Document ID: SEC-2008-1237-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-09-12T04:00Z

[Federal Register: September 12, 2008 (Volume 73, Number 178)]
[Notices]               
[Page 53064-53066]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12se08-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58467; File No. SR-NYSE-2008-77]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Amend Its Rule Governing Equity-Linked Debt Securities 
To Permit the Listing of Equity-Linked Debt Securities Linked To 
Baskets of Up to Thirty Underlying Securities and To Provide for 
Greater Flexibility in Listing Criteria

September 5, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on August 26, 2008, 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. The 
Commission is publishing this notice and order to solicit comments on 
the proposed rule change from interested persons and to approve the 
proposal on an accelerated basis.
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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 703.21 of the Exchange's 
Listed Company Manual (the ``Manual'') to permit the listing of Equity-
Linked Debt Securities (``ELDS'') related to up to thirty (30) 
underlying stocks and to provide for greater flexibility in the listing 
criteria for ELDS. The text of the proposed rule change is available at 
NYSE, http://www.nyse.com, and 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 III 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 703.21 of the Manual to 
permit the listing of ELDS related to up to thirty (30) underlying 
stocks and to provide for greater flexibility in the listing criteria 
for ELDS. The Exchange wishes to make this change in order to harmonize 
Section 703.21 with the comparable rules of the American Stock Exchange 
(the ``Amex''),\3\ as well as the rules of NYSE Arca, Inc., which were 
recently conformed to the Amex rules.\4\
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    \3\ Amex's initial listing standards for Equity-Linked Notes are 
set forth in Section 107A of the Amex Company Guide, which was 
approved by the Commission in March 1990, and Section 107B of the 
Amex Company Guide, which was approved by the Commission in May 
1993. These sections have been amended several times. The filings 
that are relevant to the topics discussed in this filing follow. See 
Securities Exchange Act Release Nos. 27753 (March 1, 1990), 55 FR 
8626 (March 8, 1990) (SR-Amex-89-29); 32343 (May 20, 1993), 58 FR 
30833 (May 27, 1993) (SR-Amex-92-42); 34549 (August 18, 1994), 59 FR 
43873 (August 25, 1994) (SR-Amex-93-46); 36990 (March 20, 1996), 61 
FR 13545 (March 27, 1996) (SR-Amex-95-44); 37783 (October 4, 1996), 
61 FR 53246 (October 10, 1996) (SR-Amex-96-31); 47055 (December 19, 
2002), 67 FR 79669 (December 30, 2002) (SR-Amex-2002-110); 55733 
(May 10, 2007), 72 FR 27602 (May 16, 2007) (SR-Amex-2007-34) 
(collectively, ``Amex Releases'').
    \4\ See Securities Exchange Act Release No. 56924 (December 7, 
2007), 72 FR 70918 (December 13, 2007) (SR-NYSEArca-2007-98) (``NYSE 
Arca Release'').
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Number of Linked Securities
    Currently, the Exchange defines ELDS as non-convertible debt of an 
issuer where the value of the debt is based, at least in part, on the 
value of another issuer's common stock, non-convertible preferred 
stock, common units of a master limited partnership or any other common 
equity security of a type classified for trading as stocks by the 
Exchange. The Exchange proposes to amend the definition to state that 
ELDS are defined as debt securities that are linked, in whole or in 
part, to the value of up to thirty (30) underlying stocks. This change 
conforms to NYSE Arca Equities Rule 5.1(b)(14), NYSE Arca Equities Rule 
5.2(j)(2), and Section 107B of the Amex Company Guide.\5\ The Exchange 
proposes to expand the number of stocks that may be linked to ELDS in 
order to accommodate the varying types of ELDS products that are 
currently offered in the marketplace. The Exchange believes that 
expanding the number of stocks that may be linked to ELDS will also 
provide investors with enhanced investment flexibility. The Exchange 
also believes that there would be no investor protection concerns with 
expanding the number of stocks linked to ELDS because each linked stock 
is required to individually satisfy the applicable listing standards 
set forth in Section 703.21.
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    \5\ See Amex Company Guide Section 107 and NYSE Arca Equities 
Rules 5.1(b)(14) and 5.2(j)(2).
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Equity-Linked Debt Security Listing Standards
    Section 703.21(B) currently provides that an issue of ELDS must 
have a minimum public distribution of one million ELDS, a minimum of 
400 holders, a minimum market value of $4 million, and a minimum term 
of one year.
    The Exchange proposes to add an exception to the minimum holders 
standard in Section 703.21(B) to provide that, if the ELDS is traded in 
$1,000 denominations, there will be no minimum number of holders. The 
Exchange also proposes to add an exception to the public distribution 
standard to provide that, if an issuance of ELDS is traded in $1,000 
denominations, there will be no minimum public distribution 
requirement. These changes correspond to NYSE Arca Equities Rule 
5.2(j)(2)(B) and Section 107A(b) of the Amex Company Guide.\6\ The 
Exchange notes that, without the exception to the one million ELDS 
minimum public distribution requirement, the Exchange would be unable 
to list ELDS in $1,000 dollar denominations having a market value of 
less than $1 billion. The Exchange believes that the proposed exception 
is a reasonable accommodation for those issuances in $1,000 
denominations.
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    \6\ See Amex Company Guide Section 107 and NYSE Arca Equities 
Rule 5.2(j)(2)(B).
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    In addition, the Exchange proposes to add an exception to the 
holders requirement in Section 703.21(B) to provide that, if the ELDS 
are redeemable at the option of the holders thereof on

[[Page 53065]]

at least a weekly basis, there will be no minimum number of holders. 
This change also corresponds to NYSE Arca Equities Rule 5.2(j)(2)(B) 
and Section 107A(b) of the Amex Company Guide.\7\ The Exchange also 
proposes to clarify that the holders requirement applies to ``public'' 
holders only.
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    \7\ Id.
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Linked Equity Listing Standards
    Section 703.21(C) currently provides minimum standards applicable 
to the stocks underlying an ELDS and the issuers of such stocks. The 
rule currently provides that the ELDS must be issued by either: (a) A 
U.S. company, or (b) a non-U.S. company that meets certain additional 
standards. The Exchange proposes to amend the language in the rule to 
indicate that an issue of ELDS may be linked to more than one security 
and, therefore, more than one issuer of a security, in accordance with 
the amended definition of ELDS as set forth above. In addition, the 
Exchange proposes to amend the requirement that the issuer of any 
security underlying an ELDS must be a U.S. company (in order not to 
have to meet additional standards applicable to non-U.S. companies) to 
require that the issuer be a Securities Exchange Act of 1934 reporting 
company listed on a national securities exchange. This change 
corresponds to NYSE Arca Equities Rule 5.2(j)(2)(C) and Section 107B(e) 
of the Amex Company Guide.\8\ The Exchange proposes this revision in 
order to encompass non-U.S. companies that have reporting requirements 
under the federal securities laws, which better addresses the 
Exchange's concern regarding the public availability of financial 
information for the issuers of the underlying securities. The Exchange 
believes that such information serves to protect investors and the 
public interest.
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    \8\ See Amex Company Guide Section 107(B)(e) and NYSE Arca 
Equities Rule 5.2(j)(2)(C) and (D).
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    In Sections 703.21(C) and (D), the Exchange also proposes certain 
minor changes in order to clarify certain language, including the 
language regarding common shares and American Depositary Shares 
(``ADSs''), generally conforming it to NYSE Arca Equities Rule 
5.2(j)(2)(C) and (D) and Section 107B(e) of the Amex Company Guide.\9\ 
In Section 703.21(D), the Exchange also proposes to add the standard 
that, if any non-U.S. security and related securities have less than 
20% of the worldwide trading volume occurring in the U.S. market during 
the six-month period preceding the date of listing, then the ELDS may 
not be linked to that non-U.S. security. This standard makes sense in 
the context of the current rule \10\ and corresponds to NYSE Arca 
Equities Rule 5.2(j)(2)(D) and Section 107B(f) of the Amex Company 
Guide.\11\ The Exchange believes that this additional standard is 
appropriate in that it limits the listing of ELDS linked to non-U.S. 
securities to those that have a significant amount of U.S. market-
trading volume, which provides reasonable assurance that the underlying 
non-U.S. securities are deliverable upon exercise of the ELDS.
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    \9\ Id.
    \10\ The current rule provides that the issuance of ELDS 
relating to underlying non-U.S. securities cannot exceed certain 
percentage limits of the total outstanding shares of the underlying 
security. These percentage limits are tied to 20%, 50% and 70% of 
worldwide trading volume. Therefore, the rule as currently in 
effect, does not contemplate less than 20% worldwide trading volume.
    \11\ See Amex Company Guide Section 107(B)(f) and NYSE Arca 
Equities Rule 5.2(j)(2)(D).
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    The Exchange also proposes to amend the last paragraph of the rule 
to clarify that the Exchange, with the concurrence of the staff of the 
Division of Trading and Markets of the Securities and Exchange 
Commission, will evaluate the maximum percentage of ELDS that may be 
issued on a case-by-case basis when an issuer proposes to list (rather 
than ``issue,'' as the current rule states) ELDS that relate to more 
than the allowable percentages of the underlying securities specified 
in the rule. We also propose to delete a reference in the last 
paragraph of the rule that indicates that this decision would relate to 
the allowable percentage of ``the underlying security,'' as this 
reference is no longer appropriate if ELDS may be issued that relate to 
multiple underlying securities.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \12\ of the Exchange Act, in general, and furthers 
the objectives of Section 6(b)(5) of the Exchange Act,\13\ 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 rule change is consistent with the protection of investors 
and the public interest in that, while the proposed amendment adds 
additional flexibility to the rule, Section 703.21 as amended will 
continue to contain significant provisions for the protection of 
investors.
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    \12\ 15 U.S.C. 78(b).
    \13\ 15 U.S.C. 78(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 Exchange 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. 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 Exchange 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-2008-77 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2008-77. 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 the filing also will be available for 
inspection and copying at the

[[Page 53066]]

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-2008-77 and should be submitted on or before 
October 3, 2008.

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

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Exchange Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\14\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange 
Act,\15\ which requires that the rules of an exchange be designed, 
among other things, 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 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.
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    \14\ In approving this 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).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving this proposal before 
the 30th day after the publication of notice thereof in the Federal 
Register. The proposal seeks to conform the Exchange's rules for ELDS 
to the rules of Amex and NYSE Arca that have previously been approved 
by the Commission.\16\ Therefore, the Commission does not believe that 
the Exchange's proposal raises any novel regulatory issues. The 
Commission believes that accelerating approval of this proposal should 
benefit investors by creating, without undue delay, additional 
competition in the market for ELDS.
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    \16\ See Amex Rule 107 and Amex Releases, note 3, supra. See 
also NYSE Arca Equities Rules 5.1(b)(14) and 5.2(j)(2) and NYSE Arca 
Release, note 4, supra.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\17\ that the proposed rule change (SR-NYSE-2008-77) be, 
and it hereby is, approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21166 Filed 9-11-08; 8:45 am]

BILLING CODE 8010-01-P