Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to an Exemption from Certain of the Exchange's Shareholder Approval Requirements for Limited Partnerships, 12240-12242 [E7-4692]

Download as PDF 12240 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices [Release No. 34–55426; File No. SR–ISE– 2007–01] It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–ISE–2007–01) be, and it hereby is, approved. Self-Regulatory Organizations; International Securities Exchange, LLC; Order Approving a Proposed Rule Change Relating to Rule 2113 (Long and Short Sales) For the Commission, by the Division of Market Regulation, pursuant to delegated authority.6 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–4691 Filed 3–14–07; 8:45 am] March 8, 2007. BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION On January 5, 2007, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change relating to NASD Rule 2113 (Long and Short Sales). The proposed rule change was published for comment in the Federal Register on February 5, 2007.3 The Commission received no comments regarding this proposal. This order approves the rule change. rmajette on PROD1PC67 with NOTICES Discussion and Commission Findings The Exchange proposes to amend ISE Rule 2113 (Long and Short Sales) to conform its language to Rule 10a– 1(a)(1)(i) promulgated under the Act. Specifically, Rule 2113 (Long and Short Sales) currently provides that the Exchange will not execute a short sale order below the price at which the last sale was effected on the Exchange. The Exchange proposes to amend ISE Rule 2113 to conform its language to Rule 10a–1(a)(1)(i) promulgated under the Act, whereby the Exchange will not execute a short sale order below the price at which the last sale was reported pursuant to an effective transaction reporting plan, as defined in Rule 242.600 under the Act. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular Section 6(b)(5) of the Act 4 which requires that the rules of an exchange be designed to promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest.5 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 55191 (January 29, 2007), 72 FR 5305 (February 5, 2007). 4 15 U.S.C. 78f(b)(5). 5 In approving this proposed rule change, the Commission notes that it has considered the VerDate Aug<31>2005 14:20 Mar 14, 2007 Jkt 211001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55423; File No. SR– NYSEArca–2007–21] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to an Exemption from Certain of the Exchange’s Shareholder Approval Requirements for Limited Partnerships March 8, 2007. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on February 23, 2007, NYSE Arca, Inc. (the ‘‘Exchange’’), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by Exchange. The Exchange has designated this proposal as non-controversial under Section 19(b)(3)(A)(iii) of the Act 4 and Rule 19b–4(f)(6) thereunder,5 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca is proposing to exempt limited partnerships (‘‘LPs’’) from the obligations to obtain shareholder approval for the issuance of common stock and related securities in the circumstances set forth in subsections (8) through (11) of NYSE Arca Equities proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 6 17 CFR 200.30–3(a)(12). 1 15 U.S.C.78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b–4(f)(6). PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 Rule 5.3(d). The text of this proposed rule change is available on the Exchange’s Web site (https:// www.nyse.com/ RegulationFrameset.html? displayPage=https://www.nysearca.com/ nysearca_reg/prf.asp), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule changes and discussed any comments it received regarding the proposal. 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 NYSE Arca is proposing to exempt limited partnerships (‘‘LPs’’) from the obligations to obtain shareholder approval for the issuance of common stock and related securities in the circumstances set forth in subsections (8) through (11) of NYSE Arca Equities Rule 5.3(d).6 The proposed amendment does not affect investors in any currently listed company, as there are currently no LPs listed on the Exchange. Subsections (8) through (11) of NYSE Arca Equities Rule 5.3(d) require listed issuers to obtain shareholder approval prior to the issuance of designated securities in the following situations: • Issuances that will result in a change of control of the issuer. • In connection with the acquisition of the stock or assets of another company, shareholder approval is needed in the following circumstances: • If any director, officer, or substantial shareholder of the listed company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction (or series of related 6 This filing does not in any way limit the applicability of the provisions of NYSE Arca Equities Rule 5.2(i) to limited partnership rollups (as defined in Section 14(h) of the Securities Exchange Act of 1934) or the continued applicability of any other rule that is currently applicable to LPs. E:\FR\FM\15MRN1.SGM 15MRN1 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices rmajette on PROD1PC67 with NOTICES transactions) and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more; or • Where the present or potential issuance of common stock, or securities convertible into or exercisable for common stock (other than in a public offering for cash), could result in an increase in outstanding common shares of 20% or more or could represent 20% or more of the voting power outstanding before the issuance of such stock or securities. • In connection with a transaction other than a public offering involving: • The sale or issuance by the company of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value, which together with sales by officers, directors or principal shareholders of the company equals 20% or more of presently outstanding common stock, or 20% or more of the presently outstanding voting power; or • The sale or issuance by the company of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of presently outstanding stock or voting power for less than the greater of book or market value of the stock. The policy underlying these requirements is that shareholders should have the right to vote on any issuance of common stock that is materially dilutive of either their voting or economic interest in the company. Nasdaq has essentially identical shareholder approval requirements to those of the NYSE Arca. However, Nasdaq exempts LPs from those requirements,7 which has placed NYSE Arca at a significant disadvantage in competing with Nasdaq for initial public offerings and transfers of LPs. To be treated as a partnership for federal tax purposes, an LP must ensure that 90% of its income is derived from 7 See Nasdaq Marketplace Rule 4360 (‘‘Qualitative Listing Requirements for Nasdaq Issuers That Are Limited Partnerships’’), which does not include the shareholder approval requirements found in Nasdaq Marketplace Rule 4350 (‘‘Qualitative Listing Requirements for Nasdaq Issuers That Are Not Limited Partnerships’’). See also Exchange Act Release No. 30811 (June 15, 1992); 57 FR 28542 (June 25, 1992) (SR–NASD–91–58) (approving the NASD’s adoption of non-quantitative listing standards for partnerships, which did not include shareholder approval requirements). See also Exchange Act Release No. 34533 (August 15, 1994); 59 FR 43147 (August 22, 1994) (SR–NASD–93–3) (approving the NASD’s adoption of the predecessor rule to Rule 4360, which also did not include shareholder approval requirements for listed limited partnerships). VerDate Aug<31>2005 14:20 Mar 14, 2007 Jkt 211001 ‘‘qualified sources,’’ which generally refers only to income derived from natural resource-related activities. Most listed LPs are engaged in energy-related businesses. The typical business model of LPs in the energy industry is to use their capital to acquire assets (e.g., pipelines) that produce predictable revenue streams and to commit in their partnership agreements to distribute most of their profits to the LP’s unit holders. These LPs acquire assets frequently on an opportunistic basis and pay for them by issuing additional LP units. The ability of an LP listed on Nasdaq to issue additional LP units without the expense and uncertainty of obtaining shareholder approval provides Nasdaq with a significant advantage over NYSE Arca in attracting and retaining listings of LPs. The Exchange believes that an analysis of the policies regarding voting and economic dilution underpinning its shareholder approval requirements demonstrates that it is appropriate to exempt LPs from their application. Listed LPs generally provide very limited voting rights to their unit holders. Typically, control of the LP resides with the general partner (‘‘GP’’) and the LP’s board is that of the GP. The owner of the GP appoints the board and the common unit holders of the LP have no voting rights with respect to the election of directors. LP partnership agreements generally provide that LP unit holders can vote only on a merger or dissolution of the LP or on any amendment to the partnership agreement that is adverse to their interests. As such, investors who buy LP units have no expectation that they will be able to vote and, therefore, the policy that shareholders should be able to vote on any stock issuances that are materially dilutive of their voting power is of less relevance to LPs than to regular corporations. Furthermore, because LP unit holders generally do not have the right to elect directors, most LPs do not hold annual meetings. Therefore, it would not be possible for an LP to arrange for shareholder approval to be obtained in conjunction with an annual meeting, as would be possible for a regular company. Rather, an LP would have to call a special meeting every time it needed approval of an issuance pursuant to the shareholder approval rules. The Exchange also believes that the economic dilution concerns underpinning the shareholder approval rules are also less relevant in the case of LPs. Listed LPs typically are required under their partnership agreements to distribute almost all of their earnings to their unit holders and specify a PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 12241 minimum quarterly distribution that the LP is required to make. As such, LPs will only invest in new assets if they know that those assets will be sufficiently accretive to earnings to pay the minimum quarterly distribution required for the additional units that are sold to raise the capital to pay for those assets. A failure to pay the minimum quarterly distribution, or a reduction in the actual distribution level historically paid, would likely, in the Exchange’s view, have a negative effect on the trading price of a listed LP, imposing a market discipline on management to ensure that any additional issuances will not be economically dilutive. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) 8 of the Act in general, and furthers the objectives of Section 6(b)(5) 9 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system. The Exchange believes that the proposed rule change will increase competition among listing markets and will remove a competitive disadvantage the Exchange currently has vis a vis Nasdaq and is therefore designed to perfect the mechanism of a free and open market. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) become operative for 30 days after the date of 8 15 99 U.S.C. 78f(b). 15 U.S.C. 78f(b)(5). E:\FR\FM\15MRN1.SGM 15MRN1 12242 Federal Register / Vol. 72, No. 50 / Thursday, March 15, 2007 / Notices the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b–4(f)(6) thereunder.11 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. A proposed rule change normally may not become operative prior to 30 days after the date of filing.12 However, Rule 19b–4(f)(iii) 13 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiver of the 30 day operative delay is consistent with the protection of investors and the public interest.14 The Commission notes that because there are no LPs presently listed on the NYSE Arca, there are no shareholders retroactively or currently impacted by the proposed rule change. Further, the proposed rule change will eliminate the competitive disadvantage to the NYSE Arca resulting from the present disparity in shareholder approval requirements between the NYSE Arca’s and Nasdaq’s treatment of LPs, while still retaining for NYSE Arca-listed LPs the provisions of the Exchange’s rules relating to shareholder approval of equity compensation plans.15 10 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 12 17 CFR 240.19b–4(f)(6)(iii). Rule 19b–4(f)(6)(iii) requires hat a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange satisfied this requirement. 13 17 CFR 240.19b–4(f)(6)(iii). 14 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 15 See NYSE Arca Rule 5.3(d)(1)–(7) (setting forth the Exchange’s rules with respect to shareholder approval of equity compensation plans). The proposed rule change would only eliminate the application of subparagraphs (8) through (11) to Rule 5.3(d) to limited partnerships. The Commission believes that it is desirable for the Exchange to have retained the requirements pertaining to shareholder approval of equity compensation plans for NYSEArca–listed limited partnerships. rmajette on PROD1PC67 with NOTICES 11 17 VerDate Aug<31>2005 14:20 Mar 14, 2007 Jkt 211001 IV. 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 e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–21 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to file Number SR–NYSEArca–2007–21. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (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 filings will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File number SR–NYSEArca–2007–21 and should be submitted by April 5, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.16 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–4692 Filed 3–14–07; 8:45 am] BILLING CODE 8010–01–P 16 17 PO 00000 CFR 200.30–3(a)(12). Frm 00079 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55424; File No. SR–Phlx– 2006–63] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Amendment No. 3 to the Proposed Rule Change, and Order Granting Accelerated Approval of Proposed Rule Change as Amended, Relating to a Philadelphia Board of Trade Enterprise License Fee for Dissemination of Certain Market Data March 8, 2007. I. Introduction On September 28, 2006, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 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 proposal to add an Enterprise License Fee of $10,000 per year or $850 per month that would be assessed by the Exchange’s wholly owned subsidiary, the Philadelphia Board of Trade (‘‘PBOT’’), on eligible market data vendors or subvendors (collectively ‘‘Vendors’’) for certain index values that subscribers receive over PBOT’s Market Data Distribution Network (‘‘MDDN’’). The Phlx filed Amendment No. 1 to the proposed rule change on November 1, 2006 and filed Amendment No. 2 on December 20, 2006. The proposed rule change, as amended, was published for comment in the Federal Register on December 28, 2006.3 The Phlx filed Amendment No. 3 to the proposed rule change on March 2, 2007.4 The Commission received no comments regarding the proposal. The Commission hereby issues notice of the filing of Amendment No. 3 and simultaneously grants accelerated approval to the proposed rule change as amended. II. Description of the Proposal The Phlx proposes to add an Enterprise License Fee for eligible Vendors of market data disseminated 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 54978 (December 20, 2006), 71 FR 78254. 4 In Amendment No. 3, Phlx clarified (1) in its fee schedule that a retail broker dealer is conducting a material portion of its business via one or more Internet Web sites if at least 20% of the brokerdealer’s business were conducted via the Internet; and (2) that the current and closing index values underlying all of Phlx’s proprietary indexes are being disseminated through PBOT. 2 17 E:\FR\FM\15MRN1.SGM 15MRN1

Agencies

[Federal Register Volume 72, Number 50 (Thursday, March 15, 2007)]
[Notices]
[Pages 12240-12242]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-4692]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55423; File No. SR-NYSEArca-2007-21]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to an 
Exemption from Certain of the Exchange's Shareholder Approval 
Requirements for Limited Partnerships

March 8, 2007.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on February 23, 2007, NYSE Arca, Inc. (the ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by Exchange. The 
Exchange has designated this proposal as non-controversial under 
Section 19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6) 
thereunder,\5\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    NYSE Arca is proposing to exempt limited partnerships (``LPs'') 
from the obligations to obtain shareholder approval for the issuance of 
common stock and related securities in the circumstances set forth in 
subsections (8) through (11) of NYSE Arca Equities Rule 5.3(d). The 
text of this proposed rule change is available on the Exchange's Web 
site (https://www.nyse.com/RegulationFrameset.html? displayPage=https://
www.nysearca.com/nysearca_reg/prf.asp), at the Exchange's Office of 
the Secretary, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule changes and 
discussed any comments it received regarding the proposal. 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
    NYSE Arca is proposing to exempt limited partnerships (``LPs'') 
from the obligations to obtain shareholder approval for the issuance of 
common stock and related securities in the circumstances set forth in 
subsections (8) through (11) of NYSE Arca Equities Rule 5.3(d).\6\ The 
proposed amendment does not affect investors in any currently listed 
company, as there are currently no LPs listed on the Exchange.
---------------------------------------------------------------------------

    \6\ This filing does not in any way limit the applicability of 
the provisions of NYSE Arca Equities Rule 5.2(i) to limited 
partnership rollups (as defined in Section 14(h) of the Securities 
Exchange Act of 1934) or the continued applicability of any other 
rule that is currently applicable to LPs.
---------------------------------------------------------------------------

    Subsections (8) through (11) of NYSE Arca Equities Rule 5.3(d) 
require listed issuers to obtain shareholder approval prior to the 
issuance of designated securities in the following situations:
     Issuances that will result in a change of control of the 
issuer.
     In connection with the acquisition of the stock or assets 
of another company, shareholder approval is needed in the following 
circumstances:
     If any director, officer, or substantial shareholder of 
the listed company has a 5% or greater interest (or such persons 
collectively have a 10% or greater interest), directly or indirectly, 
in the company or assets to be acquired or in the consideration to be 
paid in the transaction (or series of related

[[Page 12241]]

transactions) and the present or potential issuance of common stock, or 
securities convertible into or exercisable for common stock, could 
result in an increase in outstanding common shares or voting power of 
5% or more; or
     Where the present or potential issuance of common stock, 
or securities convertible into or exercisable for common stock (other 
than in a public offering for cash), could result in an increase in 
outstanding common shares of 20% or more or could represent 20% or more 
of the voting power outstanding before the issuance of such stock or 
securities.
     In connection with a transaction other than a public 
offering involving:
     The sale or issuance by the company of common stock (or 
securities convertible into or exercisable for common stock) at a price 
less than the greater of book or market value, which together with 
sales by officers, directors or principal shareholders of the company 
equals 20% or more of presently outstanding common stock, or 20% or 
more of the presently outstanding voting power; or
     The sale or issuance by the company of common stock (or 
securities convertible into or exercisable for common stock) equal to 
20% or more of presently outstanding stock or voting power for less 
than the greater of book or market value of the stock.
    The policy underlying these requirements is that shareholders 
should have the right to vote on any issuance of common stock that is 
materially dilutive of either their voting or economic interest in the 
company. Nasdaq has essentially identical shareholder approval 
requirements to those of the NYSE Arca. However, Nasdaq exempts LPs 
from those requirements,\7\ which has placed NYSE Arca at a significant 
disadvantage in competing with Nasdaq for initial public offerings and 
transfers of LPs. To be treated as a partnership for federal tax 
purposes, an LP must ensure that 90% of its income is derived from 
``qualified sources,'' which generally refers only to income derived 
from natural resource-related activities. Most listed LPs are engaged 
in energy-related businesses. The typical business model of LPs in the 
energy industry is to use their capital to acquire assets (e.g., 
pipelines) that produce predictable revenue streams and to commit in 
their partnership agreements to distribute most of their profits to the 
LP's unit holders. These LPs acquire assets frequently on an 
opportunistic basis and pay for them by issuing additional LP units. 
The ability of an LP listed on Nasdaq to issue additional LP units 
without the expense and uncertainty of obtaining shareholder approval 
provides Nasdaq with a significant advantage over NYSE Arca in 
attracting and retaining listings of LPs.
---------------------------------------------------------------------------

    \7\ See Nasdaq Marketplace Rule 4360 (``Qualitative Listing 
Requirements for Nasdaq Issuers That Are Limited Partnerships''), 
which does not include the shareholder approval requirements found 
in Nasdaq Marketplace Rule 4350 (``Qualitative Listing Requirements 
for Nasdaq Issuers That Are Not Limited Partnerships''). See also 
Exchange Act Release No. 30811 (June 15, 1992); 57 FR 28542 (June 
25, 1992) (SR-NASD-91-58) (approving the NASD's adoption of non-
quantitative listing standards for partnerships, which did not 
include shareholder approval requirements). See also Exchange Act 
Release No. 34533 (August 15, 1994); 59 FR 43147 (August 22, 1994) 
(SR-NASD-93-3) (approving the NASD's adoption of the predecessor 
rule to Rule 4360, which also did not include shareholder approval 
requirements for listed limited partnerships).
---------------------------------------------------------------------------

    The Exchange believes that an analysis of the policies regarding 
voting and economic dilution underpinning its shareholder approval 
requirements demonstrates that it is appropriate to exempt LPs from 
their application. Listed LPs generally provide very limited voting 
rights to their unit holders. Typically, control of the LP resides with 
the general partner (``GP'') and the LP's board is that of the GP. The 
owner of the GP appoints the board and the common unit holders of the 
LP have no voting rights with respect to the election of directors. LP 
partnership agreements generally provide that LP unit holders can vote 
only on a merger or dissolution of the LP or on any amendment to the 
partnership agreement that is adverse to their interests. As such, 
investors who buy LP units have no expectation that they will be able 
to vote and, therefore, the policy that shareholders should be able to 
vote on any stock issuances that are materially dilutive of their 
voting power is of less relevance to LPs than to regular corporations. 
Furthermore, because LP unit holders generally do not have the right to 
elect directors, most LPs do not hold annual meetings. Therefore, it 
would not be possible for an LP to arrange for shareholder approval to 
be obtained in conjunction with an annual meeting, as would be possible 
for a regular company. Rather, an LP would have to call a special 
meeting every time it needed approval of an issuance pursuant to the 
shareholder approval rules.
    The Exchange also believes that the economic dilution concerns 
underpinning the shareholder approval rules are also less relevant in 
the case of LPs. Listed LPs typically are required under their 
partnership agreements to distribute almost all of their earnings to 
their unit holders and specify a minimum quarterly distribution that 
the LP is required to make. As such, LPs will only invest in new assets 
if they know that those assets will be sufficiently accretive to 
earnings to pay the minimum quarterly distribution required for the 
additional units that are sold to raise the capital to pay for those 
assets. A failure to pay the minimum quarterly distribution, or a 
reduction in the actual distribution level historically paid, would 
likely, in the Exchange's view, have a negative effect on the trading 
price of a listed LP, imposing a market discipline on management to 
ensure that any additional issuances will not be economically dilutive.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Act in general, and furthers the objectives of Section 6(b)(5) \9\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system. The Exchange believes that the 
proposed rule change will increase competition among listing markets 
and will remove a competitive disadvantage the Exchange currently has 
vis a vis Nasdaq and is therefore designed to perfect the mechanism of 
a free and open market.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 9 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act.

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

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

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

    Because the proposed rule change does not: (1) Significantly affect 
the protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
after the date of

[[Page 12242]]

the filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
    A proposed rule change normally may not become operative prior to 
30 days after the date of filing.\12\ However, Rule 19b-4(f)(iii) \13\ 
permits the Commission to designate a shorter time if such action is 
consistent with the protection of investors and the public interest. 
The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the 30 day 
operative delay is consistent with the protection of investors and the 
public interest.\14\ The Commission notes that because there are no LPs 
presently listed on the NYSE Arca, there are no shareholders 
retroactively or currently impacted by the proposed rule change. 
Further, the proposed rule change will eliminate the competitive 
disadvantage to the NYSE Arca resulting from the present disparity in 
shareholder approval requirements between the NYSE Arca's and Nasdaq's 
treatment of LPs, while still retaining for NYSE Arca-listed LPs the 
provisions of the Exchange's rules relating to shareholder approval of 
equity compensation plans.\15\
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    \12\ 17 CFR 240.19b-4(f)(6)(iii). Rule 19b-4(f)(6)(iii) requires 
hat a self-regulatory organization submit to the Commission written 
notice of its intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange satisfied this requirement.
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \15\ See NYSE Arca Rule 5.3(d)(1)-(7) (setting forth the 
Exchange's rules with respect to shareholder approval of equity 
compensation plans). The proposed rule change would only eliminate 
the application of subparagraphs (8) through (11) to Rule 5.3(d) to 
limited partnerships. The Commission believes that it is desirable 
for the Exchange to have retained the requirements pertaining to 
shareholder approval of equity compensation plans for NYSEArca-
listed limited partnerships.
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IV. 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 e-mail to rule-comments@sec.gov. Please include File 
Number SR-NYSEArca-2007-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to file Number SR-NYSEArca-2007-21. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (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 
filings will also be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File number SR-NYSEArca-2007-21 and should be submitted by April 5, 
2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-4692 Filed 3-14-07; 8:45 am]
BILLING CODE 8010-01-P
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