Document ID: SEC-2007-0325-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-03-05T05:00Z

[Federal Register: March 5, 2007 (Volume 72, Number 42)]
[Notices]               
[Page 9814-9816]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr07-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55343; File No. SR-NYSE-2007-12]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To 
Amend Section 703.16 of the NYSE Listed Company Manual To Eliminate 
Requirement Regarding Index Calculation Methodology

February 23, 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 February 5, 2007 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, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On February 15, 2007, the Exchange filed Amendment No. 1 to 
the proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 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 703.16 of the NYSE Listed 
Company Manual (``Manual''), the Exchange's generic listing standard 
for investment company units (``ICUs''), to eliminate the requirement 
that the calculation methodology for the index underlying a series of 
ICUs must be one of those enumerated in Section 703.16(C)(4)(a). The 
proposed rule text is available at the NYSE, the Commission's Public 
Reference Room, and http://www.nyse.com.

[[Page 9815]]

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. The 
text of these statements may be examined at the places specified in 
Item IV 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 703.16 of the Manual, which 
includes the Exchange's generic listing standard for ICUs (which 
include exchange-traded funds), to eliminate the requirement that the 
calculation methodology for the index underlying a series of ICUs must 
be one of those enumerated in section 703.16(C)(4)(a). This Amendment 
No. 1 replaces the Exchange's initial filing in its entirety.
    The Exchange has adopted listing standards applicable to ICUs which 
are consistent with the listing criteria currently used by other 
national securities exchanges, and trading standards pursuant to which 
the Exchange may either list and trade ICUs or trade such ICUs on the 
Exchange on an unlisted trading privileges (``UTP'') basis.\3\ An ICU 
is defined in Section 703.16 of the Manual as a security that 
represents an interest in a registered investment company that could be 
organized as a unit investment trust, an open-end management investment 
company, or a similar entity. A registered investment company is 
registered under the Investment Company Act of 1940.\4\
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    \3\ In 1996, the Commission approved Section 703.16 of the 
Listed Company Manual, which sets forth the rules related to the 
listing of ICUs. See Securities Exchange Act Release No. 36923 
(March 5, 1996), 61 FR 10410 (March 13, 1996) (SR-NYSE-95-23). In 
2000, the Commission also approved the Exchange's generic listing 
standards for listing and trading, or the trading pursuant to UTP, 
of ICUs under Section 703.16 of the Listed Company Manual and 
Exchange Rule 1100. See Securities Exchange Act Release No. 43679 
(December 5, 2000), 65 FR 77949 (December 13, 2000) (SR-NYSE-2000-
46).
    \4\ 15 U.S.C. 80a.
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    The ``generic'' listing criteria of Section 703.16 of the Manual 
permit listing of ICUs that satisfy such criteria in reliance upon Rule 
19b-4(e) under the Act,\5\ without a filing pursuant to Rule 19b-4 
under the Act. Section 703.16(C)(4)(a) of the Manual requires, among 
other criteria, that, if a series of ICUs is listed for trading on the 
Exchange in reliance upon Rule 19b-4(e), the index underlying the 
series must follow one of these calculation weighting methodologies: 
Market capitalization, modified market capitalization, price, equal-
dollar, or modified equal-dollar weighting methodology or a methodology 
weighting components of the index based on any, some or all of the 
following: Sales, cash flow, book value and dividends.
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    \5\ 17 CFR 240.19b-4(e).
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    The Exchange proposes to delete Section 703.16(C)(4)(a) and thereby 
eliminate the calculation methodology limitation.\6\ In recent years, 
academics and market professionals have explored and defined a growing 
list of innovations in index construction. Most recently, the 
Commission approved amendments to the generic listing criteria to 
accommodate new index weighting methodologies based on ranking 
companies by financial data such as sales, cash flow, book value and 
dividends.\7\ The Exchange believes there are multiple ways for indexes 
to be constructed to serve useful market purposes. Additional 
methodologies are under active development by academics and market 
professionals and permitting only certain specified index weighting 
methods does not take into account the rapid innovation in this area. 
The Exchange believes that, with respect to ICUs listed pursuant to 
Rule 19b-4(e), applying the numerical weighting and liquidity criteria 
and index dissemination requirements in Section 703.16, without 
imposing constraints on the index methodology, will provide greater 
flexibility to indexers and ICU issuers to develop indexes that meet 
the investment objectives of investors. In addition, the proposed rule 
change would allow ICUs based on a non-traditional weighting 
methodology to be brought to market more quickly, thereby reducing 
burdens on ICU issuers and other market participants and promoting 
competition.
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    \6\ The Exchange also proposes to redesignate current 
subparagraphs (b) and (c) of Section 703.16(C)(4) as (a) and (b), 
respectively.
    \7\ See Securities Exchange Act Release No. 54649 (October 24, 
2006); 71 FR 63816 (October 31, 2006) (SR-NYSE-2006-88).
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    The Exchange notes that the numerical criteria in Section 703.16 
already define the concentration limits, diversity requirements and 
liquidity requirements of the companies in the underlying index. For 
example, the generic listing standards for domestic indexes require, 
among other things, that an index include at least 13 stocks, that the 
most heavily weighted component stock of an index cannot exceed 30% of 
the index weight and the five most heavily weighted component stocks of 
an index cannot exceed 65% of the index weight. The generic listing 
standards for international or global indexes require, among other 
things, that the index include at least 20 component stocks, that the 
most heavily weighted index component stock cannot exceed 25% of the 
index weight, and the five most heavily weighted component stocks 
cannot exceed 60% of the index weight. ICUs and their underlying 
indexes would continue to be subject to all other requirements of 
Section 703.16 of the Manual. Under these circumstances, the Exchange 
believes that removal of the index weighting requirements of Section 
703.16(C)(4)(a) will not compromise investor protection.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Act in general and furthers the objectives of Section 6(b)(5) \9\ 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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    \8\ 15 U.S.C. 78f(b).
    \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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory

[[Page 9816]]

organization consents, the Commission will:
    (A) by order approve the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange has requested accelerated approval of this proposed 
rule change. The Commission has determined that a 15-day comment period 
is appropriate in this case.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2007-12 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-2007-12. 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-2007-12 and should be submitted by March 20, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3741 Filed 3-2-07; 8:45 am]

BILLING CODE 8010-01-P