[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Notices]
[Pages 5915-5918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02076]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94075; File No. SR-NYSE-2022-03]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Adopt a Listing Standard for Rights

January 27, 2022.
    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 January 13, 2022, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. 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 adopt a listing standard for rights. The 
proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and

[[Page 5916]]

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.

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

1. Purpose
    Listed companies sometimes seek to raise capital from their 
existing shareholders by granting rights to subscribe for additional 
shares of the issuer's listed securities to all shareholders of record. 
The issuer may elect to make its rights either transferrable or non-
transferable and may wish to have transferrable rights traded on the 
Exchange. Historically, the Exchange has traded short-term rights 
(i.e., rights with a subscription period of less than 90 days) pursuant 
to Section 703.03 of the NYSE Listed Company Manual (``Manual'') on an 
unlisted basis.\4\
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    \4\ When trading unlisted short-term rights under Section 703.03 
of the Manual, the Exchange relies on the exemption from Exchange 
Act Section 12(a) registration requirements provided under Exchange 
Act Rule 12a-4.
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    While Section 703.03 provides for the unlisted trading of short-
term rights, it does not enable the issuer to list such rights on the 
Exchange. Nor does the Manual currently provide any mechanism for the 
trading or listing of rights with a life of 90 days or longer. The 
Exchange proposes to amend Section 703.12 of the Manual, which 
currently provides for the listing of warrants, to create a proposed 
Part (II) of that rule. Part (I) of Section 703.12, as amended, would 
consist of the current warrant listing provisions, while proposed Part 
(II) would set forth new listing requirements for rights.\5\
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    \5\ The Exchange proposes to change a reference in Part (I) of 
Section 703.12 from ``Para. 312.00'' to ``Section 312.00'' to 
conform to references elsewhere within the rule.
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    For purposes of proposed Section 703.12(II), the term ``rights'' 
refers to the privilege offered to holders of record of issued equity 
securities to subscribe (usually on a pro rata basis) for additional 
securities of the same class.
    Under proposed Section 703.12(II), to be listed on the Exchange, 
rights must be issued to purchase or receive a security that is already 
listed on the Exchange or that will be listed concurrent with the 
rights. The rights holders would not be entitled to any privileges of 
the holders of common stock (e.g., dividends, preemptive rights, or 
voting rights). If the rights are exercisable into listed common stock, 
the listing of the rights and the underlying common stock would be 
subject to the NYSE shareholder approval policy as set forth in Section 
312.00 of the Manual.
    For initial listing, rights would need to meet the following 
requirements under proposed Section 703.12(II):
    (1) At least 400,000 issued;
    (2) The underlying security must be listed on the Exchange; and
    (3) At least 100 public holders of round lots.
    The proposed rule would state that, for purposes of such rule, 
``public holders'' excludes holders that are directors, officers, or 
their immediate families and holders of other concentrated holdings of 
10 percent or more of the company's total outstanding shares.
    The Exchange notes that the numerical requirements set forth above 
are identical to those included in Nasdaq's rule for the listing of 
rights on Nasdaq Capital Market.\6\ The Exchange also notes that the 
Nasdaq listing provisions for rights would currently enable an NYSE-
listed company to list its rights on Nasdaq, while such a company would 
not currently be able to list its rights on the NYSE.
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    \6\ See Nasdaq Marketplace Rule 5515.
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    Proposed Section 703.12(II) would provide that the continued 
listing of rights is contingent on the underlying security remaining 
listed on the Exchange. If the security underlying a listed right 
ceased to be listed on the Exchange, the Exchange would promptly 
initiate suspension and delisting procedures with respect to the listed 
rights.\7\ In such case, the issuer of the listed rights would not be 
eligible to avail itself of the provisions of Sections 802.02 and 
802.03, and any such listed rights would be subject to delisting 
procedures as set forth in Section 804.00.
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    \7\ Specifically, the Exchange would immediately suspend trading 
in the rights upon delisting of the underlying security and would 
not trade the rights pending completion of any appeal by the issuer.
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    The proposed listing standard would note that the general 
instructions for preparation and filing of a listing application are 
described in Section 703.01. The proposed listing standard would also 
note that the form of listing application and information regarding 
supporting documents required in connection with the listing of rights 
are available on the Exchange's website or from the Exchange upon 
request.
    The Exchange notes that its proposed listing standards for rights 
differ from the those of Nasdaq Capital Market in two respects:
    First, Nasdaq Marketplace Rules 5515 and 5560 require, 
respectively, a listed right to have at least three registered and 
active market makers at the time of initial listing and a continued 
listing requirement to have at least two registered and active market 
makers, one of which may be a market maker entering a stabilizing bid. 
The Exchange has not included these requirements, as they are not 
applicable to our market model, in which the rights would be allocated 
to a Designated Market Maker for trading.
    Second, the applicable Nasdaq Capital Market rules provide that a 
right may be listed if the underlying security is listed on Nasdaq or 
is a Covered Security and will be subject to delisting if that ceases 
to be the case. The Exchange's proposal provides that rights may only 
be listed as an initial matter (and remain listed) if the underlying 
security is listed on the NYSE and not if it is a Covered Security. The 
Exchange has taken this approach to be consistent with its existing 
requirements for the listing of warrants and also because Covered 
Securities listed on other exchanges are subject to lower initial and 
continued listing standards than are applicable to NYSE listed 
securities.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act'') generally.\8\ 
Section 6(b)(5) \9\ requires, among other things, that exchange rules 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in 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 the public interest and the interests of 
investors, promote just and equitable principles of trade and that they 
are not designed to

[[Page 5917]]

permit unfair discrimination between issuers, brokers or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposal is designed to protect the 
public interest and the interests of investors, by providing a listed 
trading market for the shareholders of NYSE listed companies who 
receive transferable rights from the issuer and who would otherwise not 
have the ability to list the rights on the same exchange as the 
underlying securities.
    The Exchange notes that the requirements of the proposed rule are 
identical to those for the listing of rights on Nasdaq Capital Market 
as set forth in Sections 5515 and 5560 of the Nasdaq Marketplace rules, 
with the exception of the provisions described above with respect to 
market makers and the ability to list rights where the underlying 
security is a Covered Security not listed on the exchange listing the 
rights. The Exchange believes that these differences are consistent 
with the protection of investors and the public interest because: (i) 
The market maker requirement is irrelevant to the NYSE market model, in 
which the rights will be allocated to a Designated Market Maker for 
trading; and (ii) as other exchanges have continued listing standards 
for equity securities that are less stringent than those of the NYSE, 
the approach of excluding rights with respect to Covered Securities 
listed on other markets ensures that rights can only be listed with 
respect to underlying securities that are qualified for listing on the 
NYSE. Furthermore, the Exchange believes that it is not unfairly 
discriminatory to limit the listing of rights to those with respect to 
NYSE listed equities, as the purpose is not to discriminate among 
issuers, but rather to enhance investor protection by ensuring that 
rights can only be listed if the underlying security meets the more 
stringent continued listing standards applied by the NYSE.

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

    The Exchange does not believe that the proposal would impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. There would be no burden on competition among 
companies listed on the NYSE, as all NYSE-listed companies would be 
able to list their rights under the same rule provisions. Similarly, 
the proposed rule would not impose any burden on intermarket 
competition, as any rights that could be listed under the proposed rule 
would also be eligible for listing on Nasdaq. The Exchange believes the 
proposal enhances competition for listing by providing issuers with a 
choice of listing venues between the NYSE and Nasdaq when they list 
their rights. The Exchange believes that limiting the listing of rights 
to those with respect to NYSE listed equities does not impose a burden 
on competition not necessary or appropriate in furtherance of the 
purposes of the Act, as the purpose is not to discriminate among 
issuers, but rather to enhance investor protection by ensuring that 
rights can only be listed if the underlying security meets the more 
stringent continued listing standards applied by the NYSE.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \12\ normally does not become operative for 30 days after the date 
of its filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the 
Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay to 
allow the Exchange to list rights that would qualify for listing under 
the proposed rule prior to the expiration of the 30-day operative 
delay. The Exchange states that such waiver would be consistent with 
the protection of investors and the public interest because the 
proposed rule change is substantially similar to the rules of another 
national securities exchange.\14\ For this reason, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\15\
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ See supra note 6, and accompanying text.
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2022-03 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2022-03. 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 website (https://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

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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 website 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2022-03, and should be 
submitted on or before February 23, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02076 Filed 2-1-22; 8:45 am]
BILLING CODE 8011-01-P


