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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39672; File No. SR-NYSE-98-04]

Self-Regulatory Organizations; Notice of Filing and Immediate

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

Inc., Relating to the Reimbursement of Member Organizations for Costs

Incurred in the Transmission of Proxy and Other Shareholder

Communication Material

February 17, 1998.

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

(``Act''),\1\ notice is hereby given that on February 12, 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 modify 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 incurred by NYSE

member organizations for the processing of proxy materials and other

issuer communications with respect to security holders whose securities

are held in street name.

The Exchange proposes to reduce one of the fee reimbursement

guidelines \2\ that concerns charges for initial proxy and/or annual

report mailings. In addition, the Exchange proposes to extend the pilot

regarding the Rules, which currently is due to expire on May 13, 1998,

through July 31, 1998.\3\

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\2\ The specific fees listed in Rule 451 also are listed in

Paragraph 402.10 of the Exchange's Listed Company Manual. The

proposed rule change makes conforming changes to that paragraph.

\3\ See Securities Exchange Act Release No. 38406 (Mar. 14,

1997), 62 FR 13922 (Mar. 24, 1997) (the ``Previous Filing''). The

Previous Filing contains a detailed description regarding the

background and history of the Rules.

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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

Among other things, the Previous Filing lowered the reimbursement

guidelines, created incentive fees to eliminate duplicative mailings,

and established a supplemental fee for intermediaries that coordinate

multiple nominees. The Commission approved the Previous Filing as a

one-year pilot, and designated May 13, 1998, as the date of expiration.

The purpose of the proposed rule change is to lower the rate of

reimbursement for mailing each set of initial proxies and annual

reports from $.55 to $.50. The Exchange is proposing this lower fee

based on the experience over the last year, which indicates that the

lower fee better approximates proxy handling costs. This reduced fee

would be effective through the end of the current pilot period.

In addition, the pilot period presently is scheduled to expire in

the midst of the current proxy season, on May 13, 1998. The proposed

rule change would extend the pilot period through the end of the

current proxy season to July 31, 1998.\4\

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\4\ On February 6, 1998, the Exchange submitted a companion

filing to this proposed rule change that would extend the pilot

period through June 30, 2001. See SR-NYSE-98-05.

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2. Statutory Basis

The Exchange believes the proposed rule change is consistent with

Section 6(b)(4) of the Act \5\ 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) \6\ 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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\5\ 15 U.S.C. 78f(b)(4).

\6\ 15 U.S.C. 78f(b)(5).

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[[Page 9276]]

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 (or such shorter time period as designated by the Commission), the

proposed rule change has become effective pursuant to Section

19(b)(3)(A) of the Exchange Act \7\ and Rule 19b-4(e)(6) \8\

thereunder.

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\7\ 15 U.S.C. 78s(b)(3)(A).

\8\ 17 CFR 240.19b-4(e)(6).

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A proposed rule change filed pursuant to 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) \9\ 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, in order

to allow the fee reduction to be available for the 1998 proxy season,

that the Commission designate such shorter time period so that the

proposed rule change may take effect immediately upon its filing.

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\9\ 17 CFR 240.19b-4(e)(6)(iii).

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The Commission finds that the proposed rule change is consistent

with the protection of investors and the public interest and therefore

has determined to make the proposed rule change effective immediately

upon filing. The proposed rule change reduces the reimbursement fee

which Exchange member organizations are entitled to receive for mailing

initial proxies and annual reports. The fee reduction should benefit

issuers and public investors in the form of lower costs and expenses.

The fee reduction is based upon the Exchange's experience during the

pilot period and should better reflect the actual costs incurred by

member organizations.

The proposed rule change also extends the expiration date of the

pilot period from May 13, 1998, through July 31, 1998. The Commission

recognizes that the current expiration date intersects the time period

when proxy materials traditionally are distributed to shareholders. As

a result, member organizations would potentially be reimbursed at two

different rates--the rates established by the Previous Filing, and the

rates in effect prior to the implementation of the Previous Filing (the

default rates)--if the expiration date were not extended. The

Commission believes such a result would be confusing and

counterproductive. The Commission also believes the extension of the

expiration date will enable the Exchange to evaluate the effectiveness

of the reimbursement guidelines based on their application during an

entire proxy season.

The Commission notes that the pilot period reimbursement guidelines

were conditionally approved in the Previous Filing following a full

notice and comment period. As part of its approval, the Commission

carefully considered all submitted comments concerning the pilot

reimbursement guidelines and their impact on affected parties.

Furthermore, the Exchange provided the Commission with advance written

notice of the proposed rule change and implemented changes in responses

to staff comments. Therefore, the Commission believes it is reasonable

that the proposed rule change become immediately effective upon the

date of filing, February 12, 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-98-04 and should be

submitted by March 17, 1998.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\10\

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\10\ 17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98-4573 Filed 2-23-98; 8:45 am]

BILLING CODE 8010-01-M