[Federal Register Volume 62, Number 136 (Wednesday, July 16, 1997)] [Notices] [Pages 38180-38182] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 97-18611] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-38825; File No. SR-Phlx-97-29] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Amendments to Phlx's Tier I Listing and Maintenance Standards July 9, 1997. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ [[Page 38181]] notice is hereby given that on June 25, 1997, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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 Exchange Rules 803 and 810 regarding Tier I security listing and maintenance standards in order to: (a) add a term limit and minimum distribution/aggregate market value listing requirement for index and currency warrants in Rule 803(e); (b) increase the pre-tax income listing requirement for ``other securities'' from $100,000 in three of the four prior fiscal years'' to ``$750,000 in its last fiscal year or in two of its last three fiscal years'' in Rule 803(f); and (c) add maintenance standards for bonds, notes and debentures in Rule 810(a). The text of the proposed rule change is available at the Office of the Secretary, Phlx, and at the Commission. 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 In October, 1996, the National Securities Markets Improvement Act of 1996 \3\ was signed into law. Among other provisions, the law amended Section 18 of the Securities Act of 1933 (``Securities Act'') \4\ to provide for exclusive federal registration (and preemption of state blue sky laws) for ``covered securities'' which are those securities listed on the New York Stock Exchange (``NYSE''), American Stock Exchange (``Amex'') or the National Market System of the Nasdaq Stock Market (``Nasdaq/NMS'') or on any other national securities exchange designated by the Commission to have substantially similar listing standards to those markets. On March 31, 1997, the Phlx petitioned the Commission to adopt a rule that would find Phlx Tier I listing standards to be substantially similar to those of the NYSE, Amex or Nasdaq/NMS and therefore entitle its listed Tier I securities to be considered covered securities. --------------------------------------------------------------------------- \3\ Pub. L. No. 104-290, Stat. 3416 (1996). \4\ 15 U..C. 77s. --------------------------------------------------------------------------- The Commission recently proposed Rule 146(b) under Section 19 of the Securities Act which would designate certain securities as ``covered securities'' for purposes of this federal registration scheme.\5\ In order for the Commission to designate the Phlx's Tier I securities as covered securities, it must first determine that its Tier I listing and maintenance standards are substantially similar to those of either the NYSE, Amex or Nasdaq/NMS. The Commission has noted that it preliminarily believes that the Phlx's Tier I standards differ in three areas from those of the NYSE, Amex, or Nasdaq/NMS. Pursuant to this filing, the Phlx is amending its rules to make them substantially similar to those of the Amex in those three specified areas as set forth below. --------------------------------------------------------------------------- \5\ Securities Exchange Act Release No. 38728, Securities Act Release No. 7422 (June 10, 1997). --------------------------------------------------------------------------- First, Phlx Rule 803(e) would be amended to adopt additional listing standards for index warrants, currency warrants and currency index warrants. New subsection (2) would require that the warrants have a term of between one and five years from the date of issuance. New subsection (3) would impose a minimum public distribution and market value requirement of 1,000,000 warrants with at least 400 public warrant holders and a minimum aggregate market value of $4,000,000.\6\ --------------------------------------------------------------------------- \6\ These provisions are similar to Sections 106(b) and (c) of the Amex Company Guide. --------------------------------------------------------------------------- Second, the pre-tax income requirement for ``other securities'' in Rule 803(f)(2) would be increased from ``$100,000 in three of the four prior fiscal years'' to ``$750,000 in its last fiscal year or in two of its last three fiscal years.'' \7\ Other securities are hybrid securities which have features common to both equity and debt securities, yet do not fit within the traditional definitions of either. --------------------------------------------------------------------------- \7\ This provision is similar to Section 107 and, by reference, Section 101(b) of the Amex Company Guide. --------------------------------------------------------------------------- Finally, Exchange Rule 810(a) which contains the maintenance standards for Tier I securities will be amended to add subsection (5) to add maintenance standards for bonds, notes and debentures. The rule will require that debt securities maintain an aggregate market value or principal amount of the bonds that are publicly held of $400,000 and the issuer to be able to meet its obligations in the listed debt securities. Also, for any debt security convertible into a listed equity security, the debt security will be reviewed when the underlying equity security is delisted and will be delisted when the underlying equity security is no longer subject to real-time trade reporting in the United States. In addition, if common stock is delisted for violation of any of the corporate governance criteria in Exchange Rules 812 through 899, the Exchange will also delist any listed debt securities convertible into that common stock.\8\ --------------------------------------------------------------------------- \8\ These provisions are similar to Section 1003(b)(iii) and (e) of the Amex Company Guide. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act \9\ in general, and in particular, with Section 6(b)(5),\10\ in that it is designed to promote just and equitable principles of trade, prevent fraudulent and manipulative acts and practices, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, as well as to protect investors and the public interest by assuring that securities listed on the Phlx pursuant to its Tier I listing standards, which will no longer be subject to state blue sky laws, will not be any less onerous than similar securities listed on the NYSE, Amex or Nasdaq/NMS. --------------------------------------------------------------------------- \9\ 15 U.S.C. Sec. 78f. \10\ 15 U.S.C. Sec. 78f(b). --------------------------------------------------------------------------- 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. [[Page 38182]] 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 longer 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 of (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 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. Sec. 552, will be available for inspection and copying at the Commission's Public Reference Room. 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-Phlx-97-29 and should be submitted by August 6, 1997. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\11\ --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 97-18611 Filed 7-15-97; 8:45 am] BILLING CODE 8010-01-M