[Federal Register Volume 61, Number 105 (Thursday, May 30, 1996)]
[Notices]
[Pages 27123-27124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13459]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37238, File No. SR-NYSE-96-06]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to Continued
Listing Standards for Specialized Securities
May 22, 1996.
On March 18, 1996, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to establish continued listing
criteria for certain specialized securities.
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\1\ 15 U.S.C. Sec. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 37056 (Apr. 1, 1996), 61 FR 15547 (Apr. 8,
1996). No comments were received on the proposal.
Currently, the NYSE has listing standards for certain specialized
securities: stock warrants, foreign currency warrants and currency
index warrants, stock index warrants, contingent value rights
(``CVRs'') \3\ other securities, and equity-linked debt securities
(``ELDS'').\4\ The uniform listing standards for specialized securities
require one million shares outstanding, 400 holders, $4 million
aggregate market value and a minimum life of one year.\5\
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\3\ CVRs are unsecured obligations of an issuer that provide for
a possible cash payment upon maturity depending upon the price
performance of an affiliate's equity security.
\4\ ELDS are intermediate-term (two to seven years), non-
convertible, hybrid securities, the value of which is based, at
least in part, on the value of another issuer's common stock or
other equity security. ELDS may pay periodic interest or may be
issued as zero-coupon instruments with no payments to holders prior
to maturity. Moreover, ELDS may be subject to a ``cap'' on the
maximum principal amount to be repaid to holders upon maturity and,
additionally, may feature a ``floor'' on the minimum principal
amount to be repaid to holders upon maturity.
\5\ There are additional standards for several of these
securities. For example, ELDS relating to any underlying U.S.
security may not exceed five percent of the total outstanding shares
of such underlying security.
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With this rule proposal, the Exchange proposes to establish uniform
continued listing criteria for these specialized securities in
paragraphs 801 and 802 of the Exchange's Listed Company Manual
(``Manual'') to correspond to the initial listing standards. The NYSE
would consider delisting these specialized securities when the number
of publicly-held shares is less than 100,000, the
[[Page 27124]]
number of holders is less than 100, and the aggregate market value of
shares outstanding is less than $1,000,000.
Moreover, the Exchange is proposing additional requirements for
securities that are related to other securities. For stock warrants and
CVRs, the NYSE would require that the related security remain listed.
For ELDS, the issuer of the linked security must remain subject to the
reporting obligations of the Act and the linked security must remain
trading in a market in which there is last sale reporting. The Exchange
also will require the issuer of specialized debt securities to be able
to meet its obligations on such debt. For all specialized securities
listed pursuant to paragraph 703 of the Manual, the Exchange will
delist any specialized securities if the related or linked securities
are delisted for violation of the Exchange's ``Corporate
Responsibility'' criteria in Section 3 of the Manual.\6\
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\6\ Section 3 (Corporate Responsibility) includes, among others,
policies concerning voting rights, quorums, and shareholder
approval.
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The proposed rule change also eliminates the delisting criteria
relating to creation of a class of non-voting common stock. The
Exchange believes that these criteria are no longer appropriate because
the Exchange currently has listing criteria specifically addressing
non-voting common stock. Finally, the proposed rule change would delete
the current warrant continued listing criteria and include stock,
foreign currency and currency index, and stock index warrants within
the new uniform continued listing criteria. The Exchange believes that
the continued listing criteria for warrants do not conform to the
current warrant listing standards.
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, and, in
particular, with the requirements of Section 6(b).\7\ Specifically, the
Commission believes the proposal is consistent with the Section 6(b)(5)
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, and, in general, to protect investors and the public
interest; and are not designed to permit unfair discrimination between
issuers.
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\7\ 15 U.S.C. Sec. 78f(b).
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The Commission believes that the development and enforcement of
adequate standards governing the listing of securities on an exchange
is an activity of critical importance to exchange markets and to the
investing public. Listing standards serve as a means for the self-
regulatory organizations (``SROs'') to screen issuers and to provide
listed status only to bona fide companies with substantial float,
investor base, and trading interest to ensure sufficient liquidity for
fair and orderly markets. Listing standards also enable an exchange to
assure itself of the bona fides of the company and its past trading
history. In this regard, over the past several years the Exchange has
proposed, and the Commission has approved, uniform initial listing
standards for specialized securities.
With this rule proposal, the Exchange proposes uniform continued
listing criteria to correspond to the initial listing standards adopted
for specialized securities. The Commission believes that adequate
maintenance standards are of equal importance to the development of
adequate standards for initial inclusion on an exchange. The Commission
notes that once an issue has been initially approved for listing, the
Exchange must monitor continually the status and trading
characteristics of that issue to endure that it continues to meet
exchange standards for trading depth and liquidity.
In this regard, the Commission believes that the quantitative
continuing listing standards for specialized securities will ensure
that there is sufficient public float and investor interest in the
securities to support continued trading consistent with fair and
orderly markets. Further, the additional requirements for specialized
securities that are related to other securities should ensure, among
other things, that these securities cannot, through continued listing,
become a surrogate for trading a security that has been delisted due to
corporate responsibility violations.\8\ As described above, for
continued listing of stock warrants and CVRs, the Exchange will require
that the related security be, and remain, a NYSE listed security. For
ELDS, the issuer of the linked security must remain subject to the
reporting obligations of the Act and the linked security must remain
subject to last sale reporting. The Commission believes that these
standards are appropriate under the Act and will ensure that the linked
or related securities have adequate transparency and information
available and meet certain minimum requirements. With respect to CVRs
and stock warrants, the additional requirements should also help to
address concerns that such securities will not become a surrogate for
trading other securities not eligible for NYSE listing.
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\8\ See supra note 6 and accompanying text.
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In summary, the Commission believes that the maintenance criteria,
established by the rule proposal, should help to ensure the stability
of the marketplace, as well as protect investors, by subjecting the
securities of an issuer to delisting if the listed security fails to
meet the new maintenance standards.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-NYSE-96-06) is approved.
\9\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-13459 Filed 5-29-96; 8:45 am]
BILLING CODE 8010-01-M
