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57982 Federal Register / Vol. 72, No.

196 / Thursday, October 11, 2007 / Notices

100 F Street, NE., Washington, DC SECURITIES AND EXCHANGE the initial six-month period of the Pilot
20549–1090. COMMISSION Program, the Exchange concluded that
the listing standards would qualify
All submissions should refer to File [Release No. 34–56606; File No. SR–
many companies for listing that are
Number SR–CHX–2007–19. This file NYSEArca–2007–69]
much smaller than the minimum size it
number should be included on the wishes to include in its target market.
Self-Regulatory Organizations; NYSE
subject line if e-mail is used. To help the NYSE Arca further noted that the
Arca, Inc.; Order Granting Accelerated
Commission process and review your Approval of Proposed Rule Change, as proposed amended initial listing
comments more efficiently, please use Modified by Amendment No. 1, and standard would exclude from
only one method. The Commission will Notice of Filing of Amendment No. 1 qualification some companies that
post all comments on the Commission’s Thereto Relating to Adoption of currently qualify to list but whose size
Internet Web site (http://www.sec.gov/ Revised Initial and Continued Listing or financial performance is not
rules/sro.shtml). Copies of the Standards for the Pilot Program consistent with that of the kind of issuer
submission, all subsequent Expiring on November 30, 2007 NYSE Arca intends to list.
amendments, all written statements A. Initial Listing Standards
with respect to the proposed rule October 3, 2007.
change that are filed with the The current NYSE Arca listing
I. Introduction
standards require for initial listing that,
Commission, and all written On July 23, 2007, NYSE Arca, Inc. at the time of initial listing, the listed
communications relating to the (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed class of common stock shall have: 6
proposed rule change between the with the Securities and Exchange At least 1.1 million publicly held
Commission and any person, other than Commission (‘‘Commission’’), pursuant shares.
those that may be withheld from the to Section 19(b)(1) of the Securities A closing price per share of $5 or
public in accordance with the Exchange Act of 1934 (‘‘Act’’) 1 and Rule more.7
provisions of 5 U.S.C. 552, will be 19b–4 thereunder,2 a proposed rule A minimum of 400 round lot
available for inspection and copying in change to amend its initial and shareholders.
the Commission’s Public Reference continued listing standards for the In addition, the requirements of one
Room, 100 F Street, NE., Washington, listing of common stock under a pilot of Standards One, Two, or Three below
DC 20549, on official business days program expiring on November 30, 2007 must be met:
between the hours of 10 a.m. and 3 p.m.. (‘‘Pilot Program’’).3 The proposed rule Standard One
Copies of such filing also will be change was published for comment in
the Federal Register on August 16, The issuer of the security had annual
available for inspection and copying at
2007.4 The Commission received no income from continuing operations
the principal office of the CHX. All before income taxes of at least $1
comments received will be posted comments on the proposal. On
September 27, 2007, NYSE Arca filed million in the most recently completed
without change; the Commission does fiscal year or in two of the last three
Partial Amendment No. 1 to the
not edit personal identifying most recently completed fiscal years.
proposed rule change.5 This order
information from submissions. You The market value of publicly held
approves the proposed rule change, as
should submit only information that modified by Amendment No. 1, on an shares is at least $8 million.
you wish to make available publicly. All accelerated basis, and provides notice of The issuer of the security has
submissions should refer to File filing of Amendment No. 1. stockholders’ equity of at least $15
Number SR–CHX–2007–19 and should million.
be submitted on or before November 1, II. Description of the Proposal
Standard Two
2007. NYSE Arca proposes to amend its
initial and continued listing standards The issuer of the security has
For the Commission, by the Division of stockholders’ equity of at least $30
Market Regulation, pursuant to delegated under the Pilot Program. According to
the Exchange, based on its experience in million.
authority.13 The market value of publicly held
Nancy M. Morris, 1 15 U.S.C. 78s(b)(1). shares is at least $18 million.
Secretary. 2 17 CFR 240.19b–4. The issuer has a two-year operating
[FR Doc. E7–20024 Filed 10–10–07; 8:45 am] 3 The Commission initially approved the Pilot history.
Program for six months, until May 29, 2007. See
BILLING CODE 8011–01–P Securities Exchange Act Release No. 54796 Standard Three
(November 20, 2006), 71 FR 69166 (November 29, The market value of publicly held
2006) (SR–NYSEArca–2006–85). The Pilot Program
was subsequently extended for an additional six shares is at least $20 million.
months, until November 30, 2007. See Securities The issuer has:
Exchange Act Release No. 55838 (May 31, 2007), 72 A market value of listed securities of
FR 31642 (June 7, 2007) (SR–NYSEArca–2007–51). at least $75 million (currently traded
4 See Securities Exchange Act Release No. 56232
issuers must meet this requirement and
(August 9, 2007), 72 FR 46119.
5 In Partial Amendment No. 1, NYSE Arca (i)
the $5 closing price requirement for 90
Indicates that it is the Exchange’s current practice consecutive trading days prior to
to require, in the case of initial public offerings, at applying for listing); or
least $5 per share, based on the initial public Total assets and total revenue of at
offering price; (ii) codifies the Exchange’s current least $75 million each for the most
practice of requiring at least $5 per share for initial
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public offerings; (iii) describes the Exchange’s


6 See NYSE Arca Equities Rule 5.2(c).
process to verify compliance with the initial listing
requirements; and (iv) clarifies that the Exchange is 7 Inthe case of initial public offerings, the
amending the closing price per share for currently Exchange represents that it interprets the provision
listed issuers by requiring them to meet the price as requiring an initial public offering price of $5 per
for at least 90 consecutive trading days prior to share or more. See Partial Amendment No. 1, supra
13 17 CFR 200.30–3(a)(12). applying for listing. note 5.

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Federal Register / Vol. 72, No. 196 / Thursday, October 11, 2007 / Notices 57983

recently completed fiscal year or in each B. Continued Listing Standards orderly markets. Adequate standards are
of two of the last three most recently The current NYSE Arca listing especially important given the
completed fiscal years. NYSE Arca standards require for continued listing expectations of investors regarding
proposes to eliminate Standards One that the listed class of common stock exchange trading and the imprimatur of
and Two and require all issuers to shall meet either Continued Listing listing on a particular market. Once a
qualify under an amended version of Standard One or Continued Listing security has been approved for initial
existing Standard Three. As proposed, Standard Two. The factors for listing, maintenance criteria allow an
the market value of publicly held shares Continued Listing Standard One are: exchange to monitor the status and
requirement of Standard Three would 750,000 publicly held shares; trading characteristics of that issue to
be raised from $20 million to $45 Market value of publicly held shares ensure that it continues to meet the
million. All issuers would be required of $5 million; exchange’s standards for market depth
to meet the market value of listed The issuer has stockholders’ equity of and liquidity so that fair and orderly
securities of Standard Three, which at least $10 million; and markets can be maintained.
would be raised from $75 million to 400 shareholders of round lots. As discussed in more detail below,
$150 million. In addition, the issuer of NYSE Arca proposes to amend the new standards will allow NYSE
the security would be required to meet Continued Listing Standard One as Arca to list certain types of companies
two of the following four conditions: follows: that meet specified criteria, including
Total assets of at least $75 million. The publicly held shares requirement size, market value, holder, and price
Total revenues of at least $50 million requirements, which should help to
would be raised from 750,000 to 1.1
for the most recently completed fiscal ensure that listed companies have
million shares.
year. sufficient depth and liquidity to
Stockholders’ equity of at least $50 The market value of publicly held
shares requirement would be raised maintain a fair and orderly market. The
million. Commission notes that the proposed
Positive pre-tax earnings in the most from $5 million to $15 million.
The stockholders’ equity would be NYSE Arca initial listing standards
recently completed fiscal year.
raised from $10 million to $15 million. remain more restrictive than the current
Finally, NYSE Arca is amending the
closing price per share requirement. The minimum of 400 round lot Pilot Program requirements for current
Currently, NYSE Arca requires a closing shareholders would remain the same. initial listing Standard Three. For
price of $5 per share or more and does NYSE Arca is not amending Continued example, the market value of publicly
not differentiate between initial public Listing Standard Two. held shares would increase from $20
offerings and currently traded issuers.8 million to $45 million.13 In addition, the
III. Discussion market value of listed securities would
NYSE Arca proposes to require (1) In
the case of initial public offerings, an The Commission finds that the increase from $75 million to $150
initial public offering price of $5 per proposed rule change is consistent with million.14 As noted above, the
share or more 9 and (2) in the case of the requirements of the Act and the continued listing standards under
currently traded issuers, a closing price rules and regulations thereunder Standard One are being increased to
of $5 per share or more for 90 applicable to a national securities reflect the increased initial listing
consecutive trading days prior to exchange.11 In particular, the standards. For example, the market
applying for listing.10 Commission finds that the proposed value of publicly held shares is raised
rule change is consistent with section from $5 million to $15 million, the
8 The Commission notes that the previous 6(b)(5) of the Act,12 which requires that publicly held shares requirement is
language in the $5.00 minimum closing price did an exchange have rules designed, among raised from 750,000 to 1.1 million
not specify how a company listing for the first time other things, to promote just and shares, and the stockholders’ equity is
would meet this requirement since there would be
no previous closing price history. In Partial
equitable principles of trade, to remove raised from $10 million to $15 million.
Amendment No 1, NYSE Arca described the impediments to and perfect the While the rule proposal will allow
Exchanges process to verify compliance with initial mechanism of a free and open market NYSE Arca to exclude from
listing standards in an initial public offering and a national market system, protect qualification some companies that
situation.
9 According to the Exchange, in the case of initial
investors and the public interest, and currently qualify to list, but whose size
public offerings, the issuer or principal underwriter are not designed to permit unfair or financial performance is not
must provide NYSE Arca with a letter of discrimination between customers, consistent with the kind of issuer the
representation stating that the issuer is expected to issuers, brokers, or dealers. The Exchange has stated it intends to list,
be in compliance with the requisite holders, market the Commission believes that as long as
value, and share price requirements upon
development and enforcement of
completion of the offering. The letter of adequate standards governing the initial there are requirements to ensure
representation must provide NYSE Arca with an and continued listing of securities on an adequate depth and liquidity, and other
approximation of the anticipated numerical levels exchange is an activity of critical regulatory requirements are in place to
for each of the cited criteria. NYSE Arca also
requires issuers to provide a distribution schedule
importance to financial markets and the ensure adequate investor protections,
signed by an executive officer of the issuer, investing public. Listing standards serve that it is within the Exchange’s business
providing the best available estimate of the number as a means for an exchange to screen judgment to determine it no longer
of beneficial holders. For transfer listings, this form issuers and to provide listed status only wants to qualify for listing these type of
is due prior to admission to trading. For initial
public offerings, this form is due within 120 days to bona fide companies with sufficient smaller companies under its rules.15
after completion of the offering. NYSE Arca public float, investor base, and trading
13 See proposed NYSE Arca Equities Rule
represents that it intends to continue the foregoing interest to ensure that the market for a
procedures in connection with the application of its 5.2(c)(iv).
company’s stock has the depth and
initial listing standards as amended by this filing. 14 See proposed NYSE Arca Equities Rule
liquidity necessary to maintain fair and 5.2(c)(v). In addition, under the proposal, an issuer
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10 Under current NYSE Arca rules, only issuers

qualifying for listing under the first alternative of must meet two of the four factors noted above that
11 In approving this proposed rule change, the serve as indicators of the issuer’s financial
Standard Three would have to meet the $5 closing
price requirement for 90 consecutive trading days Commission notes that it has considered the condition.
prior to applying for listing. This change would proposed rules’ impact on efficiency, competition, 15 The Commission notes that under NYSE Arca

require all currently traded issuers to meet the price and capital formation. See 15 U.S.C. 78c(f). rules, the Exchange has broad discretion to deny
requirement for 90 consecutive days prior to listing. 12 15 U.S.C. 78f(b)(5). Continued

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57984 Federal Register / Vol. 72, No. 196 / Thursday, October 11, 2007 / Notices

Further, the Exchange has represented IV. Accelerated Approval of Proposed Commission and any person, other than
that any currently listed issuers who Rule Change as Modified by those that may be withheld from the
would be below the proposed continued Amendment No. 1 public in accordance with the
listing standards will have an ability to Pursuant to section 19(b)(2) of the provisions of 5 U.S.C. 552, will be
gain compliance through the Exchange’s Act,19 the Commission finds good cause available for inspection and copying in
normal process. The Exchange’s rules, to approve the proposal, as modified by the Commission’s Public Reference
among other things, set forth certain due Amendment No. 1, prior to the thirtieth Room, 100 F Street, NE., Washington,
process procedures, including a right of day after the publication of the proposal DC 20549, on official business days
review, with respect to any delisting in the Federal Register. The between the hours of 10 a.m. and 3 p.m.
determination by the Exchange.16 Commission notes that the Exchange is Copies of such filing also will be
Finally, NYSE Arca is making some codifying its current procedures with available for inspection and copying at
clarifying changes to the $5.00 respect to the initial public offering the principal office of the Exchange. All
minimum closing price requirement.17 price per share requirement and clarifies comments received will be posted
For initial public offerings, NYSE Arca that the proposal would change the without change; the Commission does
is codifying its current practice of price per share requirement for not edit personal identifying
requiring an initial public offering price currently listed issuers by requiring information from submissions. You
per share of $5 or more.18 For currently them to meet this price requirement for
should submit only information that
traded issuers, NYSE Arca is amending a specified period of time. The
you wish to make available publicly. All
the current $5 price per share Commission believes that Amendment
No. 1 clarifies the proposed rule submissions should refer to File
requirement by adding the Standard Number SR–NYSEArca–2007–69 and
Three requirement of meeting the language and does not introduce any
new regulatory issues. For these should be submitted on or before
minimal price per share for 90 November 1, 2007.
reasons, the Commission finds good
consecutive trading days prior to
cause for approving the proposal, as VI. Conclusion
applying for listing. The Commission
modified by Amendment No. 1, on an
believes that the proposed changes to
accelerated basis. For the foregoing reasons, the
the price per share requirement will
provide clarity to issuers on the price V. Solicitation of Comments Commission finds that the proposed
requirements to list on NYSE Arca and rule change, as modified by Amendment
Interested persons are invited to No. 1, is consistent with the Act and the
ensure that currently traded issuers submit written data, views, and
must evidence some minimum price rules and regulations thereunder
arguments concerning Amendment No.
history to qualify for listing. applicable to a national securities
1, including whether the amendment is
exchange, and, in particular, with
Based on the above, the Commission consistent with the Act. Comments may
be submitted by any of the following section 6(b)(5) of the Act.20
believes the rule change is reasonable
and should continue to provide only for methods: It is therefore ordered, pursuant to
the listing of securities with a sufficient Section 19(b)(2) of the Act,21 that the
Electronic Comments
investor base to maintain fair and proposed rule change (SR–NYSEArca–
orderly markets. While the changes will Use the Commission’s Internet 2007–69), as modified by Amendment
remove certain alternative initial listing comment form (http://www.sec.gov/ No. 1, be, and hereby is, approved on an
standards under NYSE Arca rules that rules/sro.shtml); or send an e-mail to accelerated basis, as a pilot until
rule-comments@sec.gov. Please include November 30, 2007.
may have actually been higher in some
File Number SR–NYSEArca–2007–69 on
respects from the current standards, For the Commission, by the Division of
the subject line.
because these are all alternative Market Regulation, pursuant to delegated
standards and the proposal actually Paper Comments authority.22
increases existing requirements under Send paper comments in triplicate to Nancy M. Morris,
initial listing alternative Standard Three Nancy M. Morris, Secretary, Securities Secretary.
and makes that the sole alternative for and Exchange Commission, 100 F
qualifying for listing, taken as a whole, [FR Doc. E7–20025 Filed 10–10–07; 8:45 am]
Street, NE., Washington, DC 20549–
the Commission believes the standards 1090. BILLING CODE 8011–01–P
are an increase over the current All submissions should refer to File
standards. The continued listing Number SR–NYSEArca–2007–69. This
standards also are an increase compared file number should be included on the 20 The approval order for the Pilot Program noted

to existing standards. Accordingly, the subject line if e-mail is used. To help the that the staff of the Division of Market Regulation
Commission believes that the changes Commission process and review your would not recommend enforcement action to the
Commission under Rules 15g–2 through 15g–9
adequately protect investors and the comments more efficiently, please use under the Act if broker-dealers treated equity
public interest. only one method. The Commission will securities listed pursuant to the initial and
post all comments on the Commission’s continued listing standards set forth in amended
listing to any company based on any event, Internet Web site (http://www.sec.gov/ NYSE Arca Equities Rule 5 as meeting the exclusion
condition, or circumstance that makes listing of the rules/sro.shtml). Copies of the from the definition of penny stock contained in
company inadvisable or unwarranted in the opinion Rule 3a51–1 under the Act pursuant to paragraph
of the Exchange. Further, the Commission notes
submission, all subsequent
amendments, all written statements (a)(2) thereof. See supra note 3. Because the
that the rule permits the Exchange to deny listing alternative listing standard contained in Rule
even if the company meets the listing standards. with respect to the proposed rule
5.2(c)(3)(ii)(b) of the Pilot Program, which
See NYSE Arca Equities Rule 5.2(a). change that are filed with the
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16 See NYSE Arca Equities Rule 5.5(m). necessitated no-action relief, is not included in the
Commission, and all written amended listing standards, no-action relief would
17 See proposed NYSE Arca Equities Rule

5.5(c)(ii).
communications relating to the not be required for the new standards being adopted
18 See supra note 9, which discuss compliance proposed rule change between the in this order.
21 15 U.S.C. 78s(b)(2).
with the initial listing standards for initial public
offerings. 19 15 U.S.C. 78s(b)(2). 22 17 CFR 200.30–3(a)(12).

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