Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the New York Stock Exchange, Inc., Extending the Pilot Rules Governing the Reimbursement of Member Organizations for Costs Incurred in the Transmission of Proxy and Other Shareholder Communication Material

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40289; File No. SR-NYSE-98-23]

Self-Regulatory Organizations; Notice of Filing and Immediate

Effectiveness of Proposed Rule Change by the New York Stock Exchange,

Inc., Extending the Pilot Rules Governing the Reimbursement of Member

Organizations for Costs Incurred in the Transmission of Proxy and Other

Shareholder Communication Material

July 31, 1998.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on July 29, 1998, the New

York Stock Exchange, Inc. (the ``Exchange'' or ``NYSE'') filed with the

Securities and Exchange Commission (``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.

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\1\ 15 U.S.C. 78s(b)(1)

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I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The Exchange seeks to extend the current pilot period regarding

Exchange Rule 451, ``Transmission of Proxy Material,'' and Exchange

Rule 465, ``Transmission of Interim Reports and Other Material''

(collectively the ``Rules''). The Rules establish guidelines for the

reimbursement of expenses by NYSE issuers to NYSE member organizations

for the processing and delivery of proxy materials and other issuer

communications to security holders whose securities are held in street

name. The present pilot period regarding the Rules is scheduled to

expire on July 31, 1998. The Exchange proposes to extend the pilot

period through October 31, 1998.

The text of the proposed rule change is available at the Office of

the Secretary, the Exchange, and at the Commission.

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 ``Initial Filings'' \2\ revised the Rules to lower certain

reimbursement guidelines, create incentive fees to eliminate

duplicative mailings, and establish a supplemental fee for

intermediaries that coordinate multiple nominees. The Commission

approved the Initial Filing as a one-year pilot, and designated May 13,

1998, as the date of expiration. In the ``February Filing,'' \3\ the

Exchange extended the pilot period through July 31, 1998, and lowered

one rate of reimbursement.\4\ This proposed rule change would extend

the pilot period through the end of the current proxy season, October

31, 1998.

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\2\ See Securities Exchange Act Release No. 38406 (Mar. 14,

1997), 62 FR 13922 (Mar. 24, 1997). The Initial Filing contains a

detailed description regarding the background and history of the

Rules.

\3\ See Securities Exchange Act Release No. 39672 (Feb. 17,

1998), 63 FR 9034 (Feb. 23, 1998).

\4\ The February Filing lowered the rate of reimbursement for

mailing each set of initial proxies and annual reports from $.55 to

$.50.

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The extension of the pilot period would give the Commission

additional time to consider the ``March Filing,'' \5\ without a lapse

in the current rules. In the March Filing, the Exchange proposed a

change to the Rules regarding ``householding'' and proposed extending

the pilot period through June 30, 2001. Thus, absent an extension of

the pilot period, the fees in effect prior to the February Filing would

return to effectiveness, creating confusion among NYSE member

organizations and issuers. Furthermore, the extension will provide the

Exchange's independent auditor with additional time to finish its

review of the impact of the pilot fee structure and will provide the

Commission with an opportunity to review that Audit Report.\6\

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\5\ See Securities Exchange Act Release No. 39774 (Mar. 19,

1998), 63 FR 14745 (Mar. 26, 1998).

\6\ As noted in the March Filing, the Exchange committed to

undertake an independent audit of the pilot fee structure during the

1998 proxy season.

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2. Statutory Basis

The Exchange believes the proposed rule change is consistent with

Section 6(b)(4) of the Act \7\ in that it provides for the equitable

allocation of reasonable dues, fees, and other charges among its

members and other persons using its facilities. The Exchange further

believes that the proposed rule change satisfies the requirement under

Section 6(b)(5) \8\ that an exchange have rules that are designed to

prevent fraudulent and manipulative acts and practices; promote just

and equitable principles of trade; foster cooperation and coordination

with persons engaged in regulating, clearing, settling, processing

information with respect to, and facilitating transactions in

securities; remove impediments to and perfect the mechanism of a free

and open market and a national market system; and, in general, protect

investors and the public interest.

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\7\ 15 U.S.C. 78f(b)(4).

\8\ 15 U.S.C. 78f(b)(5).

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

The Exchange believes 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

The Exchange has not solicited, and does not intend to solicit,

comments on the proposed rule change. The Exchange has not 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 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) the Exchange

provided the Commission with written notice of its intent to file the

proposed rule change at least five business days prior to the filing

date; the proposed rule change has become effective pursuant to Section

19(b)(3)(A) of the Exchange Act \9\ and Rule 19b-4(e)(6) \10\

thereunder.

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\9\ 15 U.S.C. 78s(b)(3)(A).

\10\ 17 CFR 240.19b-4(e)(6).

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A proposed rule change filed under Rule 19b-4(e)(6) normally does

not become operative prior to 30 days after the date of filing.

However, Rule 19b-4(e)(6)(iii) \11\ permits the Commission to designate

such shorter time if such action is consistent with the protection of

investors and the public interest. The Exchange has requested that the

Commission designate such shorter time

[[Page 42653]]

period so that the proposed rule change may take effect immediately

upon its filing. The immediate effectiveness would: (i) make the fee

reduction regarding the distribution of each set of initial proxies and

annual reports available for the remainder of the 1998 proxy season;

(ii) provide the Commission with sufficient time to complete its review

of the March Filing, and analyze the Audit Report concerning the pilot

fee structure that will be prepared by the Exchange's independent

auditor; and (iii) allow the current pilot fee structure to continue

uninterrupted.

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\11\ 17 CFR 240.19b-4(e)(6)(iii).

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The Commission, consistent with the protection of investors and the

public interest, has determined to make the proposed rule change

effective immediately upon filing for the following reasons. The

proposed rule change would make the fee reduction regarding the

distribution of each set of initial proxies and annual reports

available for the remainder of the 1998 proxy season. This fee

reduction should continue to benefit NYSE issuers and public investors

in the form of lower costs and expenses. As the Commission noted in the

March Filing, the fee reduction is based upon the Exchange's experience

with the reimbursement guidelines and better reflects the actual costs

incurred by NYSE member organizations.

The proposed rule change also extends the expiration date of the

pilot period from July 31, 1998, through October 31, 1998. The

extension of the pilot will provide the Commission with additional time

to complete its review of the March Filing \12\ and the opportunity to

further evaluate the proposal. Furthermore, the current pilot period is

due to expire before the estimated date on which the Exchange hopes to

deliver to the Commission the Audit Report examining the proxy

distribution process with respect to securities held in street name.

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\12\ The Commission received approximately 42 comment letters on

the March Filing. As part of its review of the March Filing, the

Commission will consider the substance of those comment letters.

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The Commission also notes that the current pilot period's

expiration date falls within the time period when proxy materials

traditionally are distributed to shareholders. As a result, NYSE member

organizations would potentially be reimbursed at two different rates--

the rates established by the Initial Filing, and the rates in effect

prior to the implementation of the Initial Filing (the default rates)--

if the expiration date were not extended. The Commission believes it is

reasonable that the proposed rule change become immediately effective

upon the date of filing, July 29, 1998.

At any time within 60 days of the filing of the proposed rule

change, the Commission may summarily abrogate such rule change if it

appears to the Commission that such action is necessary or appropriate

in the public interest, for the protection of investors, or otherwise

in furtherance of the purposes of the Act.

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, N.W., Washington, D.C. 20549.

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 Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such filing will also be available

for inspection and copying at the principal office of the Exchange. All

submissions should refer to File No. SR-NYSE-98-23 and should be

submitted by August 31, 1998.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\13\

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\13\ 17 CFR 200.30-3(a)(12).

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Jonathan G. Katz,

Secretary.

[FR Doc. 98-21277 Filed 8-7-98; 8:45 am]

BILLING CODE 8010-01-M