Self-Regulatory Organizations; New York Stock Exchange LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend Section 703.12(II) of the NYSE Listed Company Manual To Expand the Circumstances Under Which Rights May Be Listed on the NYSE, 67120-67124 [2024-18474]
Download as PDF
<![CDATA[
67120
Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
market participants will benefit from
any increase in market activity that the
proposal effectuates. As it relates to the
reduced Taker Fee in SPY, QQQ, and
IWM for Priority Customers, any
Member can be an Order Flow Provider,
and may direct a Priority Customer
Order to any Market Maker at any time
on an order by order basis.
In terms of inter-market competition,
the Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues if they deem fee
levels at a particular venue to be
excessive, or rebate opportunities
available at other venues to be more
favorable. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
options exchanges. Because competitors
are free to modify their own fees in
response, and because market
participants may readily adjust their
order routing practices, the Exchange
believes that the degree to which fee
changes in this market may impose any
burden on competition is extremely
limited. In sum, if the changes proposed
herein are unattractive to market
participants, it is likely that the
Exchange will lose market share as a
result. Accordingly, the Exchange does
not believe that the proposed changes
will impair the ability of members or
competing order execution venues to
maintain their competitive standing in
the financial markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
ddrumheller on DSK120RN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.18 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is: (i)
necessary or appropriate in the public
interest; (ii) for the protection of
investors; or (iii) 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.
18 15
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 rule-comments@
sec.gov. Please include file number SR–
GEMX–2024–27 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–GEMX–2024–27. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–GEMX–2024–27 and should be
submitted on or before September 9,
2024.
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
18:07 Aug 16, 2024
Jkt 262001
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–18476 Filed 8–16–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100720; File No. SR–NYSE–
2024–23]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Amend
Section 703.12(II) of the NYSE Listed
Company Manual To Expand the
Circumstances Under Which Rights
May Be Listed on the NYSE
August 13, 2024.
I. Introduction
On April 29, 2024, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend Section 703.12(II) of
the NYSE Listed Company Manual
(‘‘Manual’’) to expand the circumstances
under which rights may be listed on the
NYSE by allowing issuers to (i) issue
rights to more than existing
shareholders for a class of securities that
is listed or to be listed on the Exchange,
and (ii) list and trade rights on the
Exchange prior to listing the security
into which such rights will be
exercisable. The proposed rule change
was published for comment in the
Federal Register on May 15, 2024.3 On
June 26, 2024, pursuant to Section
19(b)(2) of the Act,4 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.5 The Commission has
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 100102
(May 10, 2024), 89 FR 42543 (Notice of Filing of
Proposed Rule Change to Amend Section 703.12(II)
of the NYSE Listed Company Manual to Expand the
Circumstances Under Which Rights May Be Listed
on the NYSE) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No.
100437, 89 FR 54894 (July 2, 2024). The
Commission designated August 13, 2024, as the
1 15
E:\FR\FM\19AUN1.SGM
19AUN1
Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
received no comment letters on the
proposed rule change. The Commission
is instituting proceedings pursuant to
Section 19(b)(2)(B) of the Act 6 to
determine whether to approve or
disapprove the proposed rule change.
ddrumheller on DSK120RN23PROD with NOTICES1
II. Description of the Proposed Rule
Change
The Exchange proposes to amend
Section 703.12(II) of the Manual to
expand the circumstances under which
rights may be listed on the NYSE. First,
the Exchange proposes allowing issuers
to issue rights to more than existing
shareholders for a class of securities that
is listed or to be listed on the Exchange.
Currently, under Section 703.12(II) of
the Manual, the term ‘‘rights’’ refers to
the privilege offered to holders of record
of issued equity securities to subscribe
for additional securities of the same
class. Consistent with the current rights
listing requirements, the Exchange
states that rights traded on the Exchange
have been limited to granting existing
shareholders the right to subscribe for
additional shares of a listed class of
equity securities that such shareholders
already hold.7 The Exchange proposes
to amend Section 703.12(II) to provide
that the term ‘‘rights’’ will refer to the
privilege offered recipients of such
rights to subscribe for shares of a class
of securities (whether or not equity
securities) of such issuer that is listed or
to be listed on the Exchange, regardless
of whether the recipients of the rights
are existing shareholders of record of
such issuer.
Second, the Exchange proposes
allowing issuers to list and trade rights
on the Exchange prior to listing the
security into which such rights will be
exercisable. Currently, under Section
703.12(II) of the Manual, in order to be
listed on the Exchange rights must be
issued to purchase or receive a security
that is already listed on the Exchange or
that will be listed on the Exchange
concurrent with the rights. The
Exchange proposes to expand the
circumstances in which a right may be
listed to permit the listing of a right
where the security into which such right
is exercisable will be listed on the
Exchange 8 upon exercise of the rights
and such exercise is pursuant to a
registration statement filed under the
date by which the Commission shall approve or
disapprove, or institute proceedings to determine
whether to approve or disapprove, the proposed
rule change.
6 15 U.S.C. 78s(b)(2)(B).
7 See Notice, supra note 3, at 42544.
8 The security underlying a Prospective Listing
Right must satisfy the applicable initial listing
standards set forth in Section 102.00 or Section
103.00 of the Manual. See id.
VerDate Sep<11>2014
18:07 Aug 16, 2024
Jkt 262001
Securities Act of 1933 (a ‘‘Securities Act
Registration Statement’’) that has been
declared effective by the Commission
prior to or simultaneous with the listing
of such rights (‘‘Prospective Listing
Rights’’). Prospective Listing Rights
would only be eligible for listing if, at
the time of initial listing, there are (i) at
least 1,000,000 Prospective Listing
Rights issued, and (ii) at least 400 public
holders of round lots.9
The Exchange will promptly initiate
suspension and delisting procedures
with respect to such Prospective Listing
Rights if it is determined that (i) the
security for which the Prospective
Listing Rights are exercisable will not be
listed on the Exchange; (ii) the market
value of publicly-held shares of a series
of Prospective Listing Rights at any time
is less than $4,000,000; or (iii) if the
Prospective Listing Rights remain
outstanding at the time of the initial
listing on the Exchange of the securities
into which such Prospective Listing
Rights are exercisable, the Prospective
Listing Rights fail to meet all of the
initial listing requirements applicable to
the listing of rights other than
Prospective Listing Rights. If the
Exchange commences delisting
procedures with respect to Prospective
Listing Rights, the issuer of the
Prospective Listing Rights will not be
eligible to avail itself of the provisions
of Sections 802.02 and 802.03 of the
Manual and any such Prospective
Listing Rights will be subject to
delisting procedures as set forth in
Section 804.00 of the Manual.10
III. Proceedings To Determine Whether
To Approve or Disapprove SR–NYSE–
2024–23 and Grounds for Disapproval
Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 11 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposed rule change. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, as described
below, the Commission seeks and
encourages interested persons to
9 For purposes of Section 703.12(II), ‘‘Public
holders’’ excludes holders that are directors,
officers, or their immediate families and holders of
other concentrated holdings of 10 percent or more
of the total outstanding shares.
10 Section 804.00 of the Manual provides
procedures for a listed company to appeal an
Exchange staff determination to delist a security.
11 15 U.S.C. 78s(b)(2)(B).
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
67121
provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
approve or disapprove the proposed
rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,12 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of, and input from
commenters with respect to, the
proposed rule change’s consistency with
the Act and, in particular, with Section
6(b)(5) of the Act, which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, 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 not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.13
The Commission has consistently
recognized the importance of national
securities exchange listing standards.
Among other things, such listing
standards help ensure that exchangelisted companies will have sufficient
public float, investor base, and trading
interest to provide the depth and
liquidity necessary to promote fair and
orderly markets.14
12 Id.
13 15
U.S.C. 78f(b)(5).
Commission has stated in approving
national securities exchange listing requirements
that the development and enforcement of adequate
standards governing the listing of securities on an
exchange is an activity of critical importance to the
financial markets and the investing public. In
addition, once a security has been approved for
initial listing, maintenance criteria allow an
exchange to monitor the status and trading
characteristics of that issue to ensure that it
continues to meet the exchange’s standards for
market depth and liquidity so that fair and orderly
markets can be maintained. See, e.g., Securities
Exchange Act Release Nos. 91947 (May 19, 2021),
86 FR 28169, 28172 n.47 (May 25, 2021) (SR–
NASDAQ–2020–057) (‘‘Nasdaq 2021 Order’’); 90768
(December 22, 2020), 85 FR 85807, 85811 n.55
(December 29, 2020) (SR–NYSE–2019–67) (‘‘NYSE
2020 Order’’); 82627 (February 2, 2018), 83 FR
5650, 5653 n.53 (February 8, 2018) (SR–NYSE–
2017–30) (‘‘NYSE 2018 Order’’); 81856 (October 11,
2017), 82 FR 48296, 48298 (October 17, 2017) (SR–
NYSE–2017–31); 81079 (July 5, 2017), 82 FR 32022,
32023 (July 11, 2017) (SR–NYSE–2017–11). The
Commission has stated that adequate listing
standards, by promoting fair and orderly markets,
are consistent with Section 6(b)(5) of the Act, in
that they are, among other things, designed to
prevent fraudulent and manipulative acts and
14 The
E:\FR\FM\19AUN1.SGM
Continued
19AUN1
67122
Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
As described above, the Exchange
proposes to substantially expand the
types of rights that may be listed on the
Exchange to include Prospective Listing
Rights, which provide the right to
subscribe for any class of securities that
is intended to be listed on the Exchange
in the future, and can be offered to
anyone. Today, the Exchange’s listing
rules limit the rights that may be listed
on the Exchange to those that provide
the right to subscribe for a class of
equity securities that is already listed on
the Exchange, or will be listed
concurrently with the rights, and are
offered only to holders of record of the
same class of equity securities. The
Commission has concerns about
whether the proposal is sufficiently
designed to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, and protect investors and the
public interest, as required by Section
6(b)(5) of the Exchange Act.
The Exchange justifies its proposal by
stating that the proposed rule change
would provide issuers ‘‘greater
flexibility in structuring a rights offering
as a capital raising tool.’’ 15 The
Exchange also believes that the
requirement that there be an effective
Securities Act Registration Statement in
relation to the exercise of the
Prospective Listing Rights prior to or
simultaneous with their listing would
provide significant investor protections,
by ensuring that investors trading or
exercising the Prospective Listing Rights
have access to the appropriate level of
disclosure to enable them to make
informed investment decisions.16 The
Exchange also points out that it will
practices, promote just and equitable principles of
trade, and protect investors and the public interest.
See, e.g., Nasdaq 2021 Order, 86 FR at 28172 n.47;
NYSE 2020 Order, 85 FR at 85811 n.55; NYSE 2018
Order, 83 FR at 5653 n.53; Securities Exchange Act
Release Nos. 87648 (December 3, 2019), 84 FR
67308, 67314 n.42 (December 9, 2019) (SR–
NASDAQ–2019–059); 88716 (April 21, 2020), 85 FR
23393, 23395 n.22 (April 27, 2020) (SR–NASDAQ–
2020–001).
15 See Notice, supra note 3, at 42544.
16 See id. Prospective Listing Rights would also be
subject to Section 202.05 and 202.06 of the Manual,
which would require immediate disclosure of all
material news. The Exchange believes that the
disclosure requirements would act as a significant
safeguard against illegal manipulation. See id. at
42545. In addition, the Exchange believes that such
Securities Act Registration Statements, including
disclosure about the anticipated business and
financial position of the issuer as it will exist upon
exercise of the Prospective Listing Rights, would
provide investors in the Prospective Listing Rights
with the ability to make judgments about the
anticipated value of the underlying securities by
making comparisons to the market values of
comparable listed companies. See id. The Exchange
further believes that its proposed initial and
continued listing standards would ensure trading
liquidity. See id.
VerDate Sep<11>2014
18:07 Aug 16, 2024
Jkt 262001
promptly initiate suspension and
delisting procedures with respect to the
Prospective Listing Rights if it is
determined that the underlying
securities will not be listed on the
Exchange (e.g., because the issuer has
determined to terminate the Prospective
Listing Rights because the transaction
they were intended to fund has been
terminated, or the underlying securities
are no longer eligible for listing), or if
they fail to meet its quantitative
continued listing standards, such as the
requirement that the market value of
publicly-held shares of a series of
Prospective Listing Rights be at least
$4,000,000.17
The Exchange’s proposal would
appear to permit the listing of
Prospective Listing Rights that are
issued both for value and without
consideration. The proposal also
provides no time limit on how long
Prospective Listing Rights may trade on
the Exchange before the underlying
security is listed.
The Exchange does not clearly
explain how market participants would
effectively value Prospective Listing
Rights, particularly those that are issued
without consideration, given that the
underlying securities will not be
publicly traded, and the uncertain
relationship between the exercise price
and the value of the underlying
securities. The Exchange does not
address, among other things, the types
of market information that could create
a positive value for the Prospective
Listing Rights, the reliability and
availability of such information, or
whether such information could support
fair and efficient trading of an
Exchange-listed security for an
indefinite period of time.
The Exchange also does not explain
how it would effectively address the
risk the price of Prospective Listing
Rights could be manipulated, or how its
proposal otherwise would be designed
to prevent fraudulent or manipulative
acts or practices. For example, the price
of Prospective Listing Rights would
appear to be particularly susceptible to
rumors about the target company, or the
likelihood the transaction the
Prospective Listing Rights is intended to
fund will be consummated. The
Exchange makes the general statement
that it believes its existing surveillance
procedures, including those relating to
Special Purpose Acquisition Companies
(‘‘SPACs’’), are adequate to detect
manipulative trading practices with
respect to Prospective Listing Rights.
Because Prospective Listing Rights may
trade at a very low price, however, they
17 See
PO 00000
id. at 42544.
Frm 00066
Fmt 4703
Sfmt 4703
may permit a bad actor to efficiently
manipulate those securities with little
upfront cost. The Exchange does not
clearly address how its proposal is
designed to prevent the risk that
Prospective Listing Rights may be
particularly susceptible to
manipulation.
Further, the Exchange does not clearly
explain the rationale for the various
numerical standards and criteria set
forth in its proposal, or how they
together are designed to be consistent
with the Exchange Act and the rules and
regulations thereunder. For example,
the Exchange proposes that an issuer’s
Prospective Listing Rights may initially
be listed on the Exchange if there are at
least 1,000,000 issued, but also proposes
a continued listing standard that
requires prompt initiation of suspension
and delisting procedures if the market
value of publicly-held shares of a series
of Prospective Listing Rights at any time
is less than $4,000,000. This would
imply a minimum price in these
circumstances of more than $4 per
Prospective Listing Right. The Exchange
acknowledges that it is not proposing
any initial market value or security
price requirements for the Prospective
Listing Rights, but believes that the
$4,000,000 market value continued
listing standard will ensure that
Prospective Listing Rights will not
commence trading on the Exchange
unless the market believes they have
more than nominal trading value.
Because Prospective Listing Rights may
decline in price after listing, however,
they may soon become subject to
delisting. The Exchange has not clearly
addressed how such a scenario would
be consistent with the protection of
investors and the public interest and
other relevant provisions of the
Exchange Act, or how the other
numerical standards and criteria in its
proposal have been designed to work
together to avoid similar outcomes.
In addition, to the extent Prospective
Listing Rights are issued in exchange for
consideration, the Exchange has not
explained how the offering proceeds
will be protected pending
consummation of the underlying
transaction and exercise. Similarly, the
proposal does not address how the
proceeds received by the issuer upon
exercise will be protected pending the
consummation of the underlying
transaction. Nor has the Exchange
explained what will happen to such
proceeds in the event the underlying
transaction is not consummated or it is
determined that the underlying security
otherwise will not be listed on the
Exchange. The Exchange’s rules relating
to the listing of SPACs, for example,
E:\FR\FM\19AUN1.SGM
19AUN1
ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
contain many detailed investor
protections relating to how and where
such funds will be held, and the
circumstances under which they will be
used to fund the business combination
or returned to shareholders.18 The
Exchange has not proposed that any of
these important investor protections
apply to Prospective Listing Rights, or
explained how their absence is
consistent with the protection of
investors or the public interest.
With respect to the Exchange’s
proposed change to allow issuers to
issue rights to more than existing
shareholders for a class of securities that
is listed or to be listed on the Exchange,
the Exchange justifies its proposal by
stating that it does not believe that there
is an investor protection concern that
justifies limiting rights to existing
shareholders.19 Further, the Exchange
states that Section 312.03(c) of the
Manual generally provides existing
shareholders of listed common stock the
ability to block any rights offering that
was materially dilutive of their
economic or voting interest.20 However,
that rule only covers issuances of
common stock or securities convertible
into common stock, and would not
appear to address other types of
securities that may underlie Prospective
Listing Rights. The Exchange has not
addressed these and related potential
investor protection concerns.
In addition, the Exchange states that
the exercise of the rights would be
‘‘pursuant to a registration statement
filed under the Securities Act of 1933 (a
‘Securities Act Registration Statement’)
that has been declared effective . . .
prior to or simultaneous with the listing
of such rights’’ and that such
registration statement would be updated
‘‘to reflect any material changes in the
information required to be included
therein that arise between the time of
effectiveness of the Securities Act
Registration Statement and the exercise
of the Prospective Listing Rights,
thereby ensuring that investors trading
the Prospective Listing Rights on the
Exchange will have access to current
information about the issuer on a
continuous basis.’’ 21 However, it does
not appear that the proposal contains a
requirement that an issuer file a new
registration statement or a post-effective
amendment, either of which must
include full disclosure regarding the
target’s business, as well as any required
target financial statements, at the critical
time when a target has been identified
18 See
Section 102.06 of the Manual.
Notice, supra note 3, at 42544.
20 See id. at 42545.
21 See id. at 42544.
19 See
VerDate Sep<11>2014
18:07 Aug 16, 2024
Jkt 262001
and rights holders begin making
decisions on exercising their
Prospective Listing Rights for the
underlying securities, thereby raising
investor protection concerns.22 The
mere updating of a registration
statement that registered the initial
issuance of the Prospective Listing
Rights (the ‘‘Initial Registration
Statement’’) via prospectus supplement
or incorporation by reference would
also raise investor protection concerns.
Importantly, without a new registration
statement or a post-effective amendment
to the Initial Registration Statement,
investors will not necessarily have the
protections of the private liability
provisions of the Securities Act of 1933
(‘‘Securities Act’’) when exercising their
rights for the underlying securities. A
new registration statement or posteffective amendment containing all of
the required information about the
target would provide investors with the
full liability protections of the Securities
Act. For example, the filing of a new
registration statement or post-effective
amendment would provide a new
effective date covering all of the
disclosures relating to the target
included therein. It would also permit
staff review of the new registration
statement or post-effective amendment
and would effectively restart the statute
of limitations under Section 11 of the
Securities Act, giving investors the full
advantage of the statutory window in
which to, if necessary, bring suit.
Without an explicit requirement to file
a new registration statement or posteffective amendment containing full
disclosure regarding the target’s
business, as well as any required target
financial statements, investors would
not necessarily have the disclosure
required to make an informed
investment decision or the full panoply
of remedies available under the
Securities Act for material
misstatements and omissions. Given
these important investor protection
issues, there are questions raised about
the proposal’s consistency with the
investor protection and public interest
requirements under Section 6(b)(5) of
the Exchange Act.
Accordingly, the Commission believes
there are questions as to whether the
proposal is consistent with Section
6(b)(5) of the Act and its requirements,
22 For
example, a Securities Act Registration
Statement may have been declared effective before
any information on the underlying security is
available, and it does not appear that the Exchange
proposal would require such Securities Act
Registration Statement to be amended once such
information becomes available or, alternatively, a
new Securities Act Registration Statement to be
filed.
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
67123
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and to protect investors and the
public interest, and not be designed to
permit unfair discrimination.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the Exchange Act and
the rules and regulations issued
thereunder . . . is on the self-regulatory
organization that proposed the rule
change.’’ 23 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,24 and
any failure of a self-regulatory
organization to provide this information
may result in the Commission not
having a sufficient basis to make an
affirmative finding that a proposed rule
change is consistent with the Act and
the applicable rules and regulations.25
For these reasons, the Commission
believes it is appropriate to institute
proceedings pursuant to Section
19(b)(2)(B) of the Act 26 to determine
whether the proposal should be
approved or disapproved.
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their data, views, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposed rule change is consistent with
Section 6(b)(5) of the Act 27 or any other
provision of the Act, or the rules and
regulations thereunder. Although there
do not appear to be any issues relevant
to approval or disapproval that would
be facilitated by an oral presentation of
data, views, and arguments, the
Commission will consider, pursuant to
Rule 19b–4 under the Act,28 any request
for an opportunity to make an oral
presentation.29
23 17
CFR 201.700(b)(3).
24 Id.
25 Id.
26 15
U.S.C. 78s(b)(2)(B).
U.S.C. 78f(b)(5).
28 17 CFR 240.19b–4.
29 Section 19(b)(2) of the Act, as amended by the
Securities Acts Amendments of 1975, Public Law
94–29 (June 4, 1975), grants to the Commission
27 15
E:\FR\FM\19AUN1.SGM
Continued
19AUN1
67124
Federal Register / Vol. 89, No. 160 / Monday, August 19, 2024 / Notices
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change should be
approved or disapproved by September
9, 2024. Any person who wishes to file
a rebuttal to any other person’s
submission must file that rebuttal by
September 23, 2024. The Commission
asks that commenters address the
sufficiency of the Exchange’s statements
in support of the proposal, in addition
to any other comments they may wish
to submit about the proposed rule
change. Comments may be submitted by
any of the following methods:
ddrumheller on DSK120RN23PROD with NOTICES1
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–
NYSE–2024–23 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–NYSE–2024–23. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Acts Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
VerDate Sep<11>2014
18:07 Aug 16, 2024
Jkt 262001
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSE–2024–23 and should be
submitted on or before September 9,
2024. Rebuttal comments should be
submitted by September 23, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–18474 Filed 8–16–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100719; File No. SR–
MEMX–2024–30]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule Concerning Transaction
Pricing
August 13, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that, on July 31,
2024, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposed rule change to
amend the Exchange’s fee schedule
applicable to Members 3 (the ‘‘Fee
Schedule’’) pursuant to Exchange Rules
15.1(a) and (c). The Exchange proposes
to implement the changes to the Fee
Schedule pursuant to this proposal on
August 1, 2024. The text of the proposed
rule change is provided in Exhibit 5.
30 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
1 15
PO 00000
Frm 00068
Fmt 4703
Sfmt 4703
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
Exchange 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
Exchange 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 purpose of the proposed rule
change is to amend the Fee Schedule to
modify the Non-Display Add Tiers by:
(1) decreasing the rebate and modifying
the required criteria under Non-Display
Add Tier 2; and (2) eliminating NonDisplay Add Tiers 3 and 4, as further
described below.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues,
to which market participants may direct
their order flow. Based on publicly
available information, no single
registered equities exchange currently
has more than approximately 15.5% of
the total market share of executed
volume of equities trading.4 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 2.3% of the overall
market share.5 The Exchange in
particular operates a ‘‘Maker-Taker’’
model whereby it provides rebates to
Members that add liquidity to the
Exchange and charges fees to Members
that remove liquidity from the
Exchange. The Fee Schedule sets forth
the standard rebates and fees applied
per share for orders that add and remove
4 Market share percentage calculated as of July 25,
2024. The Exchange receives and processes data
made available through consolidated data feeds
(i.e., CTS and UTDF).
5 Id.
E:\FR\FM\19AUN1.SGM
19AUN1
]]>Agencies
[Federal Register Volume 89, Number 160 (Monday, August 19, 2024)]
[Notices]
[Pages 67120-67124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18474]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100720; File No. SR-NYSE-2024-23]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Amend Section 703.12(II) of the NYSE Listed
Company Manual To Expand the Circumstances Under Which Rights May Be
Listed on the NYSE
August 13, 2024.
I. Introduction
On April 29, 2024, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Section 703.12(II) of
the NYSE Listed Company Manual (``Manual'') to expand the circumstances
under which rights may be listed on the NYSE by allowing issuers to (i)
issue rights to more than existing shareholders for a class of
securities that is listed or to be listed on the Exchange, and (ii)
list and trade rights on the Exchange prior to listing the security
into which such rights will be exercisable. The proposed rule change
was published for comment in the Federal Register on May 15, 2024.\3\
On June 26, 2024, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ The Commission has
[[Page 67121]]
received no comment letters on the proposed rule change. The Commission
is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act
\6\ to determine whether to approve or disapprove the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 100102 (May 10,
2024), 89 FR 42543 (Notice of Filing of Proposed Rule Change to
Amend Section 703.12(II) of the NYSE Listed Company Manual to Expand
the Circumstances Under Which Rights May Be Listed on the NYSE)
(``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 100437, 89 FR 54894
(July 2, 2024). The Commission designated August 13, 2024, as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to approve or disapprove,
the proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to amend Section 703.12(II) of the Manual to
expand the circumstances under which rights may be listed on the NYSE.
First, the Exchange proposes allowing issuers to issue rights to more
than existing shareholders for a class of securities that is listed or
to be listed on the Exchange. Currently, under Section 703.12(II) of
the Manual, the term ``rights'' refers to the privilege offered to
holders of record of issued equity securities to subscribe for
additional securities of the same class. Consistent with the current
rights listing requirements, the Exchange states that rights traded on
the Exchange have been limited to granting existing shareholders the
right to subscribe for additional shares of a listed class of equity
securities that such shareholders already hold.\7\ The Exchange
proposes to amend Section 703.12(II) to provide that the term
``rights'' will refer to the privilege offered recipients of such
rights to subscribe for shares of a class of securities (whether or not
equity securities) of such issuer that is listed or to be listed on the
Exchange, regardless of whether the recipients of the rights are
existing shareholders of record of such issuer.
---------------------------------------------------------------------------
\7\ See Notice, supra note 3, at 42544.
---------------------------------------------------------------------------
Second, the Exchange proposes allowing issuers to list and trade
rights on the Exchange prior to listing the security into which such
rights will be exercisable. Currently, under Section 703.12(II) of the
Manual, in order to be listed on the Exchange rights must be issued to
purchase or receive a security that is already listed on the Exchange
or that will be listed on the Exchange concurrent with the rights. The
Exchange proposes to expand the circumstances in which a right may be
listed to permit the listing of a right where the security into which
such right is exercisable will be listed on the Exchange \8\ upon
exercise of the rights and such exercise is pursuant to a registration
statement filed under the Securities Act of 1933 (a ``Securities Act
Registration Statement'') that has been declared effective by the
Commission prior to or simultaneous with the listing of such rights
(``Prospective Listing Rights''). Prospective Listing Rights would only
be eligible for listing if, at the time of initial listing, there are
(i) at least 1,000,000 Prospective Listing Rights issued, and (ii) at
least 400 public holders of round lots.\9\
---------------------------------------------------------------------------
\8\ The security underlying a Prospective Listing Right must
satisfy the applicable initial listing standards set forth in
Section 102.00 or Section 103.00 of the Manual. See id.
\9\ For purposes of Section 703.12(II), ``Public holders''
excludes holders that are directors, officers, or their immediate
families and holders of other concentrated holdings of 10 percent or
more of the total outstanding shares.
---------------------------------------------------------------------------
The Exchange will promptly initiate suspension and delisting
procedures with respect to such Prospective Listing Rights if it is
determined that (i) the security for which the Prospective Listing
Rights are exercisable will not be listed on the Exchange; (ii) the
market value of publicly-held shares of a series of Prospective Listing
Rights at any time is less than $4,000,000; or (iii) if the Prospective
Listing Rights remain outstanding at the time of the initial listing on
the Exchange of the securities into which such Prospective Listing
Rights are exercisable, the Prospective Listing Rights fail to meet all
of the initial listing requirements applicable to the listing of rights
other than Prospective Listing Rights. If the Exchange commences
delisting procedures with respect to Prospective Listing Rights, the
issuer of the Prospective Listing Rights will not be eligible to avail
itself of the provisions of Sections 802.02 and 802.03 of the Manual
and any such Prospective Listing Rights will be subject to delisting
procedures as set forth in Section 804.00 of the Manual.\10\
---------------------------------------------------------------------------
\10\ Section 804.00 of the Manual provides procedures for a
listed company to appeal an Exchange staff determination to delist a
security.
---------------------------------------------------------------------------
III. Proceedings To Determine Whether To Approve or Disapprove SR-NYSE-
2024-23 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \11\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\12\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and input from commenters with respect to, the proposed
rule change's consistency with the Act and, in particular, with Section
6(b)(5) of the Act, which requires, among other things, that the rules
of a national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, 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 not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.\13\
---------------------------------------------------------------------------
\12\ Id.
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission has consistently recognized the importance of
national securities exchange listing standards. Among other things,
such listing standards help ensure that exchange-listed companies will
have sufficient public float, investor base, and trading interest to
provide the depth and liquidity necessary to promote fair and orderly
markets.\14\
---------------------------------------------------------------------------
\14\ The Commission has stated in approving national securities
exchange listing requirements that the development and enforcement
of adequate standards governing the listing of securities on an
exchange is an activity of critical importance to the financial
markets and the investing public. In addition, once a security has
been approved for initial listing, maintenance criteria allow an
exchange to monitor the status and trading characteristics of that
issue to ensure that it continues to meet the exchange's standards
for market depth and liquidity so that fair and orderly markets can
be maintained. See, e.g., Securities Exchange Act Release Nos. 91947
(May 19, 2021), 86 FR 28169, 28172 n.47 (May 25, 2021) (SR-NASDAQ-
2020-057) (``Nasdaq 2021 Order''); 90768 (December 22, 2020), 85 FR
85807, 85811 n.55 (December 29, 2020) (SR-NYSE-2019-67) (``NYSE 2020
Order''); 82627 (February 2, 2018), 83 FR 5650, 5653 n.53 (February
8, 2018) (SR-NYSE-2017-30) (``NYSE 2018 Order''); 81856 (October 11,
2017), 82 FR 48296, 48298 (October 17, 2017) (SR-NYSE-2017-31);
81079 (July 5, 2017), 82 FR 32022, 32023 (July 11, 2017) (SR-NYSE-
2017-11). The Commission has stated that adequate listing standards,
by promoting fair and orderly markets, are consistent with Section
6(b)(5) of the Act, in that they are, among other things, designed
to prevent fraudulent and manipulative acts and practices, promote
just and equitable principles of trade, and protect investors and
the public interest. See, e.g., Nasdaq 2021 Order, 86 FR at 28172
n.47; NYSE 2020 Order, 85 FR at 85811 n.55; NYSE 2018 Order, 83 FR
at 5653 n.53; Securities Exchange Act Release Nos. 87648 (December
3, 2019), 84 FR 67308, 67314 n.42 (December 9, 2019) (SR-NASDAQ-
2019-059); 88716 (April 21, 2020), 85 FR 23393, 23395 n.22 (April
27, 2020) (SR-NASDAQ-2020-001).
---------------------------------------------------------------------------
[[Page 67122]]
As described above, the Exchange proposes to substantially expand
the types of rights that may be listed on the Exchange to include
Prospective Listing Rights, which provide the right to subscribe for
any class of securities that is intended to be listed on the Exchange
in the future, and can be offered to anyone. Today, the Exchange's
listing rules limit the rights that may be listed on the Exchange to
those that provide the right to subscribe for a class of equity
securities that is already listed on the Exchange, or will be listed
concurrently with the rights, and are offered only to holders of record
of the same class of equity securities. The Commission has concerns
about whether the proposal is sufficiently designed to prevent
fraudulent and manipulative acts and practices, promote just and
equitable principles of trade, and protect investors and the public
interest, as required by Section 6(b)(5) of the Exchange Act.
The Exchange justifies its proposal by stating that the proposed
rule change would provide issuers ``greater flexibility in structuring
a rights offering as a capital raising tool.'' \15\ The Exchange also
believes that the requirement that there be an effective Securities Act
Registration Statement in relation to the exercise of the Prospective
Listing Rights prior to or simultaneous with their listing would
provide significant investor protections, by ensuring that investors
trading or exercising the Prospective Listing Rights have access to the
appropriate level of disclosure to enable them to make informed
investment decisions.\16\ The Exchange also points out that it will
promptly initiate suspension and delisting procedures with respect to
the Prospective Listing Rights if it is determined that the underlying
securities will not be listed on the Exchange (e.g., because the issuer
has determined to terminate the Prospective Listing Rights because the
transaction they were intended to fund has been terminated, or the
underlying securities are no longer eligible for listing), or if they
fail to meet its quantitative continued listing standards, such as the
requirement that the market value of publicly-held shares of a series
of Prospective Listing Rights be at least $4,000,000.\17\
---------------------------------------------------------------------------
\15\ See Notice, supra note 3, at 42544.
\16\ See id. Prospective Listing Rights would also be subject to
Section 202.05 and 202.06 of the Manual, which would require
immediate disclosure of all material news. The Exchange believes
that the disclosure requirements would act as a significant
safeguard against illegal manipulation. See id. at 42545. In
addition, the Exchange believes that such Securities Act
Registration Statements, including disclosure about the anticipated
business and financial position of the issuer as it will exist upon
exercise of the Prospective Listing Rights, would provide investors
in the Prospective Listing Rights with the ability to make judgments
about the anticipated value of the underlying securities by making
comparisons to the market values of comparable listed companies. See
id. The Exchange further believes that its proposed initial and
continued listing standards would ensure trading liquidity. See id.
\17\ See id. at 42544.
---------------------------------------------------------------------------
The Exchange's proposal would appear to permit the listing of
Prospective Listing Rights that are issued both for value and without
consideration. The proposal also provides no time limit on how long
Prospective Listing Rights may trade on the Exchange before the
underlying security is listed.
The Exchange does not clearly explain how market participants would
effectively value Prospective Listing Rights, particularly those that
are issued without consideration, given that the underlying securities
will not be publicly traded, and the uncertain relationship between the
exercise price and the value of the underlying securities. The Exchange
does not address, among other things, the types of market information
that could create a positive value for the Prospective Listing Rights,
the reliability and availability of such information, or whether such
information could support fair and efficient trading of an Exchange-
listed security for an indefinite period of time.
The Exchange also does not explain how it would effectively address
the risk the price of Prospective Listing Rights could be manipulated,
or how its proposal otherwise would be designed to prevent fraudulent
or manipulative acts or practices. For example, the price of
Prospective Listing Rights would appear to be particularly susceptible
to rumors about the target company, or the likelihood the transaction
the Prospective Listing Rights is intended to fund will be consummated.
The Exchange makes the general statement that it believes its existing
surveillance procedures, including those relating to Special Purpose
Acquisition Companies (``SPACs''), are adequate to detect manipulative
trading practices with respect to Prospective Listing Rights. Because
Prospective Listing Rights may trade at a very low price, however, they
may permit a bad actor to efficiently manipulate those securities with
little upfront cost. The Exchange does not clearly address how its
proposal is designed to prevent the risk that Prospective Listing
Rights may be particularly susceptible to manipulation.
Further, the Exchange does not clearly explain the rationale for
the various numerical standards and criteria set forth in its proposal,
or how they together are designed to be consistent with the Exchange
Act and the rules and regulations thereunder. For example, the Exchange
proposes that an issuer's Prospective Listing Rights may initially be
listed on the Exchange if there are at least 1,000,000 issued, but also
proposes a continued listing standard that requires prompt initiation
of suspension and delisting procedures if the market value of publicly-
held shares of a series of Prospective Listing Rights at any time is
less than $4,000,000. This would imply a minimum price in these
circumstances of more than $4 per Prospective Listing Right. The
Exchange acknowledges that it is not proposing any initial market value
or security price requirements for the Prospective Listing Rights, but
believes that the $4,000,000 market value continued listing standard
will ensure that Prospective Listing Rights will not commence trading
on the Exchange unless the market believes they have more than nominal
trading value. Because Prospective Listing Rights may decline in price
after listing, however, they may soon become subject to delisting. The
Exchange has not clearly addressed how such a scenario would be
consistent with the protection of investors and the public interest and
other relevant provisions of the Exchange Act, or how the other
numerical standards and criteria in its proposal have been designed to
work together to avoid similar outcomes.
In addition, to the extent Prospective Listing Rights are issued in
exchange for consideration, the Exchange has not explained how the
offering proceeds will be protected pending consummation of the
underlying transaction and exercise. Similarly, the proposal does not
address how the proceeds received by the issuer upon exercise will be
protected pending the consummation of the underlying transaction. Nor
has the Exchange explained what will happen to such proceeds in the
event the underlying transaction is not consummated or it is determined
that the underlying security otherwise will not be listed on the
Exchange. The Exchange's rules relating to the listing of SPACs, for
example,
[[Page 67123]]
contain many detailed investor protections relating to how and where
such funds will be held, and the circumstances under which they will be
used to fund the business combination or returned to shareholders.\18\
The Exchange has not proposed that any of these important investor
protections apply to Prospective Listing Rights, or explained how their
absence is consistent with the protection of investors or the public
interest.
---------------------------------------------------------------------------
\18\ See Section 102.06 of the Manual.
---------------------------------------------------------------------------
With respect to the Exchange's proposed change to allow issuers to
issue rights to more than existing shareholders for a class of
securities that is listed or to be listed on the Exchange, the Exchange
justifies its proposal by stating that it does not believe that there
is an investor protection concern that justifies limiting rights to
existing shareholders.\19\ Further, the Exchange states that Section
312.03(c) of the Manual generally provides existing shareholders of
listed common stock the ability to block any rights offering that was
materially dilutive of their economic or voting interest.\20\ However,
that rule only covers issuances of common stock or securities
convertible into common stock, and would not appear to address other
types of securities that may underlie Prospective Listing Rights. The
Exchange has not addressed these and related potential investor
protection concerns.
---------------------------------------------------------------------------
\19\ See Notice, supra note 3, at 42544.
\20\ See id. at 42545.
---------------------------------------------------------------------------
In addition, the Exchange states that the exercise of the rights
would be ``pursuant to a registration statement filed under the
Securities Act of 1933 (a `Securities Act Registration Statement') that
has been declared effective . . . prior to or simultaneous with the
listing of such rights'' and that such registration statement would be
updated ``to reflect any material changes in the information required
to be included therein that arise between the time of effectiveness of
the Securities Act Registration Statement and the exercise of the
Prospective Listing Rights, thereby ensuring that investors trading the
Prospective Listing Rights on the Exchange will have access to current
information about the issuer on a continuous basis.'' \21\ However, it
does not appear that the proposal contains a requirement that an issuer
file a new registration statement or a post-effective amendment, either
of which must include full disclosure regarding the target's business,
as well as any required target financial statements, at the critical
time when a target has been identified and rights holders begin making
decisions on exercising their Prospective Listing Rights for the
underlying securities, thereby raising investor protection
concerns.\22\ The mere updating of a registration statement that
registered the initial issuance of the Prospective Listing Rights (the
``Initial Registration Statement'') via prospectus supplement or
incorporation by reference would also raise investor protection
concerns. Importantly, without a new registration statement or a post-
effective amendment to the Initial Registration Statement, investors
will not necessarily have the protections of the private liability
provisions of the Securities Act of 1933 (``Securities Act'') when
exercising their rights for the underlying securities. A new
registration statement or post-effective amendment containing all of
the required information about the target would provide investors with
the full liability protections of the Securities Act. For example, the
filing of a new registration statement or post-effective amendment
would provide a new effective date covering all of the disclosures
relating to the target included therein. It would also permit staff
review of the new registration statement or post-effective amendment
and would effectively restart the statute of limitations under Section
11 of the Securities Act, giving investors the full advantage of the
statutory window in which to, if necessary, bring suit. Without an
explicit requirement to file a new registration statement or post-
effective amendment containing full disclosure regarding the target's
business, as well as any required target financial statements,
investors would not necessarily have the disclosure required to make an
informed investment decision or the full panoply of remedies available
under the Securities Act for material misstatements and omissions.
Given these important investor protection issues, there are questions
raised about the proposal's consistency with the investor protection
and public interest requirements under Section 6(b)(5) of the Exchange
Act.
---------------------------------------------------------------------------
\21\ See id. at 42544.
\22\ For example, a Securities Act Registration Statement may
have been declared effective before any information on the
underlying security is available, and it does not appear that the
Exchange proposal would require such Securities Act Registration
Statement to be amended once such information becomes available or,
alternatively, a new Securities Act Registration Statement to be
filed.
---------------------------------------------------------------------------
Accordingly, the Commission believes there are questions as to
whether the proposal is consistent with Section 6(b)(5) of the Act and
its requirements, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
and to protect investors and the public interest, and not be designed
to permit unfair discrimination.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
self-regulatory organization that proposed the rule change.'' \23\ The
description of a proposed rule change, its purpose and operation, its
effect, and a legal analysis of its consistency with applicable
requirements must all be sufficiently detailed and specific to support
an affirmative Commission finding,\24\ and any failure of a self-
regulatory organization to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\25\
---------------------------------------------------------------------------
\23\ 17 CFR 201.700(b)(3).
\24\ Id.
\25\ Id.
---------------------------------------------------------------------------
For these reasons, the Commission believes it is appropriate to
institute proceedings pursuant to Section 19(b)(2)(B) of the Act \26\
to determine whether the proposal should be approved or disapproved.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with Section 6(b)(5) of the Act \27\ or any other
provision of the Act, or the rules and regulations thereunder. Although
there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of data,
views, and arguments, the Commission will consider, pursuant to Rule
19b-4 under the Act,\28\ any request for an opportunity to make an oral
presentation.\29\
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78f(b)(5).
\28\ 17 CFR 240.19b-4.
\29\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
[[Page 67124]]
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by September 9, 2024. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
September 23, 2024. The Commission asks that commenters address the
sufficiency of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change. 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-NYSE-2024-23 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-NYSE-2024-23. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSE-2024-23 and should be
submitted on or before September 9, 2024. Rebuttal comments should be
submitted by September 23, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
---------------------------------------------------------------------------
\30\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18474 Filed 8-16-24; 8:45 am]
BILLING CODE 8011-01-P
