[Federal Register Volume 63, Number 195 (Thursday, October 8, 1998)]
[Notices]
[Pages 54165-54169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26997]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40516; File No. SR-CHX-98-7]
Self-Regulatory Organizations; Order Granting Approval of
Proposed Rule Change and Notice of Filing and Order Granting
Accelerated Approval of Amendments No. 1, 2, and 3 to the Proposed Rule
by the Chicago Stock Exchange, Inc. Regarding Maintenance Standards and
Listing Requirements.
September 30, 1998.
I. Introduction
On March 18, 1998, the Chicago Stock Exchange, Incorporated
(``CHX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a proposed rule change pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder.\2\ In the filing, the CHX proposed rule
amendments that would set forth listing and maintenance requirements
for securities that are also listed on another primary market and
modify the maintenance and delisting standards for securities listed on
Tier II of the Exchange. Notice of the proposed rule change was
published in the Federal Register on April 30, 1998.\3\ No comments
were received on the proposal. On June 15, 1998, the CHX submitted
Amendment No. 1 to the proposed rule change.\4\ Amendment No. 2 was
subsequently filed on August 20, 1998.\5\ A final amendment to the
proposal was filed with the Commission on September 30, 1998.\6\ This
order approves the proposed rule change as amended. Amendments No. 1,
2, and 3 are herein approved on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 39906 (April 23, 1998),
63 FR 23821.
\4\ See Letter from Patricia Levy, Senior Vice President and
General Counsel, CHX, to Sarrita Cypress, SEC, Division of Market
Regulation, dated June 15, 1998. the terms of Amendment No. 1 to the
proposal are discussed in Section II of this approval order.
\5\ See Letter from Patricia Levy, Senior Vice President and
General Counsel, CHX, to Sarrita Cypress, SEC, Division of Market
Regulation, dated August 20, 1998. The terms of Amendment No. 2 to
the proposal are discussed in Section II of this approval order.
\6\ See Letter from Andre E. Owens, Schiff Hardin & Waite, to
Sharon Lawson, Division of Market Regulation, dated September 30,
1998. The terms of Amendment No. 3 to the proposal are discussed in
Section II of this approval order.
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II. Description of the Proposal
the Exchange proposes to amend CHX listing and maintenance
requirements as set forth in Exchange Rules 14, 15, 16, 17 and 22 of
Article XXVIII and the Interpretation and Policy .01 of Rule 2 of
Article XXVIII. the proposed rule amendment relate to four general
listing issues: (i) Tier II listing standards for stock warrants, (ii)
listing application requirements for securities that are listed or
approved for listing on certain other markets, (iii) delisting of a
security for lack of sufficient trading volume, and (iv) the
elimination of certain maintenance listing standards for securities
currently listed on certain other markets.
A. Tier II Stock Warrants
The Exchange does not currently have maintenance standards for
stock warrants listed on Tier II of the Exchange. The proposed rule
change would revise Rule 22(b) under Article XXVIII to require that, in
the case of Tier II stock warrants, the common stock of the company or
other security underlying the stock warrants meets the applicable Tier
II maintenance requirements. Similar requirements currently exist for
stock warrants listed pursuant to the Exchange's Tier I listing
standards, which in general are subject to quantitatively and
qualitatively higher standard then Tier II listed securities.\7\ By
adopting the proposed maintenance standards for Tier II stock warrants,
the rule change would permit the Exchange to delist stock warrants that
do not have adequate backing of an underlying security.
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\7\ See CHX Rule 17(a)(1) under Article XXVIII.
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B. Listing Application Requirements for Certain Securities Listed on
Other Markets
Currently, the Exchange may list a security of an issuer that is
listed or has been approved for listing on another primary market. The
proposed rule change would add a new Interpretation .03 to Article
XXVIII to state that if the Exchange chooses to list, under either Tier
I or Tier II, a security listed or approved for listing, within the
past twelve months, on the New York Stock Exchange (``NYSE''), the
American Stock Exchange (``Amex''), except for Emerging Company
Marketplace (``ECM'') securities,\8\ or the Nasdaq National Market, the
issuer shall not be required to fulfill all the requirements for an
original listing application.
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\8\ The Amex has discontinued the listing of new companies on
the ECM and eliminated ECM guidelines that allow for such new
listings. Companies previously approved for trading on the Amex as
ECM listed companies continue to trade on the Amex until they
graduate to the Amex's main list by meeting the appropriate listing
standards, or delist, either voluntarily or because they fail to
meet the ECM listing standards. See Securities Exchange Act Release
No. 36079 (August 9, 1995), 60 FR 42926 (August 17, 1995), approving
the discontinuation of the ECM.
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Specifically, the issuer shall be required to submit to the
Exchange (1) a copy of the application for listing on the NYSE, Amex or
Nasdaq National Market, together with all supporting materials, (2) a
board resolution of the issuer authorizing listing on the Exchange, (3)
the issuer's latest Form 10-K, most recent three Form 10-Qs, and most
recent proxy statement (for non-IPOs), or the issuer's latest
registration statement and exhibits (for IPOs), (4) the required
listing fee, (5) an executed Exchange listing agreement, (6) evidence
of approval for listing by the NYSE, Amex or Nasdaq National Market,
(7) a specimen stock certificate, (8) the issuer's registration
statement filed under the Act, and (9) a Letter of Reliance authorizing
the Exchange to process the application and supporting materials in
lieu of an original listing application. In addition to the nine
enumerated items required for the alternative listing application,
Amendment No. 1 to the proposal requires the issuer to submit to the
Exchange any other information deemed appropriate by the Exchange is
order to render a decision concerning listing eligibility.
Amendment No. 1 also revises the instructions for the preparation
of an original listing application set forth in the Interpretation and
Policy .01 of Rule 2 under Article XXVIII to delete the requirement
that financial statements certified by independent public
[[Page 54166]]
accounts be specifically addressed to the Exchange. This will in turn
permit financial statements otherwise addressed to an issuer or another
exchange to be used for purposes of preparing a CHX listing
application.\9\
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\9\ Interpretation and Policy .01 of Rule 2 was also amended to
correct a typographical error and revise the numbering of the
provisions contained therein.
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C. Delisting for Lack of Sufficient Volume or Other Factors Not in the
Public Interest
Current Rule 22(c) of Article XXVIII provides that Tier II listed
issues will normally be considered for delisting if the company fails
to maintain a net worth which is the greater of 150% of the prior
year's consolidated net loss of $500,000, or when the volume of trading
declines to a level which will not support a listed market in the
judgment of the Exchange and its Committee on Floor Procedure.
According to the CHX, the proposed rule change would eliminate the
specific reference to volume of trading as vague and unnecessary in
light of the authority Rule 22(a) grants the Exchange to delist Tier II
securities.\10\
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\10\ Currently, Rule 22(a) states that, ``[T]he Exchange
reserves the right to delist securities of any corporation, subject
to the Securities and Exchange Commission rules, which engages in
practices not in the public interest or whose assets have been
depleted to the extent that the company can no longer operate as a
going concern, or whose securities have become so closely held that
it is no longer feasible to maintain a reasonable market in the
issue. Furthermore, the Exchange reserves the right to delist the
securities of any corporation which has drastically changed its
corporate structure and/or its type of operation.''
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To clarify the intended scope of authority presently granted in
Rule 22(a), Amendment No. 1 to the proposed rule change revises Rule
22(a) to explicitly state that the Exchange may determine on an
individual basis suitability for continued listing of an issue in light
of all pertinent facts whenever it deems such action to be appropriate.
The amendment further states that many factors may be considered in
this connection, including, but not limited to, abnormally low selling
prices or volume of trading. The reference to trading volume as a
factor to be considered for continued listing of the CHX is thus
specifically incorporated into the Exchange's general grant of
authority for delisting Tier II securities. Finally, Amendment No. 1
revises Rule 22(a) to expressly state that the CHX has the authority to
delist a security even though the security continues to be listed on
the NYSE, Amex, or Nasdaq National Market.\11\
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\11\ See discussion infra, for a description of CHX rule
revisions that allow an issuer to continue to be listed on the CHX
by virtue of its listing on the Amex (except for ECM securities),
NYSE or Nasdaq National Market.
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Amendment No. 2 to the proposal provides further clarification of
the Exchange's authority to make an independent determination of the
continued suitability of securities listed on the CHX as established in
Amendment No. 1. Specifically, Amendment No. 2 deletes language from
amended Rule 22(a) that could be interpreted to allow the Exchange to
continue to list an issue that fails to meet CHX listing maintenance
requirements.\12\ This language was deleted from the proposal to
prevent an improper conclusion that listing maintenance standards could
be waived by the CHX. The Amendment thereby reiterates the affirmative
obligation of the CHX to take appropriate action to suspend or delist
securities that fail to meet CHX Tier II listing maintenance standards.
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\12\ Amendment No. 1 states that, ``[T]he Exchange may also make
an appraisal of, and determine on an individual basis, the
suitability for continued listing of a issue in light of all
pertinent facts whenever it deems such action appropriate, even
though a security meets or fails to meet enumerated criteria * * *''
(Emphasis added). Amendment No. 2 deletes the language ``fails to
meet'' from this provision.
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Maintenance Listing Standards
1. Amendments Regarding Securities Listed on Other Markets.
Currently, Rules 14, 15, 16, 17, and 22 of Article XXVIII establish
certain maintenance standards that Tier 1 and Tier II listed securities
must meet in order to continue to be listed on the Exchange. As
provided in the proposed rule change, if a security listed on the
Exchange is also listed on the NYSE, Amex (except for ECM securities)
\13\ or Nasdaq National Market, it shall not be required to meet
certain of the maintenance standards contained in the CHX rules, as
long as the security continues to be listed and has not been suspended
from trading on such other market.\14\ According to the CHX, the
adoption of the rule change will avoid a situation where the Exchange
might be forced to delist a security that fails certain maintenance
tests, when it continues to meet the maintenance requirements of one of
the three aforementioned stock markets. Nevertheless, as discussed
below, pursuant to Amendment No. 1, the CHX will retain independent
authority to delist a security, even if it continues to be listed on
the Amex, NYSE or Nasadq National Market.
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\13\ See note 8 supra.
\14\ The proposal would exempt from the Exchange's quantitative
maintenance standards securities that are also listed on the NYSE,
Amex, or Nasdaq National Market. The quantitative maintenance
standards govern, for example, net tangible assets, the number of
public beneficial shareholders, and the market value of an issuer's
shares publicly held. See Article XXVIII, Rule 14, Tier I
Maintenance Requirements for Common Stock; Rule 15, Tier I
Maintenance Requirements for Preferred Stock; Rule 16, Tier I
Maintenance Requirements for Bonds and Debentures; Rule 17, Tier I
Maintenance Requirements for Stock Warrants and Contingent Value
Rights; and Rule 22, Tier II Maintenance Standards. The Commission
notes that the proposed rule change would not provide an exemption
from the Exchange's corporate governance and disclosure requirements
for securities that maintain a listing on the CHX and are otherwise
listed on the NYSE, Amex, or Nasdaq National Market. See, Article
XXVIII, Rule 19, Tier I Corporate Governance and Disclosure
Standards; Rule 20, Tier I Voting Rights; and Rule 21, Tier II
Corporate Governance, Disclosure and Miscellaneous Requirements.
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To facilitate the CHX's efforts to independently determine if
dually listed issuers meet CHX listing standards, when they fail to
meet the standards of another market, Amendment No. 3 to the proposal
revises Article XXVIII, Rule 21 to create a new rule, Rule 21(r). Rule
21(r) requires dually listed issuers to notify the CHX promptly if,
during the time a CHX listed security is also listed on another market
that the listed security has fallen below the continued listing
requirements of such other market. Upon receipt of this notification,
the CHX has stated that it will immediately conduct an independent
review to determine if the issuer should continue to be listed on the
CHX.\15\
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\15\ Telephone conversation between Patricia Levy, Senior Vice
President and General Counsel, CHX, with Sharon Lawson and Sarrita
Cypress, SEC, Division of Market Regulation, September 28, 1998.
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As stated above, a CHX dually listed security that is delisted or
suspended from trading on the NYSE Amex, or Nasdaq National Market
would have to meet the CHX's maintenance standards in order to continue
trading on the CHX. In the event that an issuer is suspended from
trading on the NYSE, Amex, or Nasdaq National Market, the CHX will
confirm that the issuer wishes to maintain its listing on the CHX.
Thereafter, the CHX will make an independent determination as to
whether the issuer continues to meet the relevant requirements for
listing on the CHX. If the issuer does not meet the relevant
requirements, or if the issuer does not desire to maintain its listing,
the issue will be suspended from trading on the CHX immediately and the
CHX will take all appropriate actions to delist the security.
Further clarification of the CHX's independent authority to take
action with respect to dually listed securities is set forth in
Amendment No. 1. specifically, the amendment confirms
[[Page 54167]]
the Exchange's independent authority, pursuant to Article XXVIII, Rule
3 to suspend any security from dealings when the NYSE, Amex, or Nasdaq
National market suspends the same security from dealings regardless of
whether delisting procedures have been instituted.
2. New Rule 17A Maintenance Standards. Amendment No. 1 to the
proposal adopts a new provision, Rule 17A under Article XXVIII, which
establishes maintenance standards applicable to all Tier I issues.
Specifically, these provisions confirm the Exchange's authority to
delist Tier I securities if the Exchange deems such action to be
necessary to protect the interest of public investors. Exchange rules
currently contain similar protection with respect to the CHX's
authority to delist Tier II securities.\16\ By the terms of Amendment
No. 1 to the proposed rule change, the Exchange reserves the right to
delist the securities of any corporation, subject to SEC rules, which
engages in practices not in the public interest or whose assets have
been depleted to the extent that the company can no longer operate as a
going concern or whose securities have become so closely held that it
is no longer feasible to maintain a reasonable market in the issue.
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\16\ See CHX Rule 22(a) under Article XXVIII.
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New Rule 17A further states that the CHX reserves the right to
delist the securities of any corporation which has drastically changed
its corporate structure or its type of operation. Consistent with
Amendment No. 1 revisions to Rule 22(a) under Article XXVIII, Rule 17A
confirms the Exchange's authority to make an appraisal of, and
determine on an individual basis, the suitability for continued listing
of an issue in light of all pertinent facts. New Rule 17A states,
moreover, that the Exchange retains the authority to delist a security
even if it meets the CHX's enumerated criteria by virtue of an issue's
continued listing on the NYSE, Amex or Nasdaq National Market. The
Exchange notes that many factors will be considered in this connection,
including, but not limited to, abnormally low selling price or volume.
Amendment No. 2 to the proposal provides a further clarification of
the Exchange's authority to make an independent determination of the
continued suitability of Tier I securities listed on the CHX.
Specifically, Amendment No. 2 deletes language from Rule 17A that could
be interpreted to allow the Exchange to continue to list an issue that
fails to meet CHX listing maintenance requirements.\17\ This language
was deleted from the proposal to make it clear that CHX maintenance
standards can not be waived by the CHX in the exercise of its
independent authority to suspend or delist securities listed on the
Exchange. Accordingly, it reiterates the affirmative obligation of the
CHX to take appropriate action to suspend or delist securities that
fail to meet CHX Tier I listing maintenance standards.
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\17\ Amendment No. 1 states that, ``[T]he Exchange may also make
an appraisal of, and determine on an individual basis, the
suitability for continued listing of a issue in light of all
pertinent facts whenever it deems such action appropriate, even
though a security meets or fails to meet enumerated criteria * *
*.'' (Emphasis added). Amendment No. 2 deletes the language ``fails
to meet'' from this provision. Conforming amendments were also made
to Section 22(a). See note 12 supra.
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III. Discussion
The Commission finds that the proposed rule change is consistent
with section 6(b) of the Act.\18\ In particular, the Commission
believes the proposal is consistent with the Section 6(b)(5) \19\
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and in general, to protect investors and the public interest.\20\
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\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
\20\ In approving the rule change, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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The development and enforcement of adequate standards governing
initial and continued listing of securities on an exchange is of
critical importance to financial markets and the investing public.
Listing standards serve as a means for a self-regulatory organization
to screen issuers, and to provide listed status only to bona fide
companies with sufficient float, investor base and trading interest to
maintain fair and orderly markets. Once a security has been approved
for initial listing, maintenance criteria allow an exchange to monitor
the status and characteristics of that issue to ensure that it
continues to meet standards for market depth and liquidity.
The Commission believes the proposed rule change enhances the
ability of the Exchange to facilitate legitimate capital formation for
issuers while providing appropriate protection to public investors in
its markets. For example, the proposed rule change crates maintenance
standards for stock warrants listed on Tier II of the Exchange similar
to standards that now exist for Tier I warrants. Under these standards,
the common stock or security underlying the stock warrant must meet all
of the Tier II maintenance requirements as set forth in Article XXVIII,
Rule 22.\21\ This amendment fosters investor protection by providing
the Exchange with the authority to delist stock warrants where the
underlying security may lack certain characteristics, such as a
sufficient investor base or public float, while providing a market
place for warrants where the underlying securities have adequate depth
and liquidity to support exchange trading.\22\
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\21\ Under Section 22(b), issues will normally be considered for
delisting if publicly held shares, excluding officers, directors,
and other concentration, fall below 100,000 common shares or under
50,000 preferred shares. Issues will also be considered for
delisting if the stockholders drop below 500 for preferred and
common stock. As amended by this approval order, Section 22(c)
further provides that issues will be considered for delisting if the
company fails to maintain a net worth which is the greater of (i)
150% of the prior year's consolidated net loss or (ii) $500,000.
\22\ In discussions preceding the approval of the instant
filing, the CHX agreed to consider adopting additional standards to
govern CHX listed warrants. The CHX will consider, for example, the
appropriateness of establishing maintenance standards that provide
for a minimum number of public shareholders of warrants to maintain
continued listing on the CHX. Telephone conversation between
Patricia Levy, Senior Vice President and General Counsel, CHX, with
Sharon Lawson and Sarrita Cypress, SEC, Division of Market
Regulation, June 10, 1998.
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As described above, the proposal would also clarify that if the
Exchange chooses to list, under Tier I or Tier II, a security listed or
approved for listing within the past twelve months on the NYSE, the
Amex (except for ECM securities) or the Nasdaq National Market, the
issuer shall not be required to fulfill all of the requirements for an
original listing application, but rather an alternative list of
requirements. The Commission believes this rule change will provide the
Exchange greater flexibility in determining in an expedited manner
which securities warrant inclusion on the Exchange, without
compromising the benefits that the Exchange's listing process offers to
investors in ensuring that securities meet the listing standards.
The Commission notes, for example, that companies using the
alternative listing methods will have to provide a copy of the original
application filed with the other listed market. This should generally
contain much of the same information required by the CHX's listing
application. Further, a company using this listing method will be
required to submit its last 10-K and 10-Q and most recent proxy
statement. This will ensure that the CHX will have the
[[Page 54168]]
most updated financial information to analyze an issuer's suitability
for listing and that CHX will not be relying on stale information
submitted to the original marketplace. As noted above, the CHX has also
included a requirement that allows the Exchange to ask for any
additional information it deems appropriate to support the listing
application. Accordingly, to the extent the original application raises
questions or needs supplementation, the CHX will have the power to ask
for additional information. Finally, the Commission notes that these
changes adopt an alternative application procedure only for those
companies that have already gone through a recent listing process with
a primary market center (i.e., Nasdaq National Market Amex or NYSE). It
does not change the CHX's duty to continue to ensure that all listed
companies meet the applicable listing standards prior to listing.
With respect to the maintenance standards for securities listed on
the Exchange, the proposed rule change provides that if a security
listed on the CHX is also listed on the NYSE, Amex (except for ECM
securities) \23\ or Nasdaq National Market, and it continues to be
listed on such other market, it shall not be required to meet certain
of the maintenance standards contained in the Exchange's rules. The
Commission has carefully considered this provision of the proposed rule
change. While the provision raises certain concerns, the Commission
believes that the interests of investors are adequately protected
because of certain safeguards that are built into the rules.
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\23\ See not 8 supra.
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First, under the proposal as amended by the terms of Amendments No.
1 and No. 2, the CHX can only continue to list a security that fails
the quantitative maintenance standards if it continues to be listed and
has not been suspended from trading on the primary markets. If a dually
listed security is not required to meet the CHX's maintenance standards
by virtue of its trading on a primary market, and it is subsequently
suspended or delisted from trading on such market, the Exchange would
have to make an immediate and independent determinations as to whether
the issue meets maintenance standards and can continue to list on the
CHX. If it does not meet such standards, (or the issuer does not wish
to continue listing on the CHX) the CHX has stated that the issue will
be suspended from trading immediately and appropriate action will be
taken to delist the security. Accordingly, the amended proposal should
prevent issues that are clearly not meeting the quantitative listing
maintenance standards of a primary market or the CHX from continuing to
be traded on the CHX.
Further, the proposal, as amended, gives the Exchange specific
authority to delist a security based on all pertinent facts even though
the security continues to meet CHX listing standards, by, for example,
continued listing on the NYSE, Amex, or Nasdaq National Market. The
Commission notes that allowing the CHX to not apply its quantitative
maintenance standards to a security listed on either of the three
primary markets assumes, to a certain extent, that the primary market's
own quantitative listing standards are being met. While in most
instances we expect this to be the case, because compliance with
maintenance standards will be the province of another SRO, the
Commission believes it is extremely important that the CHX
independently have the ability to delist a security if it has concerns
about the issue or issuer. In this regard, the Commission expects the
CHX to continue to periodically monitor dually listed issues. If it
appears that there are concerns involving a listed company and that
company continues to trade on a primary market, we would expect CHX to
do a reasonable inquiry to ensure it should remain on CHX.\24\
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\24\ For example, the CHX's periodic review might include a
review of news reports regarding dually listed issuers.
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As discussed above, Amendment No. 3 to the proposal requires an
issuer of dually listed stock to notify the CHX if the issue falls
below the continued listing standard of another market. The Commission
believes this notification will provide the Exchange valuable
assistance in its efforts to monitor dually listed issues to ensure
compliance with listing maintenance standards.
Finally, we note that issuers of dually listed stocks will still
continue to have to separately comply with the qualitative and disclose
maintenance listing standards that exist under CHX rules to protect
investors and will not be exempted from such requirements by virtue of
trading on a primary market.\25\ Accordingly, the Commission believes
that although it is a very close question whether an issue listed on
CHX should not have to meet certain maintenance standards as long as it
continues to trade on a primary market, the protections discussed above
should help to ensure continued suitability of issues for trading on
the CHX.
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\25\ See note 14 supra for a listing of qualitative standards.
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The Commission finds good cause for approving Amendments No. 1, 2,
and 3 to the proposed rule change prior to the thirtieth day after the
date of publication of notice of filing thereof. The Commission
believes good cause exists to accelerate approval of Amendment No. 1 to
the proposal because the amendment makes significant clarifying changes
to the rule proposal and strengthens the Exchange's authority to
monitor and enforce the proposed revisions to its stock listing and
maintenance requirements that are set forth in the original proposal.
For example, in addition to the enumerated items identified in the
original filing, Amendment No. 1 provides the Exchange with the
authority to obtain any information it deems appropriate to determine
the eligibility for listing on the CHX for those securities that have
previously been listed on certain other markets. Further, critical to
protecting the interest of investors, Amendment No. 1 gives the
Exchange independently authority to delist or suspend a security that
was previously excepted from listing maintenance requirements based on
the security's listing on another exchange. The Commission believes,
moreover, that there is good cause to accelerate the approval of
Amendment No. 1 because it clarifies possible ambiguities regarding the
scope of the Exchange's authority to delist securities.
Amendment No. 1 gives the Exchange broad authority to delist Tier I
securities similar to that for Tier II securities. Based on the above,
the Commission believes the terms and conditions of Amendment No. 1
clarify possible ambiguities regarding the scope of the CHX's proposal,
as well as it provides crucial investor protection safeguards that are
necessary to implement the revisions to the CHX listing and maintenance
standards that are set forth in the proposal as originally filed.
The Commission believes good cause exists to accelerate the
approval of Amendments No. 2 to the proposal because Amendment No. 2
provides a crucial clarification of the Exchange's authority to make an
independent determination of the continued suitability of securities
listed on the CHX. Specifically, Amendment No 2 deletes language from
new Rule 17A and amended Rule 22(a) that could be interpreted to allow
the Exchange to continue to list an issue that fails to meet CHX
listing maintenance requirements. This language was deleted from the
proposal to make it clear that CHX maintenance standards are not
waivable.
Finally, good cause exists to accelerate the approval of Amendment
[[Page 54169]]
No. 3 to the proposal, because the amendment requires a dually listed
issuer to promptly notify the CHX if the issue falls below the
continued listing maintenance standards of another market. This
notification will in turn allow the CHX to ensure that the interests of
investors are protected because the CHX will conduct an immediate
independent determination of whether the issuer should continue to be
listed on the Exchange.
In granting accelerated approval for Amendments Nos. 1, 2, and 3,
the Commission notes that it did not receive any comments on the
original proposal, which was noticed for the full statutory period. In
addition, the amendments strengthen and clarify the CHX's original
proposal. Accordingly, for the reasons stated above, the Commission
finds that there is good cause, consistent with Sections 19(b) \26\ and
6(b)(5)( \27\ of the Act, to accelerate approval of Amendments Nos. 1,
2 and 3.
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\26\ 15 U.S.C. 78s(b).
\27\ 15 U.S.C. 78f(b)(5).
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Interested persons are invited to submit written data, views, and
arguments concerning Amendments No. 1, 2, and 3 including whether the
amendments are consistent with the Act. Persons making written
submissions should file six copies thereof with the 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 5 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 also will be available
for inspection and copying at the principle office of the CHX. All
submissions should refer to File No. SR-CHX-98-07 and should be
submitted by October 29, 1998.
IV. Conclusion
For the reasons stated above, the Commission believes the CHX's
amended proposal is consistent with the Act and, therefore, has
determined to approve it. The amended proposal provides the Exchange
with greater flexibility in listing and maintenance standards for CHX
listed securities, while continuing to ensure the protection of
investors and the public interest.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\28\ that the amended proposed rule change, SR-CHX-98-07, be and
hereby is approved.
\28\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-26997 Filed 10-7-98; 8:45 am]
BILLING CODE 8010-01-M
