[Federal Register: March 5, 2007 (Volume 72, Number 42)]
[Notices]
[Page 9814-9816]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr07-93]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55343; File No. SR-NYSE-2007-12]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
Amend Section 703.16 of the NYSE Listed Company Manual To Eliminate
Requirement Regarding Index Calculation Methodology
February 23, 2007.
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 February 5, 2007 the 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 substantially prepared by the
Exchange. On February 15, 2007, the Exchange filed Amendment No. 1 to
the proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Section 703.16 of the NYSE Listed
Company Manual (``Manual''), the Exchange's generic listing standard
for investment company units (``ICUs''), to eliminate the requirement
that the calculation methodology for the index underlying a series of
ICUs must be one of those enumerated in Section 703.16(C)(4)(a). The
proposed rule text is available at the NYSE, the Commission's Public
Reference Room, and http://www.nyse.com.
[[Page 9815]]
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 Exchange included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The NYSE has prepared summaries, set forth in sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Section 703.16 of the Manual, which
includes the Exchange's generic listing standard for ICUs (which
include exchange-traded funds), to eliminate the requirement that the
calculation methodology for the index underlying a series of ICUs must
be one of those enumerated in section 703.16(C)(4)(a). This Amendment
No. 1 replaces the Exchange's initial filing in its entirety.
The Exchange has adopted listing standards applicable to ICUs which
are consistent with the listing criteria currently used by other
national securities exchanges, and trading standards pursuant to which
the Exchange may either list and trade ICUs or trade such ICUs on the
Exchange on an unlisted trading privileges (``UTP'') basis.\3\ An ICU
is defined in Section 703.16 of the Manual as a security that
represents an interest in a registered investment company that could be
organized as a unit investment trust, an open-end management investment
company, or a similar entity. A registered investment company is
registered under the Investment Company Act of 1940.\4\
---------------------------------------------------------------------------
\3\ In 1996, the Commission approved Section 703.16 of the
Listed Company Manual, which sets forth the rules related to the
listing of ICUs. See Securities Exchange Act Release No. 36923
(March 5, 1996), 61 FR 10410 (March 13, 1996) (SR-NYSE-95-23). In
2000, the Commission also approved the Exchange's generic listing
standards for listing and trading, or the trading pursuant to UTP,
of ICUs under Section 703.16 of the Listed Company Manual and
Exchange Rule 1100. See Securities Exchange Act Release No. 43679
(December 5, 2000), 65 FR 77949 (December 13, 2000) (SR-NYSE-2000-
46).
\4\ 15 U.S.C. 80a.
---------------------------------------------------------------------------
The ``generic'' listing criteria of Section 703.16 of the Manual
permit listing of ICUs that satisfy such criteria in reliance upon Rule
19b-4(e) under the Act,\5\ without a filing pursuant to Rule 19b-4
under the Act. Section 703.16(C)(4)(a) of the Manual requires, among
other criteria, that, if a series of ICUs is listed for trading on the
Exchange in reliance upon Rule 19b-4(e), the index underlying the
series must follow one of these calculation weighting methodologies:
Market capitalization, modified market capitalization, price, equal-
dollar, or modified equal-dollar weighting methodology or a methodology
weighting components of the index based on any, some or all of the
following: Sales, cash flow, book value and dividends.
---------------------------------------------------------------------------
\5\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------
The Exchange proposes to delete Section 703.16(C)(4)(a) and thereby
eliminate the calculation methodology limitation.\6\ In recent years,
academics and market professionals have explored and defined a growing
list of innovations in index construction. Most recently, the
Commission approved amendments to the generic listing criteria to
accommodate new index weighting methodologies based on ranking
companies by financial data such as sales, cash flow, book value and
dividends.\7\ The Exchange believes there are multiple ways for indexes
to be constructed to serve useful market purposes. Additional
methodologies are under active development by academics and market
professionals and permitting only certain specified index weighting
methods does not take into account the rapid innovation in this area.
The Exchange believes that, with respect to ICUs listed pursuant to
Rule 19b-4(e), applying the numerical weighting and liquidity criteria
and index dissemination requirements in Section 703.16, without
imposing constraints on the index methodology, will provide greater
flexibility to indexers and ICU issuers to develop indexes that meet
the investment objectives of investors. In addition, the proposed rule
change would allow ICUs based on a non-traditional weighting
methodology to be brought to market more quickly, thereby reducing
burdens on ICU issuers and other market participants and promoting
competition.
---------------------------------------------------------------------------
\6\ The Exchange also proposes to redesignate current
subparagraphs (b) and (c) of Section 703.16(C)(4) as (a) and (b),
respectively.
\7\ See Securities Exchange Act Release No. 54649 (October 24,
2006); 71 FR 63816 (October 31, 2006) (SR-NYSE-2006-88).
---------------------------------------------------------------------------
The Exchange notes that the numerical criteria in Section 703.16
already define the concentration limits, diversity requirements and
liquidity requirements of the companies in the underlying index. For
example, the generic listing standards for domestic indexes require,
among other things, that an index include at least 13 stocks, that the
most heavily weighted component stock of an index cannot exceed 30% of
the index weight and the five most heavily weighted component stocks of
an index cannot exceed 65% of the index weight. The generic listing
standards for international or global indexes require, among other
things, that the index include at least 20 component stocks, that the
most heavily weighted index component stock cannot exceed 25% of the
index weight, and the five most heavily weighted component stocks
cannot exceed 60% of the index weight. ICUs and their underlying
indexes would continue to be subject to all other requirements of
Section 703.16 of the Manual. Under these circumstances, the Exchange
believes that removal of the index weighting requirements of Section
703.16(C)(4)(a) will not compromise investor protection.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \8\ of the
Act in general and furthers the objectives of Section 6(b)(5) \9\ 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, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 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
[[Page 9816]]
organization consents, the Commission will:
(A) by order approve the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
The Exchange has requested accelerated approval of this proposed
rule change. The Commission has determined that a 15-day comment period
is appropriate in this case.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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 e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSE-2007-12 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2007-12. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room. Copies of such
filing will also be available for inspection and copying at the
principal office of the NYSE. 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-2007-12 and should be submitted by March 20, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3741 Filed 3-2-07; 8:45 am]
BILLING CODE 8010-01-P