
[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Notices]
[Pages 76403-76406]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26490]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79187; File No. SR-NYSE-2016-58]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of Proposed Rule Change Amending Section 907.00 of 
the NYSE Listed Company Manual To Adjust the Timing of Entitlements to 
Complimentary Products and Services for Special Purpose Acquisition 
Companies

October 28, 2016.

I. Introduction

    On August 26, 2016, New York Stock Exchange LLC (``NYSE'' or 
``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 amend Section 907.00 of the NYSE Listed Company 
Manual (``Manual'') to adjust the timing of entitlements to certain 
complimentary products and services for special purpose acquisition 
companies. The proposed rule change was published in the Federal 
Register on September 13, 2016.\3\ The Commission received no comments 
on the proposal. This order grants approval of 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. 78782 (September 7, 
2016), 81 FR 62937 (September 13, 2016) (``Notice'').
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II. Description of the Proposal

    The Exchange proposed to amend Section 907.00 of the Manual to 
adjust the timing of certain entitlements to complimentary products and 
services for special purpose acquisition companies (``SPACs'') under 
that rule. In its filing, the Exchange stated that a SPAC is a special 
purpose company formed for the purpose of effecting a merger, capital 
stock exchange, asset acquisition, stock purchase, reorganization, or 
similar business combination with one or more operating businesses or 
assets.\4\ The Exchange further stated that to qualify for initial 
listing, a SPAC must meet the requirements of Sections 102.01A \5\ and 
102.06 of the Manual. Section 102.06 of the Manual provides that the 
Exchange will consider on a case-by-case basis the appropriateness for 
listing of SPACs that conduct an initial public offering of which at 
least 90% of the proceeds, together with the proceeds of any other 
concurrent sales of the SPAC's equity securities, will be held in a 
trust account controlled by an independent custodian until consummation 
of a business combination in the form of a merger, capital stock 
exchange, asset acquisition, stock purchase, reorganization, or similar 
business combination with one or more operating businesses or assets 
with a fair market value equal to at least 80% of the net assets held 
in trust (a ``Business Combination'' or the ``Business Combination 
Condition'').\6\
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    \4\ Id. at 62938.
    \5\ Section 102.01A sets forth the minimum share distribution 
criteria for listing, and requires that companies listing in 
connection with an initial public offering have at least 400 holders 
of 100 shares or more and at least 1,100,000 publicly held shares.
    \6\ See Notice, supra note 3, at 62938. Section 102.06 also 
provides, among other things, that the SPAC must be liquidated if no 
Business Combination has been consummated within a specified time 
period not to exceed three years, and that the Exchange will 
promptly commence delisting procedures with respect to any SPAC that 
fails to consummate its Business Combination within (i) the time 
period specified by its constitutive documents or by contract or 
(ii) three years, whichever is shorter.
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    As set forth in Section 907.00 of the Manual, the Exchange offers 
complimentary products and services for a period of 24 calendar months 
from the date of initial listing to a category of listed companies 
defined as ``Eligible New Listings.'' \7\ Under the current rule, 
Eligible New Listings are defined as: (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 
102.01 or 103.00 of the Manual for the first time, regardless of 
whether such U.S. or non-U.S. company conducts an offering; and (ii) 
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).
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    \7\ Under Section 907.00 of the Manual the Exchange also offers 
certain complimentary products and services to ``Eligible Current 
Listings'' that satisfy the requirements of that Section as well as 
other products and services that all listed issuers are eligible to 
receive.
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    Currently, pursuant to Section 907.00 of the Manual, Eligible New 
Listings are eligible for services as either a Tier A or Tier B 
company.\8\ Under Tier A, for

[[Page 76404]]

Eligible New Listings with a global market value of $400 million or 
more, calculated as of the date of listing on the Exchange, the 
Exchange offers market surveillance products and services (with a 
commercial value of approximately $55,000 annually), market analytics 
products and services (with a commercial value of approximately $30,000 
annually), web-hosting products and services (with a commercial value 
of approximately $16,000 annually), web-casting products and services 
(with a commercial value of approximately $6,500 annually), corporate 
governance tools (with a commercial value of approximately $50,000 
annually), and news distribution products and services (with a 
commercial value of approximately $20,000 annually) for a period of 24 
calendar months from the date of listing. Under Tier B, for Eligible 
New Listings with a global market value of less than $400 million, 
calculated as of the date of listing on the Exchange, the Exchange 
offers web-hosting products and services (with a commercial value of 
approximately $16,000 annually), market analytics products and services 
(with a commercial value of approximately $30,000 annually), web-
casting products and services (with a commercial value of approximately 
$6,500 annually), corporate governance tools (with a commercial value 
of approximately $50,000 annually), and news distribution products and 
services (with a commercial value of approximately $20,000 annually) 
for a period of 24 calendar months from the date of listing.\9\
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    \8\ The Commission previously found that providing these 
services and products to companies in different tiers is consistent 
with the Act, explaining that ``[w]hile not all issuers receive the 
same level of services, NYSE has stated that trading volume and 
market activity are related to the level of services that the listed 
companies would use in the absence of the complimentary services 
arrangements'' and that ``the criteria for satisfying the tiers are 
the same for all issuers.'' See Securities Exchange Act Release No. 
65127 (August 12, 2011), 76 FR 51449, 51452 (August 18, 2011) 
(approving NYSE-2011-20) (``NYSE 2011 Order'').
    \9\ The Exchange noted that it does not propose to make any 
changes in its filing to the values of the various services provided 
to eligible listed companies discussed above, which values are 
specified in Section 907.00 of the Manual. See Notice, supra note 3, 
at 62938.
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    Notwithstanding the foregoing, however, if an Eligible New Listing 
begins to use a particular product or service provided for under 
Section 907.00 within 30 days of its initial listing date, the 
complimentary period begins on the date of first use.
    The Exchange has now proposed to amend Section 907.00 of the Manual 
to provide that a SPAC will no longer be deemed to be an Eligible New 
Listing at the time of its initial listing, and instead will be deemed 
to be an Eligible New Listing at such time as it has completed the 
Business Combination Condition, if it remains listed thereafter on the 
Exchange. Thus, under the proposal, a SPAC will no longer be eligible 
to receive complimentary products and services under Section 907.00 as 
an Eligible New Listing at the time of its initial listing, but will 
instead be entitled to receive such products and services if and when 
it meets the Business Combination Condition. A SPAC that remains listed 
on the Exchange after meeting the Business Combination Condition will 
be entitled to the complimentary products and services under Section 
907.00 as an Eligible New Listing for a period of 24 months from the 
date on which it meets the Business Combination Condition. 
Notwithstanding the foregoing, however, if such a company begins to use 
a particular product or service provided for under Section 907.00 
within 30 days of meeting the Business Combination Condition, the 
complimentary period for that product or service will begin on the date 
of first use.

III. Discussion and Commission's 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.\10\ Specifically, the Commission believes it is consistent with 
the provisions of Sections 6(b)(4) and (5) of the Act, \11\ in 
particular, in that it 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 
\12\ 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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    \10\ 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).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
    \12\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that it is consistent with the Act for the 
Exchange to adjust the timing of when SPACs are eligible to receive 
complimentary products and services under Section 907.00 of the Manual 
as Eligible New Listings from the time of initial listing to the time 
that it completes a Business Combination Condition. The Exchange 
represented that SPACs are unlikely to utilize these complimentary 
products and services at the time of initial listing, but would likely 
find these products and services useful if they remain listed after 
they meet the Business Combination Condition.\13\ The Exchange 
explained that at the time of initial listing, SPACs are typically not 
focused on their stock price and investor relations to the same degree 
as operating companies.\14\ The Exchange stated that the complimentary 
products and services provided to Eligible New Listings under Section 
907.00 are targeted in large part toward the market-driven concerns of 
newly-listed operating companies, and are therefore less useful to 
SPACs that have not met the Business Combination Condition.\15\ The 
Exchange stated that a SPAC that has met the Business Combination 
Condition, on the other hand, is similarly situated to a newly-formed 
publicly-traded operating company.\16\ Therefore, the Exchange said 
that it believes that the complimentary products and services provided 
to Eligible New Listings under Section 907.00 will be as relevant and 
attractive to a SPAC that has met the Business Combination Condition as 
to the newly-listed operating companies that are generally eligible for 
those services.\17\
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    \13\ See Notice, supra note 3, at 62938-39.
    \14\ Id. at 62938. The Exchange stated in its filing that SPACs 
raise money on a one-time basis and typically trade at a price that 
is very close to their liquidation value. Id.
    \15\ Id.
    \16\ Id.
    \17\ Id.
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    In addition, the Exchange stated that in many cases SPACs will 
consider transferring to a new listing venue at the time they meet the 
Business Combination Condition, and that the proposed rule change will 
enable the Exchange to compete for the retention of these companies by 
offering them a package of complimentary products and services that 
assist their transition to becoming a publicly listed operating company 
for the first time.\18\
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    \18\ Id. at 62939.
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    The Exchange also stated that it recognizes that not all SPACs will 
meet the Business Combination Condition and that some listed SPACs will 
therefore never become eligible for the additional complimentary 
products and services provided to Eligible New Listings under Section 
907.00 that would be provided to an otherwise similarly qualified 
operating company that is newly-listed on the Exchange.\19\ However, 
the Exchange reiterated that, given the specific characteristics of the 
SPAC structure, the complimentary products and services provided to 
Eligible New Listings under Section 907.00 are generally not of any

[[Page 76405]]

particular value to a SPAC prior to meeting the Business Combination 
Condition, and the Exchange therefore believes that those SPACs that 
never meet the Business Combination Condition and therefore never 
qualify for these additional products and services provided to Eligible 
New Listings under Section 907.00 will not suffer any meaningful 
detriment as a consequence.\20\
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    \19\ Id.
    \20\ Id.
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    As noted in the previous order approving Section 907.00 of the 
Manual, 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.\21\ In its 
proposal, the Exchange has made representations that reasonably justify 
treating a SPAC that decides to continue to list on the Exchange after 
meeting the Business Combination Condition similar to a newly-listed 
operating company. The Commission further notes that a SPAC that 
completes the Business Combination Condition will be receiving the same 
package of services as an Eligible New Listing and that it will not be 
receiving any additional benefits or services by virtue of the proposed 
rule change. The Commission notes that the rule proposal delays the 
timing of the additional complimentary products and services offered to 
an Eligible New Listing to the time the SPAC becomes an operating 
company. Up until that time, the listed SPAC is treated like any other 
currently listed company in that it would receive the complimentary 
products and services that all listed companies receive, and could also 
receive additional products and services if it so qualifies under the 
provisions for Eligible Current Listings.\22\ The proposal does not 
alter these other services that a SPAC could receive when initially 
listed.
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    \21\ 15 U.S.C. 78f(b)(5); see also NYSE 2011 Order, supra note 
8, at 51452.
    \22\ See Section 907.00 of the Manual; see also NYSE 2011 Order, 
supra note 8, at 51450. Under Section 907.00, all listed companies 
receive complimentary services through the Exchange's Market Access 
Center as well as 24 months of complimentary access to whistleblower 
hotline services. See Securities Exchange Act Release No. 76127 
(October 9, 2015), 80 FR 62584 (October 16, 2015) (approving NYSE-
2015-36) (``NYSE 2015 Order'').
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    The Commission has previously found that the package of 
complimentary products and services offered to Eligible New Listings is 
equitably allocated among issuers consistent with Section 6(b)(4) of 
the Act and that describing the values of the products and services 
adds greater transparency to the Exchange's rules and to the fees 
applicable to such companies.\23\ The Commission also previously noted 
that describing in the Manual the products and services available to 
listed companies and their associated values will ensure that 
individual listed companies are not given specially negotiated packages 
of products or services to list or remain listed that would raise 
unfair discrimination issues under the Act.\24\
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    \23\ See NYSE 2011 Order, supra note 8, at 51452.
    \24\ Id.
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    Based on the foregoing, the Commission believes that the Exchange 
has provided a sufficient basis for adjusting the timing of when SPACs 
are eligible to qualify for additional complimentary products and 
services, as an Eligible New Listing under Section 907.00 of the 
Manual, from the time of the SPAC's initial listing to the time that a 
SPAC meets the Business Combination Condition, and that this change 
does not unfairly discriminate among issuers and is therefore 
consistent with the Act. For similar reasons, and as the value of the 
services offered are not changing, only the timing of when such 
services are provided to a SPAC, we find that the proposal is 
consistent with Section 6(b)(4) of the Act.
    The Commission also believes that it is consistent with the Act for 
the Exchange to allow the complimentary period for a particular service 
as an Eligible New Listing to begin on the date of first use if a SPAC 
that has met the Business Combination Condition begins to use the 
service within 30 days after the date of meeting the Business 
Combination Condition. The Exchange stated in its filing that, in its 
experience, it can take companies a period of time to review and 
complete necessary contracts and training for the complimentary 
products and services under Section 907.00 following their becoming 
eligible for those services and that allowing this modest 30 day 
period, if the company needs it, will help to ensure that the company 
will have the benefit of the full period permitted under the rule to 
actually use the services, thereby enabling companies to receive the 
full intended benefit.\25\ The Commission notes that Section 907.00 
currently allows an Eligible New Listing to begin using services within 
30 days of its initial listing date.\26\ As noted in the NYSE 2015 
Order, the Commission believes that this would provide only a short 
window of additional time to allow companies to finalize their 
contracts for the complimentary products and services. The Commission 
notes that under the proposed rule this additional 30 day window would 
only be available to SPACs that have determined to remain listed on the 
Exchange after meeting the Business Combination Condition and thereby 
treats such SPACs, at the time they qualify for listing as an operating 
company, the same as other newly-listed companies that qualify as 
Eligible New Listings under Section 907.00.\27\
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    \25\ See Notice, supra note 3, at 62939.
    \26\ See NYSE 2015 Order, supra note 22.
    \27\ The Commission expects the Exchange to track the start (and 
end) date of each free service.
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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 in many 
cases, SPACs will consider transferring to a new listing venue at the 
time they meet the Business Combination Condition, and that the 
proposed rule change would enable it to compete for the retention of 
these companies by offering them a package of complimentary products 
and services that assist their transition to being a publicly listed 
operating company for the first time.\28\ Further, the Commission notes 
that other exchanges have filed similar rule changes with respect to 
the timing of complimentary services offered to SPACs under their 
rules,\29\ and the Commission has recently approved one such rule 
change.\30\ The Commission also notes that nothing in the Exchange's 
rules requires a SPAC to remain listed on the Exchange after it meets 
the Business Combination Condition and that such company is free to 
list on other markets. 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.\31\
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    \28\ See Notice, supra note 3, at 56722.
    \29\ See Securities Exchange Act Release No. 78586 (August 16, 
2016), 81 FR 56720 (August 22, 2016) (SR-NYSEMKT-2016-62) and 
Securities Exchange Act Release No. 79025 (October 3, 2016), 81 FR 
69881 (October 7, 2016) (SR-NASDAQ-2016-106).
    \30\ See Securities Exchange Act Release No. 79056 (October 6, 
2016), 81 FR 70449 (October 12, 2016) (approving NYSEMKT-2016-62).
    \31\ 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,\32\ that the proposed rule change (SR-NYSE-2016-58) be, and it 
hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).


[[Page 76406]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-26490 Filed 11-1-16; 8:45 am]
BILLING CODE 8011-01-P


