Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend the Initial Listing Standards for Other Securities, 70636-70639 [E7-23970]

Download as PDF 70636 Federal Register / Vol. 72, No. 238 / Wednesday, December 12, 2007 / Notices (ii) as to which NYSE Arca consents, the Commission will: A. By order approve such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: should be submitted on or before January 2, 2008. BILLING CODE 8011–01–P the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–24033 Filed 12–11–07; 8:45 am] [Release No. 34–56906; File No. SR– NYSEArca–2007–103] mstockstill on PROD1PC66 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–125 on the subject line. Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend the Initial Listing Standards for Other Securities 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–2007–125. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will 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–2007–125 and 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 October 3, 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’’) the proposed rule change as described in Items I and II below, which items have been substantially prepared by the Exchange. On November 29, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. This order provides notice of and approves the proposed rule change, as modified by Amendment No. 1 thereto, on an accelerated basis. VerDate Aug<31>2005 15:54 Dec 11, 2007 Jkt 214001 December 5, 2007. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(1), the Exchange’s initial listing standards for ‘‘Other Securities.’’ The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http:// www.nyse.com. 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, 7 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 1. Purpose The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(1), the Exchange’s initial listing standards for ‘‘Other Securities,’’3 to provide for greater flexibility in the listing criteria for such securities, as set forth below. Under NYSE Arca Equities Rule 5.2(j)(1), the Exchange may approve for listing and trading securities which cannot be readily categorized under the listing criteria for common and preferred stocks, bonds, debentures, warrants, contingent value rights, and unit investment trusts.4 The Exchange, like certain other national securities exchanges, refers to such securities as ‘‘Other Securities.’’ This proposed rule change is designed to generally conform to the rules of the American Stock Exchange LLC (‘‘Amex’’) relating to ‘‘Other Securities.’’5 The introductory paragraph in NYSE Arca Equities Rule 5.2(j)(1) states that the Exchange will consider listing any security not otherwise covered by the requirements of NYSE Arca Equities Rules 5.2(c) through (h), provided the issue is suited for auction market trading.6 The Exchange proposes to delete the reference to the specific subsections ((c) through (h)) of NYSE Arca Equities Rule 5.2 to include all products with listing standards under 3 See Securities Exchange Act Release No. 34429 (July 22, 1994), 59 FR 38998 (August 1, 1994) (SR– PSE–93–12) (approving, among other things, the initial listing standards for ‘‘Other Securities’’). 4 NYSE Arca Equities Rule 5.2(j)(1) currently states that the Exchange will consider listing any security not otherwise covered by the requirements of NYSE Arca Equities Rules 5.2(c) through (h). See NYSE Arca Equities Rule 5.2(j)(1); see, e.g., NYSE Arca Equities Rules 5.2(c) (listing criteria for common stock); 5.2(d) (listing criteria for preferred stock and similar issues and secondary classes of common stock; 5.2(e) (listing criteria for bonds and debentures); 5.2(f) (listing criteria for warrants); 5.2(g) (listing criteria for contingent value rights); and 5.2(h) (listing criteria for unit investment trusts). 5 Amex’s initial listing standards for ‘‘Other Securities’’ are set forth in Section 107A of the Amex Company Guide. See Securities Exchange Act Release No. 27753 (March 1, 1990), 55 FR 8626 (March 8, 1990) (SR–Amex–89–29) (approving the initial listing criteria for ‘‘Other Securities’’). 6 See supra note 4. E:\FR\FM\12DEN1.SGM 12DEN1 Federal Register / Vol. 72, No. 238 / Wednesday, December 12, 2007 / Notices mstockstill on PROD1PC66 with NOTICES such rule. The Exchange proposes this change to avoid the administrative burden of updating NYSE Arca Equities Rule 5.2(j)(1) each time a new subsection is added to NYSE Arca Equities Rule 5.2. In addition, the Exchange proposes to delete the reference to ‘‘auction market’’ trading to provide that an issue of ‘‘Other Securities’’ must simply be suited for listing and trading on the Exchange. The Exchange believes that this change would allow greater flexibility in the listing of ‘‘Other Securities,’’ without impacting the protection of investors. NYSE Arca Equities Rule 5.2(j)(1)(A) currently provides that an issue of ‘‘Other Securities’’ must have at least one million publicly held trading units and a principal amount/market value of at least $20 million. The Exchange proposes to add exceptions to this standard such that, if the issue is traded in $1,000 denominations or is redeemable at the option of the holders thereof on at least a weekly basis, then no minimum number of publicly held trading units will be required. This proposed change comports to Section 107A(b) of the Amex Company Guide.7 The Exchange notes that, without the exception to the one million publicly held trading unit requirement, the Exchange would be unable to list issues in $1,000 dollar denominations having a market value of less than $1 billion. The Exchange believes that the proposed exception is a reasonable accommodation for those issuances in $1,000 denominations. The Exchange also proposes to reduce the minimum principal amount/market value requirement from at least $20 million to at least $4 million. This change corresponds to current NYSE Arca Equities Rule 5.2(j)(2)(B)(i)(c) (Equity Linked Notes) and current NYSE Arca Equities Rule 8.3(a)(3) (Listing of Currency and Index Warrants), as well as Section 107A(c) of the Amex Company Guide.8 The Exchange 7 See Section 107A(b) of the Amex Company Guide; see also Securities Exchange Act Release Nos. 56629 (October 9, 2007), 72 FR 58689 (October 16, 2007) (SR–Amex–2007–87) (approving an exception to the initial minimum public distribution listing requirement of one million trading units for certain derivative products) and 55733 (May 10, 2007), 72 FR 27602 (May 16, 2007) (SR–Amex–2007–34) (approving certain other exceptions to the initial distribution requirements for ‘‘Other Securities’’). 8 See Section 107A(c) of the Amex Company Guide; see also Securities Exchange Act Release No. 34765 (September 30, 1994), 59 FR 51220 (October 7, 1994) (SR–Amex–94–36) (approving, among other changes, the proposal to reduce the minimum principal amount/aggregate market value requirement from $20 million to $4 million and to eliminate the minimum public holder requirement if the issue of ‘‘Other Securities’’ are traded in $1,000 denominations). VerDate Aug<31>2005 15:54 Dec 11, 2007 Jkt 214001 proposes this change in order conform NYSE Arca Equities Rule 5.2(j)(1) with other NYSE Arca Equities rules and similar rules of other exchanges for the same type of securities, while still protecting the interests of investors. NYSE Arca Equities Rule 5.2(j)(1)(B) currently provides that an issue of ‘‘Other Securities’’ have at least 400 public beneficial holders, or if traded in $1,000 denominations, a minimum of 100 public beneficial holders. The Exchange proposes to amend this standard to provide that: (a) If an issue is traded in $1,000 denominations, then no minimum public holder number will be required; 9 and (b) if the securities are redeemable at the option of the holders thereof on at least a weekly basis, then no minimum public holder number will be required.10 These proposed changes correspond to section 107A(b) of the Amex Company Guide and are similar to the minimum distribution requirements for Index-Linked Securities of the Exchange and other national securities exchanges.11 Although the 100 minimum public beneficial holder requirement would be eliminated as a result of this proposal, the Exchange would continue to require that the issue of the security have a minimum market value of $4 million. The Exchange believes that the overall rule should ensure that issuances in $1,000 denominations are large enough to support a sufficiently liquid market. The Exchange believes that a weekly redemption right will ensure a strong correlation between the market price of ‘‘Other Securities’’ and the performance of the underlying asset, such as a single security or basket of securities and/or securities index, as holders will be unlikely to sell their securities for less than their redemption value if they have a weekly right to redeem such securities for their full value. In addition, in the case of certain ‘‘Other Securities’’ with a weekly redemption feature, the issuer may have the ability to issue new ‘‘Other Securities’’ from time to time at market prices prevailing at the time of sale, at prices related to market prices, or at negotiated prices. This feature provides a ready supply of new ‘‘Other Securities,’’ thereby lessening the possibility that the market price of such securities will be affected by a scarcity 9 See id. supra note 7. 11 See NYSE Arca Equities Rule 5.2(j)(6)(A)(a); see also Securities Exchange Act Release No. 56593 (October 1, 2007), 72 FR 57362 (October 9, 2007) (SR–NYSEArca–2007–96) (approving amendments to the initial distribution requirements for IndexLinked Securities, which are designated as ‘‘Other Securities,’’ and other conforming changes); see, e.g., Rule 2130 of the International Securities Exchange, LLC. 10 See PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 70637 of available ‘‘Other Securities’’ for sale. The Exchange believes that it also assists in maintaining a strong correlation between the market price and the indicative value, as investors will be unlikely to pay more than the indicative value in the open market if they can acquire ‘‘Other Securities’’ from the issuer at that price. The Exchange further believes that the ability to list ‘‘Other Securities’’ without a minimum number of publicly held trading units or public beneficial holders, subject to certain conditions, is important to the successful listing of such securities. Issuers issuing these types of ‘‘Other Securities’’ generally do not intend to do so by way of an underwritten offering. Rather, the distribution arrangement is analogous to that of an exchange-traded fund issuance, in that the issue is launched without any significant distribution event, and the float increases over time as investors purchase additional securities from the issuer at the then indicative value. The Exchange states that investors would generally seek to purchase such securities at a point when the underlying index is at a level that they perceive as providing an attractive growth opportunity. In the context of such a distribution arrangement, it would be difficult for an issuer to guarantee its ability to sell a specific number of units on the listing date. However, the Exchange believes that this difficulty in ensuring the sale of at least one million trading units to at least 400 public holders on the listing date is not indicative of a likely longterm lack of liquidity in such securities or, for the reasons set forth herein, of a difficulty in establishing a pricing equilibrium in the securities or a successful two-sided market. In addition, the Exchange proposes to amend the language in NYSE Arca Equities Rule 5.2(j)(1)(C) to clarify that it is the issuer of ‘‘Other Securities’’ that is subject to the financial requirements set forth therein. Finally, the Exchange proposes to delete NYSE Arca Equities Rule 5.2(j)(1)(D), which provides that settlements must be made in U.S. dollars for those issues with cash settlement provisions, and NYSE Arca Equities Rule 5.2(j)(1)(E), which provides that the redemption price must be at least $3.00 per unit for those issues that contain redemption provisions. The Exchange proposes to delete these provisions in order to bring the NYSE Arca Equities rules in line with those of other exchanges and, therefore, to E:\FR\FM\12DEN1.SGM 12DEN1 70638 Federal Register / Vol. 72, No. 238 / Wednesday, December 12, 2007 / Notices remain competitive in the marketplace.12 The Exchange believes that the proposed revisions would provide the Exchange with the flexibility necessary to evaluate the suitability of ‘‘Other Securities’’ for listing and trading. The Exchange states that such securities have special appeal for various investors, including institutions, in particular, and believes that securities admitted to listing under NYSE Arca Equities Rule 5.2(j)(1) benefit investors by providing important investment, hedging, and market timing opportunities, as well as benefiting those issuers that offer such securities as a means of raising capital at an advantageous cost. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,13 in general, and furthers the objectives of section 6(b)(5) of the Act,14 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, 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. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 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. mstockstill on PROD1PC66 with NOTICES III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 12 See Securities Exchange Act Release No. 37165 (May 3, 1996), 61 FR 21215 (May 9, 1996) (SR– Amex–96–15) (eliminating the U.S. dollar cash settlement and minimum redemption price requirements for ‘‘Hybrid Securities’’ in Section 107A of the Amex Company Guide). 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(5). VerDate Aug<31>2005 15:54 Dec 11, 2007 Jkt 214001 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–103 on the subject line. of the Act.16 Specifically, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act,17 which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged Paper Comments in regulating, clearing, settling, • Send paper comments in triplicate processing information with respect to, to Nancy M. Morris, Secretary, and facilitating transactions in Securities and Exchange Commission, securities, to remove impediments to 100 F Street, NE., Washington, DC and perfect the mechanism of a free and 20549–1090. open market and a national market All submissions should refer to File system, and, in general, to protect Number SR–NYSEArca–2007–103. This investors and the public interest. The file number should be included on the subject line if e-mail is used. To help the Commission believes that the proposal is reasonable and should benefit issuers Commission process and review your and investors by allowing for the listing comments more efficiently, please use only one method. The Commission will and trading of certain ‘‘Other post all comments on the Commission’s Securities’’ that would otherwise not be able to be listed and traded on the Internet Web site (http://www.sec.gov/ Exchange, particularly in light of the rules/sro.shtml). Copies of the manner in which such rule, as submission, all subsequent proposed, comports with the rules of amendments, all written statements other national securities exchanges that with respect to the proposed rule change that are filed with the govern the initial listing standards for Commission, and all written such securities.18 communications relating to the The Commission finds good cause for proposed rule change between the approving the proposed rule change Commission and any person, other than prior to the 30th day after the date of those that may be withheld from the publication of the notice of filing thereof public in accordance with the in the Federal Register. The provisions of 5 U.S.C. 552, will be Commission notes that it has approved available for inspection and copying in similar proposals amend the initial the Commission’s Public Reference distribution requirements of other Room, 100 F Street, NE., Washington, national securities exchanges for ‘‘Other DC 20549, on official business days 19 between the hours of 10 a.m. and 3 p.m. Securities.’’ The Commission does not believe that this proposal raises any Copies of such filing also will be novel regulatory issues. Accelerating available for inspection and copying at the principal office of the Exchange. All approval of this proposal should benefit investors by creating, without undue comments received will be posted delay, additional competition in the without change; the Commission does market for ‘‘Other Securities.’’ not edit personal identifying information from submissions. You Therefore, the Commission finds good should submit only information that cause, consistent with section 19(b)(2) you wish to make available publicly. All of the Act,20 to approve the proposed submissions should refer to File number rule change on an accelerated basis. SR–NYSEArca–2007–103 and should be V. Conclusion submitted on or before January 2, 2008. IV. Commission’s Findings and Order Granting Accelerated Approval of the Proposed Rule Change 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 15 and, in particular, the requirements of section 6 15 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 It is therefore ordered, pursuant to section 19(b)(2) of the Act,21 that the proposed rule change (SR–NYSEArca– 2007–103), as modified by Amendment No. 1 thereto, be, and it hereby is, approved on an accelerated basis. 16 15 U.S.C. 78f. U.S.C. 78f(b)(5). 18 See supra notes 5, 7, 8, 11, and 12. 19 Id. 20 15 U.S.C. 78s(b)(2). 21 Id. 22 17 CFR 200.30–3(a)(12). 17 15 E:\FR\FM\12DEN1.SGM 12DEN1 Federal Register / Vol. 72, No. 238 / Wednesday, December 12, 2007 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–23970 Filed 12–11–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56908; File No. NYSEArca– 2007–121] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Rule 6.37B and the Quoting Obligations of Lead Market Makers December 5, 2007. 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 November 27, 2007, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared substantially by NYSE Arca. 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 proposes to amend Exchange Rule 6.37B in order to update the quoting obligations of Lead Market Makers (‘‘LMMs’’). The text of the proposed rule change is available at NYSE Arca, the Commission’s Public Reference Room, and http:// www.nysearca.com. mstockstill on PROD1PC66 with NOTICES 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 Arca included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NYSE Arca has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Aug<31>2005 15:54 Dec 11, 2007 Jkt 214001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this rule change is to update the quoting obligations for LMMs, contained in NYSE Arca Rule 6.37B. In 2003, the Exchange established a continuous quoting obligation for LMMs,3 in conjunction with the introduction of its electronic trading system then known as PCX Plus.4 This obligation called for an LMM to provide continuous two sided-quotations throughout the trading day in its appointed issues. The quoting obligation was subsequently amended in 2005 5 so that an LMM needed only to supply continuous quotations for 99% of the time that the Exchange is open for trading in each issue. Under the PCX Plus system, in addition to LMMs, there were three other categories of Market Makers: Remote Market Makers, Floor Market Makers, and Supplemental Market Makers. Of these three, only Remote Market Makers had a minimum continuous quoting obligation. Given that fact that not all Market Makers had minimum quoting requirements, coupled with the fact that the Exchange had a relatively small number of registered Remote Market Makers,6 the Exchange believed that a 99% continuous quoting obligation for LMMs would serve as a mechanism to help ensure that there would be adequate liquidity in any issue, throughout the trading day. With the introduction of the Exchange’s current electronic trading platform, the OX system, in 2006, the Exchange reclassified the Remote Market Maker, Supplemental Market Maker, and Floor Market Maker into one classification, simply called Market Maker. Under rules adopted by the Exchange in conjunction with the implementation of the OX system, all Market Makers now have minimum continuous quoting obligations.7 Due to 3 See Securities Exchange Act Release No. 47838 (May 13, 2003), 68 FR 27129 (May 19, 2003) (SR– PCX–2002–36). 4 PCX Plus was replaced in 2006 by the OX system, NYSE Arca’s present electronic trading platform. 5 See Securities Exchange Act Release No. 51740 (May 25, 2005), 70 FR 32686 (June 3, 2005) (SR– PCX–2005–64). 6 At the time PCX Plus was introduced in October 2003, in addition to LMMs, there were five registered Remote Market Makers subject to continuous quoting obligations. 7 NYSE Arca Rule 6.37B(c) states that a Market Maker must provide continuous two sided PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 70639 the fact that all Market Makers now have some minimum quoting obligations, coupled with an increase in the number of Market Makers providing quotations on a continuous basis,8 the Exchange no longer believes that it necessary for an LMM to be held to a 99% quoting obligation in order for there to be adequate liquidity in a given issue. Therefore, the Exchange is proposing to update Rule 6.37B(b) by reducing an LMMs continuous quoting obligation from 99% to 90%. The Exchange also seeks to add certain exemptions to Rule 6.37B. Specifically, when determining whether a LMM has met its 90% quoting obligation, the Exchange would not consider the duration of any periods where a technical failure on the part of the Exchange prevents the LMM from providing continuous quotations. Also, the Exchange would retain the discretion to consider other exceptions to this continuous electronic quote obligation based on demonstrated legal or regulatory requirements or other mitigating circumstances. Finally, the Exchange proposes to amend the review period for this obligation, from a quarterly basis to a monthly basis. The shorter time period would allow the Exchange to better monitor an LMMs performance. The Exchange does not believe that lowering the LMM quoting obligation would adversely affect the quality of the Exchange’s markets or lead to a material decrease in liquidity. Rather, the Exchange believes its current market structure with its high rate of participation by LMMs and Market Makers permits the lowering of the quoting obligation without fear of losing liquidity.9 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Section 6(b)(5) of the Act,11 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 quotations throughout the trading day in its appointed issues for 60% of the time the Exchange is open for trading in each issue. 8 As of October 31, 2007, in addition to Lead Market Makers, there were fifty-five registered Market Makers subject to continuous quoting obligations. 9 Also, the Exchange notes that NYSE Arca Rule 6.37B(d), which states that in the interest of maintaining a fair and orderly market, a Market Maker may be called upon by a Trading Official to maintain continuous quotes in one or more series of an option issue, shall continue to apply. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). E:\FR\FM\12DEN1.SGM 12DEN1

Agencies

[Federal Register Volume 72, Number 238 (Wednesday, December 12, 2007)]
[Notices]
[Pages 70636-70639]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23970]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56906; File No. SR-NYSEArca-2007-103]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change, as 
Modified by Amendment No. 1 Thereto, To Amend the Initial Listing 
Standards for Other Securities

December 5, 2007.
    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 October 3, 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'') the proposed rule change as described in Items I and 
II below, which items have been substantially prepared by the Exchange. 
On November 29, 2007, the Exchange filed Amendment No. 1 to the 
proposed rule change. This order provides notice of and approves the 
proposed rule change, as modified by Amendment No. 1 thereto, on an 
accelerated basis.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(1), 
the Exchange's initial listing standards for ``Other Securities.'' The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and http://www.nyse.com.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item 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
    The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(1), 
the Exchange's initial listing standards for ``Other Securities,''\3\ 
to provide for greater flexibility in the listing criteria for such 
securities, as set forth below. Under NYSE Arca Equities Rule 
5.2(j)(1), the Exchange may approve for listing and trading securities 
which cannot be readily categorized under the listing criteria for 
common and preferred stocks, bonds, debentures, warrants, contingent 
value rights, and unit investment trusts.\4\ The Exchange, like certain 
other national securities exchanges, refers to such securities as 
``Other Securities.'' This proposed rule change is designed to 
generally conform to the rules of the American Stock Exchange LLC 
(``Amex'') relating to ``Other Securities.''\5\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 34429 (July 22, 
1994), 59 FR 38998 (August 1, 1994) (SR-PSE-93-12) (approving, among 
other things, the initial listing standards for ``Other 
Securities'').
    \4\ NYSE Arca Equities Rule 5.2(j)(1) currently states that the 
Exchange will consider listing any security not otherwise covered by 
the requirements of NYSE Arca Equities Rules 5.2(c) through (h). See 
NYSE Arca Equities Rule 5.2(j)(1); see, e.g., NYSE Arca Equities 
Rules 5.2(c) (listing criteria for common stock); 5.2(d) (listing 
criteria for preferred stock and similar issues and secondary 
classes of common stock; 5.2(e) (listing criteria for bonds and 
debentures); 5.2(f) (listing criteria for warrants); 5.2(g) (listing 
criteria for contingent value rights); and 5.2(h) (listing criteria 
for unit investment trusts).
    \5\ Amex's initial listing standards for ``Other Securities'' 
are set forth in Section 107A of the Amex Company Guide. See 
Securities Exchange Act Release No. 27753 (March 1, 1990), 55 FR 
8626 (March 8, 1990) (SR-Amex-89-29) (approving the initial listing 
criteria for ``Other Securities'').
---------------------------------------------------------------------------

    The introductory paragraph in NYSE Arca Equities Rule 5.2(j)(1) 
states that the Exchange will consider listing any security not 
otherwise covered by the requirements of NYSE Arca Equities Rules 
5.2(c) through (h), provided the issue is suited for auction market 
trading.\6\ The Exchange proposes to delete the reference to the 
specific subsections ((c) through (h)) of NYSE Arca Equities Rule 5.2 
to include all products with listing standards under

[[Page 70637]]

such rule. The Exchange proposes this change to avoid the 
administrative burden of updating NYSE Arca Equities Rule 5.2(j)(1) 
each time a new subsection is added to NYSE Arca Equities Rule 5.2. In 
addition, the Exchange proposes to delete the reference to ``auction 
market'' trading to provide that an issue of ``Other Securities'' must 
simply be suited for listing and trading on the Exchange. The Exchange 
believes that this change would allow greater flexibility in the 
listing of ``Other Securities,'' without impacting the protection of 
investors.
---------------------------------------------------------------------------

    \6\ See supra note 4.
---------------------------------------------------------------------------

    NYSE Arca Equities Rule 5.2(j)(1)(A) currently provides that an 
issue of ``Other Securities'' must have at least one million publicly 
held trading units and a principal amount/market value of at least $20 
million. The Exchange proposes to add exceptions to this standard such 
that, if the issue is traded in $1,000 denominations or is redeemable 
at the option of the holders thereof on at least a weekly basis, then 
no minimum number of publicly held trading units will be required. This 
proposed change comports to Section 107A(b) of the Amex Company 
Guide.\7\ The Exchange notes that, without the exception to the one 
million publicly held trading unit requirement, the Exchange would be 
unable to list issues in $1,000 dollar denominations having a market 
value of less than $1 billion. The Exchange believes that the proposed 
exception is a reasonable accommodation for those issuances in $1,000 
denominations.
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    \7\ See Section 107A(b) of the Amex Company Guide; see also 
Securities Exchange Act Release Nos. 56629 (October 9, 2007), 72 FR 
58689 (October 16, 2007) (SR-Amex-2007-87) (approving an exception 
to the initial minimum public distribution listing requirement of 
one million trading units for certain derivative products) and 55733 
(May 10, 2007), 72 FR 27602 (May 16, 2007) (SR-Amex-2007-34) 
(approving certain other exceptions to the initial distribution 
requirements for ``Other Securities'').
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    The Exchange also proposes to reduce the minimum principal amount/
market value requirement from at least $20 million to at least $4 
million. This change corresponds to current NYSE Arca Equities Rule 
5.2(j)(2)(B)(i)(c) (Equity Linked Notes) and current NYSE Arca Equities 
Rule 8.3(a)(3) (Listing of Currency and Index Warrants), as well as 
Section 107A(c) of the Amex Company Guide.\8\ The Exchange proposes 
this change in order conform NYSE Arca Equities Rule 5.2(j)(1) with 
other NYSE Arca Equities rules and similar rules of other exchanges for 
the same type of securities, while still protecting the interests of 
investors.
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    \8\ See Section 107A(c) of the Amex Company Guide; see also 
Securities Exchange Act Release No. 34765 (September 30, 1994), 59 
FR 51220 (October 7, 1994) (SR-Amex-94-36) (approving, among other 
changes, the proposal to reduce the minimum principal amount/
aggregate market value requirement from $20 million to $4 million 
and to eliminate the minimum public holder requirement if the issue 
of ``Other Securities'' are traded in $1,000 denominations).
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    NYSE Arca Equities Rule 5.2(j)(1)(B) currently provides that an 
issue of ``Other Securities'' have at least 400 public beneficial 
holders, or if traded in $1,000 denominations, a minimum of 100 public 
beneficial holders. The Exchange proposes to amend this standard to 
provide that: (a) If an issue is traded in $1,000 denominations, then 
no minimum public holder number will be required; \9\ and (b) if the 
securities are redeemable at the option of the holders thereof on at 
least a weekly basis, then no minimum public holder number will be 
required.\10\ These proposed changes correspond to section 107A(b) of 
the Amex Company Guide and are similar to the minimum distribution 
requirements for Index-Linked Securities of the Exchange and other 
national securities exchanges.\11\ Although the 100 minimum public 
beneficial holder requirement would be eliminated as a result of this 
proposal, the Exchange would continue to require that the issue of the 
security have a minimum market value of $4 million. The Exchange 
believes that the overall rule should ensure that issuances in $1,000 
denominations are large enough to support a sufficiently liquid market.
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    \9\ See id.
    \10\ See supra note 7.
    \11\ See NYSE Arca Equities Rule 5.2(j)(6)(A)(a); see also 
Securities Exchange Act Release No. 56593 (October 1, 2007), 72 FR 
57362 (October 9, 2007) (SR-NYSEArca-2007-96) (approving amendments 
to the initial distribution requirements for Index-Linked 
Securities, which are designated as ``Other Securities,'' and other 
conforming changes); see, e.g., Rule 2130 of the International 
Securities Exchange, LLC.
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    The Exchange believes that a weekly redemption right will ensure a 
strong correlation between the market price of ``Other Securities'' and 
the performance of the underlying asset, such as a single security or 
basket of securities and/or securities index, as holders will be 
unlikely to sell their securities for less than their redemption value 
if they have a weekly right to redeem such securities for their full 
value. In addition, in the case of certain ``Other Securities'' with a 
weekly redemption feature, the issuer may have the ability to issue new 
``Other Securities'' from time to time at market prices prevailing at 
the time of sale, at prices related to market prices, or at negotiated 
prices. This feature provides a ready supply of new ``Other 
Securities,'' thereby lessening the possibility that the market price 
of such securities will be affected by a scarcity of available ``Other 
Securities'' for sale. The Exchange believes that it also assists in 
maintaining a strong correlation between the market price and the 
indicative value, as investors will be unlikely to pay more than the 
indicative value in the open market if they can acquire ``Other 
Securities'' from the issuer at that price.
    The Exchange further believes that the ability to list ``Other 
Securities'' without a minimum number of publicly held trading units or 
public beneficial holders, subject to certain conditions, is important 
to the successful listing of such securities. Issuers issuing these 
types of ``Other Securities'' generally do not intend to do so by way 
of an underwritten offering. Rather, the distribution arrangement is 
analogous to that of an exchange-traded fund issuance, in that the 
issue is launched without any significant distribution event, and the 
float increases over time as investors purchase additional securities 
from the issuer at the then indicative value. The Exchange states that 
investors would generally seek to purchase such securities at a point 
when the underlying index is at a level that they perceive as providing 
an attractive growth opportunity. In the context of such a distribution 
arrangement, it would be difficult for an issuer to guarantee its 
ability to sell a specific number of units on the listing date. 
However, the Exchange believes that this difficulty in ensuring the 
sale of at least one million trading units to at least 400 public 
holders on the listing date is not indicative of a likely long-term 
lack of liquidity in such securities or, for the reasons set forth 
herein, of a difficulty in establishing a pricing equilibrium in the 
securities or a successful two-sided market.
    In addition, the Exchange proposes to amend the language in NYSE 
Arca Equities Rule 5.2(j)(1)(C) to clarify that it is the issuer of 
``Other Securities'' that is subject to the financial requirements set 
forth therein. Finally, the Exchange proposes to delete NYSE Arca 
Equities Rule 5.2(j)(1)(D), which provides that settlements must be 
made in U.S. dollars for those issues with cash settlement provisions, 
and NYSE Arca Equities Rule 5.2(j)(1)(E), which provides that the 
redemption price must be at least $3.00 per unit for those issues that 
contain redemption provisions. The Exchange proposes to delete these 
provisions in order to bring the NYSE Arca Equities rules in line with 
those of other exchanges and, therefore, to

[[Page 70638]]

remain competitive in the marketplace.\12\
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    \12\ See Securities Exchange Act Release No. 37165 (May 3, 
1996), 61 FR 21215 (May 9, 1996) (SR-Amex-96-15) (eliminating the 
U.S. dollar cash settlement and minimum redemption price 
requirements for ``Hybrid Securities'' in Section 107A of the Amex 
Company Guide).
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    The Exchange believes that the proposed revisions would provide the 
Exchange with the flexibility necessary to evaluate the suitability of 
``Other Securities'' for listing and trading. The Exchange states that 
such securities have special appeal for various investors, including 
institutions, in particular, and believes that securities admitted to 
listing under NYSE Arca Equities Rule 5.2(j)(1) benefit investors by 
providing important investment, hedging, and market timing 
opportunities, as well as benefiting those issuers that offer such 
securities as a means of raising capital at an advantageous cost.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\13\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\14\ 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, 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

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

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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send e-mail to rule-comments@sec.gov. Please include File 
Number SR-NYSEArca-2007-103 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-2007-103. 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 (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-2007-103 and should 
be submitted on or before January 2, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    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 \15\ and, in particular, the requirements of section 6 of the 
Act.\16\ Specifically, the Commission finds that the proposed rule 
change is consistent with section 6(b)(5) of the Act,\17\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Commission believes that the proposal is reasonable and 
should benefit issuers and investors by allowing for the listing and 
trading of certain ``Other Securities'' that would otherwise not be 
able to be listed and traded on the Exchange, particularly in light of 
the manner in which such rule, as proposed, comports with the rules of 
other national securities exchanges that govern the initial listing 
standards for such securities.\18\
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    \15\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ See supra notes 5, 7, 8, 11, and 12.
---------------------------------------------------------------------------

    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of the 
notice of filing thereof in the Federal Register. The Commission notes 
that it has approved similar proposals amend the initial distribution 
requirements of other national securities exchanges for ``Other 
Securities.'' \19\ The Commission does not believe that this proposal 
raises any novel regulatory issues. Accelerating approval of this 
proposal should benefit investors by creating, without undue delay, 
additional competition in the market for ``Other Securities.'' 
Therefore, the Commission finds good cause, consistent with section 
19(b)(2) of the Act,\20\ to approve the proposed rule change on an 
accelerated basis.
---------------------------------------------------------------------------

    \19\ Id.
    \20\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NYSEArca-2007-103), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved on 
an accelerated basis.
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    \21\ Id.
    \22\ 17 CFR 200.30-3(a)(12).


[[Page 70639]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23970 Filed 12-11-07; 8:45 am]
BILLING CODE 8011-01-P