[Federal Register Volume 73, Number 138 (Thursday, July 17, 2008)]
[Notices]
[Pages 41147-41149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16350]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58142; File No. SR-NYSEArca-2008-70]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Amending NYSE Arca Equities Rule 
5.2(j)(6)(B)(I), the Generic Listing Standard for Equity Index-Linked 
Securities

 July 11, 2008.
    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 June 27, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), 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 
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 
5.2(j)(6)(B)(I), the Exchange's generic listing standard for equity 
index-linked securities (``Equity Index-Linked Securities'') to: (1) 
Eliminate initial and continued listing capitalization weighted and 
modified capitalization weighted index requirements; and (2) to adjust 
certain equity index weighting criteria and adopt notional volume 
traded per month to both initial listing standards and continued 
listing standards. The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.

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 IV 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
    NYSE Arca proposes to amend NYSE Arca Equities Rule 
5.2(j)(6)(B)(I), the Exchange's generic listing standard for Equity 
Index-Linked Securities. Specifically, the Exchange proposes to: (1) 
Eliminate initial and continued listing capitalization weighted and 
modified capitalization weighted index requirements; and (2) to adjust 
certain equity index weighting criteria and adopt notional volume 
traded per month to both the initial listing standards and continued 
listing standards.
    For Equity Index-Linked Securities, the Exchange proposes to 
eliminate NYSE Arca Equities Rule 5.2(j)(6)(B)(I)(1)(b)(iii), the 
current initial listing requirement that, in the case of a 
capitalization weighted index or modified capitalization weighted 
index, the lesser of the five highest dollar weighted component 
securities in the index or the highest dollar weighted component 
securities in the index that in the aggregate represent at least 30% of 
the total number of component securities in the index, must have an 
average monthly trading volume of at least 2,000,000 shares over the 
previous six months. The Exchange also proposes to eliminate NYSE Arca 
Equities Rule 5.2(j)(6)(B)(I)(2)(a)(iii),\3\ the current

[[Page 41148]]

continued listing requirement, that in the case of a capitalization 
weighted index or modified capitalization weighted index, the lesser of 
the five highest dollar weighted component securities in the index or 
the highest dollar weighted component securities in the index that in 
the aggregate represent at least 30% of the total number of stocks in 
the index have an average monthly trading volume of at least 1,000,000 
shares over the previous six months.
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    \3\ E-mail from Timothy J. Malinowski, Director, NYSE Euornext, 
to Michou H.M. Nguyen, Special Counsel, and Steve Varholik, 
Attorney-Advisor, Division of Trading and Markets, Commission, on 
July 10, 2008 (correcting the citations to NYSE Arca Equities Rules 
5.2(j)(6)(B)(I)(2)(a)(iii) and 5.2(j)(6)(B)(I)(2)(a)(ii), 
respectively.) (``July 10 e-mail'').
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    The Exchange does not believe that it is consistent or justified to 
impose specific trading volume requirements applicable only to 
capitalization weighted or modified capitalization weighted indexes, 
since both of these index methodologies do not raise any unique 
characteristics that merit the application of the current initial and 
continued listing standard. Rather, the Exchange proposes that 
capitalization weighted index or modified capitalization weighted 
indexes comply with the initial and continued listing requirements 
currently applicable to all other equity indexes under NYSE Arca 
Equities Rule 5.2(j)(6)(B)(I) regardless of the index methodology.
    The Exchange notes that the Exchange's exchange-traded fund 
(``ETF'') listing standard \4\ does not impose equity index 
requirements on capitalization weighted and modified capitalization 
weighted indexes.
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    \4\ See NYSE Arca Equities Rule 5.2(j)(3) Commentary .01.
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    Currently for initial listing, Rule 5.2(j)(6)(B)(I)(1)(b)(ii) 
provides that each component security of an equity index shall have 
trading volume in each of the last six months of not less than 
1,000,000 shares per month, except that for each of the lowest weighted 
component securities in the index that in the aggregate account for no 
more than 10% of the weight of the index, the trading volume will be at 
least 500,000 shares per month in each of the last six months.
    The Exchange is proposing to: (i) Remove the requirement that each 
of the lowest weighted component securities in the index that in the 
aggregate account for 10% of the weight of the index have trading 
volume of at least 500,000 shares per month for each of the last six 
months; and (ii) adopt minimum global notional volume (``Global 
Notional Volume'') \5\ traded per month of $25,000,000 averaged over of 
the last six months as an option for meeting the listing requirements. 
Proposed Rule 5.2(j)(6)(B)(I)(1)(b)(ii) sets forth:
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    \5\ Global Notional Volume is defined as the total shares traded 
globally times the price per share.

    Component stocks that in the aggregate account for at least 90% 
of the weight of the index each shall have a minimum global monthly 
trading volume of 1,000,000 shares, or minimum Global Notional 
Volume traded per month of $25,000,000, averaged over the last six 
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months.

    With respect to the continued listing criteria, Rule 
5.2(j)(6)(B)(I)(2)(a)(ii) \6\ currently sets forth that the trading 
volume of each component security in the index must be at least 500,000 
shares for each of the last six months, except that for each of the 
lowest weighted components in the index that in the aggregate account 
for no more than 10% of the weight of the index, trading volume must be 
at least 400,000 shares for each of the last six months.
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    \6\ See July 10 e-mail supra note 3.
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    The Exchange is proposing to: (i) Remove the requirement that the 
lowest weighted component securities in the index that in the aggregate 
accounting for no more than 10% of the weight of the index have trading 
volume of at least 400,000 shares for each of the last six months; and 
(ii) adopt minimum Global Notional Volume traded per month of 
$12,500,000 averaged over the last six months as an option for 
satisfying the continued listing requirements. Proposed Rule 
5.2(j)(6)(B)(I)(2)(ii) sets forth:

    Component stocks that in the aggregate account for at least 90% 
of the weight of the index each shall have a minimum global monthly 
trading volume of 500,000 shares, or minimum Global Notional Volume 
traded per month of $12,500,000, averaged over the last six months.

    With respect to both the initial listing and continued listing 
standards, the Exchange believes that considering the weighting of the 
bottom 10% component securities is insignificant for determining the 
liquidity of the index. Rather, the Exchange proposes that focusing on 
90% of the top weighted index component securities is a better 
indication as to whether the index or indexes has sufficient liquidity 
for listing and trading of the related Equity Index-Linked Security.
    With respect to adopting, as an alternative to monthly trading 
volume, the minimum Global Notional Volume traded averaged over the 
last six months to both the initial and continued listing standards, 
the Exchange believes that averaged notional volume traded per month is 
a better measure of the liquidity of component stocks of the underlying 
index or indexes. Specifically, notional volume nullifies the volume 
discrepancies that generally occur between low-priced and high-priced 
stocks.\7\ In addition, adopting an average of the trading volume and 
notional volume over six months eliminates seasonal volume fluctuations 
that may occur in the trading volume of a particular underlying 
security represented in the index or indexes.\8\
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    \7\ For example, a stock priced at $10 per share that trades 
2,500,000 shares in a month has a notional volume of $25,000,000. 
Conversely, a stock priced at $100 per share that trades 250,000 
shares in a month has a notional volume of $25,000,000.
    \8\ See July 10 e-mail supra note 3 (clarifying that the 
adoption of six month average applies to both trading volume and 
Global Notional Volume traded).
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    Further, investors, Equity Index-Linked Securities issuers, and 
third-party index sponsors would also benefit from NYSE Arca's ability 
to list--without the delay associated with a stand-alone rule filing--
Equity Index-Linked Securities based on a broader group of indexes, 
promoting competition.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanisms of a free and open market and a national market system, 
and, in general, to protect investors and the public interest. The 
Exchange believes that the proposed rules applicable to trading 
pursuant to generic listing and trading criteria, together with the 
Exchange's surveillance procedures applicable to trading in the 
securities covered by the proposed rules, serve to foster investor 
protection.
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    \9\ 15 U.S.C. 78f.
    \10\ 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.

[[Page 41149]]

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.

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 reason for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve such 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, including whether the proposed rule 
change 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 an e-mail to [email protected]. Please include 
File Number SR-NYSEArca-2008-70 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2008-70. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. 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-NYSEArca-2008-70 and should 
be submitted on or before August 7, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Acting Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-16350 Filed 7-16-08; 8:45 am]
BILLING CODE 8010-01-P