

[Federal Register: June 20, 2006 (Volume 71, Number 118)]
[Notices]               
[Page 35474-35475]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jn06-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53978; File No. SR-NYSE-2006-42]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Relating to American Depositary Receipt Fees

June 13, 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 May 25, 2006, the New York Stock Exchange LLC (``NYSE'' or 
``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 NYSE. NYSE has 
designated the proposed rule change as a ``non-controversial'' rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposal effective upon 
filing with the Commission. On June 12, 2006, NYSE submitted Amendment 
No. 1 to the proposed rule change.\5\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
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)(iii)
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ In Amendment No. 1, the Exchange eliminated proposed changes 
to the title of Section 103.00 of the Listed Company Manual and 
corrected typographical errors in the rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE proposes to amend Section 103.04 of the Exchange's Listed 
Company Manual relating to sponsored American Depositary Receipts 
(``ADRs'') to eliminate the requirement that certain services must be 
provided without charge. The text of the proposed rule change, as 
amended, is set forth below. Proposed new language is underlined; 
proposed deletions are [bracketed].
* * * * *
Listed Company Manual
* * * * *
103.00 Non-U.S. Companies
* * * * *
103.04 Sponsored American Depository Receipts or Shares (``ADR[']s'')
    In order to list ADRs, the Exchange requires that such ADRs be 
sponsored. Foreign private issuers [Non-U.S. companies] sponsor their 
ADR[']s by entering into a[n] deposit agreement with an American 
depository bank to provide, [without charge to the ADR holders,] such 
services as cash and stock dividend payments, transfer of ownership, 
and distribution of company financial statements and notices, such as 
shareholder meeting material. This agreement is a required supplement 
to the basic Listing Agreement. (See [Para.] Section 901.00 for the 
text of the Listing Agreements.)
    [Non-U.S. companies electing to sponsor their ADR's are often 
interested in putting their names and products prominently before the 
American public. This may result in a direct relationship with American 
investors, customers and suppliers. An Exchange listing requires that a 
company sponsor its ADR'S.]
* * * * *

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

    In its filing with the Commission, NYSE included statements 
concerning the purpose of, and basis for, the proposed rule change, as 
amended, 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. 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 D
    NYSE proposes to amend Section 103.04 of the Exchange's Listed 
Company Manual (the ``Manual''). Section 103.04 currently requires that 
the depositary agreement entered into between a non-U.S. company and an 
American depository bank must provide that services such as cash and 
stock dividend payments, transfer of ownership, and distribution of 
company financial statements and notices, such as shareholder meeting 
material, be provided to ADR holders free of charge. The Exchange 
proposes to eliminate this requirement.
    The Exchange represents that Section 103.04 of the Manual dates 
from a time when companies listed ordinary shares in their home market 
and ADRs on NYSE. Historically, when an issuer listed a sponsored ADR 
security, trading would occur both in the underlying security in the 
home country and in the ADRs on the Exchange. As a result, the Exchange 
states, conversions between the underlying security and the ADR 
provided significant revenue for the depositary bank. In addition, at 
that time, the Exchange asserts, the market for depositary services was 
less competitive and institutional investors played a more limited role 
in influencing issuer and bank practices.
    The Exchange asserts that today, however, depositary receipts have 
become a preferred method of equity financing and are listed on 
exchanges around the world. Moreover, the Exchange represents that it 
is now not unusual for issuers from developing markets, such as China 
and other Asian countries, to list ADRs in the United States without 
also listing the underlying securities in their home market. The 
Exchange represents that because no other U.S. or overseas market 
limits the fees that depositary banks can charge ADR holders, it 
believes that the practical effect of Section 103.04 of the Manual is 
to increasingly foreclose the Exchange as a listing market for Asian 
issuers. As a result of a lack of potential conversion revenue, the 
Exchange argues that the effect of Section 103.04 of the Manual is to 
place the depositary bank at an economic disadvantage if the issuer 
lists its ADRs on the Exchange. Thus, the Exchange believes that NYSE's 
limitation on the fees that can be

[[Page 35475]]

charged to ADR holders has become an impediment to intermarket 
competition both within the United States and with international 
listing venues.
    Moreover, NYSE notes that fees applicable to ADR holders are 
clearly disclosed in the company's registration statement when a 
company registers its ADRs and the underlying securities with the 
Commission in connection with listing on a U.S. market. The deposit 
agreement, which sets forth the applicable fees, is also required to be 
filed as an exhibit to the company's registration statement and to the 
depositary bank's registration statement on Form F-6.
    NYSE also believes that the competition among the depositary banks 
in the sponsored ADR market serves to regulate the fees that banks 
charge to ADR holders. In light of these developments, the Exchange no 
longer feels that it is necessary or appropriate for NYSE to regulate 
fees for ADR holders.
2. Statutory Basis
    The Exchange believes that the statutory basis for the proposed 
rule change, as amended, is the requirement under Section 6(b)(5) of 
the Act \6\ that an exchange have rules that are designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to, and perfect 
the mechanism of a free and open market and, in general, to protect 
investors and the public interest.
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    \6\ 15 U.S.C. 78(f)(b)(5).
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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 Exchange 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.

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

    NYSE has designated the foregoing rule change, as amended, as a 
``non-controversial'' rule change pursuant to Section 19(b)(3)(A)(iii) 
of the Act \7\ and Rule 19b-4(f)(6) thereunder \8\ because the rule 
change does not: (i) Significantly affect the protection of investors 
or the public interest; (ii) impose any significant burden on 
competition; or (iii) become operative for 30 days from the day on 
which it was filed, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest. The Exchange has requested that the Commission waive the 
five-day pre-filing requirement and the 30-day operative delay period 
for ``non-controversial'' proposals and make the proposed rule change, 
as amended, effective and operative upon filing. The Commission hereby 
grants the request. The Commission believes that waiving the 30-day 
operative delay for the proposed rule change, as amended, is consistent 
with the protection of investors and the public interest because other 
national securities exchanges do not have similar restrictions on 
depositary bank fees in their listing standards.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission 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.\10\
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    \10\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, as 
amended, under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on June 12, 2006, the date on which 
NYSE submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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, as amended, 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSE-2006-42 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-2006-42. 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 also will be available for inspection and copying at the 
principal office of 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-2006-42 and should be submitted on or before July 11, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-9606 Filed 6-19-06; 8:45 am]

BILLING CODE 8010-01-P
