81 FR 32360 - Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 5 to 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
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 99 (May 23, 2016)
Federal Register Volume 81, Issue 99 (May 23, 2016)
| Page Range | 32360-32364 | |
| FR Document | 2016-12017 |
[Federal Register Volume 81, Number 99 (Monday, May 23, 2016)] [Notices] [Pages 32360-32364] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-12017] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-77850; File No. SR-NYSE-2016-22] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 5 to 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 May 17, 2016. I. Introduction On April 7, 2016, the New York Stock Exchange LLC (``NYSE'' or the ``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to adopt initial and continued listing standards for the listing of Equity Investment Tracking Stocks and to adopt fees for Equity Investment Tracking Stocks. The proposed rule change was published for comment in the Federal Register on April 27, 2016.\3\ On April 20, 2016, the Exchange filed Amendment No. 1 to the proposed rule [[Page 32361]] change, which superseded the original filing in its entirety. On May 17, 2016, the Exchange filed Amendment No. 5 to the proposal, which superseded the filing, as amended by Amendment No. 1.\4\ Amendment No. 5 is described in Item II below. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 5, from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 77674 (April 21, 2016), 81 FR 24919 (April 27, 2016). \4\ On May 13, 2016, the Exchange submitted and withdrew Amendment No. 2 to the proposed rule change. On May 13, 2016, the Exchange filed Amendment No. 3 to the proposed rule change, and on May 16, 2016 the Exchange withdrew Amendment No. 3 to the proposed rule change. On May 16, 2016 the Exchange submitted Amendment No. 4 to the proposal, and on May 17, 2016, the Exchange withdrew Amendment No. 4 to the proposed rule change. --------------------------------------------------------------------------- II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change, as Modified by Amendment No. 5 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 III 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 that are the sole listed common equity security of the issuer. For purposes of proposed new Section 102.07 of the Manual, an Equity Investment Tracking Stock is defined as a class of common equity securities that tracks on an unleveraged basis the performance of an investment by the issuer in the common equity securities of a single other company listed on the Exchange. An Equity Investment Tracking Stock may track multiple classes of common equity securities of a single issuer, so long as all of those classes have identical economic rights and at least one of those classes is 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 of the Manual, respectively, and the Global Market Capitalization 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 [sic] held shares available for trading. Further, as required under Section 102.01B, an Equity Investment Tracking Stock must have an aggregated [sic] 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 the Global Market Capitalization Test, under which the issuer must have $200 million in global market capitalization at the time of initial listing. The issuer of the Equity Investment Tracking Stock must also own (directly or indirectly \5\) at least 50% of both the economic interest and voting power of all of the outstanding classes of common equity of the issuer whose equity is tracked by the Equity Investment Tracking Stock. The Issuer of Equity Investment Tracking Stock must also fully comply with the Exchange's corporate governance requirements set forth in Section 303A of the Manual, subject to applicable exemptions such as those applicable to controlled companies. --------------------------------------------------------------------------- \5\ An example of an indirect ownership would be where the listed company has a 100%-owned subsidiary and that subsidiary in turn owns the stock of the company whose performance is being tracked. Another example would be where the listed company owns 100% of each of two subsidiaries, each of which owns stock in the company whose performance is being tracked. --------------------------------------------------------------------------- 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 the case of an Equity Investment Tracking Stock, the Exchange will review the continued listing status of that security if:The underlying listed equity security or securities whose value is tracked by the Equity Investment Tracking Stock ceases or cease to be listed on the Exchange. The issuer of the Equity Investment Tracking Stock owns (directly or indirectly) less than 50% of either the economic interest or the voting power of all of the outstanding classes of common equity of the issuer whose equity is tracked by the Equity Investment Tracking Stock. The Equity Investment Tracking Stock ceases to track the performance of the listed equity security or securities that was tracked at the time of initial listing. In the event that any of the foregoing conditions exist [sic], the Exchange will determine whether the Equity Investment Tracking Stock meets any other applicable initial listing standard in place at that time. If the Equity Investment Tracking Stock does not qualify for initial listing at that time under another applicable listing standard the issuer will not be eligible to follow the procedures set forth in Sections 802.02 and 802.03 and the Exchange will immediately suspend the Equity Investment Tracking Stock and commence delisting proceedings. Furthermore, whenever trading in the equity security whose value is tracked by an Equity Investment Tracking Stock is suspended or delisting proceedings are commenced with respect to such security, such Equity Investment Tracking Stock will be suspended and/or delisting proceedings commenced with respect to such Equity Investment Tracking Stock at the same time. The Exchange proposes to amend Section 202.06(B) of the Manual to provide that, in the event that the issuer of the common equity security tracked by an Equity Investment Tracking Stock [[Page 32362]] intends to issue a material news release during the trading day and the staff of NYSE Regulation determines that a regulatory trading halt required by Section 202.06 should be implemented pending dissemination of the news or any other required regulatory trading halt should be implemented, the Exchange will also halt trading in the Equity Investment Tracking Stock simultaneously with the halt in the underlying security and will also recommence trading at the same time. The Exchange represents that it will monitor activity in Equity Investment Tracking Stocks to identify and deter any potential improper trading activity in such securities. The Exchange will adopt enhanced surveillance procedures to enable it to monitor Equity Investment Tracking Stocks alongside the securities whose value they track. Additionally, the Exchange represents that its surveillance procedures are generally adequate to properly monitor the trading of Equity Investment Tracking Stocks. Specifically, the Exchange will rely on its existing trading surveillances, administered by the Exchange, or the Financial Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.\6\ --------------------------------------------------------------------------- \6\ FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement. --------------------------------------------------------------------------- The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. Given the novel investment characteristics of Equity Investment Tracking Stocks, the Exchange will conduct a review of the trading and compliance with continued listing standards of Equity Investment Tracking Stocks and their issuers over the initial two year period for which the proposed listing standard is in operation. The Exchange will furnish two reports to the SEC based on this review, one to be provided one year after the initial listing date of the first security listed under the proposed standard and the second to be provided on the second anniversary of such initial listing. At a minimum, the reports will address the relationship between the trading prices of listed Equity Investment Tracking Stocks and those of the securities whose values they track, the liquidity of the market for the two securities, and any manipulation concerns arising in connection with the trading of securities listed under the standard and the securities whose values are being tracked. The reports will also discuss any recommendations the Exchange may have for enhancements to the listing standard based on its review. The proposed rule will provide that, prior to the commencement of trading of any Equity Investment Tracking Stock, the Exchange will distribute an Information Memorandum to its Members and Member Organizations that includes (a) any special characteristics and risks of trading the Equity Investment Tracking Stock, and (b) the Exchange Rules that will apply to the Equity Investment Tracking Stock including Exchange Rules that require Member Organizations: To use reasonable diligence in regard to the opening and maintenance of every account, to know (and retain) the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer. In recommending transactions in the Equity Investment Tracking Stock to have a reasonable basis to believe that (1) the recommendation is suitable for a customer given reasonable inquiry concerning the customer's investment objectives, financial situation, needs, and any other information known by such Member Organization, and (2) the customer can evaluate the special characteristics, and is able to bear the financial risks, of an investment in the Equity Investment Tracking Stock. The Exchange proposes to amend Sections 902.02 and 902.03 of the Manual to provide that, where an Equity Investment Tracking Stock is the only common equity security of the issuer 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 for so long as it is the only common equity security of the issuer listed on the Exchange. Pursuant to Sections 902.02 and 902.03 of the Manual, listed companies are charged an annual 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 that is the issuer's only common equity security listed on the Exchange, 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 an Equity Investment Tracking Stock that is its issuer's only common equity security listed on the Exchange 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, subject to the minimum annual fee of $52,500). 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 that is the issuer's only common equity security listed on the Exchange from receiving [[Page 32363]] 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. Issuers of Equity Investment Tracking Stocks will be eligible for tier- based services commencing when they have an additional class of common equity securities listed. In determining eligibility for the various service tiers under Section 907.00, the Exchange will aggregate all of the outstanding shares of listed classes of common equity securities of a company, including all outstanding shares of any listed Equity Investment Tracking Stock that is not the issuer's only listed class of common equity securities. 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. 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,\7\ in general, and furthers the objectives of Sections 6(b)(4) \8\ and 6(b)(5) \9\ of the Act, in particular. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78f (b). \8\ 15 U.S.C. 78f(b)(4). \9\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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,\10\ 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 [sic] not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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. The Exchange notes that an Equity Investment Tracking Stock will be subject to delisting if they [sic] do [sic] not meet another applicable initial listing standard and (i) the underlying equity security whose value is tracked by the Equity Investment Tracking Stock ceases to be listed on the Exchange; (ii) the issuer of the Equity Investment Tracking Stock owns (directly or indirectly) less than 50% of either the economic interest or the voting power of all of the outstanding classes of common equity of the issuer whose equity is tracked by the Equity Investment Tracking Stock; or (iii) the Equity Investment Tracking Stock ceases to track the performance of the listed equity security that was tracked at the time of initial listing. The Issuer of Equity Investment Tracking Stock must also fully comply with the Exchange's corporate governance requirements set forth in Section 303A of the Manual, subject to applicable exemptions such as those applicable to controlled companies. The Exchange notes that it is proposing to amend Section 202.06(B) to provide that, in the event that the issuer of the common equity security tracked by an Equity Investment Tracking Stock intends to issue a material news release during the trading day and the staff of NYSE Regulation determines that a regulatory trading halt pursuant to Section 202.06 should be implemented pending dissemination of the news or if the staff of NYSE Regulation determine [sic] that any other required regulatory trading halt should be implemented, the Exchange will also halt trading in the Equity Investment Tracking Stock simultaneously with the halt in the underlying security and will also recommence trading at the same time. The Exchange believes that this proposed amendment will protect investors and the public interest by preventing market participants from gaining an advantage in trading in an Equity Investment Tracking Stock based on their possession of material nonpublic information with respect to the company whose value is being tracked by the Equity Investment Tracking Stock. The proposed rule requires the issuer of an Equity Investment Tracking Stock to meet the Global Market Capitalization Test in Section 102.01C of the Manual at the time of initial listing and does not allow applicants the alternative of meeting the Earnings Test, as would normally be available to an operating company applicant. The Exchange does not believe this is unfairly discriminatory, as many applicants will likely not have prepared standalone financial statements applicable to the equity investment being tracked and would therefore be unable to demonstrate compliance with the Earnings Test. 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 that is the issuer's only common equity security listed on the Exchange 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, so long as the Equity Investment Tracking Stock is the issuer's only common equity security listed on the exchange, they [sic] will be 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 [[Page 32364]] 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. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as modified by Amendment No. 5 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-2016-22 on the subject line. 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 June 13, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\11\ --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-12017 Filed 5-20-16; 8:45 am] BILLING CODE 8011-01-P
![32360 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices
in an award would benefit forum users C. Self-Regulatory Organization’s provisions of 5 U.S.C. 552, will be
by eliminating ambiguity and reducing Statement on Comments on the available for Web site viewing and
the risk of post-award disputes. Proposed Rule Change Received From printing in the Commission’s Public
Members, Participants, or Others Reference Room, 100 F Street NE.,
B. Self-Regulatory Organization’s Washington, DC 20549–1090, on official
Statement on Burden on Competition Written comments were neither
solicited nor received. business days between the hours of 10
FINRA does not believe that the a.m. and 3 p.m. Copies of such filing
III. Date of Effectiveness of the also will be available for inspection and
proposed rule change will result in any
Proposed Rule Change and Timing for copying at the principal office of
burden on competition that is not Commission Action FINRA. All comments received will be
necessary or appropriate in furtherance
Within 45 days of the date of posted without change; the Commission
of the purposes of the Act. FINRA does not edit personal identifying
believes that the proposed rule change publication of this notice in the Federal
Register or within such longer period (i) information from submissions. You
will mitigate the risk of failure to pay by should submit only information that
an opposing party that may arise when as the Commission may designate up to
90 days of such date if it finds such you wish to make available publicly. All
multiple parties in a dispute are found submissions should refer to File
longer period to be appropriate and
to owe non-equivalent awards Number SR–FINRA–2016–015 and
publishes its reasons for so finding or
simultaneously. Creating a presumption should be submitted on or before June
(ii) as to which the self-regulatory
that opposing award amounts will be 13, 2016.
organization consents, the Commission
offset will increase the likelihood that will: For the Commission, by the Division of
the arbitrators’ purpose in issuing (A) By order approve or disapprove Trading and Markets, pursuant to delegated
opposing awards would be carried out. such proposed rule change, or authority.4
In addition, the proposed rule would (B) institute proceedings to determine Robert W. Errett,
reduce instances where the party owed whether the proposed rule change Deputy Secretary.
the greater net damages is required to should be disapproved. [FR Doc. 2016–12012 Filed 5–20–16; 8:45 am]
make payment even if the opposing BILLING CODE 8011–01–P
party fails to pay its damages. In IV. Solicitation of Comments
addition, this proposed rule change Interested persons are invited to
would likely reduce legal expenses to submit written data, views and SECURITIES AND EXCHANGE
the party owed greater damages by arguments concerning the foregoing, COMMISSION
eliminating the need to apply for the including whether the proposed rule
[Release No. 34–77850; File No. SR–NYSE–
reopening of the case or going to court change is consistent with the Act. 2016–22]
to seek award offsets, or seek other Comments may be submitted by any of
redress. the following methods: Self-Regulatory Organizations; New
The scope of cases affected by offsets Electronic Comments York Stock Exchange LLC; Notice of
Filing of Amendment No. 5 to
is small in comparison to the number of • Use the Commission’s Internet Proposed Rule Change Adopting Initial
cases handled at the forum, but forum comment form (http://www.sec.gov/ and Continued Listing Standards for
users have asked FINRA to address the rules/sro.shtml); or the Listing of Equity Investment
issue. During 2013 and 2014, a total of • Send an email to rule-comments@ Tracking Stocks and Adopting Listing
8,375 cases were closed at the forum sec.gov. Please include File Number SR– Fees Specific to Equity Investment
(predominantly by settlement or award). FINRA–2016–015 on the subject line. Tracking Stocks
The majority of cases are settled before
Paper Comments May 17, 2016.
a hearing takes place. The offset issue
had the potential to arise in 299 cases • Send paper comments in triplicate I. Introduction
(just over 3.5% of cases) where there to Secretary, Securities and Exchange
Commission, 100 F Street NE., On April 7, 2016, the New York Stock
was a claim by both a claimant and a
Washington, DC 20549–1090. Exchange LLC (‘‘NYSE’’ or the
respondent, and the case was resolved
‘‘Exchange’’) filed with the Securities
by arbitrators at a hearing on the merits. All submissions should refer to File
and Exchange Commission
In 17 cases (0.2% of cases), the Number SR–FINRA–2016–015. This file
(‘‘Commission’’), pursuant to Section
arbitrators awarded monetary damages number should be included on the
19(b)(1) of the Securities Exchange Act
to both a claimant and a respondent, subject line if email is used. To help the
of 1934 (‘‘Act’’) 1 and Rule 19b–4
offering the opportunity for an offset. Commission process and review your
thereunder,2 a proposed rule change to
comments more efficiently, please use
Of these 17 cases, one involved a adopt initial and continued listing
only one method. The Commission will
customer dispute in which a member standards for the listing of Equity
post all comments on the Commission’s
initiated a claim for breach of contract. Investment Tracking Stocks and to
Internet Web site (http://www.sec.gov/
The arbitrators made a monetary award adopt fees for Equity Investment
rules/sro.shtml). Copies of the
to both the customer and firm and Tracking Stocks. The proposed rule
submission, all subsequent
provided for an offset. In the remaining change was published for comment in
amendments, all written statements
16 intra-industry cases, most of which the Federal Register on April 27, 2016.3
with respect to the proposed rule
sradovich on DSK3TPTVN1PROD with NOTICES
involved promissory notes, the On April 20, 2016, the Exchange filed
change that are filed with the
arbitrators made an award to both the Amendment No. 1 to the proposed rule
Commission, and all written
firm and the associated person. In 8 of communications relating to the 4 17 CFR 200.30–3(a)(12).
the 16 cases, the arbitrators ordered proposed rule change between the 1 15 U.S.C. 78s(b)(1).
award offsets. In the remaining eight Commission and any person, other than 2 17 CFR 240.19b–4.
cases, the awards were silent as to those that may be withheld from the 3 See Securities Exchange Act Release No. 77674
offset. public in accordance with the (April 21, 2016), 81 FR 24919 (April 27, 2016).
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![Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices 32361
change, which superseded the original In order to qualify for initial listing average monthly trading volume is less
filing in its entirety. On May 17, 2016, under proposed Section 102.07, an than 100,000 shares (for the most recent
the Exchange filed Amendment No. 5 to Equity Investment Tracking Stock will 12 months) or (iii) their number of
the proposal, which superseded the be required to meet the distribution and publicly-held shares is less than
filing, as amended by Amendment No. public float requirements currently 600,000. Such companies will be
1.4 Amendment No. 5 is described in applicable for initial public offerings set deemed to be below compliance with
Item II below. The Commission is forth in Sections 102.01A and 102.01B Section 802.01B if their average global
publishing this notice to solicit of the Manual, respectively, and the market capitalization over a consecutive
comments on the proposed rule change, Global Market Capitalization set forth in 30 trading-day period is less than
as modified by Amendment No. 5, from Section 102.01C. As such, as required $50,000,000 and, at the same time
interested persons. under Section 102.01A, an Equity stockholders’ equity is less than
Investment Tracking Stock, at the time $50,000,000 and (will be subject to
II. Self-Regulatory Organization’s of initial listing, will be required to have immediate delisting if they are
Statement of the Purpose of, and at least 400 holders of 100 shares or determined to have average global
Statutory Basis for, the Proposed Rule more and 1,100,000 public [sic] held market capitalization over a consecutive
Change, as Modified by Amendment shares available for trading. Further, as 30 trading-day period of less than
No. 5 required under Section 102.01B, an $15,000,000).
In its filing with the Commission, the Equity Investment Tracking Stock must In the case of an Equity Investment
self-regulatory organization included have an aggregated [sic] market value of Tracking Stock, the Exchange will
statements concerning the purpose of, publicly-held shares of $40,000,000 and review the continued listing status of
and basis for, the proposed rule change a per share price of $4 at the time of that security if:
initial listing. Under Section 102.01C, • The underlying listed equity
and discussed any comments it received
the issuer of an Equity Investment security or securities whose value is
on the proposed rule change. The text
Tracking Stock will be required to meet tracked by the Equity Investment
of those statements may be examined at
the Global Market Capitalization Test, Tracking Stock ceases or cease to be
the places specified in Item III below.
under which the issuer must have $200 listed on the Exchange.
The Exchange has prepared summaries, • The issuer of the Equity Investment
set forth in sections A, B, and C below, million in global market capitalization
at the time of initial listing. The issuer Tracking Stock owns (directly or
of the most significant parts of such indirectly) less than 50% of either the
statements. of the Equity Investment Tracking Stock
must also own (directly or indirectly 5) economic interest or the voting power of
A. Self-Regulatory Organization’s at least 50% of both the economic all of the outstanding classes of common
Statement of the Purpose of, and the interest and voting power of all of the equity of the issuer whose equity is
Statutory Basis for, the Proposed Rule outstanding classes of common equity of tracked by the Equity Investment
Change the issuer whose equity is tracked by the Tracking Stock.
Equity Investment Tracking Stock. The • The Equity Investment Tracking
1. Purpose Stock ceases to track the performance of
Issuer of Equity Investment Tracking
The Exchange proposes to adopt the listed equity security or securities
Stock must also fully comply with the
initial and continued listing standards that was tracked at the time of initial
Exchange’s corporate governance
for the listing of Equity Investment listing.
requirements set forth in Section 303A
Tracking Stocks. The Exchange also In the event that any of the foregoing
of the Manual, subject to applicable
proposes to adopt listing fees specific to conditions exist [sic], the Exchange will
exemptions such as those applicable to
Equity Investment Tracking Stocks that determine whether the Equity
controlled companies.
are the sole listed common equity Investment Tracking Stock meets any
The Exchange will not list an Equity
security of the issuer. other applicable initial listing standard
Investment Tracking Stock if, at the time
in place at that time. If the Equity
For purposes of proposed new Section of the proposed listing, the issuer of the
Investment Tracking Stock does not
102.07 of the Manual, an Equity equity tracked by the Equity Investment
qualify for initial listing at that time
Investment Tracking Stock is defined as Tracking Stock has been deemed below
under another applicable listing
a class of common equity securities that compliance with listing standards by
standard the issuer will not be eligible
tracks on an unleveraged basis the the Exchange.
The Exchange proposes to subject the to follow the procedures set forth in
performance of an investment by the Sections 802.02 and 802.03 and the
issuer in the common equity securities issuer of an Equity Investment Tracking
Stock to the same continued listing Exchange will immediately suspend the
of a single other company listed on the Equity Investment Tracking Stock and
Exchange. An Equity Investment standards under Sections 802.01A and
802.01B as are applicable to other commence delisting proceedings.
Tracking Stock may track multiple Furthermore, whenever trading in the
classes of common equity securities of companies listing common stocks on the
Exchange. As such, these companies equity security whose value is tracked
a single issuer, so long as all of those by an Equity Investment Tracking Stock
classes have identical economic rights will be considered to be below
compliance with Section 802.01A if (i) is suspended or delisting proceedings
and at least one of those classes is listed are commenced with respect to such
on the Exchange. their number of total stockholders is less
than 400 or (ii) their number of total security, such Equity Investment
stockholders is less than 1,200 and their Tracking Stock will be suspended and/
4 On May 13, 2016, the Exchange submitted and
or delisting proceedings commenced
sradovich on DSK3TPTVN1PROD with NOTICES
withdrew Amendment No. 2 to the proposed rule
change. On May 13, 2016, the Exchange filed 5 An example of an indirect ownership would be with respect to such Equity Investment
Amendment No. 3 to the proposed rule change, and where the listed company has a 100%-owned Tracking Stock at the same time.
on May 16, 2016 the Exchange withdrew subsidiary and that subsidiary in turn owns the The Exchange proposes to amend
Amendment No. 3 to the proposed rule change. On stock of the company whose performance is being Section 202.06(B) of the Manual to
May 16, 2016 the Exchange submitted Amendment tracked. Another example would be where the
No. 4 to the proposal, and on May 17, 2016, the listed company owns 100% of each of two
provide that, in the event that the issuer
Exchange withdrew Amendment No. 4 to the subsidiaries, each of which owns stock in the of the common equity security tracked
proposed rule change. company whose performance is being tracked. by an Equity Investment Tracking Stock
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![Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices 32363
the products and services provided for mechanism of a free and open market the company whose value is being
under Section 907.00, with the and a national market system, and, in tracked by the Equity Investment
exception that such issuers will receive general, to protect investors and the Tracking Stock.
the complimentary products and public interest and is [sic] not designed The proposed rule requires the issuer
services and access to discounted third- to permit unfair discrimination between of an Equity Investment Tracking Stock
party products and services through the customers, issuers, brokers, or dealers. to meet the Global Market Capitalization
NYSE Market Access Center available to In particular, the proposed listing Test in Section 102.01C of the Manual
all listed issuers. Issuers of Equity standards are designed to protect at the time of initial listing and does not
Investment Tracking Stocks will be investors and the public interest by allow applicants the alternative of
eligible for tier-based services ensuring that Equity Investment meeting the Earnings Test, as would
commencing when they have an Tracking Stocks listed on the Exchange normally be available to an operating
additional class of common equity meet stringent quantitative and company applicant. The Exchange does
securities listed. In determining qualitative listing standards to qualify not believe this is unfairly
eligibility for the various service tiers for initial and continued listing. The discriminatory, as many applicants will
under Section 907.00, the Exchange will Exchange notes that an Equity likely not have prepared standalone
aggregate all of the outstanding shares of Investment Tracking Stock will be financial statements applicable to the
listed classes of common equity subject to delisting if they [sic] do [sic] equity investment being tracked and
securities of a company, including all not meet another applicable initial would therefore be unable to
outstanding shares of any listed Equity listing standard and (i) the underlying demonstrate compliance with the
Investment Tracking Stock that is not equity security whose value is tracked Earnings Test.
the issuer’s only listed class of common by the Equity Investment Tracking Stock The proposed fee provisions further
equity securities. ceases to be listed on the Exchange; (ii) the objectives of Sections 6(b)(4) in that
The Exchange proposes to limit the the issuer of the Equity Investment they are designed to provide for the
fees that would be payable for the listing Tracking Stock owns (directly or equitable allocation of reasonable dues,
on an Equity Investment Tracking Stock indirectly) less than 50% of either the fees, and other charges among its
as an incentive for the issuer to list such economic interest or the voting power of members and issuers and other persons
security on the Exchange. As described all of the outstanding classes of common using its facilities. The Exchange
below, the Exchange proposes to make equity of the issuer whose equity is believes that the proposed fee
the aforementioned fee changes to better tracked by the Equity Investment provisions are consistent with Section
reflect the Exchange’s costs related to Tracking Stock; or (iii) the Equity 6(b)(5) of the Act in that they do not
listing Equity Investment Tracking Investment Tracking Stock ceases to unfairly discriminate among listed
Stocks and the corresponding value of track the performance of the listed companies because there is a reasonable
such listing to issuers. equity security that was tracked at the justification for charging the issuer of an
The Exchange proposes to make three time of initial listing. The Issuer of Equity Investment Tracking Stock
other minor changes in this filing: (i) To Equity Investment Tracking Stock must different fees from those charged to
remove from Section 902.03 references also fully comply with the Exchange’s other issuers as there are cost and
to the annual fee schedule applicable to corporate governance requirements set regulatory efficiencies for the Exchange
years prior to 2016; (ii) to update the forth in Section 303A of the Manual, when the issuer of an Equity Investment
web link included in Section 907.00 and subject to applicable exemptions such Tracking Stock and the issuer of the
(iii) to delete the word ‘‘four’’ from as those applicable to controlled underlying equity security are both
Section 802.01B, as there are no longer companies. listed on the Exchange. Under the
four continued listing standards referred The Exchange notes that it is Exchange’s proposal, the issuer of an
to in that rule. proposing to amend Section 202.06(B) Equity Investment Tracking Stock that is
to provide that, in the event that the the issuer’s only common equity
2. Statutory Basis issuer of the common equity security security listed on the Exchange would
The Exchange believes that the tracked by an Equity Investment pay a fixed initial listing fee of
proposed rule change is consistent with Tracking Stock intends to issue a $100,000, which is less than the
Section 6(b) of the Act,7 in general, and material news release during the trading minimum fee charged in connection
furthers the objectives of Sections day and the staff of NYSE Regulation with the listing of the primary class of
6(b)(4) 8 and 6(b)(5) 9 of the Act, in determines that a regulatory trading halt equity of an operating company. In
particular. pursuant to Section 202.06 should be addition, Equity Investment Tracking
The Exchange believes that the implemented pending dissemination of Stocks would be billed annual fees at
proposed initial and continued listing the news or if the staff of NYSE the same rate per share as the primary
standards for Equity Investment Regulation determine [sic] that any class of equity of an operating company,
Tracking Stocks further the objectives of other required regulatory trading halt but, so long as the Equity Investment
Section 6(b)(5) of the Act,10 in particular should be implemented, the Exchange Tracking Stock is the issuer’s only
in that they are designed to promote just will also halt trading in the Equity common equity security listed on the
and equitable principles of trade, to Investment Tracking Stock exchange, they [sic] will be subject to a
foster cooperation and coordination simultaneously with the halt in the lower annual fee cap that may cause an
with persons engaged in regulating, underlying security and will also issuer of an Equity Investment Tracking
clearing, settling, processing recommence trading at the same time. Stock to be subject to a lower effective
The Exchange believes that this fee rate per share than if it were a
sradovich on DSK3TPTVN1PROD with NOTICES
information with respect to, and
facilitating transactions in securities, to proposed amendment will protect regular operating company. Given the
remove impediments to and perfect the investors and the public interest by unique nature of an Equity Investment
preventing market participants from Tracking Stock, including especially the
7 15 U.S.C. 78f (b). gaining an advantage in trading in an fact that its trading price will likely be
8 15 U.S.C. 78f(b)(4). Equity Investment Tracking Stock based primarily derivative of the trading price
9 15 U.S.C. 78f(b)(5). on their possession of material of the security of another company,
10 15 U.S.C. 78f(b)(5). nonpublic information with respect to most of the services provided by the
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![32364 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices
Exchange under Section 907.00 would C. Self-Regulatory Organization’s 2016–22, and should be submitted on or
be of limited value and appeal to issuers Statement on Comments on the before June 13, 2016.
of Equity Investment Tracking Stocks Proposed Rule Change Received From For the Commission, by the Division of
and the Exchange believes it is Members, Participants, or Others Trading and Markets, pursuant to delegated
appropriate to exclude the issuers of No written comments were solicited authority.11
Equity Investment Tracking Stocks from or received with respect to the proposed Robert W. Errett,
its services program. The Exchange rule change.
believes that the fact that it will not Deputy Secretary.
provide these costly services makes it III. Solicitation of Comments [FR Doc. 2016–12017 Filed 5–20–16; 8:45 am]
appropriate to charge lower fees. In Interested persons are invited to BILLING CODE 8011–01–P
addition, the Exchange believes there submit written data, views, and
will be regulatory efficiencies when the arguments concerning the foregoing,
same regulatory staff is responsible for including whether the proposed rule SECURITIES AND EXCHANGE
oversight of an Equity Investment change, as modified by Amendment No. COMMISSION
Tracking Stock and the underlying 5 is consistent with the Act. Comments
equity security. This would include, for may be submitted by any of the [Release No. 34–77847; File No. SR–
example, the fact that news that is following methods: NYSEArca–2016–64]
material to the issuer of the underlying
security would also be material to an Electronic Comments Self-Regulatory Organizations; NYSE
investment in the Equity Investment • Use the Commission’s Internet Arca, Inc.; Notice of Filing of Proposed
Tracking Stock. comment form (http://www.sec.gov/ Rule Change, as Modified by
The Exchange does not expect many rules/sro.shtml); or Amendment No. 1 Thereto, Relating to
issuers will seek to list an Equity • Send an email to rule-comments@ the Listing and Trading of Shares of
Investment Tracking Stock. sec.gov. Please include File Number SR– the AdvisorShares KIM Korea Equity
Accordingly, the Exchange does not NYSE–2016–22 on the subject line. ETF
anticipate that it will experience any
Paper Comments May 17, 2016.
meaningful diminution in revenue as a
result of the proposed lower fees and • Send paper comments in triplicate Pursuant to Section 19(b)(1) of the
therefore does not believe that the to Brent J. Fields, Secretary, Securities Securities Exchange Act of 1934 (the
proposed fees would in any way and Exchange Commission, 100 F Street
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
negatively affect its ability to continue NE., Washington, DC 20549–1090.
notice is hereby given that, on May 2,
to adequately fund its regulatory All submissions should refer to File 2016, NYSE Arca, Inc. (the ‘‘Exchange’’
program or the services the Exchange Number SR–NYSE–2016–22. This file or ‘‘NYSE Arca’’) filed with the
provides to issuers number should be included on the
Securities and Exchange Commission
subject line if email is used. To help the
B. Self-Regulatory Organization’s (the ‘‘Commission’’) the proposed rule
Commission process and review your
Statement on Burden on Competition change as described in Items I and II
comments more efficiently, please use
The Exchange does not believe that only one method. The Commission will below, which Items have been prepared
the proposed rule change will impose post all comments on the Commission’s by the self-regulatory organization. On
any burden on competition that is not Internet Web site (http://www.sec.gov/ May 13, 2016, the Exchange submitted
necessary or appropriate in furtherance rules/sro.shtml). Copies of the Amendment No. 1 to the proposed rule
of the purposes of the Act. The submission, all subsequent change, which replaces and supersedes
proposed rule change is designed to amendments, all written statements the proposed rule change in its entirety.
provide listing standards for Equity with respect to the proposed rule The Commission is publishing this
Investment Tracking Stocks that are change that are filed with the notice to solicit comments on the
appropriately protective of investors Commission, and all written proposed rule change, as modified by
and is not designed to limit the ability communications relating to the Amendment No. 1 thereto, from
of the issuers of those securities to list proposed rule change between the interested persons.
them on any other national securities Commission and any person, other than
exchange. The proposed rule change is those that may be withheld from the I. Self-Regulatory Organization’s
designed to ensure that the fees charged public in accordance with the Statement of the Terms of Substance of
by the Exchange accurately reflect the provisions of 5 U.S.C. 552, will be the Proposed Rule Change
services provided and benefits realized available for Web site viewing and The Exchange proposes to list and
by listed companies. The market for printing in the Commission’s Public trade the shares of the following under
listing services is extremely Reference Room, 100 F Street NE., NYSE Arca Equities Rule 8.600
competitive. Each listing exchange has a Washington, DC 20549 on official
(‘‘Managed Fund Shares’’):
different fee schedule that applies to business days between the hours of
AdvisorShares KIM Korea Equity ETF.
issuers seeking to list securities on its 10:00 a.m. and 3:00 p.m. Copies of such
exchange. Issuers have the option to list filing also will be available for The proposed rule change is available
their securities on these alternative inspection and copying at the principal on the Exchange’s Web site at
venues based on the fees charged and office of the Exchange. All comments www.nyse.com, at the principal office of
sradovich on DSK3TPTVN1PROD with NOTICES
the value provided by each listing. received will be posted without change; the Exchange, and at the Commission’s
Because issuers have a choice to list the Commission does not edit personal Public Reference Room.
their securities on a different national identifying information from
securities exchange, the Exchange does submissions. You should submit only
not believe that the proposed listing information that you wish to make 11 17 CFR 200.30–3(a)(12).
standards and fee changes impose a available publicly. All submissions 1 15 U.S.C. 78s(b)(1).
burden on competition. should refer to File Number SR–NYSE– 2 17 CFR 240.19b–4.
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Document Created: 2018-02-07 15:07:29
Document Modified: 2018-02-07 15:07:29
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 81 FR 32360 |
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