FR 2024-29149

Overview

The document presents a proposal by the New York Stock Exchange (NYSE) to alter its fee structure, specifically targeting limited partnerships that are at least 40% owned by another company already listed on the Exchange. This proposal, filed on November 26, 2024, introduces a flat annual listing fee for these affiliated limited partnerships, aiming to reflect the cost efficiencies achieved through shared management and resources. The Securities and Exchange Commission (SEC) is soliciting public comments on this notice before it takes further action.

Significant Issues

One significant issue arising from the proposal is the potential perception of preferential treatment. By instituting a flat fee lower than what these partnerships might otherwise pay, the Exchange could appear to favor companies with such affiliations over those that are independently listed. This might lead to concerns that unaffiliated partnerships could be unfairly burdened by higher fees.

Another concern is the complexity of the document's language, especially in the sections discussing statutory basis and competition. The complex terms might make it hard for some stakeholders, especially those without a legal or financial background, to fully grasp the implications of the rule change.

Furthermore, the document lacks detailed justification for setting the flat fee at the existing minimum fee levels. Without a clear financial analysis, stakeholders may find it difficult to understand the rationale behind the expected cost savings.

Impact on the Public and Stakeholders

The proposed change may have broad implications for those involved in or affected by stock market listings. Generally, the public relies on fair market practices to ensure a free and open market where all companies have an equal opportunity to succeed. Adjustments in listing fees can indirectly influence market dynamics and the perceived fairness of the exchange.

For specific stakeholders, such as companies already listed on the NYSE with affiliated limited partnerships, the proposed rule offers a positive impact in the form of reduced fees, which could lower operating costs and increase their competitive advantage. On the other hand, companies without such affiliations might be negatively impacted if they perceive this as an unequal fee structure, potentially leading them to explore alternative exchanges for their listings.

Compliance and Public Engagement

The process for applying for the reduced fee could present challenges. Issuers need to provide proof of their eligibility by the first trading day of the calendar year, which may become a logistical hurdle, particularly for newly listed entities.

The document explicitly mentions that no public comments were received initially, hinting at a possible lack of engagement or awareness about the proposed rule change. It emphasizes the importance of public participation in regulatory processes like these to ensure transparency and fair input from all relevant parties.

Conclusion

In summary, while the NYSE’s proposal aims to address efficiencies and enhance competitiveness, it raises concerns about fairness and transparency. The rule change could have uneven effects on different market participants, favoring those with existing affiliations while potentially disadvantaging others. Moving forward, increased public dialogue and clearer justifications for the proposed fees could help in assuaging concerns and improving the proposal’s reception.

The document discusses a proposed rule change by the New York Stock Exchange (NYSE) to establish a flat annual listing fee for limited partnerships that are at least 40% owned by another company listed on the Exchange. This new fee structure represents a significant shift from the previous approach where fees were calculated on a per-share basis.

Financial Summary

Currently, the NYSE charges a minimum annual fee for listed entities. For a primary class of common shares, the minimum fee is $80,000. For any additional class of common shares, the minimum fee is $20,000. The proposed rule change aims to implement this minimum fee model for Affiliated Limited Partnerships, which would possibly lead to cost savings for such partnerships. The document suggests that this streamlined fee structure will better align the fees with the reduced costs incurred by the NYSE in managing these listings due to overlapping management and board members between affiliated entities.

Financial Allocations and Issues

The proposal to establish a flat fee tied to the current minimum fee rates suggests a potential financial relief for affiliated limited partnerships, as they are likely to benefit from reduced listing costs. However, this proposal raises concerns regarding preferential treatment. Unaffiliated limited partnerships might perceive that they are at a disadvantage, as they would continue to be charged based on the traditional per-share basis, which could potentially lead to higher fees.

Additionally, the document highlights that there was no mention of public comments, which could indicate a lack of engagement or feedback from those potentially affected by these financial changes. It's important for stakeholders, especially unaffiliated partnerships, to express any concerns or opposition to ensure that the fee structure remains fair and equitable across different entities.

Furthermore, while the document outlines the implementation of a flat fee, it lacks a detailed financial analysis or rationale for why this fee level specifically was chosen. This absence of detailed financial justification could limit transparency and make it challenging for stakeholders to understand the anticipated cost savings and whether such savings justify the proposed fee structure.

Compliance Challenges

The requirement for partnerships to demonstrate eligibility for the reduced fee by the first trading day of the calendar year could pose a timing challenge, especially for new listings that might not have enough time to prepare and submit the necessary proofs. This could potentially delay their ability to benefit from the reduced fees, emphasizing the need for clear guidelines and support from the NYSE to facilitate compliance with these new financial requirements.

In summary, the proposed financial allocations through a flat fee system for certain partnerships highlight a shift intended to reflect cost efficiencies. However, issues of equity, transparency, and compliance readiness need to be addressed to ensure that the changes serve the interests of all market participants fairly.