
[Federal Register: April 8, 2008 (Volume 73, Number 68)]
[Notices]               
[Page 19125-19128]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ap08-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57603; File No. SR-NYSEArca-2007-104]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change and Amendment No. 1 Thereto Relating to Listing 
Standards for Warrants, Rights, and Units

April 2, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 3, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On March 27, 2008, the Exchange filed Amendment No. 1 to the 
proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, 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 amend NYSE Arca Equities Rules 5.2(f) and 
5.5(e), which relate to the Exchange's initial and continued listing 
standards for warrants, to apply such standards to rights to purchase 
listed securities. In addition, the Exchange proposes to adopt new NYSE 
Arca Equities Rule 5.2(k) which relate to listing requirements for 
Units.\3\ The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://
www.nyse.com.
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    \3\ ``Units'' are defined as paired securities which may be 
transferred and traded only in combination with one another as a 
single economic unit. See NYSE Arca Equities Rule 5.1(b)(20). 
Currently, the Exchange has continued listing standards for Units in 
NYSE Arca Equities Rule 5.5(a), which references NYSE Arca Equities 
Rules 5.5(b)-(e). NYSE Arca Equities Rules 5.5(b)-(e) relate to the 
continued listing requirements for common stock and common stock 
equivalent securities, preferred stock and secondary classes of 
common stock, bonds and debentures, and warrants, respectively. See 
NYSE Arca Equities Rules 5.5(b)-(e). See also infra note 8.
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to: (1) Amend NYSE Arca Equities Rules 5.2(f) 
and 5.5(e), the Exchange's initial and continued listing standards for 
warrants, to apply such standards to rights to purchase securities; \4\ 
and (2) adopt new NYSE Arca Equities Rule 5.2(k) to add listing 
standards for Units. The Exchange states that the proposed rule changes 
herein are modeled upon the rules of The NASDAQ Stock Market LLC 
(``Nasdaq'').\5\
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    \4\ The initial and continued listing standards for warrants 
under NYSE Arca Equities Rules 5.2(f) and 5.5(e), respectively, were 
approved by the Commission in 1994. See Securities Exchange Act 
Release No. 34429 (July 22, 1994), 59 FR 38998 (August 1, 1994) (SR-
PSE-93-12) (approving quantitative and qualitative listing standards 
with respect to common stock, preferred stock, bonds and debentures, 
warrants, contingent value rights, and other securities).
    \5\ The Exchange states that Nasdaq's initial listing standards 
for warrants and rights are set forth in Nasdaq Rule 4420(d), and 
its continued listing standards for warrants and rights are set 
forth in Nasdaq Rule 4450(d). In addition, Nasdaq's initial listing 
standards for units are set forth in Nasdaq Rule 4420(h). The 
Exchange also states that the proposal regarding the listing 
standards for Units are based, in part, on provisions contained in 
the Company Guide of the American Stock Exchange LLC (``Amex''). See 
infra note 11.
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Listing Standards for Warrants and Rights

    Currently, NYSE Arca Equities Rule 5.2(f) addresses the Exchange's 
initial listing standards for warrants. The Exchange proposes to add 
rights to this Rule and apply these same initial listing standards to 
both warrants and rights to purchase securities.\6\ As is the case for

[[Page 19126]]

warrants, at least 500,000 rights must be publicly held by not less 
than 250 public beneficial holders under NYSE Arca Equities Rule 
5.2(f)(1), as amended. The purpose for this change is to allow the 
Exchange to list rights so that it can offer investors more investment 
options, while also remaining competitive in the marketplace.
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    \6\ The Exchange states that Nasdaq made a similar change to its 
rule, which is now contained in Nasdaq Rule 4420(d). See Securities 
Exchange Act Release No. 43435 (October 11, 2000), 65 FR 62779 
(October 19, 2000) (SR-NASD-99-69) (approving, among other things, 
the inclusion of rights in the initial listing standards for 
warrants).
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    Currently, NYSE Arca Equities Rule 5.2(f)(2) provides, in part, 
that the Exchange will not list warrants unless the common stock of the 
company or other security underlying the warrants is already listed 
(and meets the pertinent continued listing requirements) or will be 
listed on the Exchange concurrently with the warrants. The Exchange 
proposes to amend NYSE Arca Equities Rule 5.2(f)(2) to provide that the 
common stock of the company or other security underlying the warrants 
and rights must be listed and trading (and meets the pertinent 
continued listing standards), or will be listed and trading, on a 
national securities exchange concurrently with the listing and trading 
of warrants or rights, as applicable. The Exchange notes that it would 
not list a warrant or right if the security underlying such warrant or 
right is no longer trading or is subject to a trading halt, as imposed 
by the national securities exchange listing such underlying security. 
Therefore, the Exchange believes that investors would remain protected.
    Currently, NYSE Arca Equities Rule 5.5(e) addresses the continued 
listing of warrants on the Exchange. NYSE Arca Equities Rule 5.5(e) 
states that, for continued listing, the common stock of the company or 
other security underlying the warrants must meet the applicable Tier I 
maintenance requirements. The Exchange proposes to amend this Rule so 
that such continued listing standard would apply to both warrants and 
rights to purchase listed securities.\7\ As is the case with the 
proposal to add rights to the initial listing standards, the purpose 
for this change is to allow the Exchange to list rights so that it can 
offer investors more investment options, while also remaining 
competitive in the marketplace.
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    \7\ The Exchange states that Nasdaq's continued listing 
standards for warrants also apply to rights, as set forth in Nasdaq 
Rule 4450(d).
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    As stated above, NYSE Arca Equities Rule 5.5(e) provides, in 
pertinent part, that the underlying common stock of the company or 
other security must meet the applicable Tier I maintenance requirements 
under NYSE Arca Equities Rule 5.5. The Exchange proposes to amend this 
language to state that, in the case of warrants and rights, the common 
stock of the company or other security underlying the warrants or 
rights, as applicable, must continue to be listed on a national 
securities exchange. The Exchange believes that, as long as the 
security underlying warrants and rights satisfies the listing standards 
of another national securities exchange and are otherwise in good 
standing for trading, investors would be able to obtain additional 
investment options and, at the same time, remain protected. The 
Exchange also proposes this change to simplify the continued listing 
standards under NYSE Arca Equities Rule 5.5(e) and ensure that the 
issuer of an underlying security is listed on a national securities 
exchange, in the interest of protecting investors.
Listing Standards for Units
    Currently, the Exchange has no separate initial quantitative 
listing standards for Units, although it does have a definition and 
continued listing standards for Units.\8\ The Exchange proposes to 
adopt initial listing standards for Units under proposed NYSE Arca 
Equities Rule 5.2(k). The Exchange states that the proposed standards 
are substantially similar to those under Nasdaq Rule 4420(h).\9\
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    \8\ See supra note 3. NYSE Arca Equities Rule 5.5(a) states 
that, in the case of Units, the Exchange will normally consider 
suspending dealings in or delisting if any of the component parts do 
not meet the applicable listing standards as set forth in NYSE Arca 
Equities Rules 5.5(b)-(e). If one or more of the components is 
otherwise qualified for listing, that component may remain listed. 
Where all component parts of a Unit do not meet the applicable 
listing standards as set forth in NYSE Arca Equities Rules 5.5(b)-
(e), the Unit will be delisted from the Exchange.
    \9\ See Nasdaq Rule 4420(h). See also Securities Exchange Act 
Release No. 49746 (May 20, 2004), 69 FR 30356 (May 27, 2004) (SR-
NASD-2004-81) (approving listing standards for units).
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    In particular, under proposed NYSE Arca Equities Rule 5.2(k), all 
Units must have at least one equity component and that all components 
must meet the initial and continued listing standards in NYSE Arca 
Equities Rules 5.2(k) and 5.5 (a)-(e), as applicable, or in the case of 
debt components, meet certain specified criteria including: (1) An 
aggregate market value or principal amount of at least $5 million; (2) 
a requirement that the issuer of the debt security have equity 
securities that are listed on a national securities exchange; and (3) 
in the case of convertible debt, limitations on changes to conversion 
prices, subject to an exception, and a real-time last sale reporting 
requirement for the equity security into which the debt is 
convertible.\10\ In addition, all components of the Unit must be issued 
by the same issuer, and all Units and issuers of such Units must comply 
with the initial and continued listing standards of NYSE Arca Equities 
Rules 5.2(k) and 5.5(a)-(e), as applicable.
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    \10\ The Exchange notes that real-time last sale reporting must 
be available for the underlying equity security, and it will not be 
sufficient that the Unit containing such equity security be subject 
to last sale reporting.
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    The Exchange also proposes that Units be subject to a minimum 
listing period of 30 days from the first day of listing, except that 
the period may be shortened if the Units are suspended or withdrawn for 
regulatory purposes. Issuers and underwriters seeking to withdraw Units 
from listing must provide the Exchange with notice of such intent at 
least 15 days prior to withdrawal. Accordingly, the Exchange believes 
that these provisions will provide investors a meaningful period of 
time to react to the withdrawal of the Unit from listing and trading.
    Under proposed NYSE Arca Equities Rule 5.2(k)(3), each issuer of 
Units must include in its prospectus or other offering document used in 
connection with any offering of securities that is required to be filed 
with the Commission under the federal securities laws and the rules and 
regulations thereunder a statement regarding any intention to delist 
the Units immediately after the minimum inclusion period referenced 
above. In addition, an issuer of a Unit would be required to provide 
information regarding the terms and conditions of the components of the 
Unit, the ratio of the components comprising the Unit, and when a 
component of the Unit is separately listed on an exchange on the 
issuer's Internet Web site, or if it does not maintain a Web site, in 
its annual report provided to Unit holders. Further, an issuer would be 
required to immediately publicize through, at a minimum, a public 
announcement through the news media, any change in the terms of a 
listed Unit, such as changes to the terms and conditions of any of the 
components or to the ratio of components within the Unit. The Exchange 
believes that this heightened disclosure requirement is appropriate to 
ensure that sufficient information regarding the attributes of these 
securities is publicly available on a timely basis.
    The Exchange also proposes to add language clarifying the 
applicability of certain continued listing standards relating to 
components of Units that

[[Page 19127]]

have separated.\11\ The Exchange states that, when Units in good 
standing begin to separate into their component securities, the 
remaining Units that are still intact and the components of those Units 
which have separated may all be separately listed and continue to 
trade, provided that they meet the applicable continued listing 
standards. The proposal specifies that, in determining whether an 
individual component meets the applicable distribution requirements 
specified in the continued listing standards, the Units that are intact 
and freely separable into their component parts will be counted toward 
the total numbers required for continued listing of the component. For 
example, if 1,000,000 shares of common stock are publicly held after 
separation from their Units, and 500,000 intact and freely separable 
Units are publicly held, the common stock would be credited with having 
1,500,000 shares publicly held, enabling it to meet the publicly held 
shares requirement for common stock, which requires at least 1,100,000 
shares of common stock to be publicly held.\12\ If the Units are no 
longer freely separable and/or listed on the Exchange, the separately-
traded components would still be required to meet their applicable 
continued listing standards.
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    \11\ The Exchange states that its proposal to clarify the 
applicability of listing standards relating to components of Units 
that have separated is modeled upon Section 1003(g)(ii) and (iii) of 
the Amex Company Guide. See Securities Exchange Act Release No. 
55675 (April 26, 2007), 72 FR 24638 (May 3, 2007) (SR-Amex-2006-114) 
(approving amendments to listing standards for units).
    \12\ See NYSE Arca Equities Rule 5.5(b)(1).
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    Despite the fact that the aggregated distribution values satisfy 
the continued listing distribution standards, under the proposal, the 
Exchange would also consider suspending trading in, or removing from 
listing, an individual component or Unit when, in the opinion of the 
Exchange, the public distribution or aggregate market value of such 
component or Unit becomes so reduced as to make continued listing on 
the Exchange inadvisable. In its review of the advisability of the 
continued listing of an individual component or Unit under such 
circumstances, the Exchange proposes to take into account the trading 
characteristics of the component or Unit and whether it would be in the 
public interest for trading in such component or Unit to continue.
    The Exchange states that it will halt or suspend trading in the 
Units or rights, as the case may be, when the underlying security is 
halted on the relevant national securities exchange. In addition, for 
Units and rights that are listed on the Exchange and based upon an 
underlying security listed on another national securities exchange, the 
Exchange represents that it will monitor Units and rights under the 
Exchange's applicable continued listing standards.
    As is the case with the initial and continued listing standards for 
rights, the Exchange states that the purpose for the proposed initial 
listing standards for Units is to allow the Exchange to list Units so 
that it can offer investors more investment options, while also 
remaining competitive in the marketplace.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) of the Act,\13\ which states that an 
exchange have rules that are 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, in general, to protect investors and 
the public interest. The Exchange believes that the proposed rule 
change will facilitate the listing and trading of rights and Units that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. In addition, the listing and trading 
criteria set forth in the proposal are intended to protect investors 
and the public interest.
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    \13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange states that written comments on the proposed rule 
change were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 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 Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2007-104 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-104. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 1 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2007-104 and should 
be submitted on or before April 29, 2008.


[[Page 19128]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7309 Filed 4-7-08; 8:45 am]

BILLING CODE 8011-01-P
