Notice2021-27417
Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section 902.03 of the NYSE Listed Company Manual To Modify Listing and Annual Fees Applicable to Certain Warrants Listed by Foreign Companies
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 20, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 241 (Monday, December 20, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 241 (Monday, December 20, 2021)]
[Notices]
[Pages 72016-72018]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-27417]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-NYSE-2021-52; File No. SR-NYSE-2021-52]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Section 902.03 of the NYSE Listed Company Manual To Modify
Listing and Annual Fees Applicable to Certain Warrants Listed by
Foreign Companies
December 14, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on December 1, 2021, New York Stock Exchange LLC (``NYSE'' or the
``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 the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Section 902.03 of the NYSE Listed
Company Manual (the ``Manual'') to modify the listing fees applicable
to warrants listed by foreign companies whose listed ADRs represent
multiple shares or a fraction of a share. The proposed rule change is
available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
[[Page 72017]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 902.03 of the Manual sets forth initial listing fees and
annual fees applicable to listed warrants. Initial listing fees for
warrants are charged on a per warrant basis.
In many cases, foreign issuers list their equity securities on the
Exchange in the form of American Depositary Receipts (``ADRs''). In
some instances, a listed ADR will represent a single underlying common
share, but in other cases the listed ADR will represent multiple
underlying common shares or a fraction of an underlying common share.
To the extent a company with listed ADRs representing multiple
underlying common shares or a fraction of an underlying common share
seeks to list warrants to purchase common shares, this transaction
could result in a numerical discrepancy between the number of warrants
issued and the number of ADRs that could be created if those warrants
were fully exercised. For example: A company's listed ADRs each
represent five underlying common shares. The company issues and lists
five million warrants, each exercisable for a single share. If the
warrants are fully exercised, this will result in the issuance of five
million shares. If those shares are all converted into the listed ADRs,
the five million shares issued would result in the creation of one
million ADRs.
A discrepancy between the number of warrants issued and the number
of ADRs post-conversion results in a very different billing outcome
than would be the case for a company that lists its common shares
directly or lists ADRs each of which represents a single underlying
common share. In those cases, a listed company seeking to issue
warrants exercisable into one million units of its listed equity
security would issue one million warrants, rather than the five million
warrants issued in the example set forth above, and would therefore pay
only one-fifth of the initial listing and annual fees for the warrant
listing as compared to the company whose ADRs represent five underlying
common shares.
The Exchange proposes to amend Section 902.03 to charge annual and
listing fees for warrants listed on ADRs on an ADR-equivalent basis.
Specifically:
<bullet> Listing Fees for Warrants Relating to Listed ADRs. If a
listed company's primary listed security is an ADR and it lists
warrants that are exercisable into the equity security underlying such
ADRs, it will be charged initial listing fees for the warrants adjusted
to reflect the maximum number of ADRs that could be created upon
exercise of such warrants.
Example A: An issuer whose primary listed security is an ADR
representing five shares of its common stock lists five million
warrants, each exercisable into a single share of the common stock. The
issuer will be billed for listing fees for one million warrants (i.e.,
adjusted to reflect the number of ADRs that could be created with five
million shares).
Example B: An issuer whose primary listed security is an ADR
representing one-fifth of a share of its common stock lists one million
warrants, each exercisable into one share of the common stock. The
issuer will be billed for initial listing and annual fees for five
million warrants (i.e., adjusted to reflect the number of ADRs that
could be created with one million shares).\4\
---------------------------------------------------------------------------
\4\ Approximately 0.5% of the ADRs currently listed on the
Exchange represent fractional share interests.
---------------------------------------------------------------------------
<bullet> Annual Fees for Warrants Relating to Listed ADRs. If a
listed company's primary listed security is an ADR and it lists
warrants that are exercisable into the equity security underlying such
ADRs, it will be charged annual fees for the outstanding warrants
adjusted to reflect the maximum number of ADRs that could be created
upon exercise of such warrants. Example: An issuer whose primary listed
security is an ADR representing five shares of its common stock, has a
listed class of warrants each exercisable into a single share of the
common stock, with five million warrants outstanding. The issuer will
be billed for annual fees for one million warrants (i.e., adjusted to
reflect the number of ADRs that could be created with five million
shares).
The proposed amendments to the initial and annual fee provisions
for listed warrants would apply to all warrants exercisable into common
shares that are issued by a listed company whose primary listed
security is an ADR. In the case of a listed company whose ADRs
represent a multiple (a fraction) of a common share, the fees for any
warrants issued by the company that are exercisable into equity
securities underlying the ADR would be based on an adjustment downward
(upward) of the number of warrants.\5\
---------------------------------------------------------------------------
\5\ The Exchange notes that there is currently just one warrant
listed on the NYSE that is exercisable into common stock underlying
an ADR that is listed on the NYSE. This listed ADR represents 10
shares of the common stock.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(4) \7\ of the Act, in particular, in that it
is designed to provide for the equitable allocation of reasonable dues,
fees, and other charges. The Exchange also believes that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\8\ in that
it is 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 not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(4).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
As a preliminary matter, the Exchange competes for listings with
other national securities exchanges, and companies can easily choose to
list on, or transfer to, those alternative venues. As a result, the
fees the Exchange can charge listed companies are constrained by the
fees charged by its competitors and the Exchange cannot charge prices
in a manner that would be unreasonable, inequitable, or unfairly
discriminatory.
The Exchange believes that the proposal to charge listing fees for
warrants on an ADR-equivalent basis is equitable and not unfairly
discriminatory because it would remove the anomalous outcome that a
company whose listed ADRs represent multiple underlying common shares
must pay higher fees for the listing of warrants exercisable into its
listed equity securities than are paid by a company whose common stock
is listed directly or whose listed ADRs represent a single common
share.
The Exchange recognizes that the proposal would result in a
differential treatment of warrants issued by companies with ADRs listed
on the Exchange from that of other issuers of warrants, leading to
lower bills in many cases for the companies with listed ADRs. However,
the Exchange notes that companies with listed ADRs that represent
multiple underlying shares (or fractional shares) face unique
circumstances when deciding how to structure their warrants. If those
companies want to market their warrants in both their home market and
[[Page 72018]]
the United States, there are clear advantages to the company and its
investors if the same security is issued in both markets. In
particular, selling the same security avoids pricing confusion and, by
ensuring complete fungibility, facilitates the movement of warrants
between the two markets in aftermarket trading. As the ADRs would not
be traded in the home market and might not be properly understood by
investors there, it is clear why a company would make the decision to
issue warrants to purchase a single common share in both markets rather
than selling warrants to purchase ADRs in the US market and warrants to
purchase a single share in the home market. While other categories of
listed companies may also sometimes choose to issue warrants that are
exercisable for multiple listed common shares or a fraction of a common
share, their reasons for doing so are not the same unique market
structural reasons that cause foreign companies to do so when their
listed equity security is an ADR. Consequently, while the proposal does
result in a different treatment of foreign companies with listed ADRs
in a very limited circumstance, the Exchange believes that this
proposed difference in treatment is not unfairly discriminatory.
The Exchange also notes that foreign companies with listed ADRs
would not always pay lower fees on warrants if this proposal was
adopted. Rather, the issuer would always pay fees on an ADR-equivalent
basis, which would result in lower fees if the listed ADR represents
multiple common shares and higher fees if it represents a fractional
common share.
For the foregoing reasons, the Exchange believes that the proposal
is consistent with the Act.
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 not necessary or appropriate in
furtherance of the purposes of the Act. The proposed modified warrant
listing and annual fee for issuers whose listed ADRs represent multiple
underlying common shares will be applicable to all similarly situated
issuers on the same basis.
The Exchange does not believe that the proposed amended fees will
have any meaningful effect on the competition among issuers listed on
the Exchange. The Exchange operates in a highly competitive market in
which issuers can readily choose to list new securities on other
exchanges and transfer listings to other exchanges if they deem fee
levels at those other venues to be more favorable.
Because competitors are free to modify their own fees in response,
and because issuers may change their listing venue, the Exchange does
not believe its proposed fee change can impose any burden on
intermarket 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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \9\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \10\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \11\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#087a7d646d256b6765656d667c7b487b6d6b266f677e"><span class="__cf_email__" data-cfemail="3e4c4b525b135d5153535b504a4d7e4d5b5d10595148">[email protected]</span></a>. Please include
File Number SR-NYSE-2021-52 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2021-52. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website 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 the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2021-52 and should be submitted on
or before January 10, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27417 Filed 12-17-21; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on December 20, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.