Document ID: SEC-2018-1744-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2018-11-16T05:00Z

[Federal Register Volume 83, Number 222 (Friday, November 16, 2018)]
[Notices]
[Pages 57783-57786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24984]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84566; File No. SR-NYSE-2018-55]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Listed Company Manual To Clarify the Application of the 
Initial Listing Requirements to Common Equity Securities Issued in 
Exchange for a Listed Equity Investment Tracking Stock

November 9, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on November 2, 2018, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with

[[Page 57784]]

the Securities and Exchange Commission (``Commission'') the proposed 
rule change 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 change from interested 
persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend the Listed Company Manual (the 
``Manual'') to clarify the application of the initial listing 
requirements to common equity securities issued in exchange for a 
listed Equity Investment Tracking Stock. The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, 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 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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Section 102.07 of the Manual sets forth initial listing 
requirements applicable to the listing of Equity Investment Tracking 
Stocks. An Equity Investment Tracking Stock is defined as a class of 
common equity securities that tracks on an unleveraged basis the 
performance of an investment by the issuer in the common equity 
securities of a single other company listed on the Exchange. An Equity 
Investment Tracking Stock may track multiple classes of common equity 
securities of a single issuer, so long as all of those classes have 
identical economic rights and at least one of those classes is listed 
on the Exchange.\4\
---------------------------------------------------------------------------

    \4\ In order for an Equity Investment Tracking Stock to qualify 
for initial listing, it must meet the requirements of Sections 
102.01A and 102.01B of the Manual and the issuer of the Equity 
Investment Tracking Stock must meet the Global Market Capitalization 
Test set forth in Section 102.01C. The Exchange will not list an 
Equity Investment Tracking Stock if, at the time of the proposed 
listing, the issuer of the equity tracked by the Equity Investment 
Tracking Stock has been deemed below compliance with the Exchange's 
listing standards. The issuer of the Equity Investment Tracking 
Stock must own (directly or indirectly) at least 50% of both the 
economic interest and voting power of all of the outstanding classes 
of common equity securities of the issuer whose equity is tracked by 
the Equity Investment Tracking Stock.
---------------------------------------------------------------------------

    The issuer of an Equity Investment Tracking Stock may seek (by a 
shareholder vote, exchange offer or other legally permissible means) to 
exchange outstanding shares of the Equity Investment Tracking Stock for 
newly issued shares of a non-tracking stock class of common equity 
securities pursuant to a specified exchange ratio. The common stock 
issued in this exchange may be of an already listed class or it may 
consist of shares of a class that is not currently listed on the 
Exchange. However, the initial listing standards for common stock set 
forth in Section 102.01 of the Manual do not currently specify the 
listing standards applicable to a newly listed class of common stock 
issued in exchange for an Equity Investment Tracking Stock. Therefore, 
the Exchange proposes to amend Section 102.01 to clarify how the new 
class of common stock will be listed in such circumstances.
    In light of the fact that there is a predecessor security listed on 
the NYSE, the Exchange believes that the listing of a common stock in 
exchange for shares of a listed Equity Investment Tracking Stock is 
more similar to a listing upon transfer from another exchange than it 
is to an initial public offering. Specifically, such an exchange is 
comparable to a transfer in that in both cases the Exchange is able to 
rely on the existence of both historical trading information and a 
liquid public trading market in making its listing determination. As 
such the Exchange proposes to apply to such listings the initial 
listing standards applicable to transfers. The Exchange notes that the 
initial listing standards for transfers and quotations are at least as 
high as those for IPOs and are more stringent in certain respects.
    The Exchange proposes to amend Section 102.01A of the Manual to 
specify that such common equity securities listed upon consummation of 
an exchange for a listed Equity Investment Tracking Stock will be 
subject to the distribution requirements set forth in that rule for 
transfer and quotation listings. Section 102.01A provides that a 
company listing in connection with a transfer or quotation listing must 
have at least 1.1 million publicly held shares \5\ and meet one of the 
following additional distribution requirements:
---------------------------------------------------------------------------

    \5\ Shares held by directors, officers, or their immediate 
families and other concentrated holding of 10 percent or more are 
excluded in calculating the number of publicly-held shares wherever 
that term is used throughout this proposal.
---------------------------------------------------------------------------

     400 shareholders of round lots (i.e., at least 100 
shares); or
     2,200 total stockholders together with an average monthly 
trading volume of at least 100,000 shares over the most recent six 
months; or
     500 total shareholders together with an average monthly 
trading volume of at least 1,000,000 shares over the most recent 12 
months.
    Section 102.01B of the Manual requires companies listing upon 
transfer from another exchange to demonstrate that they have $100 
million in market value of publicly held shares and a closing share 
price of $4.00 per share.\6\ In applying these requirements to the 
listing of a new class of common stock in exchange for an Equity 
Investment Tracking Stock, the Exchange proposes to permit issuers to 
demonstrate their compliance by reference to the trading price and 
publicly-held shares outstanding of the Equity Investment Tracking 
Stock immediately prior to the consummation of the exchange, basing 
those calculations on the exchange ratio between the two securities.\7\ 
The Exchange believes this approach is justified, as the market price 
for the Equity Investment Tracking Stocking immediately prior to the 
consummation of the exchange will reflect the market's anticipation of 
the value of the common stock into which it will be exchanged.
---------------------------------------------------------------------------

    \6\ Companies listing in connection with an IPO are required to 
have $40 million in market value of publicly held shares.
    \7\ In making listing qualification determinations, the Exchange 
will rely generally on information with respect to a company's 
shares outstanding, publicly-held shares and the exchange ratio as 
most recently disclosed in an SEC filing, but reserves the right to 
adjust those numbers if there have been significant changes in those 
numbers since the most recent SEC disclosure.
---------------------------------------------------------------------------

    Any company listing its primary class of common stock on the 
Exchange must meet one of the two financial tests in Section 102.01C of 
the Manual, the Earnings Test or the Global Market Capitalization Test. 
As the Earnings Test is based solely on the issuer's historical 
financial statements, there are no issues specific to issuers engaged 
in these sorts of exchanges of Equity Investment Tracking Stocks for 
common stock. However, the Global Market Capitalization Test requires 
the issuer to demonstrate that it has $200 million in global market 
capitalization. In meeting this test, the Exchange proposes to permit 
issuers to demonstrate their

[[Page 57785]]

compliance by reference to the trading price and shares outstanding of 
the Equity Investment Tracking Stock prior to the consummation of the 
exchange, basing those calculations on the exchange ratio between the 
two securities.\8\ The Exchange believes this approach is justified for 
the same reasons set forth above with respect to the stock price and 
publicly-held shares requirements.
---------------------------------------------------------------------------

    \8\ Section 102.01C provides, that, in considering the listing 
under the Global Market Capitalization Test of current publicly-
traded companies, the Exchange will require such companies to meet 
the minimum $200 million global market capitalization requirement 
and maintain a closing price of at least $4 per share in each case 
for a period of at least 90 consecutive trading days prior to 
receipt of clearance to make application to list on the Exchange and 
will also 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. The proposed 
rule text clarifies that these requirements will be applicable to 
the listing of a common stock issued in exchange for an Equity 
Investment Tracking Stock.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Exchange Act,\10\ 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 and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The proposal to apply the same 
initial listing standards to the listing of a new common stock issued 
in exchange for an Equity Investment Tracking Stock as are applied to 
transfers and quotation listings is designed to protect investors and 
the public interest because the applicable standards are the most 
stringent standards applied to the listing of common equities on the 
Exchange. The proposal to use the trading price and shares outstanding 
of the Equity Investment Tracking Stock immediately prior to the 
exchange, as adjusted by the exchange ratio, in conducting its initial 
listing analysis will provide the Exchange with relevant information 
about the characteristics of the trading market for the issuer's 
securities which will be predictive of the market for the common stock 
into which the Equity Investment Tracking Stock will be exchanged. As 
such, this information will be helpful to the Exchange in making its 
initial listing determination.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 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 purposes of the Act. The sole purpose of the 
proposal is to clarify the application of the initial listing 
requirements to common equity securities issued in exchange for a 
listed Equity Investment Tracking Stock. As such, the Exchange does not 
believe the proposal imposes any burden on competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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 email to [email protected]. Please include 
File Number SR-NYSE-2018-55 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-2018-55. This file 
number should be included on the subject line if email 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2018-55, and should be submitted on 
or before December 7, 2018.

[[Page 57786]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24984 Filed 11-15-18; 8:45 am]
 BILLING CODE 8011-01-P