Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Proposing to Amend the Quantitative Continued Listing Standards Applicable to Companies Listed Under Sections 102.01C and 103.01B of the Listed Company Manual, 64043-64046 [2013-25120]
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emcdonald on DSK67QTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 207 / Friday, October 25, 2013 / Notices
regulatory compliance. Additionally,
the Exchange believes proposed rule
change does not raise any new policy
issues not previously considered by the
Commission nor impose any significant
burden on competition because it will:
(1) Result in less burdensome and more
efficient regulatory compliance for
common members; and (2) facilitate
FINRA’s performance of its regulatory
functions under the 17d–2 Agreement.
Accordingly, the Exchange has
designated this rule filing as noncontroversial under section 19(b)(3)(A)
of the Exchange Act 12 and paragraph
(f)(6) of Rule 19b–4 thereunder.13
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 prior to 30 days from the date
on which it was filed, 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 Exchange Act and Rule 19b–
4(f)(6)(iii) thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),15 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange stated its belief
that this proposal is non-controversial
and will not significantly affect the
protection of investors because the
Exchange is not proposing any
substantive changes and is merely
amending its rule text to mirror FINRA’s
rules. Based on the Exchange’s
statements and the non-controversial
nature of the proposed rule change, the
Commission believes that waiving the
operative delay is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby grants the Exchange’s request
and waives the 30-day operative
delay.16
At any time within 60 days of the
filing of such proposed rule change, the
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
16 For purposes only of waiving the operative
delay, the Commission has considered the proposed
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
13 17
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Commission summarily may
temporarily suspend 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 Exchange Act.
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 Exchange
Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
EDGA–2013–31 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File No.
SR–EDGA–2013–31. This file number
should be included on the subject line
if email 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
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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 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 No. SR–EDGA–
2013–31 and should be submitted on or
before November 15, 2013.
PO 00000
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64043
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–24915 Filed 10–24–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70728; File No. SR–NYSE–
2013–67]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Proposing to Amend the Quantitative
Continued Listing Standards
Applicable to Companies Listed Under
Sections 102.01C and 103.01B of the
Listed Company Manual
October 21, 2013.
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
8, 2013, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. 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
The Exchange proposes to harmonize
the quantitative continued listing
standards applicable to companies
listed under Sections 102.01C and
103.01B of the Listed Company Manual
(the ‘‘Manual’’). Under the proposed
amendment, a company will be
considered to be below compliance
standards if its average global market
capitalization over a consecutive 30
trading-day period is less than
$50,000,000 and, at the same time, its
total stockholders’ equity is less than
$50,000,000. The text of the proposed
rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 78, No. 207 / Friday, October 25, 2013 / 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, the
self-regulatory organization 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 those 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 parts of such
statements.
emcdonald on DSK67QTVN1PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to harmonize
the quantitative continued listing
standards applicable to companies
listed under Sections 102.01C and
103.01B of the Manual (‘‘operating
companies’’).
The Exchange’s financial initial
listing standards for domestic operating
companies are set forth in Section
102.01C of the Manual and financial
initial listing standards applicable to
non-U.S. operating companies are set
forth in Section 103.01B of the Manual.3
The Exchange’s financial continued
listing standards for operating
companies are set forth in Section
802.01B of the Manual.4 All operating
companies are subject to continued
listing requirements to maintain (i) a
stock price on a 30-trading-day average
basis of $1.00 and (ii) a total market
capitalization on a 30-trading day
average basis of $15 million (the
‘‘Minimum Listing Criteria’’). All listed
operating companies are subject to
additional financial continued listing
requirements which vary depending on
the initial listing standard in Section
102.01C or 103.01B under which the
company originally listed.
The following are the current
continued listing standards specific to
operating companies listed under the
various initial listing standards:
• A company that qualified to list
under the Earnings Test set out in
Sections 102.01C(I) or 103.01B(I), or
pursuant to the requirements set forth
under the Assets and Equity Test set
forth in Section 102.01C(IV) or the
3 Non-U.S. companies are also permitted to list
under the domestic listing standards set forth in
Section 102.01C.
4 The Exchange also maintains continued listing
standards with respect to distribution of shares, set
forth in Section 802.01A of the Manual.
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‘‘Initial Listing Standard for Companies
Transferring from NYSE Arca’’ (this
standard is no longer in existence and
was operative from October 1, 2008
until August 31, 2009), will be
considered to be below compliance
standards if average global market
capitalization over a consecutive 30
trading-day period is less than
$50,000,000 and, at the same time, total
stockholders’ equity is less than
$50,000,000.
• A company that qualified to list
under the Valuation/Revenue with Cash
Flow Test set out in Section
102.01C(II)(a) or Section 103.01B(II)(a)
will be considered to be below
compliance standards if:
Æ average global market capitalization
over a consecutive 30 trading-day
period is less than $250,000,000 and, at
the same time, total revenues are less
than $20,000,000 over the last 12
months (unless the company qualifies as
an original listing under one of the other
original listing standards); or
Æ average global market capitalization
over a consecutive 30 trading-day
period is less than $75,000,000.
• A company that qualified to list
under the Pure Valuation/Revenue Test
set out in Section 102C.01(II)(b) or in
Section 103.01B(II)(b) will be
considered to be below compliance
standards if:
Æ average global market capitalization
over a consecutive 30 trading-day
period is less than $375,000,000 and, at
the same time, total revenues are less
than $15,000,000 over the last 12
months (unless the company qualifies as
an original listing under one of the other
original listing standards); or
Æ average global market capitalization
over a consecutive 30 trading-day
period is less than $100,000,000.
• A company that qualified to list
under the Affiliated Company Test set
out in Section 102C.01(III) or Section
103.01B(III) will be considered to be
below compliance standards if:
Æ the listed company’s parent/
affiliated company ceases to control the
listed company, or the listed company’s
parent/affiliated company itself falls
below the continued listing standards
applicable to the parent/affiliated
company, and
Æ average global market capitalization
over a consecutive 30 trading-day
period is less than $75,000,000 and, at
the same time, total stockholders’ equity
is less than $75,000,000.
The Exchange proposes to amend the
applicable continued listing standards
such that every operating company will
be subject to the same standards
regardless of the standard under which
such company initially qualified. The
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proposed amendment to Section
802.01B of the Manual will state that an
operating company will be considered
to be below compliance standards if its
average global market capitalization
over a consecutive 30 trading-day
period is less than $50,000,000 and, at
the same time, its total stockholders’
equity is less than $50,000,000 (the
‘‘Proposed Continued Listing
Standard’’).5
Currently, to determine whether an
operating company complies with
continued listing standards, the
Exchange first looks to the financial
standard under which the company
initially qualified for listing and then
applies the continued listing standard
specified as applicable to that initial
listing standard. The practical impact of
this policy is that a company may be
deemed noncompliant with the
continued listing standard associated
with the initial financial listing standard
under which it originally qualified to
list, notwithstanding the fact that it
would have remained in compliance if
subject to one of the other continued
listing standards. This creates the
anomalous result that two companies
could have identical quantitative
characteristics, yet one company would
be deemed noncompliant and the other
would remain compliant, purely on the
basis of the initial listing standards
under which the respective companies
qualified to list many years previously.
The Exchange believes this potential for
disparate treatment is unfair to a listed
company and its shareholders in the
circumstance that a company is deemed
noncompliant or delisted
notwithstanding the fact that it would
have remained compliant if one of the
other continued listing standards was
applicable. Moreover, many listed
companies evolve subsequent to initial
listing, and the idea that a company
should be subject indefinitely to
continued listing criteria tailored to the
type of company it was at the time of
initial listing no longer seems
appropriate.
The Exchange notes that the approach
of assigning different quantitative
continued listing requirements to
5 Consistent with the Exchange’s general practice
in the case of rule changes (unless the amended rule
specifies otherwise), upon effectiveness of the
proposed amendment, all listed operating
companies would be subject to the Proposed
Continued Listing Standard rather than any of the
other currently applicable continued listing
standards, including any company operating under
a compliance plan due to an event of noncompliance with a previously applicable continued
listing standard or any company awaiting appeal of
a delisting determination based on non-compliance
with a previously applicable continued listing
standard.
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Federal Register / Vol. 78, No. 207 / Friday, October 25, 2013 / Notices
companies that originally listed under
different listing standards was adopted
in 2004, based on the assumption that
a company should be subject to a
continued listing requirement that was
related to the elements in the financial
listing standard under which it
originally listed.6 However, the
Exchange’s experience administering
these standards does not support the
original assumption that the disparate
standards would enhance the quality of
operating companies listed on the
Exchange. As discussed below, a review
of data collected over more than five
years indicates that all of the companies
that were delisted under any of the
other currently existing continued
listing standards during that period
would also have been delisted if they
had instead been subject to the
Proposed Continued Listing Standard,
either pursuant to the Proposed
Continued Listing Standard itself or
pursuant to the Minimum Listing
Criteria. Consequently, the Exchange
derived no appreciable regulatory
benefit during that period from having
multiple continued listing standards
rather than simply the Proposed
Continued Listing Standard and the
Minimum Listing Criteria. Therefore,
the Exchange does not believe that it is
necessary to continue to maintain a
complicated set of alternative continued
listing standards.
The Exchange acknowledges that the
other currently applicable continued
listing standards have higher minimum
quantitative requirements for average
market capitalization than the Proposed
Continued Listing Standard. Most
notably, the $50,000,000 minimum
average market capitalization
requirement of the Proposed Continued
Listing Standard is lower than the
minimum average market capitalization
requirements of all of the other
currently existing continued listing
standards. However, the Exchange
believes that, the proposed adoption of
the Proposed Continued Listing
Standard will not result in any
meaningful weakening of the quality of
companies listed on the Exchange. In
that regard, the Exchange notes that
almost all companies that are currently
below compliance with their applicable
financial continued listing standard will
also be below compliance with the
Proposed Continued Listing Standard at
the time of its adoption. Further, the
Exchange notes that more than 87% of
the operating companies currently listed
on the Exchange are already subject to
6 See Securities Exchange Act Release No. 49154
(January 29, 2004), 69 FR 5633 (February 5, 2004)
(SR–NYSE–2003–43).
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a continued listing standard identical to
the Proposed Continued Listing
Standard. For those companies,
therefore, there will be no change to
their continued listing obligations as a
result of the proposed rule change.
With regard to companies that are
currently subject to one of the other
continued listing standards, the
Exchange believes that adoption of the
Proposed Continued Listing Standard
will not result in the continued listing
of a meaningful number of companies
that would be subject to delisting under
the current continued listing standards.
In reaching this conclusion, the
Exchange reviewed all companies that
were identified as below compliance for
any of the financial standards between
2006 and 2012. Approximately 22% of
the identified companies during that
period were subject to a continued
listing standard other than the Proposed
Continued Listing Standard. Of those
22% of companies, a majority would
have been cited for noncompliance with
either the Proposed Continued Listing
Standard or the Minimum Listing
Criteria.7 With respect to the minority of
companies that would not have fallen
below either the Proposed Continued
Listing Standard or the Minimum
Listing Criteria, all have regained
compliance and currently continue to be
in compliance with the Exchange’s
quantitative continued listing standards.
Based on this empirical data, therefore,
the Exchange believes that the Proposed
Continued Listing Standard, in
combination with the Minimum Listing
Criteria, is a rigorous measure that will
capture the full universe of companies
that are financially unsuitable for listing
and will successfully maintain the
quality of the Exchange’s listing
program.
The Exchange believes that the
proposed amendment is consistent with
Rule 3a51–1(a)(2)(ii) (the ‘‘Penny Stock
Rule’’) 8 under the Act. Section (a)(2) of
the Penny Stock Rule provides that a
security is not a penny stock for
purposes of the rule if it is listed on a
national securities exchange that has
established quantitative continued
listing standards that are reasonably
related to certain enumerated initial
listing standards and that are consistent
with the maintenance of fair and orderly
markets. The Penny Stock Rule’s
minimum initial listing standards are
7 Of the 22 total companies that make up this
percentage, eight would have fallen below the
Proposed Continued Listing Standard and an
additional four were delisted for falling below the
Minimum Listing Criteria. An additional three of
the 22 companies voluntarily delisted as a result of
merger transactions.
8 17 CFR 240.3a51–1.
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64045
stockholders’ equity ($5,000,000),
market value of listed securities
($50,000,000) or net income ($750,000).
The Proposed Continued Listing
Standard requires that a listed company
maintain an average global market
capitalization over a consecutive 30
trading-day period of in excess of
$50,000,000 9 and stockholder’s equity
in excess of $50,000,000. The Exchange
believes that global market
capitalization is a comparable measure
to the Penny Stock Rule’s market value
of listed securities requirement.
Therefore, the Proposed Continued
Listing Standard contains measures that
are both related to, and equal to or far
in excess of, the Penny Stock Rule’s
initial listing standards. Therefore, the
Exchange believes that the proposed
amendment is consistent with the
Penny Stock Rule.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(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 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. In particular, the
Exchange believes that the adoption of
the Proposed Continued Listing
Standard is consistent with the
protection of investors and the public
interest because: (i) The Exchange has
many years of experience utilizing the
Proposed Continued Listing Standard as
the applicable continued listing
standard for a large percentage of listed
companies and, in the Exchange’s
experience, companies that remain in
compliance with that standard are
suitable for continued listing; and (ii)
the Proposed Continued Listing
Standard is unlikely to allow companies
to remain listed that would not
otherwise be suitable for listing, as the
Exchange’s review of historical listing
compliance matters indicates that any
company that falls below any other
applicable quantitative listing standard
will generally also fall below the
Proposed Continued Listing Standard.
9 For purposes of calculating global market
capitalization, the Exchange will only consider
securities that are (1) publicly traded (or quoted) or
(2) convertible into a publicly traded (or quoted)
security.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 78, No. 207 / Friday, October 25, 2013 / Notices
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. The
proposed change is being made to
rationalize the continued listing
standards for operating companies listed
on the Exchange. As the Exchange’s
research has indicated that this change
will be unlikely to have any meaningful
effect on the number of companies that
will be delisted, the Exchange believes
that it will not have any effect on the
competition among listing markets and
will result in no burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
emcdonald on DSK67QTVN1PROD with NOTICES
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:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2013–67 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
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All submissions should refer to File
Number SR–NYSE–2013–67. This file
number should be included on the
subject line if email 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 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–NYSE–
2013–67 and should be submitted on or
before November 15, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–25120 Filed 10–24–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70726; File No. SR–BOX–
2013–50]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
BOX Rules 4020 (Opening of
Accounts), 4050 (Discretionary
Accounts), and 4060 (Confirmation to
Public Customers) To Conform to the
Corresponding Rules of FINRA
October 21, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
12 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00088
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(‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on October 9, 2013, BOX Options
Exchange LLC (the ‘‘Exchange’’ or
‘‘BOX’’) 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. BOX has designated the
proposed rule change as constituting a
‘‘non-controversial’’ rule change under
Exchange Act Rule 19b–4(f)(6),3 which
renders the proposal effective upon
receipt of this filing by 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
The Exchange proposes to amend the
BOX Rules to conform to the
corresponding rules of the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’). The text of the proposed
rule change is available from the
principal office of the Exchange, at the
Commission’s Public Reference Room
and also on the Exchange’s Internet Web
site at https://boxexchange.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 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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
BOX Rules 4020 (Opening of Accounts),
4050 (Discretionary Accounts), and
4060 (Confirmation to Public
Customers) to conform to the
corresponding rules of FINRA.4 The
Exchange believes the proposed
amendments would clarify to Order
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
4 See FINRA Rule 2360(b)(12), (16), and (18).
2 17
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]]>Agencies
[Federal Register Volume 78, Number 207 (Friday, October 25, 2013)]
[Notices]
[Pages 64043-64046]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-25120]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70728; File No. SR-NYSE-2013-67]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Proposing to Amend the
Quantitative Continued Listing Standards Applicable to Companies Listed
Under Sections 102.01C and 103.01B of the Listed Company Manual
October 21, 2013.
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 8, 2013, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to harmonize the quantitative continued
listing standards applicable to companies listed under Sections 102.01C
and 103.01B of the Listed Company Manual (the ``Manual''). Under the
proposed amendment, a company will be considered to be below compliance
standards if its average global market capitalization over a
consecutive 30 trading-day period is less than $50,000,000 and, at the
same time, its total stockholders' equity is less than $50,000,000. The
text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.
[[Page 64044]]
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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to harmonize the quantitative continued
listing standards applicable to companies listed under Sections 102.01C
and 103.01B of the Manual (``operating companies'').
The Exchange's financial initial listing standards for domestic
operating companies are set forth in Section 102.01C of the Manual and
financial initial listing standards applicable to non-U.S. operating
companies are set forth in Section 103.01B of the Manual.\3\ The
Exchange's financial continued listing standards for operating
companies are set forth in Section 802.01B of the Manual.\4\ All
operating companies are subject to continued listing requirements to
maintain (i) a stock price on a 30-trading-day average basis of $1.00
and (ii) a total market capitalization on a 30-trading day average
basis of $15 million (the ``Minimum Listing Criteria''). All listed
operating companies are subject to additional financial continued
listing requirements which vary depending on the initial listing
standard in Section 102.01C or 103.01B under which the company
originally listed.
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\3\ Non-U.S. companies are also permitted to list under the
domestic listing standards set forth in Section 102.01C.
\4\ The Exchange also maintains continued listing standards with
respect to distribution of shares, set forth in Section 802.01A of
the Manual.
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The following are the current continued listing standards specific
to operating companies listed under the various initial listing
standards:
A company that qualified to list under the Earnings Test
set out in Sections 102.01C(I) or 103.01B(I), or pursuant to the
requirements set forth under the Assets and Equity Test set forth in
Section 102.01C(IV) or the ``Initial Listing Standard for Companies
Transferring from NYSE Arca'' (this standard is no longer in existence
and was operative from October 1, 2008 until August 31, 2009), will be
considered to be below compliance standards if average global market
capitalization over a consecutive 30 trading-day period is less than
$50,000,000 and, at the same time, total stockholders' equity is less
than $50,000,000.
A company that qualified to list under the Valuation/
Revenue with Cash Flow Test set out in Section 102.01C(II)(a) or
Section 103.01B(II)(a) will be considered to be below compliance
standards if:
[cir] average global market capitalization over a consecutive 30
trading-day period is less than $250,000,000 and, at the same time,
total revenues are less than $20,000,000 over the last 12 months
(unless the company qualifies as an original listing under one of the
other original listing standards); or
[cir] average global market capitalization over a consecutive 30
trading-day period is less than $75,000,000.
A company that qualified to list under the Pure Valuation/
Revenue Test set out in Section 102C.01(II)(b) or in Section
103.01B(II)(b) will be considered to be below compliance standards if:
[cir] average global market capitalization over a consecutive 30
trading-day period is less than $375,000,000 and, at the same time,
total revenues are less than $15,000,000 over the last 12 months
(unless the company qualifies as an original listing under one of the
other original listing standards); or
[cir] average global market capitalization over a consecutive 30
trading-day period is less than $100,000,000.
A company that qualified to list under the Affiliated
Company Test set out in Section 102C.01(III) or Section 103.01B(III)
will be considered to be below compliance standards if:
[cir] the listed company's parent/affiliated company ceases to
control the listed company, or the listed company's parent/affiliated
company itself falls below the continued listing standards applicable
to the parent/affiliated company, and
[cir] average global market capitalization over a consecutive 30
trading-day period is less than $75,000,000 and, at the same time,
total stockholders' equity is less than $75,000,000.
The Exchange proposes to amend the applicable continued listing
standards such that every operating company will be subject to the same
standards regardless of the standard under which such company initially
qualified. The proposed amendment to Section 802.01B of the Manual will
state that an operating company will be considered to be below
compliance standards if its average global market capitalization over a
consecutive 30 trading-day period is less than $50,000,000 and, at the
same time, its total stockholders' equity is less than $50,000,000 (the
``Proposed Continued Listing Standard'').\5\
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\5\ Consistent with the Exchange's general practice in the case
of rule changes (unless the amended rule specifies otherwise), upon
effectiveness of the proposed amendment, all listed operating
companies would be subject to the Proposed Continued Listing
Standard rather than any of the other currently applicable continued
listing standards, including any company operating under a
compliance plan due to an event of non-compliance with a previously
applicable continued listing standard or any company awaiting appeal
of a delisting determination based on non-compliance with a
previously applicable continued listing standard.
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Currently, to determine whether an operating company complies with
continued listing standards, the Exchange first looks to the financial
standard under which the company initially qualified for listing and
then applies the continued listing standard specified as applicable to
that initial listing standard. The practical impact of this policy is
that a company may be deemed noncompliant with the continued listing
standard associated with the initial financial listing standard under
which it originally qualified to list, notwithstanding the fact that it
would have remained in compliance if subject to one of the other
continued listing standards. This creates the anomalous result that two
companies could have identical quantitative characteristics, yet one
company would be deemed noncompliant and the other would remain
compliant, purely on the basis of the initial listing standards under
which the respective companies qualified to list many years previously.
The Exchange believes this potential for disparate treatment is unfair
to a listed company and its shareholders in the circumstance that a
company is deemed noncompliant or delisted notwithstanding the fact
that it would have remained compliant if one of the other continued
listing standards was applicable. Moreover, many listed companies
evolve subsequent to initial listing, and the idea that a company
should be subject indefinitely to continued listing criteria tailored
to the type of company it was at the time of initial listing no longer
seems appropriate.
The Exchange notes that the approach of assigning different
quantitative continued listing requirements to
[[Page 64045]]
companies that originally listed under different listing standards was
adopted in 2004, based on the assumption that a company should be
subject to a continued listing requirement that was related to the
elements in the financial listing standard under which it originally
listed.\6\ However, the Exchange's experience administering these
standards does not support the original assumption that the disparate
standards would enhance the quality of operating companies listed on
the Exchange. As discussed below, a review of data collected over more
than five years indicates that all of the companies that were delisted
under any of the other currently existing continued listing standards
during that period would also have been delisted if they had instead
been subject to the Proposed Continued Listing Standard, either
pursuant to the Proposed Continued Listing Standard itself or pursuant
to the Minimum Listing Criteria. Consequently, the Exchange derived no
appreciable regulatory benefit during that period from having multiple
continued listing standards rather than simply the Proposed Continued
Listing Standard and the Minimum Listing Criteria. Therefore, the
Exchange does not believe that it is necessary to continue to maintain
a complicated set of alternative continued listing standards.
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\6\ See Securities Exchange Act Release No. 49154 (January 29,
2004), 69 FR 5633 (February 5, 2004) (SR-NYSE-2003-43).
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The Exchange acknowledges that the other currently applicable
continued listing standards have higher minimum quantitative
requirements for average market capitalization than the Proposed
Continued Listing Standard. Most notably, the $50,000,000 minimum
average market capitalization requirement of the Proposed Continued
Listing Standard is lower than the minimum average market
capitalization requirements of all of the other currently existing
continued listing standards. However, the Exchange believes that, the
proposed adoption of the Proposed Continued Listing Standard will not
result in any meaningful weakening of the quality of companies listed
on the Exchange. In that regard, the Exchange notes that almost all
companies that are currently below compliance with their applicable
financial continued listing standard will also be below compliance with
the Proposed Continued Listing Standard at the time of its adoption.
Further, the Exchange notes that more than 87% of the operating
companies currently listed on the Exchange are already subject to a
continued listing standard identical to the Proposed Continued Listing
Standard. For those companies, therefore, there will be no change to
their continued listing obligations as a result of the proposed rule
change.
With regard to companies that are currently subject to one of the
other continued listing standards, the Exchange believes that adoption
of the Proposed Continued Listing Standard will not result in the
continued listing of a meaningful number of companies that would be
subject to delisting under the current continued listing standards. In
reaching this conclusion, the Exchange reviewed all companies that were
identified as below compliance for any of the financial standards
between 2006 and 2012. Approximately 22% of the identified companies
during that period were subject to a continued listing standard other
than the Proposed Continued Listing Standard. Of those 22% of
companies, a majority would have been cited for noncompliance with
either the Proposed Continued Listing Standard or the Minimum Listing
Criteria.\7\ With respect to the minority of companies that would not
have fallen below either the Proposed Continued Listing Standard or the
Minimum Listing Criteria, all have regained compliance and currently
continue to be in compliance with the Exchange's quantitative continued
listing standards. Based on this empirical data, therefore, the
Exchange believes that the Proposed Continued Listing Standard, in
combination with the Minimum Listing Criteria, is a rigorous measure
that will capture the full universe of companies that are financially
unsuitable for listing and will successfully maintain the quality of
the Exchange's listing program.
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\7\ Of the 22 total companies that make up this percentage,
eight would have fallen below the Proposed Continued Listing
Standard and an additional four were delisted for falling below the
Minimum Listing Criteria. An additional three of the 22 companies
voluntarily delisted as a result of merger transactions.
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The Exchange believes that the proposed amendment is consistent
with Rule 3a51-1(a)(2)(ii) (the ``Penny Stock Rule'') \8\ under the
Act. Section (a)(2) of the Penny Stock Rule provides that a security is
not a penny stock for purposes of the rule if it is listed on a
national securities exchange that has established quantitative
continued listing standards that are reasonably related to certain
enumerated initial listing standards and that are consistent with the
maintenance of fair and orderly markets. The Penny Stock Rule's minimum
initial listing standards are stockholders' equity ($5,000,000), market
value of listed securities ($50,000,000) or net income ($750,000). The
Proposed Continued Listing Standard requires that a listed company
maintain an average global market capitalization over a consecutive 30
trading-day period of in excess of $50,000,000 \9\ and stockholder's
equity in excess of $50,000,000. The Exchange believes that global
market capitalization is a comparable measure to the Penny Stock Rule's
market value of listed securities requirement. Therefore, the Proposed
Continued Listing Standard contains measures that are both related to,
and equal to or far in excess of, the Penny Stock Rule's initial
listing standards. Therefore, the Exchange believes that the proposed
amendment is consistent with the Penny Stock Rule.
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\8\ 17 CFR 240.3a51-1.
\9\ For purposes of calculating global market capitalization,
the Exchange will only consider securities that are (1) publicly
traded (or quoted) or (2) convertible into a publicly traded (or
quoted) security.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (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 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. In particular,
the Exchange believes that the adoption of the Proposed Continued
Listing Standard is consistent with the protection of investors and the
public interest because: (i) The Exchange has many years of experience
utilizing the Proposed Continued Listing Standard as the applicable
continued listing standard for a large percentage of listed companies
and, in the Exchange's experience, companies that remain in compliance
with that standard are suitable for continued listing; and (ii) the
Proposed Continued Listing Standard is unlikely to allow companies to
remain listed that would not otherwise be suitable for listing, as the
Exchange's review of historical listing compliance matters indicates
that any company that falls below any other applicable quantitative
listing standard will generally also fall below the Proposed Continued
Listing Standard.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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[[Page 64046]]
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. The proposed change is being
made to rationalize the continued listing standards for operating
companies listed on the Exchange. As the Exchange's research has
indicated that this change will be unlikely to have any meaningful
effect on the number of companies that will be delisted, the Exchange
believes that it will not have any effect on the competition among
listing markets and will result in no burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the 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:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2013-67 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2013-67. This file
number should be included on the subject line if email 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 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-NYSE-2013-67 and should be
submitted on or before November 15, 2013.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25120 Filed 10-24-13; 8:45 am]
BILLING CODE 8011-01-P
