54442 Federal Register / Vol. 73, No. 183 / Friday, September 19, 2008 / Notices 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58299 

(August 4, 2008), 73 FR 46670. 

4Shares held by directors, officers, or their 

immediate families and other concentrated holding 

of 10 percent or more are excluded in calculating 

the number of publicly-held shares. 

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–BATS–2008–003 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BATS–2008–003. 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, on official business days between 

the hours of 10 a.m. and 3 p.m. 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–BATS– 

2008–003 and should be submitted on 

or beforeOctober 10, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21947 Filed 9–18–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58550; File No. SR–NYSE– 

2008–68] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving Proposed Rule Change To 

Determine That a Company Meets the 

Exchange’s Market Value 

Requirements by Relying on a ThirdParty Valuation of the Company 

September 15, 2008. 

I. Introduction 

On July 31, 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 allow the Exchange, on a case 

by case basis, to exercise discretion to 

list a company whose stock is not 

previously registered under the Act and 

that is listing upon effectiveness of a 

selling shareholder registration 

statement without a related 

underwritten offering, by relying on an 

independent third-party valuation of the 

company and information regarding 

trading in a private placement trading 

market to determine that such a 

company has met its market value 

requirements. The proposed rule change 

was published for comment in the 

Federal Register on August 11, 2008.3

The Commission received no comments 

on the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

Section 102.01B of the Exchange’s 

Listed Company Manual (‘‘Manual’’) 

currently requires that companies listing 

on the Exchange in connection with 

their initial public offering (‘‘IPO’’) or as 

a result of a spin-off or under the 

Affiliated Company standard must 

demonstrate an aggregate market value 

of publicly-held shares of $60 million at 

the time of listing. All other companies 

must demonstrate a market value of 

publicly-held shares of $100 million.4 In 

addition, the Valuation/Revenue with 

Cash Flow, Pure Valuation/Revenue, 

and Affiliated Company standards of 

Section 102.01C require a company to 

have a global market capitalization of 

$500 million, $750 million, and $500 

million, respectively. Sections 102.01B 

and 102.01C of the Manual provide that, 

in connection with a company’s IPO, 

the Exchange will rely on a written 

commitment from the underwriter to 

represent the anticipated value of the 

company’s offering in order to 

determine a company’s compliance with 

these listing standards. In the case of a 

spin-off, the company may rely on a 

letter from the parent company’s 

investment banker or other financial 

adviser. 

The Exchange notes that it has been 

approached by a number of private 

companies that would like to list upon 

the effectiveness of a selling shareholder 

registration statement. NYSE represents 

that these private companies typically 

have sold a significant amount of 

common stock to qualified institutional 

buyers in one or more private 

placements and, as a condition to those 

sales, have agreed to file a registration 

statement to facilitate the resale of the 

privately-placed shares. These 

companies have not had any prior 

public market for their common stock 

and are not contemplating an 

underwritten offering in connection 

with their selling shareholder 

registration statement. As such, the 

company would not be able to obtain a 

written representation from an 

underwriter to determine compliance 

with the market value requirements, as 

a company would in the case of an IPO, 

and the Exchange cannot rely on trading 

on any predecessor public market to 

evaluate the company’s market value, as 

would be possible with a company 

transferring from another market. Thus, 

while the company may meet all of the 

Exchange’s other listing criteria, the 

company would not be able to satisfy 

NYSE’s current market value 

requirements in Sections 102.01B and 

102.01C of the Manual. 

The Exchange proposes to amend 

Sections 102.01B and 102.01C of the 

Manual to provide that the Exchange 

will, on a case by case basis, exercise 

discretion to list a company whose stock 

is not previously registered under the 

Exchange Act, where such company is 

listing, without a related underwritten 

offering, upon effectiveness of a 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 183 / Friday, September 19, 2008 / Notices 54443 

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

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). 

8Companies listing upon an effective registration 

statement would have to meet the distribution 

requirements set forth in Section 102.01A and 

comply with all applicable NYSE corporate 

governance requirements. 

registration statement registering only 

the resale of shares sold by the company 

in earlier private placements. 

Specifically, the Exchange proposes 

that, for such companies, the Exchange 

will have the discretion to determine 

that the company has met the applicable 

market value requirements by 

attributing a market value to the 

company equal to the lesser of: (i) The 

value calculated based on an 

independent third-party valuation of the 

company (‘‘Valuation’’); and (ii) the 

value calculated based on the most 

recent trading price of the company’s 

common stock in a trading system for 

unregistered securities operated by a 

national securities exchange or a 

registered broker-dealer (‘‘Private 

Placement Market’’). 

The proposed rule change further 

provides that any Valuation used for 

this purpose must be provided by an 

entity that has significant experience 

and demonstrable competence in the 

provision of such valuations. The 

Valuation must be of a recent date as of 

the time of the approval of the company 

for listing, and the evaluator must have 

considered, among other factors, the 

annual financial statements required to 

be included in the registration statement 

and the financial statements for any 

completed fiscal quarters subsequent to 

the end of the last year of audited 

financials included in the registration 

statement. 

The proposed rule change also 

provides that the Exchange will 

consider any market factors, or factors 

particular to the listing applicant, that 

would cause concern that the value of 

the company had diminished since the 

date of the Valuation. In addition, the 

Exchange will continue to monitor the 

company and the appropriateness of 

relying on the Valuation up to the time 

of listing. In particular, the Exchange 

will examine the trading price trends for 

the stock in the Private Placement 

Market over a period of several months 

prior to listing and will only rely on a 

Private Placement Market price if it is 

consistent with a sustained history over 

that several month period evidencing a 

market value in excess of the applicable 

standard. The Exchange may withdraw 

its approval of the listing at any time 

prior to the listing date if it believes that 

the Valuation no longer accurately 

reflects the company’s likely market 

value. 

Companies listed on the basis of these 

new provisions will be required to meet 

the $100 million test applied to 

companies transferring from another 

market under Section 102.01B, rather 

than the $60 million IPO standard. 

Companies listing under the Valuation/ 

Revenue with Cash Flow standard of 

Section 102.01C(II)(a) of the Manual and 

the Affiliated Company standard of 

Section 102.01C(III) will be required to 

have a global market capitalization of 

$600 million, rather than the usual $500 

million requirement. Companies listing 

under the Pure Valuation/Revenue 

standard of Section 102.01C(II)(b) will 

be required to have $900 million of 

global market capitalization, rather than 

the usual $750 million requirement. 

The Exchange also notes that any 

company listing in reliance upon this 

proposed amendment will still be 

required to meet the IPO distribution 

requirements of Section 102.01A, i.e., 

400 beneficial holders of round lots of 

100 shares and 1,100,000 publicly held 

shares. The Exchange states that it will 

rely upon information provided by the 

company’s transfer agent in determining 

whether the company meets the holder 

requirement. The Exchange also states 

that it will be able to determine 

compliance with the 1,100,000 publicly 

held shares requirement by reviewing 

the disclosure in the company’s 

registration statement. 

III. Discussion 

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) of the Act 5 and the 

rules and regulations thereunder. 

Specifically, the Commission finds that 

the proposed rule change is consistent 

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 prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of, a free and 

open market and a national market 

system, to protect investors and the 

public interest, and are not designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers.7

The development and enforcement of 

adequate standards governing the initial 

and continued listing of securities on an 

exchange is an activity of critical 

importance to financial markets and the 

investing public. Listing standards, 

among other things, serve as a means for 

an exchange to screen issuers and to 

provide listed status only to bona fide 

companies that have or, in the case of 

an IPO, will have sufficient public float, 

investor base, and trading interest to 

provide the depth and liquidity 

necessary to promote 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. Once a 

security has been approved for initial 

listing, maintenance criteria allow an 

exchange to monitor the status and 

trading characteristics of that issue to 

ensure that it continues to meet the 

exchange’s standards for market depth 

and liquidity so that fair and orderly 

markets can be maintained. 

The Commission believes that the 

proposed rule change will provide a 

means for a narrow category of 

companies whose stock is not 

previously registered under the Act and 

that are listing upon effectiveness of a 

selling shareholder registration 

statement, without a related 

underwritten offering, to list on the 

Exchange. In particular, for such 

companies that otherwise meet NYSE’s 

listing standards,8 the proposed rule 

change will allow the Exchange to have 

the discretion to determine that a 

company has met the market value 

requirement by attributing a market 

value to the company equal to the lesser 

of the value calculated based on a thirdparty Valuation and the value calculated 

based on the most recent trading price 

in a Private Placement Market. The 

Commission believes that using the 

lesser of these values to determine the 

market value of the company provides 

a reasonable means of assessing the 

market value of the company in these 

special circumstances where a 

company’s stock is not previously 

registered under the Act and is listing 

upon effectiveness of a selling 

shareholder registration statement, 

without a related underwritten offering. 

The Commission recognizes that each 

value, by itself, has limitations. As 

NYSE noted in its proposal, the 

Valuation is only an estimate of what a 

company’s true market value will be 

upon commencement of public trading. 

Further, the most recent trading price in 

a Private Placement Market may be an 

imperfect indication as to the value of 

a security upon listing, in part because 

the Private Placement Markets generally 

do not have the depth and liquidity and 

price discovery mechanisms found on 

public trading markets. However, 


jlentini on PROD1PC65 with NOTICES
54444 Federal Register / Vol. 73, No. 183 / Friday, September 19, 2008 / Notices 

9See Section II, Description of the Proposal, 

supra. 

10See also note 8 supra. The Commission notes 

that once listed, the company would have to 

comply with the continued listing standards like 

other companies. The NYSE has not proposed any 

changes to the continued listing standards for 

companies listing under the provisions approved 

herein. See Section 802 of the Manual. 

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

12 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. 

4See Securities Exchange Act Release No. 58533 

(September 12, 2008) (SR–FINRA–2008–036). 

recognizing these limitations, the 

Commission agrees with the Exchange 

that consideration of both of these 

values should provide the Exchange 

with an estimation of a company’s 

market value that supports listing the 

company on the Exchange. In addition, 

the proposed rule is designed to ensure 

that the Valuation is reliable by 

providing that the Valuation must be 

provided by an entity that has 

significant experience and demonstrable 

competence in providing valuations of 

companies, and must be of a recent date 

as of the time of the approval of the 

company for listing. Further, by 

assuming a market value equal to the 

lesser of the Valuation and a value based 

on the most recent Private Placement 

Market trading, the Exchange will be 

using the more conservative estimate of 

a company’s market value. 

In addition, the Commission notes 

that companies listing under this 

alternative provision will be required to 

meet higher market value standards. 

Specifically, companies will have to 

meet the $100 million transfer market 

value requirement, rather than the $60 

million IPO requirement of Section 

102.01B. Further, companies will be 

required to meet global market 

capitalization standards in Section 

102.01C of the Manual that are 20% 

higher than the normal standards.9

The Commission notes that it expects 

the vast majority of companies to 

continue to list in connection with a 

firm commitment underwritten IPO, 

upon transfer from another market, or 

pursuant to a spin-off, and that this 

proposed alternative standard will be 

used by the Exchange at its discretion. 

In particular, in accordance with the 

terms of the proposed rule, the 

Exchange will apply this standard only 

for the very narrow category of 

companies that are seeking to list their 

common equity securities on the 

Exchange without an underwritten 

offering at the time of effectiveness of a 

registration statement registering only 

the resale of shares sold by the company 

in earlier private placements. Further, 

the Commission expects the Exchange 

to utilize its discretion only after 

thorough consideration and evaluation 

of the specific company and all relevant 

factors. Specifically, the proposed rule 

change requires the Exchange to 

consider the appropriateness of relying 

on Private Placement Market trading in 

light of the price trends for the stock 

over a period of several months and 

only rely on a Private Placement Market 

price if consistent with a sustained 

history evidencing a market value in 

excess of the listing requirement. In 

relying on such Private Placement 

Market, the Commission expects the 

NYSE to consider the trading 

characteristics of the stock, including its 

trading volume and price volatility over 

a sustained period of time. In addition, 

in relying on the Valuation, the 

Exchange must consider any market 

factors or factors particular to the listing 

applicant that would cause concern that 

the value of the company had 

diminished since the date of Valuation 

and continue to monitor the company 

and the appropriateness of relying on 

the Valuation up until the time of 

listing. The Commission expects that 

where these factors indicate that the 

value calculated may not be an accurate 

estimation of a company’s market value, 

the Exchange will use its discretion to 

determine not to list such company 

pursuant to the proposed provisions. In 

general, the Commission expects that 

the Exchange will deny listing to any 

company seeking to list pursuant to the 

proposed rule change if the Exchange 

determines that the listing of any such 

company is not in the interests of the 

Exchange or the public interest. 

The Commission also notes that 

companies listing pursuant to the new 

proposed provision will still be required 

to meet the IPO distribution 

requirements of Section 102.01A of the 

Manual, i.e., that the company have 400 

beneficial holders of round lots of 100 

shares and 1,100,000 publicly held 

shares. The Commission believes that 

these existing provisions will continue 

to help ensure that the company has the 

requisite liquidity for listing on the 

Exchange.10 The Exchange’s reliance on 

the transfer agent for assurance that the 

holder requirement is met, and on the 

disclosure in the company’s registration 

statement for assurance that the publicly 

held shares requirement is met, will 

ensure that these important liquidity 

requirements are verified before a 

company may qualify for listing. 

For the reasons set forth above, the 

Commission finds that the proposed 

rule change is consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–NYSE–2008– 

68) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21944 Filed 9–18–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58549; File No. SR–NYSE– 

2008–80] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change and 

Amendment No. 1 Thereto Conforming 

Certain NYSE Rules to Changes to 

NYSE Incorporated Rules Recently 

Filed by the Financial Industry 

Regulatory Authority, Inc. 

September 15, 2008. 

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 

September 5, 2008, New York Stock 

Exchange LLC (‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. On 

September 11, 2008, the Exchange filed 

Amendment No. 1. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change, 

as amended, from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

certain New York Stock Exchange 

(‘‘NYSE’’ or the ‘‘Exchange’’) Rules to 

conform with proposed amendments to 

certain NYSE Incorporated Rules 

(defined below) recently filed by the 

Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) 4 to reduce 

regulatory duplication and relieve firms 

that are members of both FINRA and the 

Exchange of conflicting or unnecessary 

regulatory burdens in the interim period 


jlentini on PROD1PC65 with NOTICES