[Federal Register Volume 71, Number 81 (Thursday, April 27, 2006)]
[Notices]
[Pages 24876-24878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-6318]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53686; File No. SR-CHX-2005-27]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Order Granting Approval of a Proposed Rule Change and Amendment Nos. 1, 
2, and 3 To Amend Exchange Delisting Rules To Conform to Recent 
Amendments to Commission Rules Regarding Removal From Listing and 
Withdrawal From Registration

April 20, 2006.

I. Introduction

    On October 17, 2005, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with 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 amend Exchange delisting rules 
to conform to recent amendments to Commission rules regarding removal 
from listing and withdrawal from registration. On December 14, 2005,

[[Page 24877]]

CHX filed Amendment No. 1 to the proposed rule change.\3\ On February 
17, 2006, CHX filed Amendment No. 2 to the proposed rule change.\4\ On 
March 15, 2006, CHX filed Amendment No. 3 to the proposal.\5\ The 
proposed rule change, as amended, was published for comment in the 
Federal Register on March 21, 2006.\6\ No comments were received 
regarding the proposal. This order approves the proposed rule change, 
as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, CHX made several changes to the proposed 
rule text of CHX Article XXVIII, Rule 4 to clarify the organization 
of the Rule; incorporate the requirement that issuers provide notice 
to the Exchange upon filing a Form 25; and clarify the effective 
dates for the old and the new CHX Rule 4.
    \4\ In Amendment No. 2, CHX included new language to the 
proposed rule text of CHX Article XXVIII, Rule 4 relating to the 
timing of certain issuer obligations under amended SEC Rule 12d2-2 
and made other grammatical corrections to the proposed rule text.
    \5\ In Amendment No. 3, CHX included new language to the 
proposed rule text of CHX Article XXVIII, Rule 4 stating that if an 
issuer seeks to voluntarily withdraw its securities from listing and 
has either received notice from the Exchange that it is below the 
Exchange's continued listing policies and standards, or is aware 
that it is below such continued listing policies and standards even 
if it has not received such notice from the Exchange, the issuer 
must disclose that it is no longer eligible for continued listing 
(including the specific continued listing policies and standards 
that the issue is below) in: (i) Its written notice to the Exchange 
of its determination to withdraw from listing required by amended 
Rule 12d2-2(c)(2)(ii) under the Act; and (ii) its public press 
release and website notice required by amended Rule 12d2-
2(c)(2)(iii) under the Act.
    \6\ See Securities Exchange Act Release No. 53493 (March 16, 
2006), 71 FR 14265.
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II. Description of the Proposed Rule Change

    Section 12 of the Act\7\ and Rule 12d2-2 thereunder\8\ (``SEC Rule 
12d2-2'') govern the process for the delisting and deregistration of 
securities listed on national securities exchanges. Recent amendments 
to SEC Rule 12d2-2 (``amended SEC Rule 12d2-2'') and other Commission 
rules require the electronic filing of revised Form 25 on the 
Commission's Electronic Data Gathering, Analysis, and Retrieval 
(``EDGAR'') system by exchanges and issuers for all delistings, other 
than delistings of standardized options and securities futures, which 
are exempted.\9\
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    \7\ 15 U.S.C. 78l.
    \8\ 17 CFR 240.12d2-2.
    \9\ See Securities Exchange Act Release No. 52029 (July 14, 
2005), 70 FR 42456 (July 22, 2005).
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    In the case of exchange-initiated delistings, amended SEC Rule 
12d2-2(b) states that a national securities exchange may file an 
application on Form 25 to strike a class of securities from listing 
and/or withdraw the registration of such securities, in accordance with 
its rules, if the rules of such exchange, at a minimum, provide for: 
\10\
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    \10\ See also Form 8-K (Item 3.01. Notice of Delisting or 
Failure to Satisfy a Continued Listing Rule or Standard; Transfer of 
Listing), which sets forth disclosure requirements for issuers that 
do not satisfy listing standards.
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    (i) Notice to the issuer of the exchange's decision to delist its 
securities;
    (ii) An opportunity for appeal to the exchange's board of 
directors, or to a committee designated by the board; and
    (iii) Public notice of the national securities exchange's final 
determination to remove the security from listing and/or registration, 
by issuing a press release and posting notice on its Web site. Public 
notice must be disseminated no fewer than 10 days before the delisting 
becomes effective pursuant to amended SEC Rule 12d2-2(d)(1), and must 
remain posted on its Web site until the delisting is effective.
    The Exchange proposes to amend the text of its Article XXVIII, Rule 
4 relating to the delisting of securities to comply with the 
requirements of recently amended SEC Rule 12d2-2. With respect to the 
above requirements set forth in amended SEC Rule 12d2-2(b), CHX Article 
XXVIII, Rule 4 currently provides the requisite issuer notice as well 
as an opportunity for appeal to a committee designated by the Board. As 
required under amended SEC Rule 12d2-2(b)(1), CHX proposes to state in 
CHX Article XXVIII, Rule 4(f) that when a final determination is made 
with respect to the delisting of one or more securities of an issuer, 
the Exchange's Secretary promptly would provide public notice of that 
determination by issuing a press release and posting notice on the 
Exchange's Web site. This notice would be disseminated no fewer than 10 
days before the delisting becomes effective and would remain posted on 
the Exchange's Web site until the delisting is effective. The proposed 
rule change also states that the Exchange will file Form 25 with the 
Commission and provide a copy to the issuer.
    In the case of an issuer-initiated delisting, CHX Article XXVIII, 
Rule 4 currently requires that in the absence of special circumstances, 
a security would not be removed from listing and/or registration upon 
application of the issuer, unless the issuer files with the Exchange a 
certified copy of a resolution adopted by the board of directors of the 
issuer authorizing withdrawal from listing and registration. This 
provision would be retained in the CHX's amended Rule. CHX's proposal 
would add a new requirement that the issuer must file a copy of Form 25 
with the Exchange immediately after filing the Form 25 with the 
Commission.
    In addition, CHX proposes revisions to CHX Article XXVIII, Rule 
4(b) that would set forth, in general terms, the process that should be 
followed pursuant to amended SEC Rule 12d2-2 when an issuer seeks to 
voluntarily withdraw the listing or registration of a security on the 
Exchange. In such instances, CHX proposes to require the issuer to:
    (i) Comply with the Exchange's rules for delisting and applicable 
state laws;
    (ii) Submit written notice to the Exchange, no fewer than ten days 
before filing a Form 25, of its intent to withdraw its security; and
    (iii) Issue public notice of its intent to withdraw from listing 
and registration; and
    (iv) File Form 25 with the Commission.
    CHX also proposes that an issuer seeking to voluntarily apply to 
withdraw a class of securities from listing on the Exchange that has 
received notice from the Exchange that it is below the Exchange's 
continued listing policies and standards, or that is aware that it is 
below such continued listing policies and standards notwithstanding 
that it has not received such notice from the Exchange, must disclose 
that it is no longer eligible for continued listing (including the 
specific continued listing policies and standards that the issue is 
below) in: (i) Its written notice of its determination to withdraw from 
listing required by amended SEC Rule 12d2-2(c)(2)(ii) and; (ii) its 
public press release and Web site notice required by amended SEC Rule 
12d2-2(c)(2)(iii).
    Finally, the proposal makes other non-substantive changes (such as 
inserting headings and making the text part of the rule itself, rather 
than an interpretation to the rule) that are designed to make the rule 
easier to read.

III. Discussion

    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 \11\ and, in 
particular, the requirements of section 6 of the Act.\12\ Specifically, 
as discussed below, the Commission finds that the proposal is 
consistent with section 6(b)(5) of the

[[Page 24878]]

Act,\13\ which requires, in part, 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 foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, and 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, and, 
in general, to protect investors and the public interest. Further, as 
noted in more detail below, the changes being adopted by CHX meet the 
requirements of amended SEC Rule 12d2-2.
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    \11\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(5).
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A. Exchange Delisting

    Amended SEC Rule 12d2-2(b) states that a national securities 
exchange may file an application on Form 25 to strike a class of 
securities from listing and/or withdraw the registration of such 
securities, in accordance with its rules, if the rules of such 
exchange, at a minimum, provide for notice to the issuer of the 
exchange's decision to delist, opportunity for appeal, and public 
notice of the exchange's final determination to delist. The Commission 
believes that CHX's current rules and proposal comply with the dictates 
of amended SEC Rule 12d2-2(b).
    CHX Article XXVIII, Rule 4 currently provides the requisite issuer 
notice as well as an opportunity for appeal to a committee designated 
by the Board. Specifically, issuers may appeal the Hearing Examiner's 
delisting determinations to the Board's Executive Committee.\14\ In 
addition, the proposed rule change will provide for public notice of 
the Exchange's final determination to remove the security from listing 
and/or registration. This should ensure that investors have adequate 
notice of an exchange delisting and is consistent with the protection 
of investors under section 6(b)(5) of the Act.\15\
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    \14\ See CHX Article XXVIII, Article 4.
    \15\ 15 U.S.C. 78f(b)(5).
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B. Issuer Voluntary Delisting

    In the case of an issuer-initiated delisting, CHX proposes 
revisions to CHX Article XXVIII, Rule 4(b) that would set forth, in 
general terms, the process that should be followed when an issuer seeks 
to voluntarily withdraw the listing or registration of a security on 
the Exchange, including the issuer's obligation to file Form 25 with 
the Commission (and to submit it to the Exchange) and the Exchange's 
obligation to provide public notice of an issuer's voluntary request to 
delist securities. In the case of an issuer-initiated delisting, CHX 
proposes to require the issuer to:
    (i) Comply with the Exchange's rules for delisting and applicable 
state laws;
    (ii) Submit written notice to the Exchange, no fewer than ten days 
before filing a Form 25, of its intent to withdraw its security; and
    (iii) Issue public notice of its intent to withdraw from listing 
and registration; and
    (iv) File Form 25 with the Commission.
    The Commission believes that the amendments will fully inform 
issuers of the requirements for voluntary delisting of their securities 
under CHX rules and federal securities laws.
    The proposal also sets forth a new requirement not in amended SEC 
Rule 12d2-2 that would require the issuer to file a copy of Form 25 
with the Exchange immediately after filing Form 25 with the Commission. 
This requirement will allow the Exchange to be fully informed of the 
actual filing of a Form 25 and be prepared to take timely action to 
delist the security in accordance with the filing of the Form.
    CHX also proposes that an issuer seeking to voluntarily apply to 
withdraw a class of securities from listing on the Exchange that has 
received notice from the Exchange that it is below the Exchange's 
continued listing policies and standards, or that is aware that it is 
below such continued listing policies and standards notwithstanding 
that it has not received such notice from the Exchange, must disclose 
that it is no longer eligible for continued listing (including the 
specific continued listing policies and standards that the issue is 
below) in: (i) Its statement of all material facts relating to the 
reasons for withdrawal from listing provided to the Exchange along with 
written notice of its determination to withdraw from listing required 
by amended SEC Rule 12d2-2(c)(2)(ii) and; (ii) its public press release 
and Web site notice required by amended SEC Rule 12d2-2(c)(2)(iii). The 
Commission believes that this requirement will allow shareholders to be 
informed and aware that the issuer has failed to meet Exchange listing 
standards and is voluntarily delisting. Issuers will therefore not be 
permitted to delist voluntarily without public disclosure of their 
noncompliance with Exchange listing standards.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\16\ that the proposed rule change (File No. SR-CHX-2005-27), as 
amended, is approved.
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    \16\ Id.
    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-6318 Filed 4-26-06; 8:45 am]
BILLING CODE 8010-01-P