Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Accelerated Approval to a Proposed Rule Change as Modified by Amendment No. 1 To Amend Section 703.16 of the NYSE Listed Company Manual To Eliminate Requirement Regarding Index Weighting and Calculation Methodology, 15928-15929 [E7-6084]

Download as PDF 15928 Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices For the Commission, by the Division of Market Regulation, pursuant to delegated authority.21 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–6082 Filed 4–2–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55545; File No. SR–NYSE– 2007–12] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Granting Accelerated Approval to a Proposed Rule Change as Modified by Amendment No. 1 To Amend Section 703.16 of the NYSE Listed Company Manual To Eliminate Requirement Regarding Index Weighting and Calculation Methodology March 27, 2007. I. Introduction On February 5, 2007, the New York Stock Exchange LLC (‘‘NYSE’’ 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 amend Section 703.16 of the NYSE Listed Company Manual (‘‘NYSE Manual’’), the Exchange’s generic listing standard for investment company units (‘‘ICUs’’),3 to eliminate the requirement that the weighting and calculation methodology for the index underlying a series of ICUs must be one of those specified in Section 703.16(C)(4)(a). On February 15, 2007, the NYSE submitted Amendment No. 1 to the proposed rule change. The proposed rule change was published for comment in the Federal Register on March 5, 2007 for a 15-day comment period.4 The Commission received no comments regarding the proposal. This order approves the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 An ICU is defined in Section 703.16 of the NYSE Manual as a security that represents an interest in a registered investment company that could be organized as a unit investment trust, an open-end management investment company, or a similar entity. A registered investment company is registered under the Investment Company Act of 1940, 15 U.S.C. 80a et seq. 4 See Securities Exchange Act Release No. 55343 (February 23, 2007), 72 FR 9814. ycherry on PROD1PC64 with NOTICES 1 15 VerDate Aug<31>2005 18:30 Apr 02, 2007 Jkt 211001 II. Description of the Proposal The Exchange has proposed to amend its ‘‘generic’’ listing standard pursuant to Rule 19b–4(e) under the Act 5 for ICUs (which include exchange-traded funds) to eliminate the requirement that an eligible index be calculated and weighted according to a specific methodology. The Exchange currently has listing and trading standards, which permit the Exchange either to list and trade ICUs or trade such ICUs on the Exchange on an unlisted trading privileges (‘‘UTP’’) basis, subject to the procedures contained in Rule 19b–4(e) under the Act.6 The existence of generic listing standards allows qualifying ICUs to list or trade without the need to file a rule change for each security. Section 703.16(C)(4)(a) of the NYSE Manual requires that, if a series of ICUs is listed for trading on the Exchange in reliance upon Rule 19b–4(e) under the Act,7 the index underlying the series must follow a market capitalization, modified market capitalization, price, equal-dollar, or modified equal-dollar weighting methodology, or alternately, a methodology weighting components of the index based on any, some or all of the following: Sales, cash flow, book value and dividends. The proposed rule change would eliminate this standard, and, as a result, the Exchange would no longer consider index methodology in its review of an ICU’s eligibility for listing and trading pursuant to Rule 19b–4(e) under the Act.8 III. Discussion After careful consideration, 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 9 and, in particular, the requirements of Section 6 of the Act.10 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,11 which requires, among other things, that the rules of a national securities exchange be 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 5 17 CFR 240.19b–4(e). Section 703.16 of the NYSE Manual. 7 17 CFR 240.19b–4(e). 8 17 CFR 240.19b–4(e). 9 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78f. 11 15 U.S.C. 78f(b)(5). 6 See PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 open market and a national market system, and, in general, to protect investors and the public interest. As the market for ICUs has expanded, the variety of weighting and calculation methodologies for underlying indexes has grown, limiting the applicability of NYSE’s current generic listing standards for ICUs. The Commission believes that eliminating the index methodology requirement from the Exchange’s generic listing standards for ICUs will facilitate bringing ICUs based on indexes with nontraditional weighting techniques to the market, encourage innovation in index construction, reduce costs to issuers and other market participants, and promote competition. The Commission believes that these goals may be furthered without compromising investor protection. The Commission notes that the numerical criteria in Section 703.16(C) of the NYSE Manual addressing concentration, diversity, and liquidity of an underlying index’s components would continue to apply. For example, the generic listing standards for domestic indexes will continue to require, without limitation, that the most heavily weighted component stock of an index not exceed 30% of the weight of the index, and the five most heavily weighted component stocks of an index not exceed 65% of the weight of the index,12 and that an index include a minimum of 13 component stocks.13 In addition, component stocks that in the aggregate account for at least 90% of the weight of the index must have a market value of at least $75 million and minimum monthly trading volume of at least 250,000 shares for each of the last six months.14 Similarly, the generic listing standards for international or global indexes require, without limitation, that the most heavily weighted component stock of an index not exceed 25% of the weight of the index, and the five most heavily weighted component stocks of an index not exceed 60% of the weight of the index,15 and that an index include a minimum of 20 component stocks.16 Component stocks that in the aggregate account for at least 90% of the weight of the index must have a market value of at least $100 million and minimum monthly trading volume of at least 250,000 shares for each of the last 12 See Section 703.16(C)(2)(a)(iii) of the NYSE Manual. 13 See Section 703.16(C)(2)(a)(iv) of the NYSE Manual. 14 See Section 703.16(C)(2)(a)(i) and (a)(ii) of the NYSE Manual. 15 See Section 703.16(C)(2)(b)(iii) of the NYSE Manual. 16 See Section 703.16(C)(2)(b)(iv) of the NYSE Manual. E:\FR\FM\03APN1.SGM 03APN1 Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices six months.17 Therefore, the Commission believes that indexes underlying ICUs will continue to be sufficiently broad-based in scope to minimize potential manipulation. Additionally, ICUs and their underlying indexes would continue to be subject to all other requirements of Section 703.16 of the NYSE Manual. The Commission believes that accelerating approval of the proposed rule change would enable the Exchange and issuers to immediately benefit from the expected efficiencies resultant from this proposed rule change without delay while at the same time still ensuring adequate protection for investors and the public in general. The Commission notes that NYSE’s proposal substantively tracks a recently approved rule change by the American Stock Exchange LLC 18 and raises no new regulatory issues. Thus, the Commission finds good cause, consistent with Section 19(b)(2) of the Act,19 to grant accelerated approval of the proposed rule change, as amended, prior to the thirtieth day after the notice is published for comment in the Federal Register. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,20 that the proposed rule change (SR–NYSE–2007– 12), as modified by Amendment No. 1, be, and is hereby approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.21 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–6084 Filed 4–2–07; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55546; File No. SR– NYSEArca–2007–14] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Accelerated Approval To a Proposed Rule Change to Amend Existing Rules for Investment Company Units To Eliminate Requirement Regarding Index Weighting and Calculation Methodology March 27, 2007. I. Introduction On February 8, 2007, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’), through its wholly owned subsidiary NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), 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 revise its generic listing standards applicable to Investment Company Units (‘‘Investment Company Units’’ or ‘‘ICUs’’) 3 to eliminate the requirement that the weighting and calculation methodology for the index underlying a series of ICUs must be one of those specified in Commentary .01(b)(1) to NYSE Arca Equities Rule 5.2(j)(3). The proposed rule change was published for comment in the Federal Register on March 5, 2007 for a 15-day comment period.4 The Commission received no comments regarding the proposal. This order approves the proposed rule change on an accelerated basis. II. Description of the Proposal The Exchange has proposed to amend its ‘‘generic’’ listing standard pursuant to Rule 19b–4(e) under the Act 5 for ICUs (which include exchange-traded funds) to eliminate the requirement that an eligible index be calculated and weighted according to a specific methodology. The Exchange currently has listing and trading standards, which permit the Exchange either to list and trade ICUs or trade such ICUs on the Exchange on an unlisted trading privileges (‘‘UTP’’) BILLING CODE 8010–01–P 1 15 ycherry on PROD1PC64 with NOTICES 17 See Section 703.16(C)(2)(b)(i) and (b)(ii) of the NYSE Manual. 18 See Securities Exchange Act Release No. 55544 (March 27, 2007). NYSE Arca, Inc. has also proposed a parallel rule change, which the Commission is approving concurrently with this one. See Securities Exchange Act Release No. 55546 (March 27, 2007). 19 15 U.S.C. 78s(b)(2). 20 15 U.S.C. 78s(b)(2). 21 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 18:30 Apr 02, 2007 Jkt 211001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 An ICU is defined in NYSE Arca Equities Rule 5.1(b)(15) as a security representing an interest in a registered investment company that could be organized as a unit investment trust, an open-end management investment company, or a similar entity. A registered investment company is registered under the Investment Company Act of 1940, 15 U.S.C. 80a et seq. 4 See Securities Exchange Act Release No. 55339 (February 23, 2007), 72 FR 9820. 5 17 CFR 240.19b–4(e). 2 17 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 15929 basis, subject to the procedures contained in Rule 19b–4(e) under the Act.6 The existence of generic listing standards allows qualifying ICUs to list or trade without the need to file a rule change for each security. Commentary .01(b)(1) to NYSE Arca Equities Rule 5.2(j)(3) currently requires that, if a series of ICUs is listed for trading (or traded pursuant to UTP) on the Exchange in reliance upon Rule 19b– 4(e) under Rule 19b–4 under the Act,7 the index underlying the series must follow the market capitalization, modified market capitalization, price, equal-dollar or modified equal-dollar weighting methodology, or alternately, a methodology weighting components of the index based on any, some or all of the following: sales, cash flow, book value, and dividends. The proposed rule change would eliminate this standard, and, as a result, the Exchange would no longer consider index methodology in its review of an ICU’s eligibility for listing and trading pursuant to Rule 19b–4(e) under the Act.8 III. Discussion After careful consideration, 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 9 and, in particular, the requirements of Section 6 of the Act.10 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,11 which requires, among other things, that the rules of a national securities exchange be 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 a national market system, and, in general, to protect investors and the public interest. As the market for ICUs has expanded, the variety of weighting and calculation methodologies for underlying indexes has grown, limiting the applicability of NYSE Arca’s current generic listing standards for ICUs. The Commission believes that eliminating the index methodology requirement from the Exchange’s generic listing standards for ICUs will facilitate bringing ICUs based 6 See NYSE Arca Equities Rule 5.2(j)(3). CFR 240.19b–4(e). 8 17 CFR 240.19b–4(e). 9 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78f. 11 15 U.S.C. 78f(b)(5). 7 17 E:\FR\FM\03APN1.SGM 03APN1

Agencies

[Federal Register Volume 72, Number 63 (Tuesday, April 3, 2007)]
[Notices]
[Pages 15928-15929]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-6084]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55545; File No. SR-NYSE-2007-12]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Accelerated Approval to a Proposed Rule Change as Modified by 
Amendment No. 1 To Amend Section 703.16 of the NYSE Listed Company 
Manual To Eliminate Requirement Regarding Index Weighting and 
Calculation Methodology

March 27, 2007.

I. Introduction

    On February 5, 2007, the New York Stock Exchange LLC (``NYSE'' 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 amend Section 703.16 of the NYSE Listed Company Manual 
(``NYSE Manual''), the Exchange's generic listing standard for 
investment company units (``ICUs''),\3\ to eliminate the requirement 
that the weighting and calculation methodology for the index underlying 
a series of ICUs must be one of those specified in Section 
703.16(C)(4)(a). On February 15, 2007, the NYSE submitted Amendment No. 
1 to the proposed rule change. The proposed rule change was published 
for comment in the Federal Register on March 5, 2007 for a 15-day 
comment period.\4\ The Commission received no comments regarding the 
proposal. This order approves the proposed rule change, as modified by 
Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ An ICU is defined in Section 703.16 of the NYSE Manual as a 
security that represents an interest in a registered investment 
company that could be organized as a unit investment trust, an open-
end management investment company, or a similar entity. A registered 
investment company is registered under the Investment Company Act of 
1940, 15 U.S.C. 80a et seq.
    \4\ See Securities Exchange Act Release No. 55343 (February 23, 
2007), 72 FR 9814.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange has proposed to amend its ``generic'' listing standard 
pursuant to Rule 19b-4(e) under the Act \5\ for ICUs (which include 
exchange-traded funds) to eliminate the requirement that an eligible 
index be calculated and weighted according to a specific methodology.
---------------------------------------------------------------------------

    \5\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

    The Exchange currently has listing and trading standards, which 
permit the Exchange either to list and trade ICUs or trade such ICUs on 
the Exchange on an unlisted trading privileges (``UTP'') basis, subject 
to the procedures contained in Rule 19b-4(e) under the Act.\6\ The 
existence of generic listing standards allows qualifying ICUs to list 
or trade without the need to file a rule change for each security. 
Section 703.16(C)(4)(a) of the NYSE Manual requires that, if a series 
of ICUs is listed for trading on the Exchange in reliance upon Rule 
19b-4(e) under the Act,\7\ the index underlying the series must follow 
a market capitalization, modified market capitalization, price, equal-
dollar, or modified equal-dollar weighting methodology, or alternately, 
a methodology weighting components of the index based on any, some or 
all of the following: Sales, cash flow, book value and dividends. The 
proposed rule change would eliminate this standard, and, as a result, 
the Exchange would no longer consider index methodology in its review 
of an ICU's eligibility for listing and trading pursuant to Rule 19b-
4(e) under the Act.\8\
---------------------------------------------------------------------------

    \6\ See Section 703.16 of the NYSE Manual.
    \7\ 17 CFR 240.19b-4(e).
    \8\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

III. Discussion

    After careful consideration, 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 \9\ and, in particular, the requirements of Section 6 of the 
Act.\10\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
exchange be 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 
a national market system, and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As the market for ICUs has expanded, the variety of weighting and 
calculation methodologies for underlying indexes has grown, limiting 
the applicability of NYSE's current generic listing standards for ICUs. 
The Commission believes that eliminating the index methodology 
requirement from the Exchange's generic listing standards for ICUs will 
facilitate bringing ICUs based on indexes with nontraditional weighting 
techniques to the market, encourage innovation in index construction, 
reduce costs to issuers and other market participants, and promote 
competition.
    The Commission believes that these goals may be furthered without 
compromising investor protection. The Commission notes that the 
numerical criteria in Section 703.16(C) of the NYSE Manual addressing 
concentration, diversity, and liquidity of an underlying index's 
components would continue to apply. For example, the generic listing 
standards for domestic indexes will continue to require, without 
limitation, that the most heavily weighted component stock of an index 
not exceed 30% of the weight of the index, and the five most heavily 
weighted component stocks of an index not exceed 65% of the weight of 
the index,\12\ and that an index include a minimum of 13 component 
stocks.\13\ In addition, component stocks that in the aggregate account 
for at least 90% of the weight of the index must have a market value of 
at least $75 million and minimum monthly trading volume of at least 
250,000 shares for each of the last six months.\14\ Similarly, the 
generic listing standards for international or global indexes require, 
without limitation, that the most heavily weighted component stock of 
an index not exceed 25% of the weight of the index, and the five most 
heavily weighted component stocks of an index not exceed 60% of the 
weight of the index,\15\ and that an index include a minimum of 20 
component stocks.\16\ Component stocks that in the aggregate account 
for at least 90% of the weight of the index must have a market value of 
at least $100 million and minimum monthly trading volume of at least 
250,000 shares for each of the last

[[Page 15929]]

six months.\17\ Therefore, the Commission believes that indexes 
underlying ICUs will continue to be sufficiently broad-based in scope 
to minimize potential manipulation. Additionally, ICUs and their 
underlying indexes would continue to be subject to all other 
requirements of Section 703.16 of the NYSE Manual.
---------------------------------------------------------------------------

    \12\ See Section 703.16(C)(2)(a)(iii) of the NYSE Manual.
    \13\ See Section 703.16(C)(2)(a)(iv) of the NYSE Manual.
    \14\ See Section 703.16(C)(2)(a)(i) and (a)(ii) of the NYSE 
Manual.
    \15\ See Section 703.16(C)(2)(b)(iii) of the NYSE Manual.
    \16\ See Section 703.16(C)(2)(b)(iv) of the NYSE Manual.
    \17\ See Section 703.16(C)(2)(b)(i) and (b)(ii) of the NYSE 
Manual.
---------------------------------------------------------------------------

    The Commission believes that accelerating approval of the proposed 
rule change would enable the Exchange and issuers to immediately 
benefit from the expected efficiencies resultant from this proposed 
rule change without delay while at the same time still ensuring 
adequate protection for investors and the public in general. The 
Commission notes that NYSE's proposal substantively tracks a recently 
approved rule change by the American Stock Exchange LLC \18\ and raises 
no new regulatory issues. Thus, the Commission finds good cause, 
consistent with Section 19(b)(2) of the Act,\19\ to grant accelerated 
approval of the proposed rule change, as amended, prior to the 
thirtieth day after the notice is published for comment in the Federal 
Register.
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 55544 (March 27, 
2007). NYSE Arca, Inc. has also proposed a parallel rule change, 
which the Commission is approving concurrently with this one. See 
Securities Exchange Act Release No. 55546 (March 27, 2007).
    \19\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-NYSE-2007-12), as modified 
by Amendment No. 1, be, and is hereby approved on an accelerated basis.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6084 Filed 4-2-07; 8:45 am]
BILLING CODE 8010-01-P
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