01-22240. Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange, Inc.; Extending the Pilot Fee Structure Governing the Reimbursement of Member Organizations for Costs Incurred ...

August 29, 2001.

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 August 13, 2001, the New York Stock Exchange, Inc. (“Exchange” or “NYSE”) 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 NYSE. 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 NYSE is proposing to extend the pilot fee structure (“Pilot Fee Structure”) regarding Exchange Rules 451 and 465 (the “Rules”).^[3] Among other things, the Rules establish guidelines for the reimbursement of expenses by NYSE issuers to NYSE member organizations for the processing of proxy materials and other issuer communications (collectively, “Material”) with respect to security holders whose securities are held in street name. The current pilot period regarding the Rules is scheduled to expire on September 1, 2001.^[4] NYSE proposes extending the pilot through April 1, 2002.

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

I. Purpose

Among other things, the Pilot Fee Structure lowers certain guidelines concerning the reimbursement of fees for the distribution of Material, creates incentive fees to eliminate duplicative mailings, and establishes a supplemental fee for intermediaries that coordinate multiple nominees. The proposed rule change would extend the Pilot Fee Structure's termination date from September 1, 2001, to April 1, 2002.

An extension of the Pilot Fee Structure will give the Commission additional time to consider the pilot program, without a lapse in the current Rules. Absent an extension of the Pilot Fee Structure, the fees in effect prior to the pilot program would return to effectivness after September 1, 2001, which could create confusion in the market.^[5]

2. Basis

The Exchange believes that the basis under the Act for the proposed rule change is the requirement under Section 6(b)(4) of the Act ^[6] that an exchange have rules that provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. In addition, the Exchange believes that the basis for the proposed rule change is the requirement under Section 6(b)(5) of the Act ^[7] that an exchange have rules that are 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others

NYSE has engaged in an on-going dialogue regarding the Pilot Fee Structure as well as other aspects of its proxy reimbursement guidelines with Commission staff as well as with the Proxy Voting Review Committee, which is a private initiative designed to review the proxy process that includes representatives of the securities industry, corporate issuers, institutional investors, NYSE and the largest provider of proxy intermediary services. The only written comment received by NYSE is a copy of a letter sent to the Commission from the Proxy Voting Review Committee, which unanimously supports NYSE's request for the extension.^[8] NYSE has not otherwise solicited, and does not intend to solicit, comments on this proposed rule change. NYSE has not otherwise received any unsolicited written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) does not become operative for 30 days after the date of filing, or such shorter time that the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act ^[9] and Rule 19b-4(f)(6) ^[10] thereunder.^[11]

A proposed rule change filed under Rule 19b-4(f)(6) may not become operative prior to 30 days after the date of filing or such shorter time as the Commission may designate if such action is consistent with the protection of investors and the public interest. NYSE seeks to have the proposed rule change become operative on or before September 1, 2001, in order to allow the Pilot Fee Structure to continue in effect on an uninterrupted basis.

The Commission, consistent with the protection of investors and the public interest, has determined to make the proposed rule change to extend the Pilot Fee Structure until April 1, 2002 operative immediately. The extension of the Pilot Fee Structure will provide the Commission with additional time to review and evaluate the pilot fees. Further, the Commission notes that it received a letter from the Proxy Review Committee, which supports the NYSE's extension request.^[12]

The Commission notes that unless the current expiration date of the Pilot Fee Structure is extended, the reimbursement rates for Material distributed after September 1, 2001, will revert to those in effect prior to March 14, 1997. The Commission believes that such a result could be confusing and counterproductive.

Based on these reasons, the Commission believes that it is consistent with the protection of investors and the public interest that the proposed rule change become operative immediately through April 1, 2002. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such proposed 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.

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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. All submissions should refer to File No. SR-NYSE-2001-22 and should be submitted by September 26, 2001.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[13]

Jonathan G. Katz,

Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  The text of NYSE Rule 451 also is included at Paragraph 402.10(A) of the Exchange's Listed Company Manual.

4.  See Securities Exchange Act Release No. 43603 (November 21, 2000), 65 FR 75751 (December 4, 2000).

5.  The Commission notes that a Proxy Voting review Committee was established as a private initiative to review the proxy voting process, which includes fees. The Committee has been meeting and plans to ultimately submit a report to the Commission, self-regulatory organizations, and the public. Accordingly, the extension will provide additional time to consider the committee's comments on this issue. See also Item II.C. infra.

6.  15 U.S.C. 78f(b)(4).

7.  15 U.S.C. 78f(b)(5).

8.  See letter from Stephen P. Norman, Chairman, Proxy Review Committee, to Kelly Riley, Division of Market Regulation, SEC, dated August 10, 2001.

9.  15 U.S.C. 78s(b)(3)(A).

10.  17 CFR 240.19b-4(f)(6).

11.  As required under Rule 19b-4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change.

12.  See note 8 supra.

13.  17 CFR 200.30-3(a)(12).