Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 2 Thereto Relating to the Listing of PIESSM, 30166-30169 [E5-2604]
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Federal Register / Vol. 70, No. 100 / Wednesday, May 25, 2005 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51703; File No. SR–NASD–
2004–033]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Order Approving a
Proposed Rule Change and
Amendment Nos. 1, 2, and 3 Thereto
Seeking to Modify the Nasdaq Market
Center Execution Service To Add an
Optional Routing Feature
May 18, 2005.
I. Introduction
On February 25, 2004, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’), through its subsidiary, The
Nasdaq Stock Market, Inc. (‘‘Nasdaq’’),
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change seeking to modify the Nasdaq
Market Center execution service to add
an optional routing feature. On July 15,
2004, Nasdaq submitted Amendment
No. 1 to the proposed rule change.3 On
February 23, 2005, Nasdaq submitted
Amendment No. 2 to the proposed rule
change.4 On April 7, 2005, Nasdaq
submitted Amendment No. 3 to the
proposed rule change.5 The proposed
rule change, as amended, was published
for comment in the Federal Register on
April 13, 2005.6 The Commission
received no comments on the proposal.
II. Description
Nasdaq has proposed to modify the
Nasdaq Market Center execution service
to create an optional outbound order
routing feature that will route orders in
Nasdaq-listed securities to other markets
when those markets are displaying
quotes at prices superior to those
displayed on Nasdaq and that are
accessible through the router.7 Under
the proposal, Nasdaq Market Center
Participants will be able to choose on an
order-by-order basis whether they want
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaced and superseded the
originally filed proposed rule change.
4 Amendment No. 2 replaced and superseded the
originally filed proposed rule change, as amended.
5 Amendment No. 3 replaced and superseded the
originally filed proposed rule change, as amended.
6 See Securities Exchange Act Release No. 51504
(April 7, 2005), 70 FR 19538 (April 13, 2005) (SR–
NASD–2004–033).
7 Under the proposal, Nasdaq will access the
quotes of exchanges through its broker-dealer
subsidiary, Brut. See Securities Exchange Act
Release No. 51326 (March 7, 2005), 70 FR 12521
(March 14, 2005).
2 17
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an order routed outside the Nasdaq
Market Center. Such routed orders will
be executed pursuant to the rules and
regulations of the destination market. If
more than one market is at a price level
that is superior to Nasdaq’s displayed
price, the computer algorithm of the
Nasdaq Market Center router will
determine the market, or markets, to
which the order will be sent, based on
several factors including the number of
shares being displayed, response time,
likelihood of undisplayed trading
interest, and the cost of accessing the
market. If an order (or a portion of the
order) remains unfilled after being
routed, it will be returned to Nasdaq
where, if the order is marketable, it will
be returned to the Non-Directed Order
processing queue, where it can be
executed in Nasdaq, or routed again, if
Nasdaq is not at the best price when the
order is next in line in the processing
queue. Once a routed limit order is no
longer marketable, whether it becomes
non-marketable upon return to Nasdaq
or while in the execution queue, it will
be placed on the Nasdaq Market Center
book, if consistent with the order’s time
in force condition. Once on the book,
however, an order will not be routed out
of the Nasdaq Market Center, even if it
becomes marketable against the quotes
of another market.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
amended, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a self-regulatory organization.8 In
particular, the Commission believes that
the proposed rule change, as amended,
is consistent with Section 15A(b)(6) of
the Act,9 which requires, among other
things, that NASD’s rules be designed to
protect investors and the public interest.
The Commission notes that the
proposed routing functionality is an
optional feature and that Nasdaq Market
Center Participants will be able choose
whether or not to participate in routing
on an order-by-order basis. The
Commission also notes that orders
flagged for routing will only in fact
route when a superior price is available
in another market that is accessible
through the router. Therefore, the
Commission believes that the proposed
outbound order routing feature should
help investors to reach better prices
available outside the Nasdaq Market
8 The Commission has considered the proposed
rule’s impact on efficiency, competition and capital
formation. 15 U.S.C. 78c(f).
9 15 U.S.C. 78o–3(b)(6).
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Center and thereby enhance the national
market system.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (File No. SR–
NASD–2004–033), as amended, be, and
hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2605 Filed 5–24–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51706; File No. SR–NYSE–
2005–27]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Notice of
Filing and Order Granting Accelerated
Approval of Proposed Rule Change
and Amendment No. 2 Thereto
Relating to the Listing of PIESSM
Issued by Sierra Pacific Resources
Under Section 703.19
May 18, 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 19,
2005, the New York Stock Exchange,
Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. On May
16, 2005, the Exchange filed
Amendment No. 1 to the proposed rule
change. On May 18, 2005, the Exchange
withdrew Amendment No. 1 and filed
Amendment No. 2.3 The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons
and is approving the proposal on an
accelerated basis.
10 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 2, the Exchange requested
that the proposal, which had initially been
submitted under section 19(b)(3)(A) of the Act, 15
U.S.C. 78s(b)(3)(A), and Rule 19b–4(f)(6)
thereunder, 17 CFR 240.19b–4(f)(6), be approved
pursuant to section 19(b)(2) of the Act, 15 U.S.C.
78s(b)(2) and Rule 19b–4(a) thereunder, 17 CFR
240.19b–4(a).
11 17
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Federal Register / Vol. 70, No. 100 / Wednesday, May 25, 2005 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade Premium Income Equity Securities
(PIESsm ) (the ‘‘New PIES’’), each of
which consists of a purchase contract
issued by Sierra Pacific Resources
(‘‘SPR’’) that requires the holder to
purchase a variable amount of SPR
common stock and a 5% undivided
beneficial ownership interest in a senior
note of SPR with a principal amount of
$1,000 due November 15, 2007 (unless
its maturity is extended as described
below).
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NYSE included statements concerning
the purpose of and basis for the
proposed rule change. The text of these
statements may be examined at the
places specified in Item III 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
Under Section 703.19 of the NYSE
Listed Company Manual (the
‘‘Manual’’), the Exchange may approve
for listing and trading securities not
otherwise covered by the criteria of
sections 1 and 7 of the Manual,
provided the issue is suited for auction
market trading.4 The Exchange proposes
to list and trade, under section 703.19
of the Manual, the New PIES, each of
which consists of (1) a purchase
contract (‘‘Purchase Contract’’) issued
by SPR and (2) a 5% undivided
beneficial ownership interest in a senior
note of SPR with a principal amount of
$1,000 (the ‘‘Note’’, and collectively, the
‘‘Notes’’) due November 15, 2007.5
The New PIES are being offered
pursuant to an exchange offer, the full
terms of which are set out in the
Registration Statement.6 Specifically,
SPR offers to exchange the New PIES
and a cash payment of $0.125 for each
validly tendered and accepted currently
existing Corporate PIES of SPR
(collectively referred to as the ‘‘Old
PIES’’), subject to, among other things,
the condition that the Old PIES remain
listed on the Exchange.
Each Purchase Contract obligates the
holder of a New PIES to purchase from
SPR, no later than November 15, 2005
(the ‘‘Purchase Contract Settlement
Date’’), for a price of $50, the following
number of shares of SPR common stock,
$1.00 par value: (a) If the average of the
closing prices of SPR’s common stock
over the 20-trading day period ending
on the third trading day prior to the
Purchase Contract Settlement Date (the
‘‘Applicable Market Value’’) is equal to
or greater than $16.62, 3.0084 shares; (b)
if the Applicable Market Value is less
than $16.62 but greater than $13.85, a
number of shares determined by
dividing the stated amount of $50 by the
Applicable Market Value; and (c) if the
Applicable Market Value over the same
period is less than or equal to $13.85,
3.6101 shares. SPR will also pay New
PIES holders a quarterly fixed amount
in cash, called a contract adjustment
payment, at a rate of 1.07% per year of
the stated amount of $50 per New PIES,
or $0.535 per year.
The Notes will constitute senior
obligations of SPR. Prior to the Purchase
Contract Settlement Date, the ownership
interest in the Notes will be pledged to
secure the New PIES holders’ obligation
to purchase SPR’s common stock under
30167
the purchase contract. SPR will appoint
one or more remarketing agents to
remarket, the Notes to third party
investors at any time during the period
for early remarketing, which is the
period beginning the day following the
consummation of the exchange offer on
May 18, 2005 and ending on the ninth
business day prior to the Purchase
Contract Settlement Date in one or more
three-day remarketing periods that
consist of three sequential possible
remarketing dates selected by SPR, or
during a final remarketing period,
which is the period beginning on the
fifth business day, and ending on and
including the third business day,
preceding the Purchase Contract
Settlement Date. New PIES holders may
choose to opt out of the remarketing of
the Notes to third party investors to
satisfy their payment obligations on the
Contract Settlement Date. A New PIES
holder who opts out of the remarketing
of the Notes would be required to settle
each Purchase Contract for $50.00 in
cash.
Prior to a successful remarketing of
the Notes, SPR will pay New PIES
holders interest at a rate of 7.93% per
year on the principal amount of the
Note, payable quarterly. In connection
with a successful remarketing of the
Notes, certain terms of the Notes,
including the interest rate (which may
be reset to a rate greater or less than
7.93% per year), the maturity date
(which may be extended to a maximum
term of 11 years from the remarketing
settlement date), the redemption
provisions, the interest payment dates
and the addition of covenants
applicable to the Notes, may be
modified to allow a remarketing of the
Notes.
The material differences between the
Old PIES and New PIES are illustrated
in the table below.
Old PIES
Remarketing Date ...........................
New PIES
The senior notes beneficially
owned by each holder of Old
PIES will be remarketed on August 10, 2005, unless the remarketing agent delays the remarketing to a later date.
The Notes associated with the New PIES may be remarketed
• at any time during the period for early remarketing, which is the period beginning the day following the consummation of the exchange offer and ending on the ninth business day prior to the Purchase Contract Settlement Date in one or more three-day remarketing periods that consist of three sequential possible remarketing
dates selected by SPR, or
• during the final remarketing period, which is the period beginning
on the fifth business day, and ending on and including the third
business day, immediately preceding the Purchase Contract Settlement Date.
4 Securities Exchange Act Release No. 28217 (July
18, 1990), 55 FR 30056 (July 24, 1990).
5 SPR filed a Form S–4 relating to the New PIES
(the ‘‘Registration Statement’’) on April 15, 2005.
The information provided in this Rule 19b–4 filing
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17:52 May 24, 2005
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relating to the New PIES is based entirely on
information included in the Registration Statement.
6 In particular, the Registration Statement
provides a detailed discussion and comparison of
the Old PIES and the New PIES so that holders can
PO 00000
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evaluate whether it is in their best interests to
participate in the exchange offer.
E:\FR\FM\25MYN1.SGM
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Federal Register / Vol. 70, No. 100 / Wednesday, May 25, 2005 / Notices
Old PIES
Terms of the Notes Upon Remarketing.
New PIES
In connection with the remarketing
of the senior notes, the interest
rate on all senior notes, whether
or not a part of Old PIES, will be
reset to an interest rate sufficient to allow a remarketing of
the senior notes. The senior
notes mature November 15,
2007.
In connection with the remarketing of the Notes, the interest rate on
all Notes will be reset and certain terms of the Notes may be modified, including the interest rate, the maturity date (which may be
extended to a maximum term of 11 years from the remarketing settlement date), the redemption provisions, the interest payment
dates and the addition of covenants applicable to Notes. However,
terms set forth in the indenture under which the Notes were issued,
such as ranking and events of default, may not be modified in connection with the remarketing, except pursuant to the terms of the
indenture.
The New PIES represent both an
equity and fixed income investment in
SPR. The equity investment is in the
form of the Purchase Contract, which,
unless earlier terminated, requires a
New PIES holder to purchase a variable
number of shares of SPR common stock
on the Purchase Contract Settlement
Date. The fixed income investment is in
the form of the Notes, which are senior
indebtedness of SPR.
The New PIES will conform to the
issuer listing criteria under section
703.19 of the Manual and be subject to
the relevant continuing listing criteria
under section 801 and 802 of the
Manual.7 The Exchange will impose the
issuer listing requirements of section
703.19 on SPR. Under section 703.19,
among other things, if the issuer is an
NYSE-listed company, it must be a
company in good standing. SPR is an
NYSE-listed company in good standing.
The New PIES will also meet the equity
listing standards found in section
703.19(2) of the Manual, except that the
New PIES will not have the minimum
life of one year required for equity
listings. However, the Exchange does
not believe that the New PIES will raise
any significant new regulatory issues.
Because the New PIES will meet or
exceed the other equity listing
requirements under section 703.19, the
Exchange believes that the New PIES
will have sufficient liquidity and depth
of market, even if listed for a period
shorter than one year. The Exchange
also notes that the underlying SPR
common stock from which the value of
the New PIES is in part derived will
remain outstanding and listed on the
Exchange following maturity of the New
7 Section
801.00 provides, in relevant part, that
when an issuer that has fallen below any of the
continued listing criteria has more than one class
of securities listed, the Exchange will give
consideration to delisting all such classes. Section
802.01D states, in relevant part, that delisting of
specialized securities will be considered when the
number of publicly-held shares is less than 100,000;
the number of holders is less than 100; and
aggregate market value of shares outstanding is less
than $1 million. The Exchange also notes that it
may, at any time, suspend a security if it believes
that continued dealings in the security on the
Exchange are not advisable.
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17:52 May 24, 2005
Jkt 205001
PIES on the Purchase Contract
Settlement Date.
The Exchange’s existing equity
trading rules will apply to trading of the
New PIES. The Exchange will also have
in place certain other requirements to
provide additional investor protection.
First, pursuant to Exchange Rule 405,
the Exchange will impose a duty of due
diligence on its members and member
firms to learn the essential facts relating
to every customer prior to trading the
New PIES.8 Second, the New PIES will
be subject to the equity margin rules of
the Exchange.9 Third, the Exchange
will, prior to trading the New PIES,
distribute a circular to the membership
providing guidance with regard to
member firm compliance
responsibilities (including suitability
recommendations) when handling
transactions in the New PIES and
highlighting the special risks and
characteristics of the New PIES. With
respect to suitability recommendations
and risks, the Exchange will require
members, member organizations, and
employees thereof recommending a
transaction in the New PIES: (1) To
determine that such transaction is
suitable for the customer, and (2) to
have a reasonable basis for believing
that the customer can evaluate the
special characteristics of, and is able to
bear the financial risks of, such
transaction.
The Exchange represents that its
surveillance procedures are adequate to
properly monitor the trading of the New
PIES. Specifically, the Exchange will
rely on its existing surveillance
procedures governing equity, which
have been deemed adequate under the
Exchange Act.
2. Statutory Basis
The Exchange states that the basis for
the proposed rule change is the
8 NYSE Rule 405 requires that every member,
member firm or member corporation use due
diligence to learn the essential facts relative to
every customer and to every order or account
accepted.
9 See NYSE Rule 431.
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requirement under section 6(b)(5) 10 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.
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 Exchange Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2005–27 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–NYSE–2005–27. This file
number should be included on the
subject line if e-mail is used. To help the
10 15
E:\FR\FM\25MYN1.SGM
U.S.C. 78f(b)(5).
25MYN1
Federal Register / Vol. 70, No. 100 / Wednesday, May 25, 2005 / Notices
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 (https://www.sec.gov/
rules/sro/shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the NYSE. 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–2005–27 and should
be submitted on or before June 15, 2005.
IV. Commission Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, the
Commission finds that the proposed
rule change, as amended, is consistent
with the requirements of the Act and the
rules and regulations thereunder,
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b)(5) of the
Act.11 The Commission notes that the
proposal is substantially similar to
approved instruments currently listed
and traded on the NYSE.12 Accordingly,
the Commission finds that the listing
and trading of the Units is consistent
with the Act and will promote just and
equitable principles of trade, foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, and, in general, protect
investors and the public interest
consistent with section 6(b)(5) of the
Act.13
11 15
U.S.C. 78f(b)(5).
12 See, e.g., Securities Exchange Act Release No.
49112 (January 21, 2004), 69 FR 4196 (January 28,
2004) (SR–NYSE–2003–40) (approving the listing
and trading of Premium Equity Participating
Security Units issued by PPL Corporation).
13 15 U.S.C. 78f(b)(5). In approving this rule, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
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Jkt 205001
As described more fully above, the
Exchange proposes to list and trade the
New PIES, which represent both an
equity and fixed income investment in
SPR. The equity investment is in the
form of the Purchase Contract, which,
unless earlier terminated, requires a
New PIES holder to purchase a variable
number of shares of SPR common stock
on the Purchase Contract Settlement
Date. The fixed income investment is in
the form of the Notes, which are senior
indebtedness of SPR. As set forth above,
the New PIES are being offered pursuant
to an exchange offer, the full terms of
which are explained in the Registration
Statement.14 The Registration Statement
contains a comparison of Old PIES and
New PIES so that holders can evaluate
whether it is in their best interests to
participate in the exchange offer.
The Commission notes that the
Exchange’s rules and procedures
address the special concerns attendant
to the trading of certain types of hybrid
securities. In particular, by requiring the
New PIES to comply with the initial
listing standards under section 703.19 of
the Manual and the continued listing
standards under section 801 and 802 of
the Manual, as well as the equity trading
rules, suitability standards, and
disclosure requirements described
above, the Commission believes the
Exchange has addressed adequately the
potential problems that could arise from
the hybrid nature of the PIES. The
Commission also notes that the
Exchange will distribute a circular to its
members regarding member firm
compliance responsibilities when
handling transactions in the New PIES
and highlighting the special risks and
characteristics of the New PIES.
The Exchange’s ’’Other Securities’’
listing standards in section 703.19 of the
Manual provide that issuers satisfying
earnings and net tangible assets
requirements may issue securities such
as the New PIES, provided that the issue
is suited for auction market trading. The
Exchange has represented that the New
PIES will meet all of the relevant listing
standards found in section 703.19 of the
Manual except that they will not have
the minimum life of one year.15 Because
the New PIES are being offered in
connection with an exchange offer, the
Commission believes that the New PIES
supra note 6.
the Exchange has represented the
following in accordance with the listing standards
of section 703.19 of the Manual: (1) SPR is an
NYSE-listed company in good standing; (2) there
will be at least 1 million securities outstanding; (3)
there will be at least 400 holders; and (4) at least
$4 million from which the value of the New PIES
is in part derived will remain outstanding and
listed on the Exchange following maturity of the
New PIES.
PO 00000
14 See
15 Specifically,
Frm 00114
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Sfmt 4703
30169
will have sufficient liquidity and depth
of market, even if listed for a period of
shorter than one year. Further, because
the issuer of the New PIES is SPR (the
Purchase Contract issued by SPR and
the Note issued by SPR and guaranteed
by SPR), the Commission does not
object to the Exchange’s reliance on SPR
to meet the issuer listing requirements
of section 703.19 of the Manual.
The Commission also notes that the
Exchange’s existing equity trading rules
and equity margin rules will apply to
trading of the New PIES, and, as
discussed more fully above, the
Exchange will also have in place certain
other requirements to provide
additional investor protection. The
Commission notes that the Exchange
will rely on its existing surveillance
procedures governing equity, which the
Exchange represents have been deemed
adequate under the Act.
The Commission finds good cause,
consistent with sections 6(b)(5) and
19(b)(2) of the Act,16 to approve the
proposal prior to the thirtieth day after
the date of publication of notice of filing
thereof in the Federal Register.
Accelerating approval of the proposal
will enable the Exchange to
accommodate the listing of the New
PIES on or shortly after May 18, 2005,
the expiration date of the exchange offer
pursuant to which the New PIES are
being offered. The Commission notes
that it has previously approved a
substantially similar proposal involving
another listed company.17 The
Commission believes that permitting the
expeditious listing of New PIES will
serve the interests of investors and the
public interest. Accordingly, the
Commission finds that it is appropriate
to approve the proposed rule change on
an accelerated basis.
V. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act, that the
proposed rule change (SR–NYSE–2005–
27) is approved on an accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.18
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2604 Filed 5–24–05; 8:45 am]
BILLING CODE 8010–01–P
16 15
U.S.C. 78f(b)(5) and 78s(b)(2).
Securities Exchange Act Release No. 49112
(January 21, 2004), 69 FR 4196 (January 28, 2004)
(SR–NYSE–2003–40).
18 17 CFR 200.30–3(a)(12).
17 See
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]]>Agencies
[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Notices]
[Pages 30166-30169]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2604]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51706; File No. SR-NYSE-2005-27]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change and Amendment No. 2 Thereto Relating to the Listing of
PIES\SM\ Issued by Sierra Pacific Resources Under Section 703.19
May 18, 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 19, 2005, the New York Stock Exchange, Inc.
(``NYSE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
On May 16, 2005, the Exchange filed Amendment No. 1 to the proposed
rule change. On May 18, 2005, the Exchange withdrew Amendment No. 1 and
filed Amendment No. 2.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons and is approving the proposal on an accelerated
basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 2, the Exchange requested that the
proposal, which had initially been submitted under section
19(b)(3)(A) of the Act, 15 U.S.C. 78s(b)(3)(A), and Rule 19b-4(f)(6)
thereunder, 17 CFR 240.19b-4(f)(6), be approved pursuant to section
19(b)(2) of the Act, 15 U.S.C. 78s(b)(2) and Rule 19b-4(a)
thereunder, 17 CFR 240.19b-4(a).
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[[Page 30167]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade Premium Income Equity
Securities (PIESsm ) (the ``New PIES''), each of which
consists of a purchase contract issued by Sierra Pacific Resources
(``SPR'') that requires the holder to purchase a variable amount of SPR
common stock and a 5% undivided beneficial ownership interest in a
senior note of SPR with a principal amount of $1,000 due November 15,
2007 (unless its maturity is extended as described below).
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item III 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
Under Section 703.19 of the NYSE Listed Company Manual (the
``Manual''), the Exchange may approve for listing and trading
securities not otherwise covered by the criteria of sections 1 and 7 of
the Manual, provided the issue is suited for auction market trading.\4\
The Exchange proposes to list and trade, under section 703.19 of the
Manual, the New PIES, each of which consists of (1) a purchase contract
(``Purchase Contract'') issued by SPR and (2) a 5% undivided beneficial
ownership interest in a senior note of SPR with a principal amount of
$1,000 (the ``Note'', and collectively, the ``Notes'') due November 15,
2007.\5\
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\4\ Securities Exchange Act Release No. 28217 (July 18, 1990),
55 FR 30056 (July 24, 1990).
\5\ SPR filed a Form S-4 relating to the New PIES (the
``Registration Statement'') on April 15, 2005. The information
provided in this Rule 19b-4 filing relating to the New PIES is based
entirely on information included in the Registration Statement.
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The New PIES are being offered pursuant to an exchange offer, the
full terms of which are set out in the Registration Statement.\6\
Specifically, SPR offers to exchange the New PIES and a cash payment of
$0.125 for each validly tendered and accepted currently existing
Corporate PIES of SPR (collectively referred to as the ``Old PIES''),
subject to, among other things, the condition that the Old PIES remain
listed on the Exchange.
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\6\ In particular, the Registration Statement provides a
detailed discussion and comparison of the Old PIES and the New PIES
so that holders can evaluate whether it is in their best interests
to participate in the exchange offer.
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Each Purchase Contract obligates the holder of a New PIES to
purchase from SPR, no later than November 15, 2005 (the ``Purchase
Contract Settlement Date''), for a price of $50, the following number
of shares of SPR common stock, $1.00 par value: (a) If the average of
the closing prices of SPR's common stock over the 20-trading day period
ending on the third trading day prior to the Purchase Contract
Settlement Date (the ``Applicable Market Value'') is equal to or
greater than $16.62, 3.0084 shares; (b) if the Applicable Market Value
is less than $16.62 but greater than $13.85, a number of shares
determined by dividing the stated amount of $50 by the Applicable
Market Value; and (c) if the Applicable Market Value over the same
period is less than or equal to $13.85, 3.6101 shares. SPR will also
pay New PIES holders a quarterly fixed amount in cash, called a
contract adjustment payment, at a rate of 1.07% per year of the stated
amount of $50 per New PIES, or $0.535 per year.
The Notes will constitute senior obligations of SPR. Prior to the
Purchase Contract Settlement Date, the ownership interest in the Notes
will be pledged to secure the New PIES holders' obligation to purchase
SPR's common stock under the purchase contract. SPR will appoint one or
more remarketing agents to remarket, the Notes to third party investors
at any time during the period for early remarketing, which is the
period beginning the day following the consummation of the exchange
offer on May 18, 2005 and ending on the ninth business day prior to the
Purchase Contract Settlement Date in one or more three-day remarketing
periods that consist of three sequential possible remarketing dates
selected by SPR, or during a final remarketing period, which is the
period beginning on the fifth business day, and ending on and including
the third business day, preceding the Purchase Contract Settlement
Date. New PIES holders may choose to opt out of the remarketing of the
Notes to third party investors to satisfy their payment obligations on
the Contract Settlement Date. A New PIES holder who opts out of the
remarketing of the Notes would be required to settle each Purchase
Contract for $50.00 in cash.
Prior to a successful remarketing of the Notes, SPR will pay New
PIES holders interest at a rate of 7.93% per year on the principal
amount of the Note, payable quarterly. In connection with a successful
remarketing of the Notes, certain terms of the Notes, including the
interest rate (which may be reset to a rate greater or less than 7.93%
per year), the maturity date (which may be extended to a maximum term
of 11 years from the remarketing settlement date), the redemption
provisions, the interest payment dates and the addition of covenants
applicable to the Notes, may be modified to allow a remarketing of the
Notes.
The material differences between the Old PIES and New PIES are
illustrated in the table below.
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Old PIES New PIES
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Remarketing Date.............. The senior notes The Notes associated
beneficially with the New PIES
owned by each may be remarketed
holder of Old at any time
PIES will be during the period
remarketed on for early
August 10, 2005, remarketing, which
unless the is the period
remarketing beginning the day
agent delays the following the
remarketing to a consummation of the
later date. exchange offer and
ending on the ninth
business day prior
to the Purchase
Contract Settlement
Date in one or more
three-day
remarketing periods
that consist of
three sequential
possible remarketing
dates selected by
SPR, or
during the
final remarketing
period, which is the
period beginning on
the fifth business
day, and ending on
and including the
third business day,
immediately
preceding the
Purchase Contract
Settlement Date.
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[[Page 30168]]
Terms of the Notes Upon In connection In connection with
Remarketing. with the the remarketing of
remarketing of the Notes, the
the senior interest rate on all
notes, the Notes will be reset
interest rate on and certain terms of
all senior the Notes may be
notes, whether modified, including
or not a part of the interest rate,
Old PIES, will the maturity date
be reset to an (which may be
interest rate extended to a
sufficient to maximum term of 11
allow a years from the
remarketing of remarketing
the senior settlement date),
notes. The the redemption
senior notes provisions, the
mature November interest payment
15, 2007. dates and the
addition of
covenants applicable
to Notes. However,
terms set forth in
the indenture under
which the Notes were
issued, such as
ranking and events
of default, may not
be modified in
connection with the
remarketing, except
pursuant to the
terms of the
indenture.
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The New PIES represent both an equity and fixed income investment
in SPR. The equity investment is in the form of the Purchase Contract,
which, unless earlier terminated, requires a New PIES holder to
purchase a variable number of shares of SPR common stock on the
Purchase Contract Settlement Date. The fixed income investment is in
the form of the Notes, which are senior indebtedness of SPR.
The New PIES will conform to the issuer listing criteria under
section 703.19 of the Manual and be subject to the relevant continuing
listing criteria under section 801 and 802 of the Manual.\7\ The
Exchange will impose the issuer listing requirements of section 703.19
on SPR. Under section 703.19, among other things, if the issuer is an
NYSE-listed company, it must be a company in good standing. SPR is an
NYSE-listed company in good standing. The New PIES will also meet the
equity listing standards found in section 703.19(2) of the Manual,
except that the New PIES will not have the minimum life of one year
required for equity listings. However, the Exchange does not believe
that the New PIES will raise any significant new regulatory issues.
Because the New PIES will meet or exceed the other equity listing
requirements under section 703.19, the Exchange believes that the New
PIES will have sufficient liquidity and depth of market, even if listed
for a period shorter than one year. The Exchange also notes that the
underlying SPR common stock from which the value of the New PIES is in
part derived will remain outstanding and listed on the Exchange
following maturity of the New PIES on the Purchase Contract Settlement
Date.
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\7\ Section 801.00 provides, in relevant part, that when an
issuer that has fallen below any of the continued listing criteria
has more than one class of securities listed, the Exchange will give
consideration to delisting all such classes. Section 802.01D states,
in relevant part, that delisting of specialized securities will be
considered when the number of publicly-held shares is less than
100,000; the number of holders is less than 100; and aggregate
market value of shares outstanding is less than $1 million. The
Exchange also notes that it may, at any time, suspend a security if
it believes that continued dealings in the security on the Exchange
are not advisable.
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The Exchange's existing equity trading rules will apply to trading
of the New PIES. The Exchange will also have in place certain other
requirements to provide additional investor protection. First, pursuant
to Exchange Rule 405, the Exchange will impose a duty of due diligence
on its members and member firms to learn the essential facts relating
to every customer prior to trading the New PIES.\8\ Second, the New
PIES will be subject to the equity margin rules of the Exchange.\9\
Third, the Exchange will, prior to trading the New PIES, distribute a
circular to the membership providing guidance with regard to member
firm compliance responsibilities (including suitability
recommendations) when handling transactions in the New PIES and
highlighting the special risks and characteristics of the New PIES.
With respect to suitability recommendations and risks, the Exchange
will require members, member organizations, and employees thereof
recommending a transaction in the New PIES: (1) To determine that such
transaction is suitable for the customer, and (2) to have a reasonable
basis for believing that the customer can evaluate the special
characteristics of, and is able to bear the financial risks of, such
transaction.
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\8\ NYSE Rule 405 requires that every member, member firm or
member corporation use due diligence to learn the essential facts
relative to every customer and to every order or account accepted.
\9\ See NYSE Rule 431.
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The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the New PIES. Specifically,
the Exchange will rely on its existing surveillance procedures
governing equity, which have been deemed adequate under the Exchange
Act.
2. Statutory Basis
The Exchange states that the basis for the proposed rule change is
the requirement under section 6(b)(5) \10\ 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.
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\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2005-27 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-NYSE-2005-27. This file
number should be included on the subject line if e-mail is used. To
help the
[[Page 30169]]
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 (https://www.sec.gov/rules/sro/shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of such filing also will be
available for inspection and copying at the principal office of the
NYSE. 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-2005-27 and should be submitted on or before June 15, 2005.
IV. Commission Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder, applicable to a national
securities exchange, and, in particular, with the requirements of
Section 6(b)(5) of the Act.\11\ The Commission notes that the proposal
is substantially similar to approved instruments currently listed and
traded on the NYSE.\12\ Accordingly, the Commission finds that the
listing and trading of the Units is consistent with the Act and will
promote just and equitable principles of trade, foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, and, in general, protect investors and the public
interest consistent with section 6(b)(5) of the Act.\13\
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\11\ 15 U.S.C. 78f(b)(5).
\12\ See, e.g., Securities Exchange Act Release No. 49112
(January 21, 2004), 69 FR 4196 (January 28, 2004) (SR-NYSE-2003-40)
(approving the listing and trading of Premium Equity Participating
Security Units issued by PPL Corporation).
\13\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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As described more fully above, the Exchange proposes to list and
trade the New PIES, which represent both an equity and fixed income
investment in SPR. The equity investment is in the form of the Purchase
Contract, which, unless earlier terminated, requires a New PIES holder
to purchase a variable number of shares of SPR common stock on the
Purchase Contract Settlement Date. The fixed income investment is in
the form of the Notes, which are senior indebtedness of SPR. As set
forth above, the New PIES are being offered pursuant to an exchange
offer, the full terms of which are explained in the Registration
Statement.\14\ The Registration Statement contains a comparison of Old
PIES and New PIES so that holders can evaluate whether it is in their
best interests to participate in the exchange offer.
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\14\ See supra note 6.
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The Commission notes that the Exchange's rules and procedures
address the special concerns attendant to the trading of certain types
of hybrid securities. In particular, by requiring the New PIES to
comply with the initial listing standards under section 703.19 of the
Manual and the continued listing standards under section 801 and 802 of
the Manual, as well as the equity trading rules, suitability standards,
and disclosure requirements described above, the Commission believes
the Exchange has addressed adequately the potential problems that could
arise from the hybrid nature of the PIES. The Commission also notes
that the Exchange will distribute a circular to its members regarding
member firm compliance responsibilities when handling transactions in
the New PIES and highlighting the special risks and characteristics of
the New PIES.
The Exchange's ''Other Securities'' listing standards in section
703.19 of the Manual provide that issuers satisfying earnings and net
tangible assets requirements may issue securities such as the New PIES,
provided that the issue is suited for auction market trading. The
Exchange has represented that the New PIES will meet all of the
relevant listing standards found in section 703.19 of the Manual except
that they will not have the minimum life of one year.\15\ Because the
New PIES are being offered in connection with an exchange offer, the
Commission believes that the New PIES will have sufficient liquidity
and depth of market, even if listed for a period of shorter than one
year. Further, because the issuer of the New PIES is SPR (the Purchase
Contract issued by SPR and the Note issued by SPR and guaranteed by
SPR), the Commission does not object to the Exchange's reliance on SPR
to meet the issuer listing requirements of section 703.19 of the
Manual.
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\15\ Specifically, the Exchange has represented the following in
accordance with the listing standards of section 703.19 of the
Manual: (1) SPR is an NYSE-listed company in good standing; (2)
there will be at least 1 million securities outstanding; (3) there
will be at least 400 holders; and (4) at least $4 million from which
the value of the New PIES is in part derived will remain outstanding
and listed on the Exchange following maturity of the New PIES.
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The Commission also notes that the Exchange's existing equity
trading rules and equity margin rules will apply to trading of the New
PIES, and, as discussed more fully above, the Exchange will also have
in place certain other requirements to provide additional investor
protection. The Commission notes that the Exchange will rely on its
existing surveillance procedures governing equity, which the Exchange
represents have been deemed adequate under the Act.
The Commission finds good cause, consistent with sections 6(b)(5)
and 19(b)(2) of the Act,\16\ to approve the proposal prior to the
thirtieth day after the date of publication of notice of filing thereof
in the Federal Register. Accelerating approval of the proposal will
enable the Exchange to accommodate the listing of the New PIES on or
shortly after May 18, 2005, the expiration date of the exchange offer
pursuant to which the New PIES are being offered. The Commission notes
that it has previously approved a substantially similar proposal
involving another listed company.\17\ The Commission believes that
permitting the expeditious listing of New PIES will serve the interests
of investors and the public interest. Accordingly, the Commission finds
that it is appropriate to approve the proposed rule change on an
accelerated basis.
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\16\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
\17\ See Securities Exchange Act Release No. 49112 (January 21,
2004), 69 FR 4196 (January 28, 2004) (SR-NYSE-2003-40).
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V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the Act,
that the proposed rule change (SR-NYSE-2005-27) is approved on an
accelerated basis.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2604 Filed 5-24-05; 8:45 am]
BILLING CODE 8010-01-P
