Unlisted Trading Privileges (UTP) Definition

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Unlisted Trading Privileges (UTP) Definition

What Are Unlisted Trading Privileges (UTP)?

Unlisted trading privileges (UTP) refer to the procedures involved in trading a securities that does not have to fulfill certain minimum standards in order to be traded on an exchange. The Unlisted Trading Privileges Act of 1994 contains extensive regulations for UTP.

Key Takeaways

  • Unlisted trading privileges (UTP) are the regulations for trading securities that do not match the standards for exchange listing.
  • The Unlisted Trading Privileges Act of 1994, a modification to the Securities Exchange Act of 1934, governs unlisted trading in the United States.
  • Over-the-counter shares, such as penny stocks, and privately owned firms are examples of unlisted shares.
  • With UTP, a firm’s stock may be traded on an exchange even if the company has not satisfied the exchange’s extra standards.

Understanding Unlisted Trading Privileges (UTP)

UTP were created to assist boost the liquidity of securities in markets that do not have recognized exchanges. UTP allows some corporations to trade on an exchange without having to fulfill the extra criteria of each national securities exchange where they wish to list their security. Over-the-counter (OTC) shares, commonly known as pink sheets and include penny stocks, are the most frequent kind of unlisted trading.

Historically, UTP were issued via an application procedure by the Securities and Exchange Commission (SEC). However, in 1994, Congress passed the Unlisted Trading Privileges Act, which altered the rules for UTP. The new regulations required the firm issuing a security and the exchange where the asset is traded to collaborate in obtaining SEC permission for UTP.

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Unlisted Trading Privileges Act of 1994

The Securities Exchange Act of 1934, which serves as the principal governing law for the requirements for secondary market trading of securities in the United States, was changed by the Unlisted Trading Privileges Act.

The terms of the Unlisted Trading Privileges Act are specified in U.S. Code Title 15, Section 78(l) (f).This legislation authorizes any securities exchange to grant UTP to any firm that fulfills the Act’s specific requirements. Part (f) of the 1934 Securities Act, which outlines the requirements necessary for national securities exchange listing, requires the firm to be completely compliant with the sections before it.

The Unlisted Trading Privileges Act of 1994 was based on concepts that aim to promote fair and efficient market trading while also providing protection for all parties concerned. As a result, all UTP-related choices aim to evaluate and adhere to specific criteria.

Key provisions of the UTP Act include:

  • In accordance with the regulations of that exchange, an exchange may issue UTP to a security that is listed on another national securities exchange.
  • The SEC must authorize the extension of UTP, which may include certain extra restrictions.
  • The SEC has the authority to cancel and reactivate UTP on an exchange.

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