[Federal Register Volume 68, Number 72 (Tuesday, April 15, 2003)]
[Notices]
[Pages 18317-18318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9160]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47652: File No. SR-NYSE-2003-08]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by the New York 
Stock Exchange, Inc. Relating to Listing and Trading ELDS on the 
Exchange

April 8, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 4, 2003, the New York Stock Exchange, Inc. (the 
``Exchange'' or the ``NYSE'') filed with the Securities and Exchange 
Commission (the ``SEC'' or the ``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 and to 
approve the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 NYSE proposes to amend section 703.21 of the Exchange's Listed 
Company Manual relating to the listing and trading of equity-linked 
debt securities (``ELDS'') on the Exchange. The text of the proposed 
rule change is set forth below in its entirety. Proposed new language 
is in italics; proposed deletions are in [brackets].
* * * * *

Listed Company Manual

* * * * *

703.00 Subsequent Listing Applications and Debt Securities Applications

* * * * *

703.21 Equity-Linked Debt Securities

    The Exchange will consider listing equity-linked debt securities 
(``ELDS'') that meet the criteria of this paragraph. ``Equity-linked 
debt securities'' are non-convertible debt of an issuer where the value 
of the debt is based, at least in part, on the value of another 
issuer's common stock[ or], non-convertible preferred stock, common 
units of a master limited partnership or any other common equity 
security of a type classified for trading as stocks by the Exchange.
    (A) through (D)--No change
* * * * *

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, 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 III below. The Exchange 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 is proposing to amend section 703.21 of the Exchange's 
Listed Company Manual (the ``Manual'') relating to the listing and 
trading of equity-linked debt securities (``ELDS'') on the Exchange. 
The Exchange is proposing to clarify that the definition of ELDS covers 
non-convertible debt of an issuer where the value of the debt is based, 
at least in part, not only on the value of another issuer's common 
stock or non-convertible preferred stock, but also on the value of 
common units of a publicly traded master limited partnership, as well 
as any other equity security of a type classified for trading as 
``stocks'' by the Exchange. The Exchange represents that this 
terminological clarification is consistent with the intent of the 
original rule of section 703.21 and should provide issuers with greater 
transparency regarding the scope of the rule. The Exchange believes 
that this rule change will provide issuers with more flexibility in 
developing ELDS and thus provide greater investment choices in the 
market without having an adverse effect on investor protection.\3\
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    \3\ In Securities Exchange Act Release No. 34545, dated August 
18, 1994 (the ``Release''), the Commission stated that, except under 
limited circumstances, the issuance of ELDS relating to any 
underlying security may not exceed five percent of the total shares 
outstanding of such underlying security. Footnote 10 of the Release 
states that the only exceptions to this restriction are where either 
(1) the issuer of the ELDS and the issuer of the underlying security 
are affiliated; or (2) the issuer of the ELDS holds an amount of the 
underlying security at least equal to the amount of the underlying 
security represented by the ELDS. As required by the SEC under the 
Release, the maximum percentage of ELDS that may be issued will be 
evaluated by the Exchange on a case-by-case basis in consultation 
with, and with the approval of, the staff of the Commission.
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    The Exchange represents that its rules and policies currently 
applicable to ELDS generally will apply to ELDS linked to limited 
partnership units and other equity securities.\4\
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    \4\ An equity security on which the value of the debt is based 
must meet the requirements of Section 703.21(C) of the Manual.
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2. Statutory Basis
    NYSE believes that the proposed rule change is consistent with 
section 6 of the Act,\5\ in general, and furthers the objectives of 
section 6(b)(5)\6\ 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, in general, to 
protect investors and the public interest.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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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. 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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 at 450 Fifth Street, NW., 
Washington, DC 20549-0609. Copies of

[[Page 18318]]

such filing will also be available for inspection and copying at the 
principal office of the Exchange. All submissions should refer to File 
No. SR-NYSE-2003-08 and should be submitted by May 6, 2003.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    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.\7\ In 
particular, the Commission finds that the proposed rule change is 
consistent with section 6(b)(5) of the Act.\8\ Specifically, The 
Commission believes that the proposed change does not raise any 
significant regulatory issues that were not addressed in the 
Commission's prior approval orders regarding ELDS. The proposed rule 
change clarifies the existing listing criteria for ELDS contained in 
Paragraph 703.21 of the Manual by clarifying that the definition of 
ELDS covers non-convertible debt of an issuer where the value of the 
debt is based, at least in part, not only on the value of another 
issuer's common stock or non-convertible preferred stock, but also on 
the value of common units of a publicly traded master limited 
partnership, as well as any other equity security of a type classified 
for trading as ``stocks'' by the Exchange. The Commission notes that an 
equity security on which the value of the debt is based must meet the 
requirements of section 703.21(c). The Commission believes that this 
change is consistent with the intent of the original rule of section 
703.21 and will provide issuers with greater transparency regarding the 
scope of the rule.
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    \7\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    NYSE has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of notice thereof in the Federal Register to accommodate 
the listing and trading of ELDS based on publicly traded master limited 
partnerships. Accordingly, the Commission finds good cause, pursuant to 
section 19(b)(2) of the Act,\9\ for approving the proposed rule change 
prior to the thirtieth day after the date of publication of notice 
thereof in the Federal Register because these products are similar to 
other ELDS currently trading on NYSE.
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    \9\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSE-2003-08), is hereby 
approved on an accelerated basis.
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    \10\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-9160 Filed 4-14-03; 8:45 am]
BILLING CODE 8010-01-P