Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Initial Listing Fee and Annual Listing Fee, 8048-8052 [2020-02747]
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Federal Register / Vol. 85, No. 29 / Wednesday, February 12, 2020 / Notices
enabling NSCC to obtain additional and
diversified liquid resources to cover a
liquidity gap that could arise in the
event of a Member default. By covering
such a gap, the proposal complements
NSCC’s ability to meet its settlement
obligations in the event of a Member
default, thereby reducing the risk of loss
contagion (i.e., the risk of losses arising
at other NSCC Members if NSCC is
unable to deliver cash or securities on
the defaulting Member’s behalf).
Reducing the risk of loss contagion
during a Member default, in turn,
enhances the ability of NSCC and its
Members to continue to provide
stability and safety to the financial
markets they serve. Therefore, by
enhancing NSCC’s ability to address
losses and liquidity pressures that
otherwise might cause financial distress
to NSCC or its Members, the Advance
Notice promotes safety and soundness.
The Commission also believes that
NSCC’s proposal is consistent with
reducing systemic risks and supporting
the stability of the broader financial
system. Reducing the risk of loss
contagion would attenuate the
transmission of financial shocks from
defaulting Members to non-defaulting
Members. Accordingly, the proposal
would support the stability of the
broader financial system. Thus, the
Commission believes that the proposal
reflected in the Advance Notice is
consistent with the stated objectives and
principles of Section 805(b) of the
Clearing Supervision Act.
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B. Consistency With Rule 17Ad–22(e)(7)
The Commission believes that the
proposal described in the Advance
Notice is consistent with the
requirements of Rule 17Ad–22(e)(7)
under the Exchange Act. Rule 17Ad–
22(e)(7) requires NSCC to establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to effectively
measure, monitor, and manage liquidity
risk that arises in or is borne by NSCC,
including measuring, monitoring, and
managing its settlement and funding
flows on an ongoing and timely basis,
and its use of intraday liquidity, as
specified in the rule.
1. Consistency With Rule 17Ad–
22(e)(7)(i)
In particular, Rule 17Ad–22(e)(7)(i)
under the Exchange Act requires that
each covered clearing agency establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to ‘‘effectively
measure, monitor, and manage the
liquidity risk that arises in or is borne
by [it], including measuring,
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monitoring, and managing its settlement
and funding flows on an ongoing and
timely basis, and its use of intraday
liquidity by . . . [m]aintaining
sufficient liquid resources at the
minimum in all relevant currencies to
effect same-day . . . settlement of
payment obligations with a high degree
of confidence under a wide range of
foreseeable stress scenarios that
includes, but is not limited to, the
default of the participant family that
would generate the largest aggregate
payment of obligation for the covered
clearing agency in extreme but plausible
conditions.’’
As described above, the proposed
issuance of term debt would increase
the readily-available liquidity resources
available to NSCC to continue to meet
its liquidity obligations in a timely
fashion in the event of a Member
default. The funds could help maintain
sufficient liquidity resources to effect
same-day settlement of payment
obligations with a high degree of
confidence under a wide range of
foreseeable stress scenarios.
Additionally, the term debt issuance is
designed to help ensure that NSCC has
sufficient, readily available qualifying
liquid resources to meet the cash
settlement obligations of its largest
family of affiliated Members. Therefore,
the Commission finds that the proposal
is consistent with Rule 17Ad–22(e)(7)(i).
2. Consistency With Rule 17Ad–
22(e)(7)(ii)
Rule 17Ad–22(e)(7)(ii) under the
Exchange Act requires each covered
clearing agency to establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
‘‘effectively measure, monitor, and
manage the liquidity risk that arises in
or is borne by [it], including measuring,
monitoring, and managing its settlement
and funding flows on an ongoing and
timely basis, and its use of intraday
liquidity by . . . holding qualifying
liquid resources sufficient’’ to satisfy
payment obligations owed to clearing
members. Rule 17Ad–22(a)(14) under
the Exchange Act defines ‘‘qualifying
liquid resources’’ to include, among
other things, cash held either at the
central bank of issue or at creditworthy
commercial banks.
As described above, the proposed
issuance of term debt would enable
NSCC to hold additional cash proceeds
from the issuance of the term debt in a
cash deposit account at the Federal
Reserve Bank of New York or a bank
counterparty that has been approved
pursuant to NSCC’s Clearing Agency
Investment Policy. Because the funds
would be held at the Federal Reserve
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Bank of New York or a bank
counterparty, they would be a
qualifying liquid resource, as that term
is defined in Rule 17Ad–22(a)(14).34
Therefore, the Commission believes that
the proposal is consistent with Rule
17Ad–22(e)(7)(ii).
III. Conclusion
It is therefore noticed, pursuant to
Section 806(e)(1)(I) of the Clearing
Supervision Act, that the Commission
does not object to Advance Notice (SR–
NSCC–2019–802) and that NSCC is
authorized to implement the proposed
change as of the date of this notice.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02790 Filed 2–11–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88133; File No. SR–LTSE–
2020–03]
Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Initial Listing Fee and Annual Listing
Fee
February 6, 2020.
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 January
30, 2020, Long-Term Stock Exchange,
Inc. (‘‘LTSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.3
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
LTSE proposes a rule change to
establish a fee schedule of listing fees
for issuers of primary equity securities.
34 17 CFR 240.17Ad–22(a)(14) (‘‘Qualifying liquid
resources means, for any covered clearing agency,
. . . (i) cash held either at the central bank of issue
or at creditworthy commercial banks . . .’’).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange originally filed to establish a fee
schedule of listing fees for issuers of primary equity
securities on January 22, 2020 (SR–LTSE–2020–02).
On January 30, 2020, SR–LTSE–2020–02 was
withdrawn and replaced by SR–LTSE–2020–03.
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The text of the proposed rule change
is available at the Exchange’s website at
https://longtermstockexchange.com/, 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 these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization 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
The Exchange is filing this proposed
rule change to amend Rule 14.601 to
establish a schedule of Initial Listing
Fees and Annual Listing Fees for
issuers’ Primary Equity Securities.4 Both
the Initial Listing Fee and Annual
Listing Fee for an issuer’s Primary
Equity Securities on the Exchange is
proposed to be based on the company’s
market capitalization of its Primary
Equity Securities and is proposed to be
calculated as described below.
(a) Initial Listing Fee
If a company has been a public
reporting company continuously listed
on a national securities exchange for at
least 12 months prior to listing on the
Exchange, then its market capitalization
shall be an unweighted average based
on data derived in part from its Form
10–Q and Form 10–K filings over the
prior four quarters. Specifically, the
Exchange proposes to multiply the basic
weighted average shares outstanding as
provided in a company’s Form 10–Q or
Form 10–K for the end of the quarter
times the closing price of the security on
the final trading day of such quarter as
determined from the primary listing
market. For example, a company with
500 million basic weighted average
shares outstanding in its most recent
Form 10–Q and a closing price of $20
per share on the last trading day of the
quarter would have a market
capitalization for that quarter of $10
billion. The market capitalization for
purposes of assessing a listing fee would
be the unweighted average of the
company’s market capitalization as
determined on the last trading day of
each of the prior four quarters
(‘‘Reporting Company Market
Capitalization’’).5
If a company has not been a public
reporting company continuously listed
on a national securities exchange for at
least 12 months prior to listing on the
Exchange, then the market
capitalization for purposes of the Initial
Listing Fee shall be the lesser of: (i) The
number of shares of common stock to be
outstanding after its initial public
offering as provided in the final
effective registration statement times the
price per share at which the company’s
shares were sold to the underwriters
pursuant to its initial public offering
(‘‘IPO Market Capitalization’’),6 or (ii)
the Reporting Company Market
Capitalization method for each available
quarter (i.e., one, two, or three) for
which the company has filed a Form
10–Q or 10–K.
If a company conducts an
underwritten initial public offering and
commences trading on the Exchange,
then the Initial Listing Fee shall be
based on the IPO Market Capitalization
as described above. The company would
not be eligible to use the Reporting
Company Market Capitalization method
because it would not, by definition,
have made any Form 10–Q or Form 10–
K filings as a public reporting company
while listed on a national securities
exchange.
The Initial Listing Fee would be valid
for the remainder of the calendar year
and would be prorated based on the
number of remaining trading days after
listing on the Exchange.
(b) Annual Listing Fee
The Annual Listing Fee for a
company’s Primary Equity Securities
also is proposed to be based on the
company’s market capitalization.
Specifically, the Annual Listing Fee for
the upcoming calendar year would be
calculated on December 1 (or such date
of listing if after December 1), and
would be based on the company’s Form
10–Q and Form 10–K filings over the
prior four fiscal quarters. Thus, the
Annual Listing Fee would be calculated
from filings covering the fourth quarter
of the prior calendar year and the first
three quarters of the current calendar
year. Where a company does not have
filings for the prior four fiscal quarters,
its Annual Listing Fee would be
calculated in the same manner as its
Initial Listing Fee (but not at the
prorated level).
The Annual Listing Fee would not be
refunded if a company is delisted or
elects to delist during the calendar year.
(c) Fee Schedule
The proposed Initial Listing Fee and
Annual Listing Fee would be identical,
though the former would be prorated as
noted above.
The listing fees are proposed to be as
follows:
Amount
of fee
Market capitalization
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Up to $1 billion .....................................................................................................................................................................................
More than $1 billion and up to $3 billion .............................................................................................................................................
More than $3 billion and up to $5 billion .............................................................................................................................................
More than $5 billion and up to $10 billion ...........................................................................................................................................
More than $10 billion and up to $15 billion .........................................................................................................................................
More than $15 billion and up to $30 billion .........................................................................................................................................
More than $30 billion and up to $50 billion .........................................................................................................................................
More than $50 billion ...........................................................................................................................................................................
4 ‘‘Primary Equity Security’’ means a Company’s
first class of Common Stock, Ordinary Shares,
Shares or Certificates of Beneficial Interest of Trust,
Limited Partnership Interests or American
Depositary Receipts (‘‘ADRs’’) or Shares (‘‘ADSs’’).
See Rule 14.002(a)(24).
5 Because the deadline to file a Form 10–Q or
Form 10–K occurs after the end of the quarter, it
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is possible that a company that has been a public
reporting company continuously listed on a
national securities exchange for at least 12 months
prior to listing on the Exchange would have made
only three such filings at the time of its initial
listing on the Exchange. In such a scenario, the
market capitalization shall be derived from its three
most recent filings.
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$150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
6 In the case of a direct offering for which there
are no underwritten securities, the price of the
company’s securities as of the commencement of
trading on the primary listing market (i.e., opening
cross) shall be used in lieu of an initial public
offering price.
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The Exchange believes that setting
fees based on market capitalization is
appropriate in that it would allow the
Exchange to attract listings by both
larger and smaller companies. Tiering of
listing fees based on the size of a
company is a long-standing practice of
the two primary equity listing
exchanges. While these exchanges tier
their fees based on the number of total
shares outstanding, they do so as a
means to differentiate between larger
and smaller companies.7 LTSE does not
believe using total shares outstanding, a
practice that dates back decades, is
compelling in today’s markets where
shares can trade in fractions 8 or where
stock splits are far less common.9 In
addition, basing listing fees on total
shares outstanding can create incentives
for an issuer to maintain a higher price
per share instead of offering more
shares.10 The use of market
capitalization as compared to total
shares outstanding also avoids
potentially anomalous results from
stock splits or reverse mergers.11
7 See, e.g., Securities Exchange Act Release No.
34–68117 (October 26, 2012), 77 FR 66207, 66208
(November 2, 2012) (‘‘Total shares outstanding
provides a simple, objective, and efficient metric to
take into account the relative size of issuers so that
the Exchange can continue to incentivize listing by
both large and small qualified companies . . . .’’).
Cf. ‘‘Equity Issuers on Nasdaq Stockholm (Prices in
SEK exclusive of VAT),’’ Nasdaq (eff. July 1, 2019),
https://www.nasdaq.com/docs/Nasdaq_Main_
Market_Stockholm_Pricelist_2019_1.pdf (setting
listing fees based on market capitalization on
Nasdaq’s foreign affiliate exchanges).
8 LTSE does not believe that some of the
previously stated rationales—such as companies
with more shares outstanding ‘‘have a larger
number of shareholders that benefit from the
liquidity and transparency that the . . . listing
offers’’—are necessarily true today. See Securities
Exchange Act Release No. 34–68117 (October 26,
2012), 77 FR 66207 (November 2, 2012). The
shortcomings of using total shares outstanding were
also noted by another national securities exchange.
See Securities Exchange Act Release No. 34–81725
(September 26, 2017), 82 FR 45917 (October 2,
2017). See also Lisa Beilfuss, ‘‘Schwab, in Bid for
Younger Clients, to Allow Investors to Buy and Sell
Fractions of Stocks,’’ Wall St. J. (October 17, 2019),
https://www.wsj.com/articles/schwab-in-bid-foryounger-clients-to-allow-investors-to-buy-and-sellfractions-of-stocks-11571334424.
9 See Lu Wang, ‘‘Stock Split Is All But Dead and
a New Study Says Save Your Tears,’’ Bloomberg
(Aug. 23, 2017), https://www.bloomberg.com/news/
articles/2017-08-23/stock-split-is-all-but-dead-anda-new-study-says-save-your-tears?sref=CDdNJ6yd;
Steven Russolillo, ‘‘The Average Stock Price Is
Expensive; Get Used to It,’’ Wall St. J. (Jun 4, 2013),
https://blogs.wsj.com/moneybeat/2013/06/04/theaverage-stock-price-is-expensive-get-used-to-it/
?mod=article_inline.
10 See Alexander Osipovich, ‘‘Tiny ‘Odd Lot’
Trades Reach Record Share of U.S. Stock Market,’’
Wall St. J. (October 23, 2019), https://www.wsj.com/
articles/tiny-odd-lot-trades-reach-record-share-of-us-stock-market-11571745600.
11 See, e.g., Securities Exchange Act Release No.
34–85252 (March 6, 2019), 84 FR 8919, 8919–20
(March 12, 2019); Securities Exchange Act Release
No. 34–81725 (September 26, 2017), 82 FR 45917,
45918 (October 2, 2017).
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Finally, the Exchange does not
presently contemplate proposing any
other issuer fees with respect to a listing
of Primary Equity Securities, such as
listing application fees, entry fees, fees
for the listing of additional shares,
recordkeeping fees, substitution listing
fees, fees for a written interpretation of
the listing rules, or hearing fees, all of
which are or have been charged by other
national securities exchanges.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
requirements of Section 6(b) of the
Act 12 in general, and furthers the
objectives of Section 6(b)(4) of the Act 13
in particular, because it provides for the
equitable allocation of reasonable dues,
fees, and other charges among its
members, issuers, and other persons
using its facilities. The Exchange also
believes that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act 14 because 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 and dealers.
The Exchange believes that the
proposed Initial Listing Fees and
Annual Listing Fees are reasonable in
view of the value and benefits that an
LTSE listing would provide to a listed
company in terms of enabling the
company to demonstrate its
commitment to long-termism and the
Long-Term Policies set forth in Rule
14.425. The benefits to a company, its
shareholders and stakeholders from
pursuing long-term value creation were
discussed extensively in the background
and rationale for LTSE’s Long-Term
Policies.15 The Exchange believes
companies will find these listing
expenses, whether through a sole listing
or a dual listing on LTSE, as reasonable
and likely offering significant value in
relation to the types of expenses a
public company might otherwise incur
to demonstrate its commitment to longtermism and creating lasting
12 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
14 15 U.S.C. 78f(b)(5).
15 See Securities Exchange Act Release No. 34–
86327 (July 8, 2019), 84 FR 33293 (July 12, 2019).
13 15
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shareholder value. The Exchange also
believes that it is reasonable to charge
higher fees to companies with larger
market capitalizations because a larger
company has more potential for
realizing even greater value from listing
with LTSE. Conversely, companies with
smaller market capitalizations may find
the higher listing fees proposed to be
charged for larger companies to be a
greater burden, and thus the Exchange
proposes to offer a fee that starts low but
increases as a company’s market
capitalization increases.
The proposed fees are also reasonable
insofar as they fall generally within the
range of listing fees charged by other
national securities exchanges.16
Moreover, the proposed Initial Listing
Fees and Annual Listing Fees reflect the
‘‘all-in’’ costs of listing on the Exchange;
that is, the Exchange does not currently
contemplate having listing application
fees, entry fees, fees for the listing of
additional shares, stock splits,
recordkeeping fees, substitution listing
fees, fees for a written interpretation of
the listing rules, or hearing fees.
Additionally, the Exchange operates
in a highly competitive marketplace for
the listing of primary equity securities.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets.
The Exchange believes that the evershifting market share among the
exchanges with respect to new listings
and the transfer of existing listings
between competitor exchanges
demonstrates that issuers can choose
different listing markets in response to
fee changes.17 Every company
considering whether to list on LTSE has
at least two established alternatives in
NYSE and Nasdaq. Accordingly,
competitive forces constrain exchange
listing fees. Stated otherwise, changes to
exchange listing fees can have a direct
16 See NYSE Listed Company Manual at § 902.03
(Fees for Listed Equity Securities) (fee per share of
primary class of common shares is $0.00113 as of
January 1, 2020, subject to a minimum of $71,000);
Id. at § 902.02 (General Information on Fees) (‘‘The
total fees that may be billed to an issuer in a
calendar year are capped at $500,000 . . . .’’);
Nasdaq Rule 5910(b) (All-Inclusive Annual Listing
Fee) (ranges from $45,000 to $155,000 for equity
securities). See also Nasdaq Rule 5901 (Preamble to
Company Listing Fees) (‘‘With certain exceptions, a
Company that submits an application to list any
class of its securities must pay a non-refundable
application fee, and an entry fee as described in
Rule 5910(a), which is based on the number of
shares being listed. Listed Companies must also pay
an All-Inclusive Annual Listing Fee.’’); Nasdaq Rule
5910(a) (Entry Fee) (ranges from $150,000 to
$295,000 for equity securities in 2020).
17 See Securities Exchange Act Release No. 34–
87832 (December 20, 2019), 84 FR 72047 (December
30, 2019).
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effect on the ability of an exchange to
compete for new listings and retain
existing listings.
LTSE, as the newest entrant into the
listing business, has no pricing power.
If a company does not believe that
LTSE’s proposed listing fees are
reasonable, then there is no reason for
it to list on the Exchange; there are no
regulatory requirements or pressures for
any company to list on a particular
exchange. A company only needs to list
on a single exchange to fall within the
scope and protections of being part of
the SEC’s national market system. Given
this competitive environment, the
Exchange believes that its proposed fees
are reasonable while at the same time
provide revenue to support the
Exchange’s listings program and other
regulatory requirements.
The Exchange also believes its
proposed tiered fee structure, where
issuers with a larger market
capitalization pay relatively higher
Initial Listing Fees and Annual Listing
Fees, is equitable and not unfairly
discriminatory because setting fees
based on market capitalization would
allow the Exchange to attract listings by
both larger and smaller companies. The
Exchange notes that other national
securities exchanges similarly have
tiered listing fees.18 While these
exchanges tier their fees based on the
number of total shares outstanding, they
do so as a means to differentiate
between larger and smaller
companies.19 LTSE does not believe
using total shares outstanding, a
practice that dates back decades, is
compelling in today’s world where
shares commonly trade in fractions 20 or
where stock splits are far less
common.21 In addition, basing listing
fees based on total shares outstanding
can create incentives for an issuer to
maintain a higher price per share
instead of offering more shares.22 The
use of market capitalization as
compared to total shares outstanding
also avoids potentially anomalous
results from stock splits or reverse
mergers.23
The Exchange further believes that the
proposed fees would be an equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
facilities, and are not unfairly
discriminatory. As the Commission
18 See
supra note 16.
supra note 7.
20 See supra note 8.
21 See supra note 9.
22 See supra note 10.
23 See supra note 11.
19 See
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noted in its Concept Release Concerning
Self-Regulation:
The Commission to date has not issued
detailed rules specifying proper funding
levels of [self-regulatory organization
(‘‘SRO’’)] regulatory programs, or how costs
should be allocated among the various SRO
constituencies. Rather, the Commission has
examined the SROs to determine whether
they are complying with their statutory
responsibilities. This approach was
developed in response to the diverse
characteristics and roles of the various SROs
and the markets they operate. The mechanics
of SRO funding, including the amount of
revenue that is spent on regulation and how
that amount is allocated among various
regulatory operations, is related to the type
of market that an SRO is operating. . . . Thus,
each SRO and its financial structure is, to a
certain extent, unique. While this uniqueness
can result in different levels of SRO funding
across markets, it also is a reflection of one
of the primary underpinnings of the National
Market System. Specifically, by fostering an
environment in which diverse markets with
diverse business models compete within a
unified National Market System, investors
and market participants benefit.24
The portion of an exchange’s revenue
derived from each of these
constituencies can vary widely and is
highly-dependent on an exchange’s
business model. An exchange that does
not operate a listings program naturally
derives no revenue from issuers. On the
other hand, an exchange that intends to
operate without trading fees or a
proprietary market data feed, as is
presently the case with LTSE, will be
more reliant upon revenue from listings
and/or membership fees.25
The LTSE business focuses on uniting
bold ideas with patient capital,
companies, and investors who measure
success over years and decades, not
financial quarters. As such, LTSE does
not aim to compete with other
exchanges for market share or trading
volume, and, thus, many of the fees
commonly imposed by other
exchanges—such as transaction fees or
market data fees—are not germane to the
LTSE business model.26 The proposed
rule change recognizes the value that
LTSE brings to companies. Its proposed
fee structure is expected to be more
reliant on companies than brokerdealers, which the Exchange believes is
24 69
FR 71255, 71267–68 (December 8, 2004).
Exchange believes that the Commission
has not historically set limits on the percentage of
revenues from various lines of business, noting for
example, that listing fees constituted 40% and the
largest single source of revenues for the NYSE in
1998. See Jonathan R. Macey and Maureen O’Hara,
‘‘The Economics of Stock Exchange Listing Fees
and Listing Requirements,’’ 11 J. of Fin.
Intermediation 297–319 (2002).
26 The Exchange intends to establish an annual
membership fee in a forthcoming proposed rule
change.
25 The
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reasonable for an exchange that sees its
strength in listings rather than
principally as an execution venue.
Effective regulation is central to the
proper functioning of the securities
markets. Recognizing the importance of
such efforts, Congress decided to require
national securities exchanges to register
with the Commission as self-regulatory
organizations to carry out the purposes
of the Act. The Exchange therefore
believes that it is critical to ensure that
regulation is appropriately funded. The
Initial Listing Fees and Annual Listing
Fees are expected to represent a key
element of funding for the Exchange’s
total regulatory costs. Unlike other
national securities exchanges with a
listings program, the Exchange does not
presently contemplate imposing trading
fees, proprietary market data fees, colocation, or connectivity fees.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
LTSE does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change would establish a
schedule of Initial Listing Fees and
Annual Listing Fees that falls generally
within the range of listing fees charged
by other national securities exchanges.27
The market for listing services is
highly competitive. Each listing
exchange has a different fee schedule
that applies to issuers seeking to list
securities on its exchange. Issuers have
the option to list their securities on
these alternative venues based on the
fees charged and the value provided by
each listing. Because issuers have a
choice to list their securities on a
different national securities exchange,
the Exchange does not believe that the
proposed rule change imposes a burden
on competition.
Intramarket Competition. The
proposed rule change would establish
listing fees that will be charged to all
listed issuers on the same basis. The
Exchange does not believe that the
proposed fees will have any meaningful
effect on the competition among issuers
listed on the Exchange.
Intermarket Competition. The
Exchange operates in a highly
competitive market in which issuers can
readily choose to list 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 chosen listing
27 See
E:\FR\FM\12FEN1.SGM
supra text accompanying note 16.
12FEN1
8052
Federal Register / Vol. 85, No. 29 / Wednesday, February 12, 2020 / Notices
venue, the Exchange does not believe
the proposed rule change will 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
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposal has become
effective pursuant to section 19(b)(3)(A)
of the Act,28 and Rule 19b–4(f)(2) 29
thereunder. 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
to determine whether the proposed rule
should be approved or disapproved.
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:
lotter on DSKBCFDHB2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
LTSE–2020–03 on the subject line.
Paper Comments
• 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–LTSE–2020–03. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
28 15
29 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
17:03 Feb 11, 2020
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–LTSE–2020–03, and should
be submitted on or before March 4,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02747 Filed 2–11–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 102, SEC File No. 270–409, OMB
Control No. 3235–0467
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 102 of Regulation
M (17 CFR 242.102), under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.). The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Rule 102—Activities by Issuers and
Selling Security Holders During a
30 17
Jkt 250001
PO 00000
CFR 200.30–3(a)(12).
Frm 00136
Fmt 4703
Sfmt 9990
Distribution —prohibits distribution
participants, issuers, and selling
security holders from purchasing
activities at specified times during a
distribution of securities. Persons
otherwise covered by this rule may seek
to use several applicable exceptions
such as exclusion for actively traded
reference securities and the
maintenance of policies regarding
information barriers between their
affiliates.
There are approximately 955
respondents per year that require an
aggregate total of 1,855 hours to comply
with this rule. Each respondent makes
an estimated 1 annual response. Each
response takes on average
approximately 1.942 hours to complete.
Thus, the total compliance burden per
year is 1,855 burden hours. The total
internal compliance cost for all
respondents is approximately
$129,850.00, resulting in an internal
cost of compliance per respondent of
approximately $135.97 (i.e.,
$129,850.00/955 respondents).
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: February 7, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02779 Filed 2–11–20; 8:45 am]
BILLING CODE 8011–01–P
E:\FR\FM\12FEN1.SGM
12FEN1
]]>Agencies
[Federal Register Volume 85, Number 29 (Wednesday, February 12, 2020)]
[Notices]
[Pages 8048-8052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02747]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88133; File No. SR-LTSE-2020-03]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Initial Listing Fee and Annual Listing Fee
February 6, 2020.
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 January 30, 2020, Long-Term Stock Exchange, Inc. (``LTSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The Exchange originally filed to establish a fee schedule of
listing fees for issuers of primary equity securities on January 22,
2020 (SR-LTSE-2020-02). On January 30, 2020, SR-LTSE-2020-02 was
withdrawn and replaced by SR-LTSE-2020-03.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
LTSE proposes a rule change to establish a fee schedule of listing
fees for issuers of primary equity securities.
[[Page 8049]]
The text of the proposed rule change is available at the Exchange's
website at https://longtermstockexchange.com/, 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 these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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
The Exchange is filing this proposed rule change to amend Rule
14.601 to establish a schedule of Initial Listing Fees and Annual
Listing Fees for issuers' Primary Equity Securities.\4\ Both the
Initial Listing Fee and Annual Listing Fee for an issuer's Primary
Equity Securities on the Exchange is proposed to be based on the
company's market capitalization of its Primary Equity Securities and is
proposed to be calculated as described below.
---------------------------------------------------------------------------
\4\ ``Primary Equity Security'' means a Company's first class of
Common Stock, Ordinary Shares, Shares or Certificates of Beneficial
Interest of Trust, Limited Partnership Interests or American
Depositary Receipts (``ADRs'') or Shares (``ADSs''). See Rule
14.002(a)(24).
---------------------------------------------------------------------------
(a) Initial Listing Fee
If a company has been a public reporting company continuously
listed on a national securities exchange for at least 12 months prior
to listing on the Exchange, then its market capitalization shall be an
unweighted average based on data derived in part from its Form 10-Q and
Form 10-K filings over the prior four quarters. Specifically, the
Exchange proposes to multiply the basic weighted average shares
outstanding as provided in a company's Form 10-Q or Form 10-K for the
end of the quarter times the closing price of the security on the final
trading day of such quarter as determined from the primary listing
market. For example, a company with 500 million basic weighted average
shares outstanding in its most recent Form 10-Q and a closing price of
$20 per share on the last trading day of the quarter would have a
market capitalization for that quarter of $10 billion. The market
capitalization for purposes of assessing a listing fee would be the
unweighted average of the company's market capitalization as determined
on the last trading day of each of the prior four quarters (``Reporting
Company Market Capitalization'').\5\
---------------------------------------------------------------------------
\5\ Because the deadline to file a Form 10-Q or Form 10-K occurs
after the end of the quarter, it is possible that a company that has
been a public reporting company continuously listed on a national
securities exchange for at least 12 months prior to listing on the
Exchange would have made only three such filings at the time of its
initial listing on the Exchange. In such a scenario, the market
capitalization shall be derived from its three most recent filings.
---------------------------------------------------------------------------
If a company has not been a public reporting company continuously
listed on a national securities exchange for at least 12 months prior
to listing on the Exchange, then the market capitalization for purposes
of the Initial Listing Fee shall be the lesser of: (i) The number of
shares of common stock to be outstanding after its initial public
offering as provided in the final effective registration statement
times the price per share at which the company's shares were sold to
the underwriters pursuant to its initial public offering (``IPO Market
Capitalization''),\6\ or (ii) the Reporting Company Market
Capitalization method for each available quarter (i.e., one, two, or
three) for which the company has filed a Form 10-Q or 10-K.
---------------------------------------------------------------------------
\6\ In the case of a direct offering for which there are no
underwritten securities, the price of the company's securities as of
the commencement of trading on the primary listing market (i.e.,
opening cross) shall be used in lieu of an initial public offering
price.
---------------------------------------------------------------------------
If a company conducts an underwritten initial public offering and
commences trading on the Exchange, then the Initial Listing Fee shall
be based on the IPO Market Capitalization as described above. The
company would not be eligible to use the Reporting Company Market
Capitalization method because it would not, by definition, have made
any Form 10-Q or Form 10-K filings as a public reporting company while
listed on a national securities exchange.
The Initial Listing Fee would be valid for the remainder of the
calendar year and would be prorated based on the number of remaining
trading days after listing on the Exchange.
(b) Annual Listing Fee
The Annual Listing Fee for a company's Primary Equity Securities
also is proposed to be based on the company's market capitalization.
Specifically, the Annual Listing Fee for the upcoming calendar year
would be calculated on December 1 (or such date of listing if after
December 1), and would be based on the company's Form 10-Q and Form 10-
K filings over the prior four fiscal quarters. Thus, the Annual Listing
Fee would be calculated from filings covering the fourth quarter of the
prior calendar year and the first three quarters of the current
calendar year. Where a company does not have filings for the prior four
fiscal quarters, its Annual Listing Fee would be calculated in the same
manner as its Initial Listing Fee (but not at the prorated level).
The Annual Listing Fee would not be refunded if a company is
delisted or elects to delist during the calendar year.
(c) Fee Schedule
The proposed Initial Listing Fee and Annual Listing Fee would be
identical, though the former would be prorated as noted above.
The listing fees are proposed to be as follows:
------------------------------------------------------------------------
Market capitalization Amount of fee
------------------------------------------------------------------------
Up to $1 billion........................................ $150,000
More than $1 billion and up to $3 billion............... 200,000
More than $3 billion and up to $5 billion............... 250,000
More than $5 billion and up to $10 billion.............. 300,000
More than $10 billion and up to $15 billion............. 350,000
More than $15 billion and up to $30 billion............. 400,000
More than $30 billion and up to $50 billion............. 450,000
More than $50 billion................................... 500,000
------------------------------------------------------------------------
[[Page 8050]]
The Exchange believes that setting fees based on market
capitalization is appropriate in that it would allow the Exchange to
attract listings by both larger and smaller companies. Tiering of
listing fees based on the size of a company is a long-standing practice
of the two primary equity listing exchanges. While these exchanges tier
their fees based on the number of total shares outstanding, they do so
as a means to differentiate between larger and smaller companies.\7\
LTSE does not believe using total shares outstanding, a practice that
dates back decades, is compelling in today's markets where shares can
trade in fractions \8\ or where stock splits are far less common.\9\ In
addition, basing listing fees on total shares outstanding can create
incentives for an issuer to maintain a higher price per share instead
of offering more shares.\10\ The use of market capitalization as
compared to total shares outstanding also avoids potentially anomalous
results from stock splits or reverse mergers.\11\
---------------------------------------------------------------------------
\7\ See, e.g., Securities Exchange Act Release No. 34-68117
(October 26, 2012), 77 FR 66207, 66208 (November 2, 2012) (``Total
shares outstanding provides a simple, objective, and efficient
metric to take into account the relative size of issuers so that the
Exchange can continue to incentivize listing by both large and small
qualified companies . . . .''). Cf. ``Equity Issuers on Nasdaq
Stockholm (Prices in SEK exclusive of VAT),'' Nasdaq (eff. July 1,
2019), https://www.nasdaq.com/docs/Nasdaq_Main_Market_Stockholm_Pricelist_2019_1.pdf (setting listing
fees based on market capitalization on Nasdaq's foreign affiliate
exchanges).
\8\ LTSE does not believe that some of the previously stated
rationales--such as companies with more shares outstanding ``have a
larger number of shareholders that benefit from the liquidity and
transparency that the . . . listing offers''--are necessarily true
today. See Securities Exchange Act Release No. 34-68117 (October 26,
2012), 77 FR 66207 (November 2, 2012). The shortcomings of using
total shares outstanding were also noted by another national
securities exchange. See Securities Exchange Act Release No. 34-
81725 (September 26, 2017), 82 FR 45917 (October 2, 2017). See also
Lisa Beilfuss, ``Schwab, in Bid for Younger Clients, to Allow
Investors to Buy and Sell Fractions of Stocks,'' Wall St. J.
(October 17, 2019), https://www.wsj.com/articles/schwab-in-bid-for-younger-clients-to-allow-investors-to-buy-and-sell-fractions-of-stocks-11571334424.
\9\ See Lu Wang, ``Stock Split Is All But Dead and a New Study
Says Save Your Tears,'' Bloomberg (Aug. 23, 2017), https://www.bloomberg.com/news/articles/2017-08-23/stock-split-is-all-but-dead-and-a-new-study-says-save-your-tears?sref=CDdNJ6yd; Steven
Russolillo, ``The Average Stock Price Is Expensive; Get Used to
It,'' Wall St. J. (Jun 4, 2013), https://blogs.wsj.com/moneybeat/2013/06/04/the-average-stock-price-is-expensive-get-used-to-it/?mod=article_inline.
\10\ See Alexander Osipovich, ``Tiny `Odd Lot' Trades Reach
Record Share of U.S. Stock Market,'' Wall St. J. (October 23, 2019),
https://www.wsj.com/articles/tiny-odd-lot-trades-reach-record-share-of-u-s-stock-market-11571745600.
\11\ See, e.g., Securities Exchange Act Release No. 34-85252
(March 6, 2019), 84 FR 8919, 8919-20 (March 12, 2019); Securities
Exchange Act Release No. 34-81725 (September 26, 2017), 82 FR 45917,
45918 (October 2, 2017).
---------------------------------------------------------------------------
Finally, the Exchange does not presently contemplate proposing any
other issuer fees with respect to a listing of Primary Equity
Securities, such as listing application fees, entry fees, fees for the
listing of additional shares, recordkeeping fees, substitution listing
fees, fees for a written interpretation of the listing rules, or
hearing fees, all of which are or have been charged by other national
securities exchanges.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Act \12\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \13\ in
particular, because it provides for the equitable allocation of
reasonable dues, fees, and other charges among its members, issuers,
and other persons using its facilities. The Exchange also believes that
the proposed rule change is consistent with the requirements of Section
6(b)(5) of the Act \14\ because 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 and dealers.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed Initial Listing Fees and
Annual Listing Fees are reasonable in view of the value and benefits
that an LTSE listing would provide to a listed company in terms of
enabling the company to demonstrate its commitment to long-termism and
the Long-Term Policies set forth in Rule 14.425. The benefits to a
company, its shareholders and stakeholders from pursuing long-term
value creation were discussed extensively in the background and
rationale for LTSE's Long-Term Policies.\15\ The Exchange believes
companies will find these listing expenses, whether through a sole
listing or a dual listing on LTSE, as reasonable and likely offering
significant value in relation to the types of expenses a public company
might otherwise incur to demonstrate its commitment to long-termism and
creating lasting shareholder value. The Exchange also believes that it
is reasonable to charge higher fees to companies with larger market
capitalizations because a larger company has more potential for
realizing even greater value from listing with LTSE. Conversely,
companies with smaller market capitalizations may find the higher
listing fees proposed to be charged for larger companies to be a
greater burden, and thus the Exchange proposes to offer a fee that
starts low but increases as a company's market capitalization
increases.
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 34-86327 (July 8,
2019), 84 FR 33293 (July 12, 2019).
---------------------------------------------------------------------------
The proposed fees are also reasonable insofar as they fall
generally within the range of listing fees charged by other national
securities exchanges.\16\ Moreover, the proposed Initial Listing Fees
and Annual Listing Fees reflect the ``all-in'' costs of listing on the
Exchange; that is, the Exchange does not currently contemplate having
listing application fees, entry fees, fees for the listing of
additional shares, stock splits, recordkeeping fees, substitution
listing fees, fees for a written interpretation of the listing rules,
or hearing fees.
---------------------------------------------------------------------------
\16\ See NYSE Listed Company Manual at Sec. 902.03 (Fees for
Listed Equity Securities) (fee per share of primary class of common
shares is $0.00113 as of January 1, 2020, subject to a minimum of
$71,000); Id. at Sec. 902.02 (General Information on Fees) (``The
total fees that may be billed to an issuer in a calendar year are
capped at $500,000 . . . .''); Nasdaq Rule 5910(b) (All-Inclusive
Annual Listing Fee) (ranges from $45,000 to $155,000 for equity
securities). See also Nasdaq Rule 5901 (Preamble to Company Listing
Fees) (``With certain exceptions, a Company that submits an
application to list any class of its securities must pay a non-
refundable application fee, and an entry fee as described in Rule
5910(a), which is based on the number of shares being listed. Listed
Companies must also pay an All-Inclusive Annual Listing Fee.'');
Nasdaq Rule 5910(a) (Entry Fee) (ranges from $150,000 to $295,000
for equity securities in 2020).
---------------------------------------------------------------------------
Additionally, the Exchange operates in a highly competitive
marketplace for the listing of primary equity securities. The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets.
The Exchange believes that the ever-shifting market share among the
exchanges with respect to new listings and the transfer of existing
listings between competitor exchanges demonstrates that issuers can
choose different listing markets in response to fee changes.\17\ Every
company considering whether to list on LTSE has at least two
established alternatives in NYSE and Nasdaq. Accordingly, competitive
forces constrain exchange listing fees. Stated otherwise, changes to
exchange listing fees can have a direct
[[Page 8051]]
effect on the ability of an exchange to compete for new listings and
retain existing listings.
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 34-87832 (December
20, 2019), 84 FR 72047 (December 30, 2019).
---------------------------------------------------------------------------
LTSE, as the newest entrant into the listing business, has no
pricing power. If a company does not believe that LTSE's proposed
listing fees are reasonable, then there is no reason for it to list on
the Exchange; there are no regulatory requirements or pressures for any
company to list on a particular exchange. A company only needs to list
on a single exchange to fall within the scope and protections of being
part of the SEC's national market system. Given this competitive
environment, the Exchange believes that its proposed fees are
reasonable while at the same time provide revenue to support the
Exchange's listings program and other regulatory requirements.
The Exchange also believes its proposed tiered fee structure, where
issuers with a larger market capitalization pay relatively higher
Initial Listing Fees and Annual Listing Fees, is equitable and not
unfairly discriminatory because setting fees based on market
capitalization would allow the Exchange to attract listings by both
larger and smaller companies. The Exchange notes that other national
securities exchanges similarly have tiered listing fees.\18\ While
these exchanges tier their fees based on the number of total shares
outstanding, they do so as a means to differentiate between larger and
smaller companies.\19\ LTSE does not believe using total shares
outstanding, a practice that dates back decades, is compelling in
today's world where shares commonly trade in fractions \20\ or where
stock splits are far less common.\21\ In addition, basing listing fees
based on total shares outstanding can create incentives for an issuer
to maintain a higher price per share instead of offering more
shares.\22\ The use of market capitalization as compared to total
shares outstanding also avoids potentially anomalous results from stock
splits or reverse mergers.\23\
---------------------------------------------------------------------------
\18\ See supra note 16.
\19\ See supra note 7.
\20\ See supra note 8.
\21\ See supra note 9.
\22\ See supra note 10.
\23\ See supra note 11.
---------------------------------------------------------------------------
The Exchange further believes that the proposed fees would be an
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities, and are
not unfairly discriminatory. As the Commission noted in its Concept
Release Concerning Self-Regulation:
The Commission to date has not issued detailed rules specifying
proper funding levels of [self-regulatory organization (``SRO'')]
regulatory programs, or how costs should be allocated among the
various SRO constituencies. Rather, the Commission has examined the
SROs to determine whether they are complying with their statutory
responsibilities. This approach was developed in response to the
diverse characteristics and roles of the various SROs and the
markets they operate. The mechanics of SRO funding, including the
amount of revenue that is spent on regulation and how that amount is
allocated among various regulatory operations, is related to the
type of market that an SRO is operating. . . . Thus, each SRO and
its financial structure is, to a certain extent, unique. While this
uniqueness can result in different levels of SRO funding across
markets, it also is a reflection of one of the primary underpinnings
of the National Market System. Specifically, by fostering an
environment in which diverse markets with diverse business models
compete within a unified National Market System, investors and
market participants benefit.\24\
---------------------------------------------------------------------------
\24\ 69 FR 71255, 71267-68 (December 8, 2004).
The portion of an exchange's revenue derived from each of these
constituencies can vary widely and is highly-dependent on an exchange's
business model. An exchange that does not operate a listings program
naturally derives no revenue from issuers. On the other hand, an
exchange that intends to operate without trading fees or a proprietary
market data feed, as is presently the case with LTSE, will be more
reliant upon revenue from listings and/or membership fees.\25\
---------------------------------------------------------------------------
\25\ The Exchange believes that the Commission has not
historically set limits on the percentage of revenues from various
lines of business, noting for example, that listing fees constituted
40% and the largest single source of revenues for the NYSE in 1998.
See Jonathan R. Macey and Maureen O'Hara, ``The Economics of Stock
Exchange Listing Fees and Listing Requirements,'' 11 J. of Fin.
Intermediation 297-319 (2002).
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The LTSE business focuses on uniting bold ideas with patient
capital, companies, and investors who measure success over years and
decades, not financial quarters. As such, LTSE does not aim to compete
with other exchanges for market share or trading volume, and, thus,
many of the fees commonly imposed by other exchanges--such as
transaction fees or market data fees--are not germane to the LTSE
business model.\26\ The proposed rule change recognizes the value that
LTSE brings to companies. Its proposed fee structure is expected to be
more reliant on companies than broker-dealers, which the Exchange
believes is reasonable for an exchange that sees its strength in
listings rather than principally as an execution venue.
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\26\ The Exchange intends to establish an annual membership fee
in a forthcoming proposed rule change.
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Effective regulation is central to the proper functioning of the
securities markets. Recognizing the importance of such efforts,
Congress decided to require national securities exchanges to register
with the Commission as self-regulatory organizations to carry out the
purposes of the Act. The Exchange therefore believes that it is
critical to ensure that regulation is appropriately funded. The Initial
Listing Fees and Annual Listing Fees are expected to represent a key
element of funding for the Exchange's total regulatory costs. Unlike
other national securities exchanges with a listings program, the
Exchange does not presently contemplate imposing trading fees,
proprietary market data fees, co-location, or connectivity fees.
B. Self-Regulatory Organization's Statement on Burden on Competition
LTSE does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change would
establish a schedule of Initial Listing Fees and Annual Listing Fees
that falls generally within the range of listing fees charged by other
national securities exchanges.\27\
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\27\ See supra text accompanying note 16.
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The market for listing services is highly competitive. Each listing
exchange has a different fee schedule that applies to issuers seeking
to list securities on its exchange. Issuers have the option to list
their securities on these alternative venues based on the fees charged
and the value provided by each listing. Because issuers have a choice
to list their securities on a different national securities exchange,
the Exchange does not believe that the proposed rule change imposes a
burden on competition.
Intramarket Competition. The proposed rule change would establish
listing fees that will be charged to all listed issuers on the same
basis. The Exchange does not believe that the proposed fees will have
any meaningful effect on the competition among issuers listed on the
Exchange.
Intermarket Competition. The Exchange operates in a highly
competitive market in which issuers can readily choose to list
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 chosen listing
[[Page 8052]]
venue, the Exchange does not believe the proposed rule change will
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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposal has become effective pursuant to section
19(b)(3)(A) of the Act,\28\ and Rule 19b-4(f)(2) \29\ thereunder. 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 to determine whether
the proposed rule should be approved or disapproved.
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(2).
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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 is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-LTSE-2020-03 on the subject line.
Paper Comments
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-LTSE-2020-03. 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 (https://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 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-LTSE-2020-03, and should be submitted on
or before March 4, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-02747 Filed 2-11-20; 8:45 am]
BILLING CODE 8011-01-P
