IIA

103D CONGRESS

2D SESSION H. R. 4535

IN THE SENATE OF THE UNITED STATES

AUGUST 2 (legislative day, JULY 20), 1994

Received; read twice and referred to the Committee on Banking, Housing, and

Urban Affairs

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

2 of this section, any national securities exchange, in accord3 ance with the requirements of this subsection and the

4 rules hereunder, may extend unlisted trading privileges

5 to—

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

7 a national securities exchange, subject to subpara8 graph (B); and

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

10 pursuant to this section, or that would be required

11 to be so registered except for the exemption from

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

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

14 this paragraph.

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

16 unlisted trading privileges to a security described in sub17 paragraph (A)(i) during such interval, if any, after the

18 commencement of an initial public offering of such secu19 rity, as is or may be required pursuant to subparagraph

20 (C).

21 ‘‘(C) Not later than 180 days after the date of enact22 ment of the Unlisted Trading Privileges Act of 1994, the

23 Commission shall prescribe, by rule or regulation, the du24 ration of the interval referred to in subparagraph (B), if

25 any, as the Commission determines to be necessary or ap-
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1 propriate for the maintenance of fair and orderly markets,

2 the protection of investors and the public interest, or oth3 erwise in furtherance of the purposes of this title. Until

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

5 or 240 days after such date of enactment, such interval

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

7 such security commences trading on the national securities

8 exchange with which such security is registered and end

9 at the conclusion of the next day of trading.

10 ‘‘(D) The Commission may prescribe, by rule or regu11 lation such additional procedures or requirements for ex12 tending unlisted trading privileges to any security as the

13 Commission deems necessary or appropriate for the main14 tenance of fair and orderly markets, the protection of in15 vestors and the public interest, or otherwise in furtherance

16 of the purposes of this title.

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

18 securities described in subparagraph (A)(ii) may occur ex19 cept pursuant to a rule, regulation, or order of the Com20 mission approving such extension or extensions. In pro21 mulgating such rule or regulation or in issuing such order,

22 the Commission—

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

24 of unlisted trading privileges is consistent with the

25 maintenance of fair and orderly markets, the protec-
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1 tion of investors and the public interest, and other2 wise in furtherance of the purposes of this title;

3 ‘‘(ii) shall take account of the public trading ac4 tivity in such securities, the character of such trad5 ing, the impact of such extension on the existing

6 markets for such securities, and the desirability of

7 removing impediments to and the progress that has

8 been made toward the development of a national

9 market system; and

10 ‘‘(iii) shall not permit a national securities ex11 change to extend unlisted trading privileges to such

12 securities if any rule of such national securities ex13 change would unreasonably impair the ability of a

14 dealer to solicit or effect transactions in such securi15 ties for its own account, or would unreasonably re16 strict competition among dealers in such securities

17 or between such dealers acting in the capacity of

18 market makers who are specialists and such dealers

19 who are not specialists.

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

21 trading privileges in accordance with this paragraph only

22 if the exchange and the subject security continue to satisfy

23 the requirements for eligibility under this paragraph, in24 cluding any rules and regulations issued by the Commis25 sion pursuant to this paragraph, except that unlisted trad-
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1 ing privileges may continue with regard to securities which

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

3 notwithstanding the failure to satisfy such requirements.

4 If unlisted trading privileges in a security are discontinued

5 pursuant to this subparagraph, the exchange shall cease

6 trading in that security, unless the exchange and the sub7 ject security thereafter satisfy the requirements of this

8 paragraph and the rules issued hereunder.

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

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

11 offering if—

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

13 registered under the Securities Act of 1933;

14 and

15 ‘‘(II) the issuer of the security, imme16 diately prior to filing the registration statement

17 with respect to the offering, was not subject to

18 the reporting requirements of section 13 or

19 15(d) of this title; and

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

21 commences at the opening of trading on the day on

22 which such security commences trading on the na23 tional securities exchange with which such security

24 is registered.
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1 ‘‘(2)(A) At any time within 60 days of commence2 ment of trading on an exchange of a security pursuant

3 to unlisted trading privileges, the Commission may sum4 marily suspend such unlisted trading privileges on the ex5 change. Such suspension shall not be reviewable under sec6 tion 25 of this title and shall not be deemed to be a final

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

8 States Code. Upon such suspension—

9 ‘‘(i) the exchange shall cease trading in the se10 curity by the close of business on the date of such

11 suspension, or at such time as the Commission may

12 prescribe by rule or order for the maintenance of

13 fair and orderly markets, the protection of investors

14 and the public interest, or otherwise in furtherance

15 of the purposes of this title; and

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

17 trading privileges to the security, the exchange shall

18 file an application to reinstate its ability to do so

19 with the Commission pursuant to such procedures as

20 the Commission may prescribe by rule or order for

21 the maintenance of fair and orderly markets, the

22 protection of investors and the public interest, or

23 otherwise in furtherance of the purposes of this title.

24 ‘‘(B) A suspension under subparagraph (A) shall re25 main in effect until the Commission, by order, grants ap-
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1 proval of an application to reinstate, as described in sub2 paragraph (A)(ii).

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

4 affect the validity or force of an extension of unlisted trad5 ing privileges in effect prior to such suspension.

6 ‘‘(D) The Commission shall not approve an applica7 tion by a national securities exchange to reinstate its abil8 ity to extend unlisted trading privileges to a security un9 less the Commission finds, after notice and opportunity

10 for hearing, that the extension of unlisted trading privi11 leges pursuant to such application is consistent with the

12 maintenance of fair and orderly markets, the protection

13 of investors and the public interest, and otherwise in fur14 therance of the purposes of this title. If the application

15 is made to reinstate unlisted trading privileges to a secu16 rity described in paragraph (1)(A)(ii), the Commission—

17 ‘‘(i) shall take account of the public trading ac18 tivity in such security, the character of such trading,

19 the impact of such extension on the existing markets

20 for such a security, and the desirability of removing

21 impediments to and the progress that has been made

22 toward the development of a national market sys23 tem; and

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

25 rule of the national securities exchange making ap-
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1 plication under this subsection would unreasonably

2 impair the ability of a dealer to solicit or effect

3 transactions in such security for its own account, or

4 would unreasonably restrict competition among deal5 ers in such security or between such dealers acting

6 in the capacity of marketmakers who are specialists

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

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

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

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

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

Passed the House of Representatives August 1,

1994.

Attest: DONNALD K. ANDERSON,

Clerk.