103D CONGRESS

2D SESSION H. R. 4535

AN ACT

To amend the Securities Exchange Act of 1934 with respect

to the extension of unlisted trading privileges for corporate securities, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Unlisted Trading

5 Privileges Act of 1994’’.

6 SEC. 2. AMENDMENTS TO THE SECURITIES EXCHANGE ACT

7 OF 1934.

8 (a) UNLISTED TRADING PRIVILEGES.—Section 12(f)

9 of the Securities Exchange Act of 1934 (15 U.S.C. 78l(f))

10 is amended by striking paragraphs (1) and (2) and insert11 ing the following:

12 ‘‘(f)(1)(A) Notwithstanding the preceding subsections

13 of this section, any national securities exchange, in accord14 ance with the requirements of this subsection and the

15 rules hereunder, may extend unlisted trading privileges

16 to—
2

•HR 4535 EH

1 ‘‘(i) any security that is listed and registered on

2 a national securities exchange, subject to subpara3 graph (B); and

4 ‘‘(ii) any security that is otherwise registered

5 pursuant to this section, or that would be required

6 to be so registered except for the exemption from

7 registration provided in subparagraph (B) or (G) of

8 subsection (g)(2), subject to subparagraph (E) of

9 this paragraph.

10 ‘‘(B) A national securities exchange may not extend

11 unlisted trading privileges to a security described in sub12 paragraph (A)(i) during such interval, if any, after the

13 commencement of an initial public offering of such secu14 rity, as is or may be required pursuant to subparagraph

15 (C).

16 ‘‘(C) Not later than 180 days after the date of enact17 ment of the Unlisted Trading Privileges Act of 1994, the

18 Commission shall prescribe, by rule or regulation, the du19 ration of the interval referred to in subparagraph (B), if

20 any, as the Commission determines to be necessary or ap21 propriate for the maintenance of fair and orderly markets,

22 the protection of investors and the public interest, or oth23 erwise in furtherance of the purposes of this title. Until

24 the earlier of the effective date of such rule or regulation

25 or 240 days after such date of enactment, such interval
3

•HR 4535 EH

1 shall begin at the opening of trading on the day on which

2 such security commences trading on the national securities

3 exchange with which such security is registered and end

4 at the conclusion of the next day of trading.

5 ‘‘(D) The Commission may prescribe, by rule or regu6 lation such additional procedures or requirements for ex7 tending unlisted trading privileges to any security as the

8 Commission deems necessary or appropriate for the main9 tenance of fair and orderly markets, the protection of in10 vestors and the public interest, or otherwise in furtherance

11 of the purposes of this title.

12 ‘‘(E) No extension of unlisted trading privileges to

13 securities described in subparagraph (A)(ii) may occur ex14 cept pursuant to a rule, regulation, or order of the Com15 mission approving such extension or extensions. In pro16 mulgating such rule or regulation or in issuing such order,

17 the Commission—

18 ‘‘(i) shall find that such extension or extensions

19 of unlisted trading privileges is consistent with the

20 maintenance of fair and orderly markets, the protec21 tion of investors and the public interest, and other22 wise in furtherance of the purposes of this title;

23 ‘‘(ii) shall take account of the public trading ac24 tivity in such securities, the character of such trad25 ing, the impact of such extension on the existing
4

•HR 4535 EH

1 markets for such securities, and the desirability of

2 removing impediments to and the progress that has

3 been made toward the development of a national

4 market system; and

5 ‘‘(iii) shall not permit a national securities ex6 change to extend unlisted trading privileges to such

7 securities if any rule of such national securities ex8 change would unreasonably impair the ability of a

9 dealer to solicit or effect transactions in such securi10 ties for its own account, or would unreasonably re11 strict competition among dealers in such securities

12 or between such dealers acting in the capacity of

13 market makers who are specialists and such dealers

14 who are not specialists.

15 ‘‘(F) An exchange may continue to extend unlisted

16 trading privileges in accordance with this paragraph only

17 if the exchange and the subject security continue to satisfy

18 the requirements for eligibility under this paragraph, in19 cluding any rules and regulations issued by the Commis20 sion pursuant to this paragraph, except that unlisted trad21 ing privileges may continue with regard to securities which

22 had been admitted on such exchange prior to July 1, 1964,

23 notwithstanding the failure to satisfy such requirements.

24 If unlisted trading privileges in a security are discontinued

25 pursuant to this subparagraph, the exchange shall cease
5

•HR 4535 EH

1 trading in that security, unless the exchange and the sub2 ject security thereafter satisfy the requirements of this

3 paragraph and the rules issued hereunder.

4 ‘‘(G) For purposes of this paragraph—

5 ‘‘(i) a security is the subject of an initial public

6 offering if—

7 ‘‘(I) the offering of the subject security is

8 registered under the Securities Act of 1933;

9 and

10 ‘‘(II) the issuer of the security, imme11 diately prior to filing the registration statement

12 with respect to the offering, was not subject to

13 the reporting requirements of section 13 or

14 15(d) of this title; and

15 ‘‘(ii) an initial public offering of such security

16 commences at the opening of trading on the day on

17 which such security commences trading on the na18 tional securities exchange with which such security

19 is registered.

20 ‘‘(2)(A) At any time within 60 days of commence21 ment of trading on an exchange of a security pursuant

22 to unlisted trading privileges, the Commission may sum23 marily suspend such unlisted trading privileges on the ex24 change. Such suspension shall not be reviewable under sec25 tion 25 of this title and shall not be deemed to be a final
6

•HR 4535 EH

1 agency action for purposes of section 704 of title 5, United

2 States Code. Upon such suspension—

3 ‘‘(i) the exchange shall cease trading in the se4 curity by the close of business on the date of such

5 suspension, or at such time as the Commission may

6 prescribe by rule or order for the maintenance of

7 fair and orderly markets, the protection of investors

8 and the public interest, or otherwise in furtherance

9 of the purposes of this title; and

10 ‘‘(ii) if the exchange seeks to extend unlisted

11 trading privileges to the security, the exchange shall

12 file an application to reinstate its ability to do so

13 with the Commission pursuant to such procedures as

14 the Commission may prescribe by rule or order for

15 the maintenance of fair and orderly markets, the

16 protection of investors and the public interest, or

17 otherwise in furtherance of the purposes of this title.

18 ‘‘(B) A suspension under subparagraph (A) shall re19 main in effect until the Commission, by order, grants ap20 proval of an application to reinstate, as described in sub21 paragraph (A)(ii).

22 ‘‘(C) A suspension under subparagraph (A) shall not

23 affect the validity or force of an extension of unlisted trad24 ing privileges in effect prior to such suspension.
7

•HR 4535 EH

1 ‘‘(D) The Commission shall not approve an applica2 tion by a national securities exchange to reinstate its abil3 ity to extend unlisted trading privileges to a security un4 less the Commission finds, after notice and opportunity

5 for hearing, that the extension of unlisted trading privi6 leges pursuant to such application is consistent with the

7 maintenance of fair and orderly markets, the protection

8 of investors and the public interest, and otherwise in fur9 therance of the purposes of this title. If the application

10 is made to reinstate unlisted trading privileges to a secu11 rity described in paragraph (1)(A)(ii), the Commission—

12 ‘‘(i) shall take account of the public trading ac13 tivity in such security, the character of such trading,

14 the impact of such extension on the existing markets

15 for such a security, and the desirability of removing

16 impediments to and the progress that has been made

17 toward the development of a national market sys18 tem; and

19 ‘‘(ii) shall not grant any such application if any

20 rule of the national securities exchange making ap21 plication under this subsection would unreasonably

22 impair the ability of a dealer to solicit or effect

23 transactions in such security for its own account, or

24 would unreasonably restrict competition among deal25 ers in such security or between such dealers acting
8

•HR 4535 EH

1 in the capacity of marketmakers who are specialists

2 and such dealers who are not specialists.’’.

3 (b) CONFORMING AMENDMENT.—Section 12(f)(3) of

4 the Securities Exchange Act of 1934 (15 U.S.C. 78l(f)(3))

5 is amended by striking ‘‘The Commission’’ and inserting

6 ‘‘Notwithstanding paragraph (2), the Commission’’.

Passed the House of Representatives August 1,

1994.

Attest:

Clerk.

103D CONGRESS

2D SESSION H. R. 4535

AN ACT

To amend the Securities Exchange Act of 1934

purposes.privileges for corporate securities, and for otherwith respect to the extension of unlisted trading