Document ID: SEC-2008-1173-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-08-22T04:00Z

[Federal Register: August 22, 2008 (Volume 73, Number 164)]
[Notices]               
[Page 49726-49728]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22au08-122]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58376; File No. SR-NYSEArca-2008-70]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Amending NYSE Arca Equities Rule 
5.2(j)(6)(B)(I), the Generic Listing Standard for Equity Index-Linked 
Securities

August 18, 2008.

I. Introduction

    On June 27, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934

[[Page 49727]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposal to amend NYSE 
Arca Equities Rule 5.2(j)(6)(B)(I), the Exchange's generic listing 
standard for equity index-linked securities (``Equity Index-Linked 
Securities'') to: (1) Eliminate initial and continued listing 
capitalization weighted and modified capitalization weighted index 
requirements; and (2) to adjust certain equity index weighting criteria 
and adopt notional volume traded per month to both initial listing 
standards and continued listing standards. The proposed rule change was 
published for comment in the Federal Register on July 17, 2008.\3\ The 
Commission received no comments on the proposal. This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58142 (July 11, 
2008), 73 FR 41147.
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II. Description of the Proposal

    NYSE Arca proposes to amend NYSE Arca Equities Rule 
5.2(j)(6)(B)(I), the Exchange's generic listing standard for Equity 
Index-Linked Securities to: (1) Eliminate initial and continued listing 
capitalization weighted and modified capitalization weighted index 
requirements; and (2) to adjust certain equity index weighting criteria 
and adopt notional volume traded per month to both the initial listing 
standards and continued listing standards.
    The Exchange proposes that capitalization weighted index or 
modified capitalization weighted indexes comply with the initial and 
continued listing requirements currently applicable to all other equity 
indexes under NYSE Arca Equities Rule 5.2(j)(6)(B)(I) regardless of the 
index methodology.
    For Equity Index-Linked Securities, the Exchange proposes to 
eliminate NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(iii), the 
current initial listing requirement that, in the case of a 
capitalization weighted index or modified capitalization weighted 
index, the lesser of the five highest dollar weighted component 
securities in the index or the highest dollar weighted component 
securities in the index that in the aggregate represent at least 30% of 
the total number of component securities in the index, must have an 
average monthly trading volume of at least 2,000,000 shares over the 
previous six months. The Exchange also proposes to eliminate NYSE Arca 
Equities Rule 5.2(j)(6)(B)(I)(2)(a)(iii), the current continued listing 
requirement, that in the case of a capitalization weighted index or 
modified capitalization weighted index, the lesser of the five highest 
dollar weighted component securities in the index or the highest dollar 
weighted component securities in the index that in the aggregate 
represent at least 30% of the total number of stocks in the index have 
an average monthly trading volume of at least 1,000,000 shares over the 
previous six months.
    The Exchange is also proposing to: (i) Remove the requirement that 
each of the lowest weighted component securities in the index that in 
the aggregate account for 10% of the weight of the index have trading 
volume of at least 500,000 shares per month for each of the last six 
months; and (ii) adopt minimum global notional volume (``Global 
Notional Volume'') \4\ traded per month of $25,000,000 averaged over of 
the last six months as an option for meeting the listing requirements.
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    \4\ Global Notional Volume is defined as the total shares traded 
globally times the price per share.
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    With respect to the continued listing criteria, Rule 
5.2(j)(6)(B)(I)(2)(a)(ii) currently sets forth that the trading volume 
of each component security in the index must be at least 500,000 shares 
for each of the last six months, except that for each of the lowest 
weighted components in the index that in the aggregate account for no 
more than 10% of the weight of the index, trading volume must be at 
least 400,000 shares for each of the last six months.
    The Exchange is proposing to: (i) Remove the requirement that the 
lowest weighted component securities in the index that in the aggregate 
accounting for no more than 10% of the weight of the index have trading 
volume of at least 400,000 shares for each of the last six months; and 
(ii) adopt minimum Global Notional Volume traded per month of 
$12,500,000 averaged over the last six months as an option for 
satisfying the continued listing requirements.

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

    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.\5\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \6\ in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanisms 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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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Exchange's proposal to eliminate 
the above-described initial and continued listing requirements for 
Equity-Index Linked Securities based upon capitalization weighted and 
modified capitalization weighted indexes would subject all Equity 
Index-Linked Securities to the same listing requirements, regardless of 
the methodology upon which a product's underlying index is based. The 
Commission believes that the proposal should facilitate the listing and 
trading of Equity Index-Linked Securities with different index 
methodologies, thus benefiting investors by providing them with a wider 
selection of derivative products.
    The Exchange also proposes to adjust the index weighting criteria 
in NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(1)(b)(ii) and 
5.2(j)(6)(B)(I)(2)(a)(ii) and to adopt an averaged minimum global 
notional volume traded per month as an option for meeting these initial 
and continued listing requirements. The Commission believes that 
focusing the listing requirements on measuring component stocks that in 
the aggregate account for 90% of the weight of an index should be 
sufficient to evaluate the liquidity of an index underlying a given 
Equity-Index Linked Security. The Commission further believes that the 
use of global notional volume as an alternative measure to global 
trading volume is acceptable in that it should mitigate the volume 
discrepancies between low- and high-priced stocks. Finally, the 
Exchange's proposal to adopt an average of trading or notional volume, 
as the case may be, should help to eliminate seasonal volume 
fluctuations that may occur in the trading of an Equity-Index Linked 
Security in a given month. The Commission believes that the proposal 
should promote competition and benefit investors, Equity Index-Linked 
Securities issuers, and third-party index sponsors by expediting the 
Exchange's ability to list and trade Equity Index-Linked Securities 
based on a broader group of indexes.
    For the foregoing reasons, the Commission believes that the 
proposed rule change is consistent with the Act.

[[Page 49728]]

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-NYSEArca-2008-70) be, and it 
hereby is, approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-19474 Filed 8-21-08; 8:45 am]

BILLING CODE 8010-01-P