62918 Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices

12See PHLX and CBOE Approval Orders, supra

note 5.

13 15 U.S.C. 78f(b)(2) (1988). 14 17 CFR 200.30–3(a)(12) (1994).

1NASAA is an association of securities

administrators from each of the 50 states, the

District of Columbia, Puerto Rico and ten Canadian

provinces.

2See, e.g., Securities Exchange Act Release No.

34235 (June 17, 1994), 59 FR 32736 (June 24, 1994)

(approving a Philadelphia Stock Exchange rule

change adopting NASAA endorsed standards);

Securities Exchange Act Release No. 34429 (July 22,

1994), 59 FR 38998 (Aug. 1, 1994) (approving a

Pacific Stock Exchange rule change adopting

NASAA endorsed standards).

3The Memorandum of Understanding was

approved by NASAA and Phlx on October 12, 1994.

4The Memorandum of Understanding was

approved by NASAA and the PSE on October 12,

1994.

for narrow-based index options to 6,000,

9,000, or 12,000 contracts, depending on

the percentage stock concentrations

within the index, are consistent with the

requirements of the Act and the rules

and regulations thereunder.

The Commission finds good cause for

approving the proposed rule changes

prior to the thirtieth day after the date

of publication of notice of filing thereof

in the Federal Register. As noted above,

the Commission has previously

approved identical proposals submitted

by the PHLX and the CBOE.12 The

PHLX’s proposals was published for the

full notice and comment period and the

Commission received no comments on

the PHLX’s proposal. The Exchanges’

proposals raise no new regulatory

issues. Accordingly, the Commission

believes it is consistent with Sections

6(b)(5) and 19(b)(2) of the Act to

approve the proposed rule changes on

an accelerated basis. In addition, the

Commission believes it is consistent

with Sections 6(b)(5) and 19(b)(2) of the

Act to approve Amendment No. 1 to the

PSE’s proposal on an accelerated basis

so that both proposals may become

effective simultaneously.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

changes that are filed with the

Commission, and all written

communications relating to the

proposed rule changes between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. Copies of such filings

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organizations. All submissions should

refer to the file numbers in the caption

above and should be submitted by

December 28, 1995.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,13 that the

proposed rule changes (SR–Amex–95–

45 and SR–PSE–95–30) are approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29781 Filed 12–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36531; File No. SR–CHX–

95–26]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Chicago Stock Exchange, Inc.

Relating to Listing Standards

November 30, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on November 8, 1995,

the Chicago Stock Exchange, Inc.

(‘‘CHX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the self-regulatory

organization. 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 amend

Article XXVIII of the Exchange’s Rules

to modify the Exchange’s listing

standards and create two tiers of

listings.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV below.

The self-regulatory organization has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The North American Securities

Administration Association

(‘‘NASAA’’) 1 has endorsed certain

listing standards as sufficient to warrant

a state’s granting exchange-listed

securities a listing exemption from

registration. The CHX proposes to

modify its own listing standards to

comply with those endorsed by NASAA

and adopted by other stock exchanges.2

The CHX proposes changes to its

Rules regarding the quantitative

requirements for issuers and issues,

qualitative requirements for issuers (e.g.,

corporate governance standards), and

maintenance criteria for issues. In no

case do the proposed changes decrease

current CHX standards.

NASAA has entered into a

Memorandum of Understanding

(‘‘MOU’’) with the Philadelphia Stock

Exchange (‘‘Phlx’’) 3 and the Pacific

Stock Exchange (‘‘PSE’’).4 Those

memoranda set out standards that

NASAA recognizes as sufficient to

warrant listing exemptions from state

blue sky requirements. The proposed

rules establish listing standards that are

essentially identical to the standards set

out in those two NASAA MOUs.

Although the CHX is in the process of

reaching a similar MOU with NASAA,

the CHX’s new listing standards are

specifically designed to satisfy the

listing standards endorsed by NASAA.

Other exchanges have established two

tiers of listing requirements. In general,

Tier I listing standards are

quantitatively and qualitatively higher

(i.e., more restrictive and demanding)

than Tier II listing standards.

The CHX does not currently have a

two-tier structure for listings but

proposes to create a two-tiered

structure. Both Tier I and Tier II listed

issues will be traded pursuant to

identical auction rules, but otherwise

the two tiers will differ in several ways.
Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices 62919

The new, higher standards proposed by

the CHX will constitute requirements

for a new Tier I listing. The Tier I

requirements for a CHX listing will be

identical in all material respects with

the requirements of the NASAA MOUs.

The current standards of the CHX will

constitute the listing requirements for

the new CHX Tier II listing. The

NASAA MOUs do not address Tier II

standards.

Tier I issuers and issues will have to

meet the corporate governance and

disclosure standards endorsed by

NASAA MOUs. These include newly

specific requirements for disclosure of

reports filed with federal regulatory

bodies; specific requirements for

shareholder approval for certain

corporate actions involving the sale or

issuance of stock; and specific voting

rights provisions forbidding corporate

actions that have a disparate impact on

holders of stock. The CHX currently has

strict corporate governance and

disclosure requirements, which will

remain in place for Tier II issuers and

issues.

The CHX will identify and distinguish

at all times which securities are listed

pursuant to Tier I and Tier II standards.

If a Tier I listed security fails to satisfy

Tier I maintenance standards for

continued listing, the issue will be

removed from Tier I listing. If it meets

Tier II standards, it will thereupon be

listed on Tier II. If it does not meet Tier

II standards, it will be delisted.

Moreover, if a Tier II listed security

matures to the point that it could meet

the Tier I standards, the issuer must

apply and receive approval to list the

security pursuant to the Tier I standards

before the CHX will recognize that

security as a Tier I issue. The CHX

believes that adopting two tiers of

listing standards will provide flexibility

for the CHX in pursuing various listing

objectives beneficial to CHX members

and the public.

The CHX has chosen to adopt

NASAA’s MOU standards as criteria for

its new Tier I because the CHX views

those standards as carefully crafted to

provide an extremely high level of

investor and shareholder protection. For

the same reason, the CHX proposes for

Tier I to adopt also NASAA’s substantial

corporate governance standards,

including requirements for independent

directors, audit committees, shareholder

quorums, common stock voting rights,

and conflict of interest provisions. The

CHX’s current rules already address

many of these same issues, but for Tier

I the CHX proposes to adopt all of

NASAA’s suggested standards.

Tier I standards must be satisfied by

all issuers on a continuing basis.

Moreover, CHX standards for Tier I

initial and maintenance listing are both

mandatory and non-waivable.

Tier I Standards

With regard to common stock, Rule

8(a) replicates the NASAA MOUs’

numerical criteria applicable to original

listing determinations in every aspect

including net tangible assets, numbers

of shareholders and shares publicly

held, pre-tax and net earnings, and stock

price.

In Rule 8(b), the CHX proposes to also

offer alternate listing standards for

common stock issues. The proposed

standards are identical to those

endorsed by NASAA. The CHX offers

the alternate standards because there are

certain smaller companies that either

due to the nature of their business or the

amount of resources committed by the

company to research and development,

would not meet the standards in Rule

8(a) but nevertheless deserve Tier I

status. Thus, those types of companies

may be approved for listing under Tier

I if they satisfy the alternate listing

criteria.

Rule 8(c), in conformance with the

NASAA MOUs, provides standards for

initial public offerings approved for

listing on the CHX. Such offerings must

be underwritten on a ‘‘firm

commitment’’ basis and must meet the

CHX’s listing standards within a 30-day

grace period after completion of the

offering.

With regard to preferred stock, Rule 9

provides the Tier I original listing

criteria. Preferred stock issuers must

satisfy the same net tangible assets and

net earnings criteria applicable to

issuers of common stock. The ability of

the issuers to service the dividend

requirements for preferred stock will

also be evaluated. The requirements will

differ for number of shares publicly held

and aggregate market value depending

on whether the issuer has common

stock listed. Where the common stock is

listed on the CHX, New York Stock

Exchange (‘‘NYSE’’), or American Stock

Exchange (‘‘Amex’’), at least 100,000

shares of preferred stock must be

publicly held with an aggregate market

value of at least $2 million dollars.

Where the common stock is not so

listed, at least 400,000 shares of

preferred stock must be publicly held

with an aggregate market value of at

least $4 million. Differentiating on this

basis reflects the CHX’s belief that

companies whose securities are publicly

traded have a more significant investor

following and a greater demonstrated

ability to raise necessary capital while

meeting the contingent payment

obligations associated with preferred

stock and, as described below, bond and

debentures. In either case, a share of

preferred stock must have a minimum

closing bid price of $10 to be eligible for

listing.

Listing of bonds and debentures

under Tier I will be governed by Rule

10. In addition to evaluating issuers

according to the same net tangible assets

and earnings standards applicable to

equity issuers, the CHX will also

evaluate the ability of these issuers to

satisfy the interest and principal

payments of bonds and debentures as

they become due. As above, the required

aggregate market value and number of

public beneficial holders varies

depending on whether the issuer’s

common stock is listed and traded on

either the CHX, Amex or NYSE.

Additionally, the CHX will require

municipal bonds to meet higher

standards than other bonds.

Issuers seeking listing of warrants

under Tier I must satisfy the criteria of

Rule 11. The CHX will set standards

with regard to public distribution, and

it will not list warrants unless the

security underlying the warrant is

already listed or will be listed

concurrently with the warrants on Tier

I.

Rule 12 provides criteria for

contingent value rights (‘‘CVRs’’). The

CHX will set standards for CVRs with

regard to aggregate market value, public

distribution, net tangible assets, and

maturity date. CVR issuers must meet

the net tangible assets and earnings

requirements for issuers of stock listed

on the Exchange, and the CVRs to be

listed must have been approved for

listed on another national securities

exchange. Finally, Rule 13 contains

criteria applicable to new and

innovative products that do not fall

within Rules 8–12 but otherwise have

the financial qualifications to be listed

and are suitable for auction market

trading.

The CHX’s maintenance requirements

for Tier I securities duplicate those

found in the NASAA MOU with the

PSE. Rules 14–17 set forth those

maintenance requirements for each type

of issue. The CHX will initiate delisting

procedures against any issue that fails to

meet the maintenance requirements on

a continuing basis.

Tier II Standards

Rule 18 sets forth the CHX’s proposed

Tier II standards. Tier II standards will

allow companies that may not be large

enough to list under Tier I the

opportunity to have their securities

traded in an auction market, thereby

increasing liquidity and issuer access to

the investment community.
62920 Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices

1 15 U.S.C. 78s(b)(1) (1988).

2While MSTC does not have specific written ID

procedures, the MST System Flash newsletter is

sent to MSTC participants to update them on,

among other things, ID system changes. The

newsletter is kept on record at MSTC and is used

by MSTC as its participant procedures.

3 27 CFR 240.10b–10 (1994).

4The Commission has modified the text of the

summaries prepared by PHILADEP and MSTC.

5For a complete discussion of the amendments,

refer to Securities Exchange Act Release No. 34962

(November 10, 1994), 59 FR 59612.

6Letter from Catherine McGuire, Chief Counsel,

Division of Market Regulation, Commission, to

George P. Miller, Esq., Vice President and Associate

General Counsel, PSA (September 29, 1995).

The CHX’s proposed Tier II standards

are essentially identical to the current

CHX standards applicable to all listed

issues, except that index warrants and

contingent value rights will no longer be

listed under Tier II.

Miscellaneous

The CHX does not propose to

materially change its admissions

procedures or its delisting procedures.

2. Statutory Basis

The proposed rule change is

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

Act in that the proposal fosters

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating transactions

in securities, removes impediments to

and perfects the mechanism of a free

and open market and a national market

system and protects investors and the

public interest. The proposal also is

consistent with Section 11A of the Act

in that approval of the Tier I standards

will aid in the development of the

national market system by enhancing

competition for equity listings.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any inappropriate burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were either

solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such other period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the self-regulatory organization

consents, the Commission will:

(A) By order approve the proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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

communication 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 5

U.S.C. 552, will be available for

inspection and copying at the

Commission’s Public Reference Section,

450 Fifth Street, N.W., Washington, D.C.

20549. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–CHX–95–26 and should be

submitted by December 28, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

FR Doc. 95–29782 Filed 12–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36533; File Nos. SR–

PHILADEP–95–09; SR–MSTC–95–09]

Self-Regulatory Organizations;

Philadelphia Depository Trust

Company and Midwest Securities Trust

Company; Notice of Filing and

Immediate Effectiveness of Proposed

Rule Changes Modifying Procedures to

Enable Compliance With Confirmation

Disclosure Requirements Through the

Use of the Institutional Delivery

System

November 30, 1995.

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

Securities Exchange Act of 1934 (‘‘Act),1

notice is hereby given that on October

24, 1995, and on October 27, 1995,

respectively, the Philadelphia

Depository Trust Company

(‘‘PHILADEP’’) and the Midwest

Securities Trust Company (‘‘MSTC’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule changes as described in

Items I, II, and III below, which Items

have been prepared primarily by

PHILADEP and MSTC. The Commission

is publishing this notice to solicit

comments on the proposed rule changes

from interested parties.

I. Self-Regulatory Organizations’

Statements of the Terms of Substance of

the Proposed Rule Changes

PHILADEP and MSTC propose to

make additions to their respective

procedures 2 to enable their participants

using the Institutional Delivery (‘‘ID’’)

system for generating confirmations for

customer transactions to comply with

certain disclosure requirements of Rule

10b–10 under the Act.3

II. Self-Regulatory Organizations’

Statements of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In their filings with the Commission,

PHILADEP and MSTC included

statements concerning the purpose of

and the basis for the proposed rule

changes and discussed any comments

they received on the proposed rule

changes. The text of these statements

may be examined at the places specified

in Item IV below. PHILADEP and MSTC

have prepared summaries, set forth in

section (A), (B), and (C) below, of the

most significant aspects of such

statements.4

A. Self-Regulatory Organizations’

Statements of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Changes

In 1994, the Commission adopted

amendments to Rule 10b–10.5

Subsequently, the Division of Market

Regulation issued a no-action letter to

the Public Securities Association

(‘‘PSA’’) on behalf of its members and

all other brokers and dealers

temporarily exempting them from

certain disclosure requirements of

paragraphs (a)(7), (a)(8), and (a)(9) of

Rule 20b–10 until November 1, 1995.6

The purpose of these proposed rule

changes is to enable PHILADEP and

MSTC participants using the ID system

for generating confirmations for

customer transactions to comply with

the following three disclosure

requirements upon the expiration of the

temporary exemption on November 1,

1995.