Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto, To Modify Certain Fees for Listing on the Nasdaq Stock Market and To Make Available Products and Services Intended To Assist Companies With Their Disclosure and Regulatory Obligations, Shareholder Communications, and Other Corporate Objectives, 67410-67414 [E6-19620]

Download as PDF 67410 Federal Register / Vol. 71, No. 224 / Tuesday, November 21, 2006 / Notices investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–BSE–2006–51 on the subject line. sroberts on PROD1PC70 with NOTICES Paper comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BSE–2006–51. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the BSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BSE–2006–51 and should be submitted on or before December 12, 2006. VerDate Aug<31>2005 14:17 Nov 20, 2006 Jkt 211001 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.11 Nancy M. Morris, Secretary. [FR Doc. E6–19622 Filed 11–20–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54752; File No. SR– NASDAQ–2006–040] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto, To Modify Certain Fees for Listing on the Nasdaq Stock Market and To Make Available Products and Services Intended To Assist Companies With Their Disclosure and Regulatory Obligations, Shareholder Communications, and Other Corporate Objectives November 14, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 2, 2006, The NASDAQ Stock Market LLC (‘‘Nasdaq’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. On October 30, 2006, Nasdaq filed Amendment No. 1. Nasdaq filed Amendment No. 2 on October 31, 2006. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to: (i) Modify annual fees for Nasdaq Global Market and Nasdaq Capital Market issuers; (ii) modify entry fees for Nasdaq Capital Market issuers; (iii) modify the listing of additional shares (‘‘LAS’’) fee for domestic issuers and establish an LAS fee for foreign issuers; (iv) modify fees for issuers seeking written interpretations of Nasdaq’s listing rules; and (v) adopt other fee changes related to companies listing on and transferring between Nasdaq markets. The text of the proposed rule change is available at Nasdaq, at the Commission’s Public 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 Reference Room, and at www.nasdaq.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A . Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes several modifications to its listing and other issuer fees as set forth below. (i) Capital Market Entry Fee Changes Nasdaq proposes to modify the entry fees payable by issuers listing on the Nasdaq Capital Market.3 This fee is assessed on the date of entry and is calculated based on total shares outstanding. Currently, the minimum entry fee payable by a Nasdaq Capital Market issuer is $25,000 for listing up to five million shares of securities and the maximum fee is $50,000 for listing over 15 million shares. Pursuant to the proposed rule change, the minimum entry fee would increase to $50,000 for an issuer listing up to 15 million shares and the maximum fee would increase to $75,000 for an issuer listing over 15 million shares. In determining these fees, Nasdaq considered the fees charged by other markets and notes that the proposed Capital Market entry fees remain substantially below those of the New York Stock Exchange (‘‘NYSE’’) and NYSE Arca, and, are comparable to the fees charged by the American Stock Exchange (‘‘Amex’’).4 Nasdaq also considered the time and effort that its staff devotes to the review and consideration of the typical Capital Market application. Finally, Nasdaq considered recent enhancements to its trading markets that facilitate initial public offerings, such as the Nasdaq IPO 3 Nasdaq entry fees for Capital Market issuers were last increased in 2003. See Securities Exchange Act Release No. 47111 (December 31, 2002), 68 FR 822 (January 7, 2003) (SR–NASD– 2002–183). 4 The proposed Capital Market entry fees range from $15,000 below to $5,000 higher than the comparable Amex fee. E:\FR\FM\21NON1.SGM 21NON1 Federal Register / Vol. 71, No. 224 / Tuesday, November 21, 2006 / Notices Cross. The IPO Cross is designed to ensure a more orderly market for new issues, as well as to provide fair executions for investors through an open and transparent process in which investors have the ability to enter orders and participate in price discovery, creating a single price for IPOs based on supply and demand. Nasdaq believes that this enhanced opening process increases the value of a Nasdaq listing. sroberts on PROD1PC70 with NOTICES (ii) Listing of Additional Shares Fee Changes In addition, Nasdaq proposes to modify the fees for listing additional shares by domestic companies listed on the Nasdaq Global Market or the Nasdaq Capital Market.5 Under the existing rule, Nasdaq issuers are assessed a quarterly fee of $2,500 or $0.01 per additional share, whichever is higher, up to an annual maximum of $45,000 per issuer. Under the proposed rule, the minimum quarterly fee would increase to $5,000 and the maximum fee would increase to $65,000 per year. The rule would continue to provide that no fee is charged for issuances of up to 49,999 additional shares per quarter. In addition, Nasdaq proposes to introduce an LAS fee in the amount of $5,000 for non-U.S. companies that list additional shares or additional shares underlying ADRs in a given fiscal year. Historically, these companies were not charged an LAS fee. Nasdaq will calculate and assess this fee annually based on the change in the issuer’s total shares outstanding as reported on its annual reports filed with the SEC. As with domestic issuers, however, there will be no fee for issuances of up to 49,999 additional shares per year. The LAS fee is designed, in part, to offset the costs associated with reviewing the transactions that give rise to the issuance of shares for compliance with Nasdaq’s requirements. In that regard, Nasdaq staff has devoted increased time to counseling companies regarding the application of those rules and has developed a comprehensive Web site providing guidance to companies, including frequently asked questions, summaries of Nasdaq interpretive positions, and rulings by the Nasdaq Listing and Hearing Review Council. The revised LAS fees will allow Nasdaq to continue these efforts. In addition, the proposed LAS fee on non-U.S. companies will allocate costs attributable to those companies in a more equitable manner. Nasdaq believes 5 LAS fees were last increased in 2003. See Securities Exchange Act Release No. 48631 (October 15, 2003), 68 FR 60426 (October 22, 2003) (SR– NASD–2003–127). VerDate Aug<31>2005 14:17 Nov 20, 2006 Jkt 211001 it is appropriate to maintain a lower LAS fee for non-U.S. companies because the Nasdaq listing is often not the primary listing for such companies. (iii) Annual Fee Changes Nasdaq proposes to modify the annual fees payable by domestic and foreign issuers listed on the Nasdaq Global Market (including the Nasdaq Global Select Market) or the Nasdaq Capital Market.6 Currently issuers on each market are required to pay an annual fee based on the total number of shares outstanding. Under the proposed rule change, annual fees on the Nasdaq Global Market would increase from a minimum of $24,500 and a maximum of $75,000 to a minimum of $30,000 and a maximum of $95,000. In addition, annual fees on the Nasdaq Capital Market would increase from a minimum of $17,500 and a maximum of $21,000 to a $27,500 flat fee for any amount of shares outstanding. Annual fees for American Depositary Receipts (‘‘ADRs’’) listed on the Capital Market and ADRs and Closed End Funds on the Global Market would remain unchanged. Nasdaq competes with several other domestic and international stock markets for company listings. Nasdaq considered the fees charged by these other markets in determining the new fees.7 Nasdaq also considered the substantial resources it dedicates to its regulatory programs, ensuring that they are world-class. The Nasdaq Listing Qualifications Department monitors companies for compliance with the continued listing standards. In that regard, Listing Qualifications staff reviews all SEC filings made by Nasdaqlisted companies, including proxies and Forms 10–Q, 10–K and 8–K. This review is to assure that the issuer remains compliant with Nasdaq’s financial and qualitative requirements, including all of Nasdaq’s corporate governance listing standards. These reviews are facilitated by the use of a sophisticated, web-based compliance monitoring tool, which Nasdaq continuously enhances. In addition, Nasdaq has taken steps to 6 Nasdaq annual fees were last increased in 2005. See Securities Exchange Act Release No. 50838 (December 10, 2004), 69 FR 75578 (December 17, 2004) (SR–NASD–2004–128). 7 The proposed $27,500 Capital Market annual fee compares to fees of $30,000—$85,000 on NYSE Arca and from $16,500—$34,000 on Amex. Each of these markets has listing standards comparable to those applicable to Capital Market companies. The proposed annual fees for the Nasdaq Global and Global Select Markets range from $30,000 to $95,000, compared to fees on the NYSE that range from $38,000 to $500,000. For any amount of shares outstanding, Nasdaq’s fees would be less than those of the NYSE, and would be more than $400,000 less for some Global and Global Select Market companies. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 67411 enhance the transparency available to investors and potential investors surrounding its review of deficient companies and has enhanced its Web site to provide guidance to Nasdaqlisted companies. The Nasdaq MarketWatch Department maintains an orderly marketplace and a level playing field for market participants, investors and the general public. MarketWatch staff provides real-time surveillance of price and volume information reported by market participants, and reviews abnormal activity to determine if action is required to maintain a fair market. This surveillance is supported by realtime, automated detection systems, newsgathering resources, and contacts at listed companies and trading firms. Nasdaq companies and their investors also benefit by Nasdaq having an independent regulator in NASD, which enhances confidence in the trading of their securities. In setting fees, Nasdaq also considered enhancements made to its trading systems since it last raised fees. For example, Nasdaq has implemented an ‘‘Opening Cross’’ and a ‘‘Closing Cross,’’ which determine a single price for the opening and closing, respectively, thereby helping issuers and investors by increasing liquidity and improving price discovery at these critical times of the day. Nasdaq also plans to launch Intraday Crosses and a Post-Close Cross and is in the final stages of launching its ‘‘Single Book’’ platform, which will further enhance liquidity for Nasdaq-listed companies. By contributing to increased liquidity, these systems help lower the cost of capital for Nasdaq-listed companies and their investors. While most of the costs of these systems are borne by their users, it is appropriate to consider the costs of developing and running these systems in establishing listing fees because listed companies and their investors benefit from the existence of these systems and because the systems enhance the value of a Nasdaq listing. In addition, Nasdaq has announced that it will make available products and services intended to assist companies with their disclosure and regulatory obligations, shareholder communications, and other corporate objectives. Specifically, Nasdaq intends to provide enhancements to NASDAQ Online and the Market Intelligence Desk that will provide companies with additional information and analysis to help manage their investor relationship programs and understand movements in the market for their securities. In addition, Nasdaq intends to offer companies a service that converts their annual report and proxy material into a E:\FR\FM\21NON1.SGM 21NON1 67412 Federal Register / Vol. 71, No. 224 / Tuesday, November 21, 2006 / Notices sroberts on PROD1PC70 with NOTICES dynamic, online document for use by current and potential shareholders. Nasdaq also intends to offer companies a customized report to help analyze their exposure to securities litigation and, for those companies that choose to participate, peer data on the size, structure and cost of director and officer insurance programs. Finally, Nasdaq plans to offer the following services: four audio webcasts, four press releases, and four Form 8–K filings.8 Of course these services cannot satisfy all of a typical company’s disclosure and compliance requirements, but using these services a company could, for example, announce their earnings each quarter to investors in a press release, file that press release on a Form 8–K, and have an audio webcast to discuss the quarter’s results. Thus, Nasdaq believes that these services can assist companies in their disclosure requirements and will allow investors better access to company information. Nasdaq believes that all of these enhancements and services will assist companies in fulfilling their responsibilities as public companies, facilitate their investor relations and visibility goals, allow investors better access to company information and, while incidental to the listing, will differentiate a Nasdaq listing. Moreover, Nasdaq notes that these services are consistent with services that exchanges have long made available to their listed companies, which may or may not be used by those companies.9 While not every company will use every service, Nasdaq believes there will be something of value to all companies. Further, given that Nasdaq’s listing fees are generally below those of other markets, every 8 Audio webcasts are encoded audio streams that are distributed via internet compliant file formats. Press releases, limited to 500 words, would be distributed over the PrimeZone U.S. circuit, which includes distribution to all major financial and news organizations. Companies will be able to file Forms 8–K with the Commission via the Commission’s EDGAR system. The services described are what Nasdaq intends to offer during 2007. Nasdaq also plans to offer these or similar services on an ongoing basis, but will evaluate companies’ usage of the services and explore other opportunities for services for listed companies, and may adjust the mix of products and services accordingly. 9 For example, an exchange may hold an investor conference at which a company can elect to present information, or can choose not to do so. Another exchange may make a market opening ceremony available, of which some issuers may take advantage and others do not. Exchanges make reports available to their listed companies; some companies use those reports, whereas other companies instead obtain similar reports from third parties. Similarly, Nasdaq understands that other markets have made available investor disclosure services, such as webcasts, for their listed companies in recent years, which some companies have elected not to use. VerDate Aug<31>2005 14:17 Nov 20, 2006 Jkt 211001 Nasdaq also proposes to adopt two new fee waivers and eliminate the entry fee for most companies transferring between the Nasdaq Capital Market and the Nasdaq Global Market. First, Nasdaq is proposing to adopt new Interpretive Material to clarify that, in the case where a Nasdaq-listed company is acquired by a non-Nasdaq company and the surviving entity of the merger lists on the Nasdaq Global Market or the Nasdaq Capital Market, the company would receive a pro-rated waiver of the annual fee for the period of time following the merger. Because the newly listing company would also be assessed an annual fee for that period, Nasdaq believes that it is equitable to provide this waiver. Second, Nasdaq proposes to waive the entry fee if a non-listed company acquires a company listed on another market, and, in connection with the acquisition, the surviving entity lists on Nasdaq. Nasdaq believes that this situation is comparable to a company switching from another exchange, for which Nasdaq waives the entry fee. Although these companies would be reviewed for compliance with Nasdaq listing standards in the same manner as any other company applying for listing on Nasdaq, Nasdaq believes that, on average, the review of such an issuer is less likely to involve time-consuming regulatory issues than the typical application from a company conducting an initial public offering or transferring from the over-the-counter market. Third, the proposed rule change would eliminate the entry fee for most companies transferring between the Nasdaq Capital Market and the Nasdaq Global Market. The Global Market entry fee would not be applicable to a transfer from the Capital Market to the Global Market, except if a company that qualified for the Global Market chose to initially list after January 1, 2007, on the Capital Market instead. In this limited case, when the company seeks to transfer, Nasdaq will charge the company the difference between the Global Market Fee in effect at the time of the transfer and the Capital Market fee previously paid. Nasdaq believes the waiver of the entry fee is appropriate because these companies are already subject to Nasdaq’s regulation and Nasdaq’s qualitative listing requirements. As such, while Nasdaq conducts a complete review of all applicants, Nasdaq’s experience is that the review of a company that is already listed on Nasdaq will generally take less time and effort than the application of an unlisted issuer. Nasdaq also notes that the waiver will allow Nasdaq to better compete with other markets for listings. In that regard, NYSE Group recently adopted a fee waiver for companies transferring between NYSE Arca and NYSE.11 The proposed waiver is, in part, a response to that fee structure, intended to incent companies to initially list and remain listed on Nasdaq, rather than seek a listing 10 See Securities Exchange Act Release No. 48450 (September 4, 2003), 68 FR 53770 (September 12, 2004) (SR–NASD–2004–105). 11 See Securities Exchange Act Release No. 54223 (July 26, 2006), 71 FR 43833 (August 2, 2006) (SR– NYSE–2006–43). company will receive significant value for its listing fee in comparison to a listing on other markets. (iv) Fees for Written Interpretations Under Nasdaq Rule 4550, an issuer considering a specific action or transaction can request an interpretation from Nasdaq as to how Nasdaq’s rules apply to the proposed action or transaction. This service is provided for a non-refundable fee of $2,000, and the process generally takes four weeks. Alternatively, an issuer may elect to pay a non-refundable fee of $10,000 to receive an expedited response, which will be provided by a specific date that is less than four weeks but at least one week after the date staff receives all information necessary to respond to the request. Under the proposed rule, the nonrefundable fee for a written interpretation under the regular service would increase from $2,000 to $5,000 and the fee for expedited service would increase from $10,000 to $15,000. The process for reviewing written interpretations was established in 2003 and fees have not been increased since that date.10 Since that time, many of the interpretative issues raised by this process have become more complex and taken an increasing amount of staff time, due in part to an increased focus on corporate governance, executive compensation issues and new SEC requirements regarding board composition and other matters. Given these changes, Nasdaq believes the fee increase is appropriate to support the ongoing cost of providing this service to issuers and to allocate that cost to those companies using this service. In addition, Nasdaq proposes to modify Rule 4550 to clarify that an issuer that has been suspended or delisted, but where review of that decision is pending, is eligible to request a written interpretation upon payment of the applicable fee. (v) Other Fee Changes and Waivers PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\21NON1.SGM 21NON1 Federal Register / Vol. 71, No. 224 / Tuesday, November 21, 2006 / Notices elsewhere, thereby promoting competition between Nasdaq and other exchange markets. (vi) Implementation The new annual fee schedule would be effective January 1, 2007. The new LAS fee schedule for domestic issuers would be effective for issuers starting with fiscal years beginning on or after January 1, 2007. Nasdaq will establish the initial number of shares for the LAS fee for non-U.S. issuers based on an issuer’s first annual filing after January 1, 2007. Companies will be assessed the fee for the increase in the number of shares based on the subsequent annual filing. The entry fee changes would be effective upon approval of the proposed rule change by the Commission. However, issuers that have submitted a listing application to the Nasdaq Capital Market and paid the applicable application fee prior to the approval of the proposed rule change would be charged an entry fee based on the existing fee schedule and would not be subject to the change in entry fees. sroberts on PROD1PC70 with NOTICES 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,12 in general, and with Section 6(b)(4) of the Act,13 in particular. Section 6(b)(4) requires that Nasdaq’s rules provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. As described above, the proposed rule change will benefit issuers and investors by providing an equitable allocation of reasonable fees and charges among issuers listed on Nasdaq and allow Nasdaq to continue to enhance the services provided to issuers. B. Self-Regulatory Organization’s Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In that regard, Nasdaq notes that the proposed fees are generally lower than the fees charged by other U.S. marketplaces for listing and are appropriate in light of the trading system enhancements Nasdaq has made and the regulatory oversight that Nasdaq provides. The proposed fees are also justified because of the numerous additional services that Nasdaq provides and plans to provide to listed companies. Nasdaq 12 15 13 15 U.S.C. 78f. U.S.C. 78f(b)(4). VerDate Aug<31>2005 14:17 Nov 20, 2006 Jkt 211001 believes that by offering additional services to listed companies Nasdaq will differentiate itself, thereby enhancing competition among marketplaces, both domestically and globally, by increasing the value of a Nasdaq listing.14 Nasdaq also believes that offering services to listed companies will enhance competition among the providers of those services. The press release and Edgar-filing services that are being provided do not nearly satisfy listed-companies’ needs for these services. As such, companies will still need to purchase these services from service providers and these service providers will continue to compete for this business based on price, reliability, and quality of services. To the extent that Nasdaq becomes a meaningful competitor to the existing providers of such services, listed companies will benefit from enhanced competition for their business. With respect to press-release distribution, in particular, Nasdaq notes that its participation can only increase competition. Nasdaq estimates that two service providers, PR Newswire and Business Wire, distribute approximately 85% to 90% of press releases for public companies listed on U.S. exchanges.15 By contrast, PrimeZone Media Network, the Nasdaq-owned company which will provide the services described, distributes fewer than 5% of press releases for public companies listed on U.S. exchanges. In fact, if all Nasdaq companies make use of all four press releases proposed to be offered to them, Nasdaq estimates that PR Newswire and Business Wire combined will still distribute more than 80% of press releases for public companies listed on U.S. exchanges. Given this landscape, it is apparent that the services Nasdaq is offering companies could only enhance competition, thereby reducing costs for our listed companies, and would not be a burden on competition. These same providers, as well as Thomson Financial, and financial printers, such as Bowne, Donneley, and Merrill Corp., among others, also provide services comparable to the Form 8–K EDGAR filings and webcasts that Nasdaq 14 See Securities Exchange Act Release No. 54155 (July 14, 2006), 71 FR 41291 (July 20, 2006) (SR– NASDAQ–2006–001) where the Commission noted that Nasdaq operates in a competitive global exchange marketplace for listings, financial products, and market services and competes in such an environment with other market centers, including national securities exchanges, ECNs, and other alternative trading systems, for the privilege of providing market and listing services to brokerdealers and issuers. 15 Based on Nasdaq’s analysis of press releases sourced from the Comtex News Network data feed for the 90 days ending on October 23, 2006. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 67413 intends to provide. With respect to EDGAR filings, Nasdaq notes that in the twelve months prior to October 26, 2006, there were approximately 750,000 EDGAR filings.16 Even if all Nasdaqlisted companies used all four Form 8– K filings, this would represent less than 2% of total EDGAR filings. As such, Nasdaq does not believe its proposal will have any adverse impact on competition for these services. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Nasdaq has received two comments regarding the proposed rule change. One commenter requested additional information about the services offered by Nasdaq and questioned the competitive impact of Nasdaq offering services to listed companies. Nasdaq’s response to these questions are incorporated in Items 3 and 4, above. In addition, the commenter questioned whether Nasdaq will devote sufficient resources to the dissemination of information through PrimeZone. In fact, Nasdaq and PrimeZone are committed to expanding the already substantial PrimeZone distribution network. Finally, the commenter suggested that providing PrimeZone services to listed companies may be a ‘‘conflict of interest’’ with Nasdaq’s role as a regulator. Nasdaq strongly disagrees with this assertion as Nasdaq does not regulate the market for information dissemination. While Nasdaq rules support the rules of the Commission by requiring companies to disclose material news, Nasdaq rules defer to the Commission’s rules to determine the proper method of such disclosure.17 Nasdaq has no intention to change these rules.18 A second commenter expressed concerns about paying for services that his company would not use. As noted in Section 3, above, Nasdaq believes that the listing fee provides substantial value even to companies that do not use any of the services offered by Nasdaq, as it also pays for access to the trading 16 This estimate is based on a search of the EDGAR database performed through EDGARpro at http://pro.edgar-online.com/. 17 Nasdaq rules permit material information to be disclosed in ‘‘any Regulation FD complaint method (or combinations of methods).’’ See Nasdaq Rule 4310(c)(16) and IM–4120–1 (emphasis added). 18 The commenter also requested information as to the allocation of fees within Nasdaq. Nasdaq notes that as a public company it files periodic reports that include financial information with the Commission. This information will identify the sources of Nasdaq’s revenues consistent with the requirements for those reports and U.S. generally accepted accounting practice. E:\FR\FM\21NON1.SGM 21NON1 67414 Federal Register / Vol. 71, No. 224 / Tuesday, November 21, 2006 / Notices facilities and regulation of the Nasdaq marketplace, which have been enhanced since the last fee increase. In addition, Nasdaq notes that the services being provided are designed to supplement those a company already uses in achieving its investor relations, disclosure and other corporate objectives. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which NASD consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: sroberts on PROD1PC70 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–NASDAQ–2006–040 on the subject line. Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of Nasdaq. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2006–040 and should be submitted on or before December 12, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Nancy M. Morris, Secretary. [FR Doc. E6–19620 Filed 11–20–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54750; File No. SR– NYSEArca-2006–88] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Fees and Charges November 14, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 13, 2006, NYSE Acra, Inc. (‘‘NYSE Paper Comments Arca’’ or ‘‘Exchange’’) filed with the • Send paper comments in triplicate Securities and Exchange Commission to Nancy M. Morris, Secretary, (‘‘Commission’’) the proposed rule Securities and Exchange Commission, change as described in Items I, II, and Station Place, 100 F Street, NE., III below, which Items have been Washington, DC 20549–1090. prepared by the Exchange. NYSE Arca All submissions should refer to File has designated this proposal as one Number SR–NASDAQ–2006–040. This establishing or changing a due, fee, or file number should be included on the other charge imposed by a selfsubject line if e-mail is used. To help the regulatory organization pursuant to Commission process and review your Section 19(b)(3)(A) of the Act 3 and Rule comments more efficiently, please use 19b–4(f)(2) thereunder,4 which renders only one method. The Commission will the proposal effective upon filing with post all comments on the Commission’s the Commission. The Commission is Internet Web site (http://www.sec.gov/ publishing this notice to solicit rules/sro.shtml). Copies of the comments on the proposed rule change submission, all subsequent from interested persons. amendments, all written statements with respect to the proposed rule 19 17 CFR 200.30–3(a)(12). change that are filed with the 1 15 U.S.C. 78s(b)(1). Commission, and all written 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). communications relating to the 4 17 CFR 240.19b–4(f)(2). proposed rule change between the VerDate Aug<31>2005 14:17 Nov 20, 2006 Jkt 211001 PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Schedule of Fees and Charges in order to modify the fee that applies to Option Strategy Executions.5 The text of the proposed rule change is available on the Exchange’s Internet Web site (http://www.nysearca.com), at the Exchange’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange represents that the purpose of this proposed rule change is to modify the fee that applies to ‘‘Option Strategy Executions.’’ These transactions include reversals and conversions,6 dividend spreads,7 box spreads,8 and merger spreads.9 Because the referenced Options Strategy Executions are generally executed by 5 Fees on Options Strategy Executions are applicable through a Pilot Program until March 1, 2007. 6 Reversals and conversions are transactions that employ calls, puts, and the underlying stock to lock in a nearly risk free profit. Reversals are established by combining a short stock position with a short put and a long call position that shares the same strike and expiration. Conversions employ long positions in the underlying stock that accompany long puts and short calls sharing the same strike and expiration. 7 Dividend spreads are trades involving deep-inthe-money options that exploit pricing differences arising around the time a stock goes ex-dividend. 8 Box Spreads is a strategy that synthesizes long and short stock positions to create a profit. Specifically, a long call and short put at one strike is combined with a short call and long put at a different strike to create synthetic long and synthetic short stock positions, respectively. 9 A merger spread is a transaction executed pursuant to a strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but with different strike prices followed by the exercise of the resulting long option position. E:\FR\FM\21NON1.SGM 21NON1

Agencies

[Federal Register Volume 71, Number 224 (Tuesday, November 21, 2006)]
[Notices]
[Pages 67410-67414]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19620]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54752; File No. SR-NASDAQ-2006-040]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 
Thereto, To Modify Certain Fees for Listing on the Nasdaq Stock Market 
and To Make Available Products and Services Intended To Assist 
Companies With Their Disclosure and Regulatory Obligations, Shareholder 
Communications, and Other Corporate Objectives

 November 14, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 2, 2006, The NASDAQ Stock Market LLC (``Nasdaq'') filed 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared by Nasdaq. On October 30, 2006, Nasdaq 
filed Amendment No. 1. Nasdaq filed Amendment No. 2 on October 31, 
2006. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to: (i) Modify annual fees for Nasdaq Global Market 
and Nasdaq Capital Market issuers; (ii) modify entry fees for Nasdaq 
Capital Market issuers; (iii) modify the listing of additional shares 
(``LAS'') fee for domestic issuers and establish an LAS fee for foreign 
issuers; (iv) modify fees for issuers seeking written interpretations 
of Nasdaq's listing rules; and (v) adopt other fee changes related to 
companies listing on and transferring between Nasdaq markets. The text 
of the proposed rule change is available at Nasdaq, at the Commission's 
Public Reference Room, and at www.nasdaq.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A . Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes several modifications to its listing and other 
issuer fees as set forth below.
(i) Capital Market Entry Fee Changes
    Nasdaq proposes to modify the entry fees payable by issuers listing 
on the Nasdaq Capital Market.\3\ This fee is assessed on the date of 
entry and is calculated based on total shares outstanding. Currently, 
the minimum entry fee payable by a Nasdaq Capital Market issuer is 
$25,000 for listing up to five million shares of securities and the 
maximum fee is $50,000 for listing over 15 million shares. Pursuant to 
the proposed rule change, the minimum entry fee would increase to 
$50,000 for an issuer listing up to 15 million shares and the maximum 
fee would increase to $75,000 for an issuer listing over 15 million 
shares. In determining these fees, Nasdaq considered the fees charged 
by other markets and notes that the proposed Capital Market entry fees 
remain substantially below those of the New York Stock Exchange 
(``NYSE'') and NYSE Arca, and, are comparable to the fees charged by 
the American Stock Exchange (``Amex'').\4\ Nasdaq also considered the 
time and effort that its staff devotes to the review and consideration 
of the typical Capital Market application. Finally, Nasdaq considered 
recent enhancements to its trading markets that facilitate initial 
public offerings, such as the Nasdaq IPO

[[Page 67411]]

Cross. The IPO Cross is designed to ensure a more orderly market for 
new issues, as well as to provide fair executions for investors through 
an open and transparent process in which investors have the ability to 
enter orders and participate in price discovery, creating a single 
price for IPOs based on supply and demand. Nasdaq believes that this 
enhanced opening process increases the value of a Nasdaq listing.
---------------------------------------------------------------------------

    \3\ Nasdaq entry fees for Capital Market issuers were last 
increased in 2003. See Securities Exchange Act Release No. 47111 
(December 31, 2002), 68 FR 822 (January 7, 2003) (SR-NASD-2002-183).
    \4\ The proposed Capital Market entry fees range from $15,000 
below to $5,000 higher than the comparable Amex fee.
---------------------------------------------------------------------------

(ii) Listing of Additional Shares Fee Changes
    In addition, Nasdaq proposes to modify the fees for listing 
additional shares by domestic companies listed on the Nasdaq Global 
Market or the Nasdaq Capital Market.\5\ Under the existing rule, Nasdaq 
issuers are assessed a quarterly fee of $2,500 or $0.01 per additional 
share, whichever is higher, up to an annual maximum of $45,000 per 
issuer. Under the proposed rule, the minimum quarterly fee would 
increase to $5,000 and the maximum fee would increase to $65,000 per 
year. The rule would continue to provide that no fee is charged for 
issuances of up to 49,999 additional shares per quarter.
---------------------------------------------------------------------------

    \5\ LAS fees were last increased in 2003. See Securities 
Exchange Act Release No. 48631 (October 15, 2003), 68 FR 60426 
(October 22, 2003) (SR-NASD-2003-127).
---------------------------------------------------------------------------

    In addition, Nasdaq proposes to introduce an LAS fee in the amount 
of $5,000 for non-U.S. companies that list additional shares or 
additional shares underlying ADRs in a given fiscal year. Historically, 
these companies were not charged an LAS fee. Nasdaq will calculate and 
assess this fee annually based on the change in the issuer's total 
shares outstanding as reported on its annual reports filed with the 
SEC. As with domestic issuers, however, there will be no fee for 
issuances of up to 49,999 additional shares per year.
    The LAS fee is designed, in part, to offset the costs associated 
with reviewing the transactions that give rise to the issuance of 
shares for compliance with Nasdaq's requirements. In that regard, 
Nasdaq staff has devoted increased time to counseling companies 
regarding the application of those rules and has developed a 
comprehensive Web site providing guidance to companies, including 
frequently asked questions, summaries of Nasdaq interpretive positions, 
and rulings by the Nasdaq Listing and Hearing Review Council. The 
revised LAS fees will allow Nasdaq to continue these efforts. In 
addition, the proposed LAS fee on non-U.S. companies will allocate 
costs attributable to those companies in a more equitable manner. 
Nasdaq believes it is appropriate to maintain a lower LAS fee for non-
U.S. companies because the Nasdaq listing is often not the primary 
listing for such companies.
(iii) Annual Fee Changes
    Nasdaq proposes to modify the annual fees payable by domestic and 
foreign issuers listed on the Nasdaq Global Market (including the 
Nasdaq Global Select Market) or the Nasdaq Capital Market.\6\ Currently 
issuers on each market are required to pay an annual fee based on the 
total number of shares outstanding. Under the proposed rule change, 
annual fees on the Nasdaq Global Market would increase from a minimum 
of $24,500 and a maximum of $75,000 to a minimum of $30,000 and a 
maximum of $95,000. In addition, annual fees on the Nasdaq Capital 
Market would increase from a minimum of $17,500 and a maximum of 
$21,000 to a $27,500 flat fee for any amount of shares outstanding. 
Annual fees for American Depositary Receipts (``ADRs'') listed on the 
Capital Market and ADRs and Closed End Funds on the Global Market would 
remain unchanged.
---------------------------------------------------------------------------

    \6\ Nasdaq annual fees were last increased in 2005. See 
Securities Exchange Act Release No. 50838 (December 10, 2004), 69 FR 
75578 (December 17, 2004) (SR-NASD-2004-128).
---------------------------------------------------------------------------

    Nasdaq competes with several other domestic and international stock 
markets for company listings. Nasdaq considered the fees charged by 
these other markets in determining the new fees.\7\ Nasdaq also 
considered the substantial resources it dedicates to its regulatory 
programs, ensuring that they are world-class. The Nasdaq Listing 
Qualifications Department monitors companies for compliance with the 
continued listing standards. In that regard, Listing Qualifications 
staff reviews all SEC filings made by Nasdaq-listed companies, 
including proxies and Forms 10-Q, 10-K and 8-K. This review is to 
assure that the issuer remains compliant with Nasdaq's financial and 
qualitative requirements, including all of Nasdaq's corporate 
governance listing standards. These reviews are facilitated by the use 
of a sophisticated, web-based compliance monitoring tool, which Nasdaq 
continuously enhances. In addition, Nasdaq has taken steps to enhance 
the transparency available to investors and potential investors 
surrounding its review of deficient companies and has enhanced its Web 
site to provide guidance to Nasdaq-listed companies. The Nasdaq 
MarketWatch Department maintains an orderly marketplace and a level 
playing field for market participants, investors and the general 
public. MarketWatch staff provides real-time surveillance of price and 
volume information reported by market participants, and reviews 
abnormal activity to determine if action is required to maintain a fair 
market. This surveillance is supported by real-time, automated 
detection systems, newsgathering resources, and contacts at listed 
companies and trading firms. Nasdaq companies and their investors also 
benefit by Nasdaq having an independent regulator in NASD, which 
enhances confidence in the trading of their securities.
---------------------------------------------------------------------------

    \7\ The proposed $27,500 Capital Market annual fee compares to 
fees of $30,000--$85,000 on NYSE Arca and from $16,500--$34,000 on 
Amex. Each of these markets has listing standards comparable to 
those applicable to Capital Market companies. The proposed annual 
fees for the Nasdaq Global and Global Select Markets range from 
$30,000 to $95,000, compared to fees on the NYSE that range from 
$38,000 to $500,000. For any amount of shares outstanding, Nasdaq's 
fees would be less than those of the NYSE, and would be more than 
$400,000 less for some Global and Global Select Market companies.
---------------------------------------------------------------------------

    In setting fees, Nasdaq also considered enhancements made to its 
trading systems since it last raised fees. For example, Nasdaq has 
implemented an ``Opening Cross'' and a ``Closing Cross,'' which 
determine a single price for the opening and closing, respectively, 
thereby helping issuers and investors by increasing liquidity and 
improving price discovery at these critical times of the day. Nasdaq 
also plans to launch Intraday Crosses and a Post-Close Cross and is in 
the final stages of launching its ``Single Book'' platform, which will 
further enhance liquidity for Nasdaq-listed companies. By contributing 
to increased liquidity, these systems help lower the cost of capital 
for Nasdaq-listed companies and their investors. While most of the 
costs of these systems are borne by their users, it is appropriate to 
consider the costs of developing and running these systems in 
establishing listing fees because listed companies and their investors 
benefit from the existence of these systems and because the systems 
enhance the value of a Nasdaq listing.
    In addition, Nasdaq has announced that it will make available 
products and services intended to assist companies with their 
disclosure and regulatory obligations, shareholder communications, and 
other corporate objectives. Specifically, Nasdaq intends to provide 
enhancements to NASDAQ Online and the Market Intelligence Desk that 
will provide companies with additional information and analysis to help 
manage their investor relationship programs and understand movements in 
the market for their securities. In addition, Nasdaq intends to offer 
companies a service that converts their annual report and proxy 
material into a

[[Page 67412]]

dynamic, online document for use by current and potential shareholders. 
Nasdaq also intends to offer companies a customized report to help 
analyze their exposure to securities litigation and, for those 
companies that choose to participate, peer data on the size, structure 
and cost of director and officer insurance programs. Finally, Nasdaq 
plans to offer the following services: four audio webcasts, four press 
releases, and four Form 8-K filings.\8\ Of course these services cannot 
satisfy all of a typical company's disclosure and compliance 
requirements, but using these services a company could, for example, 
announce their earnings each quarter to investors in a press release, 
file that press release on a Form 8-K, and have an audio webcast to 
discuss the quarter's results. Thus, Nasdaq believes that these 
services can assist companies in their disclosure requirements and will 
allow investors better access to company information. Nasdaq believes 
that all of these enhancements and services will assist companies in 
fulfilling their responsibilities as public companies, facilitate their 
investor relations and visibility goals, allow investors better access 
to company information and, while incidental to the listing, will 
differentiate a Nasdaq listing. Moreover, Nasdaq notes that these 
services are consistent with services that exchanges have long made 
available to their listed companies, which may or may not be used by 
those companies.\9\ While not every company will use every service, 
Nasdaq believes there will be something of value to all companies. 
Further, given that Nasdaq's listing fees are generally below those of 
other markets, every company will receive significant value for its 
listing fee in comparison to a listing on other markets.
---------------------------------------------------------------------------

    \8\ Audio webcasts are encoded audio streams that are 
distributed via internet compliant file formats. Press releases, 
limited to 500 words, would be distributed over the PrimeZone U.S. 
circuit, which includes distribution to all major financial and news 
organizations. Companies will be able to file Forms 8-K with the 
Commission via the Commission's EDGAR system. The services described 
are what Nasdaq intends to offer during 2007. Nasdaq also plans to 
offer these or similar services on an ongoing basis, but will 
evaluate companies' usage of the services and explore other 
opportunities for services for listed companies, and may adjust the 
mix of products and services accordingly.
    \9\ For example, an exchange may hold an investor conference at 
which a company can elect to present information, or can choose not 
to do so. Another exchange may make a market opening ceremony 
available, of which some issuers may take advantage and others do 
not. Exchanges make reports available to their listed companies; 
some companies use those reports, whereas other companies instead 
obtain similar reports from third parties. Similarly, Nasdaq 
understands that other markets have made available investor 
disclosure services, such as webcasts, for their listed companies in 
recent years, which some companies have elected not to use.
---------------------------------------------------------------------------

(iv) Fees for Written Interpretations
    Under Nasdaq Rule 4550, an issuer considering a specific action or 
transaction can request an interpretation from Nasdaq as to how 
Nasdaq's rules apply to the proposed action or transaction. This 
service is provided for a non-refundable fee of $2,000, and the process 
generally takes four weeks. Alternatively, an issuer may elect to pay a 
non-refundable fee of $10,000 to receive an expedited response, which 
will be provided by a specific date that is less than four weeks but at 
least one week after the date staff receives all information necessary 
to respond to the request.
    Under the proposed rule, the non-refundable fee for a written 
interpretation under the regular service would increase from $2,000 to 
$5,000 and the fee for expedited service would increase from $10,000 to 
$15,000. The process for reviewing written interpretations was 
established in 2003 and fees have not been increased since that 
date.\10\ Since that time, many of the interpretative issues raised by 
this process have become more complex and taken an increasing amount of 
staff time, due in part to an increased focus on corporate governance, 
executive compensation issues and new SEC requirements regarding board 
composition and other matters. Given these changes, Nasdaq believes the 
fee increase is appropriate to support the ongoing cost of providing 
this service to issuers and to allocate that cost to those companies 
using this service.
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 48450 (September 4, 
2003), 68 FR 53770 (September 12, 2004) (SR-NASD-2004-105).
---------------------------------------------------------------------------

    In addition, Nasdaq proposes to modify Rule 4550 to clarify that an 
issuer that has been suspended or delisted, but where review of that 
decision is pending, is eligible to request a written interpretation 
upon payment of the applicable fee.
(v) Other Fee Changes and Waivers
    Nasdaq also proposes to adopt two new fee waivers and eliminate the 
entry fee for most companies transferring between the Nasdaq Capital 
Market and the Nasdaq Global Market. First, Nasdaq is proposing to 
adopt new Interpretive Material to clarify that, in the case where a 
Nasdaq-listed company is acquired by a non-Nasdaq company and the 
surviving entity of the merger lists on the Nasdaq Global Market or the 
Nasdaq Capital Market, the company would receive a pro-rated waiver of 
the annual fee for the period of time following the merger. Because the 
newly listing company would also be assessed an annual fee for that 
period, Nasdaq believes that it is equitable to provide this waiver.
    Second, Nasdaq proposes to waive the entry fee if a non-listed 
company acquires a company listed on another market, and, in connection 
with the acquisition, the surviving entity lists on Nasdaq. Nasdaq 
believes that this situation is comparable to a company switching from 
another exchange, for which Nasdaq waives the entry fee. Although these 
companies would be reviewed for compliance with Nasdaq listing 
standards in the same manner as any other company applying for listing 
on Nasdaq, Nasdaq believes that, on average, the review of such an 
issuer is less likely to involve time-consuming regulatory issues than 
the typical application from a company conducting an initial public 
offering or transferring from the over-the-counter market.
    Third, the proposed rule change would eliminate the entry fee for 
most companies transferring between the Nasdaq Capital Market and the 
Nasdaq Global Market. The Global Market entry fee would not be 
applicable to a transfer from the Capital Market to the Global Market, 
except if a company that qualified for the Global Market chose to 
initially list after January 1, 2007, on the Capital Market instead. In 
this limited case, when the company seeks to transfer, Nasdaq will 
charge the company the difference between the Global Market Fee in 
effect at the time of the transfer and the Capital Market fee 
previously paid. Nasdaq believes the waiver of the entry fee is 
appropriate because these companies are already subject to Nasdaq's 
regulation and Nasdaq's qualitative listing requirements. As such, 
while Nasdaq conducts a complete review of all applicants, Nasdaq's 
experience is that the review of a company that is already listed on 
Nasdaq will generally take less time and effort than the application of 
an unlisted issuer. Nasdaq also notes that the waiver will allow Nasdaq 
to better compete with other markets for listings. In that regard, NYSE 
Group recently adopted a fee waiver for companies transferring between 
NYSE Arca and NYSE.\11\ The proposed waiver is, in part, a response to 
that fee structure, intended to incent companies to initially list and 
remain listed on Nasdaq, rather than seek a listing

[[Page 67413]]

elsewhere, thereby promoting competition between Nasdaq and other 
exchange markets.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 54223 (July 26, 
2006), 71 FR 43833 (August 2, 2006) (SR-NYSE-2006-43).
---------------------------------------------------------------------------

(vi) Implementation
    The new annual fee schedule would be effective January 1, 2007. The 
new LAS fee schedule for domestic issuers would be effective for 
issuers starting with fiscal years beginning on or after January 1, 
2007. Nasdaq will establish the initial number of shares for the LAS 
fee for non-U.S. issuers based on an issuer's first annual filing after 
January 1, 2007. Companies will be assessed the fee for the increase in 
the number of shares based on the subsequent annual filing. The entry 
fee changes would be effective upon approval of the proposed rule 
change by the Commission. However, issuers that have submitted a 
listing application to the Nasdaq Capital Market and paid the 
applicable application fee prior to the approval of the proposed rule 
change would be charged an entry fee based on the existing fee schedule 
and would not be subject to the change in entry fees.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\12\ in general, and with 
Section 6(b)(4) of the Act,\13\ in particular. Section 6(b)(4) requires 
that Nasdaq's rules provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members and issuers and other 
persons using its facilities. As described above, the proposed rule 
change will benefit issuers and investors by providing an equitable 
allocation of reasonable fees and charges among issuers listed on 
Nasdaq and allow Nasdaq to continue to enhance the services provided to 
issuers.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. In that regard, Nasdaq notes 
that the proposed fees are generally lower than the fees charged by 
other U.S. marketplaces for listing and are appropriate in light of the 
trading system enhancements Nasdaq has made and the regulatory 
oversight that Nasdaq provides.
    The proposed fees are also justified because of the numerous 
additional services that Nasdaq provides and plans to provide to listed 
companies. Nasdaq believes that by offering additional services to 
listed companies Nasdaq will differentiate itself, thereby enhancing 
competition among marketplaces, both domestically and globally, by 
increasing the value of a Nasdaq listing.\14\
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 54155 (July 14, 
2006), 71 FR 41291 (July 20, 2006) (SR-NASDAQ-2006-001) where the 
Commission noted that Nasdaq operates in a competitive global 
exchange marketplace for listings, financial products, and market 
services and competes in such an environment with other market 
centers, including national securities exchanges, ECNs, and other 
alternative trading systems, for the privilege of providing market 
and listing services to broker-dealers and issuers.
---------------------------------------------------------------------------

    Nasdaq also believes that offering services to listed companies 
will enhance competition among the providers of those services. The 
press release and Edgar-filing services that are being provided do not 
nearly satisfy listed-companies' needs for these services. As such, 
companies will still need to purchase these services from service 
providers and these service providers will continue to compete for this 
business based on price, reliability, and quality of services. To the 
extent that Nasdaq becomes a meaningful competitor to the existing 
providers of such services, listed companies will benefit from enhanced 
competition for their business.
    With respect to press-release distribution, in particular, Nasdaq 
notes that its participation can only increase competition. Nasdaq 
estimates that two service providers, PR Newswire and Business Wire, 
distribute approximately 85% to 90% of press releases for public 
companies listed on U.S. exchanges.\15\ By contrast, PrimeZone Media 
Network, the Nasdaq-owned company which will provide the services 
described, distributes fewer than 5% of press releases for public 
companies listed on U.S. exchanges. In fact, if all Nasdaq companies 
make use of all four press releases proposed to be offered to them, 
Nasdaq estimates that PR Newswire and Business Wire combined will still 
distribute more than 80% of press releases for public companies listed 
on U.S. exchanges. Given this landscape, it is apparent that the 
services Nasdaq is offering companies could only enhance competition, 
thereby reducing costs for our listed companies, and would not be a 
burden on competition. These same providers, as well as Thomson 
Financial, and financial printers, such as Bowne, Donneley, and Merrill 
Corp., among others, also provide services comparable to the Form 8-K 
EDGAR filings and webcasts that Nasdaq intends to provide. With respect 
to EDGAR filings, Nasdaq notes that in the twelve months prior to 
October 26, 2006, there were approximately 750,000 EDGAR filings.\16\ 
Even if all Nasdaq-listed companies used all four Form 8-K filings, 
this would represent less than 2% of total EDGAR filings. As such, 
Nasdaq does not believe its proposal will have any adverse impact on 
competition for these services.
---------------------------------------------------------------------------

    \15\ Based on Nasdaq's analysis of press releases sourced from 
the Comtex News Network data feed for the 90 days ending on October 
23, 2006.
    \16\ This estimate is based on a search of the EDGAR database 
performed through EDGARpro at http://pro.edgar-online.com/.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Nasdaq has received two comments regarding the proposed rule 
change. One commenter requested additional information about the 
services offered by Nasdaq and questioned the competitive impact of 
Nasdaq offering services to listed companies. Nasdaq's response to 
these questions are incorporated in Items 3 and 4, above. In addition, 
the commenter questioned whether Nasdaq will devote sufficient 
resources to the dissemination of information through PrimeZone. In 
fact, Nasdaq and PrimeZone are committed to expanding the already 
substantial PrimeZone distribution network. Finally, the commenter 
suggested that providing PrimeZone services to listed companies may be 
a ``conflict of interest'' with Nasdaq's role as a regulator. Nasdaq 
strongly disagrees with this assertion as Nasdaq does not regulate the 
market for information dissemination. While Nasdaq rules support the 
rules of the Commission by requiring companies to disclose material 
news, Nasdaq rules defer to the Commission's rules to determine the 
proper method of such disclosure.\17\ Nasdaq has no intention to change 
these rules.\18\
---------------------------------------------------------------------------

    \17\ Nasdaq rules permit material information to be disclosed in 
``any Regulation FD complaint method (or combinations of methods).'' 
See Nasdaq Rule 4310(c)(16) and IM-4120-1 (emphasis added).
    \18\ The commenter also requested information as to the 
allocation of fees within Nasdaq. Nasdaq notes that as a public 
company it files periodic reports that include financial information 
with the Commission. This information will identify the sources of 
Nasdaq's revenues consistent with the requirements for those reports 
and U.S. generally accepted accounting practice.
---------------------------------------------------------------------------

    A second commenter expressed concerns about paying for services 
that his company would not use. As noted in Section 3, above, Nasdaq 
believes that the listing fee provides substantial value even to 
companies that do not use any of the services offered by Nasdaq, as it 
also pays for access to the trading

[[Page 67414]]

facilities and regulation of the Nasdaq marketplace, which have been 
enhanced since the last fee increase. In addition, Nasdaq notes that 
the services being provided are designed to supplement those a company 
already uses in achieving its investor relations, disclosure and other 
corporate objectives.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which NASD consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NASDAQ-2006-040 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2006-040. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of Nasdaq. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASDAQ-2006-040 and should be submitted on or before 
December 12, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-19620 Filed 11-20-06; 8:45 am]
BILLING CODE 8011-01-P