[Federal Register Volume 89, Number 95 (Wednesday, May 15, 2024)]
[Notices]
[Pages 42543-42546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10640]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100102; File No. SR-NYSE-2024-23]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Amend Section 703.12(II) of 
the NYSE Listed Company Manual To Expand the Circumstances Under Which 
Rights May Be Listed on the NYSE

May 10, 2024.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on April 29, 2024, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') 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.
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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 Section 703.12(II) of the NYSE 
Listed Company Manual (``Manual'') to expand the circumstances under 
which rights may be listed on the NYSE. The text of the proposed rule 
change is set forth in Exhibit 5. The proposed rule change is available 
on the Exchange's website 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.

[[Page 42544]]

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

1. Purpose
    Section 703.12(II) of the Manual provides for the listing of rights 
on the NYSE. For purposes of Section 703.12(II), the term ``rights'' 
refers to the privilege offered to holders of record of issued equity 
securities to subscribe for additional securities of the same class. 
Consistent with this definition, rights that have traded on the 
Exchange historically have involved a distribution of rights to the 
holders of a class of equity securities that is already listed on the 
Exchange, and such rights have typically been limited to granting the 
recipients the right to subscribe for additional shares of the listed 
class of equity securities they already hold.
    While it has historically been the case that rights traded on the 
Exchange have been granted only to existing shareholders of the issuer, 
the Exchange does not believe that there is an investor protection 
concern that justifies that limitation. Consequently, the Exchange 
proposes to amend Section 703.12(II) to provide that the term 
``rights'' will also refer to the privilege offered recipients of such 
rights to subscribe for shares of a class of securities of such issuer 
that is listed or to be listed on the Exchange, regardless of whether 
the recipients of the rights are existing shareholders of record of 
such issuer.
    Section 703.12(II) currently provides that, in order to be listed 
on the Exchange, rights must be issued to purchase or receive a 
security that is already listed on the Exchange or that will be listed 
on the Exchange concurrent with the rights. The Exchange proposes to 
expand the circumstances in which a right may be listed to permit the 
listing of a right where the security into which such right is 
exercisable will be listed on the Exchange upon exercise of the rights 
and such exercise is pursuant to a registration statement filed under 
the Securities Act of 1933 (a ``Securities Act Registration 
Statement'') that has been declared effective by the SEC prior to or 
simultaneous with the listing of such rights (such rights will be 
defined in the proposed amended rule as ``Prospective Listing 
Rights''). The proposed provisions relating to Prospective Listing 
Rights mean that some listed rights may list and trade on the Exchange 
prior to the listing and trading of the securities for which such 
rights are exercisable. The Exchange believes that this amendment will 
give issuers greater flexibility in structuring a rights offering as a 
capital raising tool. Specifically, the Exchange believes that the 
requirement that there be an effective Securities Act Registration 
Statement in relation to the exercise of the Prospective Listing Rights 
prior to or simultaneous to the listing of the Prospective Listing 
Rights would provide a significant investor protection as it would 
ensure that investors trading or exercising the Prospective Listing 
Rights would have access to the appropriate level of disclosure to 
enable them to make informed investment decisions. The Exchange notes 
that the issuer of the Prospective Listing rights will be required by 
law to update this Securities Act Registration Statement to reflect any 
material changes in the information required to be included therein 
that arise between the time of effectiveness of the Securities Act 
Registration Statement and the exercise of the Prospective Listing 
Rights, thereby ensuring that investors trading the Prospective Listing 
Rights on the Exchange will have access to current information about 
the issuer on a continuous basis.
    Any security underlying a Prospective Listing Right will be 
required to meet applicable initial listing standards set forth in 
Section 102.00 or Section 103.00. Prospective Listing Rights would only 
be eligible for initial listing if, at the time of initial listing, 
there were (i) at least 1,000,000 rights issued and (ii) at least 400 
public holders of round lots.\4\ The Exchange notes that these 
distribution requirements are identical to those required for 
securities to be listed under the ``equity'' standards (i.e., for 
trading on the NYSE's trading floor) under Section 703.19 (``Other 
Securities'') of the Manual.
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    \4\ For purposes of Section 703.12(II), ``Public holders'' 
excludes holders that are directors, officers, or their immediate 
families and holders of other concentrated holdings of 10 percent or 
more of the total outstanding shares.
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    If it is determined that the security for which the Prospective 
Listing Rights are exercisable will not be listed on the Exchange 
(which may occur for a variety of reasons, including because the 
Exchange determines that the underlying securities are no longer 
eligible for listing or the issuer chooses to terminate the Prospective 
Listing Rights because the transaction that they were intended to fund 
has been terminated), the Exchange will promptly initiate suspension 
and delisting procedures with respect to such Prospective Listing 
Rights.
    In addition, if the market value of publicly-held shares of a 
series of Prospective Listing Rights at any time is less than 
$4,000,000, the Exchange will promptly initiate suspension and 
delisting procedures with respect to such Prospective Listing Rights. 
The Exchange notes that this $4,000,000 continued listing requirement 
is comparable to the $4,000,000 initial market value requirement for 
securities to be listed under the ``equity'' standards under Section 
703.19 (``Other Securities'') of the Manual. If Prospective Listing 
Rights remain outstanding at the time of the initial listing on the 
Exchange of the securities into which such Prospective Listing Rights 
are exercisable, the Prospective Listing Rights must at such time meet 
all of the initial listing requirements applicable to the listing of 
rights other than Prospective Listing Rights. Any Prospective Listing 
Rights that do not meet such requirements will be subject to immediate 
suspension and delisting procedures. If the Exchange commences 
delisting procedures in either of the circumstances with respect to 
Prospective Listing Rights set forth in this paragraph, the issuer of 
the Prospective Listing Rights will not be eligible to avail itself of 
the provisions of Sections 802.02 and 802.03 and any such Prospective 
Listing Rights will be subject to delisting procedures as set forth in 
Section 804.00.
    Finally, as the definition of ``public holders'' will now also be 
used in the proposed listing requirements for Prospective Listing 
Rights, the Exchange proposes to move that definition to the end of 
Section 703.12(II) without changing the wording of the definition in 
any way.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \6\ 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 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange notes the existence of a significant protection of the 
interests of existing shareholders of listed common stock where the 
listed issuer

[[Page 42545]]

grants rights to recipients other than the existing shareholders of 
that listed class. Section 312.03(c) of the Manual requires (subject, 
generally, to exceptions for cash sales at the Minimum Price \7\ and 
public offerings) that a listed issuer must obtain shareholder approval 
prior to the issuance of common stock, or of securities convertible 
into or exercisable for common stock, in any transaction or series of 
related transactions if: (1) the common stock has, or will have upon 
issuance, voting power equal to or in excess of 20% of the voting power 
outstanding before the issuance of such stock or of securities 
convertible into or exercisable for common stock; or (2) the number of 
shares of common stock to be issued is, or will be upon issuance, equal 
to or in excess of 20% of the number of shares of common stock 
outstanding before the issuance of the common stock or of securities 
convertible into or exercisable for common stock. Nasdaq Rule 5635 and 
NYSE American Company Guide Section 713 include comparable 
requirements. Consequently, generally, rights offerings by listed 
issuers of common stock or of securities that are convertible into or 
exercisable for common stock would be subject to shareholder approval 
if the rights were being issued to recipients other than the holders of 
the listed common stock and (1) the shares of common stock underlying 
the rights have, or will have upon issuance, voting power equal to or 
in excess of 20% of the voting power outstanding before the issuance of 
such stock or of securities convertible into or exercisable for common 
stock; or (2) the number of shares of common stock to be issued is, or 
will be upon issuance, equal to or in excess of 20% of the number of 
shares of common stock outstanding before the issuance of the common 
stock or of securities convertible into or exercisable for common 
stock. As such, the holders of the listed common stock would have the 
ability to block any rights offering that was materially dilutive of 
their economic or voting interests.
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    \7\ Section 312.04(h) defines ``Minimum Price'' as a price that 
is the lower of: (i) the Official Closing Price immediately 
preceding the signing of the binding agreement; or (ii) the average 
Official Closing Price for the five trading days immediately 
preceding the signing of the binding agreement. Section 312.04(i) 
defines the ``Official Closing Price'' of the issuer's common stock 
as the official closing price on the Exchange as reported to the 
Consolidated Tape immediately preceding the signing of a binding 
agreement to issue the securities. For example, if the transaction 
is signed after the close of the regular session at 4:00 p.m. 
Eastern Standard Time on a Tuesday, then Tuesday's official closing 
price is used. If the transaction is signed at any time between the 
close of the regular session on Monday and the close of the regular 
session on Tuesday, then Monday's official closing price is used.
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    The Exchange believes it is consistent with the protection of 
investors to expand the circumstances in which a right may be listed to 
permit the listing of a right where the security into which such right 
is exercisable will be listed upon exercise of the rights and such 
exercise is pursuant to a Securities Act Registration Statement that 
has been declared effective by the SEC prior to or simultaneous with 
the listing of such rights (i.e., Prospective Listing Rights). The 
requirement that there be an effective Securities Act Registration 
Statement in relation to the exercise of the rights prior to or 
simultaneous with the listing of the Prospective Listing Rights would, 
in the Exchange's view, provide a significant investor protection as it 
would ensure that investors trading or exercising the Prospective 
Listing Rights would have access to the appropriate level of disclosure 
to enable them to make informed investment decisions. In particular, 
the Exchange believes that the availability of an effective Securities 
Act Registration Statement at the time of initial listing of the 
Prospective Listing Rights including disclosure about the anticipated 
business and financial position of the issuer as it will exist upon 
exercise of the Prospective Listing Rights (and the listing of the 
underlying securities on the Exchange) will provide investors in the 
Prospective Listing Rights with the ability to make judgments about the 
anticipated value of the underlying securities by making comparisons to 
the market values of comparable listed companies. The Exchange also 
believes that the obligation of the issuer of Prospective Listing 
Rights under the Securities Act and the rules thereunder to amend the 
Securities Act Registration Statement up to the time of exercise of the 
Prospective Listing Rights to reflect any material changes in the 
issuer's business or financial condition will ensure that investors 
will have access to adequate disclosure to enable them to value the 
securities throughout the life of the Prospective Listing Rights. 
Furthermore, the issuer of Prospective Listing Rights would be subject 
to the requirements of Sections 202.05 and 202.06 of the Manual, which 
require immediate disclosure of all material news. The Exchange 
believes that these requirements under the securities laws and Exchange 
rules will provide investors in Prospective Listing Rights with an 
appropriate level of access to information to make investment decisions 
and that this robust level of disclosure will also act as a significant 
safeguard against illegal manipulation of the securities.
    The Exchange notes that the proposal does not include any 
limitations on how long Prospective Listing Rights may remain 
outstanding prior to their exercise and the listing of the underlying 
securities. The Exchange believes that there are practical commercial 
reasons why such a requirement is unnecessary. Investors are unlikely 
to find it attractive to commit their capital to the exercise of rights 
if the exercise period is extended for more than a limited period. If 
the exercise period is excessive, rightholders are likely to withdraw 
from the offer, making the success of a long offering period unlikely.
    As proposed, Prospective Listing Rights must meet initial listing 
requirements of at least (i) 1,000,000 rights issued and (ii) 400 
public holders of round lots. In addition, listed Prospective Listing 
Rights would be subject to the prompt commencement of suspension and 
delisting procedures if (i) it is determined that the security for 
which the Prospective Listing Rights are exercisable will not be listed 
on the Exchange or (ii) the market value of publicly-held shares of a 
series of Prospective Listing Rights falls below $4,000,000. If the 
Exchange commences delisting procedures in the circumstances with 
respect to Prospective Listing Rights set forth in this paragraph, the 
issuer of the Prospective Listing Rights will not be eligible to avail 
itself of the provisions of Sections 802.02 and 802.03 and any such 
listed rights will be subject to delisting procedures as set forth in 
Section 804.00. The Exchange believes that these initial and continued 
listing requirements will protect investors by helping to ensure 
trading liquidity in the Prospective Listing Rights and also ensuring 
that such rights will not be traded unless the underlying security is 
expected to list on the Exchange. The Exchange notes that the proposed 
initial and continued quantitative listing standards for Prospective 
Listing Rights are identical to (or, in the case of the market-value of 
publicly-held shares requirement more rigorous than) those required for 
securities to be listed under the ``equity'' standards (i.e., for 
trading on the NYSE's trading floor) under Section 703.19 (``Other 
Securities'') of the Manual. As the Exchange has extensive experience 
with the application of those standards under Section 703.19 and 
believes that they have provided adequate investor protection when used 
in that context, the Exchange believes that these standards will also 
provide adequate

[[Page 42546]]

protection to investors in Prospective Listing Rights.
    The Exchange is not proposing to adopt any initial market value or 
security price requirements for Prospective Listing Rights. However, 
the Exchange notes that proposed $4,000,000 market value of publicly-
held shares requirement would be applied immediately and therefore 
imposes a minimum trading value for Prospective Listing Rights at the 
time of initial listing. The Exchange believes that this requirement 
ensures that Prospective Listing Rights will not commence trading on 
the Exchange unless the market believes that they have a more than 
nominal trading value.
    The Exchange believes that its existing surveillance procedures are 
adequate to enable it to detect manipulative trading practices with 
respect to Prospective Listing Rights. The Exchange notes that the NYSE 
and other self-regulatory organizations have extensive experience in 
conducting surveillance of the trading in securities whose value, like 
that of Prospective Listing Rights, is substantially dependent on the 
issuer's future acquisition of an identified operating asset, including 
for example, listed SPACs that are trading on the Exchange after 
entering into a definitive agreement with respect to a business 
combination. The Exchange also believes that market participants are 
able to arrive at market prices for such securities without excessive 
volatility and that this experience provides a reasonable basis for 
understanding how Prospective Listing Rights are likely to trade.

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. The Exchange believes that 
the proposed rule change will increase competition by giving issuers 
enhanced opportunities to raise capital by giving them greater 
flexibility in structuring rights offering as a capital raising tool.

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 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove 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, 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-NYSE-2024-23 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-NYSE-2024-23. 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 website (https://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 website 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 
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. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NYSE-2024-23 and should be 
submitted on or before June 5, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10640 Filed 5-14-24; 8:45 am]
BILLING CODE 8011-01-P