[Federal Register Volume 61, Number 105 (Thursday, May 30, 1996)]
[Notices]
[Pages 27123-27124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13459]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37238, File No. SR-NYSE-96-06]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to Continued 
Listing Standards for Specialized Securities

May 22, 1996.
    On March 18, 1996, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``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 establish continued listing 
criteria for certain specialized securities.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 37056 (Apr. 1, 1996), 61 FR 15547 (Apr. 8, 
1996). No comments were received on the proposal.
    Currently, the NYSE has listing standards for certain specialized 
securities: stock warrants, foreign currency warrants and currency 
index warrants, stock index warrants, contingent value rights 
(``CVRs'') \3\ other securities, and equity-linked debt securities 
(``ELDS'').\4\ The uniform listing standards for specialized securities 
require one million shares outstanding, 400 holders, $4 million 
aggregate market value and a minimum life of one year.\5\
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    \3\ CVRs are unsecured obligations of an issuer that provide for 
a possible cash payment upon maturity depending upon the price 
performance of an affiliate's equity security.
    \4\ ELDS are intermediate-term (two to seven years), non-
convertible, hybrid securities, the value of which is based, at 
least in part, on the value of another issuer's common stock or 
other equity security. ELDS may pay periodic interest or may be 
issued as zero-coupon instruments with no payments to holders prior 
to maturity. Moreover, ELDS may be subject to a ``cap'' on the 
maximum principal amount to be repaid to holders upon maturity and, 
additionally, may feature a ``floor'' on the minimum principal 
amount to be repaid to holders upon maturity.
    \5\ There are additional standards for several of these 
securities. For example, ELDS relating to any underlying U.S. 
security may not exceed five percent of the total outstanding shares 
of such underlying security.
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    With this rule proposal, the Exchange proposes to establish uniform 
continued listing criteria for these specialized securities in 
paragraphs 801 and 802 of the Exchange's Listed Company Manual 
(``Manual'') to correspond to the initial listing standards. The NYSE 
would consider delisting these specialized securities when the number 
of publicly-held shares is less than 100,000, the

[[Page 27124]]

number of holders is less than 100, and the aggregate market value of 
shares outstanding is less than $1,000,000.
    Moreover, the Exchange is proposing additional requirements for 
securities that are related to other securities. For stock warrants and 
CVRs, the NYSE would require that the related security remain listed. 
For ELDS, the issuer of the linked security must remain subject to the 
reporting obligations of the Act and the linked security must remain 
trading in a market in which there is last sale reporting. The Exchange 
also will require the issuer of specialized debt securities to be able 
to meet its obligations on such debt. For all specialized securities 
listed pursuant to paragraph 703 of the Manual, the Exchange will 
delist any specialized securities if the related or linked securities 
are delisted for violation of the Exchange's ``Corporate 
Responsibility'' criteria in Section 3 of the Manual.\6\
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    \6\ Section 3 (Corporate Responsibility) includes, among others, 
policies concerning voting rights, quorums, and shareholder 
approval.
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    The proposed rule change also eliminates the delisting criteria 
relating to creation of a class of non-voting common stock. The 
Exchange believes that these criteria are no longer appropriate because 
the Exchange currently has listing criteria specifically addressing 
non-voting common stock. Finally, the proposed rule change would delete 
the current warrant continued listing criteria and include stock, 
foreign currency and currency index, and stock index warrants within 
the new uniform continued listing criteria. The Exchange believes that 
the continued listing criteria for warrants do not conform to the 
current warrant listing standards.
    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, with the requirements of Section 6(b).\7\ Specifically, the 
Commission believes the proposal is consistent with the Section 6(b)(5) 
requirements that the rules of an exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts, and, in general, to protect investors and the public 
interest; and are not designed to permit unfair discrimination between 
issuers.
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    \7\ 15 U.S.C. Sec. 78f(b).
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    The Commission believes that the development and enforcement of 
adequate standards governing the listing of securities on an exchange 
is an activity of critical importance to exchange markets and to the 
investing public. Listing standards serve as a means for the self-
regulatory organizations (``SROs'') to screen issuers and to provide 
listed status only to bona fide companies with substantial float, 
investor base, and trading interest to ensure sufficient liquidity for 
fair and orderly markets. Listing standards also enable an exchange to 
assure itself of the bona fides of the company and its past trading 
history. In this regard, over the past several years the Exchange has 
proposed, and the Commission has approved, uniform initial listing 
standards for specialized securities.
    With this rule proposal, the Exchange proposes uniform continued 
listing criteria to correspond to the initial listing standards adopted 
for specialized securities. The Commission believes that adequate 
maintenance standards are of equal importance to the development of 
adequate standards for initial inclusion on an exchange. The Commission 
notes that once an issue has been initially approved for listing, the 
Exchange must monitor continually the status and trading 
characteristics of that issue to endure that it continues to meet 
exchange standards for trading depth and liquidity.
    In this regard, the Commission believes that the quantitative 
continuing listing standards for specialized securities will ensure 
that there is sufficient public float and investor interest in the 
securities to support continued trading consistent with fair and 
orderly markets. Further, the additional requirements for specialized 
securities that are related to other securities should ensure, among 
other things, that these securities cannot, through continued listing, 
become a surrogate for trading a security that has been delisted due to 
corporate responsibility violations.\8\ As described above, for 
continued listing of stock warrants and CVRs, the Exchange will require 
that the related security be, and remain, a NYSE listed security. For 
ELDS, the issuer of the linked security must remain subject to the 
reporting obligations of the Act and the linked security must remain 
subject to last sale reporting. The Commission believes that these 
standards are appropriate under the Act and will ensure that the linked 
or related securities have adequate transparency and information 
available and meet certain minimum requirements. With respect to CVRs 
and stock warrants, the additional requirements should also help to 
address concerns that such securities will not become a surrogate for 
trading other securities not eligible for NYSE listing.
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    \8\ See supra note 6 and accompanying text.
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    In summary, the Commission believes that the maintenance criteria, 
established by the rule proposal, should help to ensure the stability 
of the marketplace, as well as protect investors, by subjecting the 
securities of an issuer to delisting if the listed security fails to 
meet the new maintenance standards.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-NYSE-96-06) is approved.

    \9\ 15 U.S.C. 78s(b)(2).
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    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. 96-13459 Filed 5-29-96; 8:45 am]
BILLING CODE 8010-01-M