Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Notices 53471 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58253 

(July 30, 2008), 73 FR 45509. 

4See Securities Exchange Act Release No. 56290 

(August 20, 2007), 72 FR 49033 (August 27, 2007) 

(SR–NYSE–2007–75). 

5See Securities Exchange Act Release No. 57905 

(June 2, 2008), 73 FR 32613 (June 9, 2008) (SR– 

NYSE–2008–44). 

6 15 U.S.C. 78f(b)(5). 

7 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58500; File No. SR–NYSE– 

2008–57) 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving Proposed Rule Change To 

Adopt on a Permanent Basis a Pilot 

Program Which Allows the Exchange 

To Adjust the Earnings of Companies 

for Purposes of Its Earnings Standard 

by Reversing the Income Statement 

Effects of Changes in Fair Value of 

Financial Instruments Extinguished at 

the Time of Listing 

September 9, 2008. 

I. Introduction 

On July 23, 2008, 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 enable the Exchange to adjust 

the earnings of companies by reversing 

the income statement effects for all 

periods of any changes in fair value of 

financial instruments classified as a 

liability recorded by the company in 

earnings, provided such financial 

instrument is either being redeemed 

with the proceeds of an offering 

occurring in conjunction with the listing 

or converted into or exercised for 

common stock of the company at the 

time of listing. The proposed rule 

change was published for comment in 

the Federal Register on August 5, 2008.3

The Commission received no comments 

on the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

The Exchange proposes to amend the 

earnings standard of Section 102.01C(I) 

of the Exchange’s Listed Company 

Manual (‘‘Manual’’) to enable the 

Exchange to adjust the earnings of 

companies listing in conjunction with 

an initial public offering (‘‘IPO’’) by 

reversing the income statement effects 

for all periods of changes in fair value 

of financial instruments classified as a 

liability recorded by the company in 

earnings, provided such financial 

instrument is either being redeemed 

with the proceeds of an offering 

occurring in conjunction with the listing 

or converted into or exercised for 

common stock of the company at the 

time of listing. The proposed 

amendment was originally implemented 

for a six-month period as a Pilot 

Program.4 The Pilot Program expired 

and was subsequently renewed for an 

additional three months, expiring on 

September 2, 2008.5

The Exchange believes that it is 

appropriate to exclude the effects of 

changes in fair value of a financial 

instrument classified as a liability from 

a company’s earnings where the 

financial instrument is being retired at 

the time of a company’s listing either 

out of the proceeds of a concurrent 

offering or by conversion into common 

stock at the time of listing. The 

Exchange believes that adjusting 

company earnings for charges arising 

out of the changes in fair value of 

financial instruments that are retired 

with the proceeds of an offering 

occurring in conjunction with the listing 

or converted into common stock at the 

time of listing is consistent with the 

adjustments that are currently permitted 

under Section 102.01C. Section 102.01C 

currently provides for adjustments to 

earnings for certain nonrecurring 

charges to earnings that are included in 

net income as recorded under GAAP, 

such as the exclusion of impairment 

charges on long-lived assets, the 

exclusion of gains and losses on sales of 

a subsidiary’s or investee’s stock and the 

exclusion of in-process purchased 

research and development charges. The 

Exchange believes that this adjustment 

is reasonable given the purpose of the 

earnings standard, which is to 

determine the suitability for listing of 

companies on a forward-looking basis. 

The Exchange has stated that, as with 

all companies listed on the Exchange, 

the Financial Compliance staff of NYSE 

Regulation will monitor on an ongoing 

basis the compliance with the 

Exchange’s continued listing standards 

of any companies listed in reliance 

upon the proposed amendment. The 

Exchange represents that such 

companies will be subject to delisting if 

they are found at any time to be below 

the Exchange’s continued listing 

standards. 

In its proposal, the Exchange stated 

that as it gains experience in listing 

companies in reliance upon the 

proposed amendment, it will continue 

to carefully reevaluate its 

appropriateness. If the Exchange 

becomes aware that companies listed 

pursuant to the proposed amendment 

have difficulty complying with the 

Exchange’s continued listing standards, 

it will inform the Commission and 

discuss with the Commission the 

desirability of the continued use of the 

provision. 

III. Discussion and Commission 

Findings 

After careful review, 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 Section 6(b)(5) of the Act,6 which 

requires, among other things, that the 

rules of a national securities exchange 

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.7

The Commission believes that the 

proposed rule change is consistent with 

other adjustments the Exchange 

currently makes for certain nonrecurring 

charges to earnings when evaluating 

applicants on a forward-looking, postIPO basis under the existing earnings 

standard in Section 102.01C(I) of the 

Manual and is reasonable given the 

purpose of the earnings standard, which 

is to determine the suitability for listing 

of companies on a forward-looking 

basis. The Commission notes that in 

determining a company’s eligibility for 

listing, these changes will allow the 

Exchange to reverse the income 

statement effects for all periods of 

changes in fair value of financial 

instruments classified as a liability 

recorded by the company in earnings, 

provided such financial instrument is 

either being redeemed with the 

proceeds of an offering occurring in 

conjunction with the listing or 

converted into or exercised for common 

stock at the time of listing and will not 

impact the preparation of financial 

statements by the company listing on 

the Exchange. In addition, the 

Commission notes that the Exchange 

will monitor companies listing using 

this new adjustment and notes that the 

Exchange has agreed to discuss the 

standard with the Commission should it 

prove difficult for such companies to 


ebenthall on PROD1PC60 with NOTICES
53472 Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Notices 

8 15 U.S.C. 78s(b)(2). 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3E-mail from Tim Malinowski, Director, NYSE 

Euronext, to Edward Cho, Special Counsel, Division 

of Trading and Markets, Commission, dated 

September 3, 2008. 

4Fund Shares differ from traditional exchangetraded fund (‘‘ETF’’) shares in that they do not 

merely correspond to the performance of a given 

securities index, but rather attempt to match a 

multiple or inverse of such underlying index 

performance. Multiple Fund Shares seek to provide 

investment results, before fees and expenses, that 

correspond to a specified multiple of the percentage 

performance on a given day of a particular foreign 

or domestic equities index or Fixed Income 

Securities (as described below) index or a 

combination thereof. Inverse Fund Shares seek to 

provide investment results, before fees and 

expenses, that correspond to the inverse (opposite) 

of the percentage performance on a given day of a 

particular foreign or domestic equities index or 

Fixed Income Securities index or a combination 

thereof, by a specified multiple. Fixed Income 

Securities are described in NYSE Arca Equities Rule 

5.2(j)(3) as debt securities that are notes, bonds, 

debentures or evidence of indebtedness that 

include, but are not limited to, U.S. Department of 

Treasury securities, government-sponsored entity 

securities, municipal securities, trust preferred 

securities, supranational debt and debt of a foreign 

country or a subdivision thereof. 

5See Securities Exchange Act Release Nos. 56713 

(October 29, 2007), 72 FR 61915 (November 1, 2007) 

(SR–Amex–2007–74) (approving the listing and 

trading of Rydex Leveraged Funds, Inverse Funds 

and Leveraged Inverse Funds); 52553 (October 3, 

2005), 70 FR 59100 (October 11, 2005) (SR–Amex– 

2004–62) (approving the listing and trading of the 

ProShares Ultra Funds and Short Funds); 54040 

(June 23, 2006), 71 FR 37629 (June 30, 2006) (SR– 

Amex–2006–41) (approving the listing and trading 

of the ProShares UltraShort Funds); 55117 (January 

17, 2007), 72 FR 3442 (January 25, 2007) (SR– 

Amex–2006–101) (approving the listing and trading 

of Ultra, Short and UltraShort Funds based on 

various indexes); 56592 (October 1, 2007), 72 FR 

57364 (October 9, 2007) (SR–Amex–2007–60) 

(approving the listing and trading of ProShares 

Ultra, Short and UltraShort Funds based on various 

international indexes); and 56998 (December 19, 

2007), 72 FR 73404 (December 27, 2007) (SR– 

Amex–2007–104) (approving the listing and trading 

of ProShares Ultra, Short and UltraShort Funds 

based on several fixed income indexes, among 

others). 

6The Short Funds and Inverse Funds seek daily 

investment results, before fees and expenses, that 

correspond to the inverse or opposite of the daily 

performance (¥100%) of the underlying indexes, 

and the Ultra Short Funds and Leveraged Inverse 

Funds seek daily investment results, before fees and 

expenses, that correspond to twice the inverse or 

opposite of the daily performance (¥200%) of the 

underlying indexes. See Securities Exchange Act 

Release Nos. 56763 (November 7, 2007), 72 FR 

64103 (November 14, 2007) (SR–NYSEArca–2007– 

81) (approving UTP trading of shares of funds of 

Rydex ETF Trust); 56601 (October 2, 2007), 72 FR 

57625 (October 10, 2007) (SR–NYSEArca–2007–79) 

(approving UTP trading of shares of eight funds of 

the ProShares Trust); 55125 (January 18, 2007), 72 

FR 3462 (January 25, 2007) (SR–NYSEArca–2006– 

87) (approving UTP trading of shares of 81 funds 

of the ProShares Trust); 54026 (June 21, 2006), 71 

FR 36850 (June 28, 2006) (SR–PCX–2005–115) 

(approving UTP trading of shares of funds of the 

ProShares Trust). 

7See Securities Exchange Act Release No. 57660 

(April 14, 2008), 73 FR 21391 (April 21, 2008) (SR– 

Amex–2007–131) (order approving generic listing 

standards for Multiple Fund Shares and Inverse 

Fund Shares) (‘‘Amex Proposal’’). 

comply with the Exchange’s continued 

listing standards. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,8 that the 

proposed rule change (SR–NYSE–2008– 

57) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21544 Filed 9–15–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58484; File No. SR– 

NYSEAcra–2008–89] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Amending NYSE Arca 

Equities Rule 5.2(j)(3) in Connection 

With Generic Listing Standards for 

Multiple Fund Shares and Inverse Fund 

Shares 

September 8, 2008. 

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 August 

25, 2008, NYSE Arca, Inc. (‘‘NYSE 

Arca’’ or ‘‘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 

prepared by the Exchange. 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 Exchange, through its whollyowned subsidiary NYSE Arca Equities, 

Inc. (‘‘NYSE Arca Equities’’), proposes 

to amend its rules governing NYSE 

Arca, LLC (also referred to as the ‘‘NYSE 

Arca Marketplace’’), the equities trading 

facility of NYSE Arca Equities. The 

Exchange is proposing to amend NYSE 

Arca Equities Rule 5.2(j)(3), the 

Exchange’s initial listing standards for 

Investment Company Units (‘‘ICUs’’), to 

include generic listing standards for 

series of ICUs that seek to provide 

investment results that either exceed the 

performance of a specified index by a 

specified multiple (‘‘Multiple Fund 

Shares’’) or that correspond to the 

inverse (opposite) of the performance of 

a specified index by a specified multiple 

(‘‘Inverse Fund Shares’’) (collectively, 

‘‘Fund Shares’’). The text of the 

proposed rule change is available on the 

Exchange’s Web site at http:// 

www.nyse.com, at the Exchange’s 

principal office, and at the 

Commission’s Public Reference Room.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, 

NYSE Arca 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. NYSE 

Arca 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 is proposing to amend 

NYSE Arca Equities Rule 5.2(j)(3), the 

Exchange’s initial listing standards for 

ICUs, to include generic listing 

standards for series of Multiple Fund 

Shares and Inverse Fund Shares.4 The 

Exchange notes that the Commission 

has previously approved the listing and 

trading of various Multiple Fund Shares 

and Inverse Fund Shares.5 Multiple 

Fund Shares and Inverse Fund Shares 

currently trading on the Exchange 

include the Short Funds and UltraShort 

Funds of the ProShares Trust and the 

Inverse Funds and Leveraged Inverse 

Funds of the Rydex ETF Trust, which 

trade on the Exchange pursuant to 

unlisted trading privileges (‘‘UTP’’) 

under NYSE Arca Equities Rule 

5.2(j)(3).6

This rule proposal is similar to a 

proposed rule change by American 

Stock Exchange LLC (‘‘Amex’’) in which 

the Commission approved generic 

listing standards for Multiple Fund 

Shares and Inverse Fund Shares.7 In 

addition, the Exchange notes that the 

Commission has approved generic 

listing standards in NYSE Arca Equities 

Rule 5.2(j)(6), the Exchange’s initial 

listing standards for Equity IndexLinked Securities, Commodity-Linked 

Securities, Currency-Linked Securities, 

Fixed Income Index-Linked Securities, 

Futures-Linked Securities and 

MultiFactor Index-Linked Securities, 


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