Document ID: SEC-2008-1554-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-11-19T05:00Z

[Federal Register: November 19, 2008 (Volume 73, Number 224)]
[Notices]               
[Page 69710-69712]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no08-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58931; File No. SR-NYSE-2008-97]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment No. 
1, To Adopt an Initial Listing Standard Applicable Only to Companies 
Transferring From NYSE Arca

November 12, 2008.

I. Introduction

    On October 1, 2008, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change amending Section 102.01C of the Exchange's Listed 
Company Manual (``Manual'') to adopt an initial listing standard that 
will be applicable only to companies that are listed on NYSE Arca, Inc. 
(``NYSE Arca'') as of October 1, 2008 and that transfer to the Exchange 
on or before March 31, 2009. On October 10, 2008, the proposed rule 
change was published for comment in the Federal Register.\3\ On 
November 10, 2008, NYSE filed Amendment No. 1 to the proposed rule 
change.\4\ The Commission received no comments on the proposed rule 
change. This order approves the proposed rule change, as modified by 
Amendment No. 1.
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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. 58741 (October 6, 
2008), 73 FR 60378.
    \4\ Amendment No. 1 shows how Setion 802.01B would be effected 
by changes proposed in SR-NYSE-2008-98. Because Amendment No. 1 is 
technical in nature, the Commission is not required to publish the 
amendment for comment.
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II. Description of the Proposal

    The Exchange has proposed to amend Section 102.01C of the Manual to 
adopt an initial listing standard that will be applicable only to 
companies that are listed on NYSE Arca as of October 1, 2008 and that 
transfer to the Exchange on or before March 31, 2009. The Exchange also 
has proposed to apply the continued listing standard applicable under 
Section 802.01B to companies listed under the Earnings Test \5\ to 
companies listed under the proposed new initial listing standard.
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    \5\ See Manual Section 802.01B(1).
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    NYSE Euronext has three equity listing markets: the NYSE; NYSE 
Arca; and NYSE Alternext US.\6\ NYSE Euronext management made a 
business decision to move forward with only two operating company 
equity listing markets and, consequently, decided to discontinue the 
operating company equity listing program on NYSE Arca. As part of this 
transition, the Exchange wants to offer the opportunity for all 
suitable NYSE Arca companies to list on the NYSE. NYSE notes that NYSE 
Arca listed companies wishing to transfer to the NYSE will be required 
to submit a listing application and be subject to the same listing 
application process as all

[[Page 69711]]

other applicant companies. In its filing, the NYSE noted that not all 
NYSE Arca companies qualify to list under any of the existing NYSE 
initial listing standards.\7\ In order to list these companies, the 
Exchange proposes to adopt a special listing standard applicable only 
to those companies listed on NYSE Arca on the date of initial 
submission of this filing, that transfer their listing to NYSE on or 
before March 31, 2009.
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    \6\ NYSE Alternext US LLC (``Alternext'') is the sucessor to the 
Amex, after being acquired by the NYSE. See Securities Exchange Act 
Release No. 58673 (September 29, 2008), 73 FR 57707 (October 3, 
2008) (SR-Amex-2008-63 and SR-NYSE-2008-60).
    \7\ See Manual Section 102.
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    Companies transferring from NYSE Arca under the proposed standard 
(``NYSE Arca Transfer Standard'') would be required to have $75 million 
in total market capitalization for 90 consecutive days prior to 
applying for listing and $20 million in market value of publicly held 
shares (but not the $100 million market value of publicly held shares 
requirement of Section 102.01B). Such companies would have to meet the 
same holder, publicly held share and trading volume requirements as set 
forth in Section 102.01A as companies that list under the existing 
initial listing standards and the $4 stock price requirement of Section 
102.01B.\8\ Upon listing, the NYSE is also proposing to apply the 
current continued listing standards set forth in Section 802.01B for 
companies listing under the Exchange's Earning Test to companies 
transferring from NYSE Arca under the newly proposed standard in 
Section 102.01C. Accordingly, Arca transfers will be considered below 
compliance if their average global market capitalization over a 
consecutive 30 trading-day period is less than $75,000,000 and, at the 
same time, total stockholders' equity is less than $75,000,000.\9\ In 
addition, other requirements of Section 802, such as the requirement 
that all listed companies maintain a minimum of $25 million in global 
market capitalization \10\ and that all listed companies maintain a 
$1.00 minimum stock price,\11\ would also apply to NYSE Arca transfers. 
The Exchange has also represented that the holder, trading volume and 
publicly held share requirements of Section 802.01A along with the 
requirements of Sections 802.01D (``Other Criteria'') and 802.01E 
(``SEC Annual Report Timely Filing Criteria'') would also apply.
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    \8\ The total market capitalization and market value of publicly 
held shares requirements of the NYSE Arca Transfer Standard equal 
those of Amex Initial Listing Standard 4 (Amex Company Guide Section 
101(d)).
    \9\ See Manual Section 802.01B(I).
    \10\ See Manual Section 802.01B.
    \11\ See Manual Section 802.01C.
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    In its filing, the Exchange stated that it believes it is 
appropriate to adopt a short-term listing standard applicable only to 
NYSE Arca companies. In support of this, the Exchange noted that these 
companies listed on NYSE Arca on the assumption that it would exist as 
a permanent listing market and it is solely because of a business 
decision made by NYSE Euronext that these companies will need to 
transfer their listings. Further, NYSE noted that many of these 
companies listed on NYSE Arca because of its association with the NYSE 
and in the expectation that they would ultimately switch their listing 
to the NYSE when they met the NYSE's listing standards. As such, the 
Exchange believes that fairness dictates that it should seek to list 
these companies on the NYSE where, in its view, such a listing is 
appropriate and in the interests of the investing public.
    In its filing, the NYSE stated that it will only list companies 
under the NYSE Arca Transfer Standard if it believes that those 
companies are suitable for trading on the NYSE. NYSE also noted that 
all of the companies that would be listed under the NYSE Arca Transfer 
Standard will far exceed the NYSE's continued listing standards at the 
time of initial listing and will be in compliance with NYSE Arca 
continued listing standards. In addition, the same staff in NYSE 
Regulation's Financial Compliance and Corporate Governance groups is 
responsible for ongoing compliance reviews of both NYSE and NYSE Arca 
companies. As such, according to the NYSE, the NYSE Regulation staff 
involved in making initial listing determinations on the NYSE is 
extremely familiar with the companies currently listed on NYSE Arca and 
is uniquely positioned to determine whether those companies are 
suitable for listing on the NYSE. The Exchange believes its depth of 
knowledge with respect to NYSE Arca companies makes it appropriate to 
list them on this one time basis under a less onerous standard than the 
Exchange applies to other listing applicants. As noted above, companies 
listing under the new NYSE Arca Transfer Standard will be subject to 
the standard listing application and review process applicable to all 
listing applicants and, if Exchange staff determine that an NYSE Arca 
company is not suitable for listing on the NYSE--notwithstanding its 
qualification under the numerical requirements of the NYSE Arca 
Transfer Standard--the Exchange will not list that company.
    In its proposal, NYSE represented that the requirements of the NYSE 
Arca Transfer Standard will exceed those established by the Exchange 
Act Rule 3a51-1(a)(2) (the ``Penny Stock Rule'').\12\ The proposed 
standard's requirement that an applicant have $75 million in global 
market capitalization for 90 days prior to transferring from NYSE Arca 
exceeds the $50 million market capitalization for 90 days prior to 
listing option in the Penny Stock Rule, as well as the $50 million 
market capitalization requirement of Rule 3a51-1(a)(2)(i)(B). In 
addition, companies listing under the NYSE Arca Transfer Standard will 
be required at the time of transfer to have a $4 stock price, 400 round 
lot holders and 1.1 million publicly held shares, thereby meeting or 
exceeding all of the Penny Stock Rule's remaining requirements.
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    \12\ 17 CFR 240.3a51-1(a)(2).
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    Companies listing under the NYSE Arca Transfer Standard will have 
to comply with all other applicable Exchange listing rules, including 
the Exchange's corporate governance requirements. As with all other 
listing applicants, the Exchange reserves the right to deny listing to 
any company seeking to list under the NYSE Arca Transfer Standard if 
the Exchange determines that the listing of any such company is not in 
the interests of the Exchange or the public interest.

III. Discussion

    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 
and, in particular, with Section 6(b)(5) of the Act,\13\ which 
requires, among other things, that the rules of a national securities 
exchange be 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 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, 
and to not permit unfair discrimination between customers, issuers, 
brokers, or dealers.\14\
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    \13\ 15 U.S.C. 78f(b)(5).
    \14\ In approving this rule, the Commission has considered its 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    The development and enforcement of adequate standards governing the 
initial and continued listing of securities on an exchange is an 
activity of critical importance to financial markets and the investing 
public. Listing standards, including those applicable to companies

[[Page 69712]]

transferring from another exchange, serve as a means for an exchange to 
screen issuers and to provide listed status only to bona fide companies 
that have sufficient public float, investor base, and trading interest 
to provide the depth and liquidity necessary to promote fair and 
orderly markets. Adequate standards are especially important given the 
expectations of investors regarding exchange trading and the imprimatur 
of listing on a particular market. Once a security has been approved 
for initial listing, maintenance criteria allow an exchange to monitor 
the status and trading characteristics of that issue to ensure that it 
continues to meet the exchange's standards for market depth and 
liquidity so that fair and orderly markets can be maintained.
    The Commission believes that the proposed rule change will provide 
a means for a narrow category of companies, whose common stock is 
currently listed on NYSE Arca, to list on the Exchange. In particular, 
for companies that otherwise meet NYSE's distribution, market value, 
and price listing requirements,\15\ the proposed rule change will allow 
the Exchange the discretion to list companies that meet the proposed 
standards. In addition, the Commission expects that the Exchange will 
deny listing to any company seeking to list pursuant to the proposed 
rule change if the Exchange determines that the listing of any such 
company is not in the interests of the Exchange or the public interest.
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    \15\ Companies listing under this standard would still have to 
meet all the requirements set forth in Section 102.01A and the price 
listing requirement in Section 102.01B. Those sections include 
distribution, market value and price requirements. The Commission 
believes that these requirements will help ensure that the company 
has requisite liquidity for listing on the Exchange. Companies would 
also have to comply with all applicable NYSE corporate governance 
requirements.
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    In accordance with the terms of the proposed rule, the Exchange 
will apply this standard only for the very narrow category of 
companies, listed on NYSE Arca as of October 1, 2008, that transfer to 
the Exchange on or before March 31, 2009. Since NYSE Regulation's 
Financial Compliance and Corporate Governance groups are responsible 
for ongoing compliance reviews of both NYSE and NYSE Arca companies, 
the Commission believes the Exchange should be sufficiently familiar 
with companies seeking to transfer to be able to determine if any such 
company is an appropriate transfer candidate. While the new standards 
are lower than those previously applied to new NYSE listings, the 
Commission believes that the new criteria, coupled with the existing 
applicable listing requirements in Sections 102.01(A) and (B),\16\ 
should help to ensure a minimum level of depth and liquidity to 
maintain fair and orderly markets.
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    \16\ Only the price requirement in 102.01B would apply to NYSE 
Arca transfers. See supra note 8 and accompanying text.
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    In approving the proposal, the Commission recognizes that the new 
standard is applicable only to a small segment of transfers from a 
single market for a limited time. The Commission believes that this is 
reasonable and consistent with the Act given the business plans of the 
Exchange, but more importantly the compliance expertise of NYSE staff 
in evaluating the potential NYSE Arca transfers. The Commission expects 
the NYSE to only list those NYSE Arca transfers which they believe, 
through their past expertise reviewing these companies, are suitable 
for trading on the NYSE and the maintenance of fair and orderly 
markets.
    For the reasons set forth above, the Commission finds that the 
proposed rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSE-2008-97), as modified 
by Amendment No. 1, be, and hereby is, approved.
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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. E8-27424 Filed 11-18-08; 8:45 am]

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