Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify Nasdaq's Continued Listing Requirements To Replace Round Lot Shareholders, 27590-27593 [E8-10622]
Download as PDF
<![CDATA[
27590
Federal Register / Vol. 73, No. 93 / Tuesday, May 13, 2008 / Notices
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 (https://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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies
of such filing also will be available for
inspection and copying at the principal
office of ISE. 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–ISE–
2008–33 and should be submitted on or
before June 3, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Nancy M. Morris,
Secretary.
[FR Doc. E8–10619 Filed 5–12–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57795; File No. SR–
NASDAQ–2008–037]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Modify Nasdaq’s Continued Listing
Requirements To Replace Round Lot
Shareholders
rwilkins on PROD1PC63 with NOTICES
May 7, 2008.
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 April 25,
2008, The NASDAQ Stock Market LLC
(‘‘Exchange’’ or ‘‘Nasdaq’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
16:14 May 12, 2008
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to change the
shareholder requirements for continued
listing. Nasdaq will implement the
proposed rule immediately upon
approval.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
brackets.3
4200. Definitions
(a) For purposes of the Rule 4000
Series, unless the context requires
otherwise:
(1)–(31) No change.
(32) ‘‘Public holders’’ of a security
include both beneficial holders and
holders of record, but does not include
any holder who is, either directly or
indirectly, an executive officer, director,
or the beneficial holder of more than
10% of the total shares outstanding.
[‘‘Reported Security’’ means an equity
security for which quotations are
entered into the Consolidate Quotations
Service.]
(33) ‘‘Round lot holder’’ means a
holder of a normal unit of trading. The
number of beneficial holders will be
considered in addition to holders of
record.
(34)–(37) No change.
(38) ‘‘Total holders’’ of a security
include both beneficial holders and
holders of record.
(39) ‘‘Transaction costs’’ means costs
incurred in connection with a limited
partnership rollup transaction,
including printing and mailing the
proxy, prospectus or other documents;
legal fees not related to the solicitation
of votes or tenders; financial advisory
fees; investment banking fees; appraisal
fees; accounting fees; independent
committee expenses; travel expenses;
and all other fees related to the
preparatory work of the transaction, but
not including costs that would have
otherwise been incurred by the subject
limited partnerships in the ordinary
course of business or solicitation
expenses.
[(39)] (40) ‘‘Underwriting Activity
Report’’ is a report provided by the
Corporate Financing Department of
NASD Regulation, Inc. in connection
with a distribution of securities subject
3 Changes are marked to the rule text that appears
in the electronic manual of Nasdaq found at
https://nasdaq.complinet.com.
1 15
VerDate Aug<31>2005
substantially prepared by Nasdaq. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Jkt 214001
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
to SEC Rule 101 pursuant to NASD Rule
2710(b)(11) and includes forms that are
submitted by members to comply with
their notification obligations under
Rules 4614, 4619, and 4623.
(b)–(c) No change.
*
*
*
*
*
4310. Listing Requirements for
Domestic and Canadian Securities
To qualify for listing in Nasdaq, a
security of a domestic or Canadian
issuer shall satisfy all applicable
requirements contained in paragraphs
(a), (b), and (c) hereof. Issuers that meet
these requirements, but that are not
listed on the Nasdaq Global Market, are
listed on the Nasdaq Capital Market.
(a)–(b) No change.
(c) In addition to the requirements
contained in paragraph (a) and (b)
above, and unless otherwise indicated,
a security shall satisfy the following
criteria for listing on Nasdaq:
(1)–(5) No change.
(6) (A) In the case of common stock,
for initial [and continued] listing[,] there
shall be at least 300 round lot holders
of the security and for continued listing
there shall be at least 300 public holders
of the security.
(B) In the case of preferred stock and
secondary classes of common stock, for
initial [and continued] listing[,] there
shall be at least 100 round lot holders
of the security and for continued listing
there shall be at least 100 public holders
of the security, provided in each case
that the issuer’s common stock or
common stock equivalent equity
security must be listed on Nasdaq or be
a covered security. In the event the
issuer’s common stock or common stock
equivalent security either is not listed
on Nasdaq or is not a covered security,
the preferred stock and/or secondary
class of common stock may be listed on
Nasdaq so long as the security satisfies
the listing criteria for common stock.
(C) No change.
(7)–(30) No change.
(d) No change.
4320. Listing Requirements for NonCanadian Foreign Securities and
American Depositary Receipts
To qualify for listing on Nasdaq, a
security of a non-Canadian foreign
issuer, an American Depositary Receipt
(ADR) or similar security issued in
respect of a security of a foreign issuer
shall satisfy the requirements of
paragraphs (a), (b), and (e) of this Rule.
Issuers that meet these requirements,
but that are not listed on the Nasdaq
Global Market, are listed on the Nasdaq
Capital Market.
(a)–(d) No change.
E:\FR\FM\13MYN1.SGM
13MYN1
Federal Register / Vol. 73, No. 93 / Tuesday, May 13, 2008 / Notices
(e) In addition to the requirements
contained in paragraphs (a) and (b), the
security shall satisfy the criteria set out
in this subsection for listing on Nasdaq.
In the case of ADRs, the underlying
security will be considered when
determining the ADR’s qualification for
initial or continued listing on Nasdaq.
(1)–(3) No change.
(4)(A) In the case of common stock,
for initial [and continued] listing[,] there
shall be at least 300 round lot holders
of the security and for continued listing
there shall be at least 300 public holders
of the security.
(B) In the case of preferred stock and
secondary classes of common stock, for
initial [and continued] listing[,] there
shall be at least 100 round lot holders
of the security and for continued listing
there shall be at least 100 public holders
of the security, provided in each case
that the issuer’s common stock or
common stock equivalent equity
security must be listed on Nasdaq or be
a covered security. In the event the
issuer’s common stock or common stock
equivalent security either is not listed
on Nasdaq or is not a covered security,
the preferred stock and/or secondary
class of common stock may be listed on
Nasdaq so long as the security satisfies
the listing criteria for common stock.
(C) No change.
(5)–(26) No change.
(f) No change.
*
*
*
*
*
4426. Nasdaq Global Select Market
Listing Requirements
(a) No change.
(b) Liquidity Requirements
(1) The security must demonstrate
either:
(A)(i) a minimum of 550 [beneficial]
total shareholders, and (ii) an average
monthly trading volume over the prior
12 months of at least 1,100,000 shares
per month; or
(B) a minimum of 2,200 [beneficial]
total shareholders; or
(C) a minimum of 450 [beneficial]
round lot shareholders
(2)–(3) No change.
(c)–(f) No change.
*
*
*
*
*
rwilkins on PROD1PC63 with NOTICES
4450. Quantitative Maintenance
Criteria
After listing as a Nasdaq Global
Market security, a security must
substantially meet the criteria set forth
in paragraphs (a) or (b), and (c), (d), (e)
(f), (g), (h) or (i) below to continue to
remain listed on the Nasdaq Global
Market. A security maintaining its
listing under paragraph (b) need not also
be in compliance with the quantitative
VerDate Aug<31>2005
16:14 May 12, 2008
Jkt 214001
maintenance criteria in the Rule 4300
series.
(a) Maintenance Standard 1—First
Class of Common Stock, Shares or
Certificates of Beneficial Interest of
Trusts, Limited Partnership Interests in
Foreign or Domestic Issues and
American Depositary Receipts.
(1)–(3) No change.
(4) 400 total shareholders [of round
lots]; and
(5)–(6) No change.
(b) Maintenance Standard 2—First
Class of Common Stock, Shares or
Certificates of Beneficial Interest of
Trusts, Limited Partnership Interests in
Foreign or Domestic Issues and
American Depositary Receipts.
(1)–(4) No change.
(5) 400 total shareholders [of round
lots]; and
(6) No change.
(c)–(g) No change.
(h) Quantitative Maintenance
Criteria—Preferred Stock and Secondary
Classes of Common Stock.
For continued listing, if the common
stock or common stock equity
equivalent security of the issuer is listed
on Nasdaq or another national securities
exchange, the issue shall have:
(1)–(3) No change.
(4) A minimum of 100 [round lot]
public shareholders;
(5) No change.
Alternatively, in the event the issuer’s
common stock or common stock
equivalent security is not listed on
either Nasdaq or another national
securities exchange, the preferred stock
and/or secondary class of common stock
may be listed on Nasdaq so long as the
security satisfies the listing criteria for
common stock.
(i) No change.
*
*
*
*
*
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.
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
27591
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq rules require a company to
maintain a certain minimum number of
round lot holders for continued listing.4
However, for a variety of reasons, it is
often difficult for Nasdaq and the listed
company to determine compliance with
these requirements. First, the
Commission only requires companies to
annually disclose the number of record
holders, not round lot holders, in their
proxy. Companies often don’t know
how many round lot holders they have
since that group includes ‘‘objecting
beneficial holders’’ who wish their
identity to remain confidential from the
company.
It also can be difficult to obtain the
number of shares held by beneficial
owners from record holders, such as
broker-dealers.
In order to determine compliance
with the round lot requirement, Nasdaq
reviews a number of factors, including
whether the company has a number of
record holders well in excess of the
round lot holder requirement and
shareholder data provided by the
company’s transfer agent and
Broadridge Financial Solutions, Inc.
(formerly, Automatic Data Processing,
Inc.). While this process is effective, it
is very time-consuming for Nasdaq and
can be frustrating to the company,
which has to spend considerable time
and may be charged a fee to obtain this
information.
In contrast, the number of total
holders is more easily determined. For
example, the number of proxies that a
company mails is a very good
approximation of the number of its total
holders. In fact, many companies
disclose the number of beneficial
holders in their public filings, either
instead of, or in addition to, the number
of record holders. Further, the number
of public holders generally can be easily
determined by subtracting from the total
shareholders the number of executive
officers, directors, and 10%
shareholders that are disclosed in the
company’s proxy statement.
When the round lot holder
requirement was originally adopted it
was difficult and costly to trade in
increments of less than 100 shares. Thus
odd lot holders (that is, holders of fewer
4 The minimum requirement for continued listing
of the first class of common stock or its equivalent
on both the NASDAQ Global and Global Select
Markets is 400 round lot shareholders and on the
NASDAQ Capital Market is 300 round lot
shareholders.
E:\FR\FM\13MYN1.SGM
13MYN1
27592
Federal Register / Vol. 73, No. 93 / Tuesday, May 13, 2008 / Notices
rwilkins on PROD1PC63 with NOTICES
than 100 shares) added little to the
distribution and potential liquidity of a
security. These impediments no longer
exist, given the current state of online
trading and competitive commission
structures. As such, Nasdaq believes
that today all holders, not just holders
of round lots, can potentially contribute
to a security’s liquidity.
In addition, in Nasdaq’s experience,
companies do not typically see a
decrease in the number of round lot
holders following their listing, absent a
transaction such as a reverse stock split
or major stock buy-back.
Given these difficulties and changed
circumstances, Nasdaq proposes that the
shareholder requirements for continued
listing be changed so that it no longer
considers only round lot holders. As
revised, Nasdaq would generally require
300 public shareholders 5 for continued
listing on the Capital Market, and 400
total shareholders for continued listing
on the Global and Global Select
Markets.6 In the case of preferred stock
and secondary classes of common stock,
100 public shareholders would be
required for continued listing on the
Capital, Global and Global Select
Markets. As proposed, a public holder
would exclude any holder who is, either
directly or indirectly, an executive
officer, director, or the beneficial holder
of more than 10% of the total shares
outstanding.
Under this definition, Nasdaq would
consider immediate family members of
an executive officer, director, or 10%
holder to not be public holders to the
extent the shares held by such
individuals are considered beneficially
owned by the executive officer, director
or 10% holder under Rule 16a–1 under
the Act.7
Nasdaq also proposes to modify the
rules relating to the Nasdaq Global
Select Market to use the newly defined
5 The definition of ‘‘public holders’’ would
appear in proposed Rule 4200(a)(32) and replace
the definition of ‘‘Reported Security’’ because that
term is now defined in Regulation NMS and is not
used within the Nasdaq rules.
6 Nasdaq proposes to require public shareholders,
instead of total shareholders, on the Capital Market
so that Nasdaq’s rules remain substantially similar
to the rules of the American Stock Exchange
(‘‘Amex’’), which require 300 public shareholders.
See Section 1003(b)(i)(B) of the Amex Company
Guide. Nasdaq does not believe it necessary to limit
the shareholders on the Global and Global Select
Markets to public shareholders given the higher
number of total holders required. In addition,
Nasdaq notes that the New York Stock Exchange
(‘‘NYSE’’) requires 400 total shareholders for
continued listing. See Section 802.01A of the NYSE
Listed Company Manual.
7 See 17 CFR 240.16a–1(a)(2). Nasdaq will
determine ‘‘public holders’’ based on the
information disclosed in public filings about the
company, including ownership statements and
proxy statements.
VerDate Aug<31>2005
16:14 May 12, 2008
Jkt 214001
term ‘‘total shareholders’’ in those rules;
however, no substantive change is being
made to the requirements for the Global
Select Market. In addition, no change is
proposed to the initial listing
requirements because the majority of
initial listings are initial public
offerings, where the number of round lot
shareholders can be easily determined
by the underwriter when distributing
the offering, and because SEC rules
require that markets have a minimum of
300 round lot holders for initial listing
to avoid having listed securities be
subject to the penny stock rules.8
Nasdaq does propose, however, to
clarify that the definition of round lot
holders includes beneficial holders in
addition to holders of record, consistent
with current practice.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,9 in
general, and with Sections 6(b)(5) of the
Act,10 in particular, in that the proposal
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The proposed rule
change is consistent with these
requirements in that modifying the
requirement will facilitate consistent
application of the rules by Nasdaq and
ease the burden of compliance on listed
companies, without increasing the risk
to investors.
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, as amended.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
8 See
17 CFR 240.3a51–1(a)(2)(i)(D).
U.S.C. 78f.
10 15 U.S.C. 78f(b)(5).
9 15
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
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 the self-regulatory
organization 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Nasdaq–2008–037 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Nasdaq–2008–037. 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 (https://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, 100 F Street, NE., Washington,
DC 20549, on official business days
E:\FR\FM\13MYN1.SGM
13MYN1
Federal Register / Vol. 73, No. 93 / Tuesday, May 13, 2008 / Notices
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. 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–2008–037 and
should be submitted on or before June
3, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Nancy M. Morris,
Secretary.
[FR Doc. E8–10622 Filed 5–12–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57763; File No. SR-NASD–
2007–031]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc. (n/k/a Financial Industry
Regulatory Authority, Inc.); Order
Approving Proposed Rule Change as
Modified by Amendment Nos. 1, 2 and
3 Thereto To Amend NASD Rule 7001E
To Increase the Percentage of Market
Data Revenue Shared With NASD/
NYSE TRF Participants
May 1, 2008.
I. Introduction
rwilkins on PROD1PC63 with NOTICES
On April 24, 2007, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) (n/k/a Financial Industry
Regulatory Authority, Inc.), filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b-4 thereunder,2 a proposed rule
change to adjust the percentage of
market data revenue shared with NASD/
NYSE TRF participants.3 On June 1,
2007, NASD filed Amendment No. 1 to
the proposed rule change. On October
29, 2007, FINRA filed Amendment No.
2 to the proposed rule change. The
proposed rule change, as amended, was
published for comment in the Federal
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Effective July 30, 2007, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’) was formed
through the consolidation of NASD and the member
regulatory functions of NYSE Regulation, Inc.
1 15
VerDate Aug<31>2005
16:14 May 12, 2008
Jkt 214001
Register on November 14, 2007.4 The
Commission received one comment
letter regarding the proposal.5 On
February 4, 2008, FINRA filed
Amendment No. 3 to respond to the
comment letter and to propose a
technical change to the original rule
filing.6 This order approves the
proposed rule change, as modified by
Amendment Nos. 1, 2, and 3.
II. Description of the Proposed Rule
Change
FINRA proposes to amend NASD Rule
7001E to increase the market data
revenue that is shared with FINRA
members that report trades in Tape A,
Tape B, and Tape C stocks to the NASD/
NYSE Trade Reporting Facility (the
‘‘NASD/NYSE TRF’’).7 Currently,
FINRA members that report trades in
Tape A, Tape B, and Tape C stocks to
the NASD/NYSE TRF receive a 50% pro
rata credit on the gross market data
revenue earned by the NASD/NYSE
TRF.8
The proposed rule change increases
from 50% to 100% the percentage of
gross market data revenue that is shared
with members. FINRA members that
report trades in Tape A, Tape B and
Tape C stocks to the NASD/NYSE TRF
will thus receive a 100% pro rata credit
on gross market data revenue earned by
the NASD/NYSE TRF.
III. Summary of Comments
The Commission received one
comment letter in response to the
proposed rule change.9 The commenter
stated that the proposed rebate
demonstrated that market data fees are
4 See Securities Exchange Act Release No. 56754
(November 6, 2007), 72 FR 64101.
5 See letter from Christopher Gilkerson and
Gregory Babyak, Co-Chairs, Market Data
Subcommittee of the SIFMA Technology and
Regulation Committee, to Nancy M. Morris,
Secretary, Commission, dated December 5, 2007
(‘‘SIFMA letter’’).
6 Amendment No. 3 clarifies that the Tape B
revenue sharing program includes both the
American Stock Exchange LLC and regional
exchanges. Because it is technical in nature, it is not
subject to notice and comment (‘‘Amendment No.
3’’).
7 In establishing the NASD/NYSE TRF, NASD and
NYSE Market, Inc. (‘‘NYSE’’) entered into the
Limited Liability Company Agreement of NASD/
NYSE Trade Reporting Facility LLC. Under that
agreement, NASD, as the ‘‘SRO Member,’’ has the
sole regulatory responsibility for the NASD/NYSE
TRF. As the ‘‘Business Member,’’ NYSE is
responsible for the management of the business
affairs of the NASD/NYSE TRF, to the extent those
activities are not inconsistent with FINRA’s
regulatory functions.
8 ‘‘Gross revenue’’ is defined as the revenue
received by the NASD/NYSE TRF from the three
tape associations after the tape associations deduct
allocated support costs and unincorporated
business costs.
9 Supra note 5.
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
27593
excessive, and do not have a fair and
reasonable basis.10 The commenter
noted that, in its capacity as the ‘‘SRO
Member,’’ FINRA allocates and deducts
costs before passing market data
revenue to each TRF. The commenter
asserted that this ability to allocate costs
in the context of a TRF rebuts earlier
arguments, made by the exchanges, that
costs of collection and distribution of
market data cannot be allocated, and
should thus not be a basis for
determining the reasonableness of
market data fees.11 The commenter also
said that the filing did not address the
competitive impact of the proposed
rebates, and that any short-term benefits
from the rebates could be diminished by
the long-term impact of less
competition.12 Finally, the commenter
stated that the issue of transparency
regarding market data costs and
revenues, which constitutes part of the
NetCoalition Petition,13 is also present
in this filing.14
FINRA responded that the arguments
made by the commenter were not
germane to the proposed rule change.
For example, FINRA said that the issue
of the reasonableness of market data fees
and the purported lack of transparency
regarding the cost of collecting market
data are at issue in the NetCoalition
Petition and need not be resolved in
connection with this filing.15 According
to FINRA, the costs of collecting and
distributing market data are not
necessarily determinative of the
reasonableness of the proposed rebate.16
Finally, FINRA stated that the proposed
rebate does not constitute an undue
burden on competition that is not in
furtherance of the purposes of the Act.17
IV. Discussion and Commission
Findings
The Commission has carefully
reviewed the proposed rule change, the
comment letter, and FINRA’s response
to the comment letter, and finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
association 18 and, in particular, the
10 SIFMA
letter at 2.
11 Id.
12 Id.
at 3.
Securities Exchange Act Release No. 55011
(December 27, 2006) (order granting petition for
review of SR–NYSEArca–2006–21).
14 SIFMA letter at 3.
15 See Amendment No. 3, at 4.
16 Id.
17 Id.
18 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
13 See
E:\FR\FM\13MYN1.SGM
13MYN1
]]>Agencies
[Federal Register Volume 73, Number 93 (Tuesday, May 13, 2008)]
[Notices]
[Pages 27590-27593]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-10622]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57795; File No. SR-NASDAQ-2008-037]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Modify Nasdaq's Continued
Listing Requirements To Replace Round Lot Shareholders
May 7, 2008.
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 April 25, 2008, The NASDAQ Stock Market LLC (``Exchange'' or
``Nasdaq'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by Nasdaq.
The Commission is publishing this notice to solicit comments on the
proposed rule change 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 change the shareholder requirements for
continued listing. Nasdaq will implement the proposed rule immediately
upon approval.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.\3\
---------------------------------------------------------------------------
\3\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at https://nasdaq.complinet.com.
---------------------------------------------------------------------------
4200. Definitions
(a) For purposes of the Rule 4000 Series, unless the context
requires otherwise:
(1)-(31) No change.
(32) ``Public holders'' of a security include both beneficial
holders and holders of record, but does not include any holder who is,
either directly or indirectly, an executive officer, director, or the
beneficial holder of more than 10% of the total shares outstanding.
[``Reported Security'' means an equity security for which quotations
are entered into the Consolidate Quotations Service.]
(33) ``Round lot holder'' means a holder of a normal unit of
trading. The number of beneficial holders will be considered in
addition to holders of record.
(34)-(37) No change.
(38) ``Total holders'' of a security include both beneficial
holders and holders of record.
(39) ``Transaction costs'' means costs incurred in connection with
a limited partnership rollup transaction, including printing and
mailing the proxy, prospectus or other documents; legal fees not
related to the solicitation of votes or tenders; financial advisory
fees; investment banking fees; appraisal fees; accounting fees;
independent committee expenses; travel expenses; and all other fees
related to the preparatory work of the transaction, but not including
costs that would have otherwise been incurred by the subject limited
partnerships in the ordinary course of business or solicitation
expenses.
[(39)] (40) ``Underwriting Activity Report'' is a report provided
by the Corporate Financing Department of NASD Regulation, Inc. in
connection with a distribution of securities subject to SEC Rule 101
pursuant to NASD Rule 2710(b)(11) and includes forms that are submitted
by members to comply with their notification obligations under Rules
4614, 4619, and 4623.
(b)-(c) No change.
* * * * *
4310. Listing Requirements for Domestic and Canadian Securities
To qualify for listing in Nasdaq, a security of a domestic or
Canadian issuer shall satisfy all applicable requirements contained in
paragraphs (a), (b), and (c) hereof. Issuers that meet these
requirements, but that are not listed on the Nasdaq Global Market, are
listed on the Nasdaq Capital Market.
(a)-(b) No change.
(c) In addition to the requirements contained in paragraph (a) and
(b) above, and unless otherwise indicated, a security shall satisfy the
following criteria for listing on Nasdaq:
(1)-(5) No change.
(6) (A) In the case of common stock, for initial [and continued]
listing[,] there shall be at least 300 round lot holders of the
security and for continued listing there shall be at least 300 public
holders of the security.
(B) In the case of preferred stock and secondary classes of common
stock, for initial [and continued] listing[,] there shall be at least
100 round lot holders of the security and for continued listing there
shall be at least 100 public holders of the security, provided in each
case that the issuer's common stock or common stock equivalent equity
security must be listed on Nasdaq or be a covered security. In the
event the issuer's common stock or common stock equivalent security
either is not listed on Nasdaq or is not a covered security, the
preferred stock and/or secondary class of common stock may be listed on
Nasdaq so long as the security satisfies the listing criteria for
common stock.
(C) No change.
(7)-(30) No change.
(d) No change.
4320. Listing Requirements for Non-Canadian Foreign Securities and
American Depositary Receipts
To qualify for listing on Nasdaq, a security of a non-Canadian
foreign issuer, an American Depositary Receipt (ADR) or similar
security issued in respect of a security of a foreign issuer shall
satisfy the requirements of paragraphs (a), (b), and (e) of this Rule.
Issuers that meet these requirements, but that are not listed on the
Nasdaq Global Market, are listed on the Nasdaq Capital Market.
(a)-(d) No change.
[[Page 27591]]
(e) In addition to the requirements contained in paragraphs (a) and
(b), the security shall satisfy the criteria set out in this subsection
for listing on Nasdaq. In the case of ADRs, the underlying security
will be considered when determining the ADR's qualification for initial
or continued listing on Nasdaq.
(1)-(3) No change.
(4)(A) In the case of common stock, for initial [and continued]
listing[,] there shall be at least 300 round lot holders of the
security and for continued listing there shall be at least 300 public
holders of the security.
(B) In the case of preferred stock and secondary classes of common
stock, for initial [and continued] listing[,] there shall be at least
100 round lot holders of the security and for continued listing there
shall be at least 100 public holders of the security, provided in each
case that the issuer's common stock or common stock equivalent equity
security must be listed on Nasdaq or be a covered security. In the
event the issuer's common stock or common stock equivalent security
either is not listed on Nasdaq or is not a covered security, the
preferred stock and/or secondary class of common stock may be listed on
Nasdaq so long as the security satisfies the listing criteria for
common stock.
(C) No change.
(5)-(26) No change.
(f) No change.
* * * * *
4426. Nasdaq Global Select Market Listing Requirements
(a) No change.
(b) Liquidity Requirements
(1) The security must demonstrate either:
(A)(i) a minimum of 550 [beneficial] total shareholders, and (ii)
an average monthly trading volume over the prior 12 months of at least
1,100,000 shares per month; or
(B) a minimum of 2,200 [beneficial] total shareholders; or
(C) a minimum of 450 [beneficial] round lot shareholders
(2)-(3) No change.
(c)-(f) No change.
* * * * *
4450. Quantitative Maintenance Criteria
After listing as a Nasdaq Global Market security, a security must
substantially meet the criteria set forth in paragraphs (a) or (b), and
(c), (d), (e) (f), (g), (h) or (i) below to continue to remain listed
on the Nasdaq Global Market. A security maintaining its listing under
paragraph (b) need not also be in compliance with the quantitative
maintenance criteria in the Rule 4300 series.
(a) Maintenance Standard 1--First Class of Common Stock, Shares or
Certificates of Beneficial Interest of Trusts, Limited Partnership
Interests in Foreign or Domestic Issues and American Depositary
Receipts.
(1)-(3) No change.
(4) 400 total shareholders [of round lots]; and
(5)-(6) No change.
(b) Maintenance Standard 2--First Class of Common Stock, Shares or
Certificates of Beneficial Interest of Trusts, Limited Partnership
Interests in Foreign or Domestic Issues and American Depositary
Receipts.
(1)-(4) No change.
(5) 400 total shareholders [of round lots]; and
(6) No change.
(c)-(g) No change.
(h) Quantitative Maintenance Criteria--Preferred Stock and
Secondary Classes of Common Stock.
For continued listing, if the common stock or common stock equity
equivalent security of the issuer is listed on Nasdaq or another
national securities exchange, the issue shall have:
(1)-(3) No change.
(4) A minimum of 100 [round lot] public shareholders;
(5) No change.
Alternatively, in the event the issuer's common stock or common
stock equivalent security is not listed on either Nasdaq or another
national securities exchange, the preferred stock and/or secondary
class of common stock may be listed on Nasdaq so long as the security
satisfies the listing criteria for common stock.
(i) No change.
* * * * *
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 rules require a company to maintain a certain minimum number
of round lot holders for continued listing.\4\ However, for a variety
of reasons, it is often difficult for Nasdaq and the listed company to
determine compliance with these requirements. First, the Commission
only requires companies to annually disclose the number of record
holders, not round lot holders, in their proxy. Companies often don't
know how many round lot holders they have since that group includes
``objecting beneficial holders'' who wish their identity to remain
confidential from the company.
---------------------------------------------------------------------------
\4\ The minimum requirement for continued listing of the first
class of common stock or its equivalent on both the NASDAQ Global
and Global Select Markets is 400 round lot shareholders and on the
NASDAQ Capital Market is 300 round lot shareholders.
---------------------------------------------------------------------------
It also can be difficult to obtain the number of shares held by
beneficial owners from record holders, such as broker-dealers.
In order to determine compliance with the round lot requirement,
Nasdaq reviews a number of factors, including whether the company has a
number of record holders well in excess of the round lot holder
requirement and shareholder data provided by the company's transfer
agent and Broadridge Financial Solutions, Inc. (formerly, Automatic
Data Processing, Inc.). While this process is effective, it is very
time-consuming for Nasdaq and can be frustrating to the company, which
has to spend considerable time and may be charged a fee to obtain this
information.
In contrast, the number of total holders is more easily determined.
For example, the number of proxies that a company mails is a very good
approximation of the number of its total holders. In fact, many
companies disclose the number of beneficial holders in their public
filings, either instead of, or in addition to, the number of record
holders. Further, the number of public holders generally can be easily
determined by subtracting from the total shareholders the number of
executive officers, directors, and 10% shareholders that are disclosed
in the company's proxy statement.
When the round lot holder requirement was originally adopted it was
difficult and costly to trade in increments of less than 100 shares.
Thus odd lot holders (that is, holders of fewer
[[Page 27592]]
than 100 shares) added little to the distribution and potential
liquidity of a security. These impediments no longer exist, given the
current state of online trading and competitive commission structures.
As such, Nasdaq believes that today all holders, not just holders of
round lots, can potentially contribute to a security's liquidity.
In addition, in Nasdaq's experience, companies do not typically see
a decrease in the number of round lot holders following their listing,
absent a transaction such as a reverse stock split or major stock buy-
back.
Given these difficulties and changed circumstances, Nasdaq proposes
that the shareholder requirements for continued listing be changed so
that it no longer considers only round lot holders. As revised, Nasdaq
would generally require 300 public shareholders \5\ for continued
listing on the Capital Market, and 400 total shareholders for continued
listing on the Global and Global Select Markets.\6\ In the case of
preferred stock and secondary classes of common stock, 100 public
shareholders would be required for continued listing on the Capital,
Global and Global Select Markets. As proposed, a public holder would
exclude any holder who is, either directly or indirectly, an executive
officer, director, or the beneficial holder of more than 10% of the
total shares outstanding.
---------------------------------------------------------------------------
\5\ The definition of ``public holders'' would appear in
proposed Rule 4200(a)(32) and replace the definition of ``Reported
Security'' because that term is now defined in Regulation NMS and is
not used within the Nasdaq rules.
\6\ Nasdaq proposes to require public shareholders, instead of
total shareholders, on the Capital Market so that Nasdaq's rules
remain substantially similar to the rules of the American Stock
Exchange (``Amex''), which require 300 public shareholders. See
Section 1003(b)(i)(B) of the Amex Company Guide. Nasdaq does not
believe it necessary to limit the shareholders on the Global and
Global Select Markets to public shareholders given the higher number
of total holders required. In addition, Nasdaq notes that the New
York Stock Exchange (``NYSE'') requires 400 total shareholders for
continued listing. See Section 802.01A of the NYSE Listed Company
Manual.
---------------------------------------------------------------------------
Under this definition, Nasdaq would consider immediate family
members of an executive officer, director, or 10% holder to not be
public holders to the extent the shares held by such individuals are
considered beneficially owned by the executive officer, director or 10%
holder under Rule 16a-1 under the Act.\7\
---------------------------------------------------------------------------
\7\ See 17 CFR 240.16a-1(a)(2). Nasdaq will determine ``public
holders'' based on the information disclosed in public filings about
the company, including ownership statements and proxy statements.
---------------------------------------------------------------------------
Nasdaq also proposes to modify the rules relating to the Nasdaq
Global Select Market to use the newly defined term ``total
shareholders'' in those rules; however, no substantive change is being
made to the requirements for the Global Select Market. In addition, no
change is proposed to the initial listing requirements because the
majority of initial listings are initial public offerings, where the
number of round lot shareholders can be easily determined by the
underwriter when distributing the offering, and because SEC rules
require that markets have a minimum of 300 round lot holders for
initial listing to avoid having listed securities be subject to the
penny stock rules.\8\ Nasdaq does propose, however, to clarify that the
definition of round lot holders includes beneficial holders in addition
to holders of record, consistent with current practice.
---------------------------------------------------------------------------
\8\ See 17 CFR 240.3a51-1(a)(2)(i)(D).
---------------------------------------------------------------------------
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\9\ in general, and with
Sections 6(b)(5) of the Act,\10\ in particular, in that the proposal is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. The proposed
rule change is consistent with these requirements in that modifying the
requirement will facilitate consistent application of the rules by
Nasdaq and ease the burden of compliance on listed companies, without
increasing the risk to investors.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
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 the self-regulatory organization 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Nasdaq-2008-037 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Nasdaq-2008-037. 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 (https://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, 100 F Street,
NE., Washington, DC 20549, on official business days
[[Page 27593]]
between the hours of 10 a.m. and 3 p.m. Copies of such filing also will
be available for inspection and copying at the principal office of the
Exchange. 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-2008-037 and should be submitted on or before June 3, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E8-10622 Filed 5-12-08; 8:45 am]
BILLING CODE 8010-01-P
