[Congressional Record Volume 140, Number 103 (Monday, August 1, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 1, 1994]


 
                UNLISTED TRADING PRIVILEGES ACT OF 1994

  Mr. MARKEY. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4535) to amend the Securities Exchange Act of 1934 with 
respect to the extension of unlisted trading privileges for corporate 
securities, and for other purposes.
  The Clerk read as follows:

                               H.R. 4535

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Unlisted Trading Privileges 
     Act of 1994''.

     SEC. 2. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

       (a) Unlisted Trading Privileges.--Section 12(f) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78l(f)) is amended 
     by striking paragraphs (1) and (2) and inserting the 
     following:
       ``(f)(1)(A) Notwithstanding the preceding subsections of 
     this section, any national securities exchange, in accordance 
     with the requirements of this subsection and the rules 
     hereunder, may extend unlisted trading privileges to--
       ``(i) any security that is listed and registered on a 
     national securities exchange, subject to subparagraph (B); 
     and
       ``(ii) any security that is otherwise registered pursuant 
     to this section, or that would be required to be so 
     registered except for the exemption from registration 
     provided in subparagraph (B) or (G) of subsection (g)(2), 
     subject to subparagraph (E) of this paragraph.
       ``(B) A national securities exchange may not extend 
     unlisted trading privileges to a security described in 
     subparagraph (A)(i) during such interval, if any, after the 
     commencement of an initial public offering of such security, 
     as is or may be required pursuant to subparagraph (C).
       ``(C) Not later than 180 days after the date of enactment 
     of the Unlisted Trading Privileges Act of 1994, the 
     Commission shall prescribe, by rule or regulation, the 
     duration of the interval referred to in subparagraph (B), if 
     any, as the Commission determines to be necessary or 
     appropriate for the maintenance of fair and orderly markets, 
     the protection of investors and the public interest, or 
     otherwise in furtherance of the purposes of this title. Until 
     the earlier of the effective date of such rule or regulation 
     or 240 days after such date of enactment, such interval shall 
     begin at the opening of trading on the day on which such 
     security commences trading on the national securities 
     exchange with which such security is registered and end at 
     the conclusion of the next day of trading.
       ``(D) The Commission may prescribe, by rule or regulation 
     such additional procedures or requirements for extending 
     unlisted trading privileges to any security as the Commission 
     deems necessary or appropriate for the maintenance of fair 
     and orderly markets, the protection of investors and the 
     public interest, or otherwise in furtherance of the purposes 
     of this title.
       ``(E) No extension of unlisted trading privileges to 
     securities described in subparagraph (A)(ii) may occur except 
     pursuant to a rule, regulation, or order of the Commission 
     approving such extension or extensions. In promulgating such 
     rule or regulation or in issuing such order, the Commission--
       ``(i) shall find that such extension or extensions of 
     unlisted trading privileges is consistent with the 
     maintenance of fair and orderly markets, the protection of 
     investors and the public interest, and otherwise in 
     furtherance of the purposes of this title;
       ``(ii) shall take account of the public trading activity in 
     such securities, the character of such trading, the impact of 
     such extension on the existing markets for such securities, 
     and the desirability of removing impediments to and the 
     progress that has been made toward the development of a 
     national market system; and
       ``(iii) shall not permit a national securities exchange to 
     extend unlisted trading privileges to such securities if any 
     rule of such national securities exchange would unreasonably 
     impair the ability of a dealer to solicit or effect 
     transactions in such securities for its own account, or would 
     unreasonably restrict competition among dealers in such 
     securities or between such dealers acting in the capacity of 
     market makers who are specialists and such dealers who are 
     not specialists.
       ``(F) An exchange may continue to extend unlisted trading 
     privileges in accordance with this paragraph only if the 
     exchange and the subject security continue to satisfy the 
     requirements for eligibility under this paragraph, including 
     any rules and regulations issued by the Commission pursuant 
     to this paragraph, except that unlisted trading privileges 
     may continue with regard to securities which had been 
     admitted on such exchange prior to July 1, 1964, 
     notwithstanding the failure to satisfy such requirements. If 
     unlisted trading privileges in a security are discontinued 
     pursuant to this subparagraph, the exchange shall cease 
     trading in that security, unless the exchange and the subject 
     security thereafter satisfy the requirements of this 
     paragraph and the rules issued hereunder.
       ``(G) For purposes of this paragraph--
       ``(i) a security is the subject of an initial public 
     offering if--
       ``(I) the offering of the subject security is registered 
     under the Securities Act of 1933; and
       ``(II) the issuer of the security, immediately prior to 
     filing the registration statement with respect to the 
     offering, was not subject to the reporting requirements of 
     section 13 or 15(d) of this title; and
       ``(ii) an initial public offering of such security 
     commences at the opening of trading on the day on which such 
     security commences trading on the national securities 
     exchange with which such security is registered.
       ``(2)(A) At any time within 60 days of commencement of 
     trading on an exchange of a security pursuant to unlisted 
     trading privileges, the Commission may summarily suspend such 
     unlisted trading privileges on the exchange. Such suspension 
     shall not be reviewable under section 25 of this title and 
     shall not be deemed to be a final agency action for purposes 
     of section 704 of title 5, United States Code. Upon such 
     suspension--
       ``(i) the exchange shall cease trading in the security by 
     the close of business on the date of such suspension, or at 
     such time as the Commission may prescribe by rule or order 
     for the maintenance of fair and orderly markets, the 
     protection of investors and the public interest, or otherwise 
     in furtherance of the purposes of this title; and
       ``(ii) if the exchange seeks to extend unlisted trading 
     privileges to the security, the exchange shall file an 
     application to reinstate its ability to do so with the 
     Commission pursuant to such procedures as the Commission may 
     prescribe by rule or order for the maintenance of fair and 
     orderly markets, the protection of investors and the public 
     interest, or otherwise in furtherance of the purposes of this 
     title.
       ``(B) A suspension under subparagraph (A) shall remain in 
     effect until the Commission, by order, grants approval of an 
     application to reinstate, as described in subparagraph 
     (A)(ii).
       ``(C) A suspension under subparagraph (A) shall not affect 
     the validity or force of an extension of unlisted trading 
     privileges in effect prior to such suspension.
       ``(D) The Commission shall not approve an application by a 
     national securities exchange to reinstate its ability to 
     extend unlisted trading privileges to a security unless the 
     Commission finds, after notice and opportunity for hearing, 
     that the extension of unlisted trading privileges pursuant to 
     such application is consistent with the maintenance of fair 
     and orderly markets, the protection of investors and the 
     public interest, and otherwise in furtherance of the purposes 
     of this title. If the application is made to reinstate 
     unlisted trading privileges to a security described in 
     paragraph (1)(A)(ii), the Commission--
       ``(i) shall take account of the public trading activity in 
     such security, the character of such trading, the impact of 
     such extension on the existing markets for such a security, 
     and the desirability of removing impediments to and the 
     progress that has been made toward the development of a 
     national market system; and
       ``(ii) shall not grant any such application if any rule of 
     the national securities exchange making application under 
     this subsection would unreasonably impair the ability of a 
     dealer to solicit or effect transactions in such security for 
     its own account, or would unreasonably restrict competition 
     among dealers in such security or between such dealers acting 
     in the capacity of marketmakers who are specialists and such 
     dealers who are not specialists.''.
       (b) Conforming Amendment.--Section 12(f)(3) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78l(f)(3)) is 
     amended by striking ``The Commission'' and inserting 
     ``Notwithstanding paragraph (2), the Commission''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Massachusetts [Mr. Markey] will be recognized for 20 minutes, and the 
gentleman from Texas [Mr. Fields] will be recognized for 20 minutes.
  The Chair recognizes the gentleman from Massachusetts [Mr. Markey].
  Mr. MARKEY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, today the House is taking up legislation to streamline 
and make our Nation's stock markets more competitive by extending 
unlisted trading privileges to the regional stock exchanges for most 
registered securities as soon as they become listed and registered on 
another exchange.
  I am pleased to join with the distinguished gentleman from Oregon 
[Mr. Wyden], who is the lead sponsor on this legislation, along with 
the gentleman from Michigan [Mr. Dingell], the chairman, the 
gentlewoman from Illinois [Mrs. Collins], the gentleman from Oklahoma 
[Mr. Synar], the gentleman from Tennessee [Mr. Cooper], the gentleman 
from Illinois [Mr. Hastert], the gentlewoman from Pennsylvania [Ms. 
Margolies-Mezvinsky], the gentleman from New Mexico [Mr. Richardson], 
and the gentleman from California [Mr. Moorhead], in cosponsoring this 
important piece of legislation.
  This bill eliminates an anachronistic provision of the Securities 
Exchange Act of 1934 which requires regional stock exchanges, such as 
the Boston Stock Exchange, to receive Securities Exchange Commission 
approval before they can trade stocks listed on the New York or the 
American Stock Exchange.
  The Securities and Exchange Commission routinely approves all 
requests by the regional exchanges for unlisted trading privileges. 
Last year, for example, the Commission reported that it approved over 
1,600 exchange requests for UTP. No UTP requests have actually been 
denied since 1934, and during the last 10 years, virtually no comments 
have been submitted to the SEC on a UTP application.
  At the same time, processing the paperwork involved in a UTP 
application can result in delays of up to 60 days before the regional 
exchanges actually can initiate trading in these listed securities.
  In contrast, the stock brokerage firms that trade New York Stock 
Exchange-listed stocks in so-called over-the-counter third market, are 
subject to no comparable requirement to obtain SEC approval prior to 
trading the exact same securities. As a result, these firms can begin 
trading such stocks immediately upon their listing in the primary 
market.
  H.R. 4535 will eliminate this regulatory disparity. It will permit 
the regional exchanges to trade all listed existing securities without 
having to receive prior SEC approval. At the same time, it will empower 
the SEC to undertake a rulemaking with respect to the granting of 
unlisted trading privileges in any initial public offering of 
securities in a company approved for listing on one of the primary 
exchanges.
  On June 22, 1994, the Subcommittee on Telecommunications and Finance 
heard from representatives of the SEC, the New York Stock Exchange, the 
American Stock Exchange, the regional stock exchanges, and the NASD, 
and all of the witnesses testified that they strongly support H.R. 4535 
as a fair and equitable compromise that will benefit consumers by 
increasing competition amongst our Nation's stock markets.
  I want to again congratulate the gentleman from Oregon [Mr. Wyden] on 
this legislation, and I wanted to thank the gentleman from Texas [Mr. 
Fields], the ranking minority member of the committee. We have tried to 
work on legislation here in a way that can very expeditiously bring 
more competition and better access for consumers to these important 
security marketplace products.
  Mr. Speaker, I just once again want to thank the gentleman from Texas 
[Mr. Fields], and at this point reserve the balance of my time.
  Mr. FIELDS of Texas. Mr. Speaker, I yield myself such time as I may 
consume.
  Let me begin on a note that the chairman just closed on, because I, 
too, appreciate the way in which the chairman has conducted not only 
the hearings that we have had on this particular issue, but the markup 
and working with all parties interested in developing good legislation.
  Mr. Speaker, H.R. 4535 lays the foundation for removing unnecessary 
regulatory delays that inhibit market competition with respect to 
unlisted trading privileges.
  In 1993 alone, the SEC processed over 1,600 exchange requests for 
unlisted trading privileges. The Commission tells us that no only are 
comments on UTP applications rare, virtually no comments have been 
submitted on any application in over 10 years.
  By enacting H.R. 4535, we authorize the SEC to adopt rules that will 
provide for a minimum time period, or no time period at all, before a 
regional exchange can begin trading a stock listed on a primary 
exchange. By eliminating the application and approval process, we will 
free up valuable SEC personnel and financial resources that are 
currently being wasted on the UTP application review function.
  I note that next year will mark the 20th anniversary of the 1975 
amendments to the securities laws. It is appropriate that we review the 
progress that has been made to date, and determine what remains to be 
done to link our securities markets. The intent of Congress remains 
unchanged from what it was in 1975. We must continue our comprehensive 
legislative review of the securities laws to ensure that our markets 
continue to provide additional investor protection, to remove barriers 
to competition, and to attract the investment business of the world.
  I want to commend the chairman of the Energy and Commerce Committee, 
John Dingell, and the ranking Republican, Carlos Moorhead, for their 
leadership on this issue. I also want to commend Subcommittee Chairman 
Ed Markey, and Congressman Ron Wyden for their work on the legislation. 
I support H.R. 4535, and I urge its adoption.
  Mr. Speaker, I reserve the balance of my time.
  Mr. MARKEY. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Oregon [Mr. Wyden].
  (Mr. WYDEN asked and was given permission to revise and extend his 
remarks.)
  Mr. WYDEN. Mr. Speaker, I rise in support of the legislation.
  Mr. Speaker, let me begin first by thanking the gentleman from 
Massachusetts [Mr. Markey], the chairman of the subcommittee. He has 
been extraordinarily patient in working on this legislation with me, 
with the gentleman from Michigan [Mr. Dingell], the chairman, with our 
good friend, and the gentleman from Texas [Mr. Fields], for many years. 
We have now fashioned it so that I know of no opposition whatsoever. I 
think this is another example of what I would call the Markey-Fields 
Midas touch that they have brought to handling these regulatory 
matters.
  The fact of the matter is, as both the gentleman from Massachusetts 
[Mr. Markey], the subcommittee chairman, and the gentleman from Texas 
[Mr. Fields] have really touched on, what the subcommittee is really 
about doing is eliminating some of these regulatory dinosaurs that are 
outdated, antiquated, bureaucratic hoops that are limiting competition 
in the securities marketplace. By going after this one in particular, 
we are in a position to give consumers greater choice and investors 
better prices for their investment options.
  The bill does remove antiquated rules that require the Securities and 
Exchange Commission to conduct a lengthy application notice and 
approval process before a regional exchange can trade stocks listed on 
another exchange. This process currently takes 45 to 60 days, and as 
far as I can tell, in recent years this requirement has done absolutely 
nothing except heap extra administrative costs on the Securities and 
Exchange Commission.
  So today, by eliminating this barrier, we seek to further promote the 
development of the intermarket trading system, look to the days when 
consolidated tape and pervasive computerization of the securities 
business are a reality, and there is no reason in my view to limit 
competition, given where we are headed through these outdated unlisted 
trading privilege regulations.
  In my view, this legislation is common sense deregulation. It is 
going to increase competition, improve prices for consumers, and reduce 
costs for the Government.
  Mr. Speaker, the hearing on this legislation, as the gentleman from 
Massachusetts [Mr. Markey], the chairman, and the gentleman from Texas 
[Mr. Fields] have noted, indicates that virtually nothing since the 
early thirties suggests that there are any problems with going forward 
with this reform.

                              {time}  1240

  I would also add that at this hearing I submitted information drawn 
from the trading of actual initial public offerings that showed that 
unless the regional exchanges can trade on the first day of trading, it 
is unlikely that consumers are going to reap the benefits of 
competition and lower prices.
  The information that I submitted at that hearing indicates that on 
average the trading volume on the first day of trading was over 11 
times higher than on the third day, over 26 times higher than on the 
6th day and over 60 times higher than on the 60th day. Moreover, 
trading patterns by brokers are set in a given stock almost 
immediately. The record that we accumulated from these initial public 
offerings shows that even after the regional exchanges received 
unlisted trading privileges, their market share was generally stuck 
around 1 or 2 percent, while the share on the New York Stock Exchange 
hardly ever fell below 95 percent.
  The bottom line is, if the regional exchanges do not have the 
opportunity to do this trading the first day, their ability to compete 
will always be limited. If we limit the competition, consumers and 
investors do not have the best opportunity to receive the lowest prices 
possible. We do not think that is in the public interest. That is why 
we are passing this legislation today.
  Mr. Speaker, let me conclude, again, by expressing my thanks to the 
gentleman from Massachusetts [Mr. Markey] the gentleman from Texas, 
both of them are a pleasure to work with on these and other matters. I 
am especially pleased that this could be a real benefit to the small 
businesses of our country.
  Mr. FIELDS of Texas. Mr. Speaker, will the gentleman yield?
  Mr. WYDEN. I yield to the gentleman from Texas.
  Mr. FIELDS of Texas. I just want to point out to the House and 
particularly my side of the aisle that the gentleman from Oregon is 
being overly humble in regard to himself. It was the gentleman from 
Oregon who took this particular concept from Market 2000 and fostered 
this particular piece of legislation. I think it is important for the 
House to know who was really the inspiration behind what I consider to 
be a very good piece of legislation.
  Mr. WYDEN. I thank my friend for his kind remarks. He is gracious as 
always. I think we know, with the gentleman from Massachusetts [Mr. 
Markey] and himself, we operate in a bipartisan way and this has been a 
team effort. And it has been great to work with both of them and also 
our ranking Republican, the gentleman from California [Mr. Moorhead], 
and the gentleman from Michigan [Mr. Dingell].
  Mr. FIELDS of Texas. Mr. Speaker, I yield such time as he may consume 
to the gentleman from California [Mr. Moorhead], the senior Republican 
on the Committee on Energy and Commerce.
  Mr. MOORHEAD. Mr. Speaker, H.R. 4535 is the most recent bill the 
Energy and Commerce Committee has produced in a series that serves to 
modernize the regulation and future structure of the securities 
markets.
  H.R. 4535 will require the Securities and Exchange Commission to act 
within months of the bill being signed into law to address the process 
governing the granting of unlisted trading privileges to the regional 
stock exchanges. The commission will be required to engage in 
rulemaking to modernize these rules to ensure that monopolies are not 
being protected and that competition, not regulation, determines where 
stocks will trade.
  The bill is the result of a bipartisan effort in both Houses of 
Congress, and I particularly want to commend subcommittee chairman 
Edward Markey and Jack Fields, the ranking Republican member of the 
Telecommunications and Finance Subcommittee, and chairman John Dingell 
of the Full Committee for their leadership in this matter.
  Mr. MARKEY. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  Mr. FIELDS of Texas. Mr. Speaker, I have no further requests for 
time, and I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Sangmeister). The question is on the 
motion offered by the gentleman from Massachusetts [Mr. Markey] that 
the House suspend the rules and pass the bill, H.R. 4535.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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