
[Federal Register Volume 81, Number 56 (Wednesday, March 23, 2016)]
[Notices]
[Pages 15585-15587]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06515]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77401; File No. SR-NYSEMKT-2016-12]


Self-Regulatory Organizations; NYSE MKT LLC; Order Approving 
Proposed Rule Change Amending the NYSE MKT Company Guide To Create a 
New Section 146 Under Which a Certain Category of Newly Listed Issuers 
Would Be Entitled To Receive Complimentary Products and Services From 
the Exchange

March 17, 2016.

I. Introduction

    On January 14, 2016, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 amend the NYSE MKT Company Guide (``Company 
Guide'') to create a new Section 146 under which a certain category of 
newly listed issuers (``Eligible New Listings'') would be entitled to 
receive complimentary products and services from the Exchange. The 
proposed rule change was published for comment in the Federal Register 
on February 3, 2016.\3\ No comment letters were received in response to 
the Notice. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 76996 (January 28, 
2016), 81 FR 5803 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to adopt Section 146 of the Company Guide to 
offer the following complimentary products and services to Eligible New 
Listings \4\ on the Exchange: Web-hosting products and services (with 
an approximate commercial value of $16,000 per year), web-casting 
services (with an approximate commercial value of $6,500 per year), 
whistleblower hotline services (with an approximate commercial value of 
$4,000 per year), news distribution products and services (with an 
approximate commercial value of $20,000 per year), and corporate 
governance tools (with an approximate commercial value of $15,000 per 
year).\5\
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    \4\ For the purposes of the proposed rule, the term ``Eligible 
New Listing'' means (i) any U.S. company that lists common stock on 
the Exchange for the first time and any non-U.S. company that lists 
an equity security on the Exchange under Section 101 or 110 of the 
Company Guide for the first time, regardless of whether such U.S. or 
non-U.S. company conducts an offering, (ii) any U.S. or non-U.S. 
company that transfers its listing of common stock or equity 
securities, respectively, to the Exchange from another national 
securities exchange and (iii) any U.S. or non-U.S. company emerging 
from a bankruptcy, spinoff (where a company lists new shares in the 
absence of a public offering), and carve-out (where a company carves 
out a business line or division, which then conducts a separate 
initial public offering). For purposes of the proposed rule, 
``equity securities'' means common stock or common share equivalents 
such as ordinary shares, New York shares, global shares, American 
Depository Receipts, or Global Depository Receipts. See proposed 
Section 146 of the Company Guide.
    \5\ See proposed Section 146 of the Company Guide.
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    The Exchange proposes to provide Eligible New Listings with such 
products and services for a period of 24 calendar months, which period 
would begin on the date of listing on the Exchange.\6\ Notwithstanding 
the foregoing, however, the proposal provides that if an Eligible New 
Listing begins to use a particular product or service under proposed 
Section 146 within 30 days of its initial listing date, the 
complimentary period will begin on the date of first use.\7\ Under the 
proposal, Eligible New Listings may elect to receive some or all of the 
products and services for which they are eligible under Section 146 of 
the Company Guide and are under no obligation to accept any product or 
service for which they are eligible.\8\
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    \6\ Id.
    \7\ Id.
    \8\ Id.
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    The Exchange states that the specific products and services offered 
by the Exchange will be developed by the Exchange or by third-party 
vendors.\9\ The Exchange states that NYSE Governance Services, an 
entity that is owned by the Exchange's parent company that provides 
corporate governance, risk, and compliance services to its clients, 
which include companies listed on the Exchange, will offer and develop 
the corporate governance tools provided to Eligible New Listings, but 
will not provide any other service related to the proposed rule.\10\
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    \9\ See Notice, supra note 3, at 5804.
    \10\ Id. In its filing, the Exchange stated its belief that NYSE 
Governance Services is not a ``facility'' of the Exchange as defined 
in 15 U.S.C. 78c(a)(2), and noted that its proposed rule change is 
being filed with the Commission under Section 19(b)(2) of the Act 
because it relates to services offered in connection with a listing 
on the Exchange. See id. at 5804 n.6. The Commission notes that the 
definition of a ``facility'' of an exchange is broad under the Act, 
and ``includes its premises, tangible or intangible property whether 
on the premises or not, any right to the use of such premises or 
property or any service thereof for the purpose of effecting or 
reporting a transaction on an exchange . . . and any right of the 
exchange to the use of any property or service.'' The Commission 
further notes that any determination as to whether a service or 
other product is a facility of an exchange requires an analysis of 
the particular facts and circumstances.
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    The Exchange proposes to codify in proposed Section 146 of the 
Company Guide that all companies listed on the Exchange are entitled to 
certain complimentary products and services via the Exchange's Market 
Access Center, as described on the Exchange's Web site.\11\ The 
Exchange represents that all issuers listed on the Exchange have access 
to the Exchange's Market Access Center on the same basis and that the 
products and services currently available through the Exchange's Market 
Access Center have a commercial value of approximately $50,000.\12\
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    \11\ See Notice, supra note 3, at 5804. According to the 
Exchange, the Market Access Center is a market information analytics 
platform that is a combination of technology-enabled market 
intelligence insight and a team of highly skilled market 
professionals. According to the Exchange, the platform was created 
to provide issuers with better market insight and information across 
all exchanges and trading venues and includes products and services 
that were (i) developed by the Exchange using proprietary data and/
or intellectual property or (ii) built by a third-party expressly 
for the Exchange's listed companies. According to the Exchange, 
within this platform all issuers have access to tools and 
information related to market intelligence, education, investor 
outreach, media visibility, corporate governance, and advocacy 
initiatives. For example, the Market Access Center offers daily 
trading summaries, a trading alert system highlighting user-defined 
trading or market events, and a Web site featuring timely content 
for Exchange-listed senior executives featuring trading information, 
market data, and institutional ownership. Id.
    \12\ See id.
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III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act.\13\

[[Page 15586]]

Specifically, the Commission finds that the proposal is consistent with 
Sections 6(b)(4) \14\ and 6(b)(5) of the Act \15\ in particular, in 
that the proposed rule is designed to provide for the equitable 
allocation of reasonable dues, fees, and other charges among Exchange 
members, issuers, and other persons using the Exchange's facilities, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. Moreover, the Commission believes that 
the proposed rule change is consistent with Section 6(b)(8) of the Act 
\16\ in that it does not impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Act.
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    \13\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that the proposed rule change, which would 
permit the Exchange to provide additional complimentary products and 
services to Eligible New Listings, as well as services to all listed 
companies through the Exchange's Market Access Center, as described 
above,\17\ is appropriate and consistent with the Act. The Commission 
believes that by describing in the Company Guide the products and 
services available to listed companies and the values of the products 
and services, the Exchange is adding greater transparency to its rules 
and the fees applicable to such companies. This will help to ensure 
that individual listed companies are not given specially negotiated 
packages of products and services to list or remain listed that would 
raise unfair discrimination issues under the Act.
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    \17\ See supra notes 5 and 11-12 and accompanying text.
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    The Commission notes that while all listed companies will receive 
some services from the Exchange via the Exchange's Market Access 
Center, some listed companies will receive additional products and 
services for 24 months from the date of listing based on their status 
as an Eligible New Listing. The Commission notes that Section 6(b)(5) 
of the Act does not require that all issuers be treated the same; 
rather, the Act requires that the rules of an exchange not unfairly 
discriminate between issuers. The Commission believes that the Exchange 
has provided a sufficient basis for its different treatment of Eligible 
New Listings and that this portion of the Exchange's proposal meets the 
requirements of the Act in that it reflects competition between 
exchanges, with the Exchange offering additional products and services 
to those companies choosing to list for the first time on the Exchange 
or transferring their listing from a competing exchange. In making this 
determination, the Commission notes that the provision of services 
under the proposal is for a limited duration and that the Exchange has 
provided a reasonable basis for deciding to treat Eligible New Listings 
differently from other listed companies. Among other things, the 
Exchange has stated that the offered products and services will help to 
ease the transition of these companies that are becoming public for the 
first time or are transferring their listing to a new exchange.\18\ In 
addition, all Eligible New Listings will receive the same package of 
services. Further, the Exchange states that it hopes to better compete 
with the Nasdaq Global Market for listings in the future.\19\ The 
Commission has also previously approved proposals providing different 
services to newly-listed issuers, including those transferring their 
listing from another exchange, and has found this consistent with 
Sections 6(b)(4) and 6(b)(5) of the Act.\20\ The Commission notes that, 
according to the Exchange, Nasdaq offers similar products and services 
to new listings and those companies transferring their listing from the 
New York Stock Exchange.\21\ Accordingly, based on the factors noted 
above, the Commission believes that the proposed rule changes to the 
Company Guide are consistent with the requirements of the Act and, in 
particular, that the products and services and their commercial value 
are equitably allocated among issuers consistent with Section 6(b)(4) 
of the Act, and the rule does not unfairly discriminate between issuers 
consistent with Section 6(b)(5) of the Act.
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    \18\ See Notice, supra note 3, at 5805. Specifically, the 
Exchange states that the Web-hosting products and services will 
assist Eligible New Listings in engaging with their shareholders by 
providing them with a Web site that contains business content that 
can be viewed by investors; the web-casting services allow listed 
companies to communicate with shareholders in connection with their 
quarterly earnings release process; the whistleblower hotline will 
assist Eligible New Listings in complying with, among other things, 
the requirements of the Sarbanes-Oxley Act, Foreign Corrupt 
Practices Act, and UK Bribery Act; the news distribution products 
and services will assist Eligible New Listings in complying with 
Exchange disclosure requirements; and the corporate governance tools 
will help educate the board of directors of each Eligible New 
Listing about corporate governance best practices. See id. at 5804.
    \19\ See id. at 5804.
    \20\ See Securities Exchange Act Release Nos. 76127 (October 9, 
2015), 80 FR 62584 (October 16, 2015) (order approving SR-NYSE-2015-
36); 72669 (July 24, 2014), 79 FR 44234 (July 30, 2014) (order 
approving NASDAQ-2014-058) (``Nasdaq Order''); 65963 (December 15, 
2011), 76 FR 79262 (December 21, 2011) (order approving SR-NASDAQ-
2011-122).
    \21\ The Commission notes that the Nasdaq Global Market offers 
new listings and companies transferring their listing from the New 
York Stock Exchange complimentary products and services, while the 
Nasdaq Capital Market does not offer similar services. See Nasdaq 
Stock Market Rule IM-5900-7(a). The Exchange states that it 
currently competes with the Nasdaq Capital Market and, in some 
cases, with the Nasdaq Global Market. See Notice, supra note 3, at 
5804. While we recognize that Nasdaq does not currently provide 
services to transfers from NYSE MKT, based on the current 
competitive environment for listings it is not unreasonable for NYSE 
MKT to want to offer services to companies transferring from another 
national securities exchange to attract new listings, and is 
consistent with the Act as long as such offerings, among other 
things, under Section 6(b)(5), do not discriminate between issuers.
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    The Commission also believes that it is consistent with the Act for 
the Exchange to allow the complimentary period for a particular service 
offered to Eligible New Listings to begin on the date of first use if a 
company begins to use the service within 30 days after the date of 
listing. According to the Exchange, companies listing on the Exchange 
for the first time often require a period of time after listing to 
complete the contracting and training process with vendors providing 
the complimentary products and services.\22\ Therefore, many companies 
are not able to begin using the suite of products offered to them 
immediately on the date of listing.\23\ The Commission notes that this 
proposed change is substantially similar to Nasdaq Rule IM-5900-7, 
which also allows a company to begin using services within 30 days of 
listing.\24\ As noted in the Nasdaq Order, the Commission believes that 
this change would provide only a short window of additional time to 
allow companies to finalize their contracts for the complimentary 
products and services, and that this additional time would only be 
available to companies that have already determined to list on the 
Exchange.\25\
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    \22\ See Notice, supra note 3, at 5805.
    \23\ See id.
    \24\ See Nasdaq Order, supra note 20.
    \25\ The Commission expects the Exchange to track the start (and 
end) date of each free service.
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    The Exchange will provide the corporate governance tools to 
Eligible New Listings through an affiliated service provider, and all 
other products and services will be developed by the Exchange or by 
third-party vendors. The Exchange has represented that listed companies 
that are offered products under Section 146 of the Company Guide are 
under no obligation to accept them and a company's listing on the 
Exchange is not conditioned upon acceptance of any product or service. 
Moreover, the Exchange represents that,

[[Page 15587]]

from time to time, companies elect to purchase products and services 
from other vendors at their own expense rather than accepting 
comparable products and services offered by the Exchange.\26\
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    \26\ See Notice, supra note 3, at 5805.
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    The Commission believes that the Exchange is responding to 
competitive pressures in the market for listings in making this 
proposal. Specifically, the Exchange has represented that it faces 
competition in the market for listing services and that it competes in 
part by improving the quality of the services that it offers to listed 
companies.\27\ The Exchange states that by offering products and 
services on a complimentary basis and ensuring that it is offering the 
services most valued by its listed issuers, it improves the quality of 
the services that listed companies receive.\28\ Further, the Exchange 
states that it hopes to better compete with the Nasdaq Global Market, 
which offers a comparable suite of complimentary products and services 
to new listings and certain transfers, and expects the proposed rule 
change to enable the Exchange to more effectively compete with this 
market for listings.\29\ Accordingly, the Commission believes that the 
proposed rule reflects the current competitive environment for exchange 
listings among national securities exchanges, and is appropriate and 
consistent with Section 6(b)(8) of the Act.\30\
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    \27\ See id.
    \28\ See id.
    \29\ See id. at 5804-05. See also Nasdaq Stock Market Rule IM-
5900-7(b).
    \30\ 15 U.S.C. 78f(b)(8).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\31\ that the proposed rule change (SR-NYSEMKT-2016-12), be, and 
hereby is, approved.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06515 Filed 3-22-16; 8:45 am]
BILLING CODE 8011-01-P


