Document ID: SEC-2007-1174-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-08-22T04:00Z

[Federal Register: August 22, 2007 (Volume 72, Number 162)]
[Notices]               
[Page 47107-47109]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22au07-165]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56271; File No. SR-NYSE-2007-74]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Amend Sections 703.22 and 802.01D of the Exchange's 
Listed Company Manual Regarding the Listing and Trading of Index-Linked 
Securities

August 16, 2007.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on August 3, 2007, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes as described in Items I and 
II below, which items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule changes from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 703.22 of its Listed Company 
Manual (``Manual'') to permit the listing of securities that do not 
meet the one million unit initial distribution requirement but are 
redeemable on at least a weekly basis at the option of the holders. The 
filing also amends Section 802.01D of the Manual to apply the continued 
listing standards under the heading ``Specialized Securities'' to 
securities listed under Section 703.22.
    The text of the proposed rule change is available at the Exchange, 
the Commission's Public Reference Room, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 III below. The NYSE 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 proposes to amend Section 703.22 of the Manual to 
permit the listing of securities that do not meet the one million unit 
initial distribution requirement but are redeemable on at least a 
weekly basis at the option of the holders. Section 703.22 is the 
Exchange's generic listing standards for equity index-linked securities 
(``Equity Index-Linked Securities''), commodity-linked securities 
(``Commodity-Linked Securities''), and currency-linked securities 
(``Currency-Linked Securities'' and, together with Equity Index-Linked 
Securities and Commodity-Linked Securities, ``Index-Linked 
Securities'').
    Section 703.22 of the Manual currently exempts a new listing of 
Index-Linked Securities from the otherwise applicable requirement that 
the issue have 400 holders upon listing, but only if the issue provides 
for the redemption of securities at the option of the holders on at 
least a weekly basis. The Exchange believes that, where there is such a 
weekly redemption right, the same justification exists for an exemption 
from the requirement to have one million units issued at the time of 
listing as applies to the 400 holder requirement. The Exchange believes 
that a weekly redemption right will ensure a strong correlation between 
the market price of the Index-Linked Securities and the performance of 
the underlying index, as holders will be unlikely to sell their 
securities for less than their redemption value if they have a weekly 
right to be redeemed for their full value. In addition, in the case of 
those Index-Linked Securities with a weekly redemption feature that are 
currently listed, as well as all of those that are currently proposed 
to be listed, the issuer has the ability to issue new Index-Linked 
Securities from time to time at the indicative value at the time of 
such sale. This provides a ready supply of new Index-Linked Securities, 
thereby lessening the possibility that the market price of such 
securities will be affected by a scarcity of available Index-Linked 
Securities for sale. The Exchange believes that it also assists in 
maintaining a strong correlation between the market price and the 
indicative value, as investors will be unlikely to pay more than the 
indicative value in the open market if they can

[[Page 47108]]

acquire Index-Linked Securities from the issuer at that price.
    The Exchange states that the ability to list Index-Linked 
Securities with these characteristics without any minimum number of 
holders is important to the successful listing of such securities. 
Issuers issuing these types of Index-Linked Securities generally do not 
intend to do so by way of an underwritten offering. Rather, the 
distribution arrangement is analogous to that of an exchange traded 
fund issuance, in that the issue is launched without any significant 
distribution event and the float increases over time as investors 
purchase additional securities from the issuer at the then indicative 
value. Investors will generally seek to purchase the securities at a 
point when the underlying index is at a level that they perceive as 
providing an attractive growth opportunity. In the context of such a 
distribution arrangement, it is difficult for an issuer to guarantee 
its ability to sell a specific number of units on the listing date. 
However, the Exchange believes that this difficulty in ensuring the 
sale of one million units on the listing date is not indicative of a 
likely long-term lack of liquidity in the securities or, for the 
reasons set forth in the prior paragraph, of a difficulty in 
establishing a pricing equilibrium in the securities or a successful 
two-sided market.
    The Exchange also proposes to amend Section 802.01D of the Manual 
to apply the continued listing standards under the heading 
``Specialized Securities'' to securities listed under Section 703.22. 
These continued listing standards require that the securities be 
delisted when:
     The number of publicly-held securities is less than 
100,000.
     The number of holders is less than 100.
     The aggregate market value of securities outstanding is 
less than $1,000,000.
     For specialized securities that are debt, the issuer is 
not able to meet its obligations on such debt.
    The Exchange proposes to exempt from the 100 holders requirement 
Index-Linked Securities that are redeemable at the option of the holder 
on at least a weekly basis. The Exchange believes this exemption is 
appropriate because the securities in question are not subject to any 
minimum holder requirement at the time of initial listing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\5\ in particular in that it 
is 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. 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 e-mail to rule-comments@sec.gov. Please include File 

Number SR-NYSE-2007-74 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-NYSE-2007-74. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such 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-2007-74 and should be 
submitted by September 12, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, 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 \6\ and, in particular, the requirements of Section 6 of the 
Act.\7\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\8\ 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.
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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that this proposal should benefit investors 
by providing an exception to the minimum public distribution 
requirements for Index-Linked Securities with a weekly redemption 
right. The Commission believes that the market price of Index-Linked 
Securities with a weekly redemption right should exhibit a strong

[[Page 47109]]

correlation to the performance of the relevant underlying index, since 
holders of such securities will be unlikely to sell them for less than 
their redemption value if they have a weekly right to be redeemed for 
their full value. The Commission believes that this exception is 
reasonable and should allow for the listing and trading of certain 
Index-Linked Securities that would otherwise not be able to be listed 
and traded on the Exchange.
    The Commission further finds that the Exchange's proposal to amend 
Section 802.01D of the Manual to apply the continued listing standards 
under the heading ``Specialized Securities'' to securities listed under 
Section 703.22 will clarify the applicable continued listing criteria 
for Index-Linked Securities. Moreover, the Commission believes that the 
proposed exemption for Index-Linked Securities that are redeemable at 
the option of the holder on at least a weekly basis from an ongoing 
distribution requirement is consistent with the rationale underlying 
the exemption from the initial listing standards in Section 703.22 of 
the Manual.
    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of the 
notice of filing thereof in the Federal Register. The Commission does 
not believe that NYSE's proposal raises any novel regulatory issues 
and, therefore, that good cause exists for approving the filing on an 
expedited basis. Therefore, accelerating approval of this proposal 
should benefit investors by creating, without undue delay, additional 
competition in the market for such securities.
    Therefore, the Commission finds good cause, consistent with Section 
19(b)(2) of the Act,\9\ to approve the proposed rule change on an 
accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSE-2007-74) be, and it 
hereby is, approved on an accelerated basis.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E7-16555 Filed 8-21-07; 8:45 am]

BILLING CODE 8010-01-P