December 9, 2013.
On October 8, 2013, the New York Stock Exchange, LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 
and Rule 19b-4 thereunder,
a proposed rule change to amend the quantitative continued listing standards applicable to companies listed under one of the financial standards of Sections 102.01C and 103.01B of the Exchange's Listed Company Manual (“Manual”). The proposed rule change was published for comment in the Federal Register on October 25, 2013.
The Commission received no comments on the proposal. This order approves the proposed rule change.
II. Description of the Proposal
The Exchange proposes to amend the continued listing standards in Section 802.01B of the Manual. Under current Exchange initial listing rules, companies applying to list equity securities on the NYSE must meet one of the specific financial standards,
in addition to the other listing requirements set out in Section 102.00 for domestic companies and Section 103.00 for non-U.S. companies. Once listed, companies have to meet the Exchanges continued listing criteria set out in Section 802.01 of the Manual. In addition to the other minimum continued listing requirements that apply to capital or common stock,
companies with such securities listed on the Exchange must also meet certain quantitative financial continued listing standards which correspond to the standard under which the securities were initially listed.
There are currently four different financial continued listing standards which apply to the capital or common stock of a listed company, depending under which standard it was originally listed under.
A company that qualified to list under the Earnings Test or Assets and Equity Test, would be considered to be below compliance if over a consecutive 30 trading-day period, the average global market capitalization of its securities is less than $50,000,000 and the total stockholders' equity is less than $50,000,000.
A company qualifying to list under the Valuation/Revenue with Cash Flow Test, would be considered to be below compliance if (A) over a consecutive 30 trading-day period, the average global market capitalization of its securities is less than $250,000,000 and the total revenues are less than $20,000,000 over the last 12 months (unless the listed company qualifies as an original listing under one of the other original listing standards) or (B) the average global market capitalization over a consecutive 30 trading-day period is less than $75,000,000.
A company that qualified to list under the Pure Valuation/Revenue Test would be considered to be below compliance if (A) over a consecutive 30 trading-day period, the average global market capitalization of the company's securities is less than $375,000,000 and Start Printed Page 75953the total revenues are less than $15,000,000 over the last 12 months (unless the listed company qualifies as an original listing under one of the other original listing standards 
or (B) the average global market capitalization over a consecutive 30 trading-day period is less than $100,000,000.
Finally, listed companies that originally listed under the Affiliated Company Test would be considered to be below compliance if (A) the parent or affiliated company ceases to control the listed company, or the listed company's parent or affiliated company falls below the applicable continued listing standards and (B) over a consecutive 30 trading-day period, the average global market capitalization of the company's securities is less than $75,000,000 and the total stockholders' equity is less than $75,000,000.
The Exchange proposes to delete these four current continued listing standards, and to use one continued listing standard, which is identical to the one currently applicable to companies listing under the Earnings Test and Assets and Equity Test. Under the proposal, a listed company will be considered to be below compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50,000,000 and, at the same time, the stockholders' equity is less than $50,000,000.
III. Discussion and Commission Findings
The Commission has carefully reviewed the proposed rule change and finds that it is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, Section 6(b)(5) of the Act,
which among other things, requires that the rules of a national securities exchange be 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 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 are not designed to permit unfair discrimination between customers, issuers, brokers or dealers.
The development and enforcement of adequate standards governing the initial and continued listing of securities on an exchange is an activity of critical importance to financial markets and the investing public. Adequate standards are especially important given the expectations of investors regarding exchange trading and the imprimatur of listing on a particular market. Listing standards, among other things, serve as a means for an exchange to screen issuers and to provide listed status only to bona fide companies that have or, in the case of an IPO, will have sufficient public float, investor base, and trading interest to provide the depth and liquidity necessary to promote fair and orderly markets. Once a security has been approved for initial listing, maintenance criteria allow an exchange to monitor the status and trading characteristics of that issue to ensure that it continues to meet the exchange's standards for market depth and liquidity so that fair and orderly markets can be maintained.
The Exchange proposes to delete the current four separate tracks of continued listing standards and replace them with one continued listing standard applicable to all operating companies listing their capital or common stock, regardless of the initial listing standard that the company originally qualified for listing under. Listed companies would still be required to meet, and comply with, other standards, such as the distribution criteria,
and the minimum market capitalization requirement.
The Exchange stated its belief that it would be fairer to use a single continued listing standard that would apply to all operating companies (for the listing of their capital or common stock), since under the current rules a listed security may be below its applicable continued listing standards and deemed non-compliant or delisted notwithstanding that it would have remained compliant if another continued listing standard applied. The Exchange noted that this creates the anomalous result that two companies that have identical quantitative characteristics would be treated differently based on how it originally qualified to list, which could have been many years ago. According to the Exchange, the approach of assigning different quantitative continued listing requirements to companies that originally listed under different listing standards was adopted in 2004 
and the quality of listed companies has not been enhanced by this approach. The Exchange represented that a review of data over a period of five years indicates that all of the securities that were delisted under the current applicable standard would have been delisted under the proposed standard, or the other applicable minimum listing criteria.
We note that under the Exchange's proposal, the additional minimum listing criteria is remaining unchanged and will continue to apply.
After careful consideration, the Commission finds that the proposal is consistent with the requirements of the Act. The Commission believes that the proposal is not designed to permit unfair discrimination between issuers since under the proposal, all operating companies listing common or capital stock on the Exchange will be subject to the same financial continued listing standards. To the extent other types of listed securities, such as debt, and other types of issuers, such as trusts and partnerships, have different continued listing standards, these differences are based on the different type, and characteristics of those securities and issuers, and those differences currently exist and have been previous approved by the Commission consistent with the requirements of the Act.
The Commission has also considered whether the proposed changes will continue to ensure that only those companies with adequate market depth and liquidity can continue to trade on the Exchange so that fair and orderly markets can be maintained, consistent with investor protection and the public interest under Section 6(b)(5) of the Act. In this regard, we note that the Exchange represented that 87% of the operating companies currently listed on the Exchange are already subject to a continued listing standard which is identical to the proposed continued listing standard. As a result, for these listed companies the proposed continued listing standard will have no change as to their continued listing Start Printed Page 75954requirements. In addition, because the vast majority of listed companies have to comply with the proposed continued listing standard, the Exchange should have sufficient experience monitoring for compliance with the proposed standard. As noted above, the Exchange also found, based on a review of data of companies below compliance under the NYSE's financial standards from 2006 to 2012, that all of the securities that were delisted under the current applicable standard would have been delisted under the proposed standard, or the other applicable minimum listing criteria.
Based on the Exchange's review and experience in administering the proposed standard, the Exchange concluded that the proposed continued listing standard, in combination with the other minimum continued listing criteria, is a rigorous measure to ensure companies and their securities remain suitable for listing.
Based on the above, the Commission believes that that proposal is consistent with the requirements of the Act. We, however, would expect the Exchange to monitor its continued listing standards to ensure that they remain adequate and make adjustments to its rules where necessary.
Finally, in approving the proposal, we recognize that some of the current continued listing standards have substantially higher market capitalization requirements than under the new standard.
We understand some of the rationale for the higher standards was related to the higher market capitalization requirements in the initial listing standards. For the reasons, however, noted above, including the Exchange's representation that the proposed standard, along with the additional minimum standards, should adequately ensure the quality of companies that continue to list on the exchange based on its experience with monitoring companies for compliance, and the fact that the proposed standard had previously been approved as one of several continued financial listing standards, and thus already applies to a large majority of currently listed companies, we are approving the proposal.
We also note that the adoption of the proposed continued listing standard does not appear to set a new low when comparing the continued listing standards of other named markets under Section 18 of the Securities Act of 1933, both currently and at the time Section 18 was adopted in 1996.
Taken as a whole, the Exchange's continued listing standards appear to be as high as NYSE MKT's continued listing standards for common stock of operating companies.
For the foregoing reasons, 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, with Section 6(b)(5) of the Act.
It is therefore ordered, pursuant the Section 19(b)(2) of the Act, that the proposed rule change (SR-NYSE-2013-67), is hereby approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Kevin M. O'Neill,
[FR Doc. 2013-29741 Filed 12-12-13; 8:45 am]
BILLING CODE 8011-01-P