
[Federal Register Volume 82, Number 65 (Thursday, April 6, 2017)]
[Notices]
[Pages 16865-16867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06787]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80358; File No. SR-NYSE-2017-11]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Amend Listing Standards for 
Acquisition Companies To Modify the Initial and Continued Distribution 
Requirements

March 31, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 20, 2017, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``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\ 15 U.S.C. 78a.
    \3\ 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 its listing standards for 
Acquisition Companies (``ACs'') to modify the initial and continued 
distribution requirements. 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.

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.

[[Page 16866]]

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

1. Purpose
    The Exchange proposes to amend its initial and continued 
distribution requirements for Acquisition Companies (or ``ACs'') listed 
under Section 102.06 of the NYSE Listed Company Manual (the 
``Manual'').
    An AC (typically known in the marketplace as a special purpose 
acquisition company or ``SPAC'') is a special purpose company formed 
for the purpose of effecting a merger, capital stock exchange, asset 
acquisition, stock purchase, reorganization or similar business 
combination with one or more operating businesses or assets. The 
securities sold by the AC in its initial public offering are typically 
units, consisting of one share of common stock and one or more warrants 
(or a fraction of a warrant) to purchase common stock, that are 
separable at some point after the IPO. Management generally is granted 
a percentage of the AC's equity and may be required to purchase 
additional shares in a private placement at the time of the AC's IPO.
    Section 102.06 requires that an AC meet the distribution 
requirements of Section 102.01A at the time of initial listing. Under 
Section 102.01A, companies listing in connection with their IPO must 
have 400 holders of round lots (i.e., 100 shares) and 1.1 million 
publicly held shares. Companies listing in connection with a transfer 
from another exchange or a quotation listing must have 1.1 million 
publicly held shares at the time of initial listing on the Exchange and
    (i) 400 round lot holders;
    (ii) 2,200 total stockholders together with average monthly trading 
volume of 100,000 shares (for the most recent six months); or
    (iii) 500 total stockholders together with average monthly trading 
volume of one million shares (for the most recent twelve months).
    The Exchange proposes to modify the distribution requirements for 
ACs. As proposed, the distribution requirements for ACs would be 
included in Section 102.06 rather than incorporated by reference to 
Section 102.01A. Under the proposed amendment, ACs would have to have 
at least 300 round lot holders when listing in conjunction with an IPO 
(rather than 400 round lot holders as is the case currently). ACs 
transferring from other exchanges or listing in connection with a 
quotation listing would be allowed to list on the basis of 1.1 million 
publicly held shares and 300 round lot holders (rather than 400 round 
lot holders as is the case currently). The Exchange is proposing to 
move to Section 102.06, but not alter, the other distribution criteria 
for transfers and quotation listings.
    In addition, the Exchange is proposing to make minor clarifying 
revisions to Section 102.06. Specifically, the Exchange proposes to 
move a sentence detailing the minimum price per share for an AC at the 
time of initial listing from the end of a paragraph to the beginning of 
the same paragraph. Further, the Exchange proposes to delete an 
incorrect reference to footnote (A) after the aggregate market value 
requirement because footnote (A) only refers to the publicly-held 
shares requirement.
    Consistent with these changes to the initial listing requirements, 
the Exchange proposes to amend the continued listing standards 
applicable to ACs set forth in Section 802.01B of the Manual. Under 
Section 802.01B, ACs are currently deemed to be below continued listing 
standards if: (i) Their total number of stockholders is less than 400; 
(ii) the number of total stockholders is less than 1,200 and the 
average monthly trading volume is less than 100,000 shares (for the 
most recent 12 months); or (iii) the number of publicly-held shares is 
less than 600,000. Consistent with the proposed amendments to the 
initial listing standards, the Exchange proposes to provide that ACs 
will be deemed to be below continued listing standards if they have 
fewer than 300 total stockholders (rather than the 400 total 
stockholders currently required).\4\
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    \4\ ACs will also continue to be deemed to be below continued 
listing standards if (i) the number of total stockholders is less 
than 1,200 and the average monthly trading volume is less than 
100,000 shares (for the most recent 12 months) or (ii) the number of 
publicly-held shares is less than 600,000.
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    The Exchange believes that the proposed modification in the 
distribution requirements for ACs is appropriate because of the unique 
characteristics of the Acquisition Company structure. Specifically, 
pending the completion of a business combination, each share of an AC 
represents a right to a pro rata share of the AC's assets held in 
trust, AC shares typically have a trading price very close to their 
liquidation value and the liquidity and market efficiency concerns 
relevant to listed operating companies do not arise to the same degree. 
As such, there is less of a necessity to ensure that there are a large 
number of shareholders of an AC to create an active market that 
generates appropriate pricing. The Exchange also notes that SPACs have 
been listing on the Nasdaq Capital Market for a number of years subject 
to initial and continued shareholder requirements identical to those 
proposed by the Exchange \5\ and that the proposed amendments will 
enable the Exchange to compete more effectively for SPAC listings.
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    \5\ See Nasdaq Marketplace Rules 5505(a)(3) and 5550(a)(3).
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    The Exchange believes that the proposed amendment does not affect 
the status of NYSE listed securities under Exchange Act Rule 3a51-1(a) 
(the ``Penny Stock Rule''),\6\ as the amended standards satisfy the 
requirements of Exchange Act Rule 3a51-1(a)(2).\7\ While the amended 
requirements do not include an explicit requirement that newly-listed 
ACs have at least $5 million in stockholders' equity as required by 
Rule 3a51-1(a)(2)(i)(A)(1),\8\ the requirement that the AC must place 
at least 80% of its offering proceeds in trust upon consummation of its 
IPO ensures that all ACs will meet this requirement upon initial 
listing.
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    \6\ 17 CFR 240.a51-1(a).[sic]
    \7\ 17 CFR 240.a51-1(a)(2).[sic]
    \8\ 17 CFR 240.a51-1(a)(2)(i)(A)(1)[sic]
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) \10\ of the Act, in particular in that it 
is designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendments to its 
distribution requirements for ACs are consistent with the protection of 
investors because AC shares typically have a trading price very close 
to their liquidation value. The Exchange's distribution standards are 
important because the existence a significant number of holders can be 
an indicia of a liquid trading market, which supports an appropriate 
level of price discovery. As AC shares typically trade close to their 
liquidation value, price discovery is less important than it is with 
operating companies and therefore there

[[Page 16867]]

is a reduced reliance on distribution requirements to assure 
appropriate price discovery. In addition, a number of ACs have listed 
on Nasdaq Capital Market subject to identical distribution requirements 
to those proposed by the Exchange and there is no evidence that they 
have proven unfit for exchange trading. It is also important to note 
that any AC that remains listed after completing a business combination 
will be required to meet the NYSE's initial listing requirement of 400 
round lot holders at the time of consummation of the transaction.\11\
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    \11\ See Section 802.01B of the Manual.
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    While the proposed amended distribution requirements for the 
listing of ACs would be lower than those for other listing applicants, 
the Exchange does not believe that this difference is unfairly 
discriminatory. The Exchange believes this to be the case because 
market value-based listing standards are largely adopted to ensure 
adequate trading liquidity and, consequently, efficient market pricing 
of a company's securities. As an investment in an AC prior to its 
business combination represents a right to a pro rata share of the AC's 
assets held in trust, AC shares typically have a trading price very 
close to their liquidation value and the liquidity and market 
efficiency concerns relevant to listed operating companies do not arise 
to the same degree. As such, the Exchange does not believe it is 
unfairly discriminatory to apply different distribution requirements to 
ACs than to other listing applicants.

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 rule change is 
designed to enable the Exchange to better compete with Nasdaq Capital 
Market by adopting distribution requirements that a greater number of 
ACs will be able to meet at the time of their IPOs. As such, it is 
intended to promote competition for the listing of ACs.

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 up to 90 days (i) as the Commission may designate 
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-2017-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2017-11. 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 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-NYSE-2017-11 and should be 
submitted on or before April 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06787 Filed 4-5-17; 8:45 am]
 BILLING CODE 8011-01-P


