Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2, 3, 4, 5, 6, and 7 Thereto by the New York Stock Exchange, Inc., To Amend Its Original and Continued Quantitative Listing Standards, 12924-12934 [E5-1132]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 50 (Wednesday, March 16, 2005)]
[Notices]
[Pages 12924-12934]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1132]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51322, File No. SR-NYSE-2004-20]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1, 2, 3, 4, 5, 6, and 7 Thereto by the New 
York Stock Exchange, Inc., To Amend Its Original and Continued 
Quantitative Listing Standards

March 8, 2005.
    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 April 13, 2004, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. On May 20, 2004, NYSE submitted Amendment No. 1 to the 
proposed rule change.\3\ The proposed rule change, as amended, was 
published for comment in the Federal Register on July 2, 2004.\4\ On 
August 31, 2004, NYSE submitted Amendment No. 2 to the proposed rule 
change.\5\ On November 29, 2004, NYSE submitted Amendment No. 3 to the 
proposed rule change.\6\ On December

[[Page 12925]]

17, 2004, NYSE withdrew Amendment No. 3. On December 17, 2004, NYSE 
submitted Amendment No. 4 to the proposed rule change.\7\ On January 
25, 2005, NYSE submitted Amendment No. 5 to the proposed rule 
change.\8\ On February 17, 2005, NYSE submitted Amendment No. 6 to the 
proposed rule change.\9\ On March 4, 2005, NYSE submitted Amendment No. 
7 to the proposed rule change.\10\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \4\ See Securities Exchange Act Release No. 49917 (June 25, 
2004), 69 FR 40439.
    \5\ Amendment No. 2 replaced and superseded the original filing 
in its entirety.
    \6\ Amendment No. 3 replaced and superseded the original filing 
in its entirety.
    \7\ Amendment No. 4 replaced and superseded the original filing 
in its entirety.
    \8\ Amendment No. 5 replaced and superseded the original filing 
in its entirety.
    \9\ Amendment No. 6 partially amended Sections 802.01B, 802.02, 
and 802.03 of the proposed rule text.
    \10\ Amendment No. 7 partially amended Sections 802.03 of the 
proposed rule text.
---------------------------------------------------------------------------

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

    The NYSE is proposing to amend Sections 102.01C, 103.01B, 802.01A, 
802.01B, 802.01C, 802.02, and 802.03 of the NYSE's Listed Company 
Manual regarding the minimum numerical original and continued listing 
standards. Proposed new language is italicized; deletions are 
bracketed.\11\
---------------------------------------------------------------------------

    \11\ NYSE amended the proposed rule change to make technical 
corrections to Exhibit 5 of the proposed rule change. E-mail from 
Annemarie Tierney, Assistant General Counsel, and Glenn Tyranski, 
Vice President, Financial Compliance, NYSE, dated February 24, 2005.
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* * * * *

102.00 Domestic Companies

* * * * *

102.01C A company must meet one of the following financial standards.

(I) Earnings Test

    (1) Pre-tax earnings from continuing operations and after minority 
interest, amortization and equity in the earnings or losses of 
investees, [as] adjusted [(E)] for items specified in (2)(a) through 
(2)(i) below [(F)] must total at least[.] [$2,500,000 in the latest 
fiscal year together with $2,000,000 in each of the preceding two 
years; or $6,500,000] $10,000,000 in the aggregate for the last three 
fiscal years together with a minimum of $[4,5]2,000,000 in each of the 
two most recent fiscal years, and positive amounts [for] in all [each 
of the preceding two] three years.
    (2) Adjustments (E)(F) that must be included in the calculation of 
the amounts required in paragraph (1) are as follows:
    (a) Application of Use of Proceeds[.]--If a company is in 
registration with the SEC and is in the process of an equity offering, 
adjustments should be made to reflect the net proceeds of that 
offering, and the specified intended application(s) of such proceeds 
to:
    (i) Pay off existing debt[.]: The adjustment will include 
elimination of the actual historical interest on debt being retired 
with offering proceeds of all relevant periods. If the event giving 
rise to the adjustment occurred during a time-period such that pro 
forma amounts are not set forth in the SEC registration statement 
(typically, the pro forma effect of repayment of debt will be provided 
in the current registration statement only with respect to the last 
fiscal year plus any interim period in accordance with SEC rules), the 
company must prepare the relevant adjusted financial data to reflect 
the adjustment to its historical financial data, and its outside audit 
firm must provide a report of having applied agreed-upon procedures 
with respect to such adjustments. Such report must be prepared in 
accordance with the standards established by the American Institute of 
Certified Public Accountants.
    (ii) Fund an acquisition:
    (1) The adjustments will include those applicable with respect to 
acquisition(s) to be funded with the proceeds. Adjustments will be made 
that are disclosed as such in accordance with Rule 3-05 ``Financial 
Statements of Business Acquired or to be Acquired'' and Article 11 of 
Regulation S-X. Adjustments will be made for all the relevant periods 
for those acquisitions for which historical financial information of 
the acquiree is required to be disclosed in the SEC registration 
statement; and
    (2) Adjustments applicable to any period for which pro forma 
numbers are not set forth in the registration statement shall be 
accompanied by the relevant adjusted financial data to combine the 
historical results of the acquiree (or relevant portion thereof) and 
acquiror, as disclosed in the company's SEC filing. Under SEC rules, 
the number of periods disclosed depends upon the significance level of 
the acquiree to the acquiror. The adjustments will include those 
necessary to reflect (a) the allocation of the purchase price, 
including adjusting assets and liabilities of the acquiree to fair 
value recognizing any intangibles (and associated amortization and 
depreciation), and (b) the effects of additional financing to complete 
the acquisition. The company must prepare the relevant adjusted 
financial data to reflect the adjustment to its historical financial 
data, and its outside audit firm must provide a report of having 
applied agreed-upon procedures with respect to such adjustments. Such 
report must be prepared in accordance with the standards established by 
the American Institute of Certified Public Accountants[.];
    (b) Acquisitions and Dispositions[:]--In instances other than 
acquisitions (and related dispositions of part of the acquiree) funded 
with the use of proceeds, adjustments will be made for those 
acquisitions and dispositions that are disclosed as such in a company's 
financial statements in accordance with Rule 3-05 ``Financial 
Statements of Business Acquired or to be Acquired'' and Article 11 of 
Regulation S-X. If the disclosure does not specify pre-tax earnings 
from continuing operations, minority interest, and equity in the 
earnings or losses of investees, then such data must be prepared by the 
company's outside audit firm for the Exchange's consideration. In this 
regard, the audit firm would have to issue an independent accountant's 
report on applying agreed-upon procedures in accordance with the 
standards established by the American Institute of Certified Public 
Accountants[.];
    (c) Exclusion of Merger or Acquisition Related Costs Recorded under 
Pooling of Interests;
    (d) Exclusion of Charges or Income Specifically Disclosed in the 
Applicant's SEC Filing for the Following[:]--
    (i) In connection with exiting an activity for the following:
    (1) Costs of severance and termination benefits
    (2) Costs and associated revenues and expenses associated with the 
elimination and reduction of product lines
    (3) Costs to consolidate or relocate plant and office facilities
    (4) Loss or gain on disposal of long-lived assets
    (ii) Environmental clean-up costs
    (iii) Litigation settlement[.];
    (e) Exclusion of Impairment Charges on Long-lived Assets (goodwill, 
property, plant, and equipment, and other long-lived assets);
    (f) Exclusion of Gains or Losses Associated with Sales of a 
Subsidiary's or Investee's Stock;
    (g) Exclusion of In-Process Purchased Research and Development 
Charges;
    (h) Regulation S-X Article 11 Adjustments--Adjustments will include 
those contained in a company's pro forma financial statements provided 
in a current filing with the SEC pursuant to SEC rules and regulations 
governing

[[Page 12926]]

Article 11 ``Pro forma information of Regulation S-X Part 210--Form and 
Content of and Requirements for Financial Statements[.];''
    (i) Exclusion of the Cumulative Effect of Adoption of New 
Accounting Standards (APB Opinion No. 20).

 OR

(II) Valuation/Revenue Test

    Companies listing under this standard may satisfy either (a) the 
Valuation/Revenue with Cash Flow Test or (b) the Pure Valuation/Revenue 
Test.
    (a) Valuation/Revenue with Cash Flow Test--[A Company with]
    (1) [not less than] at least $500,000,000 in global market 
capitalization, [and]
    (2) at least $100,000,000 in revenues during the most recent 12-
month period, [must] and
    (3) [demonstrate from the operating activity section of its cash 
flow statement that its cash flow, which represents net income adjusted 
to (a) reconcile such amounts to cash provided by operating activities, 
and (b) exclude changes in operating assets and liabilities, is] at 
least $25,000,000 [in the] aggregate cash flows for the last three 
fiscal years [and each year is reported as a] with positive amounts in 
all three years, as adjusted [(E)(F)] pursuant to Paras. 102.01C 
(I)(2)(a) and (b), as applicable.
    A Company must demonstrate cash flow based on the operating 
activity section of its cash flow statement. Cash flow represents net 
income adjusted to (a) reconcile such amounts to cash provided by 
operating activities, and (b) exclude changes in operating assets and 
liabilities. With respect to reconciling amounts pursuant to this 
Paragraph, all such amounts are limited to the amount included in the 
company's income statement.
    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 $500,000,000 global market capitalization requirement based upon 
the completion of the offering (or distribution).
    (b) Pure Valuation/Revenue Test--
    (1) at least $750,000,000 in global market capitalization, and
    (2) at least $75,000,000 in revenues during the most recent fiscal 
year.
    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 $750,000,000 global market capitalization requirement based upon 
the completion of the offering (or distribution). For all other 
companies, market capitalization valuation will be determined over a 
six-month average.

 [OR

    (III) For companies with not less than $1 billion in total 
worldwide market capitalization and with not less than $100 million 
revenues in the recent fiscal year, there are no additional financial 
requirements. For such companies listing in connection with an IPO, the 
market capitalization valuation must be demonstrated by written 
representation from the underwriter (or, in the case of a spin-off, by 
a written representation from the parent company's investment banker or 
other financial advisor) of the total market capitalization of the 
company upon completion of the offering (or distribution). For all 
other such companies, the market capitalization valuation will be 
determined over a six-month average.]

 OR

(III) Affiliated Company Test

    (1) at least $500,000,000 in global market capitalization;
    (2) at least 12 months of operating history (although a company is 
not required to have been a separate corporate entity for such period); 
and
    (3) the company's parent or affiliated company is a listed company 
in good standing (as evidenced by written representation from the 
company or its financial advisor excluding that portion of the balance 
sheet attributable to the new entity); and
    (4) the company's parent or affiliated company retains control of 
the entity or is under common control with the entity.
    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 $500,000,000 global market capitalization requirement based upon 
the completion of the offering (or distribution).
     ``Control'' for purposes of the Affiliated Company Test will mean 
having the ability to exercise significant influence over the operating 
and financial policies of the listing company, and will be presumed to 
exist where the parent or affiliated company holds 20% or more of the 
listing company's voting stock directly or indirectly. Other indicia 
that may be taken into account when determining whether control exists 
include board representation, participation in policy making processes, 
material intercompany transactions, interchange of managerial 
personnel, and technological dependency. The Affiliated Company Test is 
taken from and intended to be consistent with generally accepted 
accounting principles regarding use of the equity method of accounting 
for an investment in common stock.
    (E) Only adjustments arising from events specifically so indicated 
in the company's SEC filing(s) as to both categorization and amount can 
and must be made. Any such adjustment applies only in the year in which 
the event occurred except with regard to the use of proceeds or 
acquisitions and dispositions. Any company for which the Exchange 
relies on adjustments in granting clearance must include all relevant 
adjusted financial data in its listing application as specified in 
Section 702.04, and disclose the use of adjustments by including a 
statement in a press release (i) that additional information is 
available upon which the NYSE relied to list the company and is 
included in the listing application and (ii) that such information is 
available to the public upon request. This press release must be issued 
concurrently with any listing announcement issued by the company or, if 
a listing announcement is not issued, within 30 days from the date the 
company lists on the NYSE.
    (F) [The above-referenced adjustments are measured and recognized] 
Interested parties should apply the list of adjustments in accordance 
with any relevant accounting literature, such as that published by the 
Financial Accounting Standards Board (``FASB''), the Accounting 
Principles Board (``APB''), the Emerging Issues Task Force (``EITF''), 
the American Institute of Certified Public Accountants (``AICPA''), and 
the SEC. Any literature is intended to guide issuers and investors 
regarding the affected adjustment listed. If successor interpretations 
(or guidelines) are published with respect to any particular 
adjustment, the most recent relevant interpretations (or guidelines) 
should be consulted.
* * * * *

[(IV) Affiliated Company Standard

    (1) Market capitalization of $500,000,000 million or greater (as 
evidenced by written representation

[[Page 12927]]

from the underwriter, company, or its investment advisor);
    (2) Minimum of 12 months of operations (although it is not required 
to have been a separate corporate entity for such period);
    (3) Parent or affiliated company is a listed company in good 
standing (as evidenced by written representation from the company or 
its financial advisor excluding that portion of the balance sheet 
attributable to the new entity); and
    (4) Parent/affiliated company retains control* of the entity or is 
under common control* with the entity.
    * ``Control'' for these purposes will mean the ability to exercise 
significant influence over operating and financial policies, and will 
be presumed to exist when the parent involved holds directly or 
indirectly 20% or more of the entity's voting stock. Other indicia that 
may be taken into account for this purpose include board 
representation, participation in policy making processes, material 
intercompany transactions, interchange of managerial personnel, and 
technological dependency. This test is taken from and intended to be 
consistent with generally accepted accounting principles regarding use 
of the equity method of accounting for an investment in common stock.]
* * * * *

103.00 Non-U.S. Companies

* * * * *

103.01 Minimum Numerical Standards--Non-U.S. Companies--Equity Listings 
Distribution

* * * * *

103.01B A company must meet one of the following financial standards:

(I) Earnings Test

    (1) Pre-tax earnings from continuing operations and after minority 
interest, amortization and equity in the earnings or losses of 
investees, adjusted [(C)(D)] for items specified in Section 
102.01C(I)(2)(a) through (i) above, and 103.01B(I)(2) below, must total 
at least[:] $100,000,000 in the aggregate for the last three fiscal 
years [together] with a minimum of $25,000,000 in each of the most 
recent two fiscal years.
    (2) Additional Adjustment (C)(D) Available for Foreign Currency 
Devaluation. Non-operating adjustments when associated with translation 
adjustments representing a significant devaluation of a country's 
currency (e.g., the currency of a company's country of domicile 
devalues by more than 10 percent against the U.S. dollar within a six-
month period). Adjustments may not include those associated with normal 
currency gains or losses.
    (3) Reconciliation to U.S. GAAP of the third year back would only 
be required if the Exchange determines that reconciliation is necessary 
to demonstrate that the aggregate $100,000,000 threshold is satisfied.

 OR

(II) Valuation/Revenue Test

    Companies listing under this standard may satisfy either (a) the 
Valuation/Revenue with Cash Flow Test or (b) the Pure Valuation/Revenue 
Test.
    (a) Valuation/Revenue with Cash Flow Test--[A Company with]
    (1) [not less than] at least $500,000,000 in global market 
capitalization, [and]
    (2) at least $100,000,000 in revenues during the most recent 12-
month period, [must] and
    (3) [demonstrate from the operating activity section of its cash 
flow statement that its operating cash flow excluding changes in 
operating assets and liabilities is] at least $100,000,000 [in the] 
aggregate cash flows for the last three fiscal years where each of the 
two most recent years is reported at a minimum of $25,000,000, [as] 
adjusted in accordance with (C)(D) [for] Section 102.01C(I)(2)(a) and 
(b).
    A Company must demonstrate cash flow based on the operating 
activity section of its cash flow statement. Cash flow represents net 
income adjusted to (a) reconcile such amounts to cash provided by 
operating activities, and (b) exclude changes in operating assets and 
liabilities. With respect to reconciling amounts pursuant to this 
Paragraph, all such amounts are limited to the amount included in the 
company's income statement.
    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 $500,000,000 global market capitalization requirement based upon 
the completion of the offering (or distribution).
    Reconciliation to U.S. GAAP of the third fiscal year back would 
only be required if the Exchange determines that reconciliation is 
necessary to demonstrate that the [aggregate] $100,000,000 aggregate 
cash flow threshold is satisfied.
    (b) Pure Valuation/Revenue Test--
    (1) at least $750,000,000 in global market capitalization, and
    (2) at least $75,000,000 in revenues during the most recent fiscal 
year.
    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 $750,000,000 global market capitalization requirement upon 
completion of the offering (or distribution). For all other companies, 
market capitalization valuation will be determined over a six-month 
average.

 [OR

    (III) For companies with not less than $1 billion in total 
worldwide market capitalization and with not less than $100 million 
revenues in the recent fiscal year, there are no additional financial 
requirements. For such companies listing in connection with an IPO, the 
market capitalization valuation must be demonstrated by a written 
representation from the underwriter (or, in the case of a spin-off, by 
a written representation from the parent company's investment banker, 
other financial advisor or transfer agent) of the total market 
capitalization of the company upon completion of the offering (or 
distribution). For all other such companies, the market capitalization 
valuation will be determined over a six-month average.]

 OR

(III) Affiliated Company Test

    (1) at least $500,000,000 in global market capitalization;
    (2) at least 12 months of operating history (although a company is 
not required to have been a separate corporate entity for such period); 
and
    (3) the company's parent or affiliated company is a listed company 
in good standing (as evidenced by written representation from the 
company or its financial advisor excluding that portion of the balance 
sheet attributable to the new entity); and
    (4) the company's parent or affiliated company retains control of 
the entity or is under common control with the entity.
    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 $500,000,000 global market capitalization requirement based upon 
the completion of the offering (or distribution).
    ``Control'' for purposes of the Affiliated Company Test will mean

[[Page 12928]]

having the ability to exercise significant influence over the operating 
and financial policies of the listing company, and will be presumed to 
exist where the parent or affiliated company holds 20% or more of the 
listing company's voting stock directly or indirectly. Other indicia 
that may be taken into account when determining whether control exists 
include board representation, participation in policy making processes, 
material intercompany transactions, interchange of managerial 
personnel, and technological dependency. The Affiliated Company Test is 
taken from and intended to be consistent with generally accepted 
accounting principles regarding use of the equity method of accounting 
for an investment in common stock.
    (C) Only adjustments arising from events specifically so indicated 
in the company's SEC filing(s) as to both categorization and amount can 
and must be made. Any such adjustments apply only in the year in which 
the event occurred except with regard to the use of proceeds or 
acquisitions and dispositions. Any company for which the Exchange 
relies on adjustments in granting clearance must include all relevant 
adjusted financial data in its listing application as specified in 
Section 702.04, and disclose the use of adjustments by including a 
statement in a press release (i) that additional information is 
available upon which the NYSE relied to list the company and is 
included in the listing application and (ii) that such information is 
available to the public upon request. This press release must be issued 
concurrently with any listing announcement issued by the company or, if 
a listing announcement is not issued, within 30 days from the date the 
company lists on the NYSE.
    (D) Interested parties should apply the list of adjustments in 
accordance with any relevant accounting literature, such as that 
published by the Financial Accounting Standards Board (``FASB), the 
Accounting Principles Board (``APB''), the Emerging Issues Task Force 
(``EITF''), the American Institute of Certified Public Accountants 
(``AICPA''), and the SEC. Any literature is intended to guide issuers 
and investors regarding the affected adjustment listed. If successor 
interpretations (or guidelines) are published with respect to any 
particular adjustment, the most recent relevant interpretations (or 
guidelines) should be consulted.

[(IV) Affiliated Company Standard

    (1) Market capitalization of $500 million or greater (as evidenced 
by written representation from the underwriter, company, or its 
investment advisor);
    (2) Minimum of 12 months of operations (although it is not required 
to have been a separate corporate entity for such period);
    (3) Parent or affiliated company is a listed company in good 
standing (as evidenced by written representation from the company or 
its financial advisor excluding that portion of the balance sheet 
attributable to the new entity); and
    (4) Parent/affiliated company retains control* of the entity or is 
under common control* with the entity.
    * ``Control'' for these purposes will mean the ability to exercise 
significant influence over operating and financial policies, and will 
be presumed to exist when the parent involved holds directly or 
indirectly 20% or more of the entity's voting stock. Other indicia that 
may be taken into account for this purpose include board 
representation, participation in policymaking processes, material 
intercompany transactions, interchange of managerial personnel, and 
technological dependency. This test is taken from and intended to be 
consistent with generally accepted accounting principles regarding use 
of the equity method of accounting for an investment in common stock.]
* * * * *

802.00 Continued Listing

* * * * *

802.01 Continued Listing Criteria

    The Exchange would normally give consideration to the prompt 
initiation of suspension and delisting procedures with respect to a 
security of either a domestic or non-U.S. issuer when:

802.01A. Distribution Criteria for Capital or Common Stock--

     Number of total stockholders (A) is less than--400

 OR

     Number of total stockholders (A) is less than--1,200 and
     Average monthly trading volume is less than--100,000 
shares (for most recent 12 months)

 OR

     Number of publicly-held shares ([A] B) is less than--
600,000([B]C)
    (A) The number of beneficial holders of stock held in the name of 
Exchange member organizations will be considered in addition to holders 
of record.
    ([A]B ) Shares held by directors, officers, or their immediate 
families and other concentrated holdings of 10% or more are excluded in 
calculating the number of publicly-held shares.
    ([B]C) If the unit of trading is less than 100 shares, the 
requirement relating to the number of shares publicly held shall be 
reduced proportionately.

802.01B Numerical Criteria for Capital or Common Stock

    [If] A[a] company that falls below [any of the following] the 
criteria applicable to the standard under which it originally listed 
will be considered to be below compliance [, it is subject to the 
procedures outlined in Paras. 802.02 and 802.03:].
    Notwithstanding items (I) to (IV) below, the Exchange will promptly 
initiate suspension and delisting procedures with respect to a company 
if that company is determined to have average global market 
capitalization over a consecutive 30 trading-day period of less than 
$25,000,000, regardless of the original standard under which it listed. 
A company is not eligible to follow the procedures outlined in Sections 
802.02 and 802.03 with respect to this criteria.
    (I) A company that qualified to list under the Earnings Test set 
out in Section 102.01C(I) or in Section 103.01B(I) will be considered 
to be below compliance standards if [(i) A]average global market 
capitalization over a consecutive 30 trading-day period is less than 
[$50,000,000] $75,000,000 and, at the same time, total stockholders' 
equity is less than [$50,000,000] $75,000,000 [(C); or
    (ii) Average global market capitalization over a consecutive 30 
trading-day period is less than $15,000,000; or]
    (II) A company that qualified to list under the Valuation/Revenue 
with Cash Flow Test set out in Section 102.01C(II)(a) or Section 
103.01B(II)(a) will be considered to be below compliance standards if:
    (i) Average global market capitalization over a consecutive 30 
trading-day period is less than $250,000,000 and, at the same time, 
total revenues are less than $20,000,000 over the last 12 months 
(unless the company qualifies as an original listing under one of the 
other original listing standards); or
    (ii) Average global market capitalization over a consecutive 30 
trading-day period is less than $75,000,000.
    [(iii) For companies that qualified for original listing under the 
``global market capitalization'' standard:]

[[Page 12929]]

    (III) A company that qualified to list under the Pure Valuation/
Revenue Test set out in Section 102.01C(II)(b) or Section 
103.01B(II)(b) will be considered to be below compliance standards if:
    (i) [A]average global market capitalization over a consecutive 30 
trading-day period is less than [$500,000,000] $375,000,000 and, at the 
same time, total revenues are less than [$20,000,000] $15,000,000 over 
the last 12 months (unless the [resultant entity] company qualifies as 
an original listing under one of the other original listing standards) 
[(D)]; or
    (ii) average global market capitalization over a consecutive 30 
trading-day period is less than $100,000,000.
    (IV) A company that qualified to list under the Affiliated Company 
Test set out in Section 102.01C(III) or Section 103.01B(III) will be 
considered to be below compliance standards if:
    (i) the listed company's parent/affiliated company ceases to 
control the listed company, or the listed company's parent/affiliated 
company itself falls below the continued listing standards applicable 
to the parent/affiliated company, and:
    (ii) 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.
    When applying the market capitalization test in any of the above 
[three] four standards, the Exchange will generally look to the total 
common stock outstanding (excluding treasury shares) as well as any 
common stock that would be issued upon conversion of another 
outstanding equity security. The Exchange deems these securities to be 
reflected in market value to such an extent that the security is a 
``substantial equivalent'' of common stock. In this regard, the 
Exchange will only consider securities (1) publicly traded (or quoted), 
or (2) convertible into a publicly traded (or quoted) security. For 
partnerships, the Exchange will analyze the creation of the current 
capital structure to determine whether it is appropriate to include 
other publicly traded securities in the calculation.
    [Affiliated Companies--Will not be subject to the $50,000,000 
average global market capitalization and stockholders' equity test 
unless the parent/affiliated company no longer controls the entity or 
such parent/affiliated company itself falls below the continued listing 
standards described in this section.]
    The Exchange will promptly initiate suspension and delisting 
procedures with respect to Funds, REITs and Limited Partnerships [--
will be subject to immediate suspension and delisting procedures] if 
the average market capitalization of the entity over 30 consecutive 
trading days is below [$15,000,000] $25,000,000 [or (2)]. In addition, 
the Exchange will promptly initiate suspension and delisting procedures 
with respect to [in the case of] a Fund[,] it ceases to maintain its 
closed-end status.[, and in the case of a] The Exchange will promptly 
initiate suspension and delisting procedures with respect to a REIT[,] 
it fails to maintain its REIT status (unless the resultant entity 
qualifies for an original listing as a corporation).
    The Exchange will notify the Fund, REIT or limited partnership if 
the average market capitalization falls below [$25,000,000] $35,000,000 
and will advise the Fund, REIT or limited partnership of the delisting 
standard. Funds, REITs and limited partnerships are not [subject] 
eligible to follow the procedures outlined in Sections 802.02 and 
802.03.
    The Exchange will promptly initiate suspension and delisting 
procedures with respect to Bonds[--] if:
    (i) [(T]the aggregate market value or principal amount of 
publicly-held bonds is less than $1,000,000, or
    (ii) [(T]the issuer is not able to meet its obligations on 
the listed debt securities.
    Bonds are not eligible to follow the procedures outlined in 
Sections 802.02 and 802.03.
    The Exchange will promptly initiate suspension and delisting 
procedures with respect to Preferred Stock, Guaranteed Railroad Stock 
and Similar Issues[--] if:
    (i) []the [A]aggregate market value of publicly-held shares 
is less than $2,000,000, or
    (ii) []the number of [P]publicly-held shares is less than 
100,000.
    These types of securities are not eligible to follow the procedures 
outlined in Paras. 802.02 and 802.03.
    [(C) To be considered in conformity with continued listing 
standards pursuant to Paras. 802.02 and 802.03, a company that is 
determined to be below this continued listing criterion must do one of 
the following:
    (i) Reestablish both its market capitalization and its 
stockholders' equity to the $50,000,000 level, or
    (ii) Achieve average global market capitalization over a 
consecutive 30 trading-day period of at least $100,000,000, or
    (iii) Achieve average global market capitalization over a 
consecutive 30 trading-day period of $60,000,000, with either (x) 
stockholders' equity of at least $40,000,000, or (y) an increase in 
stockholders' equity of at least $40,000,000 since the company was 
notified by the Exchange that it was below continued listing standards.
    (D) A company that is determined to be below this continued listing 
criterion must reestablish both its market capitalization and its 
revenues to be considered in conformity with continued listing 
standards pursuant to paras. 802.02 and 802.03.]

802.01C Price Criteria for Capital or Common Stock[--]

    A Company will be considered to be below compliance standards if 
the [A]average closing price of a security is less than $1.00 over a 
consecutive 30-trading-day period [(E)]. [(E)] Once notified, the 
company must bring its share price and average share price back above 
$1.00 by six months following receipt of the notification. [If this is 
the only criteria that makes the company below the Exchange's continued 
listing standards, the procedures outlined in Paras. 802.02 and 802.03 
do not apply.] A company is not eligible to follow the procedures 
outlined in Paras. 802.02 and 802.03 with respect to this criteria.
* * * * *

802.00 Continued Listing

802.02 Evaluation and Follow-Up Procedures for Domestic Companies

    The following procedures shall be applied by the Exchange to 
domestic companies [which] that are identified as being below the 
Exchange's continued listing criteria. Notwithstanding the above, when 
the Exchange deems it necessary for the protection of investors, 
trading in any security can be suspended immediately, and application 
made to the SEC to delist the security.
    Once the Exchange identifies, through internal reviews or notice (a 
press release, news story, company communication, etc.), a company as 
being below the continued listing criteria set forth in Section 802.01( 
and not able to otherwise qualify under an original listing standard), 
the Exchange will notify the company by letter of its status within 10 
business days. This letter will also provide the company with an 
opportunity to provide the Exchange with a plan (the ``Plan'') advising 
the Exchange of definitive action the company has taken, or is taking, 
that would bring it into conformity with continued listing standards 
within 18 months of receipt of the letter.

[[Page 12930]]

    Within 10 business days after receipt of the letter, the company 
must contact the Exchange to confirm receipt of notification, discuss 
any possible financial data of which the Exchange may be unaware, and 
indicate whether or not it plans to present a Plan; otherwise, 
suspension and delisting procedures will commence. If the company 
submits a Plan, it must identify specific quarterly milestones against 
which the Exchange will evaluate the company's progress.
    The company has 45 days from the receipt of the letter to submit 
its Plan to the Exchange for review; otherwise, suspension and 
delisting procedures will commence. If the company is determined to be 
below the criteria listed in Section 802.01B[(i) or 802.01B(iii)], the 
Plan it presents must demonstrate how it will return to compliance with 
the applicable continued listing standard by the end of the Plan period 
[reestablish both its market capitalization and stockholders' equity 
(or revenues, as applicable, to the levels specified in such clauses].
    In any event, all companies submitting a Plan must include 
quarterly financial projections, details related to any strategic 
initiatives the company plans to complete, and market performance 
support. Exchange staff will evaluate the Plan, including any 
additional documentation that supports the Plan, and make a 
determination as to whether the company has made a reasonable 
demonstration in the Plan of an ability to come into conformity with 
the relevant standard(s) within 18 months. The Exchange will make such 
determination within 45 days of receipt of the proposed Plan, and will 
promptly notify the company of its determination in writing.
    The company also has 45 days from receipt of the letter to issue a 
press release disclosing the fact that it has fallen below the 
continued listing standards of the Exchange. If the company fails to 
issue this press release during the allotted 45 days, the Exchange will 
issue the requisite press release.
    If the Exchange does not accept the Plan, the Exchange will 
promptly initiate suspension and delisting procedures and issue a press 
release disclosing the forthcoming suspension and application to the 
SEC [for] to delist[ing of] the company's securities.
    If the Exchange accepts the Plan, the Exchange will review the 
company on a quarterly basis for compliance with the Plan. If the 
company fails to meet the material aspects of the Plan or any of the 
quarterly milestones, the Exchange will review the circumstances and 
variance, and determine whether such variance warrants commencement of 
suspension and delisting procedures. Should the Exchange determine to 
proceed with suspension and delisting procedures, it may do so 
regardless of the company's continued listing status at that time. The 
Exchange will deem the Plan period over prior to the end of the 18 
months if a company is able to demonstrate returning to compliance with 
the applicable continued listing standards, or achieving the ability to 
qualify under an original listing standard, for a period of two 
consecutive quarters. [This early Plan termination will not be 
available to a company based on satisfying the alternative criteria 
specified in clauses (ii) or (iii) of footnote C to Para. 802.01B.] In 
any event, if the company does not meet continued listing standards 
[(including the criteria specified in footnote C to Section 802.01B, if 
applicable)] at the end of the 18-month period, the Exchange promptly 
will initiate suspension and delisting procedures.
    If the company, within twelve months of the end of the Plan period 
[(including any early termination of the Plan period under the 
procedures described above)], is again determined to be below continued 
listing standards, the Exchange will examine the relationship between 
the two incidents of falling below continued listing standards and re-
evaluate the company's method of financial recovery from the first 
incident. It will then take appropriate action, which, depending upon 
the circumstances, may include truncating the procedures described 
above or immediately initiating suspension and delisting procedures.

802.03 Continued Listing

Evaluation and Follow-up Procedures for Non-U.S. Companies

    The following procedures shall be applied by the Exchange to non-
U.S. companies [who] that are identified as being below the Exchange's 
continued listing criteria. Notwithstanding the above, when the 
Exchange deems it necessary for the protection of the investors, 
trading in any security can be suspended immediately, and application 
made to the SEC to delist the security. Once the Exchange identifies, 
through internal reviews or notice (a press release, news story, 
company communication, etc.), a company as being below the continued 
listing criteria set forth in Section 802.01(and not able to otherwise 
qualify under an original listing standard), the Exchange will notify 
the company by letter of its status within 10 business days. This 
letter will also provide the company with an opportunity to provide the 
Exchange with a plan (the ``Plan'') advising the Exchange of definitive 
action the company has taken, or is taking, that would bring it into 
conformity with the standards within 18 month of receipt of the letter. 
Within 30 business days after receipt of the letter, the company must 
contact the Exchange to confirm receipt of notification, discuss any 
possible financial data of which the Exchange may be unaware, and 
indicate whether or not it plans to present a Plan; otherwise, 
suspension and delisting procedures will commence. If the company 
submits a Plan, it must identify specific semi-annual milestones 
against which the Exchange will evaluate the company's progress.
    The company has 90 days from the receipt of the letter to submit 
its Plan to the Exchange for review; otherwise, suspension and 
delisting procedures will commence. If the company is determined to be 
below the criteria listed in Section 802.01B [(i) or 802.01B(iii)], the 
Plan it presents must demonstrate how it will return to compliance with 
the applicable continued listing standard by the end of the Plan period 
[reestablish both its market capitalization and stockholders' equity 
(or revenues, as applicable, to the levels specified in such clauses].
    In any event, all companies submitting a Plan must include 
quarterly financial projections, details related to any strategic 
initiatives the company plans to complete, and market performance 
support. Exchange staff will evaluate the Plan, including any 
additional documentation that supports the Plan, and make a 
determination as to whether the company has made a reasonable 
demonstration in the Plan of an ability to come into conformity with 
the relevant standard(s) within 18 months. The Exchange will make such 
determination within 45 days of receipt of the proposed Plan, and will 
promptly notify the company of its determination in writing.
    The company also has 90 days from receipt of the letter to issue 
press release disclosing the fact that it has fallen below the 
continued listing standards of the Exchange. If the company fails to 
issue this press release during the allotted 90 days, the Exchange will 
issue the requisite press release.
    If the Exchange does not accept the Plan, the Exchange will 
promptly initiate suspension and delisting procedures and issue a press 
release disclosing the forthcoming suspension and application to the 
SEC to delist[ing of] the company's securities.

[[Page 12931]]

    If the Exchange accepts the Plan, the Exchange will review the 
company on a semi-annual basis for compliance with the Plan. If the 
company fails to meet the material aspects of the Plan or any of the 
semi-annual milestones, the Exchange will review the circumstances and 
variance, and determine whether such variance warrants commencement of 
suspension and delisting procedures. Should the Exchange determine to 
proceed with suspension and delisting procedures, it may do so 
regardless of the company's continued listing status at that time. The 
Exchange will deem the Plan period over prior to the end of the 18 
months if a company is able to demonstrate returning to compliance with 
the applicable continued listing standards, or achieving the ability to 
qualify under an original listing standard, for a period of two 
consecutive quarters. [This early Plan termination will not be 
available to a company based on satisfying the alternative criteria 
specified in clauses (ii) or (iii) of footnote C to Para. 802.01B.] In 
any event, the Exchange will promptly initiate suspension and delisting 
procedures with respect to [if the] a company that does not meet the 
continued listing standards [(including the criteria specified in 
footnote C to Para. 802.01B, if applicable)] at the end of the 18-month 
period[, the Exchange promptly will initiate suspension and delisting 
procedures.]
    If the company, within twelve months of the end of the Plan period 
[(including any early termination of the Plan period under the 
procedures described above)], is again determined to be below continued 
listing standards, the Exchange will examine the relationship between 
the two incidents of falling below continued listing standards and re-
evaluate the company's method of financial recovery from the first 
incident. It will then take appropriate action, which, depending upon 
the circumstances, may include truncating the procedures described 
above or immediately initiating suspension and delisting procedures.
* * * * *

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 amendments to certain of its minimum 
numerical standards for the listing and continued listing of equity 
securities on the NYSE. On January 29, 2004, the Commission approved 
these proposed amendments sought by the NYSE on a pilot program basis 
(the ``Pilot Program'').\12\ The Pilot Program provided a transition 
period for companies that were below compliance under the previous 
continued listing standards at the time the Pilot Program was approved, 
granting them an opportunity to present an additional business plan 
advising the Exchange of definitive action the company has taken, or is 
taking, that would bring the company into conformity with the Pilot 
Program requirements within 12 months of the end of their previous 
plan. No transition period was provided, however, for companies that 
were in compliance with the previous standards but not in compliance 
with the Pilot Program standards at the time the Pilot Program was 
approved.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 49154 (January 29, 
2004), 69 FR 5633 (February 5, 2004) (approving File No. SR-NYSE-
2003-43).
---------------------------------------------------------------------------

    Due to the fact that the Exchange requested the Commission approve 
the Pilot Program on an accelerated basis, there was no opportunity for 
listed companies to review and comment on the Pilot Program 
requirements prior to the date compliance was required. The NYSE notes 
that a number of the listed companies that did not comply with the 
Pilot Program standards as of the date of approval expressed 
significant dismay at the automatic application of the new continued 
listing standards.\13\ In order to address these concerns, the Exchange 
suspended the portions of the Pilot Program relating to the continued 
listing standards of Section 802.01B of the NYSE's Listed Company 
Manual.\14\ In File No. SR-NYSE-2004-15, the Exchange noted its 
intention to publish the requirements of the Pilot Program relating to 
Section 802.01B for public comment on a non-accelerated timeframe.\15\ 
File No. SR-NYSE-2004-15 did not, however, amend the Pilot Program with 
respect to Sections 102.01C and 103.01B of the NYSE's Listed Company 
Manual concerning original minimum listing standards or the Pilot 
Program's non-substantive change to the language of Section 
802.01C.\16\
---------------------------------------------------------------------------

    \13\ See letters from Kenneth A. Hoogstra, von Briesen & Roper, 
s.c., to Jonathan G. Katz, Secretary, Commission, dated February 25, 
2004, and W. Randy Eaddy, Kilpatrick Stockton LLP, to Jonathan G. 
Katz, Secretary, Commission, dated March 11, 2004, (commenting on 
File No. SR-NYSE-2003-43).
    \14\ See Securities Exchange Act Release No. 49443 (March 18, 
2004), 69 FR 13929 (March 24, 2004) (File No. SR-NYSE-2004-15).
    \15\ See id.
    \16\ See id.
---------------------------------------------------------------------------

    In this filing, File No. SR-NYSE-2004-20, the Exchange now seeks 
permanent approval for the Pilot Program currently in effect with 
respect to the Exchange's original minimum listing standards and 
approval of the continued minimum listing standards as initially 
proposed in File No. SR-NYSE-2003-43. File No. SR-NYSE-2004-20, as 
amended, by Amendment No. 1 was published in the Federal Register on 
July 2, 2004.\17\ The Exchange also seeks approval for continued 
minimum listing standards, with changes to that proposed in File No. 
SR-NYSE-2003-43 that are responsive to public comments submitted to the 
Commission. The Exchange represents that it maintains an ongoing dialog 
with knowledgeable practitioners at investment banks, broker-dealers, 
and venture capital firms, and adjusts its listing standards 
periodically to ensure that the standards recognize and reflect current 
market conditions and to allow the Exchange to continue to attract 
quality companies. The Exchange represents, furthermore, that such 
changes are proposed only after detailed analysis by Exchange staff of 
how the proposed standards would affect the NYSE list. The NYSE asserts 
that the proposed amendments will strengthen certain aspects of the 
minimum original and continued listing standards, while modestly easing 
the pre-Pilot Program ``Market-Cap/Revenue Test'' to enable the NYSE to 
list somewhat younger companies that still meet substantial 
quantitative thresholds over their operating history. According to the 
NYSE, Exchange staff monitored the modest number of companies over the 
last two years that would have met the ``Market-Cap/Revenue Test'' as 
the Exchange proposes to modify it and found that those companies have 
performed to a standard that would be appropriate for inclusion on the 
NYSE list. The Exchange represents that its standard in this respect 
remains far higher than any other U.S. marketplace.
---------------------------------------------------------------------------

    \17\ See supra note 4.

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

[[Page 12932]]

    Prior to the Pilot Program, Section 102.01C of the Listed Company 
Manual provided that a company must meet one of four specified 
financial standards in order to qualify to have its equity securities 
listed. The Exchange is proposing permanent approval of amendments to 
three of these four standards that have been in effect under the Pilot 
Program.\18\ The Exchange is also proposing permanent approval of 
amendments to Section 103.01B(III), which provides a corresponding 
numerical standard applicable to international companies and have also 
been in effect under the Pilot Program.
---------------------------------------------------------------------------

    \18\ The ``Earnings Test,'' the ``Valuation/Revenue Test'' 
(incorporating in one section the pre-Pilot Program Valuation/
Revenue with Cash Flow Test and in another section the Pure 
Valuation/Revenue Test), or the ``Affiliated Company Test.'' See 
supra note 11 (approving File No. SR-NYSE-2003-43).
---------------------------------------------------------------------------

    Prior to the Pilot Program, Section 102.01C(I) required that a 
company demonstrate pre-tax earnings of $6.5 million in aggregate for 
the last three fiscal years, with either a minimum of: (a) $2.5 million 
in earnings in the most recent fiscal year and $2 million in each of 
the preceding two years; or (b) $4.5 million in earnings in the most 
recent fiscal year, with positive earnings in each of the preceding two 
years. Pursuant to the Pilot Program, the ``Earnings Test'' requires 
that companies demonstrate pre-tax earnings of $10 million in aggregate 
for the last three fiscal years. It also requires that the company 
demonstrate positive results in all three of the years tested with a 
minimum of $2.0 million in earnings in each of the preceding two years. 
The Exchange believes that these changes strengthen the ``Earnings 
Test'' standard and also simplify it by eliminating the current two-
tiered structure.
    Prior to the Pilot Program, Section 102.01C(II) of the Listed 
Company Manual required that a company demonstrate market 
capitalization of at least $500 million and revenues of at least $100 
million over the most recent 12-month period. Provided that these 
thresholds were met, a company with operating cash flows of at least 
$25 million in aggregate for the last three fiscal years and positive 
amounts in each of the three fiscal years would have qualified for 
listing. Section 102.01C(III) required that an issuer demonstrate (a) 
market capitalization of at least $1 billion and (b) revenues of at 
least $100 million in the most recent fiscal year. Because both of 
these tests are valuation and revenue-based, the Exchange now seeks 
permanent approval to consolidate them into one test with two 
alternative subsections. One of the sections of the current Pilot 
Program, the ``Valuation/Revenue Test,'' incorporates the pre-Pilot 
Program requirements of Section 102.01C(II) as the ``Valuation/Revenue 
with Cash Flow Test'' with no change to the previous thresholds. The 
other section incorporates the pre-Pilot Program requirements of 
Section 102.01C(III) as the ``Pure Valuation/Revenue Test.'' In 
addition, the Exchange is proposing to permanently approve the 
amendments to the thresholds of Section 102.01C(III) that require that 
companies demonstrate (a) market capitalization of at least $750 
million and (b) revenues of at least $75 million during the most recent 
fiscal year. As noted above, the Exchange represents that its staff has 
monitored the modest number of companies over the last two years that 
would have met the Pilot Program's ``Pure Valuation/Revenue Test'' and 
found that those companies performed to a standard that is appropriate 
for inclusion on the NYSE list.
    The Exchange is also proposing permanent approval of corresponding 
restructuring changes to Section 103.01B of the Listed Company Manual, 
which sets out minimum numerical standards for non-U.S. issuers. The 
Exchange is also proposing permanent approval of changes to the numeric 
thresholds of Section 103.01B(III) in accordance with changes to 
Section 102.01C(III).
    In addition, the Exchange seeks permanent approval of its suspended 
Pilot Program restructuring and amending the numerical continued 
listing standards. Section 802.01B of the Listed Company Manual 
currently applies to companies that fall below any of the following 
criteria: (i) Average global market capitalization over a consecutive 
30 trading-day period is less than $50 million and total stockholders' 
equity is less than $50 million; or (ii) average global market 
capitalization over a consecutive 30-trading-day period is less than 
$15 million; or (iii) for companies that qualified for original listing 
under the ``global market capitalization'' standard, (a) average global 
market capitalization over a consecutive 30 trading-day period is less 
than $500 million and total revenues are less than $20 million over the 
last 12 months (unless the resultant entity qualifies as an original 
listing under one of the other original listing standards), or (b) 
average global market capitalization over a consecutive 30 trading-day 
period is less than $100 million.
    The Exchange proposes to amend these thresholds and to specifically 
relate the continued listing standards of Section 802.01B of the Listed 
Company Manual to the original listing standards of Section 102.01C 
used to qualify a company for listing. In addition, the Exchange 
proposes to add a minimum continued listing standard applicable to all 
companies regardless of original listing standard. This standard would 
require that all companies maintain average global market 
capitalization over a consecutive 30 trading-day period of at least 
$25,000,000 or be subject to suspension and delisting (the ``Minimum 
Continued Listing Standard'').\19\
---------------------------------------------------------------------------

    \19\ This requirement is in substance identical to the proposal 
in File No. SR-NYSE-2003-43, but it restates the standard in a 
manner the Exchange believes is more readily understandable. In a 
substantive change from the current provisions and from the 
proposals as published for public comment, companies that fall below 
this minimum threshold would not be afforded the opportunity to 
submit a plan and ``cure'' their noncompliance over a plan period. 
In addition, companies that list under the Affiliated Company Test 
would be subject to the proposed $25,000,000 threshold, regardless 
of the status of their parent company.
---------------------------------------------------------------------------

    Companies that list under the Pilot Program ``Earnings Test'' or 
its predecessor test will be considered to be below compliance if 
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. This level has been 
increased in the proposal to reflect marketplace expectations of those 
companies deemed suitable for continued listing. The current alternate 
threshold for the Earnings Test that resulted in a company being below 
compliance if average global market capitalization over a consecutive 
30 trading-day period is less than $15,000,000 is proposed to be 
eliminated as a result of the proposed $25,000,000 Minimum Continued 
Listing Standard.
    Issuers that list under the Pilot Program's ``Valuation/Revenue 
with Cash Flow Test'' or its predecessor test would be considered to be 
below compliance standards if: (a) Average global market capitalization 
over a consecutive 30 trading-day period is less than $250 million and, 
at the same time, total revenues are less than $20 million over the 
last 12 months (unless the company qualifies as an original listing 
under one of the other original listing standards); \20\ or (b) average 
global market capitalization over a consecutive 30 trading-day period 
is less than $75 million.
---------------------------------------------------------------------------

    \20\ These levels are lower than the existing ``global market 
capitalization'' standard.
---------------------------------------------------------------------------

    Issuers that list under the Pilot Program's ``Pure Valuation/
Revenue Test'' or its predecessor test would be

[[Page 12933]]

considered to be below compliance standards if: (a) Average global 
market capitalization over a consecutive 30 trading-day period is less 
than $375 million and, at the same time, total revenues are less than 
$15 million over the last 12 months (unless the company qualifies as an 
original listing under one of the other original listing standards); or 
(b) average global market capitalization over a consecutive 30 trading-
day period is less than $100 million.
    The Exchange also proposes to clarify that, in circumstances where 
a listed company's parent or affiliated company no longer controls the 
listed company or such listed company's parent or affiliated company 
falls below the continued listing standards applicable to the parent or 
affiliated company, the continued listing standards applicable to the 
Pilot Program's ``Earnings Test'' would apply to companies that 
originally listed under the Affiliated Company Standard. Amendments are 
also proposed to make clear that companies that list under the 
Affiliated Company Standard are subject to the Minimum Continued 
Listing Standard, regardless of the status of the listed company's 
parent. In addition, the Exchange proposes to increase the continued 
listing criteria for closed-end funds, REITs, and limited partnerships 
from $15 million to $25 million with a corresponding increase to the 
notification threshold from $25 million to $35 million.
    Companies that fall below the foregoing minimum standards could be 
permitted a period of time to return to compliance, in accordance with 
the procedures specified in Sections 802.02 and 802.03 of the Listed 
Company Manual. As a general matter, companies must reestablish the 
level of market capitalization (and, if applicable, shareholder's 
equity) specified in the continued listing standard below which the 
company fell. However, with respect to the current requirements of 
Section 802.01B(I) that a company reestablish both its market 
capitalization and its stockholders' equity to the $50 million level, 
footnote (C) to Section 802.01B provides several alternatives. 
Currently, the footnote specifies that, to return to conformity, a 
company must do one of the following: (a) Reestablish both its market 
capitalization and its stockholders' equity to the $50 million level; 
(b) achieve average global market capitalization over a consecutive 30-
trading-day period of at least $100 million; or (c) achieve average 
global market capitalization over a consecutive 30-trading-day period 
of $60 million, with either (x) stockholders' equity of at least $40 
million, or (y) an increase in stockholders' equity of at least $40 
million, since the company was notified by the Exchange that it was 
below continued listing standards. Likewise, with respect to the 
current requirements of Section 802.01B(iii) relating to companies that 
listed under the current global market capitalization standard, 
footnote (D) states that companies must reestablish both market 
capitalization and revenues in conformity with continued listing 
standards.
    In a change from the proposals as originally published for comment, 
the Exchange proposes to eliminate footnotes (C) and (D) to Section 
802.01B of the Listed Company Manual, and, instead pr