12240 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 55191 

(January 29, 2007), 72 FR 5305 (February 5, 2007). 

4 15 U.S.C. 78f(b)(5). 

5 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

6 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4 

4 15 U.S.C. 78s(b)(3)(A). 

5 17 CFR 240.19b–4(f)(6). 

6This filing does not in any way limit the 

applicability of the provisions of NYSE Arca 

Equities Rule 5.2(i) to limited partnership rollups 

(as defined in Section 14(h) of the Securities 

Exchange Act of 1934) or the continued 

applicability of any other rule that is currently 

applicable to LPs. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55426; File No. SR–ISE–

2007–01] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Approving a Proposed 

Rule Change Relating to Rule 2113 

(Long and Short Sales) 

March 8, 2007. 

On January 5, 2007, pursuant to 

Section 19(b)(1) of the Securities 

Exchange Act of 1934 (the ‘‘Act’’),1 and 

Rule 19b–4 thereunder,2 the 

International Securities Exchange, LLC 

(the ‘‘Exchange’’ or the ‘‘ISE’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change relating to NASD 

Rule 2113 (Long and Short Sales). The 

proposed rule change was published for 

comment in the Federal Register on 

February 5, 2007.3 The Commission 

received no comments regarding this 

proposal. This order approves the rule 

change. 

Discussion and Commission Findings 

The Exchange proposes to amend ISE 

Rule 2113 (Long and Short Sales) to 

conform its language to Rule 10a–

1(a)(1)(i) promulgated under the Act. 

Specifically, Rule 2113 (Long and Short 

Sales) currently provides that the 

Exchange will not execute a short sale 

order below the price at which the last 

sale was effected on the Exchange. The 

Exchange proposes to amend ISE Rule 

2113 to conform its language to Rule 

10a–1(a)(1)(i) promulgated under the 

Act, whereby the Exchange will not 

execute a short sale order below the 

price at which the last sale was reported 

pursuant to an effective transaction 

reporting plan, as defined in Rule 

242.600 under the Act. 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange, and in particular Section 

6(b)(5) of the Act 4 which requires that 

the rules of an exchange be designed to 

promote just and equitable principles of 

trade, serve to remove impediments to 

and perfect the mechanism for a free 

and open market and a national market 

system, and, in general, to protect 

investors and the public interest.5

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (SR–ISE–2007–01) 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.6

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–4691 Filed 3–14–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55423; File No. SR–

NYSEArca–2007–21] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to an Exemption 

from Certain of the Exchange’s 

Shareholder Approval Requirements 

for Limited Partnerships 

March 8, 2007. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on February 

23, 2007, NYSE Arca, Inc. (the 

‘‘Exchange’’), through its wholly owned 

subsidiary, NYSE Arca Equities, Inc. 

(‘‘NYSE Arca Equities’’), filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been 

substantially prepared by Exchange. The 

Exchange has designated this proposal 

as non-controversial under Section 

19(b)(3)(A)(iii) of the Act 4 and Rule 

19b–4(f)(6) thereunder,5 which renders 

the proposed rule change effective upon 

filing with the Commission. 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 

NYSE Arca is proposing to exempt 

limited partnerships (‘‘LPs’’) from the 

obligations to obtain shareholder 

approval for the issuance of common 

stock and related securities in the 

circumstances set forth in subsections 

(8) through (11) of NYSE Arca Equities 

Rule 5.3(d). The text of this proposed 

rule change is available on the 

Exchange’s Web site (http:// 

www.nyse.com/

RegulationFrameset.html? 

displayPage=http://www.nysearca.com/

nysearca_reg/prf.asp), at the Exchange’s 

Office of the Secretary, and at the 

Commission’s Public Reference Room. 

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 changes and 

discussed any comments it received 

regarding the proposal. 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 

NYSE Arca is proposing to exempt 

limited partnerships (‘‘LPs’’) from the 

obligations to obtain shareholder 

approval for the issuance of common 

stock and related securities in the 

circumstances set forth in subsections 

(8) through (11) of NYSE Arca Equities 

Rule 5.3(d).6 The proposed amendment 

does not affect investors in any 

currently listed company, as there are 

currently no LPs listed on the Exchange. 

Subsections (8) through (11) of NYSE 

Arca Equities Rule 5.3(d) require listed 

issuers to obtain shareholder approval 

prior to the issuance of designated 

securities in the following situations: 

• Issuances that will result in a 

change of control of the issuer. 

• In connection with the acquisition 

of the stock or assets of another 

company, shareholder approval is 

needed in the following circumstances: 

• If any director, officer, or 

substantial shareholder of the listed 

company has a 5% or greater interest (or 

such persons collectively have a 10% or 

greater interest), directly or indirectly, 

in the company or assets to be acquired 

or in the consideration to be paid in the 

transaction (or series of related 


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Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices 12241 

7See Nasdaq Marketplace Rule 4360 (‘‘Qualitative 

Listing Requirements for Nasdaq Issuers That Are 

Limited Partnerships’’), which does not include the 

shareholder approval requirements found in Nasdaq 

Marketplace Rule 4350 (‘‘Qualitative Listing 

Requirements for Nasdaq Issuers That Are Not 

Limited Partnerships’’). See also Exchange Act 

Release No. 30811 (June 15, 1992); 57 FR 28542 

(June 25, 1992) (SR–NASD–91–58) (approving the 

NASD’s adoption of non-quantitative listing 

standards for partnerships, which did not include 

shareholder approval requirements). See also 

Exchange Act Release No. 34533 (August 15, 1994); 

59 FR 43147 (August 22, 1994) (SR–NASD–93–3) 

(approving the NASD’s adoption of the predecessor 

rule to Rule 4360, which also did not include 

shareholder approval requirements for listed 

limited partnerships). 

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

9 9 15 U.S.C. 78f(b)(5). 

transactions) and the present or 

potential issuance of common stock, or 

securities convertible into or exercisable 

for common stock, could result in an 

increase in outstanding common shares 

or voting power of 5% or more; or 

• Where the present or potential 

issuance of common stock, or securities 

convertible into or exercisable for 

common stock (other than in a public 

offering for cash), could result in an 

increase in outstanding common shares 

of 20% or more or could represent 20% 

or more of the voting power outstanding 

before the issuance of such stock or 

securities. 

• In connection with a transaction 

other than a public offering involving: 

• The sale or issuance by the 

company of common stock (or securities 

convertible into or exercisable for 

common stock) at a price less than the 

greater of book or market value, which 

together with sales by officers, directors 

or principal shareholders of the 

company equals 20% or more of 

presently outstanding common stock, or 

20% or more of the presently 

outstanding voting power; or 

• The sale or issuance by the 

company of common stock (or securities 

convertible into or exercisable for 

common stock) equal to 20% or more of 

presently outstanding stock or voting 

power for less than the greater of book 

or market value of the stock. 

The policy underlying these 

requirements is that shareholders 

should have the right to vote on any 

issuance of common stock that is 

materially dilutive of either their voting 

or economic interest in the company. 

Nasdaq has essentially identical 

shareholder approval requirements to 

those of the NYSE Arca. However, 

Nasdaq exempts LPs from those 

requirements,7 which has placed NYSE 

Arca at a significant disadvantage in 

competing with Nasdaq for initial 

public offerings and transfers of LPs. To 

be treated as a partnership for federal 

tax purposes, an LP must ensure that 

90% of its income is derived from 

‘‘qualified sources,’’ which generally 

refers only to income derived from 

natural resource-related activities. Most 

listed LPs are engaged in energy-related 

businesses. The typical business model 

of LPs in the energy industry is to use 

their capital to acquire assets (e.g., 

pipelines) that produce predictable 

revenue streams and to commit in their 

partnership agreements to distribute 

most of their profits to the LP’s unit 

holders. These LPs acquire assets 

frequently on an opportunistic basis and 

pay for them by issuing additional LP 

units. The ability of an LP listed on 

Nasdaq to issue additional LP units 

without the expense and uncertainty of 

obtaining shareholder approval provides 

Nasdaq with a significant advantage 

over NYSE Arca in attracting and 

retaining listings of LPs. 

The Exchange believes that an 

analysis of the policies regarding voting 

and economic dilution underpinning its 

shareholder approval requirements 

demonstrates that it is appropriate to 

exempt LPs from their application. 

Listed LPs generally provide very 

limited voting rights to their unit 

holders. Typically, control of the LP 

resides with the general partner (‘‘GP’’) 

and the LP’s board is that of the GP. The 

owner of the GP appoints the board and 

the common unit holders of the LP have 

no voting rights with respect to the 

election of directors. LP partnership 

agreements generally provide that LP 

unit holders can vote only on a merger 

or dissolution of the LP or on any 

amendment to the partnership 

agreement that is adverse to their 

interests. As such, investors who buy LP 

units have no expectation that they will 

be able to vote and, therefore, the policy 

that shareholders should be able to vote 

on any stock issuances that are 

materially dilutive of their voting power 

is of less relevance to LPs than to 

regular corporations. Furthermore, 

because LP unit holders generally do 

not have the right to elect directors, 

most LPs do not hold annual meetings. 

Therefore, it would not be possible for 

an LP to arrange for shareholder 

approval to be obtained in conjunction 

with an annual meeting, as would be 

possible for a regular company. Rather, 

an LP would have to call a special 

meeting every time it needed approval 

of an issuance pursuant to the 

shareholder approval rules. 

The Exchange also believes that the 

economic dilution concerns 

underpinning the shareholder approval 

rules are also less relevant in the case 

of LPs. Listed LPs typically are required 

under their partnership agreements to 

distribute almost all of their earnings to 

their unit holders and specify a 

minimum quarterly distribution that the 

LP is required to make. As such, LPs 

will only invest in new assets if they 

know that those assets will be 

sufficiently accretive to earnings to pay 

the minimum quarterly distribution 

required for the additional units that are 

sold to raise the capital to pay for those 

assets. A failure to pay the minimum 

quarterly distribution, or a reduction in 

the actual distribution level historically 

paid, would likely, in the Exchange’s 

view, have a negative effect on the 

trading price of a listed LP, imposing a 

market discipline on management to 

ensure that any additional issuances 

will not be economically dilutive. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) 8 of the Act 

in general, and furthers the objectives of 

Section 6(b)(5) 9 in particular in that it 

is 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 

facilitating transactions in securities, 

and to remove impediments to and 

perfect the mechanisms of a free and 

open market and a national market 

system. The Exchange believes that the 

proposed rule change will increase 

competition among listing markets and 

will remove a competitive disadvantage 

the Exchange currently has vis a vis 

Nasdaq and is therefore designed to 

perfect the mechanism of a free and 

open market. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the proposed rule change 

does not: (1) Significantly affect the 

protection of investors or the public 

interest; (2) impose any significant 

burden on competition; and (3) become 

operative for 30 days after the date of 


rmajette on PROD1PC67 with NOTICES
12242 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). Rule 19b–4(f)(6)(iii) 

requires hat a self-regulatory organization submit to 

the Commission written notice of its intent to file 

the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

satisfied this requirement. 

13 17 CFR 240.19b–4(f)(6)(iii). 

14For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s on efficiency, competition, and 

capital formation. See 15 U.S.C. 78c(f). 

15See NYSE Arca Rule 5.3(d)(1)–(7) (setting forth 

the Exchange’s rules with respect to shareholder 

approval of equity compensation plans). The 

proposed rule change would only eliminate the 

application of subparagraphs (8) through (11) to 

Rule 5.3(d) to limited partnerships. The 

Commission believes that it is desirable for the 

Exchange to have retained the requirements 

pertaining to shareholder approval of equity 

compensation plans for NYSEArca–listed limited 

partnerships. 16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 54978 

(December 20, 2006), 71 FR 78254. 

4 In Amendment No. 3, Phlx clarified (1) in its fee 

schedule that a retail broker dealer is conducting a 

material portion of its business via one or more 

Internet Web sites if at least 20% of the brokerdealer’s business were conducted via the Internet; 

and (2) that the current and closing index values 

underlying all of Phlx’s proprietary indexes are 

being disseminated through PBOT. 

the filing, or such shorter time as 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 10 and 

Rule 19b–4(f)(6) thereunder.11

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. 

A proposed rule change normally may 

not become operative prior to 30 days 

after the date of filing.12 However, Rule 

19b–4(f)(iii) 13 permits the Commission 

to designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the 30 day operative delay is 

consistent with the protection of 

investors and the public interest.14 The 

Commission notes that because there are 

no LPs presently listed on the NYSE 

Arca, there are no shareholders 

retroactively or currently impacted by 

the proposed rule change. Further, the 

proposed rule change will eliminate the 

competitive disadvantage to the NYSE 

Arca resulting from the present 

disparity in shareholder approval 

requirements between the NYSE Arca’s 

and Nasdaq’s treatment of LPs, while 

still retaining for NYSE Arca-listed LPs 

the provisions of the Exchange’s rules 

relating to shareholder approval of 

equity compensation plans.15

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended, is consistent with 

the Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2007–21 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to file 

Number SR–NYSEArca–2007–21. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro/shtml). 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 filings will also be 

available for inspection and copying at 

the principal office of the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File number 

SR–NYSEArca–2007–21 and should be 

submitted by April 5, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–4692 Filed 3–14–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55424; File No. SR–Phlx–

2006–63] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Notice of Filing of Amendment No. 3 to 

the Proposed Rule Change, and Order 

Granting Accelerated Approval of 

Proposed Rule Change as Amended, 

Relating to a Philadelphia Board of 

Trade Enterprise License Fee for 

Dissemination of Certain Market Data 

March 8, 2007. 

I. Introduction 

On September 28, 2006, the 

Philadelphia Stock Exchange, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposal to add an 

Enterprise License Fee of $10,000 per 

year or $850 per month that would be 

assessed by the Exchange’s wholly 

owned subsidiary, the Philadelphia 

Board of Trade (‘‘PBOT’’), on eligible 

market data vendors or subvendors 

(collectively ‘‘Vendors’’) for certain 

index values that subscribers receive 

over PBOT’s Market Data Distribution 

Network (‘‘MDDN’’). The Phlx filed 

Amendment No. 1 to the proposed rule 

change on November 1, 2006 and filed 

Amendment No. 2 on December 20, 

2006. The proposed rule change, as 

amended, was published for comment 

in the Federal Register on December 28, 

2006.3 The Phlx filed Amendment No. 

3 to the proposed rule change on March 

2, 2007.4 The Commission received no 

comments regarding the proposal. The 

Commission hereby issues notice of the 

filing of Amendment No. 3 and 

simultaneously grants accelerated 

approval to the proposed rule change as 

amended. 

II. Description of the Proposal 

The Phlx proposes to add an 

Enterprise License Fee for eligible 

Vendors of market data disseminated 


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