II

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

OCTOBER 6 (legislative day, SEPTEMBER 12), 1994

Committee discharged

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))
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1 is amended by striking paragraphs (1) and (2) and insert2 ing the following:

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

4 of this section, any national securities exchange, in accord5 ance with the requirements of this subsection and the

6 rules hereunder, may extend unlisted trading privileges

7 to—

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

9 a national securities exchange, subject to subpara10 graph (B); and

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

12 pursuant to this section, or that would be required

13 to be so registered except for the exemption from

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

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

16 this paragraph.

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

18 unlisted trading privileges to a security described in sub19 paragraph (A)(i) during such interval, if any, after the

20 commencement of an initial public offering of such secu21 rity, as is or may be required pursuant to subparagraph

22 (C).

23 ‘‘(C) Not later than 180 days after the date of enact24 ment of the Unlisted Trading Privileges Act of 1994, the

25 Commission shall prescribe, by rule or regulation, the du-
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1 ration of the interval referred to in subparagraph (B), if

2 any, as the Commission determines to be necessary or ap3 propriate for the maintenance of fair and orderly markets,

4 the protection of investors and the public interest, or oth5 erwise in furtherance of the purposes of this title. Until

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

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

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

9 such security commences trading on the national securities

10 exchange with which such security is registered and end

11 at the conclusion of the next day of trading.

12 ‘‘(D) The Commission may prescribe, by rule or regu13 lation such additional procedures or requirements for ex14 tending unlisted trading privileges to any security as the

15 Commission deems necessary or appropriate for the main16 tenance of fair and orderly markets, the protection of in17 vestors and the public interest, or otherwise in furtherance

18 of the purposes of this title.

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

20 securities described in subparagraph (A)(ii) may occur ex21 cept pursuant to a rule, regulation, or order of the Com22 mission approving such extension or extensions. In pro23 mulgating such rule or regulation or in issuing such order,

24 the Commission—
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1 ‘‘(i) shall find that such extension or extensions

2 of unlisted trading privileges is consistent with the

3 maintenance of fair and orderly markets, the protec4 tion of investors and the public interest, and other5 wise in furtherance of the purposes of this title;

6 ‘‘(ii) shall take account of the public trading ac7 tivity in such securities, the character of such trad8 ing, the impact of such extension on the existing

9 markets for such securities, and the desirability of

10 removing impediments to and the progress that has

11 been made toward the development of a national

12 market system; and

13 ‘‘(iii) shall not permit a national securities ex14 change to extend unlisted trading privileges to such

15 securities if any rule of such national securities ex16 change would unreasonably impair the ability of a

17 dealer to solicit or effect transactions in such securi18 ties for its own account, or would unreasonably re19 strict competition among dealers in such securities

20 or between such dealers acting in the capacity of

21 market makers who are specialists and such dealers

22 who are not specialists.

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

24 trading privileges in accordance with this paragraph only

25 if the exchange and the subject security continue to satisfy
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1 the requirements for eligibility under this paragraph, in2 cluding any rules and regulations issued by the Commis3 sion pursuant to this paragraph, except that unlisted trad4 ing privileges may continue with regard to securities which

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

6 notwithstanding the failure to satisfy such requirements.

7 If unlisted trading privileges in a security are discontinued

8 pursuant to this subparagraph, the exchange shall cease

9 trading in that security, unless the exchange and the sub10 ject security thereafter satisfy the requirements of this

11 paragraph and the rules issued hereunder.

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

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

14 offering if—

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

16 registered under the Securities Act of 1933;

17 and

18 ‘‘(II) the issuer of the security, imme19 diately prior to filing the registration statement

20 with respect to the offering, was not subject to

21 the reporting requirements of section 13 or

22 15(d) of this title; and

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

24 commences at the opening of trading on the day on

25 which such security commences trading on the na-
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1 tional securities exchange with which such security

2 is registered.

3 ‘‘(2)(A) At any time within 60 days of commence4 ment of trading on an exchange of a security pursuant

5 to unlisted trading privileges, the Commission may sum6 marily suspend such unlisted trading privileges on the ex7 change. Such suspension shall not be reviewable under sec8 tion 25 of this title and shall not be deemed to be a final

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

10 States Code. Upon such suspension—

11 ‘‘(i) the exchange shall cease trading in the se12 curity by the close of business on the date of such

13 suspension, or at such time as the Commission may

14 prescribe by rule or order for the maintenance of

15 fair and orderly markets, the protection of investors

16 and the public interest, or otherwise in furtherance

17 of the purposes of this title; and

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

19 trading privileges to the security, the exchange shall

20 file an application to reinstate its ability to do so

21 with the Commission pursuant to such procedures as

22 the Commission may prescribe by rule or order for

23 the maintenance of fair and orderly markets, the

24 protection of investors and the public interest, or

25 otherwise in furtherance of the purposes of this title.
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1 ‘‘(B) A suspension under subparagraph (A) shall re2 main in effect until the Commission, by order, grants ap3 proval of an application to reinstate, as described in sub4 paragraph (A)(ii).

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

6 affect the validity or force of an extension of unlisted trad7 ing privileges in effect prior to such suspension.

8 ‘‘(D) The Commission shall not approve an applica9 tion by a national securities exchange to reinstate its abil10 ity to extend unlisted trading privileges to a security un11 less the Commission finds, after notice and opportunity

12 for hearing, that the extension of unlisted trading privi13 leges pursuant to such application is consistent with the

14 maintenance of fair and orderly markets, the protection

15 of investors and the public interest, and otherwise in fur16 therance of the purposes of this title. If the application

17 is made to reinstate unlisted trading privileges to a secu18 rity described in paragraph (1)(A)(ii), the Commission—

19 ‘‘(i) shall take account of the public trading ac20 tivity in such security, the character of such trading,

21 the impact of such extension on the existing markets

22 for such a security, and the desirability of removing

23 impediments to and the progress that has been made

24 toward the development of a national market sys25 tem; and
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1 ‘‘(ii) shall not grant any such application if any

2 rule of the national securities exchange making ap3 plication under this subsection would unreasonably

4 impair the ability of a dealer to solicit or effect

5 transactions in such security for its own account, or

6 would unreasonably restrict competition among deal7 ers in such security or between such dealers acting

8 in the capacity of marketmakers who are specialists

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

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

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

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

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

Passed the House of Representatives August 1,

1994.

Attest: DONNALD K. ANDERSON,

Clerk.