the ``Manual'') to apply a $50,000 fee cap per 
transaction for issuances of additional shares by closed end funds. 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

[[Page 49958]]

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
    Under Section 902.04 of the Manual, listing fees on the issuance of 
additional shares of an already listed class of stock are capped at 
$500,000 per transaction.\4\ The Exchange proposes to amend this 
provision to establish a fee cap of $50,000 in relation to an issuance 
of additional shares by a closed end fund.
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    \4\ Section 902.04 includes a list of examples of transactions 
that are subject to this fee cap, including ``in the case where 
shares are issued in conjunction with a merger or consolidation 
where a listed company survives, subsequent public offerings of a 
listed security and conversions of convertible securities into a 
listed security.''
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    Under Section 902.02 of the Manual, operating companies benefit 
from a $500,000 fee cap per calendar year with respect to the aggregate 
of all annual fees and fees paid for the issuance of additional shares. 
Giving effect to the payment of annual fees and any earlier payments of 
listing fees for additional share issuances during the same calendar 
year, the annual $500,000 fee cap may cause an operating company to be 
subject to a significantly reduced fee obligation in connection with a 
material share issuance, or even no additional fees at all. By 
contrast, Section 902.04 does not include an annual cap on fees for 
closed end funds at the individual fund level.\5\ Therefore, a closed 
end fund receives no reduction in its fee obligations with respect to a 
material share issuance as a consequence of its annual fee payments or 
even the fees paid with respect to other material transactions earlier 
in the same calendar year. As such, a closed end fund may be charged as 
much as $500,000 for a transaction for which it would have been charged 
far smaller fees if it had been an operating company, if any at all.
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    \5\ There is a fund family discount that is exclusively 
applicable to annual fees. Fund families that list between three and 
14 closed end funds receive a 5% discount off the calculated annual 
fee for each fund listed, and those with 15 or more listed closed 
end funds receive a discount of 15%. Fund families that list between 
three and 14 closed end funds receive a 5% discount off the 
calculated annual fee for each fund listed, those with between 15 
and 19 listed closed end funds receive a discount of 15%, and those 
with 20 or more listed closed end funds receive a discount of 50%. 
No fund family is required to pay aggregate annual fees in excess of 
$1,000,000 in any given year. A fund family consists of closed-end 
funds with a common investment adviser or investment advisers who 
are ``affiliated persons'' as defined in Section 2(a)(3) of the 
Investment Company Act of 1940, as amended.
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    It is impossible to specify the fee disparity that would exist 
between the amount that would be paid by any closed end fund under 
Section 902.04 as currently in effect and how much it would owe under 
the operating company fee provisions if they applied, as the 
differential would be affected by the amount of annual fees the company 
paid, the number of shares issued and whether individual issuances had 
their fees capped. Nevertheless, the Exchange believes that a $50,000 
cap per transaction is a reasonable approach. In reaching this 
conclusion, the Exchange reviewed the fee impact of additional share 
issuances on operating companies as limited by the $500,000 annual cap 
and also examined the likely impact on closed end funds of a $50,000 
per transaction fee cap. Based on this review, the Exchange concluded 
that a $50,000 cap per transaction for closed end funds would generally 
result in a treatment of closed end funds that would be reasonably 
similar to the treatment of similarly-situated operating companies. As 
a per share rate would continue to be applied up to $50,000 under the 
proposed amendment, the fees for additional issuances would generally 
be greater for closed end funds that issued greater numbers of 
additional shares in the course of a year.
    The Exchange does not believe that any reduction in revenue would 
have an impact on its ability to conduct its regulatory activities.
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\ of the Act, in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
dues, fees, and other charges and is not designed to permit unfair 
discrimination among its members and issuers and other persons using 
its facilities. The Exchange also believes that the proposed rule 
change is consistent with Section 6(b)(5) of the Act, in particular 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed rule change is consistent 
with Sections 6(b)(4) and 6(b)(5) of the Act in that it represents an 
equitable allocation of fees and does not unfairly discriminate among 
listed companies. The proposed rule change provides for an equitable 
allocation of fees and is reasonable under Section 6(b)(4) in that it 
is designed to reasonably address a discrepancy in the fees paid by 
closed end funds when compared to fees paid by operating companies for 
similar transactions. The proposal is not unfairly discriminatory under 
Section 6(b)(5) because all closed end funds will be subject to the 
same fee schedule for additional share issuances. In addition, as 
discussed above in the section entitled ``Purpose,'' the proposal is 
not unfairly discriminatory because it is reasonably designed to 
address a significant discrepancy in the fee impact of an issuance of 
additional shares by a closed end fund when compared to the impact of a 
similar issuance on an operating company that is otherwise similarly 
situated.

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 purpose of the Act. The proposed amendment does 
not impose and burden on competition as its purpose is to address an 
anomaly in how closed end funds are charged for additional share 
issuances compared to the treatment of operating companies.

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,

[[Page 49959]]

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 [email protected]. Please include 
File Number SR-NYSE-2018-41 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-2018-41. 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-2018-41 and should be submitted on 
or before October 24, 2018.

    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,
Assistant Secretary.
[FR Doc. 2018-21482 Filed 10-2-18; 8:45 am]
 BILLING CODE 8011-01-P