NYSE Arca accepts notional volumes, standardizes equity index treatment in amended listing requirements

By Kenneth Lim

Boston, Aug. 19 - NYSE Arca will now recognize notional volumes as an option in its listing requirements for equity index-linked securities, among other rule changes approved by the Securities and Exchange Commission on Monday.

Certain equity index weighting criteria will also be adjusted, while certain listing requirements for capitalization-weighted indexes will be eliminated to bring them in line with all other equity indexes, the SEC said in an announcement. NYSE Arca proposed the changes in June.

The amended rules remove minimum trading volume requirements for component securities in capitalization-weighted or modified capitalization-weighted indexes.

The exchange will also adopt a minimum six-month global notional average monthly volume of $25 million as an option for meeting listing requirements, and a minimum six-month global notional average monthly volume of $12.5 million for continued listing requirements.

The SEC noted that the changes will subject all equity index-linked securities to the same listing requirements, regardless of the methodology upon which the underlying index is based, and should facilitate the listing and trading of different types of equity index-linked securities, "thus benefiting investors by providing them with a wider selection of derivative products."

As for using notional volume, the SEC said it "believes that the use of global notional volume as an alternative measure to global trading volume is acceptable in that it should mitigate the volume discrepancies between low- and high-priced stocks."

"Finally, the exchange's proposal to adopt an average of trading or notional volume, as the case may be, should help to eliminate seasonal volume fluctuations that may occur in the trading of an equity-index linked security in a given month," the SEC said in its announcement.

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