[Federal Register Volume 61, Number 143 (Wednesday, July 24, 1996)]
[Notices]
[Pages 38505-38506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18798]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37453; File No. SR-PHLX-96-16]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to Listing 
Standards

July 18, 1996.
    On May 20, 1996, the Philadelphia Stock Exchange, Inc. (``PHLX'' 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 revise a drafting error that 
occurred in PHLX Rule 804(2) pertaining to listing criteria.\3\
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1996).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 34235 (June 17, 
1994), 59 FR 32736 (June 24, 1994) (File No. SR-PHLX-93-31) (order 
approving proposed rule change establishing new listing and 
maintenance standards).
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 37279 (June 5, 1996), 61 FR 29782 (June 12, 
1996). No comments were received on the proposal.
    Currently, PHLX Rules 803 through 805 describe a two-tier structure 
for listing common stock, preferred stock, bonds and debentures, 
various types of warrants, contingent value rights, and other 
securities.\4\ For Tier I securities, two alternative minimum listing 
standards are described. PHLX Rule 803 sets forth the first alternative 
(``Alternative 1''), while PHLX Rule 804 sets forth the second 
alternative (``Alternative 2''), which is geared toward mid-sized and 
research and development companies. Both rules are based substantially 
upon the Memorandum of Understanding (``MOU'') on the uniform model 
marketplace exemption that had been approved by the National 
Association of Securities Dealers, Inc. (``NASD'') and the North 
American Securities Administrators Association, Inc. (``NASAA'').\5\
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    \4\ Id.
    \5\ See Securities Act Release No. 6810 (Dec. 6, 1988) 
(publicizing the release of the MOU).
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    The current PHLX Rule 804(2) sets forth a general requirement that 
the public float for issuers is 1,000,000 shares, with an additional 
shareholder requirement that the issuer have at least 800 public 
shareholders if the issuer has between 500,000 and 1,000,000 shares 
publicly held, or at least 400 public shareholders if the issuer has 
either over (i) 1,000,000 shares publicly held, or (ii) over 500,000 
shares publicly held and average daily trading volume in excess of 
2,000 shares per day for a six-month period preceding the date of 
application.
    The Exchange proposes to amend this rule to provide that issuers 
seeking to list pursuant to Rule 804 must show that there are at least 
1,000,000 shares publicly held and at least 400 public shareholders in 
the security. The Exchange states that the current Rule 804 incorrectly 
incorporated some of the language from the public float/public 
shareholder requirements in Alternative 1 for Tier I securities set 
forth in Rule 803.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b).\6\ In particular, 
the Commission believes the proposal is consistent with the Section 
6(b)(5) requirements that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest; and are not designed to permit 
unfair discrimination between issuers.
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    \6\ 15 U.S.C. Sec. 78f(b).
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    The Commission believes that the proposal is consistent with the 
purposes of the Act in that the amended Rule 804(2) will reflect the 
original intent of the Exchange and the MOU. In addition, the amendment 
to the rule is not a substantive change. Rule 804(2) sets forth a 
requirement that the public float for Tier I issuers under Alternative 
2 must be at least 1,000,000 shares.\7\ The holder requirement in 
current Rule 804(2) states that an issuer listing under Alternative 2 
must have either (1) a minimum of 800 public shareholders if the issuer 
has between 500,000 and 1,000,000 shares, or (2) a minimum of 400 
public shareholders if the issuer has either (i) over 1,000,000 shares 
publicly held or (ii) over 500,000 shares publicly held and average 
daily volume in excess of 2,000 shares per day for a six-month period 
preceding the date of application. Because the minimum public float 
requirement for companies listing under this alternative is 1,000,000 
shares, an issuer can never be eligible to have less public float by 
meeting the higher 800 public shareholder requirement or the trading

[[Page 38506]]

volume test noted above. Accordingly, the changes in PHLX Rule 804(2) 
will eliminate any confusion about the minimum holder and public float 
requirements and will, as originally intended, make clear that the 
minimum listing requirement under this alternative is at least 
1,000,000 shares publicly held with at least 400 public shareholders.
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    \7\ As originally drafted, Rule 804(2) states that the public 
float of an issuer must be ``1,000,000 shares.'' The Exchange 
clarified the public float requirement by stating in amended Rule 
804(2) that the public float must be ``at least 1,000,000 shares.''
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-PHLX-96-16) is approved.

    \8\ 15 U.S.C. Sec. 78s(b)(2) (1996).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-18798 Filed 7-23-96; 8:45 am]
BILLING CODE 8010-01-M