Union Calendar No. 341

103D CONGRESS

2D SESSION H. R. 4535

[Report No. 103–626]

A BILL

To amend the Securities Exchange Act of 1934

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

JULY 28, 1994

Committed to the Committee of the Whole House on the

State of the Union and ordered to be printed
IB

Union Calendar No. 341

103D CONGRESS

2D SESSION H. R. 4535

[Report No. 103–626]

To amend the Securities Exchange Act of 1934 with respect to the extension

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

IN THE HOUSE OF REPRESENTATIVES

MAY 26, 1994

Mr. WYDEN (for himself, Mr. DINGELL, Mr. MARKEY, Miss COLLINS of

Michigan, Mr. SYNAR, Mr. COOPER, Mr. HASTERT, and Ms. MARGOLIESMEZVINSKY) introduced the following bill; which was referred to the Committee on Energy and Commerce

JULY 28, 1994

Additional sponsors: Mr. RICHARDSON, Mrs. COLLINS of Illinois, and Mr.

MOORHEAD

JULY 28, 1994

Committed to the Committee of the Whole House on the State of the Union

and ordered to be printed

A BILL

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,
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1 SECTION 1. SHORT TITLE.

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

3 Privileges Act of 1994’’.

4 SEC. 2. AMENDMENTS TO THE SECURITIES EXCHANGE ACT

5 OF 1934.

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

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

8 is amended by striking paragraphs (1) and (2) and insert9 ing the following:

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

11 of this section, any national securities exchange, in accord12 ance with the requirements of this subsection and the

13 rules hereunder, may extend unlisted trading privileges

14 to—

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

16 a national securities exchange, subject to subpara17 graph (B); and

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

19 pursuant to this section, or that would be required

20 to be so registered except for the exemption from

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

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

23 this paragraph.

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

25 unlisted trading privileges to a security described in sub26 paragraph (A)(i) during such interval, if any, after the
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1 commencement of an initial public offering of such secu2 rity, as is or may be required pursuant to subparagraph

3 (C).

4 ‘‘(C) Not later than 180 days after the date of enact5 ment of the Unlisted Trading Privileges Act of 1994, the

6 Commission shall prescribe, by rule or regulation, the du7 ration of the interval referred to in subparagraph (B), if

8 any, as the Commission determines to be necessary or ap9 propriate for the maintenance of fair and orderly markets,

10 the protection of investors and the public interest, or oth11 erwise in furtherance of the purposes of this title. Until

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

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

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

15 such security commences trading on the national securities

16 exchange with which such security is registered and end

17 at the conclusion of the next day of trading.

18 ‘‘(D) The Commission may prescribe, by rule or regu19 lation such additional procedures or requirements for ex20 tending unlisted trading privileges to any security as the

21 Commission deems necessary or appropriate for the main22 tenance of fair and orderly markets, the protection of in23 vestors and the public interest, or otherwise in furtherance

24 of the purposes of this title.
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1 ‘‘(E) No extension of unlisted trading privileges to

2 securities described in subparagraph (A)(ii) may occur ex3 cept pursuant to a rule, regulation, or order of the Com4 mission approving such extension or extensions. In pro5 mulgating such rule or regulation or in issuing such order,

6 the Commission—

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

8 of unlisted trading privileges is consistent with the

9 maintenance of fair and orderly markets, the protec10 tion of investors and the public interest, and other11 wise in furtherance of the purposes of this title;

12 ‘‘(ii) shall take account of the public trading ac13 tivity in such securities, the character of such trad14 ing, the impact of such extension on the existing

15 markets for such securities, and the desirability of

16 removing impediments to and the progress that has

17 been made toward the development of a national

18 market system; and

19 ‘‘(iii) shall not permit a national securities ex20 change to extend unlisted trading privileges to such

21 securities if any rule of such national securities ex22 change would unreasonably impair the ability of a

23 dealer to solicit or effect transactions in such securi24 ties for its own account, or would unreasonably re25 strict competition among dealers in such securities
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1 or between such dealers acting in the capacity of

2 market makers who are specialists and such dealers

3 who are not specialists.

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

5 trading privileges in accordance with this paragraph only

6 if the exchange and the subject security continue to satisfy

7 the requirements for eligibility under this paragraph, in8 cluding any rules and regulations issued by the Commis9 sion pursuant to this paragraph, except that unlisted trad10 ing privileges may continue with regard to securities which

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

12 notwithstanding the failure to satisfy such requirements.

13 If unlisted trading privileges in a security are discontinued

14 pursuant to this subparagraph, the exchange shall cease

15 trading in that security, unless the exchange and the sub16 ject security thereafter satisfy the requirements of this

17 paragraph and the rules issued hereunder.

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

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

20 offering if—

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

22 registered under the Securities Act of 1933;

23 and

24 ‘‘(II) the issuer of the security, imme25 diately prior to filing the registration statement
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1 with respect to the offering, was not subject to

2 the reporting requirements of section 13 or

3 15(d) of this title; and

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

5 commences at the opening of trading on the day on

6 which such security commences trading on the na7 tional securities exchange with which such security

8 is registered.

9 ‘‘(2)(A) At any time within 60 days of commence10 ment of trading on an exchange of a security pursuant

11 to unlisted trading privileges, the Commission may sum12 marily suspend such unlisted trading privileges on the ex13 change. Such suspension shall not be reviewable under sec14 tion 25 of this title and shall not be deemed to be a final

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

16 States Code. Upon such suspension—

17 ‘‘(i) the exchange shall cease trading in the se18 curity by the close of business on the date of such

19 suspension, or at such time as the Commission may

20 prescribe by rule or order for the maintenance of

21 fair and orderly markets, the protection of investors

22 and the public interest, or otherwise in furtherance

23 of the purposes of this title; and

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

25 trading privileges to the security, the exchange shall
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1 file an application to reinstate its ability to do so

2 with the Commission pursuant to such procedures as

3 the Commission may prescribe by rule or order for

4 the maintenance of fair and orderly markets, the

5 protection of investors and the public interest, or

6 otherwise in furtherance of the purposes of this title.

7 ‘‘(B) A suspension under subparagraph (A) shall re8 main in effect until the Commission, by order, grants ap9 proval of an application to reinstate, as described in sub10 paragraph (A)(ii).

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

12 affect the validity or force of an extension of unlisted trad13 ing privileges in effect prior to such suspension.

14 ‘‘(D) The Commission shall not approve an applica15 tion by a national securities exchange to reinstate its abil16 ity to extend unlisted trading privileges to a security un17 less the Commission finds, after notice and opportunity

18 for hearing, that the extension of unlisted trading privi19 leges pursuant to such application is consistent with the

20 maintenance of fair and orderly markets, the protection

21 of investors and the public interest, and otherwise in fur22 therance of the purposes of this title. If the application

23 is made to reinstate unlisted trading privileges to a secu24 rity described in paragraph (1)(A)(ii), the Commission—
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1 ‘‘(i) shall take account of the public trading ac2 tivity in such security, the character of such trading,

3 the impact of such extension on the existing markets

4 for such a security, and the desirability of removing

5 impediments to and the progress that has been made

6 toward the development of a national market sys7 tem; and

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

9 rule of the national securities exchange making ap10 plication under this subsection would unreasonably

11 impair the ability of a dealer to solicit or effect

12 transactions in such security for its own account, or

13 would unreasonably restrict competition among deal14 ers in such security or between such dealers acting

15 in the capacity of marketmakers who are specialists

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

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

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

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

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