Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt a Round Lot Holder Initial Listing Requirement for Listing of Warrants on the Nasdaq Global and Capital Markets Except for Initial Firm Commitment Underwritten Public Offering, 9982-9985 [2010-4411]
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Federal Register / Vol. 75, No. 42 / Thursday, March 4, 2010 / Notices
‘‘derivatives clearing organization’’
registered with the Commodities
Futures Trading Commission (‘‘CFTC’’),
OCC also filed this proposed rule
change with the CFTC for prior approval
by the CFTC pursuant to provisions of
the Commodity Exchange Act (‘‘CEA’’)
in order to foreclose any potential
liability under the CEA based on an
argument that OCC’s clearing of such
options as securities options or the
clearing of such futures as security
futures constitutes a violation of the
CEA.
The products that are affected by this
approval order are essentially the same
as the options and security futures on
SPDR Gold Shares, iShares COMEX
Gold Shares, and iShares Silver Shares
that OCC currently clears pursuant to
rule changes approved by the
Commission last year.4
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III. Discussion
Section 17A(b)(3)(F) of the Act
requires, among other things, that the
rules of a clearing agency be designed to
promote the prompt and accurate
clearance and settlement of securities
transactions and derivative
transactions.5 By amending its By-Laws
to help clarify that options and security
futures on ETFS Physical Swiss Gold
Shares and ETFS Physical Silver Shares
will be treated and cleared as securities
options or security futures, OCC’s
proposed rule change should help
clarify the jurisdictional status of such
contracts and accordingly should help
to promote the prompt and accurate
clearance and settlement of securities
transactions and of derivative
transactions. In accordance with the
Memorandum of Understanding entered
into between the CFTC and the
Commission on March 11, 2008, and in
particular the addendum thereto
concerning Principles Governing the
Review of Novel Derivative Products,
the Commission believes that novel
derivative products that implicate areas
of overlapping regulatory concern
should be permitted to trade in either a
CFTC- or Commission-regulated
environment or both in a manner
consistent with laws and regulations
(including the appropriate use of all
available exemptive and interpretive
authority).
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
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For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–4517 Filed 3–3–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61594; File No. SR–
NASDAQ–2010–024]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt a
Round Lot Holder Initial Listing
Requirement for Listing of Warrants on
the Nasdaq Global and Capital Markets
Except for Initial Firm Commitment
Underwritten Public Offering
February 25, 2010.
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 February
19, 2010, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by
NASDAQ. NASDAQ has designated the
proposed rule change as constituting a
non-controversial rule change under
Rule 19b–4(f)(6) under the Act,3 which
renders the proposal effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
6 15
U.S.C. 78q–1.
U.S.C. 78s(b)(2).
8 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
9 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
7 15
No. 61483 (Feb. 3, 2010), 75 FR 6753 (Feb. 10,
2010).
4 Securities Exchange Act Release Nos. 57895
(May 30, 2008), 73 FR 32066 (June 5, 2008) and
59054 (Dec. 4, 2008), 73 FR 75159 (Dec. 10, 2008).
5 15 U.S.C. 78q–1(b)(3)(F).
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rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act 6 and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,7 that the
proposed rule change (File No. SR–
OCC–2009–20) be and hereby is
approved.8
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
NASDAQ is filing this proposed rule
change to adopt a round lot holder
requirement for listing on the Global
and Capital markets, and to make a
technical correction to a cross
referenced rule.
The text of the proposed rule change
is below. Proposed new language is in
italics and proposed deletions are in
[brackets].
5410. Initial Listing Requirements for
Rights and Warrants
For initial listing, the rights or
warrants must meet all the requirements
below:
(a) No change.
(b) The underlying security must be
listed on the Global Market or be a
Covered Security; [and]
(c) There must be at least three
registered and active Market Makers[.] ;
and
(d) In the case of warrants, there must
be at least 400 Round Lot Holders
(except that this requirement will not
apply to the listing of warrants in
connection with the initial firm
commitment underwritten public
offering of such warrants).
*
*
*
*
*
5515. Initial Listing Requirements for
Rights, Warrants, and Convertible Debt
The following requirements apply to
a Company listing convertible debt,
rights or warrants on The Nasdaq
Capital Market.
(a) For initial listing, rights, warrants
and put warrants (that is, instruments
that grant the holder the right to sell to
the issuing company a specified number
of shares of the Company’s common
stock, at a specified price until a
specified period of time) must meet the
following requirements:
(1) No change.
(2) The underlying security must be
listed on Nasdaq or be a Covered
Security; [and]
(3) At least three registered and active
Market Makers[.] ; and
(4) In the case of warrants, at least
400 Round Lot Holders (except that this
requirement will not apply to the listing
of rights or warrants in connection with
the initial firm commitment
underwritten public offering of such
warrants).
(b)–(c) No change.
*
*
*
*
*
5730. Listing Requirements for
Securities Not Specified Above (Other
Securities)
(a) Initial Listing Requirements
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(1) Nasdaq will consider listing on the
Global Market any security not
otherwise covered by the criteria in the
Rule 5400 or 5700 Series, provided the
instrument is otherwise suited to trade
through the facilities of Nasdaq. Such
securities will be evaluated for listing
against the following criteria:
(A) The Company shall have assets in
excess of $100 million and stockholders’
equity of at least $10 million. In the case
of a Company which is unable to satisfy
the income criteria set forth in Rule
5405(b)(1)(A)[paragraph (a)(1)], Nasdaq
generally will require the Company to
have the following:
(i)–(ii) No change.
(B)–(D) No change.
(2)–(3) No change.
(b) 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 is proposing to adopt a
round lot holder requirement for the
initial listing of warrants on the Global
and Capital Markets, with a limited
exemption for companies listing
warrants pursuant to a firm commitment
underwritten initial public offering.4
Currently, Listing Rule 5410 provides
that to list a warrant on the Global
Market a Company must have at least
450,000 warrants issued, the underlying
security must be listed on the Global
Market or be a Covered Security 5, and
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4 The
Commission notes that the proposed
changes to the Global Market warrant holder
requirement would apply to the Global Select
Market under Nasdaq Rule 5320, which provides
that ‘‘[i]f the Primary Equity Security of a Company
is included in the Global Select Market, any other
security of that same Company, such as other
classes of common or preferred stock, warrants and
units, that qualify for listing on the Global Market
shall also be included in the Global Select Market.’’
5 Rule 5005(a)(9) defines a Covered Security as a
security described in Section 18(b) of the Securities
Act of 1933.
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16:39 Mar 03, 2010
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there must be at least three registered
and active Market Makers. To list a
warrant on the Capital Market, a
Company must have at least 400,000
warrants issued, the underlying security
must be listed on NASDAQ or be a
Covered Security, and there must be at
least three registered and active Market
Makers.6
On March 12, 2009, NASDAQ filed a
proposed rule change to revise the rules
relating to the qualification, listing, and
delisting of companies listed on, or
applying to list on, NASDAQ to improve
the organization of the rules, eliminate
redundancies and simplify the rule
language.7 These rules (the ‘‘Listing
Rules’’) were operative April 13, 2009.
In adopting the new Listing Rules,
NASDAQ inadvertently omitted the
requirement in the prior rules that a
warrant have at least 400 round lot
holders for initial listing 8 on the Global
Market. NASDAQ is proposing to
modify Rule 5410 to add the round lot
holder requirement back to the rule.
NASDAQ is also proposing to adopt
an identical 400 round lot holder
requirement for the initial listing of
warrants on the Capital Market.
NASDAQ does not currently have a
holder requirement for listing warrants
on the Capital Market; however,
NASDAQ believes that adopting such a
requirement will help ensure that
warrants listed on the Capital Market
will have adequate distribution and a
liquid trading market.
NASDAQ is proposing to adopt an
exemption from the proposed round lot
holder requirements of both the Global
and Capital Markets for warrants listed
pursuant to a firm commitment
underwritten initial public offering.
NASDAQ believes that a primary
purpose of distribution requirements in
listing standards is to ensure a liquid
trading market, promoting price
discovery and the establishment of an
appropriate market price for the listed
securities. In the case of warrants,
NASDAQ believes that this liquidity
concern is partially addressed by the
fact that the market price for a warrant
is in large part determined by the
trading price of the underlying common
stock. Warrant values are primarily
determined using valuation models that
factor in the trading price of the
underlying stock, the warrant exercise
6 Rule
5515(a).
7 Securities Exchange Act Release No. 59663
(March 31, 2009), 74 FR 15552 (April 6, 2009)(SR–
NASDAQ–2009–018).
8 Former Rule 4420(d)(1) required warrants to
substantially meet the requirements of the Global
Market listing rules, which included a minimum of
400 round lot shareholders under all three entry
standards.
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9983
price and the expiration date of the right
or warrant. NASDAQ believes that the
sale of warrants in an underwritten
public offering provides an additional
basis for believing that a liquid trading
market will likely develop for such
warrants after listing, since the offering
process is designed to promote
appropriate price discovery. Moreover,
the underwriters in a firm commitment
underwritten public offering will also
generally make a market in the
securities for a period of time after the
offering, assisting in the creation of a
liquid trading market. For the foregoing
reasons, NASDAQ believes that it is
consistent with the protection of
investors and the public interest to
exempt from the proposed holder
requirements of Rules 5410 and 5515(a)
any series of warrants that is listed in
connection with its initial firm
commitment underwritten public
offering. This proposed exemption is
also consistent with a recent change to
the listing requirements of the New
York Stock Exchange (‘‘NYSE’’).9
NASDAQ is not proposing to require
a minimum number of holders for the
initial listing of rights, because rights
are generally distributed to the holders
of an existing security and becomes a
part of the realizable value of that
security. As such, because the existing
security must meet liquidity
requirements, including a continued
listing holders requirement, there is not
a need to require a separate minimum
number of holders of the rights to help
ensure the liquidity of the rights.10
NASDAQ is also making a technical
correction to a cross-reference contained
in the Listing Rules. Rule 5730(a)(1)(A)
was derived from old Rule 4420(d),
which contained a cross reference to the
Global Market income criteria found
under old Rule 4420(a)(1). Rule
4420(a)(1) was moved to new Listing
Rule 5405(b)(1)(A), yet the cross
reference in Rule 5730(a)(1)(A) was not
updated to reflect this new location.
Accordingly, NASDAQ proposes to
correct the reference in Rule
5730(a)(1)(A).
2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
9 See SR–NYSE–2009–115 (December 2, 2009), 74
FR 64781 (December 8, 2009) (amending Section
703.12 of the NYSE Listed Company Manual to
exempt from the 400 holders requirement any series
of warrants listed in connection with the initial firm
commitment underwritten public offering of such
warrants).
10 This is also consistent with the NYSE’s
treatment of rights. See Section 703.03(N) of the
NYSE Listed Company Manual.
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Federal Register / Vol. 75, No. 42 / Thursday, March 4, 2010 / Notices
provisions of Section 6 of the Act,11 in
general and with Section 6(b)(5) of the
Act,12 in particular in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, 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, which imposes a round lot
holder requirement applicable to the
initial listing of warrants, subject to a
limited exception for warrants listed
pursuant to firm commitment initial
public offerings, will protect investors
and the public interest and remove
impediments to and perfect the
mechanism of a free and open market by
helping to assure adequate liquidity,
and correcting inadvertent errors in the
adoption of the New Listing Rules.
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
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 13 and Rule 19b–4(f)(6) 14
thereunder because the proposal does
not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) by its
terms, become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate if consistent with the
protection of investors and the public
interest.15
U.S.C. 78f.
U.S.C. 78f(b)(5).
13 15 U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied the pre-filing requirement.
A proposed rule change filed under
Rule 19b–4(f)(6) normally may not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 16 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay period.
The Commission believes that waiver
of the 30-day operative delay period is
consistent with the protection of
investors and the public interest. For the
Global Market, Nasdaq would require
the same 400 round lot warrant holders
requirement that was contained in the
rules for warrants prior to the
reorganization of its Listing Rules. For
the Capital Market, Nasdaq is proposing
an identical 400 round lot warrant
holders requirement as the Global
Market. The Commission believes that
waiver of the 30-day operative delay
period is consistent with the protection
of investors and the public interest as
the proposed changes should help to
enhance liquidity and price discovery
for warrants. Further, for both the
Global Market and the Capital Market,
Nasdaq’s proposed exemption from the
holder requirement for initial firm
commitment underwritten public
offerings is identical to the rules of the
NYSE, which were published for notice
and comment in the Federal Register.17
The Commission did not receive any
comments during the public comment
period. The Commission further notes
that waiving the 30-day operative delay
for this provision is consistent with the
protection of investors and the public
interest as market making by the
underwriters in an initial firm
commitment public offering of warrants
for a period of time after the offering
should help alleviate short term
liquidity concerns.18 Finally, Nasdaq
proposes to correct inaccurate cross
references in the Listing Rules. Based on
the above, the Commission believes it is
consistent with the protection of
investors and the public interest to
waive the 30-day operative delay and
therefore deems the proposal effective
upon filing.19
11 15
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12 15
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16 17
CFR 240.19b–4(f)(6)(iii).
note 9 supra.
18 As noted by Nasdaq, the price of such warrants
would be established by the firm commitment
underwritten offering process, in addition to the
price of the underlying security, the exercise price
of the warrants, and the expiration of the warrants.
19 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
17 See
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At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such proposed rule change if it appears
to the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.20
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2010–024 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2010–024. 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 Web site viewing and
printing 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 offices of the NASDAQ.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
20 15
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U.S.C. 78s(b)(3)(C).
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Federal Register / Vol. 75, No. 42 / Thursday, March 4, 2010 / Notices
should submit only information that
you wish to make available publicly.
All submissions should refer to File
Number SR–NASDAQ–2010–024, and
should be submitted on or before March
25, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–4411 Filed 3–3–10; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61582; File No. SR–
NASDAQ–2010–025]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Amend the By-Laws of The NASDAQ
OMX Group, Inc.
February 25, 2010.
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 February
24, 2010, The NASDAQ Stock Market
LLC (the ‘‘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 prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NASDAQ Exchange is filing this
proposed rule change relating to the ByLaws of its parent corporation, The
NASDAQ OMX Group, Inc. (‘‘NASDAQ
OMX’’). The text of the proposed rule
change is available at https://
nasdaqomx.cchwallstreet.com, at the
Exchange’s principal office, on the
Commission’s Web site at https://
www.sec.gov, 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
NASDAQ Exchange included statements
concerning the purpose of and basis for
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
NASDAQ 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
NASDAQ OMX is proposing to make
certain amendments to its By-Laws to
make improvements in its governance.
Currently, NASDAQ OMX By-Laws
provide that each director receiving a
plurality of the votes at any election of
directors at which a quorum is present
is duly elected to the Board.3 Under
Corporate Governance Guidelines
adopted by the Board, however, any
director in an uncontested election who
receives a greater number of votes
‘‘withheld’’ from his or her election than
votes ‘‘for’’ such election is required to
tender his or her resignation promptly
following receipt of the certification of
the stockholder vote. The NASDAQ
OMX Nominating & Governance
Committee then considers the
resignation offer and recommends to the
Board whether to accept it. Within 90
days after the certification of the
election results, the Board will decide
whether to accept or reject the
resignation. Promptly thereafter, the
Board will announce its decision by
means of a press release. In a contested
election (i.e., where the number of
nominees exceeds the number of
directors to be elected), the unqualified
plurality standard controls.
Uncontested Election
NASDAQ OMX proposes the adoption
of a majority voting standard by
amending Article IV, Section 4.4 of the
By-Laws to provide that, in an
uncontested election, directors shall be
elected by holders of a majority of the
votes cast at any meeting for the election
3 Section 216 of the General Corporation Law of
the State of Delaware provides that in the absence
of the specification in the certificate of
incorporation or bylaws of a Delaware corporation,
directors of the Delaware corporation shall be
elected by a plurality of the shares present in
person or represented by proxy at the meeting and
entitled to vote on the election of directors. Since
the Certificate of Incorporation and By-Laws of
NASDAQ OMX do not specify the voting standard
for the election of NASDAQ OMX’s directors, the
Section 216 default standard applies to NASDAQ
OMX and, therefore, elections of NASDAQ OMX’s
directors are currently governed by a plurality vote
standard.
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9985
of directors at which a quorum is
present. Under the majority voting
standard, a nominee who fails to receive
the requisite vote would not be duly
elected to the Board; however, because
a director holds office until his or her
successor is duly elected and qualified,
any incumbent director-nominee who
fails to receive the requisite vote does
not automatically cease to be a director.
Instead, such director continues as a
‘‘holdover director’’ until such director’s
death, resignation or removal, or until
his or her successor is duly elected and
qualified. For this reason, the majority
voting standard under consideration
requires that any incumbent nominee,
as a condition to his or her nomination
for election, must submit in writing an
irrevocable resignation, the effectiveness
of which is conditioned upon the
director’s failure to receive the requisite
vote in any uncontested election and the
Board’s acceptance of the resignation.
The resignation would be considered by
the Nominating & Governance
Committee and acted upon by the Board
in the same manner as a resignation
tendered under current rules.4
Acceptance of that resignation by the
Board shall be in accordance with the
policies and procedures adopted by the
Board for such purpose. NASDAQ OMX
specifies its policies and procedures
pertaining to the election of its directors
in its By-Laws. Specifically, the policies
and procedures for the acceptance of the
resignation of a director, by the Board,
are proposed to be specified in By-Law
Article IV, Section 4.4. There are no
additional policies and procedures other
than what is indicated in the By-Laws.
In the event that NASDAQ OMX
proposes to further amend its By-Laws
with respect to the election of directors,
including the adoption of any policies
and procedure with respect to such
election, NASDAQ OMX shall file a
proposed rule change with the
Commission to seek approval of those
amendments.
Contested Election
The Exchange is codifying its process
for a contested election. The directors
shall continue to be elected by a
plurality vote in a contested election.
There is no change to the process for
contested elections because if a majority
voting standard were to apply in a
contested election, the likelihood of a
‘‘failed election’’ (i.e., a situation in
which no director receives the requisite
vote) would be more pronounced.
Moreover, the rationale underpinning
the majority voting policy does not
4 See NASDAQ OMX By-Law Article IV, Section
4.5.
E:\FR\FM\04MRN1.SGM
04MRN1
]]>Agencies
[Federal Register Volume 75, Number 42 (Thursday, March 4, 2010)]
[Notices]
[Pages 9982-9985]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-4411]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61594; File No. SR-NASDAQ-2010-024]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt a Round Lot Holder Initial Listing Requirement for Listing of
Warrants on the Nasdaq Global and Capital Markets Except for Initial
Firm Commitment Underwritten Public Offering
February 25, 2010.
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 February 19, 2010, The NASDAQ Stock Market LLC (``NASDAQ'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by NASDAQ.
NASDAQ has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\
which renders the proposal effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
NASDAQ is filing this proposed rule change to adopt a round lot
holder requirement for listing on the Global and Capital markets, and
to make a technical correction to a cross referenced rule.
The text of the proposed rule change is below. Proposed new
language is in italics and proposed deletions are in [brackets].
5410. Initial Listing Requirements for Rights and Warrants
For initial listing, the rights or warrants must meet all the
requirements below:
(a) No change.
(b) The underlying security must be listed on the Global Market or
be a Covered Security; [and]
(c) There must be at least three registered and active Market
Makers[.] ; and
(d) In the case of warrants, there must be at least 400 Round Lot
Holders (except that this requirement will not apply to the listing of
warrants in connection with the initial firm commitment underwritten
public offering of such warrants).
* * * * *
5515. Initial Listing Requirements for Rights, Warrants, and
Convertible Debt
The following requirements apply to a Company listing convertible
debt, rights or warrants on The Nasdaq Capital Market.
(a) For initial listing, rights, warrants and put warrants (that
is, instruments that grant the holder the right to sell to the issuing
company a specified number of shares of the Company's common stock, at
a specified price until a specified period of time) must meet the
following requirements:
(1) No change.
(2) The underlying security must be listed on Nasdaq or be a
Covered Security; [and]
(3) At least three registered and active Market Makers[.] ; and
(4) In the case of warrants, at least 400 Round Lot Holders (except
that this requirement will not apply to the listing of rights or
warrants in connection with the initial firm commitment underwritten
public offering of such warrants).
(b)-(c) No change.
* * * * *
5730. Listing Requirements for Securities Not Specified Above (Other
Securities)
(a) Initial Listing Requirements
[[Page 9983]]
(1) Nasdaq will consider listing on the Global Market any security
not otherwise covered by the criteria in the Rule 5400 or 5700 Series,
provided the instrument is otherwise suited to trade through the
facilities of Nasdaq. Such securities will be evaluated for listing
against the following criteria:
(A) The Company shall have assets in excess of $100 million and
stockholders' equity of at least $10 million. In the case of a Company
which is unable to satisfy the income criteria set forth in Rule
5405(b)(1)(A)[paragraph (a)(1)], Nasdaq generally will require the
Company to have the following:
(i)-(ii) No change.
(B)-(D) No change.
(2)-(3) No change.
(b) 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 is proposing to adopt a round lot holder requirement for the
initial listing of warrants on the Global and Capital Markets, with a
limited exemption for companies listing warrants pursuant to a firm
commitment underwritten initial public offering.\4\ Currently, Listing
Rule 5410 provides that to list a warrant on the Global Market a
Company must have at least 450,000 warrants issued, the underlying
security must be listed on the Global Market or be a Covered Security
\5\, and there must be at least three registered and active Market
Makers. To list a warrant on the Capital Market, a Company must have at
least 400,000 warrants issued, the underlying security must be listed
on NASDAQ or be a Covered Security, and there must be at least three
registered and active Market Makers.\6\
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\4\ The Commission notes that the proposed changes to the Global
Market warrant holder requirement would apply to the Global Select
Market under Nasdaq Rule 5320, which provides that ``[i]f the
Primary Equity Security of a Company is included in the Global
Select Market, any other security of that same Company, such as
other classes of common or preferred stock, warrants and units, that
qualify for listing on the Global Market shall also be included in
the Global Select Market.''
\5\ Rule 5005(a)(9) defines a Covered Security as a security
described in Section 18(b) of the Securities Act of 1933.
\6\ Rule 5515(a).
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On March 12, 2009, NASDAQ filed a proposed rule change to revise
the rules relating to the qualification, listing, and delisting of
companies listed on, or applying to list on, NASDAQ to improve the
organization of the rules, eliminate redundancies and simplify the rule
language.\7\ These rules (the ``Listing Rules'') were operative April
13, 2009. In adopting the new Listing Rules, NASDAQ inadvertently
omitted the requirement in the prior rules that a warrant have at least
400 round lot holders for initial listing \8\ on the Global Market.
NASDAQ is proposing to modify Rule 5410 to add the round lot holder
requirement back to the rule.
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\7\ Securities Exchange Act Release No. 59663 (March 31, 2009),
74 FR 15552 (April 6, 2009)(SR-NASDAQ-2009-018).
\8\ Former Rule 4420(d)(1) required warrants to substantially
meet the requirements of the Global Market listing rules, which
included a minimum of 400 round lot shareholders under all three
entry standards.
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NASDAQ is also proposing to adopt an identical 400 round lot holder
requirement for the initial listing of warrants on the Capital Market.
NASDAQ does not currently have a holder requirement for listing
warrants on the Capital Market; however, NASDAQ believes that adopting
such a requirement will help ensure that warrants listed on the Capital
Market will have adequate distribution and a liquid trading market.
NASDAQ is proposing to adopt an exemption from the proposed round
lot holder requirements of both the Global and Capital Markets for
warrants listed pursuant to a firm commitment underwritten initial
public offering. NASDAQ believes that a primary purpose of distribution
requirements in listing standards is to ensure a liquid trading market,
promoting price discovery and the establishment of an appropriate
market price for the listed securities. In the case of warrants, NASDAQ
believes that this liquidity concern is partially addressed by the fact
that the market price for a warrant is in large part determined by the
trading price of the underlying common stock. Warrant values are
primarily determined using valuation models that factor in the trading
price of the underlying stock, the warrant exercise price and the
expiration date of the right or warrant. NASDAQ believes that the sale
of warrants in an underwritten public offering provides an additional
basis for believing that a liquid trading market will likely develop
for such warrants after listing, since the offering process is designed
to promote appropriate price discovery. Moreover, the underwriters in a
firm commitment underwritten public offering will also generally make a
market in the securities for a period of time after the offering,
assisting in the creation of a liquid trading market. For the foregoing
reasons, NASDAQ believes that it is consistent with the protection of
investors and the public interest to exempt from the proposed holder
requirements of Rules 5410 and 5515(a) any series of warrants that is
listed in connection with its initial firm commitment underwritten
public offering. This proposed exemption is also consistent with a
recent change to the listing requirements of the New York Stock
Exchange (``NYSE'').\9\
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\9\ See SR-NYSE-2009-115 (December 2, 2009), 74 FR 64781
(December 8, 2009) (amending Section 703.12 of the NYSE Listed
Company Manual to exempt from the 400 holders requirement any series
of warrants listed in connection with the initial firm commitment
underwritten public offering of such warrants).
---------------------------------------------------------------------------
NASDAQ is not proposing to require a minimum number of holders for
the initial listing of rights, because rights are generally distributed
to the holders of an existing security and becomes a part of the
realizable value of that security. As such, because the existing
security must meet liquidity requirements, including a continued
listing holders requirement, there is not a need to require a separate
minimum number of holders of the rights to help ensure the liquidity of
the rights.\10\
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\10\ This is also consistent with the NYSE's treatment of
rights. See Section 703.03(N) of the NYSE Listed Company Manual.
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NASDAQ is also making a technical correction to a cross-reference
contained in the Listing Rules. Rule 5730(a)(1)(A) was derived from old
Rule 4420(d), which contained a cross reference to the Global Market
income criteria found under old Rule 4420(a)(1). Rule 4420(a)(1) was
moved to new Listing Rule 5405(b)(1)(A), yet the cross reference in
Rule 5730(a)(1)(A) was not updated to reflect this new location.
Accordingly, NASDAQ proposes to correct the reference in Rule
5730(a)(1)(A).
2. Statutory Basis
NASDAQ believes that the proposed rule change is consistent with
the
[[Page 9984]]
provisions of Section 6 of the Act,\11\ in general and with Section
6(b)(5) of the Act,\12\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, 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, which imposes a round lot holder requirement applicable to
the initial listing of warrants, subject to a limited exception for
warrants listed pursuant to firm commitment initial public offerings,
will protect investors and the public interest and remove impediments
to and perfect the mechanism of a free and open market by helping to
assure adequate liquidity, and correcting inadvertent errors in the
adoption of the New Listing Rules.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(5).
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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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\ thereunder
because the proposal does not: (i) Significantly affect the protection
of investors or the public interest; (ii) impose any significant burden
on competition; and (iii) by its terms, become operative for 30 days
from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the Exchange to give the Commission written
notice of the Exchange's intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied the pre-filing requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \16\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay period.
---------------------------------------------------------------------------
\16\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that waiver of the 30-day operative delay
period is consistent with the protection of investors and the public
interest. For the Global Market, Nasdaq would require the same 400
round lot warrant holders requirement that was contained in the rules
for warrants prior to the reorganization of its Listing Rules. For the
Capital Market, Nasdaq is proposing an identical 400 round lot warrant
holders requirement as the Global Market. The Commission believes that
waiver of the 30-day operative delay period is consistent with the
protection of investors and the public interest as the proposed changes
should help to enhance liquidity and price discovery for warrants.
Further, for both the Global Market and the Capital Market, Nasdaq's
proposed exemption from the holder requirement for initial firm
commitment underwritten public offerings is identical to the rules of
the NYSE, which were published for notice and comment in the Federal
Register.\17\ The Commission did not receive any comments during the
public comment period. The Commission further notes that waiving the
30-day operative delay for this provision is consistent with the
protection of investors and the public interest as market making by the
underwriters in an initial firm commitment public offering of warrants
for a period of time after the offering should help alleviate short
term liquidity concerns.\18\ Finally, Nasdaq proposes to correct
inaccurate cross references in the Listing Rules. Based on the above,
the Commission believes it is consistent with the protection of
investors and the public interest to waive the 30-day operative delay
and therefore deems the proposal effective upon filing.\19\
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\17\ See note 9 supra.
\18\ As noted by Nasdaq, the price of such warrants would be
established by the firm commitment underwritten offering process, in
addition to the price of the underlying security, the exercise price
of the warrants, and the expiration of the warrants.
\19\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such proposed rule change
if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.\20\
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\20\ 15 U.S.C. 78s(b)(3)(C).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2010-024 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2010-024. 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 Web site
viewing and printing 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 offices of the NASDAQ. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You
[[Page 9985]]
should submit only information that you wish to make available
publicly.
All submissions should refer to File Number SR-NASDAQ-2010-024, and
should be submitted on or before March 25, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4411 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P
