
[Federal Register: January 27, 2009 (Volume 74, Number 16)]
[Notices]               
[Page 4790-4792]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27ja09-70]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59265; File No. SR-BSE-2008-36]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order 
Approving Proposed Rule Change Relating to Delisting Standards

January 16, 2009.

I. Introduction

    On November 3, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``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 adopt new criteria permitting the delisting of 
a security when the Exchange has terminated its program for listing and 
trading cash equities (``Listing Program'') in connection with the 
discontinuation of trading in all securities listed on its market. The 
proposed rule change was published for comment in the Federal Register 
on November 28, 2008.\3\ The Commission received no comments on the 
proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58990 (November 20, 
2008), 73 FR 72534 (``Notice''). In order for a company to 
voluntarily delist from the Exchange, it would have to follow the 
procedures set forth in Rule 12d2-2 under the Act, which includes 
the filing of a Form 25 with the Commission. See Rule 12d2-2 under 
the Act, 17 CFR 240.12d2-2.
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II. Description of the Proposed Rule Change

    On September 5, 2007, the Exchange announced the discontinuation of 
the operations of the Boston Equities Exchange. In addition to that 
announcement, in October 2007, all issuers were given additional notice 
that the BSE had terminated its Listing Program. While trading in all 
securities on the BSE ceased on September 5, 2007, not all companies 
have delisted their securities from the Exchange by filing a Form 25 
with the Commission.\4\ As a result, the Exchange proposes to adopt new 
rules that would give it the authority to delist, under certain 
conditions, the remaining BSE-listed companies, because there is no 
basis to involuntarily delist these companies under BSE's existing 
rules.
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    \4\ As of the date of the Notice, twenty-nine issuers currently 
have listings with the Exchange.
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    Under the proposal, the Exchange may determine to delist a security 
when the Exchange has terminated its Listing Program in connection with 
the discontinuation of trading in all securities listed on its market. 
The proposed new rule will provide that at least 15 days before issuing 
such delisting determination, the Board of Directors or its designee 
must give notice of the delisting to the company. As soon as 
practicable after the issuance of the delisting determination, notice 
will be provided to the company and the Commission of such delisting 
determination. Notice to the company of the delisting determination 
shall inform the company of the opportunity to appeal, applying the 
same appeal rights that exist under BSE rules for any company 
involuntarily delisted by the Exchange when the BSE was operational.\5\
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    \5\ See infra note 6.
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    The Exchange represents that it would use this authority to delist 
on the grounds that BSE is not currently operating a listing program 
and, therefore, it is in the public interest that the Exchange not 
maintain any appearance of having any listings on the Exchange as long 
as programs for listing and trading cash equities and related activity 
have ceased. In addition, prior to implementing any involuntary 
delistings, the Exchange represented that it will contact each company 
and suggest that it file a Form 25 to effect a voluntary delisting 
before the Exchange issues any delisting determination. Thereafter, the 
Exchange will move to delist those companies that do not act

[[Page 4791]]

in accordance with that suggestion. Companies that are involuntarily 
delisted under the rule being adopted in this filing will have the 
appeal right provided for by new Section 2(c)(3) of Chapter XXVII of 
the Rules of the Exchange.\6\
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    \6\ The Commission notes that the appeals procedures proposed in 
new Section 2(c)(3) of Chapter XXVII are identical to the appeals 
procedures set forth in the current BSE Rules. See Chapter XXVII, 
Section 2(b)(2) of the BSE Rules.
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    In its filing, BSE noted that the NASDAQ OMX Group, Inc. (``NASDAQ 
OMX'') has acquired the Exchange. According to BSE, NASDAQ OMX expects 
that the Exchange will resume a program for listing and trading cash 
equities. Accordingly, the Exchange believes it is appropriate to leave 
all of its listing rules, as amended, in place pending rule changes to 
its listing rules.\7\ Upon the resumption of a listing business by the 
Exchange, delisted companies may be eligible for relisting if their 
securities meet the applicable standards of the Exchange.\8\
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    \7\ Any future proposal to resume trading on a BSE market and 
amend listing standards would be required to be submitted as a 
proposed rule change to the Commission under Section 19(b) of the 
Act and Rule 19b-4 thereunder. See 15 U.S.C. 78s(b), 17 CFR 240.19b-
4.
    \8\ Any company that seeks listing on the Exchange would be 
required to apply and meet the Exchange's initial listing standards. 
Delisted companies may also apply to list on another national 
securities exchange if they meet that exchange's initial listing 
standards.
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III. Discussion and Commission Findings

    After careful consideration, 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 \9\ and, in particular, the requirements of Section 6 of the 
Act.\10\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
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, 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 
and are not designed to permit unfair discrimination between customers, 
issuers, brokers or dealers. The Commission also finds that the 
proposed rule change is consistent with Section 6(b)(7) of the Act,\12\ 
which requires, among other things, that the rules of the exchange 
provide a fair procedure for the prohibition or limitation by the 
exchange of any person with respect to access to services offered by 
the exchange.
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    \9\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(7).
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    The BSE proposes to adopt new criteria permitting the delisting of 
securities that are no longer being traded in connection with the 
discontinuation of trading in all securities listed on its market. The 
Commission notes that the new delisting standard can only be utilized 
in rare and unusual circumstances and emphasizes that it can only be 
used to involuntarily delist companies when the Exchange has 
discontinued trading in all listed securities in its marketplace, as 
BSE has done. Specifically, the Exchange announced in September 2007 
that it was terminating its Listings Program, and in October 2007, all 
issuers were given additional notice that the Listings Program had 
ceased. However, not all issuers have voluntarily delisted their 
securities in accordance with the requirements in Rule 12d2-2 under the 
Act \13\ and BSE rules. The proposed rule change should also make the 
delisting process more efficient for both the Exchange and listed 
companies in light of the cessation of trading on the BSE market. The 
new delisting standard should provide the Exchange with an additional 
means of ensuring the quality of and public confidence in BSE as a 
national securities exchange during its reorganization.
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    \13\ 17 CFR 240.12d2-2.
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    The proposed rule change further serves to protect the public from 
being mislead into believing that these securities retain the 
imprimatur of an exchange listing on an active trading market. In this 
regard, the Commission notes that companies listed on a national 
securities exchange retain certain benefits and privileges. If an 
exchange has ceased all trading in all securities due to 
discontinuation of its marketplace, companies generally should not be 
able to retain their exchange listing and corresponding privileges, as 
they are no longer providing liquidity via the market. Moreover, these 
companies would no longer be monitored for compliance with maintenance 
listing criteria, and thus investors and the public would not have 
necessary information regarding these companies' viability. The 
Commission thus believes that the proposed new delisting standard is 
consistent with the protection of investors under Section 6(b)(5) of 
the Act.\14\
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    \14\ 15 U.S.C. 78f(b)(5).
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    The Commission also believes the proposal provides sufficient 
notice to companies facing delisting pursuant to the new criteria 
consistent with the Act. First, notice will be given to the company at 
least 15 days before the Exchange issues its delisting determination. 
The Commission believes that the proposed rule affords sufficient time 
for interested parties to submit to the Exchange and/or Commission any 
comments they have on the anticipated delisting, or to take any other 
action as permitted under state and federal law including commencing a 
voluntary delisting in accordance with Rule 12d2-2 under the Act.\15\
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    \15\ 17 CFR 240.12d2-2.
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    Second, notice will be given to the company (and the Commission) 
after the issuance of the delisting determination, and the notice shall 
inform the company of the opportunity to appeal. The appeals procedures 
proposed in new Section 2(c)(3) of Chapter XXVII, which are identical 
to the appeals procedures currently set forth in Section 2(b)(2) of 
Chapter XXVII, provide for notice to the issuer of the Exchange's 
decision to delist its securities; an opportunity for appeal to the 
Exchange's board of directors, or to a designee of the board, with a 
$3000 fee; and public notice, no fewer than 10 days before the 
delisting becomes effective, of the Exchange's final determination to 
delist the security. The Commission believes that the proposed rule 
requiring notice to the issuer of the Exchange's delisting decision and 
establishing appeal procedures provides issuers with adequate notice 
and opportunity to appeal the delisting as required by Rule 12d2-2 
under the Act.\16\ The Commission notes that the appeal procedures 
being adopted by the Exchange set forth an adequate structure to meet 
the requirements of Section 6(b)(7) of the Act \17\ and for BSE to 
review on appeal any involuntary delistings commenced under the new 
rule being adopted herein.\18\
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    \16\ 17 CFR 240.12d2-2.
    \17\ 15 U.S.C. 78f(b)(7).
    \18\ The Commission has made similar findings in approving the 
original delisting appeal procedures of the BSE. See Securities 
Exchange Act Release No. 53700 (April 21, 2006), 71 FR 25257 (April 
28, 2006) (SR-BSE-2005-46).

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[[Page 4792]]

    Finally, the proposed rule change requires that public notice of 
the final delisting determination by the Exchange be provided no fewer 
than 10 days before the delisting becomes effective, in accordance with 
Rule 12d2-2 under the Act.\19\ The Commission believes that public 
notice of the Exchange's final determination 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.\20\
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    \19\ 17 CFR 240.12d2-2.
    \20\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 6 of the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-BSE-2008-36) is approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-1673 Filed 1-26-09; 8:45 am]

BILLING CODE 8011-01-P
