Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc., 34325-34326 [E7-12017]


[Federal Register: June 21, 2007 (Volume 72, Number 119)]
[Page 34325-34326]
From the Federal Register Online via GPO Access []



[Release No. 34-55917; File No. SR-NYSEArca-2007-22]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
Proposed Rule Change as Amended by Amendments No. 1, 2, and 3 Thereto
Relating to Listing and Annual Fees for Derivative Securities Products,
Closed-End Funds and Structured Products

June 15, 2007.

I. Introduction

    On February 27, 2007, the NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange''), through its wholly owned subsidiary, NYSE Arca Equities,
Inc., 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
proposal to restructure and amend its Schedule of Fees and Charges
(``Fee Schedule'') to revise fees applicable to Derivative Securities
Products, Closed-End Funds, and Structured Products listed on NYSE
Arca, L.L.C., the equities facility of NYSE Arca Equities. NYSE Arca
filed Amendment No. 1 to the proposed rule change on May 1, 2007 and
filed Amendment No. 2 to the proposed rule change on May 3, 2007. The
proposed rule change was published for comment in the Federal Register
on May 14, 2007.\3\ On June 12, 2007, NYSE Arca filed Amendment No. 3
to the proposed rule change.\4\ The Commission received no comments
regarding the proposal. This order approves the proposed rule change,
as amended.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55720 (May 7, 2007),
72 FR 27160 (``Notice'').
    \4\ For a description of Amendment No. 3, see Description of the
Proposal, infra. Amendment No. 3 is a technical amendment, therefore
it is not subject to notice and comment.

II. Description of the Proposal

    NYSE Arca proposes to substantially revise its Fee Schedule. In
particular, as detailed in its proposal,\5\ NYSE Arca proposes to (1)
eliminate the Application Processing Fee for Derivative Securities
Products,\6\ Closed-End Funds,\7\ and Structured Products; (2) impose
an original listing fee of $5,000 per Derivative Securities Product;
(3) amend the annual fee for some Derivative Securities Products; and
(4) establish a separate listing and annual fees for Closed-End Funds.
NYSE Arca also proposes a number of related modifications to the Fee
Schedule, including fee discounts, limitations, minimums and caps for
Closed-End Funds.\8\

    \5\ See Notice, supra note 3.
    \6\ For purposes of this proposal, Derivative Securities
Products include securities qualified for listing and trading on
NYSE Arca under the following NYSE Arca Equities Rules: Rule
5.2(j)(3) (Investment Company Units), 5.2(j)(5) (Equity Gold
Shares), 8.100 (Portfolio Depositary Receipts), 8.200 (Trust Issued
Receipts), 8.201 (Commodity-Based Trust Shares), 8.202 (Currency
Trust Shares), 8.300 (Partnership Units), and 8.400 (Paired Trust
Securities), as these rules may be amended from time to time.
    \7\ Closed-End Funds are a type of investment company registered
under the Investment Company Act of 1940 that offer a fixed number
of shares. Their assets are professionally managed in accordance
with the Closed-End Fund's investment objectives and policies, and
may be invested in stocks, fixed income securities or a combination
of both.
    \8\ In addition, NYSE Arca proposed to amend the Fee Schedule to
specify that for other structured products the $20,000 Listing Fee
applies to an initial listing (e.g., a listing transfer to NYSE Arca
from another exchange) in addition to Initial Public Offerings.

    NYSE Arca proposes to implement these revised fees, as applicable,
to all issuers of Derivative Securities Products, Closed-End Funds, and
Structured Products retroactively as of January 1, 2007 with the
exception of listing fees for Closed-End Funds, which would take effect
as of the date of Commission approval of the proposed rule change.

Amendment No. 3

    In Amendment No. 3, NYSE Arca proposes minor revisions to the Fee
Schedule to correct the grammar in certain sections of the rule text
and to conform the rule text to proposed rule changes that were
recently approved by the Commission. Amendment No. 3 does not change
the proposal substantively. Specifically, NYSE Arca amended the rule
text to clarify the three examples in which the listing fee cap for
Closed-End Funds would apply, in particular: (1) When shares are issued
in conjunction with a merger or consolidation where a listed company
survives; (2) subsequent public offerings of a listed security; or (3)
where there are conversions of convertible securities into a listed
security. Amendment No. 3 also clarified that when listing additional
Closed-End Funds, the issuer will be billed a listing fee that is the
greater of $2,500 or the fee calculated on a per share basis.

III. Discussion

    After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange \9\ and, in particular, the requirements of Section 6 of the
Act.\10\ Specifically, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\11\ which
requires, among other things, that the rules of a national securities
exchange be designed to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in

[[Page 34326]]

general, to protect investors and the public interest. The Commission
also finds that the proposed rule change is consistent with Section
6(b)(4) of the Act,\12\ which requires that the rules of the exchange
provide for the equitable allocation of reasonable dues, fees, and
other charges among its members and issuers and other persons using its

    \9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(4).

    NYSE Arca's proposal specifies the listing fees and annual fees
applicable to Derivative Securities Products, Closed-End Funds, and
Structured Products. Numerical examples on how fees are calculated
provide appropriate clarification, where necessary.\13\ The Commission
notes that the amended Fee Schedule will in some cases reduce and in
some cases increase the applicable listing fees and annual fees owed by
issuers, depending on various factors including the number of funds
listed by the same issuer, the shares outstanding for each fund, and
with respect to Closed-End Funds, the applicability of fee discounts,
limitations, minimums and caps.

    \13\ For example, the Fee Schedule specifies that treasury
stock, restricted stock and shares issued in conjunction with the
exercise of an over-allotment option, if applicable, are included in
the number of shares a Closed-End Fund is billed for at the time a
security is first listed.

    The Commission notes that the revised Annual Fee for Derivative
Securities Products would be billed quarterly in arrears, beginning
after the first calendar quarter in 2007, effective as of January 1,
2007.\14\ The proposed Annual Fee for Closed-End Funds would apply as
of January 1, 2007, and, for issuers listed in calendar year 2007, will
be pro-rated based on days listed in 2007. The proposed listing fees
for Derivative Securities Products would also be effective as of
January 1, 2007 while the listing fees for Closed-End Funds will be
effective as of the date of this approval order. NYSE Arca represented
that the retroactive fees would affect only a few issuers, specifically
two issuers of Investment Company Units (Derivative Securities
Products) \15\ and three Closed-End Funds, all of which are aware of
the proposed listing and annual fees.

    \14\ Billing for the first calendar quarter of 2007, for
example, will be based on the number of shares outstanding for an
issue on March 30, 2007. For example, for an issue with 45 million
shares outstanding on March 30, 2007, the Annual Fee payable for the
quarter would be $1,000 ($4,000 Annual Fee divided by 4). If, at the
end of the second calendar quarter of 2007, the number of shares
outstanding for such issue increased to 55 million, the Annual Fee
payable for such quarter would be $2,000 ($8,000 Annual Fee divided
by 4). For the list of revised annual fees, see Notice, supra note
    \15\ NYSE Arca represented that the retroactive fees would not
affect the Derivative Securities Products currently listed on the
Exchange. The Investment Company Units of one issuer with two
separate trusts was a transfer from another national securities
exchange and not subject to a listing fee in accordance with
Commentary .04 to the Exchange's Fee Schedule (which will cease to
have effect on December 31, 2007). An additional issuer, which
listed a series of Investment Company Units on the Exchange on March
28, 2007, would incur $5,000 under the proposed fee schedule, rather
than the current $20,000 initial listing fee and, thus, benefit from
this proposal.

    The Commission believes the Fee Schedule overall is consistent with
the Act. The Commission notes that the proposed annual and listing fees
are identical to the fee schedule for Closed-End Funds and Derivative
Securities Products of the New York Stock Exchange LLC (``NYSE'') as
set forth in Sections 902.04 and 902.07 of the NYSE Listed Company
Manual. The Commission notes that applying sections of the amended Fee
Schedule, effective as of January 1, 2007, will enable the Exchange to
apply its Fee Schedule uniformly to all affected issuers listed on the
Exchange, including those listed in the first quarter of 2007, who may
benefit from cost savings resulting from the revised Fee Schedule.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change, as amended, (SR-NYSEArca-2007-
22) is hereby approved.

    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\

    \17\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-12017 Filed 6-20-07; 8:45 am]