Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices 15747 

10 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. 

4NYSE-listed limited partnerships would still be 

subject to the Exchange’s shareholder approval 

requirements for equity compensation plans. See 

NYSE Listed Company Manual Sections 303A.08 

and 312.03(a). 5See supra note 4. 

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. 

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

Number SR–NSX–2007–03 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–NSX–2007–03. 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 the filing also will be 

available for inspection and copying at 

the principal office of NSX. 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–NSX–2007–03 and should 

be submitted on or before April 23, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5988 Filed 3–30–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55528; File No. SR–NYSE–

2007–28] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Exempt Limited Partnerships From 

Certain of Its Shareholder Approval 

Rules 

March 26, 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 March 9, 

2007, New York Stock Exchange LLC 

(the ‘‘NYSE’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule changes as described in 

Items I, II, and III below, which items 

have been substantially prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule changes 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s Listed Company Manual 

(the ‘‘Manual’’) to exempt limited 

partnerships from the obligation to 

obtain shareholder approval under the 

circumstances set forth in Sections 

312.03(b), (c), and (d) for the issuance of 

common stock and securities 

convertible into or exchangeable for 

common stock.4

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nyse.com, the Office of 

the Secretary, the Exchange 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 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 

NYSE 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 Exchange proposes to exempt 

limited partnerships from the obligation 

to obtain shareholder approval under 

the circumstances set forth in Manual 

Sections 312.03(b), (c), and (d) for the 

issuance of common stock and 

securities convertible into or 

exchangeable for common stock.5

Subject to certain exceptions specified 

therein, Manual Sections 312.03(b), (c), 

and (d) require listed issuers to obtain 

shareholder approval prior to the 

issuance of common stock or securities 

convertible into or exchangeable for 

common stock in any transaction or 

series of related transactions in the 

following situations: 

• Where the potential dilution exceeds 

either one percent of the number of shares of 

common stock or one percent of the voting 

power outstanding before the issuance to: (a) 

a director, officer or substantial security 

holder of the company (each a ‘‘Related 

Party’’); (b) a subsidiary, affiliate or other 

closely-related person of a Related Party; or 

(c) any company or entity in which a Related 

Party has a substantial direct or indirect 

interest. 

• If the Related Party involved in a 

transaction covered by the preceding bullet is 

classified as such solely because such person 

is a substantial security holder, and if the 

issuance relates to a sale of stock for cash at 

a price at least as great as each of the book 

and market value of the issuer’s common 

stock, then shareholder approval will not be 

required unless the number of shares of 

common stock to be issued, or unless the 

number of shares of common stock into 

which the securities may be convertible or 

exercisable, exceeds either five percent of the 

number of shares of common stock or five 

percent of the voting power outstanding 

before the issuance. 

• If: (a) the common stock has, or will have 

upon issuance, voting power equal to or in 


hsrobinson on PROD1PC76 with NOTICES
15748 Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices 

6See 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 Securities 

Exchange Act Release No. 30811 (June 15, 1992); 57 

FR 28542 (June 25, 1992) (SR–NASD–91–58) 

(approving the NASD’s adoption of nonquantitative listing standards for partnerships, 

which did not include shareholder approval 

requirements). See also Securities 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). 

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

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

excess of 20 percent of the voting power 

outstanding before the issuance of such stock 

or of securities convertible into or exercisable 

for common stock; or (b) the number of 

shares of common stock to be issued is, or 

will be upon issuance, equal to or in excess 

of 20 percent of the number of shares of 

common stock outstanding before the 

issuance of the common stock or of securities 

convertible into or exercisable for common 

stock. 

• If the issuance will result in a change of 

control of the issuer. 

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 similar shareholder 

approval requirements to those of the 

NYSE. However, Nasdaq exempts 

limited partnerships (‘‘LPs’’) from those 

requirements,6 which the Exchange 

believes has placed it 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 Exchange believes that 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 the 

Exchange 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, the Exchange 

believes that 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 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) 7 of the Act 

in general, and furthers the objectives of 

Section 6(b)(5),8 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 purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the Exchange consents, 

the Commission will: 

(A) By order approve such proposed 

rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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. 

Comments may be submitted by any of 

the following methods: 


hsrobinson on PROD1PC76 with NOTICES
Federal Register / Vol. 72, No. 62 / Monday, April 2, 2007 / Notices 15749 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(5). 

5See Securities Exchange Act Release No. 55398 

(March 5, 2007), 72 FR 11072 (March 12, 2007) (SR–

NYSE–2007–25). 

6See Regulation NMS Rule 612, 17 CFR 242.612, 

which permits markets to accept bids, offers, orders 

and indications of interest in increments smaller 

than a $0.01, but not less than $0.0001, for stocks 

priced below $1.00 per share and to quote and trade 

such stocks in sub-pennies. Markets may choose not 

to accept such bids, offers, orders or indications of 

interest and the NYSE has done so, maintaining a 

minimum trading and quoting variation of $0.01 for 

all securities trading below $100,000. See NYSE 

Rule 62. 

7See 17 CFR. 242.600(b)(4). 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an e-mail to 

rulecomments@sec.gov. Please include 

File Number SR–NYSE–2007–28 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–NYSE–2007–28. 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 filing also will be 

available for inspection and copying at 

the principal office of the NYSE. 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–NYSE–2007–28 and should 

be submitted on or before April 23, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5964 Filed 3–30–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55537; File No. SR–NYSE–

2007–30] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Rule 123D (Openings and Halts in 

Trading) 

March 27, 2007. 

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 March 19, 

2007, the New York Stock Exchange 

LLC (‘‘NYSE’’ or the ‘‘Exchange’’) 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 substantially prepared by the 

Exchange. The NYSE has filed this 

proposal pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(5) 

thereunder,4 which renders it 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 

The NYSE proposes to amend NYSE 

Rule 123D(3) to establish that any orders 

received by the NYSE in a security 

subject to a ‘‘Sub-penny Trading’’

condition will be routed to NYSE Arca, 

Inc. (‘‘NYSE Arca’’) and handled in 

accordance with the rules governing 

that market. The text of the proposed 

rule change is available at the 

Exchange’s Office of the Secretary, on 

the Exchange’s Web site at http:// 

www.nyse.com/ 

Frameset.html?displayPage=http:// 

apps.nyse.com/commdata/pub19b4.nsf/ 

rulefilings?openview, 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 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 

Recently, the Exchange amended 

NYSE Rule 123D to add subsection (3),5

which provides for a non-regulatory 

trading halt on the NYSE when 

securities listed on the Exchange 

approach the price at which quoting and 

trading in sub-penny increments is 

permitted pursuant to SEC Rules.6

Pursuant to NYSE Rule 123D(3), 

whenever a security trading on the 

Exchange is reported on the 

consolidated tape during normal trading 

hours as having traded at a price of 

$1.05 or less, or if a security would open 

on the Exchange at a price of $1.05 or 

less, trading in the security on the 

Exchange shall be immediately halted 

due to a ‘‘Sub-penny Trading’’

condition. Once halted for such reason, 

trading shall not resume on the 

Exchange until the security has traded 

on another automated trading center as 

defined in Commission Rule 600(b)(4) 7

for at least one entire trading day at a 

price or prices that are at all times at or 

above $1.10. Any such resumption of 

trading shall occur at the beginning of 

a trading day, so that normal opening 

procedures can apply. In contrast to 

other trading halts described in NYSE 

Rule 123D, a ‘‘Sub-penny Trading’’ halt 

is automatic and does not require the 

approval of any Floor Officials. 

However, if a determination is made by 

a Floor Official that a trade that 

triggered a halt because of a ‘‘Sub-penny 

Trading’’ condition was made in error or 

otherwise was an anomaly, trading of 

the security on the Exchange will 

resume immediately. 

The purpose of this filing is to amend 

NYSE Rule 123D(3) to reflect that orders 

entered with the Exchange in a security 

subject to a ‘‘Sub-penny Trading’’


hsrobinson on PROD1PC76 with NOTICES