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69166 Federal Register / Vol. 71, No.

229 / Wednesday, November 29, 2006 / Notices

or delivery at the end of the quarter. In Commission believes that the proposed SECURITIES AND EXCHANGE
such case, the customer would receive rule change, as amended, should COMMISSION
a quarterly statement even though it had remove impediments to and perfect the
[Release No. 34–54796; File No. SR–
consented not to receive one. BNP mechanisms of a free and open market NYSEArca–2006–85]
contended that the customer would be and national market system by removing
confused by such statement and the an unnecessary and potentially costly Self-Regulatory Organizations; NYSE
statement would not benefit the obligation on firms to deliver quarterly Arca, Inc.; Notice of Filing and Order
customer.12 account statements to DVP/RVP Granting Accelerated Approval of
The SIA letter supported the proposed customers. At the same time, the Proposed Rule Change Relating to a
amendment to NYSE Rule 409 but proposal maintains certain investor Six-Month Pilot Program To Adopt New
commented that the proposal would protections (i.e., requiring NYSE Initial and Continued Listing Standards
unnecessarily and impractically require member organizations to obtain
individual firms to retain a record that affirmative consent to the suspension of November 20, 2006.
reflects each institution’s consent to the quarterly account statements, preserving Pursuant to Section 19(b)(1) of the
suspension of statements. SIA proposed the ability of customers to obtain Securities Exchange Act of 1934
that the NYSE interpret proposed particular statements upon request and (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
amended Rule 409 to make an to resume receipt of statements notice is hereby given that on November
institution’s notification to Omgeo 13 promptly upon request, and precluding 17, 2006, NYSE Arca, Inc. (‘‘NYSE
and Omgeo’s population of their member organizations from unilaterally Arca’’ or ‘‘Exchange’’) filed with the
database sufficient for recordkeeping terminating delivery of such Securities and Exchange Commission
purposes. statements). Therefore, the Commission (‘‘Commission’’ or ‘‘SEC’’) the proposed
believes the proposal is consistent with rule change as described in Items I and
III. NYSE’s Response to Comments II below, which Items have been
the Exchange Act.
In filing Amendment No. 2, NYSE substantially prepared by the Exchange.
addressed comments on the proposal by Accelerated Approval of Amendment The Commission is publishing this
revising proposed amended Rule No. 2 notice to solicit comment on the
409(a)(3) to confirm that transactional The Commission finds good cause to proposed rule change from interested
positions, such as those arising from a approve Amendment No. 2 to the persons. For the reasons discussed
fail to receive or deliver money or proposed rule change, as amended, below, the Commission is granting
securities, will not be deemed money or prior to the thirtieth day after accelerated approval of the proposed
security positions for purposes of this Amendment No. 2 is published for rule change, as a six-month pilot, until
rule. This proposed change is intended comment in the Federal Register May 29, 2007.
to avoid the possibility raised by BNP pursuant to Section 19(b)(2) of the I. Self-Regulatory Organization’s
that firms could be in violation of the Act.16 Amendment No. 2 clarifies that Statement of the Terms of Substance of
rule due to a failed receipt or delivery transactional positions, such as those the Proposed Rule Change
at the end of a quarter. arising from a fail to receive or deliver The Exchange proposes, on a six-
IV. Discussion money or securities, will not be deemed month pilot program basis (the ‘‘Pilot
money or security positions for Program’’), to make significant revisions
The Commission finds that the purposes of the proposed amended rule.
proposed rule change, as amended, is to its initial and continued financial
The Commission finds that Amendment listing standards for operating
consistent with the requirements of the No. 2 appropriately addresses a concern
Exchange Act and the rules and companies.3 The text of the proposed
raised by a commenter.17 For these rule change is available on the
regulations thereunder applicable to a reasons, the Commission believes that
national securities exchange.14 In Exchange’s Web site at
good cause exists to accelerate approval www.nysearca.com, at the Exchange’s
particular, the Commission finds that of Amendment No. 2.
the proposed rule change is consistent Office of the Secretary and at the
with Section 6(b)(5) of the Exchange V. Conclusion Commission’s Public Reference Room.
Act.15 Section 6(b)(5) of the Act It is therefore ordered, pursuant to II. Self-Regulatory Organization’s
requires, among other things, that the Section 19(b)(2) of the Exchange Act,18 Statement of the Purpose of, and
rules of an exchange be designed to that the proposed rule change (SR– Statutory Basis for, the Proposed Rule
promote just and equitable principles of NYSE–2005–90), as amended by Change
trade, to remove impediments to and Amendment No. 1 thereto, be, and In its filing with the Commission, the
perfect the mechanism of a free and hereby is, approved, and that self-regulatory organization included
open market and national market Amendment No. 2 thereto, be, and statements concerning the purpose of
system, and in general, to protect hereby is, approved on an accelerated and basis for the proposed rule change
investors and the public interest. The basis. and discussed any comments it received
12 In its comment, discussed below, SIA does not For the Commission, by the Division of on the proposed rule change. The text
believe that condition (3) should apply to those Market Regulation, pursuant to delegated of these statements may be examined at
accounts that show a money or position balance at authority.19
the end of the quarter because of unsettled items or Nancy M. Morris, 1 15 U.S.C. 78s(b)(1).
a ‘‘DK.’’ 2 17 CFR 240.19b–4.
13 According to SIA, Omgeo, LLC is the leading Secretary.
3 The Commission notes that the proposed
industry provider of institutional processing [FR Doc. E6–20227 Filed 11–28–06; 8:45 am] changes are primarily to the initial and continued
services. SIA believes that other vendors would also BILLING CODE 8011–01–P listing standards of common stock and common
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provide such indicators. stock equivalent securities, preferred stock and


14 In approving this proposed rule change, the
16 15
similar issues and secondary classes of common
Commission has considered whether the proposed U.S.C. 78s(b)(2). stock. Some changes are also being made to the
17 See BNP letter, footnote 6, supra.
rule change will promote efficiency, competition, listing standards for bonds and debentures,
and capital formation. See 15 U.S.C. 78c(f). 18 15 U.S.C. 78s(b)(2).
warrants, contingent value rights, other securities,
15 15 U.S.C. 78f(b)(5). 19 17 CFR 200.30–3(a)(12). and index-linked exchangeable notes.

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Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices 69167

the places specified in Item III below. financial requirements.5 The principal event, condition, or circumstance that
The self-regulatory organization has objectives of these proposed revisions makes the listing of the company
prepared summaries, set forth in are to upgrade the financial condition, inadvisable or unwarranted in the
Sections A, B, and C below, of the most shareholder interest, and stature of opinion of the Exchange. Such
significant aspects of such statements. issuers listing on NYSE Arca determination could be made even if the
Marketplace; more closely align NYSE company meets the standards set forth
A. Self-Regulatory Organization’s Arca Marketplace’s listing standards
Statement of the Purpose of, and below.
and structure with the NYSE; and
Statutory Basis for, the Proposed Rule enhance NYSE Arca Marketplace’s Summary of Current and Proposed
Change competitive position.6 Initial Listing Standards
1. Purpose NYSE Arca Equities Rule 5.1(a) Summary of Current Initial Listing
provides that the Board of the Directors Standards for Operating Companies
On March 7, 2006, Archipelago of the Exchange will make
Holdings, Inc. and the New York Stock determinations as to whether to list Currently, the NYSE Arca
Exchange, Inc. completed their merger securities or admit securities to unlisted
(the ‘‘Merger’’), creating NYSE Group, Marketplace has a two-tier listing
trading privileges on the Exchange. structure, classifying listed securities as
Inc. (‘‘NYSE Group’’). NYSE Group is a Similarly, current NYSE Arca Equities
holding company that operates, among either Tier I or Tier II. For their common
Rule 5.2(a) provides that the prescribed stock to qualify for initial listing as a
other subsidiaries, two securities forms of applications to list securities
exchanges: New York Stock Exchange Tier I security, issuers must satisfy,
on the Exchange will be determined by among other things, the numerical
LLC (‘‘NYSE’’) and NYSE Arca Equities, the Board of Directors. This filing
Inc. (‘‘NYSE Arca Equities’’ or the criteria set forth in NYSE Arca Equities
proposes to amend both of the Rule 5.2(c).7 To qualify for initial listing
‘‘Corporation’’).4 NYSE Arca Equities aforementioned requirements to state
conducts its equities trading operations as a Tier II security, issuers must satisfy,
that the Exchange will make such
through its equities trading facility, among other things, the numerical
determinations. Such decisions will be
NYSE Arca, L.L.C. (also referred to as criteria set forth in NYSE Arca Equities
made by the chief executive officer of
the ‘‘NYSE Arca Marketplace’’). Rule 5.2(k). Both Rule 5.2(c) and Rule
the Exchange or by staff of the Exchange
In connection with the Merger, NYSE pursuant to authority delegated by the 5.2(k) also provide that an issuer may
Arca Marketplace examined all aspects chief executive officer. In addition, qualify under either a Basic or an
of its listings program, and as a result, NYSE Arca Equities Rule 5.2(a) would Alternate set of listing criteria. To be
determined to make substantial be amended to state that the Exchange eligible to list, an issuer need only
modifications and enhancements to its may deny listing or apply additional or satisfy all of the criteria under one of
listing standards. Accordingly, with this more stringent criteria based on any these four separate sets of standards.8
filing, NYSE Arca is proposing
7 In addition to the numerical criteria set forth in
significant revisions to the initial and 5 This filing relates only to quantitative (financial)

continued listing criteria applicable to original and continued listing standards applicable Rules 5.2(c) and 5.2(k), issuers must also satisfy
to operating companies. It does not relate to listing certain qualitative requirements, including
operating companies set forth in NYSE standards for corporate governance, exchange corporate governance-related standards set forth in
Arca Equities Rule 5, completely traded funds, open and closed-end funds, NYSE Arca Equities Rule 5.3. These corporate
replacing the current tiered structure commodity-based trusts, trust issued receipts, governance rules are not the subject of this
with a single set of numerical and portfolio depositary receipts, investment company
proposal.
units or other types of structured products. See
8 NYSE Arca Equities Rule 5.2(a) provides that
supra note 3.
4 The Commission notes that NYSE Arca is 6 The Commission recently approved substantial approval of listing applications is a matter solely
actually the registered national securities exchange revisions to NYSE Arca’s listing fees. See Securities within the discretion of NYSE Arca Equities, and
and NYSE Arca Equities is a wholly-owned Exchange Act Release No. 54007 (June 16, 2006), 71 the fact that an issuer may meet the applicable
subsidiary of NYSE Arca. FR 36155 (June 23, 2006) (SR–PCX–2006–16). listing requirements does not necessarily mean that
its application will be approved.
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69168 Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices

These requirements are:

Tier I (Rule 5.2(c)) Tier II (Rule 5.2(k))

Basic Alternate Basic Alternate

Net tangible assets 9 ........................................................................................ ........................ ........................ $2,000,000 ........................


Net worth 10 ...................................................................................................... $4,000,000 $12,000,000 ........................ $8,000,000
Pre-tax income 11 ............................................................................................. $750,000 ........................ ........................ ........................
Net income 12 ................................................................................................... ........................ ........................ $100,000 ........................
Public float (shares) ......................................................................................... 500,000 1,000,000 500,000 1,000,000
Public beneficial holders 13 .............................................................................. 800 or 400 400 500 500
Market value .................................................................................................... $3,000,000 $15,000,000 $1,500,000 $2,000,000
Operating history ............................................................................................. ........................ 3 years 3 years ........................
Price 14 ............................................................................................................. $5 $3 $3 $1

Proposed Initial Listing Standards for require for initial listing that, at the time Æ Total assets and total revenue of
Common Stock and Common Stock of initial listing, the listed class of $75 million each for the most recently
Equivalent Securities common stock or common stock completed fiscal year or two of the last
With this filing, NYSE Arca is equivalent securities 15 shall have: three most recently completed fiscal
proposing to eliminate the Tier I and II • At least 1.1 million publicly held years.
classifications and replace, in their shares. In evaluating compliance with these
entirety, the current Tier I and Tier II • A closing price per share of $5 or standards, the Exchange will consider
numerical standards for initial listing more. amounts contained in a company’s pro
• A minimum of 400 round lot forma financial statements provided in
for common stock set forth in NYSE
shareholders. a filing with the Commission pursuant
Arca Rules 5.2(c) and (k), respectively. In addition, the requirements of one
Companies whose common stock is to Commission rules and regulations
of Standards One, Two or Three below governing Article 11 ‘‘Pro forma
listed with a Tier II designation will be
must be met: information of Regulation S–X Part
able to remain listed under the existing
Tier II rules as long as they are in Standard One 210—Form and Content of and
compliance with the maintenance Requirements for Financial Statements.’’
• The issuer of the security had This shall include, without limitation,
requirements of Arca Equities Rule annual income from continuing
5.5(h). However, the Exchange will no adjustments relating to the proceeds of
operations before income taxes of at an offering. In the case of foreign private
longer list any new issuers or additional least $1 million in the most recently
classes of securities with a Tier II issuers (as such term is defined in Rule
completed fiscal year or in two of the 3b–4 under the Act), the Exchange will
designation. last three most recently completed fiscal
In place of the existing Tier I and Tier take into account global market
years. capitalization in evaluating compliance
II standards, this filing proposes to • The market value of publicly held
with the market capitalization
shares is at least $8 million.
9 NYSE Arca Equities Rule 5.1(b)(10) defines ‘‘net
• The issuer of the security has requirements of this rule.
tangible assets’’ as the amount of funds remaining This revised rule shall apply to
after deducting intangible assets from stockholders’ stockholders’ equity of at least $15
common stock and common stock
equity. This rule further provides that intangible million.
assets include, but are not limited to, goodwill, equivalents, including, but not limited
patents, copyrights, trademarks, leaseholds, Standard Two to: Ordinary shares, American
franchises, licenses, permits, research and Depository Receipts (‘‘ADRs’’),
development costs, organization costs, and similar • The issuer of the security has
types of property rights. stockholders’ equity of at least $30 American Depository Shares, global
10 NYSE Arca Equities Rule 5.1(b)(9) defines ‘‘net
million. depository shares, depository shares,
worth’’ as total assets (excluding the value of • The market value of publicly held shares or certificates of beneficial
goodwill) less total liabilities. interest of trusts, and other similar
11 NYSE Arca Equities Rule 5.2(c)(4) provides that shares is at least $18 million.
an issuer must have pre-tax income from continuing • The issuer has a two-year operating issues that have the same characteristics
operations of at least $750,000 in the last fiscal year history. of common stock.
or two of the last three fiscal years.
12 NYSE Arca Equities Rule 5.2(k)(4) provides that Standard Three Summary of Current Initial Listing
an issuer must have net income from continuing Standards for Preferred Stock and
operations of at least $100,000 in the last fiscal year
• The market value of publicly held Similar Issues
or in two of the last three fiscal years, or total net shares is at least $20 million.
tangible assets of $2,500,000. • The issuer has: Currently, as set forth in NYSE Arca
13 NYSE Arca Equities Rule 5.2(c)(2) provides that
Æ A market value of listed securities Equities Rule 5.2(d), in the case of
issuers must have at least 800 public beneficial of $75 million (currently traded issuers preferred stock and similar issues, the
holders if the issuer has at least 500,000 and less
than 1,000,000 shares publicly held, or a minimum must meet this requirement and the $5 following listing requirements among
of 400 public beneficial holders if the issuer has closing price requirement for 90 others must be met:
either: (i) At least 1,000,000 shares publicly held; consecutive trading days prior to • The issuer must meet the net worth
or (ii) at least 500,000 shares publicly held and and earnings requirements as set forth
average daily trading volume in excess of 2,000
applying for listing); or
shares for the six months preceding the date of
in the Tier I Basic Listing Requirements
application. 15 Proposed NYSE Arca Equities Rule 5.1(b)(26) under Rule 5.2(c), and must meet and
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14 NYSE Arca Equities Rules 5.2(c)(5) and defines common stock equivalent as ‘‘ordinary appear to be able to service the dividend
5.2(k)(5) provide that the issuer must maintain the shares, ADRs, American Depository Shares, global requirements for the preferred stock.
minimum price for the majority of business days for depository shares, depository shares, shares or
the most recent six-month period prior to the date certificates of beneficial interest of trusts, and other
• If the company’s common stock is
of application, and the price must be at or above similar issues that have the same characteristics of traded on NYSE Arca or on either the
the minimum per share at the time of application. common stock.’’ American Stock Exchange LLC

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Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices 69169

(‘‘Amex’’) or NYSE, the following public security of the issuer is listed on the satisfies the initial listing criteria for
distribution requirements must be met: Exchange or on the NYSE, The Nasdaq common stock.
At least 100,000 preferred shares Global Market or the Amex, the issue
publicly held and an aggregate market shall have: Summary of Current and Proposed
Continued Listing Standards
value of at least $2,000,000, and a • At least 200,000 publicly held
minimum closing bid price of $10. shares; Current Continued Listing Standards for
• If the related common stock is not • A market value of publicly held Common Stock
traded on any of the above referenced shares of at least $4,000,000;
exchanges then the requirements are: At To qualify for continued listing as a
• A minimum closing price per share
least 400,000 preferred shares publicly Tier I security, issuers must satisfy,
of $5;
held and an aggregate market value of at among other things, the numerical
least $4,000,000, and a minimum • A minimum of 100 round lot
shareholders. criteria set forth in NYSE Arca Equities
closing bid price of $10. At least 800 Rule 5.5(b). To qualify for continued
public beneficial holders of 100 shares Alternatively, in the event the issuer’s
listing as a Tier II security, issuers must
or more shall also be required. common stock or common stock
equivalent security is not listed on satisfy, among other things, the
Proposed Initial Listing Standards for either the Exchange or on the NYSE, numerical criteria set forth in NYSE
Preferred Stock and Similar Issues and The Nasdaq Global Market or the Amex, Arca Equities Rule 5.5(h).
Secondary Classes of Common Stock the preferred stock and/or secondary These requirements are:
For initial listing, if the common stock class of common stock may be traded on
or common stock equity equivalent the Exchange so long as the security

Tier I (Rule 5.5(b)) Tier II (Rule 5.5(h))

Net tangible assets or Net worth ........................................ $2,000,000 or 4,000,000 16 ................................................ $500,000 or 2,000,000.
Public float (shares) ............................................................ 200,000 .............................................................................. 300,000.
Public beneficial holders ..................................................... 400 17 ................................................................................. 250.
Market value ....................................................................... $1,000,000 ......................................................................... $500,000.
Bid price 18 .......................................................................... $3 ....................................................................................... $1.

Proposed Continued Listing Standards Under the proposed new standards, a means (x) the closing sale price per
for Common Stock and Common Stock listed common stock must meet each of share of the common stock or common
Equivalent Securities the criteria set forth in Continued stock equivalent security underlying the
Listing Standards One or Two below to ADRs multiplied by (y) the number of
With this filing, NYSE Arca is continue to remain listed on the shares of such common stock or
proposing to eliminate the two tiered Exchange. common stock equivalent security
structure and replace, in their entirety, outstanding worldwide (including any
Continued Listing Standard One
the current Tier I and Tier II numerical shares underlying outstanding ADRs).
standards for continued listing for • 750,000 publicly held shares; In addition, an issuer will also be
common stock set forth in NYSE Arca • Market value of publicly held considered to be below compliance
Rules 5.5(b) and (h), respectively, except shares of $5 million; standards if the average closing price of
• The issuer has stockholders’ equity a security is less than $1.00 over a
that Rule 5.5(h) will continue to be
of at least $10 million; and consecutive 30 trading-day period. Once
applied to common stocks listed with a • 400 shareholders of round lots.
Tier II designation prior to the notified, the issuer must bring its share
effectiveness of this filing. In their Continued Listing Standard Two price and average share price back
above $1.00 by six months following
place, this filing proposes in new Rule • The issuer has:
5.5(b) to require for continued listing Æ A market value of listed securities receipt of the notification. The issuer
of $50 million or, in the case of non-U.S. must, however, notify the Exchange,
that a listed common stock must meet
companies, a global market within 10 business days of receipt of the
the criteria set forth in either Continued
capitalization of $50 million; or notification, of its intent to cure this
Listing Standard One or Continued
Æ total assets and total revenue of $50 deficiency or be subject to suspension
Listing Standard Two below to continue and delisting procedures. Once a U.S.
to remain listed on the Exchange. All of million each for the most recently
completed fiscal year or two of the last issuer is notified that it is below
the existing Tier I issuers and securities compliance, it is required to issue a
currently meet the requirements of the three most recently completed fiscal
years. press release disclosing the fact that it
proposed continued listing standards. has fallen below the continued listing
• 1,100,000 shares publicly held;
As such, the Exchange does not need to • Market value of publicly held standards of the Exchange concurrent
provide a phase in period for shares of $15 million; and with filing notice of such non-
compliance with the new rules and will • 400 shareholders of round lots. compliance with the SEC as required by
be able to apply them as soon as the In the case of a non-U.S. company Form 8–K. Once a foreign private issuer
Commission approves the Pilot with ADRs listed on the Exchange, the is notified that it is below compliance,
Program. term ‘‘global market capitalization’’ the issuer has 30 days to issue a press
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16 If the issuer has sustained losses from years, then it must have a minimum of $4 million consideration of market conditions, the issuer’s
continuing operations and/or net losses in two of in net worth. capitalization, the number of outstanding and
the last three fiscal years, then it must have a 17 Alternatively, an issuer must have at least 300 publicly held shares, and any other factors NYSE
minimum of $2 million in net worth. If the issuer beneficial holders of 100 shares or more. Arca Equities deems appropriate. This proposal
has sustained losses from continuing operations 18 NYSE Arca Equities Rules 5.5(b) and (h) eliminates this provision and replaces it with the
and/or net losses in three of the last four fiscal provide that NYSE Arca Equities may waive the ‘‘cure period’’ set forth in revised Rule 5.5(b).
minimum bid price requirements upon

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69170 Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices

release disclosing the fact that it has standards to any failure to maintain a $1 III. Solicitation of Comments
fallen below the continued listing closing price. Interested persons are invited to
standards of the Exchange. If the foreign Alternatively, in the event the issuer’s
submit written data, views and
private issuer fails to issue this press common stock or common stock
arguments concerning the foregoing,
release during the allotted 30 days, the equivalent security is not listed on
including whether the proposed rule
Exchange will issue the requisite press either the Exchange or on the NYSE,
change is consistent with the Act.
release. In the event that at the The Nasdaq Global Market or the Amex,
Comments may be submitted by any of
expiration of the six-month cure period, the preferred stock and/or secondary
the following methods:
both a $1.00 share price and a $1.00 class of common stock may be listed on
average share price over the preceding the Exchange so long as the security Electronic Comments
30 trading days are not attained, the satisfies the continued listing criteria for • Use the Commission’s Internet
Exchange will commence suspension common stock. comment form (http://www.sec.gov/
and delisting procedures. Other Securities Pre-Tax Income rules/sro.shtml); or
Notwithstanding the foregoing, if an Requirement • Send an e-mail to rule-
issuer determines that, if necessary, it comments@sec.gov. Please include File
will cure the price condition by taking To conform to the parallel provision
in Standard One of the proposed Number SR–NYSEArca–2006–85 on the
an action that will require approval of subject line.
common stock initial listing standards,
its shareholders, it must so inform the
the Exchange proposes to increase the Paper Comments:
Exchange in the above referenced
pre-tax income from continuing
notification, must obtain the
operations standard of NYSE Arca • Send paper comments in triplicate
shareholder approval by no later than its to Nancy M. Morris, Secretary,
Equities Rule 5.2(e) (‘‘Bonds and
next annual meeting, and must Securities and Exchange Commission,
Debentures’’), NYSE Arca Equities Rule
implement the action promptly 100 F Street, NE., Washington, DC
5.2(g) (‘‘Contingent Value Rights’’),
thereafter. The price condition will be 20549–1090.
NYSE Arca Equities Rule 5.2(j)(1)
deemed cured if the price promptly All submissions should refer to File
(‘‘Other Securities’’) and NYSE Arca
exceeds $1.00 per share, and the price Number SR–NYSEArca–2006–85. This
Equities Rule 5.2(j)(4) (‘‘Index-Linked
remains above the level for at least the Exchangeable Notes’’) from $750,000 to file number should be included on the
following 30 trading days. $1 million.19 subject line if e-mail is used. To help the
Notwithstanding the foregoing, if the Commission process and review your
subject security is not the primary 2. Statutory Basis comments more efficiently, please use
trading common equity security of the The Exchange believes the proposed only one method. The Commission will
issuer (e.g., a tracking stock or a rule change is consistent with Section post all comments on the Commission’s
preferred class), as discussed in more 6(b) of the Act,20 in general, and furthers Internet Web site (http://www.sec.gov/
detail below, the Exchange may the objectives of Section 6(b)(5) of the rules/sro.shtml). Copies of the
determine whether to apply this test to Act 21 in particular, because it is submission, all subsequent
such security after evaluating the designed to prevent fraudulent and amendments, all written statements
financial status of the issuer. manipulative acts and practices, to with respect to the proposed rule
Continued Listing Standards for promote just and equitable principles of change that are filed with the
Preferred Stock and Similar Issues and trade, to foster cooperation and Commission, and all written
Secondary Classes of Common Stock coordination with persons engaged in communications relating to the
facilitating transactions in securities, proposed rule change between the
NYSE Arca proposes to replace its and to remove impediments to and Commission and any person, other than
existing continued listing standards for perfect the mechanism of a free and those that may be withheld from the
preferred stock and similar issues with open market and a national market public in accordance with the
the requirements described below and system. provisions of 5 U.S.C. 552, will be
to also apply those requirements to available for inspection and copying in
secondary classes of common stock. B. Self-Regulatory Organization’s
Statement on Burden on Competition the Commission’s Public Reference
For continued listing, if the common Room. Copies of such filing also will be
stock or common stock equity The Exchange does not believe that available for inspection and copying at
equivalent security of the issuer is listed the proposed rule change will impose the principal office of the Exchange. All
on the Exchange or on the NYSE, The any burden on competition that is not comments received will be posted
Nasdaq Global Market or the Amex, the necessary or appropriate in furtherance without change; the Commission does
issue shall have: of the purposes of the Act. not edit personal identifying
• At least 100,000 publicly held C. Self-Regulatory Organization’s information from submissions. You
shares; Statement on Comments on the should submit only information that
• A market value of publicly held Proposed Rule Change Received From you wish to make available publicly. All
shares of at least $1,000,000; Members, Participants, or Others submissions should refer to File
• A minimum closing price per share Number SR–NYSEArca–2006–85 and
Written comments on the proposed
of $1; should be submitted on or before
rule change were neither solicited nor
• A minimum of 100 round lot December 20, 2006.
received.
shareholders.
If the preferred stock or similar issue IV. Commission’s Findings and Order
19 The Commission notes that, among other
is the issuer’s only security listed on the Granting Accelerated Approval of
things, the Exchange proposes other clarifying
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Exchange, after evaluating the financial changes, additional definitions, and different net Proposed Rule Change
status of the issuer, the Exchange may worth standards for bonds and debentures, The Commission finds that the
contingent value rights, other securities, and index-
choose to apply the six-month cure linked exchangeable notes. proposed rule change is consistent with
period provided under the proposed 20 15 U.S.C. 78f(b). the requirements of the Act and the
common stock continued listing 21 15 U.S.C. 78f(b)(5). rules and regulations thereunder

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Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices 69171

applicable to a national securities per share of $5 or more; and (3) a standards. In addition, the Exchange
exchange.22 In particular, the minimum of 400 round lot shareholders, proposes to amend the initial listing
Commission finds that the proposed in addition to meeting the additional standards for other securities and index-
rule change is consistent with Section standards set forth in one of three linked exchangeable notes to add a pre-
6(b)(5) of the Act,23 which requires that alternatives.25 Among other things, tax income requirement, consistent with
an exchange have rules designed, among Standard 1 and Standard 2 would the pre-tax income requirements of the
other things, to promote just and replace the current net worth common stock initial listing standards.
equitable principles of trade, to remove requirement with an increased The pre-tax income requirement for
impediments to and perfect the stockholders’ equity requirement of these securities is being raised from
mechanism of a free and open market $15,000,000 and $30,000,000, $750,000 to $1,000,000.
and a national market system, and are respectively. In addition, under Based on the foregoing, the
not designed to permit unfair Standard 3, the current net worth Commission believes that the proposed
discrimination between customers, requirement would be eliminated and amendments to the NYSE Arca Equities
issuers, brokers, or dealers. the issuer would be required to have a initial listing standards are consistent
The Exchange proposes to make market value of listed securities of with the requirements of the Act.
significant changes to its initial and $75,000,000 or total assets and total
continued listing standards. Among revenue of $75,000,000 each for the B. Continued Listing Standards
other things, the Exchange would no most recently completed fiscal year or The Commission believes that the
longer have a two-tiered listing two of the last three most recently proposed amendments to the NYSE
structure. The Exchange represents that completed fiscal years. The Commission Arca Equities continued listing
all existing Tier I issuers would meet notes that the proposed initial listing standards are consistent with the
one of the proposed continued listing standards for common stock or common requirements of the Act. The Exchange
standards set forth in proposed NYSE stock equivalent securities are proposes to amend the common stock or
Arca Equities Rule 5.5(h). Further, the substantially similar to The Nasdaq common stock equivalent securities
proposal would include a grandfather Global Market initial listing standards.26 continued listing standard, by requiring
clause to ensure that the existing Tier II The Exchange’s proposed preferred that common stock must meet the
issuers would have the option to remain stock (and similar issues) and secondary standards set forth in one of two
listed on the Exchange for as long as classes of common stock initial listing alternatives.30 Both common stock
they meet the continued listing standards would also be significantly continued listing standards would
standards. The Commission believes modified. The Exchange would increase the current publicly held
that the proposal is designed not to eliminate the current net worth and shares requirement. In addition, the
permit unfair discrimination among earnings requirements, and increase the current $1,000,000 market value
issuers, since the proposal would treat current publicly held shares requirement would be increased to a
all prospective issuers and existing requirement and market value $5,000,000 market value of publicly
Exchange-listed issuers equally. requirement. The Exchange would also held shares requirement under
Although the proposal significantly lower the current bid price requirement. Continued Listing Standard 1 and
restructures and changes NYSE Arca As proposed, if the common stock or $15,000,000 under Continued Listing
listing standards, as discussed below, common stock equivalent security of the Standard 2. Continued Listing Standard
the changes are substantially similar to issuer is listed on the Exchange, NYSE, 1 would replace the current net worth
The Nasdaq Global Market initial and The Nasdaq Global Market, or Amex, requirement of $2,000,000 or $4,000,000
continued listing standards. Based on these securities must have: (1) At least with a higher stockholders’ equity
this, the Commission believes it is 200,000 publicly held shares; (2) a requirement of $10,000,000. Continued
reasonable for the Exchange to market value of publicly held shares of Listing Standard 2 would eliminate the
determine that companies that meet at least $4 million; (3) a closing price current net worth requirement, but
these new listing standards are per share of $5 or more; and (4) a require companies to maintain a market
appropriate for inclusion and continued minimum of 100 round lot value of listed securities of $50,000,000
listing on NYSE Arca. For these reasons, shareholders.27 If the common stock or (in the case of non-U.S. companies, a
as discussed in more details below, the common stock equivalent security of the global market capitalization of
Commission finds that the proposal is issuer is not listed on the Exchange, $50,000,000), or total assets and total
consistent with the requirements of the NYSE, The Nasdaq Global Market, or revenue of $50,000,000 each for the
Act. Amex, these securities must satisfy the most recently completed fiscal year or
A. Initial Listing Standards initial listing standards for common two of the last three most recently
stock.28 The Commission notes that completed fiscal years. In addition, the
As proposed, the Exchange’s common
these requirements are substantially Exchange would require under both
stock or common stock equivalent
similar to The Nasdaq Global Market common stock continued listing
securities 24 initial listing standards
initial listing standards.29 standards that all common stock have
would be significantly modified and the The Exchange also proposes to amend an average closing price of at least $1.00
Exchange would no longer have Tier I the initial listing standards for bonds over a consecutive 30-day trading
or Tier II securities. Common stock or and debentures and contingent value period, instead of the current $3 bid
common stock equivalent securities rights by increasing the net worth price requirement.31 The Commission
would need: (1) At least 1.1 million requirement and pre-tax income notes that the proposed continued
publicly held shares; (2) a closing price requirement consistent with the listing standards for common stock,
22 In approving this proposed rule change, the
proposed common stock initial listing common stock equivalent securities and
similar issues are substantially similar
jlentini on PROD1PC65 with NOTICES

Commission notes that it has considered the


25 See proposed NYSE Arca Equities Rule 5.2(c).
proposed rules’ impact on efficiency, competition,
26 See Nasdaq Rule 4420(a)–(c).
and capital formation. See 15 U.S.C. 78c(f). 30 See proposed NYSE Arca Equities Rule 5.5(b).
23 15 U.S.C. 78f(b)(5). 27 See proposed NYSE Arca Equities Rule 5.2(d). 31 As noted above, issuers would have six months
24 See proposed NYSE Arca Equities Rule 28 See proposed NYSE Arca Equities Rule 5.2(d).
to cure this deficiency. See proposed NYSE Arca
5.1(b)(26). 29 See Nasdaq Rule 4420(k). Equities Rule 5.5(b).

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69172 Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices

to The Nasdaq Global Market continued any proposed rule change prior to the For the Commission, by the Division of
listing standards.32 30th day after the date of publication of Market Regulation, pursuant to delegated
The Exchange also proposes to amend notice of the filing thereof, unless the authority.44
the preferred stock (and similar issues) Commission finds good cause for so Nancy M. Morris,
and secondary classes of common stock doing and publishes its reasons for so Secretary.
continued listing standards.33 The finding. The Exchange has requested the [FR Doc. E6–20211 Filed 11–28–06; 8:45 am]
Exchange would eliminate the current Commission find good cause for BILLING CODE 8011–01–P
net worth requirement and continuing approving the proposed rule change
operations requirements. In addition, prior to the 30th day after the date of
the proposed new preferred continued publication of notice in the Federal SECURITIES AND EXCHANGE
listing standards would contain a new Register. COMMISSION
$1 bid price requirement. The The Commission believes that it is
Commission notes that the proposed reasonable to grant accelerated approval [Release No. 34–54793; File No. SR–OCC–
continued listing standards for preferred to allow for the efficient administration 2006–20]
stock and similar issues and secondary of the Exchange’s initial and continued
classes of common stock are listing programs as promptly as Self-Regulatory Organizations; The
substantially similar to The Nasdaq possible. The Commission notes that the Options Clearing Corporation; Notice
Global Market continued listing proposed listing standards, while of Filing of Proposed Rule Change To
standards.34 significantly different than the Accelerate the Expiration Date of
Exchange’s current listing standards, are American-Style Equity Options That
C. Other Changes Have Been Adjusted To Call for Cash-
substantially similar to The Nasdaq
The proposed rule change would Global Market, which the Commission Only Delivery
permit the Exchange, rather than its previously approved. In addition, the November 20, 2006.
board of directors, to approve securities Commission notes that the proposed
for listing and to prescribe the form of Pursuant to Section 19(b)(1) of the
listing standards would be in effect only
listing applications.35 In particular, the Securities Exchange Act of 1934
as a pilot program for a six-month
Exchange may deny listing or apply (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
period.39 Accordingly, the Commission
additional or more stringent criteria notice is hereby given that on October
believes that there is good cause,
based on any event, condition, or 26, 2006, The Options Clearing
pursuant to Sections 6(b)(5) of the Act 40
circumstance that makes the listing of Corporation (‘‘OCC’’) filed with the
and 19(b)(2) of the Act,41 to grant
the company inadvisable or Securities and Exchange Commission
accelerated approval to the proposed
unwarranted in the opinion of the (‘‘Commission’’) the proposed rule
rule change prior to the 30th day after
Exchange. Such determination could be change described in Items I, II, and III
the date of publication of notice in the
made even if the company meets the below, which items have been prepared
Federal Register.
standards set forth below. The primarily by OCC. The Commission is
Commission believes that it is V. Conclusion publishing this notice to solicit
reasonable for the Exchange, based upon For the foregoing reasons, the comments on the proposed rule change
its experience, to determine whether the Commission finds that the proposed from interested parties.
security of a company would be rule change is consistent with the Act I. Self-Regulatory Organization’s
appropriate for inclusion on NYSE Arca. and the rules and regulations Statement of the Terms of Substance of
The Commission notes that this thereunder applicable to a national the Proposed Rule Change
amendment is similar to NYSE’s listing securities exchange, and, in particular,
standards.36 Further, with respect to the The purpose of the proposed rule
with Section 6(b)(5) of the Act.42
continued listing standards of all change is to accelerate the expiration
It is therefore ordered, pursuant to
securities, the Exchange proposes to date of American-style equity options
Section 19(b)(2) of the Act,43 that the
require all issuers to comply with the that have been adjusted to call for cash-
proposed rule change (SR–NYSEArca–
Exchange’s corporate governance only delivery to the earliest practicable
2006–85), is hereby approved on an
qualitative standards, rather than only regular expiration date. OCC currently
accelerated basis, as a six-month pilot,
the independent directors/board has such authority with respect to
until May 29, 2007.
committees requirement in current European-style options that have been
NYSE Arca Equities Rule 5.3(k).37 The 39 In any request under Section 19(b) of the Act
so adjusted.
Commission believes that these for permanent approval or an extension of the pilot II. Self-Regulatory Organization’s
amendments are consistent with the period, the Exchange may wish to report on the Statement of the Purpose of, and
operations of the new standards during the pilot
requirements of the Act. period. Statutory Basis for, the Proposed Rule
D. Accelerated Approval 40 15 U.S.C. 78f(b)(5). Change
41 15 U.S.C. 78s(b)(2).
Pursuant to Section 19(b)(2) of the 42 15 U.S.C. 78f(b)(5). The staff of the Division of
In its filing with the Commission,
Act,38 the Commission may not approve Market Regulation (‘‘Staff’’) would not recommend
OCC included statements concerning
enforcement action to the Commission under Rules the purpose of and basis for the
32 See Nasdaq Rule 4450(a)–(b). 15g–2 through 15g–9 under the Act if broker-dealers proposed rule change and discussed any
33 See treat equity securities listed pursuant to the initial comments it received on the proposed
proposed NYSE Arca Equities Rule 5.5(c).
and continued listing requirements set forth in
34 See Nasdaq Rule 4450(h).
amended NYSE Arca Equities Rule 5 as meeting the
rule change. The text of these statements
35 See proposed NYSE Arca Equities Rule 5.1(a)
exclusion from the definition of penny stock may be examined at the places specified
and 5.2(a). contained in Rule 3a51–1 udner the Act pursuant in Item IV below. OCC has prepared
jlentini on PROD1PC65 with NOTICES

36 See NYSE Listed Company Manual Section


to paragraph (a)(2) thereof. In taking this position, summaries, set forth in sections (A), (B),
101.00. the Staff notes in particular that these amended
37 See also NYSE Arca Equities Rule 5.5(k), which listing requirements are equivalent, in all material
44 17 CFR 200.30–3(a)(12).
sets forth other reasons for suspending or delisting respects, to the listing requirments of the The
securities on the Exchange. Nasdaq Global Market. 1 15 U.S.C. 78s(b)(1).
38 15 U.S.C. 78s(b)(2). 43 15 U.S.C. 78s(b)(2). 2 17 CFR 240.19b–4.

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