25824 Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 

5See, e.g., New York Stock Exchange Price List 

2007 at http://www.nyse.com/pdfs/2007pricelist.pdf 

(itemizing numerous registration, regulation, and 

trading rights fees); NASD By-Laws Schedule A, 

Section 1 at http://nasd.complinet.com/n nasd/

display/display.html?rbid=1189&element_

id=1159000126; Chicago Stock Exchange Fees and 

Assessments at http://wallstreet.cch.com/CHXtools/ 

PlatformViewer.asp?SelectedNode=chp_1_

1&manual=/CHX/Admin/chx-feesandassessments/. 

6 15 U.S.C. 78f. 

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

8 15 U.S.C. 78s(b)(3)(A)(ii). 

9 17 CFR 240.19b–4(f)(2). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

warranted to ensure that its monthly 

and annual membership fees fund a 

greater portion of the cost of regulating 

the Nasdaq market. Nasdaq believes that 

even with the fee increase, the cost of 

Nasdaq membership is generally lower 

than the cost of membership in other 

SROs.5 In this regard, it is particularly 

notable that unlike other SROs, Nasdaq 

does not charge annual registration fees 

for each of a firm’s registered 

representatives. 

Nasdaq is also deleting language from 

Rule 7001 that waived the application 

fee for NASD members applying for 

Nasdaq membership prior to August 1, 

2006. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,6 in 

general, and with Section 6(b)(4) of the 

Act,7 in particular, in that it provides for 

the equitable allocation of reasonable 

dues, fees and other charges among 

members and issuers and other persons 

using any facility or system which 

Nasdaq operates or controls. Nasdaq 

believes that an increased monthly 

trading rights fee is a reasonable and 

equitable method of ensuring that its 

monthly and annual membership fees 

fund a greater portion of the cost of 

regulating the Nasdaq market, and that 

the overall cost of Nasdaq membership 

is reasonable as compared with the cost 

of membership in other SROs. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received form 

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 

The foregoing proposed rule change 

has become effective upon filing with 

the Commission pursuant to Section 

19(b)(3)(A)(ii) of the Act 8 and Rule 19b–

4(f)(2) thereunder,9 in that the proposed 

rule change establishes or changes a 

member due, fee, or other charge 

imposed by the self-regulatory 

organization. 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. 

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–NASDAQ–2007–044 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–NASDAQ–

2007–044. 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 Nasdaq. 

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–NASDAQ–2007–044 and 

should be submitted on or before May 

29, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8596 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55687; File No. SR–NYSE–

2007–27] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Amendment No. 3 to 

Proposed Rule Change and Order 

Granting Accelerated Approval to 

Proposed Rule Change, as Modified by 

Amendments No. 1, 2, and 3 Thereto, 

To Adopt Generic Listing Standards 

for Index-Linked Securities 

May 1, 2007. 

I. Introduction 

On March 9, 2007, the New York 

Stock Exchange LLC (‘‘NYSE’’ 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 proposed rule change to 

adopt generic listing standards for 

equity index-linked securities (‘‘Equity 

Index-Linked Securities’’), commoditylinked securities (‘‘Commodity-Linked 

Securities’’), and currency-linked 

securities (‘‘Currency-Linked 

Securities’’ and, together with Equity 

Index-Linked Securities and 

Commodity-Linked Securities, ‘‘IndexLinked Securities’’). On April 4, 2007, 

Exchange filed Amendment No. 1 to the 

proposed rule change. On April 5, 2007, 

the Exchange filed Amendment No. 2 to 

the proposed rule change. The proposed 

rule change, as amended, was published 

for comment in the Federal Register on 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25825 

3See Securities Exchange Act Release No. 55600 

(April 9, 2007), 72 FR 18712 (‘‘Notice’’). 

4 In Amendment No. 3 to the proposed rule 

change, the Exchange clarified the eligibility criteria 

for component securities comprising the 

Underlying Index (as defined herein) for Equity 

Index-Linked Securities, broadened the requirement 

for surveillance procedures, including adequate 

comprehensive surveillance sharing agreements, for 

all Index-Linked Securities, and represented that 

Exchange trading rules governing the Index-Linked 

Securities would be identified and disclosed in the 

Information Memorandum. 

5See 17 CFR 240.19b–4(e)(1). 

6When relying on Rule 19b–4(e), the SRO must 

submit Form 19b–4(e) to the Commission within 

five business days after the SRO begins trading the 

new derivative securities products. See Securities 

Exchange Act Release No. 40761 (December 8, 

1998), 63 FR 70952 (December 22, 1998). 

7Some Index-Linked Securities may provide for 

‘‘contingent’’ protection of the principal amount, 

whereby the principal protection may disappear if 

the Underlying Index at any point in time during 

the life of such security reaches a certain 

predetermined level. 

8 ‘‘Tangible net worth’’ is defined as total assets, 

less intangible assets and total liabilities. 

Intangibles include non-material benefits such as 

goodwill, patents, copyrights, and trademarks. 

9 If the Index-Linked Securities are fully and 

unconditionally guaranteed by an affiliate of the 

issuer, the Exchange will rely on such affiliate’s 

tangible net worth for purposes of these 

requirements and will include in its calculation all 

Index-Linked Securities that are fully and 

unconditionally guaranteed by such affiliate. 

10See 17 CFR 240.10A–3 (setting forth the listing 

standards relating to audit committees). 

11See NYSE Rule 86 (establishing rules and 

standards with respect to the Exchange’s electronic 

system, known as ‘‘NYSE Bonds,’’ for receiving, 

processing, executing, and reporting bids, offers, 

and executions in bonds). In addition, this 

requirement will not be applicable if the issue 

provides for the redemption of Index-Linked 

Securities at the option of the holders on at least 

a weekly basis. See Notice, supra note 3, 72 FR at 

18713 (describing the purpose of weekly 

redemption rights of Index-Linked Securities and 

the rationale behind this exception to the minimum 

holder requirement). 

12 15 U.S.C. 78s(b)(2). 

April 13, 2007 for a 15-day comment 

period.3 The Commission received no 

comments on the proposal. On April 26, 

2007, the Exchange filed Amendment 

No. 3 to the proposed rule change.4 This 

order approves the proposed rule 

change, as modified by Amendments 

No. 1, 2, and 3, on an accelerated basis. 

II. Description of the Proposal 

As explained more fully in the Notice, 

the Exchange proposes to add new 

Section 703.22 to its Listed Company 

Manual (the ‘‘Manual’’) to provide 

generic listing standards to permit the 

listing and trading of Index-Linked 

Securities pursuant to Rule 19b–4(e) 

under the Act.5 This proposal will 

enable the Exchange to list and trade 

Index-Linked Securities pursuant to 

Rule 19b–4(e) of the Act if each of the 

conditions set forth in proposed Section 

703.22 of the Manual is satisfied. Rule 

19b–4(e) provides that the listing and 

trading of a new derivative securities 

product by a self-regulatory organization 

(‘‘SRO’’) shall not be deemed a proposed 

rule change, pursuant to paragraph 

(c)(1) of Rule 19b–4, if the Commission 

has approved, pursuant to Section 19(b) 

of the Act, the SRO’s trading rules, 

procedures, and listing standards for the 

product class that would include the 

new derivatives securities product, and 

the SRO has a surveillance program for 

the product class.6

Index-Linked Securities 

Index-Linked Securities are designed 

for investors who desire to participate in 

a specific market segment by providing 

exposure to one or more identifiable 

underlying securities, commodities, 

currencies, derivative instruments, or 

market indexes of the foregoing (the 

‘‘Underlying Index’’ or ‘‘Underlying 

Indexes’’). Index-Linked Securities are 

the non-convertible debt of an issuer 

that have a term of at least one year, but 

not greater than thirty years, and are 

tied to the performance of the 

Underlying Index. Index-Linked 

Securities may or may not make interest 

payments based on dividends or other 

cash distributions paid on the securities 

comprising the Underlying Index or 

Indexes to the holder during their term. 

Despite the fact that Index-Linked 

Securities are linked to an Underlying 

Index, each will trade as a single, 

exchange-listed security. 

The proposed generic listing 

standards will not be applicable to 

Index-Linked Securities with respect to 

which the payment at maturity is based 

on a multiple of the negative 

performance of an Underlying Index or 

Indexes. An Index-Linked Security may 

or may not provide ‘‘principal 

protection,’’ i.e., a minimum guaranteed 

amount to be repaid.7 In addition, 

Index-Linked Securities do not give the 

holder any right to receive a portfolio 

component, dividend payments, or any 

other ownership right or interest in the 

portfolio or underlying components 

comprising the Underlying Index. 

Pursuant to proposed Section 703.22 of 

the Manual, the current or composite 

value of the Underlying Index will be 

widely disseminated at least every 15 

seconds during the trading day. 

Proposed General Listing Criteria for 

Index-Linked Securities 

The Exchange will apply the 

following requirements to all issuers of 

Index-Linked Securities: 

• If the issuer is a NYSE-listed 

company, the entity must be a company 

in good standing (i.e., meets NYSE’s 

applicable continued listing criteria); if 

the issuer is an affiliate of a NYSE-listed 

company, the NYSE-listed company 

must be a company in good standing; if 

not listed, the issuer must meet the size 

and earnings requirements of Sections 

102.01–102.03 or Sections 103.01–

103.05 of the Manual. Sovereign issuers 

will be evaluated on a case-by-case 

basis. 

• The issuer will be expected to have 

a minimum tangible net worth 8 of 

$250,000,000. In the alternative, the 

issuer will be expected: (i) To have a 

minimum tangible net worth of 

$150,000,000 and (ii) not to issue IndexLinked Securities, the original issue 

price of which, combined with all the 

issuer’s other Index-Linked Securities 

listed on a national securities exchange, 

exceeds 25% of the issuer’s tangible net 

worth at the time of issuance.9

• The issuer must be in compliance 

with Rule 10A–3 under the Act.10

In addition, the Exchange will apply 

the following requirements to each issue 

of Index-Linked Securities: 

• The issue must have a minimum 

public distribution of at least 1 million 

units and a minimum of 400 holders, 

except if traded on the NYSE Bonds 

system and the applicable NYSE Bonds 

listing and trading standards are 

satisfied; 11

• The issue must have a principal 

amount/aggregate market value of not 

less than $4 million; 

• The issue must have a term of at 

least one year, but not greater than thirty 

years; 

• The issue must be the nonconvertible debt of the issuer; and 

• The issue must not base its payment 

at maturity on a multiple of the negative 

performance of an Underlying Index or 

Indexes, although the payment at 

maturity may or may not provide for a 

multiple of the positive performance of 

an Underlying Index or Indexes. 

Listing Standards for Equity IndexLinked Securities 

Equity Index-Linked Securities would 

be subject to the criteria in proposed 

Section 703.22(B)(I) of the Manual for 

initial and continued listing. For an 

Underlying Index to be appropriate for 

the initial listing of an Equity IndexLinked Security, such Underlying Index 

must comprise at least ten component 

securities of different issuers. The 

Underlying Index must also either: (i) 

Be approved for the trading of options 

or other derivative securities by the 

Commission under Section 19(b)(2) of 

the Act 12 and rules thereunder, and the 

conditions set forth in the Commission’s 

approval order, including 

comprehensive surveillance sharing 


pwalker on PROD1PC71 with NOTICES
25826 Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 

13See Notice, supra note 3, 72 FR at 18713–18714 

(providing, among others, detailed eligibility 

requirements of the component securities 

comprising the Underlying Index based on 

minimum market value, trading volume, and 

certain dollar weight percentages). 

14See 17 CFR 242.600(b)(47). 

15Proposed Section 703.22 of the Manual 

provides for certain exceptions to the continued 

listing criteria of Equity Index-Linked Securities 

based on certain numerical requirements and 

percentages with respect to the component 

securities comprising the Underlying Index. See 

Notice, supra note 3, 72 FR at 18714. 

16 15 U.S.C. 78s(b)(2). 

17Commodity Reference Asset is defined as one 

or more physical commodities or commodity 

futures, options, or other commodity derivatives, 

Commodity Trust Shares (as defined in NYSE Rule 

1300B), or a basket or index of any of the foregoing. 

18Currency Reference Asset is defined as one or 

more currencies, or options, currency futures, or 

other currency derivatives, Currency Trust Shares 

(as defined in NYSE Rule 1300A), or a basket or 

index of any of the foregoing. 

19 15 U.S.C. 78s(b)(2). 

20 In the case of a Commodity Reference Asset, 

the pricing information for each component thereof 

must be derived from a market which is an ISG 

member or affiliate or with which the Exchange has 

a comprehensive surveillance sharing agreement. In 

the case of a Currency Reference Asset, the pricing 

information for each component thereof must be 

either (1) the generally accepted spot price for the 

currency exchange rate in question or (2) derived 

from a market which (a) is an ISG member or 

affiliate or with which the Exchange has a 

comprehensive surveillance sharing agreement and 

(b) is the pricing source for components of a 

Currency Reference Asset that has previously been 

approved by the Commission. 

agreements for non-U.S. stocks, 

continue to be satisfied, or (ii) satisfy 

certain eligibility standards, rebalancing 

obligations, and empirical requirements 

based on market value, trading volume, 

and dollar weight percentages.13 In 

particular, all component securities 

comprising the Underlying Index for 

Equity Index-Linked Securities must 

either be: (A) securities (other than 

foreign country securities and American 

Depository Receipts (‘‘ADRs’’), that are 

(1) issued by an Act reporting company 

which is listed on a national securities 

exchange and (2) NMS stocks, as 

defined in Rule 600 of Regulation 

NMS,14 or (B) foreign country securities 

or ADRs, provided that foreign country 

securities or foreign country securities 

underlying ADRs having their primary 

trading market outside the United States 

on foreign trading markets that are not 

members of the Intermarket 

Surveillance Group (‘‘ISG’’) or parties to 

comprehensive surveillance sharing 

agreements with the Exchange will not, 

in the aggregate, represent more than 

20% of the dollar weight of the 

Underlying Index. 

In connection with an Equity IndexLinked Security, the Exchange would 

commence delisting or removal 

proceedings if any of the standards set 

forth in the initial eligibility criteria are 

not continuously maintained 15 or an 

Underlying Index fails to satisfy the 

maintenance standards or conditions for 

such Underlying Index or Indexes as set 

forth by the Commission in its order 

under Section 19(b)(2) of the Act 16

approving the Underlying Index for the 

trading of options or other derivatives. 

The Exchange would also commence 

delisting or removal proceedings of an 

Equity Index-Linked Security if: (1) The 

aggregate market value or the principal 

amount of the Equity Index-Linked 

Securities publicly held is less than 

$400,000; (2) the value of the 

Underlying Index or composite value of 

the Underlying Indexes is no longer 

calculated and widely disseminated on 

at least a 15-second basis during the 

time the Equity Index-Linked Securities 

trade on the Exchange; or (3) such other 

event occurs or condition exists which, 

in the opinion of the Exchange, makes 

further dealings on the Exchange 

inadvisable. 

Listing Standards for CommodityLinked and Currency-Linked Securities 

Commodity-Linked and CurrencyLinked Securities would be subject to 

the criteria in proposed Sections 

703.22(B)(II) and 703.22(B)(III) of the 

Manual, respectively, for initial and 

continued listing. Each issue of 

Commodity-Linked or Currency-Linked 

Securities must meet either of the 

following initial listing standards: 

• The Commodity Reference Asset 17

or Currency Reference Asset,18 as the 

case may be, to which the 

corresponding security is linked shall 

have been reviewed and approved for 

the trading of Commodity Trust Shares 

(in the case of Commodity-Linked 

Securities) or Currency Trust Shares (in 

the case of Currency-Linked Securities), 

options, or other derivatives by the 

Commission under Section 19(b)(2) of 

the Act 19 and rules thereunder, and the 

conditions set forth in the Commission’s 

approval order, including with respect 

to comprehensive surveillance sharing 

agreements, continue to be satisfied; or 

• The pricing information for each 

component of a Commodity Reference 

Asset or Currency Reference Asset, as 

the case may be, must be derived from 

certain required sources.20

With respect to each of the 

Commodity-Linked and CurrencyLinked Securities, the value of the 

Commodity Reference Asset or Currency 

Reference Asset, as the case may be, 

must be calculated and widely 

disseminated on at least a 15-second 

basis during the time the corresponding 

Commodity-Linked or Currency-Linked 

Securities trade on the Exchange. In 

addition, if the Commodity-Linked or 

Currency-Linked Securities are 

periodically redeemable, the indicative 

value of the subject Commodity-Linked 

or Currency-Linked Securities, as the 

case may be, must be calculated and 

widely disseminated by one or more 

major market data vendors on at least a 

15-second basis during the time such 

securities trade on the Exchange. 

The Exchange would commence 

delisting or removal proceedings if any 

of the initial listing criteria described 

above for each of the CommodityLinked or Currency-Linked Securities, 

as applicable, is not continuously 

maintained. Notwithstanding the 

foregoing, an issue of CommodityLinked or Currency-Linked Securities 

would not be delisted for a failure to 

have in place comprehensive 

surveillance sharing agreements if the 

Commodity Reference Asset or Currency 

Reference Asset, as the case may be, has 

at least 10 components, and the 

Exchange has comprehensive 

surveillance sharing agreements with 

respect to at least 90% of the dollar 

weight of such Commodity Reference 

Asset or Currency Reference Asset. The 

Exchange would also commence 

delisting or removal proceedings if: (1) 

The aggregate market value or the 

principal amount of the CommodityLinked or Currency-Linked Securities 

publicly held is less than $400,000; (2) 

the value of the Commodity Reference 

Asset or Currency Reference Asset, as 

the case may be, is no longer calculated 

or available and a new corresponding 

Commodity or Currency Reference Asset 

is substituted, unless the new 

corresponding Commodity or Currency 

Reference Asset meets the requirements 

of proposed Section 703.22; or (3) such 

other event occurs or condition exists 

which, in the opinion of the Exchange, 

makes further dealings on the Exchange 

inadvisable. 

Exchange Rules Applicable to IndexLinked Securities 

Index-Linked Securities traded on the 

Exchange’s equity trading floor will be 

subject to all Exchange rules governing 

the trading of equity securities. The 

Exchange’s equity margin rules and the 

Exchange’s regular trading hours (9:30 

a.m. to 4 p.m. Eastern Time) will apply 

to transactions in Index-Linked 

Securities. However, Index-Linked 

Securities traded on the NYSE Bonds 

system will be subject to the rules 

applicable to such securities traded on 

that system. 

Information Memorandum 

The Exchange represents that it will 

prepare and distribute, if appropriate, 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25827 

21The Exchange states that NYSE Rules 1300B(b) 

and Rule 1301B provide for certain conflict-ofinterest restrictions on specialist firms transacting 

in components of a Commodity Reference Asset, or 

any derivative instrument thereon, with respect to 

any issue of Commodity-Linked Securities. 

Similarly, a proposed rule change to NYSE Rules 

1300A and 1301A seeks to impose similar 

restrictions on specialist firms for any issue of 

Currency-Linked Securities. See Securities 

Exchange Act Release No. 55222 (February 1, 2007), 

72 FR 6021 (February 8, 2007) (SR–NYSE–2006–

68). 

22 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

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

23 23 15 U.S.C. 78f(b)(5). 

24 15 U.S.C. 78s(b)(1). 

25 25 17 CFR 240.19b–4. 

26See, e.g., Securities Exchange Act Release No. 

54167 (July 18, 2006), 71 FR 42145 (July 25, 2006) 

(SR–NASDAQ–2006–002) (approving Rule 4420(m) 

of the NASDAQ Stock Market LLC); Securities 

Exchange Act Release No. 52204 (August 3, 2005), 

70 FR 46559 (August 10, 2005) (SR–PCX–2005–63) 

(approving generic listing standards for indexlinked securities for the Pacific Exchange, Inc., n/ 

k/a NYSE Arca, Inc.); and Securities Exchange Act 

Release No. 51563 (April 15, 2005), 70 FR 21257 

(April 25, 2005) (SR–Amex–2005–001) (approving 

Section 107(D) of the American Stock Exchange 

LLC Company Guide). 

an Information Memorandum that 

describes the product to each member 

organization highlighting the particular 

structure and corresponding risks of an 

Index-Linked Security. In particular, the 

Memorandum will set forth the 

Exchange’s suitability rule that sets 

forth certain requirements for member 

organizations recommending a 

transaction in Index-Linked Securities. 

In addition, the Information 

Memorandum will note that all of the 

Exchange’s equity trading rules will be 

applicable to trading in the IndexLinked Securities, except in the case of 

Index-Linked Securities traded on the 

NYSE Bonds system, in which case the 

Information Memorandum will note that 

the Index-Linked Securities will be 

subject to the trading rules applicable to 

securities trading on such system. The 

Memorandum will also reference the 

member requirements to deliver a 

prospectus to each investor purchasing 

newly issued Index-Linked Securities 

prior to or concurrently with the 

confirmation of a transaction. 

Surveillance 

The Exchange represents that it will 

closely monitor activity in Index-Linked 

Securities to identify and deter any 

potential improper trading activity in 

such securities. Additionally, the 

Exchange states that its surveillance 

procedures are adequate to properly 

monitor the trading of Index-Linked 

Securities. Specifically, the Exchange 

will rely on its existing surveillance 

procedures governing equities, options, 

and exchange-traded funds. The 

Exchange represents that it has 

developed procedures to closely 

monitor activity in Index-Linked 

Securities and the Underlying Indexes 

and their components to identify and 

deter potential improper trading 

activity. To the extent applicable, the 

Exchange will be able to obtain trading 

and beneficial holder information from 

the primary trading markets for the 

components of the Underlying Indexes 

in relation to Index-Linked Securities, 

either pursuant to bilateral information 

sharing agreements with those markets 

or because those markets are full or 

affiliate members of ISG. 

Firewall Procedures 

For Index-Linked Securities where the 

Underlying Index is maintained by a 

broker-dealer, the broker-dealer will be 

required to erect a ‘‘firewall’’ around the 

personnel responsible for the 

maintenance of the Underlying Index or 

who have access to information 

concerning changes and adjustments to 

the Underlying Index, and the 

Underlying Index will be calculated by 

a third party who is not a broker-dealer. 

Any advisory committee, supervisory 

board, or similar entity that advises an 

Index Licensor or Administrator (each 

as defined in NYSE Rule 1100, 

Supplementary Material .10) or that 

makes decisions regarding the 

Underlying Index or portfolio 

composition, methodology, and related 

matters would be required to implement 

and maintain, or be subject to, 

procedures designed to prevent the use 

and dissemination of material, nonpublic information regarding the 

applicable Underlying Index or 

portfolio.21

Trading Halts 

In the case of Commodity-Linked or 

Currency-Linked Securities, if the 

indicative value or the Commodity 

Reference Asset value or Currency 

Reference Asset value, as the case may 

be, applicable to a corresponding series 

of such securities is not being 

disseminated as required, or, in the case 

of Equity Index-Linked Securities, if the 

value of the Underlying Index is not 

being disseminated as required, the 

Exchange may halt trading during the 

day on which such interruption first 

occurs. If such interruption persists past 

the trading day in which it occurred, the 

Exchange will halt trading no later than 

the beginning of the trading day 

following the interruption. 

III. Discussion and Commission’s 

Findings 

After careful consideration, the 

Commission finds that the proposed 

rule change, as amended, is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange.22 In particular, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of Section 6(b)(5) of the 

Act,23 which requires, among other 

things, that the Exchange’s rules be 

designed 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. 

A. Generic Listing Standards for IndexLinked Securities 

To list and trade Index-Linked 

Securities, the Exchange currently must 

file a proposed rule change with the 

Commission pursuant to Section 

19(b)(1) of the Act 24 and Rule 19b–4 

thereunder.25 However, Rule 19b–4(e) 

provides that the listing and trading of 

a new derivative securities product by a 

SRO will not be deemed a proposed rule 

change pursuant to Rule 19b–4(c)(1) if 

the Commission has approved, pursuant 

to Section 19(b) of the Act, the SRO’s 

trading rules, procedures, and listing 

standards for the product class that 

would include the new derivative 

securities product, and the SRO has a 

surveillance program for the product 

class. The Exchange’s proposed rules for 

the listing and trading of Index-Linked 

Securities pursuant to Rule 19b–4(e) 

fulfill these requirements. 

The Exchange’s ability to rely on Rule 

19b–4(e) to list and trade Index-Linked 

Securities that meet the requirements of 

proposed Section 703.22 of the Manual 

should reduce the time frame for 

bringing these securities to the market 

and thereby reduce the burdens on 

issuers and other market participants, 

while also promoting competition and 

making Index-Linked Securities 

available to investors more quickly. 

The Commission has previously 

approved generic listing standards 

pursuant to Rule 19b–4(e) for IndexLinked Securities based on indexes that 

consist of domestic, and to a certain 

extent, foreign, equity securities.26 The 

Commission has also previously 

approved the listing and trading on the 

Exchange of debt securities linked to the 

performance of a variety of commodities 


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27See, e.g., Securities Exchange Release No. 

55548 (March 28, 2007), 72 FR 16392 (April 4, 

2007) (SR–NYSE–2006–71) (approving a proposal to 

list and trade notes linked to the performance of 

sub-indices of the Dow Jones-AIG Commodity 

Index); Securities Exchange Release No. 54731 

(November 9, 2006), 71 FR 66814 (November 16, 

2006) (SR–NYSE–2006–54) (approving the listing 

and trading of two series of commodity-linked 

securities); Securities Exchange Release No. 54177 

(July 19, 2006), 71 FR 42700 (July 27, 2006) (SR–

NYSE–2006–19) (approving the listing and trading 

of index-linked notes linked to the performance of 

the Goldman Sachs Crude Oil Total Return Index); 

Securities Exchange Release No. 53849 (May 22, 

2006), 71 FR 30706 (May 30, 2006) (SR–NYSE–

2006–20) (approving the listing and trading of 

index-linked securities linked to the performance of 

the GSCI Total Return Index); and Securities 

Exchange Release No. 53876 (May 25, 2006), 71 FR 

32158 (June 2, 2006) (SR–NYSE–2006–16) 

(approving the listing and trading of index-linked 

securities linked to the performance of the Dow 

Jones-AIG Commodity Index Total Return). 

28See, e.g., Securities Exchange Act Release No. 

55268 (February 9, 2007), 72 FR 7793 (February 20, 

2007) (SR–NYSE–2007–03) (approving the listing 

and trading of Currency Trust Shares relating to the 

Japanese Yen); Securities Exchange Act Release No. 

54020 (June 20, 2006), 71 FR 36579 (June 27, 2006) 

(SR–NYSE–2006–35) (approving the listing and 

trading of six Currency Trust Shares); and 

Securities Exchange Act Release No. 52843 

(November 28, 2005), 70 FR 72486 (December 5, 

2005) (SR–NYSE–2005–65) (approving the listing 

and trading of Euro Shares). 

29The Commission notes that the failure of a 

particular product or index to comply with the 

proposed generic listing standards under Rule 19b–

4(e), however, would not preclude the Exchange 

from submitting a separate filing pursuant to 

Section 19(b)(2), requesting Commission approval 

to list and trade a particular index-linked product. 

30See supra note 20 and accompanying text. 

31 17 CFR 240.600(b)(47). 

and commodity indexes 27 and 

derivative products based on 

currencies.28 In approving these 

securities for Exchange trading, the 

Commission considered applicable 

Exchange rules that govern their trading. 

The Commission believes that generic 

listing standards for Index-Linked 

Securities should fulfill the intended 

objective of Rule 19b–4(e) and allow 

Index-Linked Securities that satisfy the 

proposed generic listing standards to 

commence trading without the need for 

public comment and Commission 

approval.29

B. Listing and Trading Index-Linked 

Securities 

Taken together, the Commission finds 

that the NYSE proposal contains 

adequate rules and procedures to govern 

the listing and trading of Index-Linked 

Securities listed pursuant to Rule 19b–

4(e) on the Exchange. All Index-Linked 

Security products listed under the 

proposed generic standards will be 

subject to the full panoply of NYSE 

rules and procedures that currently 

govern the trading of equity securities 

on the Exchange. 

As set forth more fully above, NYSE 

has proposed size, earnings, and 

minimum tangible net worth 

requirements for each Index-Linked 

Security issuer, as well as minimum 

distribution and holder, principal 

amount/market value, and minimum 

term thresholds for each issuance of 

Index-Linked Securities. The 

Exchange’s proposed listing criteria 

include minimum market capitalization, 

monthly trading volume, and relative 

weighting requirements for each Equity 

Index-Linked Security and the 

components underlying each such 

security. For Commodity-Linked and 

Currency-Linked Securities, the assets 

(or their derivatives) to which they are 

linked must either have been reviewed 

and approved for trading by the 

Commission or their pricing information 

must be derived from certain required 

sources.30 These requirements are 

designed to ensure that the trading 

markets for the Underlying Index 

components are adequately capitalized 

and sufficiently liquid, and that, in the 

case of Equity Index-Linked Securities, 

no one component dominates the 

Underlying Index. The Commission 

believes that these requirements should 

minimize the potential for 

manipulation. 

The Commission also finds that, in 

the case of Commodity-Linked and 

Currency-Linked Securities with at least 

10 components, the requirement that at 

least 90% of the dollar weight of the 

corresponding Commodity Reference 

Asset or Currency Reference Asset, as 

the case may be, must have 

comprehensive surveillance sharing 

agreements with the Exchange should 

permit the Exchange to identify 

potential trading and other violations of 

its rules. In the case of Equity IndexLinked Securities, each component 

security (other than foreign country 

securities and ADRs) must be issued by 

a reporting company under the Act, 

listed on a national securities exchange, 

and be an ‘‘NMS stock,’’ as such term is 

defined in Rule 600 of Regulation 

NMS.31 The Commission believes that 

such a requirement will contribute to 

the transparency of the Underlying 

Index. Alternatively, such component 

securities may also be foreign country 

securities, including foreign country 

securities underlying ADRs, so long as 

the foreign country securities having 

their primary trading market on foreign 

markets that are not ISG members or 

parties to comprehensive surveillance 

agreements with the Exchange do not, in 

the aggregate, represent more than 20 

percent of the dollar weight of the 

Underlying Index. The Commission also 

believes that, with respect to Equity 

Index-Linked Securities, the 

requirement that at least 90 percent of 

the component securities, by dollar 

weight, and 80 percent of the total 

number of component securities, be 

eligible individually for options trading 

should prevent an Index-Linked 

Security from being a vehicle for trading 

options on a security not otherwise 

options eligible. The Commission also 

notes that, by requiring pricing 

information for the relevant Underlying 

Index or Indexes to be readily available, 

the proposed listing standards of 

Section 703.22 of the Manual should 

help ensure a fair and orderly market for 

Index-Linked Securities listed and 

traded pursuant to Rule 19b–4(e). 

The Exchange has also developed 

delisting criteria that will permit it to 

suspend trading of an Index-Linked 

Security in circumstances that make 

further dealings in the product 

inadvisable. The Commission believes 

that the delisting criteria should help 

ensure that a minimum level of liquidity 

exists for each Index-Linked Security to 

allow for the maintenance of fair and 

orderly markets. Also, in the event that 

the value of the Underlying Index or, in 

the case of Commodity-Linked and 

Currency-Linked Securities that are 

periodically redeemable, the indicative 

value, is no longer calculated and 

widely disseminated on at least a 15- 

second basis, the Exchange may halt 

trading during the day on which the 

interruption first occurs; however, if the 

interruption persists past the trading 

day on which it occurred, the Exchange 

will halt trading no later than the 

beginning of the trading day following 

the interruption and will commence 

delisting proceedings. 

C. Surveillance 

The Commission notes that any 

Index-Linked Securities approved for 

listing and trading would be subject to 

the Exchange’s existing surveillance 

procedures governing equities, options, 

and exchange-traded funds, as well as 

procedures the Exchange represents it 

has developed to closely monitor 

activity in Index-Linked Securities and 

the Underlying Indexes and their 

components. The Exchange has 

represented that its surveillance 

procedures are adequate to properly 

monitor the trading of Index-Linked 

Securities listed pursuant to these 

proposed generic listing standards. In 

addition, the Commission notes that the 

Exchange has represented that it will be 

able to obtain trading and beneficial 

holder information from the primary 

trading markets for the components of 

the Underlying Indexes in relation to 

Index-Linked Securities, either pursuant 


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Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25829 

32See supra note 21. 

33See supra note 26. 

34See supra notes 27–28. 

35 15 U.S.C. 78s(b)(2). 

36 15 U.S.C. 78s(b)(2). 

37 17 CFR 200.30–3(a)(12). 

to bilateral information sharing 

agreements with those markets or 

because those markets are full members 

or affiliate members of the ISG. In 

particular, the Exchange has represented 

that it will implement adequate 

comprehensive surveillance sharing 

agreements for non-U.S. components, as 

applicable. 

D. Information Memorandum 

The Exchange has represented that it 

will distribute, as appropriate, an 

Information Memorandum to members 

describing the product, the structure of 

the product, and the corresponding risks 

of the Index-Linked Security. In 

addition, the Information Memorandum 

will set forth the Exchange’s suitability 

requirements with respect to 

recommendations in transactions in 

Index-Linked Securities to customers 

and the prospectus delivery 

requirements. The Memorandum will 

also identify and describe the 

Exchange’s trading rules governing the 

Index-Linked Securities. 

E. Firewall Procedures 

The Exchange has further represented 

that, if the Underlying Index is 

maintained by a broker-dealer, such 

broker-dealer will establish a ‘‘firewall’’

around personnel responsible for the 

maintenance of the Underlying Index. 

As an added measure, a third-party who 

is not a broker-dealer will calculate the 

Underlying Index. In addition, the 

Exchange has stated that any person, 

committee, board, or similar entity that 

advises the Index Licensor or 

Administrator (each as defined in NYSE 

Rule 1100, Supplementary Material .10) 

or that makes decisions regarding the 

composition and methodology of the 

Underlying Index, will be subject to 

policies and procedures designed to 

prevent the use and dissemination of 

material, non-public information. With 

respect to trading on NYSE, the 

Exchange has stated that, with respect to 

any issue of Index-Linked Securities, 

specialists will be restricted from 

making markets in and trading 

components of the Underlying 

Securities or any derivative instruments 

thereof.32

F. Acceleration 

The Commission finds good cause for 

approving the proposed rule change, as 

modified by Amendments No. 1, 2, and 

3 thereto, before the 30th day after the 

date of publication of notice of filing 

thereof in the Federal Register. The 

Exchange requested accelerated 

approval of the proposal to facilitate the 

prompt listing and trading of IndexLinked Securities based on indexes or 

portfolios meeting the specified criteria 

of proposed Section 703.22 of the 

Manual. The Commission notes that the 

Exchange’s proposed generic listing 

standards are based, in part, on 

previously approved listing standards 

for Index-Linked Securities based on an 

Underlying Index made up of equity 

securities.33 The Commission also notes 

that it has previously approved the 

listing and trading of derivative 

products based on commodities and 

currencies.34 The Commission believes 

that accelerated approval of the 

proposed rule change should expedite 

the listing and trading of additional 

Index-Linked Securities, subject to the 

standards discussed herein, to the 

benefit of the investing public. 

Therefore, the Commission finds good 

cause, consistent with Section 19(b)(2) 

of the Act,35 to approve the proposed 

rule change on an accelerated basis. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether Amendment No. 3 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–NYSE–2007–27 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2007–27. 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 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–NYSE–2007–27 and should 

be submitted on or before May 29, 2007. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,36 that the 

proposed rule change (SR–NYSE–2007–

27), as modified by Amendments No. 1, 

2, and 3, is hereby approved on an 

accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.37

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8600 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #10854] 

Iowa Disaster #IA–00007 Declaration of 

Economic Injury 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Notice. 

SUMMARY: This is a notice of an 

Economic Injury Disaster Loan (EIDL) 

declaration for the State of Iowa, dated 

04/27/2007. 

Incident: Winter Storms. 

Incident Period: 02/23/2007 through 

03/02/2007. 

EFFECTIVE DATE: 04/27/2007. 

EIDL Loan Application Deadline Date: 

01/28/2008. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing And 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 


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