
[Federal Register Volume 78, Number 207 (Friday, October 25, 2013)]
[Notices]
[Pages 64043-64046]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-25120]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70728; File No. SR-NYSE-2013-67]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Proposing to Amend the 
Quantitative Continued Listing Standards Applicable to Companies Listed 
Under Sections 102.01C and 103.01B of the Listed Company Manual

October 21, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on October 8, 2013, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to harmonize the quantitative continued 
listing standards applicable to companies listed under Sections 102.01C 
and 103.01B of the Listed Company Manual (the ``Manual''). Under the 
proposed amendment, a company will be considered to be below compliance 
standards if its average global market capitalization over a 
consecutive 30 trading-day period is less than $50,000,000 and, at the 
same time, its total stockholders' equity is less than $50,000,000. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

[[Page 64044]]

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to harmonize the quantitative continued 
listing standards applicable to companies listed under Sections 102.01C 
and 103.01B of the Manual (``operating companies'').
    The Exchange's financial initial listing standards for domestic 
operating companies are set forth in Section 102.01C of the Manual and 
financial initial listing standards applicable to non-U.S. operating 
companies are set forth in Section 103.01B of the Manual.\3\ The 
Exchange's financial continued listing standards for operating 
companies are set forth in Section 802.01B of the Manual.\4\ All 
operating companies are subject to continued listing requirements to 
maintain (i) a stock price on a 30-trading-day average basis of $1.00 
and (ii) a total market capitalization on a 30-trading day average 
basis of $15 million (the ``Minimum Listing Criteria''). All listed 
operating companies are subject to additional financial continued 
listing requirements which vary depending on the initial listing 
standard in Section 102.01C or 103.01B under which the company 
originally listed.
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    \3\ Non-U.S. companies are also permitted to list under the 
domestic listing standards set forth in Section 102.01C.
    \4\ The Exchange also maintains continued listing standards with 
respect to distribution of shares, set forth in Section 802.01A of 
the Manual.
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    The following are the current continued listing standards specific 
to operating companies listed under the various initial listing 
standards:
     A company that qualified to list under the Earnings Test 
set out in Sections 102.01C(I) or 103.01B(I), or pursuant to the 
requirements set forth under the Assets and Equity Test set forth in 
Section 102.01C(IV) or the ``Initial Listing Standard for Companies 
Transferring from NYSE Arca'' (this standard is no longer in existence 
and was operative from October 1, 2008 until August 31, 2009), will be 
considered to be below compliance standards if average global market 
capitalization over a consecutive 30 trading-day period is less than 
$50,000,000 and, at the same time, total stockholders' equity is less 
than $50,000,000.
     A company that qualified to list under the Valuation/
Revenue with Cash Flow Test set out in Section 102.01C(II)(a) or 
Section 103.01B(II)(a) will be considered to be below compliance 
standards if:
    [cir] average global market capitalization over a consecutive 30 
trading-day period is less than $250,000,000 and, at the same time, 
total revenues are less than $20,000,000 over the last 12 months 
(unless the company qualifies as an original listing under one of the 
other original listing standards); or
    [cir] average global market capitalization over a consecutive 30 
trading-day period is less than $75,000,000.
     A company that qualified to list under the Pure Valuation/
Revenue Test set out in Section 102C.01(II)(b) or in Section 
103.01B(II)(b) will be considered to be below compliance standards if:
    [cir] average global market capitalization over a consecutive 30 
trading-day period is less than $375,000,000 and, at the same time, 
total revenues are less than $15,000,000 over the last 12 months 
(unless the company qualifies as an original listing under one of the 
other original listing standards); or
    [cir] average global market capitalization over a consecutive 30 
trading-day period is less than $100,000,000.
     A company that qualified to list under the Affiliated 
Company Test set out in Section 102C.01(III) or Section 103.01B(III) 
will be considered to be below compliance standards if:
    [cir] the listed company's parent/affiliated company ceases to 
control the listed company, or the listed company's parent/affiliated 
company itself falls below the continued listing standards applicable 
to the parent/affiliated company, and
    [cir] average global market capitalization over a consecutive 30 
trading-day period is less than $75,000,000 and, at the same time, 
total stockholders' equity is less than $75,000,000.
    The Exchange proposes to amend the applicable continued listing 
standards such that every operating company will be subject to the same 
standards regardless of the standard under which such company initially 
qualified. The proposed amendment to Section 802.01B of the Manual will 
state that an operating company will be considered to be below 
compliance standards if its average global market capitalization over a 
consecutive 30 trading-day period is less than $50,000,000 and, at the 
same time, its total stockholders' equity is less than $50,000,000 (the 
``Proposed Continued Listing Standard'').\5\
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    \5\ Consistent with the Exchange's general practice in the case 
of rule changes (unless the amended rule specifies otherwise), upon 
effectiveness of the proposed amendment, all listed operating 
companies would be subject to the Proposed Continued Listing 
Standard rather than any of the other currently applicable continued 
listing standards, including any company operating under a 
compliance plan due to an event of non-compliance with a previously 
applicable continued listing standard or any company awaiting appeal 
of a delisting determination based on non-compliance with a 
previously applicable continued listing standard.
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    Currently, to determine whether an operating company complies with 
continued listing standards, the Exchange first looks to the financial 
standard under which the company initially qualified for listing and 
then applies the continued listing standard specified as applicable to 
that initial listing standard. The practical impact of this policy is 
that a company may be deemed noncompliant with the continued listing 
standard associated with the initial financial listing standard under 
which it originally qualified to list, notwithstanding the fact that it 
would have remained in compliance if subject to one of the other 
continued listing standards. This creates the anomalous result that two 
companies could have identical quantitative characteristics, yet one 
company would be deemed noncompliant and the other would remain 
compliant, purely on the basis of the initial listing standards under 
which the respective companies qualified to list many years previously. 
The Exchange believes this potential for disparate treatment is unfair 
to a listed company and its shareholders in the circumstance that a 
company is deemed noncompliant or delisted notwithstanding the fact 
that it would have remained compliant if one of the other continued 
listing standards was applicable. Moreover, many listed companies 
evolve subsequent to initial listing, and the idea that a company 
should be subject indefinitely to continued listing criteria tailored 
to the type of company it was at the time of initial listing no longer 
seems appropriate.
    The Exchange notes that the approach of assigning different 
quantitative continued listing requirements to

[[Page 64045]]

companies that originally listed under different listing standards was 
adopted in 2004, based on the assumption that a company should be 
subject to a continued listing requirement that was related to the 
elements in the financial listing standard under which it originally 
listed.\6\ However, the Exchange's experience administering these 
standards does not support the original assumption that the disparate 
standards would enhance the quality of operating companies listed on 
the Exchange. As discussed below, a review of data collected over more 
than five years indicates that all of the companies that were delisted 
under any of the other currently existing continued listing standards 
during that period would also have been delisted if they had instead 
been subject to the Proposed Continued Listing Standard, either 
pursuant to the Proposed Continued Listing Standard itself or pursuant 
to the Minimum Listing Criteria. Consequently, the Exchange derived no 
appreciable regulatory benefit during that period from having multiple 
continued listing standards rather than simply the Proposed Continued 
Listing Standard and the Minimum Listing Criteria. Therefore, the 
Exchange does not believe that it is necessary to continue to maintain 
a complicated set of alternative continued listing standards.
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    \6\ See Securities Exchange Act Release No. 49154 (January 29, 
2004), 69 FR 5633 (February 5, 2004) (SR-NYSE-2003-43).
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    The Exchange acknowledges that the other currently applicable 
continued listing standards have higher minimum quantitative 
requirements for average market capitalization than the Proposed 
Continued Listing Standard. Most notably, the $50,000,000 minimum 
average market capitalization requirement of the Proposed Continued 
Listing Standard is lower than the minimum average market 
capitalization requirements of all of the other currently existing 
continued listing standards. However, the Exchange believes that, the 
proposed adoption of the Proposed Continued Listing Standard will not 
result in any meaningful weakening of the quality of companies listed 
on the Exchange. In that regard, the Exchange notes that almost all 
companies that are currently below compliance with their applicable 
financial continued listing standard will also be below compliance with 
the Proposed Continued Listing Standard at the time of its adoption. 
Further, the Exchange notes that more than 87% of the operating 
companies currently listed on the Exchange are already subject to a 
continued listing standard identical to the Proposed Continued Listing 
Standard. For those companies, therefore, there will be no change to 
their continued listing obligations as a result of the proposed rule 
change.
    With regard to companies that are currently subject to one of the 
other continued listing standards, the Exchange believes that adoption 
of the Proposed Continued Listing Standard will not result in the 
continued listing of a meaningful number of companies that would be 
subject to delisting under the current continued listing standards. In 
reaching this conclusion, the Exchange reviewed all companies that were 
identified as below compliance for any of the financial standards 
between 2006 and 2012. Approximately 22% of the identified companies 
during that period were subject to a continued listing standard other 
than the Proposed Continued Listing Standard. Of those 22% of 
companies, a majority would have been cited for noncompliance with 
either the Proposed Continued Listing Standard or the Minimum Listing 
Criteria.\7\ With respect to the minority of companies that would not 
have fallen below either the Proposed Continued Listing Standard or the 
Minimum Listing Criteria, all have regained compliance and currently 
continue to be in compliance with the Exchange's quantitative continued 
listing standards. Based on this empirical data, therefore, the 
Exchange believes that the Proposed Continued Listing Standard, in 
combination with the Minimum Listing Criteria, is a rigorous measure 
that will capture the full universe of companies that are financially 
unsuitable for listing and will successfully maintain the quality of 
the Exchange's listing program.
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    \7\ Of the 22 total companies that make up this percentage, 
eight would have fallen below the Proposed Continued Listing 
Standard and an additional four were delisted for falling below the 
Minimum Listing Criteria. An additional three of the 22 companies 
voluntarily delisted as a result of merger transactions.
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    The Exchange believes that the proposed amendment is consistent 
with Rule 3a51-1(a)(2)(ii) (the ``Penny Stock Rule'') \8\ under the 
Act. Section (a)(2) of the Penny Stock Rule provides that a security is 
not a penny stock for purposes of the rule if it is listed on a 
national securities exchange that has established quantitative 
continued listing standards that are reasonably related to certain 
enumerated initial listing standards and that are consistent with the 
maintenance of fair and orderly markets. The Penny Stock Rule's minimum 
initial listing standards are stockholders' equity ($5,000,000), market 
value of listed securities ($50,000,000) or net income ($750,000). The 
Proposed Continued Listing Standard requires that a listed company 
maintain an average global market capitalization over a consecutive 30 
trading-day period of in excess of $50,000,000 \9\ and stockholder's 
equity in excess of $50,000,000. The Exchange believes that global 
market capitalization is a comparable measure to the Penny Stock Rule's 
market value of listed securities requirement. Therefore, the Proposed 
Continued Listing Standard contains measures that are both related to, 
and equal to or far in excess of, the Penny Stock Rule's initial 
listing standards. Therefore, the Exchange believes that the proposed 
amendment is consistent with the Penny Stock Rule.
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    \8\ 17 CFR 240.3a51-1.
    \9\ For purposes of calculating global market capitalization, 
the Exchange will only consider securities that are (1) publicly 
traded (or quoted) or (2) convertible into a publicly traded (or 
quoted) security.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\10\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\11\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. In particular, 
the Exchange believes that the adoption of the Proposed Continued 
Listing Standard is consistent with the protection of investors and the 
public interest because: (i) The Exchange has many years of experience 
utilizing the Proposed Continued Listing Standard as the applicable 
continued listing standard for a large percentage of listed companies 
and, in the Exchange's experience, companies that remain in compliance 
with that standard are suitable for continued listing; and (ii) the 
Proposed Continued Listing Standard is unlikely to allow companies to 
remain listed that would not otherwise be suitable for listing, as the 
Exchange's review of historical listing compliance matters indicates 
that any company that falls below any other applicable quantitative 
listing standard will generally also fall below the Proposed Continued 
Listing Standard.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).

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[[Page 64046]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is being 
made to rationalize the continued listing standards for operating 
companies listed on the Exchange. As the Exchange's research has 
indicated that this change will be unlikely to have any meaningful 
effect on the number of companies that will be delisted, the Exchange 
believes that it will not have any effect on the competition among 
listing markets and will result in no burden on competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2013-67 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2013-67. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2013-67 and should be 
submitted on or before November 15, 2013.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25120 Filed 10-24-13; 8:45 am]
BILLING CODE 8011-01-P


