Document ID: SEC-2006-0667-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2006-05-24T04:00Z

[Federal Register: May 24, 2006 (Volume 71, Number 100)]
[Notices]               
[Page 30009-30011]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my06-141]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53825; File No. SR-NYSE-2006-38]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Exchange's Financial Listing Criteria

May 17, 2006.
    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 May 16, 2006, the New York Stock Exchange LLC (``NYSE'' or 
``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 Exchange. NYSE has 
filed this proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes to amend its domestic financial listing standards 
for companies proposing to list on the Exchange contained in Section 
102.01C of the Exchange's Listed Company Manual (the ``Manual'') to 
allow domestic companies to qualify for listing, under certain limited 
circumstances, on the basis of their earnings, cash flows or revenues, 
as applicable, in the most recent completed nine-month period. However 
the Exchange must conclude that the company can reasonably be expected 
to qualify under the regular standard upon completion of its then 
current fiscal year.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nyse.com), at the Exchange's Office of the 

Secretary, and at the Commission's Public Reference Room.

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 IV below. 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
    NYSE proposes to amend its domestic financial listing standards for 
companies proposing to list on the Exchange contained in Section 
102.01C of the Exchange's Listed Company Manual (the ``Manual'') to 
allow companies seeking to list under the Exchange's domestic standards 
to qualify for listing, under certain limited circumstances, on the 
basis of their earnings, cash flows or revenues, as applicable, in the 
most recent completed nine-month period.
    Section 102.01C of the Manual allows companies to list under the 
Exchange's domestic listing criteria by meeting one of the following 
three standards:
     Earnings Test (1) Pre-tax earnings from continuing 
operations and after minority interest, amortization and equity in the 
earnings or losses of investees, adjusted for certain specified items, 
must total at least $10,000,000 in the aggregate for the last three 
fiscal years together with a minimum of $2,000,000 in each of the two 
most recent fiscal years, and positive amounts in all three years.
     Valuation/Revenue with Cash Flow Test--
    (1) At least $500,000,000 in global market capitalization,
    (2) At least $100,000,000 in revenues during the most recent 12 
month period, and
    (3) At least $25,000,000 aggregate cash flows for the last three 
fiscal years with positive amounts in all three years, subject to 
certain adjustments.
     Pure Valuation/Revenue Test--
    (1) At least $750,000,000 in global market capitalization, and
    (2) At least $75,000,000 in revenues during the most recent fiscal 
year.
    Over the years, the Exchange states that it has been unable to list 
a number of financially healthy companies because those companies had 
insufficient earnings, cash flows, or revenues in the earliest fiscal 
year required by the applicable standard. In many cases, such a company 
is very different at the time of its listing application from the 
company that had existed in such earlier period. Such company may have 
undergone a recapitalization transaction in which it substantially 
reduced its debt burden. Alternatively, the company may have undergone 
a significant change in its operations, including, but not limited to:
     A divestiture or discontinuation of a loss-making business 
line,
     A change in management,
     An acquisition or series of acquisitions,
     Economies of scale and increased revenues as the company 
emerges from its start-up phase,
     The effect of foreign currency valuation,
     Entering a new geographic region or market or exiting a 
geographic region or market, or
     The launch of a new product or service.
    Therefore, the Exchange proposes to amend Section 102.01C(I) and 
(II) (the ``Earnings'' and ``Valuation/Revenue with Cash Flow'' Tests) 
to enable it to qualify a company based on the most recent completed 
nine months in lieu of the earliest fiscal year otherwise required by 
the applicable standard, in circumstances where a recapitalization 
transaction or significant change in operations has rendered irrelevant 
the financial position of the company in

[[Page 30010]]

that third year back and the company would meet the requirements of 
Section 102.01C(I) or (II) based on the most recent nine months and the 
two immediately preceding fiscal years. For the same reasons, the 
Exchange proposes to amend Section 102.01C(III) (the ``Pure Valuation/
Revenue'' Test) on the basis of the most recent nine months, instead of 
a full fiscal year. In such cases, the Exchange must conclude that the 
Company can reasonably be expected to qualify under the regular 
standard upon completion of its then current fiscal year.
    The Exchange believes that investors are not protected less by the 
qualification for listing of companies that can meet the Earnings or 
Valuation/Revenue with Cash Flow Tests on the basis of 33 months of 
financial history, including their last two completed fiscal quarters, 
than by the qualification of companies based on an older three-year 
period, particularly if a recapitalization or significant change in 
operations has materially changed the nature of the company. Similarly, 
the Exchange believes that investors are not protected less by the 
qualification for listing of companies that can meet the Pure 
Valuation/Revenue Test on the basis of the most recently completed nine 
months period, rather than an older twelve month period. The Exchange 
believes that any company it would qualify for listing on the basis of 
the proposed amendment would meet the existing standards of Section 
102.01C with the passage of time upon completion of its next fiscal 
year.\5\
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    \5\ For purposes of Rule 3a51-1(a)(1) under the Act, the 
Exchange states that, as proposed to be amended herein, its initial 
listing standards will be substantially similar to the initial 
listing standards in place on January 8, 2004. 17 CFR 240.3a51-
1(a)(1).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of Section 6(b) \6\ of the Act, in general, and 
Section 6(b)(5) \7\ of the Act, in particular, in that it is 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, in general, to 
protect investors and the public interest.
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    \6\ 15 U.S.C. 78(f)(b).
    \7\ 15 U.S.C. 78(f)(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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) 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). As required by Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange also provided with the Commission with 
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 the proposed rule 
change.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay specified in Rule 19b-4(f)(6)(iii).\10\ The Commission hereby 
grants that request because the Commission believes that waiving the 
30-day operative period is consistent with the protection of investors 
and public interest.\11\ In its proposal to qualify a company, in the 
case of the Earnings Test and Valuation/Revenue with Cash Flow Test, on 
the basis of 33 months of financial history and, in the case of the 
Pure Valuation/Revenue Test, on the basis of nine months of financial 
history, the Exchange has stated its belief that any company that it 
would qualify for listing on the basis of the proposed rule change 
would meet the existing standards of Section 102.01C upon completion of 
its next fiscal year. Therefore, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ 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. See 15 U.S.C. 
78c(f). The Exchange also requested that the Commission waive the 
five-day pre-filing requirement; however, the Exchange provided the 
Commission with such notice; therefore, this request is moot.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such 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 e-mail to rule-comments@sec.gov. Please include File 

Number SR-NYSE-2006-38 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-2006-38. 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. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the NYSE. 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-2006-38 and should be submitted by June 14, 2006.

[[Page 30011]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).

Nancy M. Morris,
Secretary.
[FR Doc. E6-7914 Filed 5-23-06; 8:45 am]

BILLING CODE 8010-01-P