[Federal Register Volume 64, Number 237 (Friday, December 10, 1999)]
[Notices]
[Pages 69304-69305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32065]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42198; File No. SR-CHX-99-17]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to Voluntary 
Delisting Requirements

December 2, 1999.

I. Introduction

    On September 24, 1999, the Chicago Stock Exchange, Inc. (``CHX'' 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 (``Exchange Act'' or ``Act'') \1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change to amend Article 
XXVIII, Rule 4 of the Exchange's rules to modify the prerequisites to 
voluntarily delist from the Exchange.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 1240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on October 20, 1999.\3\ No comments were received on the 
proposal. This order approves the proposal.
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    \3\ See Exchange Act Release No. 42001 (October 13, 1999), 64 FR 
56553.
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II. Description

    The CHX proposes to amend Article XXVIII, Rule 4 of its rules to 
modify the prerequisites to voluntary delisting from the Exchange. 
Specifically, the proposed rule change would delete the requirement 
that an issuer to delist first obtain shareholder approval, replacing 
the deleted provision with a provision requiring that the issuer first 
file with the Exchange a certified copy of its board resolution 
authorizing delisting.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of Section 6 of the Act and the rules and 
regulations thereunder applicable to a national securities exchange. In 
particular, the Commission believes that the proposed rule change is 
consistent with and furthers the objectives of Sections 6(b)(5) and 
6(b)(8) of the Act.\4\ Section 6(b)(5) of the Act requires, among other 
things, that the rules of an exchange be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market, and to protect investors and the public 
interest.\5\ Section 6(b)(5) also requires that the rules of an 
exchange must not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.\6\ In addition, Section 
6(b)(8)of the Act prohibits the rules of an exchange from imposing any 
burden on competition not necessary or appropriate in furtherance of 
the purpose of the statute.\7\
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    \4\ 15 U.S.C. 78f(b)(5) and(8).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
    \7\ 15 U.S.C. 78f(b)(8). In approving this rule change, the 
Commission notes that it has considered the proposal's impact on 
efficiency, competition, and capital formation. Id. at 78c(f).
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    The CHX proposes to replace the current procedures governing 
voluntary delisting from the Exchange by an issuer.\8\ In place of the 
current share holder approval requirement, the Exchange would now 
require that the issuer file with the Exchange a certified copy of a 
resolution adopted by the board of directors of the issuer, authorizing 
the withdrawal from listing and registration. The voluntary delisting 
procedures proposed by the CHX represent a significant and positive 
change over the current delisting process. In particular, the proposed 
voluntary delisting rule is considerably less burdensome than the 
existing shareholder approval requirement.
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    \8\ In a July 21, 1999 letter, the staff requested the CHX to 
reexamine its voluntary delisting procedures, especially in light of 
the recent approval of amendments to the New York Stock Exchange's 
(``NYSE'') Rule 500, removing a number of restrictions on voluntary 
delistings. See Letter to David W. Fox, chairman, CHX, from Annette 
L. Nazareth, Director, Division of Market Regulation, Commission, 
dated July 21, 1999.
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    When shareholder approval requirements were first adopted, they 
were typically intended to protect shareholders at a time when an 
issuer's decision to delist from an exchange generally resulted in the 
loss of a public market for a security. With the development of 
established securities markets and changes in the competitive 
environment, many of the concerns that gave rise to the adoption of 
restrictions on voluntary delisting were rendered obsolete.
    Over the last several years, the Commission and its staff have 
repeatedly expressed to the stock exchanges their concerns regarding 
the potentially anti-competitive effects of restrictions on voluntary 
delistings. The Commission's regulatory concerns centered upon its 
belief that such restrictions created nearly insurmountable obstacles 
for listed companies desiring to delist their securities from an 
exchange, and as such, impeded competition between securities markets. 
The Commission believes that the CHX's proposal should help to 
eliminate this impediment to intermarket competition.
    The Commission also notes the CHX's proposal brings its voluntary 
delisting procedures in line with those of the Pacific Exchange, Inc. 
(``PCX''), the American Stock Exchange LLC (``Amex''), and the 
Philadelphia Stock Exchange, Inc. (``Phlx'').\9\ The PCX, Amex and Phlx 
all require that an issuer submit a certified copy of a resolution 
adopted by the issuer's board of directors authorizing the withdrawal 
from listing and a statement detailing the reasons for the proposed 
withdrawal.\10\ The Commission further

[[Page 69305]]

notes that it recently approved a proposed rule change by the NYSE, 
amending its voluntary delisting procedures.\11\
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    \9\ See PCX Rule 3.4; Amex Rule 18; and Phlx Rule 809.
    \10\ In addition to requiring a detailed statement detailing the 
reasons for the proposed withdrawal, Amex retains the discretion to 
determine whether the reasons advanced by the issuer warrant 
withdrawal of the listing. In addition, Amex may require the issuer 
to send to all registered holders of the security at least fifteen 
days prior to the filing of the delisting application with the 
Commission a complete, clear and definite statement of the reasons 
and supporting facts for the withdrawal. See Amex Rule 18. PCX and 
Phlx also retain the discretion to require the issuer to submit the 
proposed withdrawal to the shareholders for a vote provided the 
security is not also listed on another exchange. See PCX Rule 3.4 
and Phlx Rule 809.
    \11\ The NYSE's rule requires approval of the issuer's board of 
directors according to applicable state law on majority votes, as 
well as approval by the issuer's audit committee. In addition, a 
U.S. issuer must notify the thirty-five largest record holders. 
Foreign issuers must give notice to the thirty-five largest U.S. 
record holders. The issuer must also issue a press release. Finally, 
there is a minimum waiting period before a security may be delisted 
of twenty business days after the later of the date the notice is 
sent or the press release is issued, and a maximum period of sixty 
business days. See NYSE Rule 500. Although the NYSE's proposal did 
not ease voluntary delisting restrictions to the extent that the 
CHX's proposal does, it is indicative of the Commission's belief 
that impediments to competition in the context of voluntary 
delisting standards must be eased, if not eliminated.
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    The Commission recognizes the significance of an issuer's decision 
regarding the appropriate market in which to list its securities. The 
Commission believes that issuers should carefully consider the best 
interests of their shareholders in both listing and delisting 
decisions, and that the CHX's proposal should ensure that due 
consideration is given to a decision regarding whether to delist from 
the Exchange. The Commission believes that the proposed rule change 
eliminates an onerous restriction on voluntary delistings. As a result, 
the Commission believes that the CHX's proposed rule change is 
consistent with the provisions of the Act.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-CHX-99-17) be, and hereby 
is, approved.

    \12\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-32065 Filed 12-9-99; 8:45 am]
BILLING CODE 8010-01-M