What Are Unlisted Trading Privileges (UTP)?
Let me explain what Unlisted Trading Privileges, or UTP, really mean. They cover the processes for trading securities that aren't required to hit certain minimum standards to get traded on an exchange. You'll find the regulations for UTP laid out in the Unlisted Trading Privileges Act of 1994.
Key Takeaways
Here's what you need to know about UTP: they are the rules for trading securities that don't qualify for full listing on an exchange. In the U.S., this is governed by the Unlisted Trading Privileges Act of 1994, which updated the Securities Exchange Act of 1934. Unlisted shares often include over-the-counter options like penny stocks or shares from privately-held companies. With UTP, a company's stock can trade on an exchange even if it hasn't met that exchange's extra requirements.
Understanding Unlisted Trading Privileges (UTP)
I want you to understand that UTP were created to boost liquidity for securities in markets outside registered exchanges. They let certain companies trade on an exchange without fulfilling the additional criteria each national securities exchange demands for listing. You see this most often with over-the-counter (OTC) shares, sometimes called pink sheets, which can include penny stocks.
In the past, the Securities and Exchange Commission (SEC) granted UTP through an application process. But in 1994, Congress passed the Unlisted Trading Privileges Act, changing how this works. Now, the company issuing the security and the exchange where it's traded must jointly seek SEC authorization for UTP.
Unlisted Trading Privileges Act of 1994
This Act amended the Securities Exchange Act of 1934, which is the main law governing secondary market trading of securities in the United States.
You can find the provisions in U.S. Code Title 15, Section 78(l)(f). It permits any securities exchange to offer UTP to a company that meets the Act's specified conditions. The company has to comply fully with the parts of the 1934 Act before section (f), which outline standards for listing on national securities exchanges.
The Act was built on principles aimed at fostering fair and efficient trading while protecting everyone involved. So, all UTP decisions must uphold these principles.
Key Provisions of the UTP Act
- An exchange can offer UTP to a security that's listed on another national securities exchange and complies with that exchange's requirements.
- The extension of UTP must be approved by the SEC, which can add certain additional requirements.
- The SEC has the right to revoke and reinstate UTP on an exchange.
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