Unlisted Trading Privileges (UTP)

What Are Unlisted Trading Privileges (UTP)?

Unlisted trading privileges (UTP) refer to the processes around the trading of a security that is not required to meet certain minimum requirements to be traded on an exchange. Regulation for UTP is detailed in the Unlisted Trading Privileges Act of 1994.

Key Takeaways

  • Unlisted trading privileges (UTP) refer to the rules regarding trading securities that do not meet the requirements for listing on an exchange.
  • In the U.S., regulation for unlisted trading is spelled out in the Unlisted Trading Privileges Act of 1994, an amendment to the Securities Exchange Act of 1934.
  • Unlisted shares include over-the-counter shares such as penny stocks or those of privately-held companies.
  • With UTP, a company's stock can be traded on an exchange even though the company hasn't met the additional requirements of that particular exchange. 

Understanding Unlisted Trading Privileges (UTP)

UTP were developed in order to help increase the liquidity of securities across markets that do not include registered exchanges. UTP give certain companies the ability to trade on an exchange without meeting the additional requirements required for each national securities exchange in which they choose to list their security. The most common instance of unlisted trading occurs with over-the-counter (OTC) shares, also known as pink sheets, which may include penny stocks.

Historically, UTP were granted by the Securities and Exchange Commission (SEC) through an application process. However, Congress in 1994 enacted the Unlisted Trading Privileges Act, which changed the procedures for UTP. The new provisions required the company offering a security issuance, and the exchange where the security is traded, to work jointly in gaining authorization for UTP from the SEC.

Unlisted Trading Privileges Act of 1994

The Unlisted Trading Privileges Act amended the Securities Exchange Act of 1934, which serves as a primary governing legislation for the requirements for secondary market trading of securities in the United States.

The Unlisted Trading Privileges Act provisions are detailed in U.S. Code Title 15, Section 78(l)(f). This law allows any securities exchange to extend UTP to any company that meets the specified provisions detailed in the Act. The company must be fully compliant with the provisions preceding part (f) of the 1934 Securities Act, which discusses the standards required for national securities exchange listing.

The Unlisted Trading Privileges Act of 1994 was developed on principles that seek to cultivate fair and efficient market trading as well as protections for all parties involved. Therefore, all decisions surrounding UTP seek to consider and maintain certain principles.

Key provisions of the UTP Act include:

  • An exchange can offer UTP to a security that is listed on another national securities exchange in compliance with that exchange's requirements.
  • The extension of UTP must be approved by the SEC, which can integrate certain additional requirements.
  • The SEC has the right to revoke and reinstate UTP on an exchange.

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  1. U.S. Congress. "H.R. 4535—Unlisted Trading Privileges Act of 1994." Accessed Aug. 23, 2021.