[Federal Register Volume 77, Number 206 (Wednesday, October 24, 2012)]
[Notices]
[Pages 65028-65030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26143]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68065; File No. SR-NYSE-2012-52]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending Sections 102.01 and 103.00 of the Exchange's Listed Company 
Manual To Permit the Consideration of Stockholders and Trading Volume 
in the Company's Home Country Market or Primary Trading Market Outside 
the United States, Provided Such Market is a Regulated Stock Exchange, 
When Determining the Qualification for Initial Listing Under Section 
102.01 of a Company From Outside North America

October 18, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that October 5, 2012, 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 and 
II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 Sections 102.01 and 103.00 of the 
Exchange's Listed Company Manual (the ``Manual'') to permit the 
consideration of stockholders and trading volume in the company's home 
country market or primary trading market outside the United States, 
provided such market is a regulated stock exchange, when determining 
the qualification for initial listing under Section 102.01 of a company 
from outside North America. The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Sections 102.01 and 103.00 of the 
Manual to permit the consideration of stockholders and trading volume 
in the company's home country market or primary trading market outside 
the United States, provided such market is a regulated stock exchange, 
when determining the qualification for initial listing under Section 
102.01 of a company from outside North America.
    Section 102.01A of the Manual sets forth the Exchange's minimum 
initial listing requirements with respect to distribution for companies 
seeking to list under the Exchange's ``domestic'' initial listing 
standards.\4\ A note included in Section 102.01B provides that, when 
considering a listing application from a company organized under the 
laws of Canada, Mexico or the United States (``North America''), the 
Exchange will include all North American holders and North American 
trading volume in applying the minimum stockholder and trading volume 
requirements of Section 102.01A. By comparison, Section 103.00 
specifies that, when a company from outside North America seeks to list 
under the domestic criteria in Section 102.01B, the Exchange will 
consider only stockholders and trading volume in the United States.
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    \4\ While Section 102.01 makes reference to ``domestic'' 
companies, Section 103.00 specifies that non-U.S. companies can 
qualify for listing under either the ``domestic'' standards set 
forth in Section 102.01 or the Alternate Listing Standards for 
foreign companies set forth in Section 103.
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    The Exchange proposes to amend Sections 102.01B and 103.00 to 
provide that, in connection with the listing of any issuer from outside 
North America, the Exchange will have the discretion, but will not be 
required, to consider holders and trading volume in the company's home 
country market or primary trading market outside the United States in 
determining whether a company is qualified for listing under Section 
102.01, provided such market is a regulated stock exchange.\5\ The 
proposed amended rule text specifies that, in exercising this 
discretion, the Exchange would consider all relevant factors including: 
(i) Whether the information was derived from a reliable source, 
preferably either a regulated securities market or a transfer agent 
that was subject to governmental regulation; (ii) whether there existed 
efficient

[[Page 65029]]

mechanisms for the transfer of securities between the company's non-
U.S. trading market and the United States; and (iii) the number of 
shareholders and the extent of trading in the company's securities in 
the United States prior to the listing.
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    \5\ Consistent with the existing text of Section 102.01B, in the 
case of a security that would list as an American Depositary Receipt 
(``ADR''), the Exchange would adjust share data so that the 
company's shareholders and trading volume would be analyzed on an 
ADR-equivalent basis. For example, assume that a Mexican company has 
ADRs trading in the United States and ordinary shares trading in 
Mexico, with each ADR representing 10 ordinary shares. If the 
company were to apply to list its U.S.-traded ADRs on the NYSE, the 
Exchange would divide the Mexican share volume by 10 in determining 
whether the combined ADR/share volume meets the requirements of the 
listing criteria. For Companies that have multiple series of shares 
or ADR's the Exchange will include the volume only in the specific 
ordinary shares and overlying ADRs that would be listed on the 
exchange.
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    The Exchange notes that it has been its experience that where there 
is a liquid market for a company's securities in its home country or 
primary trading market and where it is relatively easy to transfer 
securities between the home country or primary trading market and the 
United States, a liquid trading market can develop quickly on the 
Exchange even if there are relatively few U.S. holders at the time of 
original listing. Brazil is an example of a country whose companies 
sometimes list on the Exchange without a concurrent U.S. initial public 
offering and where a liquid trading market quickly develops in the 
United States.
    Currently, the only option for listing qualification available to a 
company from outside North America which is unable to comply with the 
U.S.-only distribution requirements of Section 102.01B \6\ [sic] is to 
qualify under the Alternate Listing Standards for foreign companies set 
forth in Section 103. The Alternate Listing Standards were adopted at a 
time when the listing of foreign companies on U.S. exchanges was still 
relatively uncommon. At that time, the Exchange's domestic listing 
standards required applicants to have 2,000 round lot holders in the 
United States, or, in the case of North American companies, within 
North America. As stated in Section 103.00, the Exchange recognized 
that the domestic distribution requirements then in effect were ``a 
major obstacle for many large non-U.S. companies which otherwise 
fulfill many times over the normal size and earnings requirements for 
listing on the Exchange.'' As the Alternate Listing Standards were 
designed for the listing of large foreign companies with a large 
shareholder base and an exchange listing in their home country, the 
5,000 worldwide round lot holder requirement of Section 103.01 was not 
unduly burdensome. However, since the adoption of the Alternate Listing 
Standards there have been two significant changes. First, the NYSE 
amended its distribution standards in Section 102.01B \7\ [sic] so that 
companies listing under the domestic standards typically now list on 
the basis of a 400 round lot holder requirement. Consequently, the 
disparity between the 5,000 round lot holder requirement of the 
Alternate Listing Standards and the current domestic distribution 
requirements is far greater than when the Alternate Listing Standards 
were initially adopted. Second, many of the foreign companies which now 
apply to list are significantly smaller than the large foreign 
companies for which the Alternate Listing Standards were designed. 
Consequently, the significant disparity between the domestic and 
international shareholder requirements is further highlighted by the 
fact that many of the smaller foreign companies now seeking to list on 
the Exchange have far fewer shareholders than was typical for the large 
companies for which the international distribution requirements were 
designed.
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    \6\ The Commission notes that Section 102.01A of the Exchange's 
Listed Company Manual contains the distribution requirements.
    \7\ See id.
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    In addition to the difficulty many foreign listing applicants 
experience in meeting the distribution requirements under the Alternate 
Listing Standards, it has also been the Exchange's experience in recent 
years that many foreign companies that apply to list on the NYSE are 
able to meet the financial requirements to list under one or more of 
the domestic listing standards, but are not large enough to meet the 
market capitalization and financial requirements of the Alternate 
Listing Standards. The proposed amendments address this anomaly, as 
they would permit the listing of foreign companies which meet one of 
the domestic financial listing standards and which, while they would 
not meet any of the domestic distribution standards based solely on 
shareholders or trading volume in the United States, would be able to 
meet those requirements on the basis of their aggregate shareholder 
base and trading volume in both the United States and the company's 
home country market or primary trading market outside the United 
States, provided such market is a regulated stock exchange.
    The Exchange notes that the Nasdaq Global Market requires 
applicants for initial listing to have 400 round lot holders, but do 
not specify that this requirement can only be met on the basis of 
holders in the United States.\8\ Consequently, the Nasdaq Global Market 
has the discretion to qualify companies on the basis of their worldwide 
holders. The Exchange also notes that its distribution standards as 
amended would continue to be as stringent as, or more stringent than, 
those of other listing markets.\9\ Consequently, the Exchange does not 
believe that the proposed amendments raise any novel regulatory issues 
or give rise to any investor protection concerns.
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    \8\ See Nasdaq Marketplace Rule 5405(a). The Exchange also notes 
that Nasdaq Marketplace Rule 5215(b) provides that, when listing an 
ADR, the underlying security will be considered when determining 
annual income from continuing operations, publicly held shares, 
market value of publicly held shares, stockholders' equity, round 
lot or public holders, operating history, market value of listed 
securities, and total assets and total revenue.
    \9\ See note 8 supra.
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    Section 103.00 contains the following text:
    Domestic listing requirements call for minimum distribution of a 
company's shares within the United States, or in the case of North 
American companies, within North America. This is a major obstacle for 
many large non-U.S. companies which otherwise fulfill many times over 
the normal size and earnings requirements for listing on the Exchange. 
The principal Alternate Listing Standards focus on worldwide rather 
than U.S. or North American distribution of a non-U.S. company's 
shares.
    As the foregoing would no longer be accurate after adoption of the 
proposed amendments, the Exchange proposes to delete this text in its 
entirety.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \10\ of the Securities Exchange Act of 1934 (the 
``Act'') \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\12\ in particular in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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. The Exchange believes that 
the proposed amendments are consistent with the protection of investors 
and the public interest because the Exchange's holders and trading 
volume requirements exist to ensure that there will be a liquid trading 
market in a listing applicant's stock and the factors the Exchange will 
consider in exercising its discretion to include in its calculations 
shareholders and trading volume from the company's home country market 
or primary trading market will enable the Exchange to exercise this 
discretion only in cases where the Exchange is comfortable that a 
liquid trading market will develop on

[[Page 65030]]

the NYSE after listing. In that regard, the Exchange notes that the 
proposed amendment is consistent with the concern underlying its 
distribution standards that there should be a liquid trading market for 
NYSE listed securities, as it has been its experience that where there 
is a liquid market for a company's securities in its home country or 
primary trading market and where it is relatively easy to transfer 
securities between the home country or primary trading market and the 
United States, a liquid trading market can develop quickly on the 
Exchange even if there are relatively few U.S. holders at the time of 
original listing.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78a.
    \12\ 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

    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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, become operative for 30 days 
from the date on which it was filed.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's intent to file 
the proposed rule change, along with a brief description and text of 
the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Exchange has satisfied this 
requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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.\16\
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    \16\ 15 U.S.C. 78s(b)(3)(C).
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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. 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 email to [email protected]. Please include 
File Number SR-NYSE-2012-52 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2012-52. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such 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-NYSE-2012-52 and should be 
submitted on or before November 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26143 Filed 10-23-12; 8:45 am]
BILLING CODE 8011-01-P