Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Notices 25257

33Because all movements out of an agent bank’s

account are monitored, DTC is able to determine

exactly which shares are reclaimed. In contrast,

shares are removed from a broker-dealer’s free

account without regard to their origin.

34Supra note 3.

35 17 CFR 200.30–3(a)(12) (1995).

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

2 17 CFR 240.19b–4.

3For purposes of this rule, a company is

‘‘domiciled’’ in the country under the laws of which

it is organized.

4 In deciding whether to approve the listing of an

equity security, the NYSE also takes qualitative

factors into consideration. These factors include

whether the company is a going concern or a

successor thereto, the degree of national interest in

the company, the character of the market for its

products, its relative stability and position in its

industry.

5 In determining the number of holders for the

above distribution standards, the NYSE considers

both beneficial and record owners.

6According to the NYSE, the NYSE would

consider an ‘‘exchange’’ to be a trading market that

is regulated as a stock exchange by home-country

regulators. The NYSE believes that the Bolsa

Mexicana de valores is the only market in Mexico

that would be considered an ‘‘exchange’’ for this

purpose. In Canada, the NYSE believes that there

currently are five stock exchanges that satisfy this

test: The Montreal Exchange and the Toronto,

Vancouver, Winnipeg, and Alberta Stock

Exchanges. See letter from Michael J. Simons,

Milbank, Tweed, Hadley & McCloy, to Glen

Barrentine, Senior Counsel, Division of Market

Regulation, SEC, dated April 1, 1996.

7For example, assume that a Mexican company

has ADRs trading in the United States and ordinary

shares trading in Mexico, with each ADR

representing 10 ordinary shares. If the company

were to apply to list its U.S.-traded ADRs on the

NYSE, the Exchange would divide the Mexican

share volume by 10 in determining whether the

combined ADR/share volume meets the

requirements of the listing criteria. For Companies

that have multiple series of shares or ADR’s the

Exchange will include the volume only in the

specific ordinary shares and overlying ADRs that

would be listed on the exchange.

However, the Commission notes that

while a delivery reclaimed by an agent

bank on behalf of an institution will be

matched to the original delivery and the

reclamation will not be recorded as a

flip, a reclamation done for shares

delivered from a selling group brokerdealer’s IPO control account will be

registered as flipped. This distinction

could possibly result in discrimination

between retail customers, who typically

hold through broker-dealers, and

institutional customers. The

Commission understands that this

distinction is a result of systems

limitations.33 The Commission urges

DTC to monitor this situation once the

system is operational to determine

whether the limitation has a

discriminatory effect. If so, DTC should

consider systems modifications to

address this concern.

IV. Conclusion

The Commission finds that DTC’s

proposal is consistent with the

requirements of the Act and particularly

with Section 17A and the rules and

regulations thereunder.

It is therefore ordered, pursuant to

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

proposed rule change (File No. SR–

DTC–95–27) be and hereby is approved.

As stated, DTC has agreed to notify selfregulatory organizations and managing

underwriters at least thirty calendar

days prior to the general availability of

the IPO Tracking System.34

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.35

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12540 Filed 5–17–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37211; International Series

Release No. 978; File No. SR–NYSE–96–05]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change Relating to Listing Standards

May 14, 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

that would permit companies domiciled

in Canada, Mexico, and the United

States (‘‘North America’’) 3 to include

holders and trading volume in North

America toward meeting the

stockholder and trading volume

requirements for listing on the Exchange

pursuant to the domestic listing criteria.

The proposed rule change was

published for comment in Securities

Exchange Act Release No. 37055 (Apr.

1, 1996), 61 FR 15546 (Apr. 8, 1996). No

comments were received on the

proposal.

Under the current NYSE rules,

companies applying to list on the

Exchange must meet the applicable

listing criteria. For equity listings, there

are two different standards: domestic

criteria, which are available to all

companies, (‘‘domestic standards’’) and

criteria available solely to non-U.S.

companies (‘‘worldwide standards’’).

Non-U.S. companies may elect to

qualify for listing under the Exchange’s

domestic numerical standards or

worldwide numerical standards. NonU.S. companies, however, must meet all

of the criteria within the standard under

which they seek to qualify for listing.

Paragraph 102.01 of the NYSE’s Listed

Company Manual (‘‘Manual’’) sets forth

the standards for domestic companies

that want to list their equity securities

on the Exchange. These standards

require applicants to satisfy certain

minimum numerical criteria.4 Under

these requirements for listing, the

company must have, among things, (a)

2,000 round-lot holders; (b) 2,200 total

stockholders, together with an average

monthly trading volume of 100,000

shares for the most recent six months;

or (c) 500 total stockholders, together

with an average monthly trading volume

of 1,000,000 shares for the most recent

12 months.5 The domestic criteria

require that these standards be met only

through holders and trading volume

occurring in the U.S.

The Exchange proposes to amend

these initial listing standards to provide

that for listing applications from North

American companies the Exchange will

include all North American holders and

North American trading volume in

applying the minimum stockholder and

trading volume requirements in

Paragraph 102.01 of the Manual. The

Exchange believes that with continuing

integration of the North American

market, this market should be viewed as

a whole in reviewing a company’s

eligibility for listing. Moreover, the

Exchange believes that this will foster

internationalization of the securities

markets by enhancing the access of U.S.

investors to the trading of Canadian and

Mexican securities.

Pursuant to the proposed rule change,

the Exchange would look at the number

of beneficial holders resident in North

America in applying the initial listing

criteria of Paragraph 102.01 to North

American companies. In computing

trading volume, the Exchange will look

to the reported volume (i) on U.S. stock

exchanges, (ii) in the U.S. over-thecounter market, and (iii) on Canadian or

Mexican stock exchanges.6 The total

volume reported from these sources

must satisfy the NYSE’s initial listing

standards. For American Depositary

Receipts (‘‘ADRs’’) to be listed on the

NYSE, volume in the ordinary shares

would be adjusted to be on an ADRequivalent basis.7 Finally, the proposed

rule change would make conforming

changes to Paragraph 103.00 of the

Manual, which establishes alternate

initial listing criteria for non-U.S.

companies.

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
25258 Federal Register / Vol. 61, No. 98 / Monday, May 20, 1996 / Notices

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

9 If the NYSE were to decide to include trading

data from other sources, the NYSE would need to

file a proposed rule change with the Commission

pursuant to Section 19(b) of the Act.

10See supra note 7.

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) (1988).

2Letter from J. Keith Kessel, Compliance Officer,

Philadep, to Peter R. Geraghty, Senior Counsel,

Division of Market Regulation, Commission (April

10, 1996).

3A position listing indicates the participant

holders of a certain security and the number of

shares Philadep holds on their behalf.

4The Commission has modified the text of the

summaries prepared by Philadep.

requirements of Section 6(b).8

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 pubic interest;

and are not designed to permit unfair

discrimination between issuers.

The development and enforcement of

adequate standards governing the initial

and continued listing of securities on an

exchange is an activity of critical of

critical importance to financial markets

and the investing public. Listing

standards serve as a means for an

exchange to screen issuers and to

provide listed status only to bona fide

companies with sufficient public float,

investor base, and trading interest to

ensure that the market for a company’s

stock has the depth and liquidity

necessary to maintain fair and orderly

markets. Adequate standards are

especially important given the

expectations of investors regarding

exchange trading and the imprimatur of

listing on a particular market.

For the reasons set forth below, the

Commission believes that the proposed

rule change will provide the NYSE with

greater flexibility in determining which

equity securities warrant inclusion in its

market, without compromising the

effectiveness of the Exchange’s initial

listing standards.

The Commission believes that

permitting North American companies

to satisfy the stockholder and trading

volume requirements of the Exchange’s

domestic initial listing standards by

including the holders and trading

volume in North America is not

inconsistent with the purposes of the

Act. With efforts such as the North

American Free Trade Agreement

(‘‘NAFTA’’), North America increasingly

is becoming an integrated market place,

and companies and investors are able to

obtain easier access to markets across

borders. There is active interest by U.S.

investors in these markets, and Mexican

and Canadian issues are actively traded

on the Exchange.

The Commission believes that this

amendment to the initial listing

standards may assist companies

domiciled in Canada and Mexico and

U.S. companies with a significant

presence in those countries to gain

admittance to the NYSE and may

promote greater investment

opportunities across borders in North

America. Therefore, the Commission

believes that it is not unreasonable to

consider the holders and trading volume

in all three countries for purposes of

reviewing a company’s application to

list under the domestic initial listing

standards on the NYSE.

Moreover, the Commission believes

that the NYSE is appropriately looking

only to the reported volume on the

Canadian and Mexican stock exchanges

in addition to the reported volume on

the U.S. stock exchanges and in the U.S.

over-the-counter market to calculate

trading volume.9 The Commission

believes that the reported volume from

these non-U.S. exchanges is sufficiently

reliable for purposes of determining a

company’s listing eligibility. Finally, for

ADRs, the Exchange will adjust the

volume in the ordinary shares to an

ADR-equivalent basis for calculating

trading volume for purposes of

determining eligibility.10 The

Commission believes that this

adjustment will more accurately reflect

the price of the instrument trading on

the NYSE because the price of each

share trading in Canada or Mexico may

be a fraction of the ADR.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,11 that the

proposed rule change (SR–NYSE–96–

05) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12596 Filed 5–17–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37210; File No. SR–

Philadep–96–04]

Self-Regulatory Organizations;

Philadelphia Depository Trust

Company; Notice of Filing and

Immediate Effectiveness of Proposed

Rule Change Modifying the Fee

Schedule for Position Listings To

Incorporate a Quantity Discount for

Multiple Municipal Bond Listing

Requests

May 14, 1996.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

March 8, 1996, the Philadelphia

Depository Trust Company (‘‘Philadep’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared primarily by

Philadep. On April 15, 1996, Philadep

supplemented the filing.2 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Philadep proposes to modify its fee

schedule for position listing requests to

incorporate a quantity discount for

multiple municipal bond listing

requests.3

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

Philadep included statements

concerning the purposes of and the

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.

Philadep has prepared summaries, as set

forth in sections (A), (B), and (C) below,

of the most significant aspects of these

statements.4

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Change

Currently, Philadep charges $45 for

each position listing request per date,

per issuer, and per CUSIP number.

Philadep charges a flat fee of $360 for

twelve monthly dates per CUSIP

number (i.e., twelve end-of-month

listings of a particular CUSIP) or $1,300

for fifty-two weekly dates per CUSIP

number (i.e., fifty-two end-of-week

listings of a particular CUSIP). Philadep

proposes to modify its position listing

fee schedule to provide a quantity

discount for multiple municipal bond

listing requests. The discount will be

available only if the requests pertain to

the same issuer for the same position

listing date and if Philadep has at least

ten business days from the date of the

initial request by the municipality or its

agent to provide the requested