Document ID: SEC-2008-0180-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-02-04T05:00Z

[Federal Register: February 4, 2008 (Volume 73, Number 23)]
[Notices]               
[Page 6542-6544]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe08-76]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57219; File No. SR-NYSEArca-2008-13]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Relating To 
Listing Standards for Index-Linked Exchangeable Notes in NYSE Arca 
Equities Rule 5.2(j)(4)

January 29, 2008.
    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 January 22, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly-owned subsidiary NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), 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. The Exchange filed the 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 Exchange proposes to amend its rules governing NYSE Arca, LLC 
(also referred to as the ``NYSE Arca Marketplace''), which is the 
equities trading facility of NYSE Arca Equities. More specifically, the 
Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(4), the 
Exchange's initial listing standards for ``Index-Linked Exchangeable 
Notes.'' The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://www.nyse.com
.

[[Page 6543]]

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. The Exchange 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 is proposing to amend NYSE Arca Equities Rule 
5.2(j)(4), the Exchange's initial listing standards for ``Index-Linked 
Exchangeable Notes,'' to provide for greater flexibility in the listing 
criteria for such securities, as set forth below. The proposed 
substantive rule changes herein are based upon the rules of the 
American Stock Exchange LLC (``Amex'').\5\ The Commission has approved 
similar proposed rule changes by the Exchange recently.\6\
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    \5\ See Securities Exchange Act Release Nos. 55733 (May 10, 
2007), 72 FR 27602 (May 16, 2007) (SR-Amex-2007-34) (the ``May 2007 
Amex Order''); and 56629 (October 9, 2007), 72 FR 58689 (October 16, 
2007) (SR-Amex-2007-87) (the ``October 2007 Amex Order''). These two 
orders approved changes to Section 107A of the Amex Company Guide.
    \6\ See Securities Exchange Act Release Nos. 56924 (December 7, 
2007), 72 FR 70918 (December 13, 2007) (SR-NYSEArca-2007-98) 
(amending NYSE Arca Equities Rule 5.2(j)(2) (``Equity-Linked 
Notes'')); 56906 (December 5, 2007), 72 FR 70636 (December 12, 2007) 
(SR-NYSEArca-2007-103) (amending NYSE Arca Equities Rule 5.2(j)(1) 
(``Other Securities'')); and 56593 (October 1, 2007), 72 FR 57362 
(October 9, 2007) (SR-NYSEArca-2007-96) (amending NYSE Arca Equities 
Rule 5.2(j)(6) (``Equity Index-Linked Securities, Commodity-Linked 
Securities and Currency-Linked Securities'')).
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    Currently, NYSE Arca Equities Rule 5.2(j)(4)(a) provides that an 
issue of Index-Linked Exchangeable Notes must have a minimum public 
distribution of 150,000 notes with a minimum of 400 public note-
holders, except, if traded in thousand dollar denominations, then no 
minimum number of holders. The Exchange proposes to expand the 
exception to provide that, if the notes are traded in thousand dollar 
denominations, then there is also no minimum public distribution 
requirement.\7\ The Exchange notes that, without the exception to the 
150,000 publicly distributed notes requirement, the Exchange would be 
unable to list issues in thousand dollar denominations having a market 
value of less than $150 million. The Exchange believes that the 
proposed exception is a reasonable accommodation for those issuances in 
$1,000 denominations.
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    \7\ See the May 2007 Amex Order, supra at note 5.
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    The Exchange proposes to further amend NYSE Arca Equities Rule 
5.2(j)(4)(a) to provide that there are no minimum public distribution 
and holders requirements if the notes are redeemable at the option of 
the holders thereof on at least a weekly basis (regardless of whether 
the notes are traded in thousand dollar denominations).\8\ The Exchange 
believes that a weekly redemption right will ensure a strong 
correlation between the market price of the notes and the performance 
of the underlying index, as holders will be unlikely to sell their 
notes for less than their redemption value if they have a weekly right 
to redeem such notes for their full value. In addition, in the case of 
certain notes with a weekly redemption feature, the issuer may have the 
ability to issue new notes from time to time at market prices 
prevailing at the time of sale, at prices related to market prices, or 
at negotiated prices. This provides a ready supply of new notes, 
thereby lessening the possibility that the market price of such notes 
will be affected by a scarcity of available notes for sale. The 
Exchange believes that the weekly redemption right also assists in 
maintaining a strong correlation between the market price and the 
indicative value of the notes, as investors will be unlikely to pay 
more than the indicative value in the open market if they can acquire 
notes from the issuer at that price.
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    \8\ See the May 2007 Amex Order (approving no minimum holders 
requirement if there is a weekly redemption right) and the October 
2007 Amex Order (approving no minimum public distribution 
requirement if there is a weekly redemption right), supra at note 5.
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    The Exchange believes that the ability to list Index-Linked 
Exchangeable Notes with these characteristics without any minimum 
public distribution or holders requirements is important to the 
successful listing of such notes. Issuers issuing these types of notes 
generally do not intend to do so by way of an underwritten offering. 
Rather, the distribution arrangement is analogous to that of an 
exchange-traded fund issuance, in that the issue is launched without 
any significant distribution event and the float increases over time as 
investors purchase additional securities from the issuer at the then 
indicative value. Investors will generally seek to purchase the notes 
at a point when the underlying index is at a level that they perceive 
as providing an attractive growth opportunity. In the context of such a 
distribution arrangement, it is difficult for an issuer to guarantee 
its ability to sell a specific number of units on the listing date. 
However, the Exchange believes that this difficulty in ensuring the 
sale of 150,000 notes or 400 public holders on the listing date is not 
indicative of a likely long-term lack of liquidity in the notes or, for 
the reasons set forth in the prior paragraph, of a difficulty in 
establishing a pricing equilibrium in the notes or a successful two-
sided market.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \9\ in general, and furthers the objectives of section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 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

    Because the foregoing proposed rule change does not: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). The Exchange satisfied the 
requirement of this provision that the Exchange provide the 
Commission 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 filing it.

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[[Page 6544]]

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay and make the proposed rule change operative 
upon filing because the proposal raises no novel issues and is based on 
a previously approved proposal filed by NYSE Arca.\13\ The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because the Exchange's 
proposed amendment would conform its listing standards for Index-Linked 
Exchangeable Notes with respect to minimum public holders and public 
distribution to be substantively identical to the parallel listing 
standards of other national securities exchanges, which the Commission 
has previously approved. In addition, the Commission notes that it has 
also previously approved substantively identical rules for other new 
derivative security products.\14\ The Commission further believes that 
the proposal should benefit investors by creating, without undue delay, 
additional competition in the market for Index-Linked Exchangeable 
Notes. For these reasons, the Commission designates the proposed rule 
change as operative upon filing.\15\
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    \13\ See supra at note 5.
    \14\ See supra at note 6.
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 such 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 an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSEArca-2008-13 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-NYSEArca-2008-13. 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-NYSEArca-2008-13 and should 
be submitted on or before February 25, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-1961 Filed 2-1-08; 8:45 am]

BILLING CODE 8011-01-P