Document ID: SEC-2009-0738-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange LLC Amending the Exchange's Continued Listing Standards on a Pilot Program Basis
Posted Date: 2009-06-04T04:00Z

[Federal Register: June 4, 2009 (Volume 74, Number 106)]
[Notices]               
[Page 26912-26914]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn09-125]                         

[[Page 26912]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59996; File No. SR-NYSE-2009-48]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending the Exchange's Continued Listing Standards on a Pilot Program 
Basis

May 28, 2009.
    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 May 12, 2009, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change 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 certain of the continued listing 
requirements in Section 802.01B of the Exchange's Listed Company Manual 
(the ``Manual'') on a pilot program basis (the ``Pilot Program'') 
through October 31, 2009. 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 self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    Section 802.01B(I) of the Manual provides that any company that 
qualified to list under the Earnings Test set out in Section 102.01C(I) 
or in Section 103.01B(I) (in the case of foreign private issuers) or 
pursuant to the requirements set forth under the Assets and Equity Test 
set forth in Section 102.01C(IV) or the ``Initial Listing Standard for 
Companies Transferring from NYSE Arca'' set forth in Section 102.01C(V) 
(the ``NYSE Arca Transfer Standard'') will be considered to be below 
compliance standards if average global market capitalization over a 
consecutive 30 trading-day period is less than $75 million and, at the 
same time, total stockholders' equity is less than $75 million. The 
Exchange proposes to amend this requirement on a Pilot Program basis 
through October 31, 2009, to provide that companies that listed under 
the initial listing standards set forth in the immediately preceding 
sentence will only be considered to be below compliance standards if 
average global market capitalization over a consecutive 30 trading-day 
period is less than $50 million and, at the same time, total 
stockholders' equity is less than $50 million. For companies listed 
under the Earnings Test, this rule change returns continued listing 
requirements to those in place prior to the adoption of the current 
requirements on June 9, 2005.\4\ Companies that are below compliance 
with the current continued listing requirements will be deemed to have 
returned to compliance at the time of effectiveness of this filing, 
unless they are below the levels established under the Pilot Program.
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    \4\ See Securities Exchange Act Release No. 51813 (June 9, 
2005), 70 FR 35484 (June 20, 2005) (SR-NYSE-2004-20). The Assets and 
Equity Test set forth in Section 102.01C(IV) and the NYSE Arca 
Transfer Standard set forth in Section 102.01C(V) were adopted 
subsequent to this amendment.
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    In 2005, when the Exchange effectively amended its continued 
listing standards for companies that listed under the Earnings test, 
there were very few companies that were below the requirements at that 
time and there was an expectation that very few companies would fall 
below compliance with those requirements for the then foreseeable 
future in light of relatively stable market and economic conditions. As 
such, the heightened continued listing standards were considered a 
reasonable response to the financial environment at that time and did 
not lead to any meaningful increase in the number of companies that 
fell below compliance. Conditions in the capital markets have changed 
considerably over the last year, with a dramatic decline in stock 
prices and market capitalizations of many listed companies and an 
increase in market volatility. As such, a far greater number of 
companies have fallen below the continued listing standards in the last 
eighteen months than at any time since the effective date of the 
amendment to the continued listing standards in 2005. Many companies 
have fallen below $75 million in total market capitalization and it 
seems likely that the stock prices of many of these companies will have 
difficulty returning to their pre-recession level for a considerable 
period of time. Consequently, the Exchange believes that a $50 million 
market capitalization requirement is more appropriate under current 
market conditions than the current $75 million requirement.
    Similarly, a large number of listed companies have recorded--or are 
expected to soon record--significant write downs in the value of their 
assets or significant impairment charges. It is reasonable to assume 
that it will take many of these companies a long time to raise their 
stockholders' equity back to pre-recession levels. The Exchange notes 
that companies that list under the Earnings Test and the NYSE Arca 
Transfer Standard are not subject to any stockholders' equity 
requirement at the time of initial listing, while companies that list 
under the Assets and Equity Test must demonstrate $50 million in 
stockholders' equity. Yet, companies that listed under any of these 
standards that have suffered a significant diminution in market 
capitalization are required to have $75 million in stockholders' equity 
to avoid becoming noncompliant or to cure an event of noncompliance, 
notwithstanding the fact that they were required to demonstrate a lower 
level of stockholders' equity--or none at all--at the time of original 
listing. In light of that fact, the Exchange believes that a 
stockholders' equity requirement of $50 million is more appropriate as 
an element in its continued listing standard under current market 
conditions.
    Because the continued listing standards proposed under the Pilot 
Program are the same as those that were previously in place for 
companies that listed under the Earnings Test, the Exchange has 
considerable experience with the continued listing of companies that 
have continued to trade on the Exchange with global market 
capitalization and stockholders' equity

[[Page 26913]]

each below $75 million, but without triggering the continued listing 
standard proposed under the Pilot Program. Based on that experience, 
the Exchange believes that companies that exceed the proposed continued 
listing standard are suitable for continued listing on the Exchange. 
The Exchange notes that (i) under the Earnings Test, companies can list 
on the basis of positive sustained earnings history and a $60 million 
IPO public float ($100 million for a transfer), (ii) under the Assets 
and Equity Test, companies can list on the basis of $150 million in 
global market capitalization, $75 million in total assets and $50 
million in total stockholders equity and a $60 million IPO public float 
($100 million for a transfer) and (iii) under the NYSE Arca Transfer 
Standard, companies can list on the basis of $75 million in global 
market capitalization and $20 million in aggregate market value of 
publicly-held shares, with no minimum requirement as to stockholders' 
equity. Any significant diminution in the market capitalization of a 
company listing under any of these standards that did not have 
significant stockholders' equity could quickly lead to such company 
being below compliance. The Exchange believes that continued listing 
standards need to be established at a level that appropriately 
corresponds to initial listing standards in the context of current 
market and economic conditions, so that companies do not move rapidly 
from initial listing qualification to being below compliance. The 
Exchange believes that the proposed continued listing standards under 
the Pilot Program will achieve this objective, given the current 
financial environment.
    The Exchange notes that the continued listing standards to be 
adopted under the Pilot Program are higher than those of any other 
national securities exchange. Consequently, the Exchange believes that 
the Pilot Program is consistent with the protection of investors and 
the public interest and does not raise any novel regulatory issues. In 
addition, because the continued listing standards under the Pilot 
Program are the same as those that were in place on January 8, 2004, 
the adoption of the Pilot Program does not affect the status of NYSE 
listed securities under Exchange Act Rule 3a51-1(a) (the ``Penny Stock 
Rule'').\5\
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    \5\ 17 CFR 240.a51-1(a). The Commission notes that the listing 
standards of the Exchange are no longer included in the 
``grandfather'' exception. See Securities Exchange Act Release No. 
57785 (May 6, 2008), 73 FR 27597 (May 13, 2008) (SR-NYSE-2008-17). 
As a result of losing this exception, the Exchange is required to 
satisfy the requirements of Exchange Act Rule 3a51-1(a)(2). The 
Commission believes that the continued listing standards to be 
adopted under the Pilot Program meet the requirements established in 
Exchange Act Rule 3a51-1(a)(2)(ii) in that they are reasonably 
related to the initial listing standards set forth in paragraph 
(a)(2)(i) of Exchange Act Rule 3a51-1. The Commission notes that the 
$50 million in total stockholders' equity requirement contained in 
the Pilot Program exceeds the $5 million contained in Exchange Act 
Rule 3a51-1(a)(2)(i)(A). The Commission further notes that the $50 
million in average global market capitalization over a 30 trading-
day period is reasonably related to the $50 million in market value 
of listed securities for 90 consecutive days prior to initial 
listing contained in Exchange Act Rule 3a51-1(a)(2)(i)(A).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \6\ of the Act, in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\\\ 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. 
The Exchange believes that the proposed amendment is consistent with 
the investor protection objectives of the Act in that the proposed 
continued listing standards are set at a high enough level that only 
companies that are suitable for continued listing on the Exchange will 
exceed the requirements of the continued listing standards.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \8\ and 
Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay.
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow NYSE to immediately implement, on a pilot basis, 
new continued listing standards. The Commission notes that the new 
continued listing standards will apply to companies qualified to list 
under: (i) the Earnings Test set out in Section 102.01C(I) or in 
Section 103.01B(I); (ii) the Assets and Equity Test set forth in 
Section 102.01C(IV); or (iii) the ``Initial Listing Standards for 
Companies Transferring from NYSE Arca'' as set forth in Section 
102.01C(V). The Commission also notes that the standards being adopted 
under the Pilot Program are identical, for those companies qualifying 
under the Earnings Test, to those in effect on the Exchange prior to 
the adoption of the current standards in 2005.\12\ The Commission 
further notes that the continued listing standards proposed under the 
Pilot Program are higher than similar standards currently in place on 
other exchanges. In addition, the Commission notes that these continued 
listing standards are being adopted on a pilot basis and absent a 
proposed rule change by NYSE to either extend the pilot period or make 
these changes permanent, the new listing standards will expire after 
October 31, 2009. The pilot period will allow the NYSE and

[[Page 26914]]

the Commission to assess how the lower standards have worked should the 
NYSE wish to extend the pilot. For these reasons, the Commission 
designates that the proposed rule change become operative immediately 
upon filing.\13\
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    \12\ See Securities Exchange Act Release No. 51813 (June 9, 
2005), 70 FR 35484 (June 20, 2005) (SR-NYSE-2004-20).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2009-48 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2009-48. 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-
NYSE-2009-48 and should be submitted on or before June 25, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-12998 Filed 6-3-09; 8:45 am]

BILLING CODE 8010-01-P