Document ID: SEC-2021-1760-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2021-12-20T05:00Z

[Federal Register Volume 86, Number 241 (Monday, December 20, 2021)]
[Notices]
[Pages 72016-72018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27417]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-NYSE-2021-52; File No. SR-NYSE-2021-52]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Section 902.03 of the NYSE Listed Company Manual To Modify 
Listing and Annual Fees Applicable to Certain Warrants Listed by 
Foreign Companies

December 14, 2021.
    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 December 1, 2021, New York Stock Exchange LLC (``NYSE'' or the 
``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 amend Section 902.03 of the NYSE Listed 
Company Manual (the ``Manual'') to modify the listing fees applicable 
to warrants listed by foreign companies whose listed ADRs represent 
multiple shares or a fraction of a share. 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.

[[Page 72017]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Section 902.03 of the Manual sets forth initial listing fees and 
annual fees applicable to listed warrants. Initial listing fees for 
warrants are charged on a per warrant basis.
    In many cases, foreign issuers list their equity securities on the 
Exchange in the form of American Depositary Receipts (``ADRs''). In 
some instances, a listed ADR will represent a single underlying common 
share, but in other cases the listed ADR will represent multiple 
underlying common shares or a fraction of an underlying common share.
    To the extent a company with listed ADRs representing multiple 
underlying common shares or a fraction of an underlying common share 
seeks to list warrants to purchase common shares, this transaction 
could result in a numerical discrepancy between the number of warrants 
issued and the number of ADRs that could be created if those warrants 
were fully exercised. For example: A company's listed ADRs each 
represent five underlying common shares. The company issues and lists 
five million warrants, each exercisable for a single share. If the 
warrants are fully exercised, this will result in the issuance of five 
million shares. If those shares are all converted into the listed ADRs, 
the five million shares issued would result in the creation of one 
million ADRs.
    A discrepancy between the number of warrants issued and the number 
of ADRs post-conversion results in a very different billing outcome 
than would be the case for a company that lists its common shares 
directly or lists ADRs each of which represents a single underlying 
common share. In those cases, a listed company seeking to issue 
warrants exercisable into one million units of its listed equity 
security would issue one million warrants, rather than the five million 
warrants issued in the example set forth above, and would therefore pay 
only one-fifth of the initial listing and annual fees for the warrant 
listing as compared to the company whose ADRs represent five underlying 
common shares.
    The Exchange proposes to amend Section 902.03 to charge annual and 
listing fees for warrants listed on ADRs on an ADR-equivalent basis. 
Specifically:
     Listing Fees for Warrants Relating to Listed ADRs. If a 
listed company's primary listed security is an ADR and it lists 
warrants that are exercisable into the equity security underlying such 
ADRs, it will be charged initial listing fees for the warrants adjusted 
to reflect the maximum number of ADRs that could be created upon 
exercise of such warrants.
    Example A: An issuer whose primary listed security is an ADR 
representing five shares of its common stock lists five million 
warrants, each exercisable into a single share of the common stock. The 
issuer will be billed for listing fees for one million warrants (i.e., 
adjusted to reflect the number of ADRs that could be created with five 
million shares).
    Example B: An issuer whose primary listed security is an ADR 
representing one-fifth of a share of its common stock lists one million 
warrants, each exercisable into one share of the common stock. The 
issuer will be billed for initial listing and annual fees for five 
million warrants (i.e., adjusted to reflect the number of ADRs that 
could be created with one million shares).\4\
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    \4\ Approximately 0.5% of the ADRs currently listed on the 
Exchange represent fractional share interests.
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     Annual Fees for Warrants Relating to Listed ADRs. If a 
listed company's primary listed security is an ADR and it lists 
warrants that are exercisable into the equity security underlying such 
ADRs, it will be charged annual fees for the outstanding warrants 
adjusted to reflect the maximum number of ADRs that could be created 
upon exercise of such warrants. Example: An issuer whose primary listed 
security is an ADR representing five shares of its common stock, has a 
listed class of warrants each exercisable into a single share of the 
common stock, with five million warrants outstanding. The issuer will 
be billed for annual fees for one million warrants (i.e., adjusted to 
reflect the number of ADRs that could be created with five million 
shares).
    The proposed amendments to the initial and annual fee provisions 
for listed warrants would apply to all warrants exercisable into common 
shares that are issued by a listed company whose primary listed 
security is an ADR. In the case of a listed company whose ADRs 
represent a multiple (a fraction) of a common share, the fees for any 
warrants issued by the company that are exercisable into equity 
securities underlying the ADR would be based on an adjustment downward 
(upward) of the number of warrants.\5\
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    \5\ The Exchange notes that there is currently just one warrant 
listed on the NYSE that is exercisable into common stock underlying 
an ADR that is listed on the NYSE. This listed ADR represents 10 
shares of the common stock.
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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 Section 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. The Exchange also believes that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\8\ 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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    \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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    As a preliminary matter, the Exchange competes for listings with 
other national securities exchanges, and companies can easily choose to 
list on, or transfer to, those alternative venues. As a result, the 
fees the Exchange can charge listed companies are constrained by the 
fees charged by its competitors and the Exchange cannot charge prices 
in a manner that would be unreasonable, inequitable, or unfairly 
discriminatory.
    The Exchange believes that the proposal to charge listing fees for 
warrants on an ADR-equivalent basis is equitable and not unfairly 
discriminatory because it would remove the anomalous outcome that a 
company whose listed ADRs represent multiple underlying common shares 
must pay higher fees for the listing of warrants exercisable into its 
listed equity securities than are paid by a company whose common stock 
is listed directly or whose listed ADRs represent a single common 
share.
    The Exchange recognizes that the proposal would result in a 
differential treatment of warrants issued by companies with ADRs listed 
on the Exchange from that of other issuers of warrants, leading to 
lower bills in many cases for the companies with listed ADRs. However, 
the Exchange notes that companies with listed ADRs that represent 
multiple underlying shares (or fractional shares) face unique 
circumstances when deciding how to structure their warrants. If those 
companies want to market their warrants in both their home market and

[[Page 72018]]

the United States, there are clear advantages to the company and its 
investors if the same security is issued in both markets. In 
particular, selling the same security avoids pricing confusion and, by 
ensuring complete fungibility, facilitates the movement of warrants 
between the two markets in aftermarket trading. As the ADRs would not 
be traded in the home market and might not be properly understood by 
investors there, it is clear why a company would make the decision to 
issue warrants to purchase a single common share in both markets rather 
than selling warrants to purchase ADRs in the US market and warrants to 
purchase a single share in the home market. While other categories of 
listed companies may also sometimes choose to issue warrants that are 
exercisable for multiple listed common shares or a fraction of a common 
share, their reasons for doing so are not the same unique market 
structural reasons that cause foreign companies to do so when their 
listed equity security is an ADR. Consequently, while the proposal does 
result in a different treatment of foreign companies with listed ADRs 
in a very limited circumstance, the Exchange believes that this 
proposed difference in treatment is not unfairly discriminatory.
    The Exchange also notes that foreign companies with listed ADRs 
would not always pay lower fees on warrants if this proposal was 
adopted. Rather, the issuer would always pay fees on an ADR-equivalent 
basis, which would result in lower fees if the listed ADR represents 
multiple common shares and higher fees if it represents a fractional 
common share.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed modified warrant 
listing and annual fee for issuers whose listed ADRs represent multiple 
underlying common shares will be applicable to all similarly situated 
issuers on the same basis.
    The Exchange does not believe that the proposed amended fees will 
have any meaningful effect on the competition among issuers listed on 
the Exchange. 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) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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) \11\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \11\ 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-2021-52 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-2021-52. 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-2021-52 and should be submitted on 
or before January 10, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27417 Filed 12-17-21; 8:45 am]
BILLING CODE 8011-01-P