[Federal Register Volume 75, Number 77 (Thursday, April 22, 2010)]
[Notices]
[Pages 21094-21095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9358]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61912; File No. SR-NYSE-2010-15]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Order Approving Proposed Rule Change Making Permanent the Exchange's
Pilot Program With Respect to Its Continued Listing Standards
April 15, 2010.
I. Introduction
On February 26, 2010, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ a
proposal to make permanent an amendment to the continued listing
requirements in Section 802.01B of the Exchange's Listed Company Manual
(the ``Manual'') that is currently in effect on a pilot program basis
(the ``Pilot Program''). The proposed rule change was published for
comment in the Federal Register on March 12, 2010.\4\ The Commission
received no comments regarding the proposal. This order approves the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 61657 (March 5,
2010), 75 FR 11970.
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II. Description of the Proposal
The Exchange proposes to make its Pilot Program permanent. Prior to
the adoption of the Pilot Program,\5\ Section 802.01B(I) of the Manual
provided that any company that qualified to list under the Earnings
Test set out in Section 102.01C(I) or in Section 103.01B(I) (in the
case of foreign private issuers) 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'' (the ``NYSE Arca Transfer Standard'') set forth in Section
102.01(C)(V) (the NYSE Arca Transfer Standard expired by its terms on
August 31, 2009) was considered to be below compliance standards if
such company's average global market capitalization over a consecutive
30 trading-day period was less than $75 million and, at the same time,
total stockholders' equity was less than $75 million. Under the Pilot
Program, companies that listed under the initial listing standards set
forth in the immediately preceding sentence are considered to be below
compliance standards if average global market capitalization over a
consecutive 30 trading-day period is less than $50 million and, at the
same time, total stockholders' equity is less than $50 million.
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\5\ See Securities Exchange Act Release No. 59996 (May 28,
2009), 74 FR 26912 (June 4, 2009) (SR-NYSE-2009-48) (the ``Pilot
Program Notice'').
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The Pilot Program originally expired by its terms on October 31,
2009, but the Exchange extended its application for an additional five
months, until February 28, 2010.\6\ NYSE filed an immediately effective
proposed rule change to extend the Pilot Program for a further four
months, until June 30, 2010.\7\ This order approves the Pilot Program
on a permanent basis.
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\6\ See Securities Exchange Act Release No. 60911 (November 2,
2009), 74 FR 57730 (November 9, 2010) (SR-NYSE-2009-109).
\7\ See Securities Exchange Act Release No. 61609 (March 1,
2010), 75 FR 10336 (March 5, 2010) (SR-NYSE-2010-13).
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III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange \8\ and, in particular, the requirements of Section 6 of the
Act.\9\ Specifically, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\10\ which
requires, among other things, that the rules of a national securities
exchange be 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 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 are not designed to permit unfair discrimination between customers,
issuers, brokers or dealers.
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\8\ In approving this proposed rule change the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
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The development and enforcement of adequate standards governing the
initial and continued listing of securities on an exchange is an
activity of critical importance to financial markets and the investing
public. Listing standards serve as a means for an exchange to screen
issuers and to provide listed status only to bona fide companies that
have, or in the case of an initial public offering will have,
sufficient public float, investor base, and trading interest to provide
the depth and liquidity necessary to promote fair and orderly markets.
Adequate standards are especially important given the expectations of
investors regarding exchange trading and the imprimatur of listing on a
particular market. Once a security has been approved for initial
listing, maintenance criteria allow an exchange to monitor the status
and trading characteristics of that issue to ensure that it continues
to meet the exchange's standards for market depth and liquidity so that
fair and orderly markets can be maintained.
The Commission believes that the proposal to make permanent the
Pilot Program is reasonable and consistent with the Act, and furthers
investor protection and the public interest. Under the proposal,
companies that initially listed under the Earnings Test, Assets and
Equity Test, or NYSE Arca Transfer Standard are considered to be below
compliance standards if average global market capitalization over a
consecutive 30 trading-day period is less than $50 million and, at the
same time, total stockholders' equity is less than $50 million. The
Commission notes that for companies listed under the Earnings Test, the
Pilot Program returned continued listing requirements to those in place
prior to the higher standards adopted on June 9, 2005.\11\ Thus, even
prior to implementation of the Pilot Program, the Exchange had had
considerable historical experience with the continued listing of
companies that had continued to trade on the Exchange with global
market capitalization and stockholders' equity each below $75 million
but greater than $50 million. In addition, the Exchange represents that
its experience under the Pilot Program has been very positive, as only
one of the companies that was deemed back in compliance as a result of
the adoption
[[Page 21095]]
of the Pilot Program has subsequently fallen below the standard as
amended by the Pilot Program as of the date of this filing and only two
additional companies have been newly identified as being below the
Pilot Program standard.
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\11\ See Securities Exchange Act Release No. 51813 (June 9,
2005), 70 FR 35484 (June 20, 2005) (SR-NYSE-2004-20). The Assets and
Equity Test set forth in Section 102.01C(IV) and the NYSE Arca
Transfer Standard set forth in Section 102.01C(V) were adopted
subsequent to this amendment.
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The Commission notes that the continued listing standards as
amended by the Pilot Program are at least as stringent as those of any
other national securities exchange. In addition, the Exchange notes
that the Commission stated in the Pilot Program Notice\12\ that it
believed that the continued listing standards adopted under the Pilot
Program met the requirements established in Exchange Act Rule 3a51-
1(a)(2)(ii)\13\ in that they were reasonably related to the initial
listing standards set forth in paragraph (a)(2)(i) of Exchange Act Rule
3a51-1 (the ``Penny Stock Rule'').\14\
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\12\ See the Pilot Program Notice at Note 5.
\13\ 17 CFR 240.3a51-1(a)(2)(ii).
\14\ 17 CFR 240.3a51-1(a)(2)(i).
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Based on the above, the Commission believes that permanent adoption
of the Pilot Program is appropriate and that the continued listing
standards, although lower than the standards in place prior to the
Pilot Program, should help to ensure that listed companies continue to
have adequate depth and liquidity to maintain fair and orderly markets
for the protection of investors. Consequently, the Commission believes
that the Pilot Program is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NYSE-2010-15) is hereby
approved.
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\15\ 15 U.S.C. 78s(b)(2).
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-9358 Filed 4-21-10; 8:45 am]
BILLING CODE 8011-01-P