Document ID: SEC-2008-1417-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-10-10T04:00Z

[Federal Register: October 10, 2008 (Volume 73, Number 198)]
[Notices]               
[Page 60382-60385]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc08-148]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58740; File No. SR-NYSE-2008-98]

 
Self-Regulatory Organizations; Notice of Filing by New York Stock 
Exchange LLC To Adopt an Additional Initial Listing Standard for 
Operating Companies

October 6, 2008.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on October 1, 2008, New York Stock Exchange LLC (``NYSE'' or 
``the Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule changes as described in Items I, 
II and III below, which items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule changes from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

[[Page 60383]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Section 102.01C of the Exchange's 
Listed Company Manual (the ``Manual'') to adopt an additional initial 
listing standard under which companies may qualify to list on the 
Exchange. The Exchange also proposes to apply the continued listing 
standard applicable under Section 802.01B to companies listed under the 
Earnings Test to companies listed under the proposed new initial 
listing standard.\4\
---------------------------------------------------------------------------

    \4\ The Commission notes that NYSE is also proposing to adopt a 
new initial listing standard applicable only to companies 
transferring from NYSE Arca. See Securities Exchange Act Release No. 
58741 (October 6, 2008) (SR-NYSE-2008-97).
---------------------------------------------------------------------------

    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 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 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 102.01C of the Manual to 
adopt an additional initial listing standard under which companies may 
qualify to list on the Exchange. The Exchange also proposes to apply 
the continued listing standard applicable under Section 802.01B to 
companies listed under the Earnings Test to companies listed under the 
proposed new initial listing standard.
    The proposed new standard (the ``Assets and Equity Test'') will not 
replace any of the existing initial listing standards set forth in 
Section 102.01C. Rather it will be an additional alternative standard 
under which companies may qualify to list. Companies qualifying to list 
under the proposed new standard will have to meet the same holders, 
publicly-held shares and trading volume requirements as set forth in 
Section 102.01A as companies that list under the existing initial 
listing standards and must meet the same market value of publicly-held 
shares requirements \5\ and $4 stock price requirement in Section 
102.01B as companies that list under the existing initial listing 
standards in Section 102.01C. In addition, at the time of listing, they 
will be required to have, at a minimum, (i) $75 million in total 
assets, (ii) $50 million in stockholders' equity and (iii) $150 million 
of total market capitalization.\6\ In considering the listing under the 
Assets and Equity Test of companies transferring from other markets, 
the Exchange will consider whether the company's business prospects and 
operating results indicate that the company's market capitalization 
value is likely to be sustained or increase over time.
---------------------------------------------------------------------------

    \5\ $60 million in the case of IPOs and $100 million for all 
other companies.
    \6\ The total assets and stockholders equity that the Exchange 
will use for qualification purposes will be taken from the company's 
most recent balance sheet included in an SEC filing, in each case as 
adjusted pursuant to Sections 102.01C(I)(3)(a) (adjusting for the 
use of offering proceeds) and (b) (adjusting for the effects of 
acquisitions and dispositions) as applicable. The adjustments 
referenced in the prior sentence enable the Exchange to analyze the 
company's balance sheet at the time of listing on a pro forma basis 
to reflect the infusion of new capital from a concurrent financing 
or the balance sheet effects of any acquisition or disposition of 
assets taking place in conjunction with the listing. This is 
consistent with the Exchange's approach in listing companies under 
its existing initial listing standards and the Exchange believes 
that making these pro forma adjustments provides a more accurate 
understanding of the entity that will actually list. The Exchange 
also adjusts listing applicants' market capitalization and public 
float to give effect to any new shares issued at the time of 
listing. All of these adjustments are typical of the financial 
presentation provided by companies in their offering prospectuses 
that are reviewed by the Division of Corporation Finance and 
included in the related registration statements declared effective 
by the Division of Corporation Finance. In the case of companies 
listing in connection with an IPO, the company's underwriter (or, in 
the case of a spin-off, the parent company's investment banker or 
other financial advisor) must provide a written representation that 
demonstrates the company's ability to meet the $150 million global 
market capitalization requirement based upon the completion of the 
offering (or distribution).
---------------------------------------------------------------------------

    While companies that list under the Assets and Equity Test will not 
be required to have any minimum operating history prior to listing, 
companies that would otherwise have been considered for listing under 
Section 102.06 of the Manual--the Exchange's Acquisition Company 
standard (i.e., ``SPACs'')--will not qualify for listing under the 
Assets and Equity Test. SPACs will continue to be listed only under 
Section 102.06. Companies qualifying under the Assets and Equity Test 
will be subject to the same continued listing standard in Section 
802.01B as companies that qualify under the Earnings Test, i.e., they 
will be considered to be below compliance standards if their average 
global market capitalization over a consecutive 30 trading-day period 
is less than $75 million and, at the same time, total stockholders' 
equity is less than $75 million. Of course, the holders, trading volume 
and publicly-held shares requirements of Section 802.01A, the $25 
million global market capitalization requirement in Section 802.01B, 
the $1.00 minimum stock price requirement in Section 802.01C, Section 
802.01D (``Other Criteria''), and Section 802.01E (``SEC Annual Report 
Timely Filing Criteria'') will also apply.
    Companies may apply to list under the Assets and Equity Test that 
have not previously had their common equity securities registered under 
the Act but which have sold common equity securities in a private 
placement, and wish to list their common equity securities on the 
Exchange at the time of effectiveness of a registration statement filed 
solely for the purpose of allowing existing shareholders to sell their 
shares. These companies will be required to demonstrate a global market 
capitalization of $180 million. In such cases, the Exchange may 
exercise its discretion to determine that such a company has met the 
global market capitalization requirement based on a combination of both 
(i) an independent third party valuation of the company and (ii) the 
most recent trading price for the company's common stock in a trading 
system for unregistered securities operated by a national securities 
exchange or a registered broker-dealer. The lesser of these values will 
be used for determining the company's compliance with the Exchange's 
global market capitalization requirement.
    The Exchange recently adopted provisions in relation to all of its 
existing initial listings standards that enable it to use third party 
valuations as a basis for determining compliance with the applicable 
market capitalization requirements.\7\ The circumstances under which 
third party valuations may be used in connection with listings under 
the Assets and Equity Test will be identical to those that are applied 
under the existing initial listing standards. In particular, companies 
listing on this basis will be required to demonstrate a global market 
capitalization of $180

[[Page 60384]]

million, representing a 20% increase over the general market 
capitalization requirement of the listing standard, as is the case with 
companies utilizing a third party valuation under any of the other 
original listing standards. The Exchange believes that it is 
appropriate to use third party valuations in connection with the 
determination of the market capitalization of companies listing under 
the Assets and Equity test, as the requirement that the market 
capitalization demonstrated must be 20% higher than that normally 
required under the standard and the additional reliance on private 
market trading prices as a verification of the adequacy of the 
valuation in each case constitute, in the Exchange's view, significant 
safeguards to ensure the validity of the market capitalization derived 
from the third party valuation.
---------------------------------------------------------------------------

    \7\ See 34-58550 (September 15, 2008) (SR-NYSE-2008-68).
---------------------------------------------------------------------------

    The Exchange believes that, upon adoption of the proposed Assets 
and Equity Test, its listing standards will continue to ensure that 
only companies of a significant size and financial standing will be 
able to list on the Exchange. The Exchange notes that, while many 
companies will qualify for listing under the Assets and Equity Test 
that do not qualify under any other Exchange listing standard, many 
companies will continue to qualify to list on Nasdaq or the American 
Stock Exchange that will not meet any of the Exchange's initial listing 
standards.
    The Assets and Equity Test requires all of the elements that must 
be met by a company listing under the total value of market 
capitalization option of Amex Initial Listing Standard 4.\8\ However, 
the Assets and Equity Test establishes equivalent or higher thresholds 
for each of the relevant criteria. Under Amex Initial Listing Standard 
4, a company may list if it has a total market capitalization of $75 
million, while the Assets and Equity Test requires a minimum total 
market capitalization of at least $150 million, as well as $75 million 
in total assets and $50 million in stockholders' equity. Amex Initial 
Listing Standard 4 requires $20 million of publicly-held shares, while 
companies listing under the Assets and Equity Test must have either $60 
million (for IPOs) or $100 million (for all other companies) of 
publicly-held shares. The Amex will list a company that has 400 public 
holders and 1 million publicly-held share, while the minimum 
distribution required by the NYSE is 400 round lot holders and 1.1 
million publicly-held shares.\9\
---------------------------------------------------------------------------

    \8\ See Amex Initial Listing Standard 4 (Amex Company Guide 
Section 101(d)). Companies may list under Amex Initial Listing 
Standard 4 without demonstrating any minimum market capitalization 
if the company has total assets and total revenue of $75 million 
each in its last fiscal year, or in two of its last three fiscal 
years.
    \9\ The Exchange believes that its round lot holder requirement 
is at least as stringent as the Amex's public holders requirement, 
as the Amex counts all public holders regardless of how 
insignificant their holdings may be.
---------------------------------------------------------------------------

    The Exchange's listing standards after adoption of the proposed 
Assets and Equity Test will exceed those established by Exchange Act 
Rule 3a51-1(a)(2) (the ``Penny Stock Rule'').\10\ The proposed 
standard's $50 million stockholders' equity requirement exceeds the $5 
million option and the proposed standard's $150 million total market 
capitalization requirement exceeds the $50 million market 
capitalization option in the Penny Stock Rule. In addition, the 
Exchange requires all initial listings, regardless of which standard 
they are listed under, to have $60 million (in the case of IPOs) or 
$100 million (in all other cases) of market capitalization of publicly-
held shares, 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.
---------------------------------------------------------------------------

    \10\ 17 CFR 240.a51-1(a)(ii).
---------------------------------------------------------------------------

    Companies listing under the Assets and Equity Test 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 Assets and Equity Test if the 
Exchange determines that the listing of any such company is not in the 
interests of the Exchange or the public interest.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \11\ 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. The 
Exchange believes that the proposed amendment is consistent with the 
protection of investors and the public interest in that the 
requirements of the proposed new listing standard will ensure that only 
companies of a suitable size will qualify for listing and many 
companies that are eligible to list on other national securities 
exchanges will continue to be ineligible for listing on the Exchange.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 purpose of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

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 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.

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 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-2008-98 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-2008-98. 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

[[Page 60385]]

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 
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-2008-98 and should be submitted on or before 
October 31, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-24182 Filed 10-9-08; 8:45 am]

BILLING CODE 8011-01-P