[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