SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 230
Release No. 33-7494, 34-39542, File No. S7-17-97
RIN 3235-AH18
Covered securities pursuant to Section 18 of the Securities Act of 1933.
AGENCY: Securities and Exchange Commission
ACTION: Final Rule
SUMMARY: The Securities and Exchange Commission ("SEC" or "Commission") is
adopting Rule 146(b) under Section 18 the Securities Act of 1933, as
amended ("Securities Act"). The purpose of the Rule is to designate
securities listed on the Chicago Board Options Exchange, Tier I of the
Pacific Exchange, and Tier I of the Philadelphia Stock Exchange as covered
securities for the purposes of Section 18 of the Securities Act. Covered
Securities under Section 18 are exempt from state law registration
requirements.
EFFECTIVE DATES: Section 230.146(b) is effective [insert date of
publication in Federal Register].
FOR FURTHER INFORMATION CONTACT: Sharon M. Lawson, Senior Special
Counsel, James T. McHale, Special Counsel, or David S. Sieradzki, Esq., at
202/942-0181, 202/942-0190, or 202/942-0135; Office of Market Supervision,
Division of Market Regulation, Securities and Exchange Commission (Mail
Stop 2-2), 450 Fifth Street, N.W., Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION:
I. Introduction
On October 11, 1996, The National Securities Markets Improvement Act
of 1996 ("NSMIA")<(1)> was signed into law. Among other changes made
<(1)> Pub. L. No. 104-290, 110 Stat. 3416 (1996).
to the federal securities laws, NSMIA amends Section 18 of the Securities
Act<(2)> to provide for exclusive federal registration of securities
listed, or authorized for listing, on the New York Stock Exchange ("NYSE"),
the American Stock Exchange ("Amex"), or listed on the National Market
System of the Nasdaq Stock Market ("Nasdaq/NMS"), or any other national
securities exchange designated by the Commission to have substantially
similar listing standards to those markets. More specifically, Section
18(a) provides that "no law, rule, regulation, or order, or other
administrative action of any State. . . requiring, or with respect to,
registration or qualification of securities. . . shall directly or
indirectly apply to a security that-- (A) is a covered security." Covered
securities are defined in Section 18(b)(1) to include those securities
listed, or authorized for listing, on the NYSE, Amex, or listed on
Nasdaq/NMS (collectively the "Named Markets"), or those securities listed,
or authorized for listing, on a national securities exchange (or tier or
segment thereof) that has listing standards that the Commission determines
by rule are "substantially similar" to one of the Named Markets.
The Pacific Exchange, Incorporated ("PCX"), the Chicago Board Options
Exchange, Incorporated ("CBOE"), the Chicago Stock Exchange, Incorporated
("CHX"), and the Philadelphia Stock Exchange, Incorporated ("Phlx")
(collectively the "Petitioners") have petitioned the Commission to adopt a
rule which finds their listing standards to be substantially similar to
those of the NYSE, Amex, or Nasdaq/NMS and, therefore, entitling securities
<(2)> 15 U.S.C. 77r.
======END OF PAGE 2======
listed pursuant thereto to be deemed covered securities under Section 18 of
the Securities Act.<(3)>
On June 10, 1997, the Commission issued a release proposing to adopt
Rule 146(b) that would designate securities listed on the CBOE and Tier I
of the PCX as designated securities for the purposes of Section 18(a) of
the Securities Act, and soliciting comment on whether Tier I securities of
the CHX and Phlx should be included in Rule 146(b).<(4)> The
Commission received three comment letters in response to the
proposal.<(5)>
<(3)> See Letter from David P. Semak, Vice President,
Regulation, Pacific Stock Exchange, Incorporated (n/k/a
Pacific Exchange, Inc.), to Arthur Levitt, Jr.,
Chairman, Commission, dated November 15, 1996 ("PCX
Petition"); letter from Alger B. Chapman, Chairman,
CBOE, to Jonathan G. Katz, Secretary, Commission, dated
November 18, 1996("CBOE Petition"); letter from J.
Craig Long, Esq., Foley and Lardner, to Jonathan G.
Katz, Secretary, Commission, dated February 4,
1997("CHX Petition"); and letter from Michele R.
Weisbaum, Vice President and Associate General Counsel,
Phlx, to Jonathan G. Katz, Secretary, Commission, dated
March 31, 1997 ("Phlx Petition") (collectively the
"Petitions").
<(4)> Securities Act Release No. 7422, Securities Exchange
Act Release No. 38728 (June 10, 1997) ("proposing
release"), 62 FR 32705 (June 17, 1997).
<(5)> See Letter from J. Craig Long, Esq., Foley & Lardner,
to Jonathan G. Katz, Secretary, Commission, dated June
26, 1997 (received June 30, 1997) ("Foley letter");
letter from Ira L. Kotel, Esq., Roberts, Sheridan &
Kotel, to Jonathan G. Katz, Secretary, Commission,
dated July 16, 1997 (received July 21, 1997) ("Kotel
letter"); and letter from James C. Yong, First Vice
President and General Counsel, The Options Clearing
Corporation ("OCC"), to Jonathan G. Katz, Secretary,
Commission, dated July 8, 1997 (received July 22, 1997)
("OCC letter").
======END OF PAGE 3======
As to the inclusion of securities listed on Tier I of the CHX and Tier
I of the Phlx in Rule 146(b), the Commission stated that while most of
their Tier I listing standards are substantially similar to one of the
Named Markets, they differed in several important respects.<(6)> The
Commission also indicated, however, that if the CHX and Phlx were to revise
their Tier I listing standards in these areas to conform them to those of
the NYSE, Amex, or Nasdaq/NMS prior to the adoption of the proposed Rule,
the Commission likely would include securities listed on these markets in
final Rule 146(b). Accordingly, in order to obtain the benefits of the
exemption under the proposed Rule, the CHX and Phlx<(7)> both revised
their Tier I listing standards to address the noted deficiencies. Although
CHX has modified its listing and maintenance standards as suggested, the
Commission has concerns regarding the CHX's listing and maintenance
procedures and thus does not include CHX in the final Rule. The Commission
will continue to review the CHX's listing program, including listing
<(6)> Specifically, the Commission noted that unlike the
NYSE, Amex, or Nasdaq/NMS, the CHX did not have a
minimum share price requirement for continued listing
of common stock on Tier I. With regard to the Phlx,
the Commission identified the Exchange's lack of a
maintenance standard for bonds and debentures listed on
Tier I of the Exchange as a deficiency in their listing
standards. Moreover, with respect to stock index,
currency and currency index warrants, the Phlx had no
public distribution, aggregate market value, nor term
to maturity requirements. Finally, the Commission
noted that issuers of "other securities" listed on Tier
I of the Phlx were required to have pre-tax income of
only $100,000 in three of the four last fiscal years,
versus the Amex requirement that issuers have $750,000
in pre-tax income in their last fiscal year, or in two
of their last three fiscal years. See proposing
release, supra note 4.
<(7)> See Phlx Listing Standards Order, infra note 18.
======END OF PAGE 4======
standards and operations, and may determine to include securities listed on
CHX Tier I in the future.
After careful comparison, the Commission concludes that currently the
listing standards of Tier I of the PCX, and Phlx, and the listing standards
of the CBOE are substantially similar to the listing standards of the NYSE,
Amex or Nasdaq/NMS. Accordingly, the Commission today is adopting Rule
146(b) which designates securities listed on such markets as covered
securities under Section 18(b)(1) of the Securities Act. As adopted, Rule
146(b) will provide those covered securities with an exemption from state
blue sky provisions as set forth under Section 18(a) of the Securities Act.
II. Background
The development and enforcement of adequate standards governing the
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 ("SRO") 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
trading characteristics of that issue to ensure that it continues to meet
the exchange's standards for market depth and liquidity.
Many States have recognized the importance of listing standards by
excepting from state registration requirements securities traded on the
Named Markets.<(8)> In enacting Section 18, Congress intended to
<(8)> See, e.g., Del. Code Ann. tit. 6 7309(a)(8) (1996).
======END OF PAGE 5======
codify in the Securities Act an exemption from state registration
requirements similar to these state law provisions.<(9)> In order to
avoid competitive disparities, Congress provided the Commission with the
discretionary authority to extend similar preemption treatment to other
national securities exchanges (or tiers or segments thereof) that have
substantially similar listing standards.<(10)>
As noted above, the PCX, CBOE, CHX, and Phlx all have petitioned the
Commission to adopt a rule as contemplated by Section 18.<(11)> The
Petitioners assert that their Tier I listing standards<(12)> are
substantially similar to those of the Named Markets, and that until the
Commission acts to provide them with the benefits of the Section 18
exemption, they will be at a competitive disadvantage to these markets.
The Commission recognizes the competitive concerns raised by the
Petitioners, but notes that the statute requires the Commission to make an
independent finding that the Petitioners' listing standards are
substantially similar to those of the NYSE, the Amex or Nasdaq/NMS.
III. Comment Letters
<(9)> H.R. Rep. No. 622, 104th Cong., 2d Sess., pt. 1, at 30
(1996) ("Legislative History"). As a result of this
federal preemption of the state registration process,
SRO listing standards have become all the more
important to preserving the integrity of U.S financial
markets and protecting investors.
<(10)> See Legislative History, supra note 9.
<(11)> See Petitions, supra note 3.
<(12)> The Commission notes that presently the CBOE only has
one tier, or segment, for listing purposes.
======END OF PAGE 6======
As noted above, the Commission received three comment letters in
response to the proposal.<(13)> The Foley letter, filed on behalf of
the CHX, noted that the CHX had submitted a proposed rule change with the
Commission to amend its maintenance standards for common stock listed on
Tier I of the Exchange to add a minimum share price. The Foley letter
urged that once approved, the amendment should resolve the Commission's
concerns relating to the CHX's Tier I standards and that the Commission
should include securities listed on CHX's Tier I in Rule 146(b). The
Kotel letter did not address the desirability of adopting proposed Rule
146(b) generally, but urged the Commission to include securities listed on
the Nasdaq SmallCap Market ("SmallCap") in the Rule. In support of this
view, the Kotel letter noted that the National Association of Securities
Dealers, Inc. ("NASD") recently proposed to amend the requirements for
initial listing on SmallCap and that once the new SmallCap listing
standards were approved, they would be substantially similar to those of
the Amex.<(14)> Accordingly, the Kotel letter urged that securities
listed on SmallCap should be deemed covered securities for purposes of Rule
146(b). In addition, the Kotel letter stated that extending the benefits
of the Rule to securities listed on SmallCap would further the Commission's
policy of simplifying securities regulation for small businesses and would
lower the costs for small businesses in complying with federal and state
regulations.
<(13)> See supra note 5.
<(14)> The changes to the SmallCap listing standards referred
to in the Kotel letter were recently approved by the
Commission. See Securities Exchange Act Release No.
38961 (August 22, 1997) ("Nasdaq Listing Standards
Order").
======END OF PAGE 7======
The third comment letter received by the Commission, the OCC letter,
generally supported the proposed Rule. In addition, the OCC letter urged
the Commission to designate standardized options traded on Tier I of the
Phlx as covered securities under the Rule, in the event the Phlx did not
file to amend its listing standards to address the concerns raised by the
Commission in the proposing release.
IV. Discussion
The Commission has reviewed extensively the listing and maintenance
standards for all securities listed and traded on the Petitioners' markets,
including common stock, preferred stock, bonds and debentures, and
options.<(15)> With regard to applying the "substantially similar"
standard, the Commission notes that under Section 18(b)(1)(B) of the
Securities Act the Commission has the authority to compare the listing
standards of a petitioner with those of either the NYSE, Amex, or
Nasdaq/NMS. The Commission attempted initially to compare a petitioner's
listing standards for all securities with only one of these
markets.<(16)> If a petitioner's listing standards in a particular
category did not meet the standards of that market, however, the Commission
compared the petitioner's standards to the other two markets.
<(15)> The Commission also has reviewed each exchange's
listing and maintenance standards for warrants,
currency and index warrants, other securities,
contingent value rights, equity linked notes, and unit
investment trusts. See proposing release, supra note
4.
<(16)> For purposes of comparing the listing standards of the
CBOE and Tier I of the PCX, Phlx and CHX, the
Commission used the listing standards applicable to
securities listed on the Amex.
======END OF PAGE 8======
Additionally, the Commission interpreted the substantially similar standard
to require listing standards at least as comprehensive as those of the
markets named in Section 18(b)(1)(A). If a petitioner's standards were
higher than such markets, then the Commission still determined that the
petitioner's standards were substantially similar to these markets.
Finally, the Commission reviewed the listing standards for each type of
security in making the substantially similar determination. Differences in
language or approach of the listing standards for a particular security did
not necessarily lead to a determination that the listing standards of a
petitioner were not substantially similar to those of the named exchange.
After careful comparison, using the approach outlined above, the
Commission concludes that currently the listing standards of the CBOE and
Tier I of the PCX, and Phlx are substantially similar to the listing
standards of the NYSE, Amex or Nasdaq/NMS.<(17)> Therefore, the
Commission is adopting Rule 146(b), designating securities listed on these
markets as "covered securities" for purposes of Section 18 of the
Securities Act.
With regard to the CHX, the Commission has determined not to include
securities listed on Tier I of the Exchange at this time. Although the
Exchange has modified its listing and maintenance standards as suggested,
the Commission has concerns regarding the CHX's listing and maintenance
procedures. The Commission will continue to review the CHX's listing
program, including listing standards and operations, and may determine to
include securities listed on CHX Tier I in the future.
<(17)> The proposing release contains a more detailed
description of the comparison of these exchanges to the
Named Markets. See proposing release, supra note 4
======END OF PAGE 9======
With regard to the Phlx, the Commission concludes that the changes
recently made by the Exchange to its Tier I listing standards<(18)>
enable the Commission to make the substantially similar
finding.<(19)> First, the Phlx amended Rule 803(e) to adopt
additional listing standards for stock index warrants, currency warrants
and currency index warrants (collectively "non-equity warrants"). New
subsection (2) to Rule 803(e) requires that non-equity warrants have a term
of between one and five years from the date of issuance. Rule 803(e)(3)
imposes a minimum public distribution and market value requirement of
1,000,000 non-equity warrants with at least 400 public warrant holders and
a minimum aggregate market value of $4,000,000. Finally, new subsection
(9) to Rule 803(e) requires that non-equity warrants be cash-settled in
U.S. dollars.<(20)>
Second, the Phlx increased the pre-tax income requirement for issuers
of "other securities" in Rule 803(f)(2) from $100,000 in three of the four
prior fiscal years to $750,000 in the issuer's last fiscal year or in two
<(18)> See Securities Exchange Act Release No. 39053
(September 11, 1997), 62 FR 49286 (September 19, 1997)
("Phlx Listing Standards Order").
<(19)> As noted above, the Commission stated in the proposing
release that if the Phlx were to revise its Tier I
listing standards in the areas where the Commission
identified deficiencies prior to the adoption of the
proposed Rule, the Commission likely would include
securities listed on the Phlx in final Rule 146(b).
<(20)> Although the Commission did not identify the lack of a
cash-settlement requirement as a deficiency in the
Phlx's Tier I listing standards, the Phlx determined to
codify its existing requirement that non-equity
warrants be cash-settled in U.S. dollars. This
requirement is identical to Section 106(d) of the Amex
Company Guide.
======END OF PAGE 10======
of its last three fiscal years.<(21)> Other securities are hybrid
securities that have features common to both equity and debt securities,
yet do not fit within the traditional definitions of either.
Third, the Phlx amended Rule 810(a), which contains the maintenance
standards for Tier I securities, to add maintenance standards for bonds,
notes and debentures. New subsection (5) to Rule 810(a) requires that debt
securities maintain an aggregate market value or principal amount of bonds
that are publicly held of $400,000 and that the issuer is 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 Phlx
Rules 812 through 899, the Exchange also will delist any listed debt
security convertible into that common stock.<(22)>
In light of the above changes made by the Phlx to its Tier I listing
standards, the Commission concludes that the Phlx's Tier I listing
standards, when taken as a whole, are substantially similar to those of the
Amex, and that securities listed on Tier I of the Phlx should be included
in Rule 146(b) as covered securities. In addition, because Phlx Tier I
securities include options, the Commission need not consider whether
<(21)> This provision is substantially similar to Section 107
and, by reference, Section 101(b) of the Amex Company
Guide.
<(22)> These provisions are substantially similar to Section
1003(b)(iii) and (e) of the Amex Company Guide.
======END OF PAGE 11======
standardized options traded on the Phlx could be deemed covered securities
separately from other Phlx Tier I securities, as suggested in the OCC
letter.
With regard to the Kotel letter, while it does appear that the
SmallCap initial listing standards for common stock are similar to those of
the Amex, the Commission has determined not to include securities listed on
SmallCap in Rule 146(b) at this time. First, the proposing release did not
solicit comment on whether SmallCap listing standards are substantially
similar to one of the Named Markets. Second, the Commission has identified
several aspects of the SmallCap listing standards which appear to differ
significantly from those of the Amex and the other primary
markets.<(23)> Third, pursuant to the Nasdaq Listing Standards
Order, the new maintenance standards do not become effective until six
months after the Order was issued (February 22, 1998), and the existing
maintenance standards for securities listed on SmallCap are considerably
less stringent than those of any one of the Named Markets. Finally, the
Commission notes that it has the authority to undertake a more extensive
<(23)> Specifically, the minimum share price for preferred
stock to be listed on SmallCap is $4 per share, while
the minimum share price for initial inclusion of
preferred shares on the Amex is $10. See Section
103(b) of the Amex Company Guide and NASD Rule
4310(c)(4). In addition, SmallCap does not have a
minimum distribution requirement for preferred stock,
while the Amex requires a minimum of 100,000 publicly
held shares when the issuer of the preferred shares has
common stock listed on the Amex or NYSE. See Amex
Section 103(b). Lastly, warrants listed on SmallCap
are required to have a minimum distribution of 100,000
warrants for initial inclusion, while Amex requires a
minimum distribution of 1,000,000 warrants to 400
public holders or 500,000 warrants to 800 public
holders. See Amex Section 105(b) and NASD Rule
4310(c)(9).
======END OF PAGE 12======
review of the SmallCap listing standards in the future and, if appropriate,
propose an amendment to Rule 146(b) to include securities listed on
SmallCap in the Rule.
With respect to a designated exchange maintaining its status under
Rule 146(b), the Commission notes that Congress intended for the Commission
to monitor the listing requirements of the regional exchanges, consistent
with its supervisory authority under the Securities Exchange Act of 1934
("Exchange Act"), to ensure the continued integrity of these markets and
the protection of investors.<(24)> For example, if a regional
exchange proposed to lower its listing standards for common stock, the
Commission likely would consider this to be a substantive revision which
may change the finding that the regional exchange's listing standards are
substantially similar to those of the Named Markets.<(25)>
<(24)> See Legislative History, supra note 9.
<(25)> If, however, one of the Named Markets raised its
listing standards with respect to a particular
security, a conforming change by the exchanges
designated in Rule 146(b) may not necessarily be
required for two reasons. First, Section 18(b)(1)(B)
requires that the regional exchanges' listing standards
be substantially similar to only one of the Named
Markets in order to qualify for the exemption. Second,
a listing standard change made by one of the Named
Markets should not force the exchanges designated in
Rule 146(b) to conform their listing standards.
Otherwise, a single Named Market would be, in effect,
setting the listing standards for all the regional
exchanges. If, however, all three Named Markets were
to raise their listing standards, and the Commission
believed that the change was significant enough so that
failure to adopt the new standard rendered the
exchanges designated in Rule 146(b) to have
substantially inferior standards, then the Commission
may require the latter exchanges to raise their
standards in order to maintain their exemption under
the Rule.
======END OF PAGE 13======
Accordingly, in reviewing future proposed changes to SRO listing standards,
the Commission will consider whether the proposed change(s) will require an
amendment to Rule 146(b). In the event that the Commission determines that
a proposed change in listing standards would require an amendment to Rule
146(b), and where the proposed rule change is subject to full notice and
comment under Section 19(b) of the Exchange Act, the Commission may
conclude that it is unnecessary to provide notice and comment for the
corresponding amendment to this Rule.<(26)> Finally, the Commission
notes that enforcement of an SRO's listing standards is subject to periodic
inspections by Commission staff, as is enforcement of all SRO rules, and
should the Commission find that an exchange designated in Rule 146(b) is
not adequately enforcing its requirements for initial and continued
listing, the Commission will take appropriate action to revoke that
exchange's exemption.
V. Conclusion
For the reasons discussed above, as supplemented by the Commission's
detailed discussion in the proposing release, the Commission concludes that
the listing standards of the CBOE, and Tier I of the PCX, and Phlx are
substantially similar to those of the NYSE, Amex or Nasdaq/NMS.
Accordingly, securities listed on these Exchanges should be deemed covered
<(26)> Although the Administrative Procedure Act states that
an agency must provide general notice of the proposed
rulemaking and an opportunity for comment, these
requirements do not apply if the agency for good cause,
finds that those procedures are "impracticable,
unnecessary, or contrary to the public interest." 5
U.S.C. 553(b)(B).
======END OF PAGE 14======
securities and entitled to an exemption from state blue sky provisions as
set forth in Section 18(a) of the Securities Act.
The Commission concludes that the Rule offers potential benefits for
investors. The Rule should facilitate listings on qualifying exchanges, or
tiers or segments thereof, which should increase competition and enhance
the overall liquidity of the U.S. securities markets. The Commission does
not anticipate that the Rule would result in any costs for U.S. investors
or others. As noted above, through the review of SRO listing standards
pursuant to Section 19(b) of the Exchange Act, the Commission will be able
to continue to ensure such listing standards are sufficient to protect
investors. The Commission also concludes that Rule 146(b) should serve to
reduce the cost of raising capital because it will streamline the
registration process for issuers listing on the Exchanges designated in the
Rule. Thus, the Commission has considered the Rule's impact on efficiency,
competition and capital formation and concludes that it would promote these
three objectives.<(27)> At the same time, Rule 146(b) does not
undercut the state securities review of offerings because the listing
standards of the CBOE and Tier I of the PCX, and Phlx are substantially
similar to the Named Markets, which are already exempt from state
registration. Finally, Rule 146(b) imposes no recordkeeping or compliance
burdens, and merely provides a limited purpose exemption under the federal
securities laws.
VI. Administrative Requirements
<(27)> 15 U.S.C. 77b(b).
======END OF PAGE 15======
Pursuant to Section 605(b) of the Regulatory Flexibility Act, 5 U.S.C.
605(b), the Chairman of the Commission has certified that Rule 146(b)
should not have a significant economic impact on a substantial number of
small entities. This certification, including the reasons therefor, is
attached to this release as Appendix A. The Paperwork Reduction Act does
not apply because the proposed amendments do not impose recordkeeping or
information collection requirements, or other collections of information
which require the approval of the Office of Management and Budget under 44
U.S.C. 3501, et. seq.
VII. Statutory Basis
Rule 146(b) is being adopted pursuant to 15 U.S.C. 77r et seq.,
particularly Section 18 of the Securities Act unless otherwise noted.
VIII. Text of the Rule
List of Subjects in 17 CFR Part 230
Securities.
For the reasons set forth in the preamble, Title 17, Chapter II of the
Code of Federal Regulations is amended as follows:
Part 230 - GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
1. The authority citation for Part 230 continues to read, in part, as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78d,
78l, 78m, 78n, 78o, 78w, 78ll(d), 78t, 80a-8, 80a-29, 80a-30, and 80a-37,
unless otherwise noted.
* * * * *
======END OF PAGE 16======
2. Section 230.146 is amended by revising the section heading,
redesignating the introductory text as paragraph (a), redesignating
paragraphs (a) and (b) as paragraphs (a)(1) and (a)(2) and adding paragraph
(b) to read as follows:
230.146 Rules under Section 18 of the Act.
* * * * *
(b) Covered securities for purposes of Section 18.
(1) For purposes of Section 18(b) of the Act (15 U.S.C. 77r), the
Commission finds that the following national securities exchanges, or
segments or tiers thereof, have listing standards that are substantially
similar to those of the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("Amex"), or the National Market System of the Nasdaq Stock
Market ("Nasdaq/NMS"), and that securities listed on such exchanges shall
be deemed covered securities:
(i) Tier I of the Pacific Exchange, Incorporated;
(ii) Tier I of the Philadelphia Stock Exchange, Incorporated; and
(iii) The Chicago Board Options Exchange, Incorporated.
(2) The designation of securities in paragraphs (b)(1)(i) through
(iii) of this section as covered securities is conditioned on such
exchanges' listing standards (or segments or tiers thereof) continuing to
be substantially similar to those of the NYSE, Amex, or Nasdaq/NMS.
By the Commission.
Jonathan G. Katz
Secretary
Dated: January 13, 1998
======END OF PAGE 17======
Note: Appendix A to the Preamble will not appear in the Code of Federal
Regulations.
Appendix A
Regulatory Flexibility Act Certification
I, Arthur Levitt, Jr., Chairman of the Securities and Exchange
Commission, hereby certify, pursuant to 5 U.S.C. 605(b), that Rule 146(b)
("Rule") under the Securities Act of 1933 ("Securities Act"), which will
designate securities listed on certain national securities exchanges, or
tiers or segments thereof, as covered securities under Section 18 of the
Securities Act, and therefore provide them with an exemption from state
registration requirements, will not have a significant economic impact on a
substantial number of small entities for the following reasons. Under the
Securities Act, a small entity is defined as "an issuer whose total assets
on the last day of its most recent fiscal year were $5,000,000 or less."
Issuers of this size generally will not qualify for listing on the national
securities exchanges, or tiers or segments thereof, designated in Rule
146(b). More specifically, both the Chicago Board Options Exchange,
Incorporated and Tier I of the Pacific Exchange, Incorporated require
issuers of common stock to have net worth of at least $4,000,000. To be
listed on Tier I of the Philadelphia Stock Exchange, Incorporated issuers
of common stock must have net tangible assets of at least $4,000,000. I do
not believe that there are a substantial number of small entities which
have total assets less than $5,000,000, yet a net worth or net tangible
assets of at least $4,000,000. For example, none of the issuers of common
stock listed exclusively on Tier I of the Pacific Exchange have total
assets of $5,000,000 or less. In addition, the proposed rule imposes no
======END OF PAGE 18======
record-keeping or compliance burden, but merely exempts certain qualifying
securities from state law registration requirements.
Arthur Levitt, Jr.
Chairman
Dated: January 2, 1998
======END OF PAGE 19======