[Federal Register Volume 60, Number 25 (Tuesday, February 7, 1995)]
[Notices]
[Pages 7245-7246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2906]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35301; File No. SR-NYSE-95-01]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc., Relating to Domestic Listing 
Standards

January 31, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on January 
18, 1995, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE is proposing amendments to its domestic listing standards. 
These listing standards are contained in Paragraph 102.01 of the 
Exchange's Listed Company Manual. The text of the proposed rule change 
is available at the Office of the Secretary, NYSE, and at the 
Commission.

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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 purpose of the proposed rule change is to create alternatives 
for two existing Exchange listing standards and to amend two additional 
standards. According to the Exchange, the NYSE already has, and intends 
to maintain, the highest listing requirements among U.S. markets. 
Current listing requirements measure, among other things, demonstrated 
earning power and shareholder distribution, as well as tangible net 
worth and market capitalization of publicly-held shares. The rule 
change would provide alternatives to the existing demonstrated earning 
power and shareholder distribution tests. In addition, the proposal 
would increase the existing requirements for tangible net worth and 
public market capitalization.

Demonstrated Earning Power

    Under the Exchange's demonstrated earning power standard, the 
existing requirement calls for:

Demonstrated earning power--income before federal income                
 taxes and under competitive conditions:                                
  Latest fiscal year.......................................   $2,500,000
  Each of the preceding two fiscal years...................   $2,000,000
[[Page 7246]]                                                           
                                                                        
    or                                                                  
Demonstrated earning power--income before federal income                
 taxes and under competitive conditions:                                
  Aggregate for last three fiscal years together with......   $6,500,000
  A minimum in most recent fiscal year (All three years                 
   must be profitable).....................................   $4,500,000
                                                                        

    The NYSE believes that there are substantial companies, in some 
cases multi-billion dollar enterprises, that do not manage their 
business on the basis of reported income. In order to provide an 
opportunity for these companies to list, the Exchange is proposing an 
alternate demonstrated earning power test for companies with a market 
capitalization of not less than $500 million and revenues of not less 
than $200 million in the most recent fiscal year. These companies would 
be in a position to qualify for listing under an alternate listing 
standard based on net income adjusted for the cash effects of investing 
or financing cash flows.
    The proposed standard would call for aggregate adjusted net income 
of not less than $25 million for the last three years, with each year 
showing a positive amount. Reported net income (before preferred 
dividends) would be adjusted, under the new standard, to remove the 
effects of all items whose cash effects are ``investing'' or 
``financing'' cash flows as determined pursuant to Paragraph 28(b) of 
the Financial Accounting Standards Board's Statement of Financial 
Accounting Standards No. 95, ``Statement of Cash Flows'' (depreciation, 
amortization of good will and gains or losses on sales of property, 
plant and equipment are examples of such items). The adjustment to net 
income with respect to the cash effects of (1) discontinued operations, 
(2) the cumulative effect of an accounting change, (3) an extraordinary 
item or (4) the gain or loss on extinguishment of debt would be limited 
to the amount charged or credited in determining net income for the 
period.

Shareholder Distribution

    The Exchange's current shareholder distribution requirement calls 
for a minimum of:

Number of holders of 100 shares or more or of a unit of                 
 trading if less than 100 shares...........................        2,000
     or                                                                 
Total stockholders together with...........................        2,200
Average monthly trading volume (For most recent six months)      100,000
                                                                        

    The proposed rule change would add a distribution standard for 
companies whose shares are very actively traded as an alternative to 
the existing shareholder distribution tests. Under the new alternative 
standard, a company with average monthly share trading volume of 1 
million shares (for the most recent 12 months) could qualify for 
listing with 500 total shareholders. The Exchange believes that a 
company with this demonstrated level of trading activity would be 
appropriate for trading in the Exchange's agency-auction market as long 
as there are at least 500 shareholders.

Market Value and Net Tangible Assets

    In addition to the two alternate standards proposed above, the 
Exchange is proposing to increase the existing requirements for both 
aggregate market value of publicly-held shares and net tangible assets 
from the current $18 million to $40 million. These requirements 
previously were adjusted in 1984. The NYSE views the increase in these 
standards as appropriately reflecting the attributes of the kinds of 
companies that the Exchange wants to attract, and expects that such 
standards would help to maintain the quality of the NYSE list.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that are 
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 a national 
market system and, in general, to protect investors and the public 
interest.

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

    The proposed rule change does not 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 not solicited, and does not intend to solicit, 
comments on the proposed rule change. The Exchange has not received any 
unsolicited written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the publication of this notice in the Federal 
Register or within such other 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 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
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 at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to File No. SR-NYSE 95-01 and should be 
submitted by February 28, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-2906 Filed 2-6-95; 8:45 am]
BILLING CODE 8010-01-M