[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Notices]
[Pages 13557-13558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7343]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36993; File No. SR-NYSE-95-39]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Order Approving Proposed Rule Change Relating to Revised Listing
Standards for Equity Linked Derivative Securities (``ELDs'')
March 20, 1996.
On November 29, 1995, the New York Stock Exchange, Inc. (``NYSE''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to revise the trading volume
requirements for linked securities underlying ELDs issuances.
\1\ 15 U.S.C. 78s(b)(1) (1988 & Supp. V 1993).
\2\ 17 CFR 240.19b-4 (1994).
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Notice of the proposed rule change was published for comment and
appeared in the Federal Register on December 20, 1995.\3\ No comments
were received on the proposal. This order approves the proposal.
\3\ See Securities Exchange Act Release No. 36581 (Dec. 13,
1995).
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I. Description of the Proposal
ELDs are non-convertible debt securities 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.\4\ The
purpose of the proposed rule change is to amend the trading volume
criteria for the linked security, that is, the security on which the
value of the ELDs is based. Currently, under Section 703.21 of the
Listed Company Manual, in order to list an ELDs product, the linked
security must meet one of the following criteria:
\4\ See Securities Exchange Act Release No. 33468 (Jan. 13,
1994). These listing standards were subsequently revised in
Securities Exchange Act Release Nos. 33841 (March 31, 1994) and
34985 (Nov. 18, 1995).
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Market Capitalization and Annual Trading Volume
$3 billion and 2.5 million shares.
$1.5 billion and 20 million shares.
$500 million and 80 million shares.
The NYSE now proposes to amend Section 703.21 to provide for
greater flexibility in the listing criteria for ELDs. The proposed rule
change will lower the trading volume requirements criteria for
underlying linked stocks meeting the capitalization requirements of
$1.5 billion and $500 million. Under the revised criteria, a linked
stock with market capitalization of $1.5 billion would now need an
annual trading volume of 10 million shares, as opposed to the current
trading volume requirement of 20 million shares. Securities with a
market capitalization in excess of $500 million also would be eligible
for ELDs listing if they have annual trading volume of 15 million
shares, as opposed to the 80 million shares under the current rule.\5\
\5\ Under the rule, as amended by this proposal, ELDs could be
listed where the linked security met any of the following criteria:
Market Capitalization and Annual Trading Volume
$3 billion and 2.5 million shares.
$1.5 billion and 10 million shares.
$500 million and 15 million shares.
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The Exchange believes the new criteria will provide it with greater
flexibility to list these types of securities. The rule change will
also delete the current provision of the rule that allows the Exchange
to list ELDs that do not meet these criteria if the Division of Market
Regulation of the SEC concurs. With the increased flexibility that the
new numerical listing criteria will supply, it will no longer be
necessary to conduct such a case-by-case review of ELDs listing.
II. Discussion
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, and, in
particular, the requirements of Section 6(b)(5).\6\ In particular, the
Commission believes the proposal is consistent with the Section 6(b)(5)
requirement that the rules of an exchange be designed to promote just
and equitable principles of trade and not to permit unfair
dicrimination between customers, issuers, brokers, and dealers.
\6\ 15 U.S.C. 78f(b)(5) (1982).
[[Page 13558]]
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The Commission finds that the proposal to reduce the trading volume
requirement for eligible linked securities will expand the number of
securities that ELDs can be linked to while maintaining the requirement
that the linked security be an actively traded, highly capitalized
common stock or ADR. While the proposal reduces the trading volume
criteria for securities with market capitalizations in the $1.5 billion
and $500 million tiers to 10 million and 15 million shares,
respectively (from 20 and 80 million shares, respectively), the
Commission nevertheless believes that, together, the applicable
capitalization and new trading volume requirements will continue to
help ensure that ELDs are only issued on highly liquid securities of
broadly capitalized companies. Accordingly, the Commission believes
that these requirements will continue to help reduce the likelihood of
any adverse market impact on the securities underlying ELDs.
Finally, the Commission notes that the Exchange has deleted the
provision that allows it to list ELDs on securities not meeting the
market capitalization and trading volume criteria if the Division of
Market Regulation of the SEC concurs. The revised criteria will expand
the number of securities eligible for ELDs trading. The increased
flexibility in the listing criteria should effectively reduce or
eliminate the need for additional discretion in this area, in addition
to providing issuers and the Exchange with specific and clear guidance
on the applicable listing criteria for a security to be eligible to
underlie an ELD.
It therefore is ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-NYSE-95-39) is approved.
\7\ 15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-7343 Filed 3-26-96; 8:45 am]
BILLING CODE 8010-01-M