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value is of issuers continuing to file similar reports under section 15 (d) of the act.

Delisting Proceedings under Section 19(a)

Under section 19 (a) (2) the Commission may suspend for a period not exceeding 12 months, or withdraw, the registration of a security on a national securities exchange if, in its opinion, such action is necessary or appropriate for the protection of investors and, after notice and opportunity for hearing, the Commission finds that the issuer of the security has failed to comply with any provision of the act or the rules and regulations thereunder. Shown below is the number of such proceedings during the 1959 fiscal year.

Proceedings pending at the beginning of the fiscal year.
Proceedings initiated during the fiscal year----

Proceedings terminated during the fiscal year:

By order withdrawing security from registration_-_.
By order suspending registration of security---

Proceedings pending at the end of the fiscal year-----

86

5

13

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The six proceedings which were terminated during the fiscal year were terminated during the early part of the year and were described in the Commission's 24th Annual Report.20

Section 19 (a) (4) authorizes the Commission summarily to suspend trading in any registered security on a national securities exchange for a period not exceeding 10 days if, in its opinion, such action is necessary or appropriate for the protection of investors and the public interest so requires. The Commission has used this power infrequently in the past. However, during the 1959 fiscal year the Commission found it necessary and appropriate in connection with three pending proceedings under section 19 (a) (2) to use its authority summarily to suspend trading in securities registered on a national securities exchange. Only one of these suspensions remained in effect at the end of the fiscal year.

UNLISTED TRADING PRIVILEGES ON EXCHANGES

The classical method by which stock exchanges evolved was for a group of local brokers to commence trading in any available securities. For more than half a century after the historic 1792 meeting under the buttonwood tree, any security could be called up for trading on the New York Stock Exchange at the pleasure of any member. By 1856, vote of a majority of members present came to be required for the placing of a security on the list to be called, but upon payment of * Pp. 64-71.

a 25-cent "fine" any member could have any other security temporarily inserted. Unlisted trading on the New York Stock Exchange was finally abolished in 1910, upon the recommendation of the New York Governor's Committee on Speculation in Securities and Commodities (the "Hughes Committee") and because most of the stocks in the unlisted department were in any event becoming listed.

The leading regional stock exchanges began trading in much the same way. For example, the rule on the Philadelphia Stock Exchange as late as 1876 was that "members may call up the various stocks of any chartered company, whether on the regular list or not." As their growth in trading volumes and prestige enabled them to impose formal listing agreements and listing fees upon issuers, many of these exchanges came to abolish unlisted trading entirely, as the New York Stock Exchange has done, or to restrict it to issues listed upon other leading exchanges.21 A resolution adopted by the Boston Stock Exchange in 1869 provided that "securities dealt in at the New York or Philadelphia Stock Exchanges may be called once, after the regular list, without charge ." The rule on the Philadelphia Stock Exchange by 1932 was that no securities could be admitted to unlisted trading which were not listed on the New York Stock Exchange, New York Curb Exchange, as it was then styled, Boston Stock Exchange, Pittsburgh Stock Exchange, or Chicago Stock Exchange.

The American Stock Exchange (known as the New York Curb Exchange until 1953) is the principal center of exchange trading on an unlisted basis. In 1931-32 it had over 1,800 stock and 850 bond issues on its unlisted roster. As a result of the New York State Attorney General's examination of unlisted trading practices, the number was substantially reduced during 1933-34 by removal of issues inactively traded on the Exchange. The New York Produce Exchange provided facilities for security trading from 1928 to 1935, and had about 750 stock and 150 bond issues available for unlisted trading. The New York Real Estate Securities Exchange operated from 1929 to 1941, and had about 100 stock and 200 bond issues available for trading on an unlisted basis. A number of other exchanges on which unlisted trading occurred ceased to operate in the early days of the

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21 The listing process has had a long evolution. As early as 1847, the New York Stock Exchange called for transfer books to be located in New York City. Its Committee on Stock List, created in 1869, promulgated rules protecting against forgery and over-issuance of securities, and sought to obtain statements of condition and lists of officers of issuers. The regular files of printed listing statements date from 1884. By 1900, the Exchange had commenced to call upon applicants for agreements to publish detailed statements and annual reports. The issuers' agreements with the Exchange became more comprehensive over the years, providing for periodic earnings statements, independent auditing, prompt notifications of issuer actions affecting their security holders, etc. With the advent of the Commission, the requirements of the listing agreements were supplemented by the requirements for registration along with listing.

Commission.

The net number of securities admitted to unlisted trading on the exchanges prior to 1934 is not available, but clearly ran into thousands.

Under section 12(f) of the Securities Exchange Act of 1934 22 the Commission may approve applications by national securities exchanges to admit securities to unlisted trading privileges without action on the part of the issuers, if it finds such admissions are necessary or appropriate in the public interest or for the protection of investors. Such admissions impose no duties on issuers beyond any they may already have under the act. Section 12(f) provides for three categories of unlisted trading privileges. Clause (1) provides for continuation of unlisted trading privileges existing on the exchanges prior to March 1, 1934. Clause (2) provides for granting by the Commission of applications by exchanges for unlisted trading privileges in securities listed on other exchanges. Clause (3) provides for granting by the Commission of applications for unlisted trading privileges conditioned, among other things, upon the availability of information substantially equivalent to that required to be filed by listed issuers.

Included under clause (1) of section 12(f) are securities which had unlisted trading privileges on some exchanges prior to March 1, 1934, and (a) were also listed and registered on some other exchange or exchanges, or (b) were admitted only to unlisted exchange trading. Issuers of securities in group (a) are subject to the statutory reporting requirements by reason of the listing and registration of their securities. Issuers of securities in group (b) may or may not be issuing public reports. Of the issues in group (b), only 246 stock and 20 bond issues remained in that status as of June 30, 1959. The attrition has been due to many factors. Bond and preferred stock issues have been retired. Companies have merged or liquidated. Marginal exchanges opening around the 1929 peak of market activity ceased operations thereafter. Many leading common stocks traded on an unlisted basis have subsequently been listed or exchanged for listed stocks of merging companies.

The stocks with only unlisted trading privileges on the exchanges had an aggregate market value of $21.4 billion as of December 31, 1958. Standard Oil (New Jersey) held 52.5 percent of this total in stocks of Creole Petroleum Corporation, Humble Oil & Refining Company, Imperial Oil Limited, and International Petroleum Company, Limited. An additional 17.5 percent of the total was of 58 issues of

"The original bills proposed abolition of unlisted trading on stock exchanges. The proposals were opposed by the American Stock Exchange and other smaller exchanges as presenting too sharp a transition. Congress directed the Commission to study the problem and submit its recommendations, which was done in a "Report on Trading in Unlisted Securities upon Exchanges," dated January 3, 1936. The recommendations

were adopted and the present section 12(f) was enacted in May 1936.

55 issuers reporting as fully as though they were listed, by reason of registrations under the Securities Act, the Public Utility Holding Company Act, the Investment Company Act, or because the issuers in some cases had other securities listed on registered exchanges. The residue in public hands of such unlisted stocks accordingly amounted to only about $6.5 billion, and of this amount, about $4.2 billion was of 70 Canadian and other foreign stocks and American depositary receipts for foreign shares. The reported volume of trading on the exchanges in stock admitted to unlisted trading only, for the calendar year 1958, was about 32.3 million shares or about 2.5 percent of the total share volume on all the exchanges. Over 90 percent of this 32.3 million share volume was on the American Stock Exchange.

Unlisted trading privileges on exchanges in issues listed and registered on other exchanges, granted under clause (1), are for the life of the issue, while those granted under clause (2) are only for the duration of the issue's listing and registration on another exchange." The number of unlisted trading privileges 24 granted under clause (1), in issues listed on other exchanges, were 991 in stocks and 75 in bonds on December 31, 1935. Similar privileges were thereafter granted under clause (2) for 1,410 stock issues and 8 bond issues. Mergers of exchanges, mergers of issuers, etc., have reduced the number of such privileges, which as of June 30, 1959, comprised 1,492 in stocks and 1 in bonds. The reported volume of trading on the exchanges pursuant to these unlisted trading privileges for the calendar year 1958 was about 38.7 million shares or about 3 percent of the total share volume on all the exchanges. About 15 percent of this 38.7 million share volume was on the American Stock Exchange and 85 percent was on the regional exchanges.

On June 30, 1959, unlisted trading privileges existed pursuant to clause (3) of section 12(f) in only 12 bond and 4 stock issues, and 2 of the stock issues have also become listed on other exchanges. There have been no applications under clause (3) since 1949.

Applications for Unlisted Trading Privileges

Applications by exchanges for unlisted trading privileges in stocks listed on other exchanges, made pursuant to clause (2) of section 12(f) of the Securities Exchange Act, were granted by the Commission during the fiscal year ended June 30, 1959 as follows:

"Ordinarily, delisting occurs upon termination of the existence of an issue, and so the unlisted trading privileges therein, whether under clause (1) or clause (2), also end, Occasionally, however, an unlisted trading privilege on one exchange granted under clause (1) has continued after the issue has been delisted from another exchange upon application by the issuer or by the exchange or because a listing was dropped upon merger of exchanges. Currently, 4 such unlisted trading privileges continue in stocks which were formerly listed on other exchanges.

24 The number of trading privileges is greater than the number of issues because there may be trading privileges in an issue on more than one exchange.

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Rule 12f-2 under section 12(f) of the Securities Exchange Act provides that when a security admitted to unlisted trading on an exchange is changed in more than certain stipulated minor respects, the exchange may apply for Commission determination that the unlisted trading privileges may continue on the ground that the changed security is substantially equivalent to the security theretofore admitted to unlisted trading privileges. During the fiscal year the Commission granted applications by the American Stock Exchange for continuance of unlisted trading under this rule in three stock issues and two bond issues.

BLOCK DISTRIBUTIONS REPORTED BY EXCHANGES

Rule 10b-2 under the Securities Exchange Act of 1934 in substance prohibits any person participating or otherwise financially interested in the primary or secondary distribution of a security from paying any other person for soliciting a third person to buy any security of the same issuer on a national securities exchange. This rule is an antimanipulative rule adopted under section 10(b) of the act which makes it unlawful for any person to use any manipulative or deceptive device or contrivance in contravention of Commission rules prescribed in the public interest or for the protection of investors. Paragraph (d) of rule 10b-2 exempts transactions where compensation is paid pursuant to the terms of a plan, filed by a national securities exchange and declared effective by the Commission, authorizing the payment of such compensation in connection with the distribution. The Commission in its declaration may impose such terms and conditions upon such plan as it deems necessary or appropriate in the public interest or for the protection of investors.

At the present time two types of plans are in effect to permit a block of securities to be distributed through the facilities of a national securities exchange when it has been determined by the exchange that the regular market on the floor of the exchange cannot absorb the particular block within a reasonable time and at a reasonable price or prices. These plans have been designated the "Special Offering Plan," essentially a fixed price offering based on the market price,

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