Document ID: SEC-2006-0333-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.
Posted Date: 2006-03-14T05:00Z

[Federal Register: March 14, 2006 (Volume 71, Number 49)]
[Notices]               
[Page 13200-13202]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14mr06-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53443; File No. SR-NYSE-2006-14]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Establishment of a Trading License Fee for 2006 and the 
Creation of Certain Other Fees for Trading License Holders

March 8, 2006.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 6, 2006, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes as described in Items I, II, 
and III below, which items have been prepared by the NYSE. NYSE has 
designated the proposed rule change as one establishing or changing a 
due, fee, or other charge, pursuant to Section 19b(3)(A)(ii) of the Act 
\3\ and Rule 19b-4(f)(2) thereunder,\4\4 which renders the proposal 
effective upon filing with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to establish a trading license fee for 2006 
to be implemented at the time of closing of its merger with Archipelago 
Holdings, Inc. (``Archipelago''). In addition, the Exchange proposes to 
create certain other fees for trading license holders, to eliminate 
from the 2006 Exchange Price List references to fees that will no 
longer be relevant after the merger, and to make three technical 
changes to the 2006 Exchange Price List to clarify how certain fees 
will be charged.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nyse.com), at the Exchange's Office of the 

Secretary, 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 Exchange 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 these statements may be examined at the places specified in 
Item IV below. The NYSE has prepared summaries, set forth in Sections 
A, B and C below, of the most significant aspects of such statements.

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

1. Purpose
    The NYSE is submitting this filing to establish a trading license 
fee for 2006 to be implemented at the time of the Exchange's proposed 
merger and to eliminate from the 2006 Exchange Price List references to 
fees charged to Exchange members that will no longer be relevant after 
the Exchange's proposed merger. The Exchange is also proposing the 
following new fees: (i) A fee relating to the approval of any new 
member or pre-qualified substitute; (ii) a badge maintenance fee; and 
(iii) a license transfer fee. The Exchange is also making three 
technical changes to the 2006 Exchange Price List to clarify how 
certain fees will be charged after the merger.
    The Exchange is planning to consummate a merger with Archipelago, 
as a result of which the businesses of the NYSE and Archipelago will be 
held under a single, publicly traded holding company named NYSE Group, 
Inc. (``NYSE Group''). Following the merger, the NYSE's current 
businesses and assets will be held in three separate entities 
affiliated with NYSE Group--New York Stock Exchange LLC (``NYSE LLC''), 
NYSE Market, Inc. and NYSE Regulation, Inc. The Commission has approved 
the Exchange's rule filing in connection with the merger \5\ and the 
merger is scheduled to close on March 7, 2006.
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    \5\ See Securities Exchange Act Release No. 53382 (February 27, 
2006) (SR-NYSE-2005-77).

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[[Page 13201]]

Trading License Fees
    Upon completion of the merger, all of the membership interests in 
the Exchange will be exchanged for a combination of cash and common 
stock of NYSE Group. NYSE LLC will be the successor to the Exchange's 
status as a self-regulatory organization (``SRO''). After the merger, 
the right to transact business on the floor of the Exchange will be 
acquired by purchasing a trading license from the Exchange. Each 
trading license will provide to the license holder identical trading 
floor access rights to those previously held by a member of the 
Exchange. Starting with calendar year 2007, the Exchange will sell 
trading licenses in an annual modified ``Dutch'' auction under new NYSE 
Rule 300. However, to facilitate the distribution of trading licenses 
so that licensees could transact business immediately after the merger, 
an initial trading license auction was held on January 3, 2006. While 
NYSE Rule 300 will not be effective until after the merger, the 2006 
trading license auction was conducted under the same modified ``Dutch'' 
auction procedures established by NYSE Rule 300 for auctions in future 
years, subject to the modifications set out in new NYSE Rule 300T.\6\
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    \6\ New Rule 300T modified the auction provisions of NYSE Rule 
300 in the following respects for the 2006 auction:
    (A) The Minimum Bid Price was eighty percent (80%) of the 
Reference Price (as hereinafter defined), and there was also imposed 
a ``Maximum Bid Price'' of one hundred twenty percent (120%) of the 
Reference Price. The term ``Reference Price'' means the average 
annual lease price for leases (including renewal leases) which 
leases (or renewals) commenced during the six-month period ending on 
the last business day of the last calendar month ending at least 
thirty days before the opening of the auction. In addition, in 
determining the Auction Price, the Clearing Price is reduced by 
multiplying it by a fraction the numerator of which is the number of 
months for which the license shall be issued and the denominator of 
which is twelve (12).
    (B) The number of trading licenses that could be acquired by a 
single member organization was limited to a number that was the 
greater of: (i) 35, and (ii) 125% of the number of regular and 
electronic access Exchange memberships utilized by the member 
organization in its business immediately prior to the merger.
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    The auction produced 1,274 successful bids for trading licenses at 
an annual price of $49,290 each. Assuming the merger closes on March 7, 
2006, as scheduled, the actual price payable for 2006 trading licenses 
will be $40,147.50, representing a pro-ration of the annual fee to 
reflect the amount of time remaining in the year at the time of the 
closing of the merger. Subject to the maximum number allowable of 1,366 
licenses, the Exchange will sell additional trading licenses during the 
remainder of 2006 at an annual rate of $54,219 (i.e., 110% of the 
$49,290 annual fee set in the 2006 auction) pro-rated to reflect the 
amount of time remaining in the year at the time of the commencement of 
the license.
    New NYSE Rule 300 provides that: (i) Trading license holders must 
pay the annual fee in equal monthly installments in advance over the 
period during which the trading license is in effect, and (ii) prior to 
the commencement of the trading license, the holder shall pay to the 
Exchange the first monthly installment of the trading license fee, plus 
a cash deposit equal to one month's installment of the trading license 
fee. As the trading license fee applicable to calendar 2006 could not 
be determined until the merger closing date was known with specificity, 
the Exchange was unable to bill trading license holders their initial 
installment in advance. Therefore, the Exchange will send trading 
license holders a bill in early April 2006 for: (i) The period from the 
closing of the merger until March 31, 2006; (ii) the month of April 
2006; and (iii) a one-month deposit which will be applied to payment 
for the month of December 2006 or to the one-month fee payable upon 
early termination of the trading license, if applicable. Bills are 
payable on receipt.
Fee for Approval of New Member or Pre-qualified Substitute or of 
Existing Member or Pre-qualified Substitute Upon Transfer to a 
Different Member Organization
    The Exchange proposes to charge a fee of $1,000 for the approval of 
new members. This fee will not apply to current Exchange members who 
continue approved for trading floor access after the merger. From and 
after the merger, however, the fee will be billed to the new employer 
of: (i) Any new member or pre-qualified substitute not transferring 
from another member organization; (ii) any approved member who changes 
employment and continues as a member with another trading license 
holder; or (iii) any pre-qualified substitute who changes employment 
and continues as a pre-qualified substitute with another trading 
license holder. This fee reflects the costs to the Exchange of 
processing such new memberships or transfers, including checking that 
the member organization has a license for its new employee or approving 
the purchase of a license, ensuring that the member is not subject to 
any regulatory restriction, checking that the member's new employer has 
put in place the required financial guarantee, and issuing or resetting 
the member's badge and handheld. Under the Exchange rules existing 
prior to the merger, the Exchange charges a fee (currently $5,000 \7\) 
(``Transfer Fee'') for the transfer of a membership, including a 
transfer between two employees of the same member organization. As 
such, the processing fee associated with the hiring of new member or 
pre-qualified substitute employees by a member organization will be 
reduced from $5,000 to $1,000 after the merger.

    \7\ Transfer fees for purchased and leased memberships equal 5% 
of the purchase price or last contracted sale of a membership, 
subject to minimum and maximum fees of $1,000 and $5,000 
respectively. As membership prices currently exceed $1,000,000, the 
current initiation fee is the $5,000 maximum.
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Badge Maintenance Fee
    The Exchange proposes to charge a $250 badge maintenance fee, to be 
charged annually to member organizations with respect to each active 
member and each pre-qualified substitute. The fee will cover the 
Exchange's costs in maintaining the technological infrastructure 
supporting the badge system and updating system data as personnel 
commence and leave employment on the trading floor.

Trading License Transfer Fee
    The Exchange proposes to charge a trading license transfer fee of 
$1,000, to be charged when an existing trading license is to be 
transferred to a permitted transferee. Permitted transfers of trading 
licenses pursuant to new NYSE Rule 300(a) are limited to transfers to a 
qualified and approved member organization: (i) Which is an affiliate, 
or (ii) which continues substantially the same business of such trading 
license holder without regard to the form of the transaction used to 
achieve such continuation, e.g., merger, sale of substantially all 
assets, reincorporation, reorganization or the like. This fee will be 
applied separately to each individual license transferred. The trading 
license transfer fee reflects the processing costs incurred by the 
Exchange in effectuating a permitted transfer, including the re-
registration of employee members with the new member organization and 
the closing down of the old billing account and opening of one in the 
new member organization's name. Prior to the merger, any transfer of an 
Exchange membership is subject to the $5,000 Transfer Fee described 
above. As a transfer of a trading license after the merger is 
equivalent to the transfer of a membership before the merger, the 
Exchange is effectively reducing the fee charged upon the occurrence of 
a permitted transfer from $5,000 to $1,000 after the merger.

[[Page 13202]]

Technical Changes to Price List
    The Exchange proposes to make three clarifying changes to the 2006 
Exchange Price List to clarify that: (i) The annual aggregate 
regulatory fee of $16,000,000 to be allocated among specialist firms 
will be based on the number of trading licenses held by each specialist 
firm; (ii) the annual regulatory fee of $11,000 charged to non-
specialist members will be charged on a per trading license basis; and 
(iii) the $180 minimum regulatory fee currently charged to members who 
do not conduct a public business will be charged after the merger to 
member organizations.
Deletion of Fees Charged to Members
    The 2006 Exchange Price List contains references to fees charged to 
members, physical access members and electronic access members. As the 
concept of Exchange membership as a means of acquiring the right to 
conduct business on the trading floor will be superseded by the 
issuance of trading licenses upon completion of the merger, these fees 
will have no continued relevance. Therefore, the Exchange is deleting 
all references to them from the 2006 Exchange Price List.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(4) of the Act,\8\ which requires that an Exchange 
have rules that provide an equitable allocation of reasonable dues, 
fees, and other charges among its members and other persons using its 
facilities.
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    \8\ 15 U.S.C. 78f(b)(4).
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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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) \9\ of the Act and subparagraph (f)(2) \10\ thereunder 
because it establishes or changes a due, fee, or other charge. At any 
time within 60 days of the filing of the proposed rule change, the 
Commission may summarily abrogate 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to rule-comments@sec.gov. Please include File 

Number SR-NYSE-2006-14 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2006-14. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the NYSE. 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-2006-14 and should be submitted by April 4, 2006. 

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-3574 Filed 3-13-06; 8:45 am]

BILLING CODE 8010-01-P