Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40575

9 15 U.S.C. 78f(b)(4).

10 15 U.S.C. 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange made

technical corrections to the proposed rule change

and clarified the purpose of the proposal. See Letter

from James E. Buck, Senior Vice President and

Secretary, Exchange, to Michael Walinskas, Deputy

Associate Director, Division of Market Regulation,

Commission, dated April 29, 1998. (‘‘Amendment

No. 1’’).

4Securities Exchange Act Release No. 39973 (May

7, 1998), 63 FR 26660.

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW,

Washington DC 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room, 450 Fifth Street, NW,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of CBOE. All submissions should

refer to the File No. SR–CBOE–98–28

and should be submitted by August 19,

1998.

V. Commission’s Findings and Order

Granting Partial Accelerated Approval

of the Proposed Rule Change

The Commission finds that the

Exchange’s proposal to provide the

option of obtaining the Exchange

Bulletin via e-mail to non-members at a

cost of $50.00 per copy is consistent

with the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange. Specifically, the Commission

finds that the proposed rule change is

consistent with Section 6(b)(4) of the

Act 9 in that it provides for the equitable

allocation of reasonable dues, fees and

other charges among its members,

issuers and other persons using its

facilities.

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing in

the Federal Register. The Commission

believes that accelerated approval of the

proposal is appropriate because the

Exchange is merely adding an

alternative method for non-members to

receive the Exchange Bulletin that will

facilitate access to the Bulletin by both

members and non-members at a cost

less than the current fee for a hard copy

of the Exchange Bulletin.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act 10 that the

proposed rule change relating to nonmembers, is hereby partially approved

on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20190 Filed 7–28–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40253; File No. SR–NYSE–

98–12]

Self-Regulatory Organizations; Order

Granting Approval of Proposed Rule

Change and Amendment No. 1 Thereto

by the New York Stock Exchange, Inc.,

Relating to Changes in Bond Listing

Procedures and Practices

July 23, 1998.

I. Introduction

On April 15, 1998, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

amend its bond listing procedure and

practices. On April 30, 1998, the NYSE

submitted to the Commission

Amendment No. 1 to the proposed rule

change.3 The proposed rule change, as

amended, was published for comment

in the Federal Register on May 13,

1998.4 No comments were received

regarding the proposal. This order

approves the proposed rule change, as

amended.

II. Description of the Proposal

The NYSE proposes to amend its

Listed Company Manual (‘‘Manual’’) to

alter certain provisions regarding listing

requirements for debt securities and

other debt security practices. Those

provisions in the Manual include:

(i) Interest Payments. Currently,

Paragraph 204.18 requires that an issuer

or its paying agent notify the Exchange

whenever the issuer makes an interest

payment, and the Exchange also

requires an issuer to notify the press and

the Exchange whenever the issuer does

not meet its interest obligations. The

proposal would delete the obligation to

inform the Exchange of interest

payments made, whether by

confirmation cards or otherwise. And,

the proposal also adds to the end of

Paragraph 204.18 a cross-reference to

202.00, which reminds issuers that they

are required to disclose material

information (including the inability to

meet payment obligations).

(ii) Multiple Facsimile Signatures.

Paragraph 501.06 presently requires

bonds to be executed, either manually

or by facsimile machine, by two of the

issuer’s officers. Whether the issuer uses

one facsimile signature (and one manual

signature) or two facsimile signatures,

the Exchange currently requires the

issuer to submit an opinion of counsel

that states that the use of each facsimile

signature (a) is specifically authorized

by (or at least is not inconsistent with)

the issuer’s charter or by-laws and the

issue’s indenture, and (b) is valid and

effective under the laws of the state of

the issuer’s incorporation. When a

single facsimile signature is used, the

opinion of counsel also must state that

the actual facsimile signature to be used

has been duly adopted. Where two

facsimile signatures are used, the issuer

must submit to the Exchange the board

resolution adopting the actual

signatures to be used.

Although the Exchange would

continue to require issuers to authorize

the use of facsimile signatures, to adopt

the specific facsimile signatures to be

used, to comply with charter, by-law

and indenture provisions, and to

comply with state laws, it proposes to

discontinue the practice of requiring

issuers to submit opinions of counsel

and board resolutions in respect of those

requirements.

(iii) Discharge of Obligation upon

Default of Funds. Paragraph 602.01 and

Subparagraph (D) of Paragraph 703.06

currently each require, in part, that a

debt security’s indenture may not

discharge the issuer’s payment

obligation if the funds representing

payment are deposited with the trustee,

depository or paying agent more than

ten days before the date on which the

funds become available to bond holders.

The Exchange would remove this

requirement from the Manual.

(iv) Clearance of Terms.

Subparagraph (B) of Paragraph 703.06

presently asks an issuer to submit the

indenture and registration terms to the

Exchange prior to applying to list a

bond and to receive the Exchange’s

clearance of the terms of those

documents before the company is

permitted to use a ‘‘listing intention
40576 Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices

5See Letter From Fred Siesel, Director, Fixed

Income Markets, Exchange, to Kenneth M. Rosen,

Attorney, Division of Market Regulation,

Commission, dated July 10, 1998 (‘‘July 10 Letter’’).

6 15 U.S.C. 78f(b)(5). In approving this rule, the

Commission has considered the proposed rule’s

impact on efficiency, competition, and capital

formation. 15 U.S.C. 78c(f).

statement’’ in the offering prospectus.

The proposal would eliminate these

requirements and would amend

Subparagraph (B) to clarify the

remaining portions of that

Subparagraph. The remaining portions

provide guidance on the contents of a

description of the issue. The Exchange

has clarified that the description of the

issue is part of the listing application for

the security and is reviewed prior to the

date the security is listed.5

(v) Delivery of Prospectus, Mortgage

and/or Indenture. Subparagraph (F) of

Paragraph 703.06 currently requires the

issuer to provide with its listing

application four copies of a security’s

prospectus if the debt security has been

issued for 12 months or less and to

provide one copy of the prospectus if

the debt security has been issued for

more than 12 months. The Exchange

also requires the issuer to provide one

final copy of the issuer’s mortgage or

indenture.

The Exchange proposes to change

those document delivery requirements if

the issuer makes the document publicly

available by means of a disclosure

service (such as Disclosure, Inc.) that

the Exchange finds satisfactory. If a

document is available in that manner,

the Exchange would no longer require

the issuer to submit the final copy (in

the case of a mortgage or indenture) and

would require the issuer to submit only

one copy of the prospectus, even if the

debt security has been issued for 12

months or less.

(vi) Opinion of Counsel.

Subparagraph (G) of Paragraph 703.06

now requires an issuer to provide the

Exchange with an opinion of counsel

that verifies such things as the validity

of the debt securities and the

authorization for the issuance. Pursuant

to the proposal, for issues that a

registered broker-dealer purchases from

the issuer with a view toward resale,

whether through an underwritten public

offering or otherwise, the Exchange

would accept as sufficient an issuer’s

affirmation of the existence of the

opinion of counsel. The Exchange

would continue to require the

submission of the opinion of counsel for

Rule 144A offerings.

In addition, the Exchange would

eliminate certain of the items that

currently must appear in the opinion of

counsel. Specifically, the Exchange

would no longer require the opinion: (a)

To set forth the date, nature, and status

of orders or proceedings of regulatory

authorities relating to the issuance of

securities that are the subject of a listing

application; (b) to state that the Board

has authorized the issuing and listing of

the securities; and (c) to disclose an

affiliation of the counsel to the issuer.

III. Discussion

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of

Section 6 of the Act. In particular, the

Commission believes the proposal is

consistent with Section 6(b)(5) of the

Act.6 Section 6(b)(5) requires, among

other things, that the rules of the

Exchange be designed to foster

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating transactions

in securities, and to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system.

The Commission agrees with the

Exchange that the proposed changes to

the Manual should facilitate the listing

process for debt securities and should

update rules and policies to better

conform with current practices. By

eliminating certain requirements in the

Manual, it should become less

burdensome for companies to follow

relevant procedures. This in turn should

improve the transparency of the debt

securities market for all market

participants, including investors. With

less burdensome rules and procedures,

additional companies might list their

debt securities on the NYSE, thus

increasing the number of these

securities accessible through and subject

to the Exchange’s trading and disclosure

systems.

Moreover, the Commission feels that

such benefits should outweigh any

minimal protection afforded by

eliminated provisions. Having carefully

reviewed each of the proposed changes

to the Manual, the Commission agrees

with the Exchange’s representation that

each of the eliminated provisions and

document submission requirements are

no longer necessary.

More specifically, the Commission

agrees that an issuer’s obligation to

report to the press and to the Exchange

failures to meet payment obligations

and unusual conditions and

circumstances related to and issuer’s

ability to meet interest payments

sufficiently protects investors without

also continuing to require that issuers

notify the Exchange each time an

interest payment is made.

Second, as to facsimile signatures,

recognizing the continued requirements

that issuers authorized the use of such

signatures, adopt the specific facsimile

signature to be used, and comply with

relevant state laws and charter, by-law,

and indenture provisions, it is

appropriate to eliminate additional

submissions of opinions of counsel and

board resolutions related to such

requirements. The Commission notes

the increased acceptance of facsimile

signatures and agrees with the Exchange

that the remaining requirements related

to such signatures should adequately

protect the public.

Third, the Commission concurs with

the elimination of the prohibition

against a debt security’s indenture

discharging the issuer’s payment

obligation if the funds representing

payment are deposited with the trustee,

depository or paying agent more than

ten days before the date on which the

funds become available to bond holders.

As the Exchange represented, the

prohibition addressed the practice of

depositing securities with the trustee in

advance of a payment obligation as a

way of satisfying a restrictive covenant

where the indenture does not provide

for prepayment. The Exchange adopted

those provisions to protect bondholders

prior to the enactment of the Trust

Indenture Act and the widespread use

of early call provisions. However, the

Exchange notes that the practice of

advance security deposits is no longer

in use. The Commission agrees that this

along with protections now afforded

bondholders by the Trust Indenture Act

and the fact that an issuer’s defeasance

does not normally discharge that

issuer’s payment obligation to the

bondholder as set forth in the debt

instrument weigh in favor of removing

the ban.

Fourth, the Commission also finds

that elimination of early submission and

prior clearance requirements are

permissible. The Commission notes that

when evaluating a bond for listing, the

Exchange currently examines whether

the issuer’s equity security is listed on

the Exchange or, if the issuer does not

list an equity security on the Exchange,

whether a nationally recognized

security rating organization has rated

the debt issue no lower than a Standard

& Poors’ ‘‘B’’ rating or its equivalent.

This evaluation should give the

Exchange sufficient indication of

whether the issuer should be permitted

to move forward with the listing process

prior to a debt security’s listing.

Furthermore, the Exchange explains that

nothing in its filing on
Federal Register / Vol. 63, No. 145 /Wednesday, July 29, 1998 / Notices 40577

7See July 10 Letter.

8See July 10 Letter.

9See July 10 Letter.

10See Amendment No. 1.

11See July 10 Letter.

12 15 U.S.C. 78s(b)(2).

13 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) (1994).

2 17 CFR 240.19b–4 (1997).

3The proposed rule change was originally filed

on June 19, 1998 pursuant to Section 19(b)(3)(A)(ii)

of the Act. The amendment converted the proposed

rule change to a filing pursuant to Section 19(b)(2)

of the Act because the proposed rule change

modifies fees that apply to issuers. Letter from

Robert P. Pacileo, Staff Attorney, Regulatory Policy,

PCX to Kelly McCormick, Attorney, Office of

Market Supervision, Division of Market Regulation,

Commission, dated July 10, 1998.

bond listing procedures in any way

changes the Exchange’s substantive debt

listing standards nor the Exchange’s

enforcement of those standards, such as

the requirement that to be listed the

issue must have a par value of at least

$5,000,000.7

As for early review of indenture

terms, what continued to necessitate

such review was the prohibition against

defeasance discussed above. However,

by eliminating that requirement, the

Exchange eliminates the last

justification of its need to pre-clear

indenture and registration terms.

Despite these changes, the Commission

notes that the Exchange has represented

that issuers may still contact the

Exchange to discuss the issue’s

eligibility prior to engaging in the

process of completing a listing

application when it is uncertain as to

whether it will qualify for listing.

Fifth, the Commission finds that it is

appropriate for the Exchange to ease

certain document submission

requirements when those documents are

readily available to the Exchange

through electronic services. The

Exchange has clarified that for such a

service to qualify as satisfactory, it must

be one to which the Exchange

subscribes, and the NYSE also has noted

its access to other SEC public document

services through the Internet.8

Consequently, in carrying out its review

of debt securities, the Exchange should

continue to have ready access to

documents which no longer need to be

physically submitted by an issuer.

Sixth, substituting the affirmation of

the existence of an opinion of counsel

for a copy of the opinion should also

facilitate the listing process. The

Commission accepts the Exchange’s

representation that its physical

possession of the opinion of counsel is

no longer necessary because in

connection with an underwritten

offering the Exchange rarely has need to

refer to that opinion, and the Exchange

can direct the issuer to provide an

opinion should the need arise.9

Moreover, eliminating content from

such opinion should not have a

substantial impact. Because the

Exchange represents that it has rarely

used or relied upon the opinion’s

description of regulatory proceedings,

deletion appears to sacrifice little, while

serving to simplify the opinion. In

addition, the Commission accepts the

use of a listing-application signature of

an authorized officer of the issuer as

assurance of the board’s authorization of

the issue and of listing the issue on the

Exchange. Moreover, should the

Exchange ultimately need to review an

opinion, it then could inquire as to any

affiliation of the opinion’s writer with

the issuer.10

Finally, the Commission wishes to

emphasize again that the proposal does

not affect the NYSE’s substantive

quantitative debt listing standards.11

And, having reviewed the proposal in

light of the requirements and

protections that remain in the Manual,

the Commission believes that adequate

information will remain publicly

available to inform investors about the

quality of issuers and their debt

securities.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (SR–NYSE–98–

12), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–20248 Filed 7–28–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40249; File No. SR–PCX–

98–32]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment No. 1 Thereto by the

Pacific Exchange, Inc. Relating to

Listing and Maintenance Fees for

Nasdaq Listings

July 22, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 14,

1998, the Pacific Exchange, Inc. (‘‘PCX’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the Exchange.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to modify its

listing and maintenance fees so that

certain issues listed on both the PCX

and the Nasdaq Stock Market, Inc.

(‘‘Nasdaq’’) will be deemed to be

‘‘dually listed’’ for purposes of the

Exchange’s Listing Fee Schedule. The

text of the proposed rule change is set

out below. Additions are italicized.

Deletions are bracketed.

LISTING FEE SCHEDULE

Original Listing Fees—Original Listing fees are fixed fees in that they are not charged by the number of shares being listed:

Common Stock, dually listed on NYSE [or] AMEX, or Nasdaq National Market ................................................................................ $10,000.00

Common Stock, not listed on NYSE [or] AMEX, or Nasdaq National Market .................................................................................... 20,000.00

Annual Maintenance Listing Fee (Billed and payable January of each year following initial listing):

For one issue, dually listed on NYSE [or] AMEX, or Nasdaq National Market .................................................................................. $1,000.00

For one issue, not listed on NYSE [or] AMEX, or Nasdaq National Market ....................................................................................... 2,000.00