Document ID: SEC-2007-1621-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-11-30T05:00Z

[Federal Register: November 30, 2007 (Volume 72, Number 230)]
[Notices]               
[Page 67772-67774]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no07-100]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56835; File No. SR-NYSE-2007-104]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Enable the Exchange To List Certain Companies Based on Two Completed 
Fiscal Years and Financial Statements Covering the First Six Months of 
the Current Fiscal Year as Long as Prior to Listing Certain Summary 
Financial Data Confirms That the Company Continues To Satisfy the 
Applicable Standard Based on at Least Nine Completed Months of the 
Current Fiscal Year

November 21, 2007.
    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 November 15, 2007, the 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 substantially prepared by the Exchange. 
The Exchange filed the proposed rule change pursuant to section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposed rule change effective upon filing with the 
Commission. 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\ 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 Exchange proposes to amend the earnings standard and valuation/
revenue with cash flow standard of section 102.01B of the Exchange's 
Listed Company Manual (``Manual''). The amendment will enable the 
Exchange, under certain limited circumstances, to qualify companies for 
listing under the three-year financial requirements of those two 
standards on the basis of two completed fiscal years of financial 
statements and financial statements covering the first six months of 
the current fiscal year, provided that the company must include, in a 
public disclosure (either an SEC filing or a press release) prior to 
the date of listing, financial data as derived from financial 
statements that have been subject to a Statement of Auditing Standards 
100 (``SAS 100'') review that confirms that the company continues to 
satisfy the applicable standard based on at least nine completed months 
of the 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 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 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
    The Exchange proposes to amend the earnings standard and valuation/
revenue with cash flow standard of section 102.01B of the Manual. The 
amendment will enable the Exchange, under certain limited 
circumstances, to qualify companies for listing under the three-year 
financial requirements of those two standards on the basis of two 
completed fiscal years of financial statements and financial statements 
covering the first six months of the current fiscal year, provided that 
the company must include, in a public disclosure (either an SEC filing 
or press release) prior to the date of listing, financial data as 
derived from financial statements that have been subject to an SAS 100 
review that confirms that the company continues to satisfy the 
applicable standard based on at least nine completed months of the 
current fiscal year.
    The proposed rule change does not alter the quantitative 
requirements companies must meet under the Exchange's financial listing 
standards, but simply provides greater flexibility to certain companies 
in demonstrating their satisfaction of those requirements. Currently, 
where a company has changed its fiscal year or undergone a significant 
change in its operations \5\ or capital structure, section 102.01C 
provides that such company may satisfy the earnings test or valuation/
revenue with cash flow test on the basis of financial information for a 
nine to twelve month period in the current fiscal year in lieu of the 
first year in the three fiscal year period otherwise required. When 
qualifying a company for listing based on interim financial information 
from the current fiscal year, 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. In reaching 
this conclusion, the Exchange considers whether the company's revenues 
or costs are subject to seasonal variation and the possible impact of 
any such variation on the suitability of predicting the company's full 
year performance based on its results in the first nine months of the 
year. In addition, if the company does not qualify under the regular 
standard at the end of such current fiscal year or qualify at such time 
for original listing under another listing standard, section 102.01C 
provides that the Exchange will promptly initiate suspension and 
delisting procedures with respect to the company.
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    \5\ The types of significant changes in operations considered by 
the Exchange, include, but are not limited to:
     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.
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    Under the proposed amendment, the company would still need to 
demonstrate compliance with the relevant standard over at least nine 
completed months of the current fiscal year. The only distinction is 
that the company could demonstrate compliance through the inclusion of 
summary financial information for the nine-

[[Page 67773]]

month period--rather than full financial statements--in a public 
disclosure (either an SEC filing or a press release). The information 
for the nine-month period would be required to be derived from 
financial statements that have been subject to an SAS 100 review. To 
ensure that Exchange staff has a more complete understanding of the 
company's financial status, the proposed amendment requires that 
financial statements compliant with applicable SEC rules be available 
for the first six months of the period, demonstrating the company's 
satisfaction of the applicable financial listing standard over that 
period. While the proposed rule change modifies the Exchange's 
requirement with respect to the financial disclosure it will accept as 
evidence of a company's compliance with the Exchange's financial 
listing standards for those companies that are eligible,\6\ companies 
listing on the Exchange will continue to be subject to the requirement 
to present financial statements in their SEC filings compliant with 
applicable SEC rules.\7\
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    \6\ See note 5 supra and accompanying text.
    \7\ The Commission notes that companies listing on the Exchange 
will still have to meet the registration requirements of Section 
12(b), and any other requirements, under the Act. See 15 U.S.C. 
78l(b). The NYSE's proposal only alters certain time periods, and 
the type of financial information the Exchange would review, when 
considering the eligibility of these companies for listing on the 
Exchange under Sections 102.01C(1) and (II) of the Manual and has no 
effect on the financial statements, or any other information, 
required by the Commission.
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    The proposed amendment will enable the Exchange to facilitate the 
listing of companies that have completed at least nine months of their 
current fiscal year and qualify for listing on the basis of their 
interim results but have not yet been able to prepare full financial 
statements for the relevant period. Market conditions and the timing of 
companies' financing needs frequently make it undesirable for companies 
to delay their listing. As such, companies that would like to list on 
the Exchange, and have financial results that qualify them for listing, 
may occasionally feel compelled to list elsewhere because they cannot 
wait until work is finished on their interim financial statements. The 
Exchange believes that the proposed amendment will provide reasonable 
flexibility to enable it to list companies that find themselves in this 
circumstance, without in any way diluting the financial standards those 
companies must meet.\8\
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    \8\ The Exchange notes that the NYSE earnings standard--both 
currently and as proposed to be amended by this filing--would always 
require a higher level of earnings in the most recently completed 
fiscal year than is required by Nasdaq Global Market Standard 1. The 
Nasdaq standard requires $1 million of earnings in either the most 
recent fiscal year or two of the three most recent fiscal years, so 
a company listing could have either: (i) $1 million of earnings in 
the most recently completed fiscal year with no limit as to its 
losses in the two preceding years or (ii) $1 million of earnings in 
each of the two preceding years with no limits as to losses in the 
most recent fiscal year. Assuming using the six/nine month 
exemption, the same company on NYSE would have to have either: (i) 
$10 million aggregate earnings in the two most recent completed 
fiscal years and the current partial year with at least $2 million 
in each of the current fiscal year and the most recent completed 
fiscal year and positive earnings in the preceding fiscal year or 
(ii) $12 million aggregate over the same period, with at least $5 
million in the current fiscal year and $2 million in the most recent 
completed fiscal year. As such, an NYSE company listing under the 
earnings standard could never have less than $2 million of earnings 
in the most recent completed fiscal year, while a company listing 
under Nasdaq Global Market Standard 1 could have either $1 million 
of earnings or a loss. While Nasdaq has a $15 million shareholders' 
equity requirement that the NYSE does not have, NYSE's public float 
requirement of $60 million far exceeds the $8 million required by 
Nasdaq.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) of the Act \9\ that an exchange have 
rules that are 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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    \9\ 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) \11\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, become operative for 30 days 
from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that the Exchange has given the 
Commission 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \12\ 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 period so that the proposal 
becomes operative upon filing with the Commission. The Exchange states 
that the proposal would allow the Exchange to list those companies that 
have changed their fiscal year or undergone a significant change in 
their operations \13\ if they have completed at least nine months of 
their current fiscal year but have not prepared full financial 
statements for such nine-month period.\14\ The Exchange further notes 
that the proposal does not alter the quantitative requirements of its 
financial listing standards, but provides greater flexibility for 
companies to demonstrate they meet those requirements.
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ See note 5 supra and accompanying text.
    \14\ See note 7 supra.
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    The Commission notes that the Exchange's quantitative requirements 
for the last fiscal year are not changing. Rather, under the proposal, 
the Exchange's requirements could be met in a shorter period of time 
and through the review of summary interim financial information. The 
rule specifically requires that when qualifying companies for listing 
based on interim financial information from the current fiscal year, 
the Exchange must conclude that the company can reasonably be expected 
to qualify under the regular standard upon completion of the companies' 
then current fiscal year. In reaching this conclusion, the Exchange 
states that it would consider whether the company's revenues or costs 
are subject to seasonal variation and the possible impact of any such 
variation on the suitability of predicting the company's full year 
performance based on its results for the first nine months

[[Page 67774]]

of the year.\15\ The Commission notes that scrutinizing companies in 
this manner should help to ensure that only those companies that can be 
expected to meet the Exchange's standard will be listed. Finally, the 
Commission notes that companies listed under the proposal would be 
required to meet the existing standards of Section 102.01C of the 
Manual at the end of their current fiscal year or qualify at such time 
for original listing under another listing standard-otherwise, the 
Exchange would promptly initiate suspension and delisting 
procedures.\16\ Thus, the Commission believes that waiver of the 30-day 
operative delay period is consistent with the protection of investors 
and the public interest.\17\
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    \15\ In implementing the proposal, the Commission expects the 
Exchange to thoroughly review companies for any such variations.
    \16\ See proposed Sections 102.01C(I)(2) and 102.01C(II) of the 
Manual.
    \17\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 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 such proposed 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.\18\
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    \18\ 15 U.S.C. 78s(b)(3)(C).
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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-2007-104 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-2007-104. 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-2007-104 and should be 
submitted on or before December 21, 2007.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-23202 Filed 11-29-07; 8:45 am]

BILLING CODE 8011-01-P