II

103D CONGRESS

2D SESSION S. 2192

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 SENATE OF THE UNITED STATES

JUNE 15 (legislative day, JUNE 7), 1994

Mr. BENNETT (for himself, Mr. SASSER, Mrs. FEINSTEIN, Mr. WOFFORD, Ms.

MOSELEY-BRAUN, Mr. DOMENICI, Mr. FAIRCLOTH, Mr. SPECTER, Mr.

SIMON, Mrs. BOXER, Mr. KENNEDY, and Mr. BOND) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

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,

3 SECTION 1. SHORT TITLE.

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

5 Privileges Act of 1994’’.
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1 SEC. 2. AMENDMENTS TO THE SECURITIES EXCHANGE ACT

2 OF 1934.

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

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

5 is amended by striking paragraphs (1) and (2) and insert6 ing the following:

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

8 of this section, any national securities exchange, in accord9 ance with the requirements of this subsection and the

10 rules hereunder, may extend unlisted trading privileges

11 to—

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

13 a national securities exchange, subject to subpara14 graph (B); and

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

16 pursuant to this section, or that would be required

17 to be so registered except for the exemption from

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

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

20 this paragraph.

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

22 unlisted trading privileges to a security described in sub23 paragraph (A)(i) during such interval, if any, after the

24 commencement of an initial public offering of such secu25 rity, as is or may be required pursuant to subparagraph

26 (C).
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1 ‘‘(C) Not later than 180 days after the date of enact2 ment of the Unlisted Trading Privileges Act of 1994, the

3 Commission shall prescribe, by rule or regulation, the du4 ration of the interval referred to in subparagraph (B), if

5 any, as the Commission determines to be necessary or ap6 propriate for the maintenance of fair and orderly markets,

7 the protection of investors and the public interest, or oth8 erwise in furtherance of the purposes of this title. Until

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

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

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

12 such security commences trading on the national securities

13 exchange with which such security is registered and end

14 at the conclusion of the next day of trading.

15 ‘‘(D) The Commission may prescribe, by rule or regu16 lation such additional procedures or requirements for ex17 tending unlisted trading privileges to any security as the

18 Commission deems necessary or appropriate for the main19 tenance of fair and orderly markets, the protection of in20 vestors and the public interest, or otherwise in furtherance

21 of the purposes of this title.

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

23 securities described in subparagraph (A)(ii) may occur ex24 cept pursuant to a rule, regulation, or order of the Com25 mission approving such extension or extensions. In pro-
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1 mulgating such rule or regulation or in issuing such order,

2 the Commission—

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

4 of unlisted trading privileges is consistent with the

5 maintenance of fair and orderly markets, the protec6 tion of investors and the public interest, and other7 wise in furtherance of the purposes of this title;

8 ‘‘(ii) shall take account of the public trading ac9 tivity in such securities, the character of such trad10 ing, the impact of such extension on the existing

11 markets for such securities, and the desirability of

12 removing impediments to and the progress that has

13 been made toward the development of a national

14 market system; and

15 ‘‘(iii) shall not permit a national securities ex16 change to extend unlisted trading privileges to such

17 securities if any rule of such national securities ex18 change would unreasonably impair the ability of a

19 dealer to solicit or effect transactions in such securi20 ties for its own account, or would unreasonably re21 strict competition among dealers in such securities

22 or between such dealers acting in the capacity of

23 market makers who are specialists and such dealers

24 who are not specialists.
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1 ‘‘(F) An exchange may continue to extend unlisted

2 trading privileges in accordance with this paragraph only

3 if the exchange and the subject security continue to satisfy

4 the requirements for eligibility under this paragraph, in5 cluding any rules and regulations issued by the Commis6 sion pursuant to this paragraph, except that unlisted trad7 ing privileges may continue with regard to securities which

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

9 notwithstanding the failure to satisfy such requirements.

10 If unlisted trading privileges in a security are discontinued

11 pursuant to this subparagraph, the exchange shall cease

12 trading in that security, unless the exchange and the sub13 ject security thereafter satisfy the requirements of this

14 paragraph and the rules issued hereunder.

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

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

17 offering if—

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

19 registered under the Securities Act of 1933;

20 and

21 ‘‘(II) the issuer of the security, imme22 diately prior to filing the registration statement

23 with respect to the offering, was not subject to

24 the reporting requirements of section 13 or

25 15(d) of this title; and
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1 ‘‘(ii) an initial public offering of such security

2 commences at the opening of trading on the day on

3 which such security commences trading on the na4 tional securities exchange with which such security

5 is registered.

6 ‘‘(2)(A) At any time within 60 days of commence7 ment of trading on an exchange of a security pursuant

8 to unlisted trading privileges, the Commission may sum9 marily suspend such unlisted trading privileges on the ex10 change. Such suspension shall not be reviewable under sec11 tion 25 of this title and shall not be deemed to be a final

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

13 States Code. Upon such suspension—

14 ‘‘(i) the exchange shall cease trading in the se15 curity by the close of business on the date of such

16 suspension, or at such time as the Commission may

17 prescribe by rule or order for the maintenance of

18 fair and orderly markets, the protection of investors

19 and the public interest, or otherwise in furtherance

20 of the purposes of this title; and

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

22 trading privileges to the security, the exchange shall

23 file an application to reinstate its ability to do so

24 with the Commission pursuant to such procedures as

25 the Commission may prescribe by rule or order for
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1 the maintenance of fair and orderly markets, the

2 protection of investors and the public interest, or

3 otherwise in furtherance of the purposes of this title.

4 ‘‘(B) A suspension under subparagraph (A) shall re5 main in effect until the Commission, by order, grants ap6 proval of an application to reinstate, as described in sub7 paragraph (A)(ii).

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

9 affect the validity or force of an extension of unlisted trad10 ing privileges in effect prior to such suspension.

11 ‘‘(D) The Commission shall not approve an applica12 tion by a national securities exchange to reinstate its abil13 ity to extend unlisted trading privileges to a security un14 less the Commission finds, after notice and opportunity

15 for hearing, that the extension of unlisted trading privi16 leges pursuant to such application is consistent with the

17 maintenance of fair and orderly markets, the protection

18 of investors and the public interest, and otherwise in fur19 therance of the purposes of this title. If the application

20 is made to reinstate unlisted trading privileges to a secu21 rity described in paragraph (1)(A)(ii), the Commission—

22 ‘‘(i) shall take account of the public trading ac23 tivity in such security, the character of such trading,

24 the impact of such extension on the existing markets

25 for such a security, and the desirability of removing
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1 impediments to and the progress that has been made

2 toward the development of a national market sys3 tem; and

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

5 rule of the national securities exchange making ap6 plication under this subsection would unreasonably

7 impair the ability of a dealer to solicit or effect

8 transactions in such security for its own account, or

9 would unreasonably restrict competition among deal10 ers in such security or between such dealers acting

11 in the capacity of marketmakers who are specialists

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

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

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

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

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

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