FR 2021-00817

General Summary

The Securities and Exchange Commission (SEC) has approved a change proposed by the New York Stock Exchange (NYSE) that extends the duration of complimentary products and services provided to newly listed and transferred companies. Previously, these companies were eligible for these services for two years, but now this period will be four years. The services include market surveillance, web hosting, and other support offerings that are essential for companies navigating public listing requirements and operations. The proposal aims to enhance NYSE's competitiveness against other exchanges, notably Nasdaq, which offers similar benefits.

Significant Issues and Concerns

One of the main issues is the potential increase in costs for the NYSE due to the extended period of complimentary services. This could raise questions about how efficiently the resources are being used and whether this move will impact the exchange's financial health in the long run.

There are also concerns regarding the selection of third-party vendors who provide these complementary services. The document does not clarify how these vendors are chosen, which could lead to questions about neutrality and fairness in vendor selection.

Additionally, the distinction between Tier A and Tier B companies—based on their global market value—may be perceived as unfairly benefiting larger companies. While the document states that within each tier, companies will receive equal treatment, smaller companies might feel disadvantaged from the start.

Broad Public Impact

For the general public, particularly investors and market participants, the document suggests that the NYSE is actively working to stay competitive, which can be seen as a positive development. A competitive exchange can attract more listings, including potentially more successful and innovative companies, possibly leading to better investment opportunities.

However, potential investors may need to be aware of how these extended complimentary services could influence the selection and sustainability of companies listed on the exchange, especially if they are smaller firms that may not benefit as equally as larger firms.

Impact on Specific Stakeholders

For companies considering listing on the NYSE, the extended period of complimentary services is undoubtedly beneficial. It provides them more time to utilize vital services at no additional cost, potentially easing their public debut and continued compliance efforts.

On the other hand, third-party vendors stand to gain from the extended agreements, assuming they maintain contracts with the NYSE to provide these services. However, without transparency in the vendor selection process, concerns about fairness and competition could arise within the vendor community.

Furthermore, existing listed companies that do not qualify for this extended benefit might feel disadvantaged, which might lead to concerns about equitable treatment across all NYSE-listed entities.

Overall, the document reflects an endeavor by the NYSE to maintain competitiveness in a fiercely contested market. While it offers considerable advantages to new and transferring companies, it must balance the interests of other stakeholders and ensure transparency and equitable treatment across all parameters.

In the reviewed document, financial references primarily focus on the complimentary services offered by the New York Stock Exchange (NYSE) to certain companies. The rule change extends the period during which these services are provided, reflecting significant monetary values associated with each service.

Financial Summary

The NYSE provides a variety of complimentary products and services to eligible companies, with specific financial metrics highlighted:

• Whistleblower hotline services have a commercial value of approximately $4,000 annually.
• For certain eligible issuers, the Exchange provides:
• Market surveillance products and services valued at approximately $55,000 annually.
• Web-hosting services valued at approximately $16,000 annually.
• Web-casting services valued at approximately $6,500 annually.
• Market analytics products and services valued at approximately $30,000 annually.
• News distribution products and services valued at approximately $20,000 annually.

These services will now be extended from 24 months to 48 months for both new listings and transfer companies under the proposed amendment. This decision involves significant financial allocations, potentially influencing how the NYSE allocates resources and budgets for these extended provisions.

Relation to Identified Issues

The extended period for complimentary services results in increased financial outlays, which raise certain concerns:

1. Resource Allocation: Extending the services to 48 months could result in substantial increases in costs for the NYSE. This might raise questions about how the Exchange manages its resources and whether the decision effectively balances financial sustainability with competitive pressures.

2. Vendor Selection Transparency: The document implies that these services are provided by third-party vendors, but it lacks clarity on the selection criteria for these vendors. Without transparency, this could give rise to questions regarding potential favoritism or lack of competitive bidding processes.

3. Market Value Distinctions: Companies classified into Tier A (with a global market value of $400 million or more) and Tier B (less than $400 million) demonstrate that financial considerations are integral to service eligibility. While the tiers aim to provide equitable service access within each group, the scale may still be perceived as favoring larger entities. This can be contentious if not clearly justified within the broader competitive context.

4. Comparison with Competitors: The mention of Nasdaq’s similar four-year complimentary service offering for companies with a market capitalization of at least $750 million underscores how competitive dynamics influence these financial allocations. However, whether such extensions genuinely enhance competitiveness or merely align with the standard offerings remains an open question.

In conclusion, the document outlines significant financial undertakings by the NYSE to provide value to listed companies, although it also reflects certain transparency and equity issues in its implementation. The monetary references highlight both the potential benefits and challenges associated with these financial decisions.