[Federal Register Volume 69, Number 57 (Wednesday, March 24, 2004)]
[Notices]
[Pages 13929-13932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6598]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49443; File No. SR-NYSE-2004-15]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Relating to a Pilot Program To Review Minimum Numerical Continued 
Listing Standards

March 18, 2004.
    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 March 16, 2004, the New York Stock Exchange, Inc. (``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 prepared by the Exchange. The 
Exchange filed the proposal pursuant to section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

     The NYSE is proposing to suspend its current six-month pilot 
program relating to section 802.01B of the Exchange's Listed Company 
Manual (the ``Manual'') regarding the minimum numerical continued 
listing standards. Proposed new language is in italics, and proposed 
deletions are in [brackets].
* * * * *

Listed Company Manual

* * * * *

802.00 Continued Listing

* * * * *

802.01 Continued Listing Criteria

    The Exchange would normally give consideration to delisting a 
security either a domestic or non-U.S. issuer when:
* * * * *

802.01B Numerical Criteria for Capital or Common Stock

    A company that falls below the criteria applicable to it is subject 
to the procedures outlined in Paras. 802.02 and 802.03.
    [(I) A company that qualified to list under the Earnings Test set 
out in Para. 102.01C(I) or in Para. 103.01B(I) will be considered to be 
below compliance standards if:
    (i) average global market capitalization over a consecutive 30 
trading-day period is less than $75,000,000 and, at the same time, 
total stockholders' equity is less than $75,000,000 (C); or
    (ii) average global market capitalization over a consecutive 30 
trading-day period is less than $25,000,000.
    (II) A company that qualified to list under the Valuation/Revenue 
with Cash Flow Test set out in Para. 102.01C(II)(a) or Para. 
103.01B(II)(a) will be considered to be below compliance standards if:
    (i) Average global market capitalization over a consecutive 30 
trading-day period is less than $250,000,000 and, at the same time, 
total revenues are less than $20,000,000 over the last 12 months 
(unless the company qualifies as an original listing under one of the 
other original listing standards) (D) ; or
    (ii) Average global market capitalization over a consecutive 30 
trading-day period is less than $75,000,000.
    (III) A company that qualified to list under the Pure Valuation/
Revenue Test set out in Para. 102.01C(II)(b) or Para. 103.01B(II)(b) 
will be considered to be below compliance standards if:
    (i) average global market capitalization over a consecutive 30 
trading-day period is less than $375,000,000 and, at the same time, 
total revenues are less than $15,000,000 over the last 12 months 
(unless the company qualifies as an original listing under one of the 
other original listing standards) (D); or
    (ii) average global market capitalization over a consecutive 30 
trading-day period is less than $100,000,000.
    (IV) A company that qualified to list under the Affiliated Company 
Test set out in Para. 102.01C(III) or Para. 103.01B(III) is not subject 
to any continued numerical standards unless:
    (i) the listed company's parent/affiliated company ceases to 
control the listed company, or
    (ii) the listed company's parent/affiliated company itself falls 
below the continued listing standards described to the parent/
affiliated company.
    In such case, the listed company that qualified to list under the 
Affiliated Company Test will be considered to be below compliance 
standards at any time that:
    (i) average global market capitalization over a consecutive 30 
trading-day period is less than $75,000,000 and, at the same time, 
total stockholders' equity is less than $75,000,000 (C); or
    (ii) average global market capitalization over a consecutive 30 
trading-day period is less than $25,000,000.
* * * * *
    When applying the market capitalization test in any of the above 
four standards, the Exchange will generally look to the total common 
stock outstanding (excluding treasury shares) as well as any common 
stock that would be issued upon conversion of another outstanding 
equity security. The Exchange deems these securities to be reflected in 
market value to such an extent that the security is a ``substantial 
equivalent'' of common stock. In this regard, the Exchange will only 
consider securities (1) publicly traded (or quoted), or (2) convertible 
into a publicly traded (or quoted) security. For partnerships, the 
Exchange will analyze the creation of the current capital structure to 
determine whether it is appropriate to include other publicly-traded 
securities in the calculation.
    Funds, REITs and Limited Partnerships will be subject to immediate 
suspension and delisting procedures if the average market 
capitalization of the entity over 30 consecutive trading days is below 
$25,000,000. In addition, a Fund is subject to immediate suspension and 
delisting if it ceases to maintain its closed-end status. A REIT is 
subject to immediate suspension and delisting if it fails to maintain 
its REIT status (unless the resultant entity qualifies for an original 
listing as a corporation).

[[Page 13930]]

    The Exchange will notify the Fund, REIT or limited partnership if 
the average market capitalization falls below $35,000,000 and will 
advise the Fund, REIT or limited partnership of the delisting standard. 
Funds, REITs and limited partnerships are not subject to the procedures 
outlined in Paras. 802.02 and 802.03.
    Bonds will be subject to immediate suspension and delisting 
procedures if:
    (i) the aggregate market value or principal amount of publicly-held 
bonds is less than $1,000,000, or
    (ii) the issuer is not able to meet its obligations on the listed 
debt securities.
    Bonds are not subject to the procedures outlined in Paras. 802.02 
and 802.03. Preferred Stock, Guaranteed Railroad Stock and Similar 
Issues will be subject to immediate suspension and delisting procedures 
if:
    (i) the aggregate market value of publicly-held shares is less than 
$2,000,000, or
    (ii) the number of publicly-held shares is less than 100,000.
    These types of securities are not subject to the procedures 
outlined in Paras. 802.02 and 802.03.
    (C) In order to be considered in conformity with continued listing 
standards pursuant to Paras. 802.02 and 802.03, a company that is 
determined to be below compliance under this continued listing 
criterion must do one of the following:
    (i) reestablish both its market capitalization and its 
stockholders' equity to the $75,000,000 level, or
    (ii) achieve average global market capitalization over a 
consecutive 30 trading-day period of at least $150,000,000, or
    (iii) achieve average global market capitalization over a 
consecutive 30 trading-day period of $90,000,000, with either (x) 
stockholders' equity of at least $60,000,000, or (y) an increase in 
stockholders' equity of at least $60,000,000 since the company was 
notified by the Exchange that it was below continued listing standards.
    (D) In order to be deemed in conformity with continued listing 
standards pursuant to Paras. 802.02 and 802.03, a company that is 
determined to be below compliance under this continued listing 
criterion must either:
    (i) reestablish both its market capitalization and its revenues to 
the applicable amounts, or
    (ii) qualify as an original listing under any of the original 
listing standards.]
    (i) Average global market capitalization over a consecutive 30 
trading-day period is less than $50,000,000 and total stockholders' 
equity is less than $50,000,000 (C); or
    (ii) Average global market capitalization over a consecutive 30 
trading-day period is less than $15,000,000; or
    (iii) For companies that qualified for original listing under the 
``global market capitalization'' standard: 
    Average global market capitalization over a consecutive 30 trading-
day period is less than $500,000,000 and total revenues are less than 
$20,000,000 over the last 12 months (unless the resultant entity 
qualifies as an original listing under one of the other original 
listing standards) (D); or
    Average global market capitalization over a consecutive 30 trading-
day period is less than $100,000,000. 
    When applying the market capitalization test in any of the above 
three standards, the Exchange will generally look to the total common 
stock outstanding (excluding treasury shares) as well as any common 
stock that would be issued upon conversion of another outstanding 
equity security. The Exchange deems these securities to be reflected in 
market value to such an extent that the security is a ``substantial 
equivalent'' of common stock. In this regard, the Exchange will only 
consider securities (1) publicly traded (or quoted), or (2) convertible 
into a publicly traded (or quoted) security. For partnerships, the 
Exchange will analyze the creation of the current capital structure to 
determine whether it is appropriate to include other publicly-traded 
securities in the calculation.
    Affiliated Companies--Will not be subject to the $50,000,000 
average global market capitalization and stockholders' equity test 
unless the parent/affiliated company no longer controls the entity or 
such parent/affiliated company itself falls below the continued listing 
standards described in this section.
    Funds, REITs and Limited Partnerships--will be subject to immediate 
suspension and delisting procedures if (1) the average market 
capitalization over 30 consecutive trading days is below $15,000,000 or 
(2) in the case of a Fund, it ceases to maintain its closed-end status, 
and in the case of a REIT, it fails to maintain its REIT status (unless 
the resultant entity qualifies for an original listing as a 
corporation). The Exchange will notify the fund, REIT or limited 
partnership if the average market capitalization falls below 
$25,000,000 and advise the Fund, REIT or limited partnership of the 
delisting standard. Funds, REITs and limited partnerships are not 
subject to the procedures outlined in Paras. 802.02 and 802.03.
    Bonds--

 The aggregate market value or principal amount of 
publicly-held bonds is less than $1,000,000.
     The issuer is not able to meet its obligations 
on the listed debt securities. Preferred Stock, Guaranteed Railroad 
Stock and Similar Issues.
 Aggregate market value of publicly-held shares is 
less than $2,000,000.
     Publicly-held shares is less than 100,000.
    (C) To be considered in conformity with continued listing standards 
pursuant to Paras. 802.02 and 802.03 a company that is determined to be 
below this continued listing criterion must do one of the following:
    (i) Reestablish both its market capitalization and its 
stockholders' equity to the $50,000,000 level, or
    (ii) Achieve average global market capitalization over a 
consecutive 30 trading-day period of at least $100,000,000, or
    (iii) Achieve average global market capitalization over a 
consecutive 30 trading-day period of $60,000,000, with either (x) 
stockholders' equity of at least $40,000,000, or (y) an increase in 
stockholders' equity of at least $40,000,000 since the company was 
notified by the Exchange that it was below continued listing standards.
    (D) A company that is determined to be below this continued listing 
criterion must reestablish both its market capitalization and its 
revenues to be considered in conformity with continued listing 
standards pursuant to paras. 802.02 and 802.03.
* * * * *

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 NYSE included statements 
concerning the purpose of, and the basis for, the proposed rule change, 
as amended, 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 Amex 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
    On January 29, 2004, the Commission approved a pilot program 
amending certain of the minimum numerical standards for the listing and 
continued

[[Page 13931]]

listing of equity securities on the Exchange (``Pilot Program'').\5\ At 
that time, the Exchange believed that the impact of the Pilot Program 
would be to strengthen certain aspects of the minimum original and 
continued listing standards, while modestly easing its market-cap/
revenue test to enable the NYSE to list somewhat younger companies that 
still meet substantial quantitative thresholds over their operating 
history.
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    \5\ See Securities Exchange Act Release No. 49154 (January 29, 
2004), 69 FR 5633 (February 5, 2004) (SR-NYSE-2003-43). The Pilot 
Program was scheduled to expire on July 29, 2004.
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    The Exchange is proposing to suspend the portion of the Pilot 
Program relating to the numerical continued listing standards set out 
in section 802.01B of the Manual. Under the previous requirements, 
section 802.01B applied to companies that fell below any of the 
following criteria: (i) Average global market capitalization over a 
consecutive 30 trading-day period is less than $50,000,000 and total 
stockholders' equity is less than $50,000,000; (ii) average global 
market capitalization over a consecutive 30 trading-day period is less 
than $15,000,000; or (iii) for companies that qualified for original 
listing under the ``global market capitalization'' standard (a) average 
global market capitalization over a consecutive 30 trading-day period 
is less than $500,000,000 and total revenues are less than $20,000,000 
over the last 12 months (unless the resultant entity qualifies as an 
original listing under one of the other original listing standards), or 
(b) average global market capitalization over a consecutive 30 trading-
day period is less than $100,000,000.
    Under the Pilot Program, companies that are listed under the 
Section 102.01C(I) ``Earnings Test'' are considered to be below 
compliance if (a) average global market capitalization over a 
consecutive 30 trading-day period is less than $75,000,000 and, at the 
same time, total stockholders' equity is less than $75,000,000; or (b) 
average global market capitalization over a consecutive 30 trading-day 
period is less than $25,000,000.
    A company that qualifies to list under the section 102.01C(II)(a) 
``Valuation/Revenue with Cash Flow Test'' is considered to be below 
compliance standards if (a) average global market capitalization over a 
consecutive 30 trading-day period is less than $250,000,000 and, at the 
same time, total revenues are less than $20,000,000 over the last 12 
months (unless the company qualifies as an original listing under one 
of the other original listing standards); or (b) average global market 
capitalization over a consecutive 30 trading-day period is less than 
$75,000,000.
    A company that qualifies to list under the section 102.01C(II)(b) 
``Pure Valuation/Revenue Test'' is considered to be below compliance 
standards if (a) average global market capitalization over a 
consecutive 30 trading-day period is less than $375,000,000 and, at the 
same time, total revenues are less than $15,000,000 over the last 12 
months (unless the resultant entity qualifies as an original listing 
under one of the other original listing standards); or (b) average 
global market capitalization over a consecutive 30 trading-day period 
is less than $100,000,000.
    Under the Pilot Program, companies that fall below the foregoing 
minimum standards are permitted a period of time to return to 
compliance, in accordance with the procedures specified in sections 
802.02 and 802.03 of the Manual. As a general matter, companies must 
reestablish the level of market capitalization (and, if applicable, 
shareholder's equity) specified in the continued listing standard that 
the company fell below. However, the previous requirements of section 
802.01B(I) that a company reestablish both its market capitalization 
and its stockholders' equity to the $50,000,000 level provided several 
alternatives, specifying that to return to conformity, a company must 
do one of the following: (a) Reestablish both its market capitalization 
and its stockholders' equity to the $50,000,000 level; (b) achieve 
average global market capitalization over a consecutive 30 trading-day 
period of at least $100,000,000; or (c) achieve average global market 
capitalization over a consecutive 30 trading-day period of $60,000,000, 
with either (x) stockholders' equity of at least $40,000,000 or (y) an 
increase in stockholders' equity of at least $40,000,000 since the 
company was notified by the Exchange that it was below continued 
listing standards. Under the Pilot Program, companies are required to 
(a) reestablish both its market capitalization and its stockholders' 
equity to the $75,000,000 level; (b) achieve average global market 
capitalization over a consecutive 30 trading-day period of at least 
$150,000,000; or (c) achieve average global market capitalization over 
a consecutive 30 trading-day period of $90,000,000, with either (x) 
stockholders' equity of at least $60,000,000 or (y) an increase in 
stockholders' equity of at least $60,000,000 since the company was 
notified by the Exchange that it was below continued listing standards.
    The Pilot Program provides a transition period for companies that 
were below compliance under the previous standards at the time the 
Pilot Program was approved, granting them an opportunity to present an 
additional business plan advising the Exchange of definitive action the 
company has taken, or is taking, that would bring the company into 
conformity zilot Program requirements within a further 12 months from 
the end of their previous plan. No transition period was provided, 
however, for companies that were in compliance under the previous 
standards but not in compliance with the Pilot Program standards at the 
time the Pilot Program was approved.
    The Exchange had requested, and the Pilot Program was approved, by 
the Commission on an accelerated basis. The Exchange represents that 
there was no opportunity for listed companies to review and comment on 
the Pilot Program requirements prior to the date compliance was 
required. A number of the listed companies that found themselves not in 
compliance with the Pilot Program standards as of the date of approval 
have expressed significant dismay at the automatic application of the 
new standards with no public notice. The Exchange is aware that the 
Commission has received two comment letters expressing this 
sentiment,\6\ in addition to the numerous oral communications by 
companies directed to the Exchange staff. In order to address these 
concerns, the Exchange proposes to suspend the portions of the Pilot 
Program relating to section 802.01B. The Exchange intends, instead, 
later to file a proposed rule change to adopt the requirements of the 
Pilot Program relating to 802.01B with the Commission for public 
comment on a non-accelerated timeframe.\7\
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    \6\ See Letters to Jonathan G. Katz, Secretary, Commission, from 
W. Randy Eaddy, Kilpatrick Stockton L.L.P., dated March 11, 2004, 
and Kenneth A. Hoogstra, von Briesen & Roper, s.c., dated February 
25, 2004.
    \7\ If the NYSE plans to implement the Pilot Program as 
initially proposed in SR-NYSE-2003-43 on a permanent basis, the 
Commission expects the NYSE to file all aspects of the Pilot Program 
(which include the Pilot Program's revisions to the NYSE initial and 
continued listing standards) for full notice and comment pursuant to 
section 19(b) of the Act.
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    The Pilot Program, however, will continue without change with 
respect to Sections 102.01C and 103.01B. The Exchange will also 
continue the Pilot Program's non-substantive change to the language of 
section 802.01C.

[[Page 13932]]

2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act,\8\ in general, and the 
provisions of section 6(b)(5) of the Act,\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 
a national market system, and, in general, to protect investors and the 
public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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, as 
amended, will impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change, as amended.

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

    Because the foregoing proposed rule change, as amended, does not: 
(i) Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) \11\ thereunder.\12\ At any time within 60 days of the filing 
of the proposed rule change, as amended, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business days prior to the 
filing date or such shorter period as designated by the Commission.
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    The NYSE has requested that the Commission waive the five-day pre-
filing notice and the 30-day operative delay. The Commission believes 
that waiving the five-day pre-filing notice and the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Waiver of the operative date will allow the Exchange to 
suspend immediately its effective Pilot Program relating to minimum 
continued numerical listing standards for qualification of domestic and 
international companies. The Commission notes that suspension of the 
Pilot Program for minimum continued numerical listing standards would 
alleviate the concerns of commenters who believed that they were given 
inadequate notice of the effectiveness of the Pilot Program.\13\ For 
these reasons, the Commission designates the proposal to be effective 
and operative upon filing with the Commission.\14\
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    \13\ See infra note 6.
    \14\ For purposes only of waiving the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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IV. 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NYSE-2004-15. 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, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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 Exchange. All 
submissions should refer to File No. SR-NYSE-2004-15 and should be 
submitted by April 14, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-6598 Filed 3-23-04; 8:45 am]
BILLING CODE 8010-01-P