Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of Proposed Rule Change To Modify the Fees for Listing on the Nasdaq Stock Market and the Fee for Written Interpretations of Nasdaq Listing Rules, 11958-11962 [2010-5413]
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11958
Federal Register / Vol. 75, No. 48 / Friday, March 12, 2010 / Notices
for trades settling on or after March 1,
2010.
Number SR–Phlx–2010–32 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
2. Statutory Basis
The Exchange believes that its
proposal to amend its schedule of fees
is consistent with Section 6(b) of the
Act 7 in general, and furthers the
objectives of Section 6(b)(4) of the Act 8
in particular, in that it is an equitable
allocation of reasonable fees and other
charges among Exchange members
because Exchange members would
equally be assessed the costs incurred
by the Exchange to route customer
orders to away markets on behalf of its
members.
Paper Comments
[Release No. 34–61669; File No. SR–
NASDAQ–2009–081]
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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)(ii) of the Act 9 and paragraph
(f)(2) of Rule 19b–4 10 thereunder. At
any time within 60 days of the filing of
the proposed rule change, the
Commission may summarily abrogate
such 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.
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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 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
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
9 15 U.S.C. 78s(b)(3)(A)(ii).
10 17 CFR 240.19b–4(f)(2).
• 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–Phlx–2010–32. 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, 100 F Street, NE.,
Washington, DC 20549, 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 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–Phlx–
2010–32 and should be submitted on or
before April 2, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–5316 Filed 3–11–10; 8:45 am]
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Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Granting Approval of Proposed Rule
Change To Modify the Fees for Listing
on the Nasdaq Stock Market and the
Fee for Written Interpretations of
Nasdaq Listing Rules
March 5, 2010.
I. Introduction
On October 6, 2009, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’) 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 modifying the application, entry
and annual fees currently charged to
issuers listed on the Nasdaq Global and
Nasdaq Global Select Markets, as well as
the fee for written interpretations of
Nasdaq listing rules. The proposed rule
change was published for comment in
the Federal Register on November 4,
2009.3 The Commission received three
comment letters from one commenter on
the proposal.4 Nasdaq submitted four
letters in response to the comments.5
This order approves the proposed rule
change.
II. Description of the Proposal
A. Nasdaq Global and Global Select
Application, Entry and Annual Fees
Nasdaq currently imposes a $5,000
application fee on a company applying
to list on the Nasdaq Global or Nasdaq
Global Select Markets.6 Nasdaq
1 15
U.S.C. 78s(b)(1).
CFR 240.19b-4.
3 See Securities Exchange Act Release No. 60899
(October 28, 2009), 74 FR 57212 (‘‘Notice’’).
4 See Letters to Elizabeth M. Murphy, Secretary,
Commission, from Jesse W. Markham, Jr., Roger
Myers, and Stephen Ryerson, Holme Roberts &
Owen LLP (writing on behalf of Business Wire,
Inc.), dated November 24, 2009 (‘‘Business Wire
Letter 1’’); January 8, 2010 (stating its intent to
respond to Nasdaq’s response to its initial letter);
and January 14, 2010 (‘‘Business Wire Letter 2’’).
5 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from Arnold P. Golub, Vice President
and Associate General Counsel, The NASDAQ
Stock Market LLC, dated December 23, 2009
(‘‘Nasdaq Letter 1’’); from Michael N. Sohn and
Donna E. Patterson, Arnold & Porter, LLP, dated
December 23, 2009 (writing on behalf of Nasdaq)
(‘‘Nasdaq Letter 2’’); from Arnold P. Golub, Vice
President and Associate General Counsel, The
NASDAQ Stock Market LLC, dated January 22, 2010
(‘‘Nasdaq Letter 3’’); and February 5, 2010 (‘‘Nasdaq
Letter 4’’).
6 The application fee is non-refundable. The
Global Select Market is a segment of The Nasdaq
Global Market. See Nasdaq Rule 5005(a)(25) and
(29).
2 17
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Federal Register / Vol. 75, No. 48 / Friday, March 12, 2010 / Notices
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proposes to increase this fee to $25,000.
The application fee would continue to
be credited towards entry fees upon
listing, and thus, this change would not
affect the overall fees a company pays
to list.
Nasdaq also proposes to modify the
entry fee a company pays when listing
on the Nasdaq Global or Nasdaq Global
Select Markets. Currently, those fees are
charged in three tiers, based on the
number of shares the company has
outstanding, and range from $100,000 to
$150,000.7 Nasdaq proposes to create,
for Nasdaq Global and Nasdaq Global
Select listings, an additional tier for
companies issuing over 50 million to
100 million shares and to increase the
entry fee by $25,000 to $75,000,
depending on the number of shares to
be listed.8 These fees were last
increased in January 2002.9
In addition, Nasdaq proposes to
modify the annual fee imposed on
domestic and foreign issues and
American Depositary Receipts (‘‘ADRs’’)
listed on the Nasdaq Global and Nasdaq
Global Select Markets. The proposed
change would result in revised annual
fees for domestic and foreign issues for
Nasdaq Global and Nasdaq Global Select
listings, ranging from $35,000 to
$99,500, based on the number of shares
outstanding, and a maximum increase of
$5,000, depending on the company’s
total shares outstanding.10 In addition,
Nasdaq proposes to combine two of the
existing seven fee tiers to create a new
tier for companies with over 10 million
to 50 million shares outstanding. As a
result, according to Nasdaq, there would
be no fee increase for approximately 25
percent of Nasdaq companies.11 Annual
7 The current entry fees for Nasdaq Global and
Nasdaq Global Select listings are as follows:
$100,000 for up to 30 million shares; $125,000 for
30+ to 50 million shares; and $150,000 for over 50
million shares. See Nasdaq Rule 5910(a).
8 The proposed entry fees for Nasdaq Global and
Nasdaq Global Select listings are as follows:
$125,000 for up to 30 million shares; $150,000 for
30+ to 50 million shares; $200,000 for 50+ to 100
million shares; and $225,000 for shares over 100
million.
9 See Securities Exchange Act Release No. 45206
(December 28, 2001), 67 FR 621 (January 4, 2002)
(approving SR–NASD–2001–76).
10 The current annual fees for domestic and
foreign issues listed on Nasdaq Global and Nasdaq
Global Select are as follows: $30,000 for up to 10
million shares; $35,000 for 10+ to 25 million shares;
$37,500 for 25+ to 50 million shares; $45,000 for
50+ to 75 million shares; $65,500 for 75+ to 100
million shares; $85,000 for 100+ to 150 million
shares; and $95,000 for over 150 million shares. See
Nasdaq Rule 5910(c).
11 The proposed annual fees for domestic and
foreign issues listed on Nasdaq Global or Nasdaq
Global Select are as follows: $35,000 for up to 10
million shares; $37,500 for 10+ to 50 million shares;
$46,500 for 50+ to 75 million shares; $68,500 for
75+ to 100 million shares; $89,000 for 100+ to 150
million shares; and $99,500 for shares over 150
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fees for domestic and foreign 12
companies were last increased in
January 2007.13 The revised annual fee
applicable to ADRs listed on Nasdaq
Global and Nasdaq Global Select would
result in an annual increase ranging
from $8,775 to $20,000, and the revised
fee would range from $30,000 to
$50,000, depending on the number of
ADRs outstanding.14 In addition,
Nasdaq proposes to expand the size of
the tiers of shares outstanding on which
these proposed fees are based. Annual
fees for ADRs were last increased in
February 2004.15
B. Fee for Written Interpretations of
Nasdaq Listing Rules
Nasdaq also proposes to change the
fee for written interpretations of Nasdaq
listing rules 5000 through 5900 16 for all
companies listed on Nasdaq’s Capital,
Global and Global Select Markets.
Currently, for a written interpretation, a
company is required to submit a nonrefundable fee of $5,000 for a regular
request, which is generally completed
within four weeks from the date Nasdaq
receives all information necessary to
respond to the request, or $15,000 for an
expedited request, in which the
company requests a response by a
specific date that is less than four weeks
after the date Nasdaq receives all
necessary information.
Nasdaq proposes to eliminate the
alternative for a non-expedited request
and require all companies seeking a
written interpretation to pay $15,000.
Further, Nasdaq proposes to modify the
timeframes in which Nasdaq would
respond to interpretive requests. As
revised, the rule would state that
Nasdaq would generally respond to all
requests for a written interpretation
million. Companies with 25 million to 50 million
shares outstanding would not face a fee increase
under the proposed change.
12 Telephone conversation between Arnold
Golub, Vice President and Associate General
Counsel, Nasdaq, and Terri Evans, Special Counsel,
and Arisa Tinaves, Special Counsel, Division of
Trading and Markets, Commission, on November 5,
2009 (clarifying that fees for foreign companies also
were last increased in January 2007).
13 See Securities Exchange Act Release No. 55202
(January 30, 2007), 72 FR 6017 (February 8, 2007)
(approving SR–NASDAQ–2006–40).
14 The current annual fees for ADRs listed on
Nasdaq Global and Nasdaq Global Select are as
follows: $21,225 for up to 10 million ADRs; $26,500
for 10+ to 25 million ADRs; $29,820 for 25+ to 50
million ADRs; and $30,000 for over 50 million
ADRs. See Nasdaq Rule 5910(d). The proposed
annual fee for ADRs is as follows: $30,000 for up
to 10 million ADRs; $37,500 for 10+ to 50 million
ADRs; $42,500 for 50+ to 75 million ADRs; and
$50,000 for ADRs over 75 million.
15 See Securities Exchange Act Release No. 49169
(February 2, 2004), 69 FR 6009 (February 9, 2004)
(approving SR–NASD–2003–178).
16 The Commission notes that the 5000 series
Rules are entitled NASDAQ Listing Rules.
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11959
within four weeks from the date Nasdaq
receives all information necessary to
respond to the request, although Nasdaq
would attempt to respond by a sooner
date if the company so requires. Nasdaq
will continue, as it currently does, to
not charge companies for oral
interpretations of its rules.17
C. Implementation
The revised annual fee schedule
would be effective January 1, 2010. The
application and entry fee schedule
would be effective for companies that
apply for listing after Commission
approval of the proposed rule change;
thus a company that applied and paid
the application fee prior to Commission
approval would be charged an entry fee
according to the fee schedule in effect
at the time of its application. Finally, we
note that the change to the interpretive
fees is effective upon approval of the fee
in this order.
III. Summary of Comments
The Commission received three
comment letters on the proposed rule
change from Business Wire.18 Generally,
Business Wire requests that the
Commission: ‘‘(1) deny Nasdaq’s
proposal to increase its fees absent
assurances that Nasdaq is not engaged
in cross-subsidization of its information
dissemination services subsidiary
through application, entry, and annual
fees for listings; (2) require transparency
in all future pricing proposals from
Nasdaq; and (3) restrict Nasdaq’s
ownership of and/or involvement in
business outside its core function that
create actual or apparent conflicts of
interest.’’ 19
According to Business Wire, Nasdaq
is increasing its ‘‘fee structure to cover
unspecified cost increases at the same
time it is attempting to attract new
listings by offering millions of dollars in
‘free’ Information Dissemination
Services [(‘‘IDSs’’)] bundled into the
listing fee.’’ 20 Business Wire believes
that Nasdaq is, in fact, raising its fees to
subsidize the delivery of free or
discounted IDSs to current or
prospective listed companies through
GlobeNewswire and other affiliates that
provide IDSs such as press release
services, webcasting, Web hosting and
17 The Commission notes that Nasdaq has stated
that it does not charge companies for oral
interpretation requests of their rules. Telephone
conversation on October 28, 2009 between Arnold
Golub, Vice President and Associate General
Counsel, Nasdaq and Sharon Lawson, Senior
Special Counsel, Commission.
18 See supra note 4.
19 See Business Wire Letters 1 and 2.
20 See Business Wire Letter 1; see also Business
Wire Letter 2 (stating that the proposed rule change
fails to explain why additional revenue is needed).
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Federal Register / Vol. 75, No. 48 / Friday, March 12, 2010 / Notices
EDGAR filings, all of which Nasdaq
refers to as its ‘‘Core Services,’’ and
which are offered under the umbrella of
Nasdaq affiliate Nasdaq OMX Group
Corporate Services, Inc. (‘‘NOCS’’).21
According to Business Wire, Nasdaq
jointly markets itself and the IDSs
offered by NOCS, to induce companies
listed on other exchanges to switch
listings or to retain Nasdaq listings, by
effectively reducing a company’s listing
costs through the provision of IDSs.22
Specifically, Business Wire asserts that
Nasdaq offers extensive free or
discounted IDSs to certain listed
companies and that, in fact, Nasdaq has
offered ‘‘up to five years of free or
heavily discounted wire distribution
* * * to certain companies either as an
inducement to switch listings or as part
of a package deal to reduce the cost of
the company’s existing listing on
Nasdaq.’’ 23 According to Business Wire,
the alleged cross-subsidization unduly
burdens competition and inequitably
allocates fees among its issuers in
violation of Sections 6(b)(4), (5) and (8)
of the Act, as well as Sections 1 and 2
of the Sherman Act.24
Specifically, Business Wire argues
that Nasdaq’s proposal fails to satisfy
Section 6(b)(4) of the Act, which
requires the equitable allocation of
reasonable dues, fees and other charges
among its issuers, because listed
companies that use Nasdaq’s free or
discounted IDSs pay the same listing
fees as listed companies that elect not to
do so and purchase such services from
third parties. Business Wire believes
that Nasdaq’s fees are not equitably
allocated because one set of listed
companies is subsidizing another by
effectively paying, through their listing
fees, a portion of the costs that are
incurred by Nasdaq to provide free or
discounted IDSs.25 Business Wire
further asserts that the proposed fee
increases would facilitate Nasdaq’s
alleged tying and cross-subsidization in
violation of the antitrust laws and
would, therefore, be inconsistent with
just and equitable principles of trade
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21 See
Business Wire Letter 1. The Commission
notes that Nasdaq clarified that NOCS and Nasdaq
are separate subsidiaries of NASDAQ OMX Group,
Inc. See Nasdaq Letter 1. Nasdaq also clarified that
references in its letters to Nasdaq Corporate
Services, Inc., NASDAQ OMX Corporate Services,
Inc., and Nasdaq Corporate Services, LLC should all
be references to NASDAQ OMX Group Corporate
Services, Inc. Telephone conversation on March 3,
2010 between Arnold Golub, Vice President and
Associate General Counsel, Nasdaq, and Terri
Evans, Special Counsel, Commission.
22 See Business Wire Letter 2.
23 See Business Wire Letter 2.
24 See Business Wire Letter 1.
25 See Business Wire Letter 1.
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under Section 6(b)(5) of the Act.26
Moreover, Business Wire believes that
Nasdaq’s proposed fee increases would
impose a burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. According to
Business Wire, Nasdaq’s ‘‘crosssubsidization provides no significant
benefit to investors, listed companies, or
the exchange system that might make
such a significant impact on
competition necessary or
appropriate.’’ 27
Business Wire also alleges that
Nasdaq is tying its IDSs to its listing
services in violation of Section 1 of the
Sherman Act. According to Business
Wire, a tying arrangement violates
Section 1 of the Sherman Act ‘‘if the
seller has appreciable economic power
in the tying product market and if the
arrangement affects a substantial
volume of commerce in the tied
market.’’ 28 Business Wire believes that
Nasdaq’s free or discounted offerings
meet the legal standard of a tying
arrangement in violation of the antitrust
laws.29
Additionally, Business Wire alleges
that Nasdaq, by offering free or
discounted IDSs, evinces an attempt to
monopolize in violation of Section 2 of
the Sherman Act.30 Specifically,
Business Wire alleges that Nasdaq is
engaging in predatory anti-competitive
conduct. Business Wire urges the
Commission to ensure that no part of
the proposed fee increase is used to
subsidize Nasdaq’s provision of IDSs.
Finally, Business Wire states that
Nasdaq’s offering of IDSs creates a
conflict of interest with its role as a selfregulatory organization. For example,
Business Wire believes that Nasdaq’s
role in enforcing compliance with rules
relating to the dissemination of material
information by listed companies could
result in Nasdaq effectively becoming
26 See
Business Wire Letter 1.
Business Wire Letter 1.
28 See Business Wire Letter 1.
29 Business Wire believes that Nasdaq is tying
together its listing services and its IDSs because
customers that list on Nasdaq and are provided
such free or discounted services will effectively be
precluded from switching to another source of IDSs
since they would be paying for Nasdaq’s IDSs,
whether they use them or not, through the elevated
listing fees. Business Wire further alleges that
Nasdaq has sufficient market power to coerce
purchase of the tied product since the only way to
avoid the indirect cost of Nasdaq’s IDSs would be
for a company to either not list on Nasdaq or incur
significant costs to move their listing to a different
exchange. Lastly, Business Wire asserts that the
amount of commerce affected in the IDSs’ market
is far above the ‘‘not insubstantial’’ requirement of
the Sherman Act (asserting that Nasdaq is offering
millions of dollars of free wire distribution and
other IDSs). See Business Wire Letters 1 and 2.
30 See Business Wire Letter 1.
27 See
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the ‘‘preferred provider’’ of IDSs.31
Accordingly, Business Wire believes
that not only should Nasdaq’s proposal
be rejected, but that Nasdaq should be
required to sell GlobeNewswire or
operate it on a strict arms-length basis.32
IV. Response to Comments
In response to Business Wire’s
comments, Nasdaq asserts that its
proposed fee change satisfies the
requirements of the Act.33 Specifically,
Nasdaq states that its ‘‘proposed fees are
in all cases equal to, or less than, the
fees charges by other exchanges’’ and are
supported by improvements to its
market and regulatory process, as well
as by changes in the marketplace.34
According to Nasdaq, it must now
‘‘spread its fixed costs, including the
costs for regulation, across fewer listed
companies and applicants than in the
past.’’ 35 Specifically, Nasdaq states that
the number of companies listed on
Nasdaq has declined approximately ten
percent, but that its regulatory costs
have either remained constant or
increased.36 Nasdaq also asserts that the
proposal does not permit unfair
discrimination between customers,
issuers, brokers, or dealers. According to
Nasdaq the proposed fees are ‘‘allocated
based on shares outstanding, as are
Nasdaq’s current fees and fees for other
exchanges, and that similarly situated
companies would be charged the same
fees.’’ 37
Further, in response to Business
Wire’s concern that Nasdaq’s proposed
fees unduly burden competition in
violation of Section 6(b)(8) of the Act,
Nasdaq believes that in assessing
competition, the Commission should be
concerned with competition among the
entities it regulates, such as exchanges,
brokers, dealers, and issuers, and not
competitive issues in other areas of the
economy.38 Accordingly, Nasdaq asserts
that the only competitive impact of the
proposed rule change would be to allow
Nasdaq ‘‘to recover the costs of, and
continue to make, improvements to its
market and regulatory process, and
31 See Business Wire Letter 1; see also Business
Wire Letter 2 (stating by ‘‘intertwining its listing
services with Globe’s Information Dissemination
Services, Nasdaq is circumventing any controls
between its regulatory function and the nonregulated services provided by its affiliated
entities.’’)
32 See Business Wire Letters 1 and 2.
33 See Nasdaq Letters 1, 3 and 4.
34 See Nasdaq Letter 4.
35 See Nasdaq Letter 1.
36 See Nasdaq Letter 3. Nasdaq represents that
from December 31, 2006 until December 31, 2009,
the number of companies listed on Nasdaq has
declined from 3,193 companies to 2,852 companies.
37 See Nasdaq Letter 1.
38 See Nasdaq Letter 1.
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therefore to continue to compete with
other listing markets * * *.’’ 39 Nasdaq
also believes that any potential conflicts
of interest are addressed by its
separation of its regulatory functions,
including the listing department, from
its business functions, as well as
through the rule filing process.40
Moreover, the effectiveness of its
regulatory program is subject to periodic
Commission examination.41
Nasdaq also represents that its
proposed fee changes are not designed
to recoup GlobeNewswire’s costs,42 and
that ‘‘GlobeNewswire is profitable on a
stand-alone basis, even after considering
the marketing expenses it incurs when
offering products for free on a trial basis,
and there is therefore no need for
Nasdaq to cross-subsidize
GlobeNewswire * * *.’’ 43 According to
Nasdaq, GlobeNewswire makes
promotional and partnership offers to
current and prospective customers as
part of its marketing efforts.44 However,
Nasdaq acknowledges that such
marketing efforts on behalf of NOCS,
including GlobeNewswire, ‘‘typically
occur in meetings and discussions about
the company’s choice of listing
market.’’ 45 Nasdaq represents, however,
that while NOCS will continue to offer
a sample of services on a complimentary
or discounted basis, such offers will be
made regardless of where the company
is listed or determines to list.46 In
addition, Nasdaq represents that while
NOCS, including GlobeNewswire, may
offer, without regard to the company’s
choice of listing market, promotional
packages of services to broad categories
of companies with certain
characteristics, it will not offer any
individually customized packages of
free or discounted services to any
company.47 Accordingly, Nasdaq
believes that ‘‘any discounts provided
for NOCS products cannot be
misconstrued as being offered in
39 See
Nasdaq Letter 1.
Nasdaq Letter 1.
41 See Nasdaq Letter 1.
42 See Nasdaq Letter 1.
43 See Nasdaq Letter 3.
44 See Nasdaq Letter 1.
45 See Nasdaq Letter 4.
46 Nasdaq represents that any future offers of free
and discounted services by NOCS will explicitly
and expressly provide that companies are free to
accept the offer whether or not they choose to list
on Nasdaq. See Nasdaq Letter 4.
47 See Nasdaq Letter 4. Nasdaq has represented
that it will not offer any customized packages of
free or discounted services, unless the Commission
specifically states that it is permitted to do so.
Telephone conversation on February 22, 2010
between Arnold Golub, Vice President and
Associate General Counsel, Nasdaq and Sharon
Lawson, Senior Special Counsel, Commission.
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40 See
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connection with a company’s listing on
Nasdaq.’’ 48
Also, in response to Business Wire’s
antitrust claims, Nasdaq disputes
Business Wire’s allegation that Nasdaq
illegally ties GlobeNewswire and other
IDSs to a company’s listing on Nasdaq.49
Nasdaq asserts that companies wishing
to list on Nasdaq are not forced to use
IDSs provided by Nasdaq since neither
the receipt of such services nor a
Nasdaq listing are conditioned on the
other.50 Therefore, Nasdaq believes that
the promotional offers for
GlobeNewswire services do not
constitute tying.51 Nasdaq further
asserts that ‘‘Business Wire’s claim that
the costs of the * * * promotions are
the unstated basis for Nasdaq’s listing
fee proposal is pure speculation.’’ 52
Finally, Nasdaq asserts that the
promotional nature of the offering alone
precludes a predatory pricing claim
constituting attempted monopolization
under Section 2 of the Sherman Act.
Nasdaq notes that courts routinely hold
that promotional offers cannot
constitute predatory pricing.53
V. Discussion and Commission’s
Findings
The Commission 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
exchange.54 Specifically, the
Commission finds that the proposed
rule change is consistent with Sections
48 See
Nasdaq Letter 4.
Nasdaq Letter 2. Nasdaq maintains that
NOCS, Nasdaq’s affiliate, has offered and plans to
offer a limited amount of free or discounted ‘‘Core
Services’’ to all companies whether the company is
listed on Nasdaq or not.
50 According to Nasdaq, ‘‘[i]llegal tying is the
‘seller’s exploitation of its control over the tying
product * * * to force the buyer into the purchase
of a tied product * * * that the buyer either did
not want at all, or might have preferred to purchase
elsewhere on different terms.’’ See Nasdaq Letter 2.
51 See Nasdaq Letter 2. Nasdaq asserts, among
other things, that any offers of GlobeNewswire free
or discounted services when competing for listings
would fail the coercion element of the Sherman
Act, since Nasdaq is willing to and does offer the
listing service alone without the IDSs. Additionally,
according to Nasdaq, because Nasdaq must compete
for listings, Nasdaq does not have the requisite
market power required under the Sherman Act for
a tying claim. See Nasdaq Letter 2.
52 See Nasdaq Letter 2.
53 Nasdaq further states that GlobeNewswire does
not pose a real danger of driving competitors from
the market, since GlobeNewswire only processes
approximately 10 percent of corporate news
releases in the U.S. Nasdaq also notes the
substantial resources available to Business Wire.
See Nasdaq Letter 2.
54 In approving the proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
49 See
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Sfmt 4703
11961
6(b)(4), (b)(5), and (b)(8) of the Act,55
which require, in part, that the rules of
an exchange: (i) Provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
members and issuers and other persons
using its facilities; (ii) are not designed
to permit unfair discrimination between
customers, issuers, brokers or dealers;
and (iii) do not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.
The Commission believes that
assurances it has received from Nasdaq
in response to the comments of Business
Wire adequately address the concerns
expressed that Nasdaq is acting in an
anti-competitive manner that is
inconsistent with the Act. Specifically,
Nasdaq has represented that
promotional offers of IDSs made by its
affiliate, NOCS, are made regardless of
whether or not a prospective customer
is listed or may become listed on
Nasdaq. Furthermore, NOCS will limit
its promotional activities to: (1) Offering
a free or discounted sampling of IDSs—
its ‘‘Core Services’’ package—to all
prospective customers; and (2) perhaps
offering other packages of
complimentary or discounted IDSs to
broad categories of companies. In either
case, the free or discounted services
offered by NOCS ‘‘will explicitly and
expressly provide that companies will
be free to accept the offer and test NOCS
services whether or not they choose to
list on Nasdaq.’’ 56
Based on Nasdaq’s representation that
offers of IDSs by NOCS will be made
independent of the listing status of
NOCS customers or potential customers,
as well as additional information
contained in Nasdaq’s responses,57 the
Commission does not believe that the
proposed increases in listing fees crosssubsidize NOCS services in any way
that constitutes an inappropriate burden
on competition or an inequitable
allocation of fees, or fails to promote
just and equitable principles of trade, in
a manner inconsistent with the Act.
Accordingly, we find that the proposed
changes to Nasdaq listing fees is
consistent with the requirements of the
55 15
U.S.C. 78f(b)(4), (b)(5) and (b)(8).
Nasdaq Letter 4. In expressly and explicitly
notifying companies that permitted offers are not
contingent on a Nasdaq listing, Nasdaq further
represents that any mention of a permitted offer on
a Nasdaq or NOCS Web site will also state that the
offer is not conditioned on the companies’ choice
of listing market. The Commission notes it is
important that any communications, irrespective of
the method, on permitted free or discounted
services make it expressly and explicitly clear that
such services are available whether or not the
company lists on Nasdaq.
57 See Nasdaq Letters 1–4.
56 See
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Federal Register / Vol. 75, No. 48 / Friday, March 12, 2010 / Notices
Act and, in particular, provides for an
equitable allocation of reasonable fees
among its issuers consistent with
Section 6(b)(4) of the Act, does not
unfairly discriminate between issuers
consistent with Section 6(b)(5) of the
Act, and is consistent with Section
6(b)(8) of the Act.
As to the concerns raised by Business
Wire that the offering of IDSs by NOCS
creates a conflict of interest with
Nasdaq’s self-regulatory functions since,
among other things, Nasdaq enforces
rules relating to the dissemination of
material information by listed
companies, Nasdaq has represented that
it has effectively separated its regulatory
functions from its business functions,
and that its business functions,
including those of NOCS, in no way
influence the regulatory oversight of
listed companies and their disclosure
requirements.58 The Commission
believes that Nasdaq’s assurances
concerning the separation of its business
and regulatory functions adequately
address the conflict of interest concerns
raised by Business Wire. The
Commission also notes that it oversees
Nasdaq as a registered national
securities exchange, including the
performance of its regulatory functions
in a manner consistent with the Act.
With respect to its application,
annual, and entry fees, Nasdaq has
represented that the proposed increase
in fees better reflects the costs
associated with, among other things,
listing application reviews, Nasdaq’s
new on-line application center, and
enhancements to its listings compliance
systems.59 Moreover, Nasdaq notes that
the number of listed companies on
Nasdaq has declined approximately
10% since 2006, so that its regulatory
costs must be allocated among fewer
listed companies.60 Nasdaq further
notes that, despite the decline in
listings, because of enhancements to its
compliance programs and changes in
regulatory requirements, the number of
issuer filings that it reviews has
substantially increased since 2002, and
that the workload to monitor
compliance in recent years has
increased due to market conditions and
other issues.
The Commission notes that Nasdaq’s
fees are comparable to and, in some
instances, less than similar fees of the
New York Stock Exchange.61 Further,
the Commission did not receive any
comment letters from currently-listed
Nasdaq companies or prospective listed
companies opposing the fee increase.
Thus, the Commission finds that
Nasdaq’s proposed fees are reasonable,
equitably allocated among issuers, and
otherwise consistent with the
requirements of the Act.
Finally, with respect to the increased
fee for written interpretations, Nasdaq
has represented that the fee increase is
reasonable given the costs incurred by
Nasdaq in connection with such
requests. Nasdaq is proposing to charge
$15,000 for all written interpretation
requests, and eliminate the distinction
between a regular request, which
currently costs $5,000, and an expedited
request which currently costs $15,000.
Nasdaq noted that since January 2008,
the large majority of requests for a
written interpretation (nearly 75%) are
expedited reviews. While the
Commission would be concerned if the
written interpretive fee was set at a level
so high that issuers were deterred from
seeking such written interpretations
when needed, this does not appear to be
the case since the majority of issuers
today elect to pay $15,000 for an
expedited review. Accordingly, the
Commission believes that the proposed
fee increase provides for the equitable
allocation of reasonable fees among
issuers consistent with Section 6(b)(4) of
the Act, does not unfairly discriminate
between issuers consistent with Section
6(b)(5) of the Act, and is otherwise
consistent with the requirements of the
Act. Moreover, the Commission notes
that with respect to interpretations,
issuers will still continue to receive oral
interpretations at no charge.62
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,63 that the
proposed rule change (SR–Nasdaq2009–081) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.64
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–5413 Filed 3–11–10; 8:45 am]
BILLING CODE 8011–01–P
58 Telephone
conversation on March 5, 2010
between Arnold Golub, Vice President and
Associate General Counsel, Nasdaq and Sharon
Lawson, Senior Special Counsel, Commission.
59 See Nasdaq Letter 4.
60 See Nasdaq Letter 3.
61 See NYSE Sections 902.02 and 902.03 of the
NYSE Listed Company Manual.
VerDate Nov<24>2008
17:18 Mar 11, 2010
Jkt 220001
62 See
supra note 17.
U.S.C. 78s(b)(2).
64 17 CFR 200.30–3(a)(12).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61660; File No. SR–CBOE–
2010–024]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating To Temporary
Membership Status and Interim
Trading Permit Access Fees
March 5, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
February 26, 2010, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or the ‘‘Exchange’’) 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 CBOE. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CBOE proposes to adjust (i) the
monthly access fee for persons granted
temporary CBOE membership status
(‘‘Temporary Members’’) pursuant to
Interpretation and Policy .02 under
CBOE Rule 3.19 (‘‘Rule 3.19.02’’) and (ii)
the monthly access fee for Interim
Trading Permit (‘‘ITP’’) holders under
CBOE Rule 3.27. The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.cboe.org/Legal/), at the Exchange’s
Office of the Secretary, 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,
CBOE included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The CBOE has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
63 15
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U.S.C. 78s(b)(1).
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]]>Agencies
[Federal Register Volume 75, Number 48 (Friday, March 12, 2010)]
[Notices]
[Pages 11958-11962]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-5413]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61669; File No. SR-NASDAQ-2009-081]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval of Proposed Rule Change To Modify the Fees for
Listing on the Nasdaq Stock Market and the Fee for Written
Interpretations of Nasdaq Listing Rules
March 5, 2010.
I. Introduction
On October 6, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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
modifying the application, entry and annual fees currently charged to
issuers listed on the Nasdaq Global and Nasdaq Global Select Markets,
as well as the fee for written interpretations of Nasdaq listing rules.
The proposed rule change was published for comment in the Federal
Register on November 4, 2009.\3\ The Commission received three comment
letters from one commenter on the proposal.\4\ Nasdaq submitted four
letters in response to the comments.\5\ This order approves the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 60899 (October 28,
2009), 74 FR 57212 (``Notice'').
\4\ See Letters to Elizabeth M. Murphy, Secretary, Commission,
from Jesse W. Markham, Jr., Roger Myers, and Stephen Ryerson, Holme
Roberts & Owen LLP (writing on behalf of Business Wire, Inc.), dated
November 24, 2009 (``Business Wire Letter 1''); January 8, 2010
(stating its intent to respond to Nasdaq's response to its initial
letter); and January 14, 2010 (``Business Wire Letter 2'').
\5\ See Letter to Elizabeth M. Murphy, Secretary, Commission,
from Arnold P. Golub, Vice President and Associate General Counsel,
The NASDAQ Stock Market LLC, dated December 23, 2009 (``Nasdaq
Letter 1''); from Michael N. Sohn and Donna E. Patterson, Arnold &
Porter, LLP, dated December 23, 2009 (writing on behalf of Nasdaq)
(``Nasdaq Letter 2''); from Arnold P. Golub, Vice President and
Associate General Counsel, The NASDAQ Stock Market LLC, dated
January 22, 2010 (``Nasdaq Letter 3''); and February 5, 2010
(``Nasdaq Letter 4'').
---------------------------------------------------------------------------
II. Description of the Proposal
A. Nasdaq Global and Global Select Application, Entry and Annual Fees
Nasdaq currently imposes a $5,000 application fee on a company
applying to list on the Nasdaq Global or Nasdaq Global Select
Markets.\6\ Nasdaq
[[Page 11959]]
proposes to increase this fee to $25,000. The application fee would
continue to be credited towards entry fees upon listing, and thus, this
change would not affect the overall fees a company pays to list.
---------------------------------------------------------------------------
\6\ The application fee is non-refundable. The Global Select
Market is a segment of The Nasdaq Global Market. See Nasdaq Rule
5005(a)(25) and (29).
---------------------------------------------------------------------------
Nasdaq also proposes to modify the entry fee a company pays when
listing on the Nasdaq Global or Nasdaq Global Select Markets.
Currently, those fees are charged in three tiers, based on the number
of shares the company has outstanding, and range from $100,000 to
$150,000.\7\ Nasdaq proposes to create, for Nasdaq Global and Nasdaq
Global Select listings, an additional tier for companies issuing over
50 million to 100 million shares and to increase the entry fee by
$25,000 to $75,000, depending on the number of shares to be listed.\8\
These fees were last increased in January 2002.\9\
---------------------------------------------------------------------------
\7\ The current entry fees for Nasdaq Global and Nasdaq Global
Select listings are as follows: $100,000 for up to 30 million
shares; $125,000 for 30+ to 50 million shares; and $150,000 for over
50 million shares. See Nasdaq Rule 5910(a).
\8\ The proposed entry fees for Nasdaq Global and Nasdaq Global
Select listings are as follows: $125,000 for up to 30 million
shares; $150,000 for 30+ to 50 million shares; $200,000 for 50+ to
100 million shares; and $225,000 for shares over 100 million.
\9\ See Securities Exchange Act Release No. 45206 (December 28,
2001), 67 FR 621 (January 4, 2002) (approving SR-NASD-2001-76).
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In addition, Nasdaq proposes to modify the annual fee imposed on
domestic and foreign issues and American Depositary Receipts (``ADRs'')
listed on the Nasdaq Global and Nasdaq Global Select Markets. The
proposed change would result in revised annual fees for domestic and
foreign issues for Nasdaq Global and Nasdaq Global Select listings,
ranging from $35,000 to $99,500, based on the number of shares
outstanding, and a maximum increase of $5,000, depending on the
company's total shares outstanding.\10\ In addition, Nasdaq proposes to
combine two of the existing seven fee tiers to create a new tier for
companies with over 10 million to 50 million shares outstanding. As a
result, according to Nasdaq, there would be no fee increase for
approximately 25 percent of Nasdaq companies.\11\ Annual fees for
domestic and foreign \12\ companies were last increased in January
2007.\13\ The revised annual fee applicable to ADRs listed on Nasdaq
Global and Nasdaq Global Select would result in an annual increase
ranging from $8,775 to $20,000, and the revised fee would range from
$30,000 to $50,000, depending on the number of ADRs outstanding.\14\ In
addition, Nasdaq proposes to expand the size of the tiers of shares
outstanding on which these proposed fees are based. Annual fees for
ADRs were last increased in February 2004.\15\
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\10\ The current annual fees for domestic and foreign issues
listed on Nasdaq Global and Nasdaq Global Select are as follows:
$30,000 for up to 10 million shares; $35,000 for 10+ to 25 million
shares; $37,500 for 25+ to 50 million shares; $45,000 for 50+ to 75
million shares; $65,500 for 75+ to 100 million shares; $85,000 for
100+ to 150 million shares; and $95,000 for over 150 million shares.
See Nasdaq Rule 5910(c).
\11\ The proposed annual fees for domestic and foreign issues
listed on Nasdaq Global or Nasdaq Global Select are as follows:
$35,000 for up to 10 million shares; $37,500 for 10+ to 50 million
shares; $46,500 for 50+ to 75 million shares; $68,500 for 75+ to 100
million shares; $89,000 for 100+ to 150 million shares; and $99,500
for shares over 150 million. Companies with 25 million to 50 million
shares outstanding would not face a fee increase under the proposed
change.
\12\ Telephone conversation between Arnold Golub, Vice President
and Associate General Counsel, Nasdaq, and Terri Evans, Special
Counsel, and Arisa Tinaves, Special Counsel, Division of Trading and
Markets, Commission, on November 5, 2009 (clarifying that fees for
foreign companies also were last increased in January 2007).
\13\ See Securities Exchange Act Release No. 55202 (January 30,
2007), 72 FR 6017 (February 8, 2007) (approving SR-NASDAQ-2006-40).
\14\ The current annual fees for ADRs listed on Nasdaq Global
and Nasdaq Global Select are as follows: $21,225 for up to 10
million ADRs; $26,500 for 10+ to 25 million ADRs; $29,820 for 25+ to
50 million ADRs; and $30,000 for over 50 million ADRs. See Nasdaq
Rule 5910(d). The proposed annual fee for ADRs is as follows:
$30,000 for up to 10 million ADRs; $37,500 for 10+ to 50 million
ADRs; $42,500 for 50+ to 75 million ADRs; and $50,000 for ADRs over
75 million.
\15\ See Securities Exchange Act Release No. 49169 (February 2,
2004), 69 FR 6009 (February 9, 2004) (approving SR-NASD-2003-178).
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B. Fee for Written Interpretations of Nasdaq Listing Rules
Nasdaq also proposes to change the fee for written interpretations
of Nasdaq listing rules 5000 through 5900 \16\ for all companies listed
on Nasdaq's Capital, Global and Global Select Markets. Currently, for a
written interpretation, a company is required to submit a non-
refundable fee of $5,000 for a regular request, which is generally
completed within four weeks from the date Nasdaq receives all
information necessary to respond to the request, or $15,000 for an
expedited request, in which the company requests a response by a
specific date that is less than four weeks after the date Nasdaq
receives all necessary information.
---------------------------------------------------------------------------
\16\ The Commission notes that the 5000 series Rules are
entitled NASDAQ Listing Rules.
---------------------------------------------------------------------------
Nasdaq proposes to eliminate the alternative for a non-expedited
request and require all companies seeking a written interpretation to
pay $15,000. Further, Nasdaq proposes to modify the timeframes in which
Nasdaq would respond to interpretive requests. As revised, the rule
would state that Nasdaq would generally respond to all requests for a
written interpretation within four weeks from the date Nasdaq receives
all information necessary to respond to the request, although Nasdaq
would attempt to respond by a sooner date if the company so requires.
Nasdaq will continue, as it currently does, to not charge companies for
oral interpretations of its rules.\17\
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\17\ The Commission notes that Nasdaq has stated that it does
not charge companies for oral interpretation requests of their
rules. Telephone conversation on October 28, 2009 between Arnold
Golub, Vice President and Associate General Counsel, Nasdaq and
Sharon Lawson, Senior Special Counsel, Commission.
---------------------------------------------------------------------------
C. Implementation
The revised annual fee schedule would be effective January 1, 2010.
The application and entry fee schedule would be effective for companies
that apply for listing after Commission approval of the proposed rule
change; thus a company that applied and paid the application fee prior
to Commission approval would be charged an entry fee according to the
fee schedule in effect at the time of its application. Finally, we note
that the change to the interpretive fees is effective upon approval of
the fee in this order.
III. Summary of Comments
The Commission received three comment letters on the proposed rule
change from Business Wire.\18\ Generally, Business Wire requests that
the Commission: ``(1) deny Nasdaq's proposal to increase its fees
absent assurances that Nasdaq is not engaged in cross-subsidization of
its information dissemination services subsidiary through application,
entry, and annual fees for listings; (2) require transparency in all
future pricing proposals from Nasdaq; and (3) restrict Nasdaq's
ownership of and/or involvement in business outside its core function
that create actual or apparent conflicts of interest.'' \19\
---------------------------------------------------------------------------
\18\ See supra note 4.
\19\ See Business Wire Letters 1 and 2.
---------------------------------------------------------------------------
According to Business Wire, Nasdaq is increasing its ``fee
structure to cover unspecified cost increases at the same time it is
attempting to attract new listings by offering millions of dollars in
`free' Information Dissemination Services [(``IDSs'')] bundled into the
listing fee.'' \20\ Business Wire believes that Nasdaq is, in fact,
raising its fees to subsidize the delivery of free or discounted IDSs
to current or prospective listed companies through GlobeNewswire and
other affiliates that provide IDSs such as press release services,
webcasting, Web hosting and
[[Page 11960]]
EDGAR filings, all of which Nasdaq refers to as its ``Core Services,''
and which are offered under the umbrella of Nasdaq affiliate Nasdaq OMX
Group Corporate Services, Inc. (``NOCS'').\21\ According to Business
Wire, Nasdaq jointly markets itself and the IDSs offered by NOCS, to
induce companies listed on other exchanges to switch listings or to
retain Nasdaq listings, by effectively reducing a company's listing
costs through the provision of IDSs.\22\ Specifically, Business Wire
asserts that Nasdaq offers extensive free or discounted IDSs to certain
listed companies and that, in fact, Nasdaq has offered ``up to five
years of free or heavily discounted wire distribution * * * to certain
companies either as an inducement to switch listings or as part of a
package deal to reduce the cost of the company's existing listing on
Nasdaq.'' \23\ According to Business Wire, the alleged cross-
subsidization unduly burdens competition and inequitably allocates fees
among its issuers in violation of Sections 6(b)(4), (5) and (8) of the
Act, as well as Sections 1 and 2 of the Sherman Act.\24\
---------------------------------------------------------------------------
\20\ See Business Wire Letter 1; see also Business Wire Letter 2
(stating that the proposed rule change fails to explain why
additional revenue is needed).
\21\ See Business Wire Letter 1. The Commission notes that
Nasdaq clarified that NOCS and Nasdaq are separate subsidiaries of
NASDAQ OMX Group, Inc. See Nasdaq Letter 1. Nasdaq also clarified
that references in its letters to Nasdaq Corporate Services, Inc.,
NASDAQ OMX Corporate Services, Inc., and Nasdaq Corporate Services,
LLC should all be references to NASDAQ OMX Group Corporate Services,
Inc. Telephone conversation on March 3, 2010 between Arnold Golub,
Vice President and Associate General Counsel, Nasdaq, and Terri
Evans, Special Counsel, Commission.
\22\ See Business Wire Letter 2.
\23\ See Business Wire Letter 2.
\24\ See Business Wire Letter 1.
---------------------------------------------------------------------------
Specifically, Business Wire argues that Nasdaq's proposal fails to
satisfy Section 6(b)(4) of the Act, which requires the equitable
allocation of reasonable dues, fees and other charges among its
issuers, because listed companies that use Nasdaq's free or discounted
IDSs pay the same listing fees as listed companies that elect not to do
so and purchase such services from third parties. Business Wire
believes that Nasdaq's fees are not equitably allocated because one set
of listed companies is subsidizing another by effectively paying,
through their listing fees, a portion of the costs that are incurred by
Nasdaq to provide free or discounted IDSs.\25\ Business Wire further
asserts that the proposed fee increases would facilitate Nasdaq's
alleged tying and cross-subsidization in violation of the antitrust
laws and would, therefore, be inconsistent with just and equitable
principles of trade under Section 6(b)(5) of the Act.\26\ Moreover,
Business Wire believes that Nasdaq's proposed fee increases would
impose a burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. According to Business Wire,
Nasdaq's ``cross-subsidization provides no significant benefit to
investors, listed companies, or the exchange system that might make
such a significant impact on competition necessary or appropriate.''
\27\
---------------------------------------------------------------------------
\25\ See Business Wire Letter 1.
\26\ See Business Wire Letter 1.
\27\ See Business Wire Letter 1.
---------------------------------------------------------------------------
Business Wire also alleges that Nasdaq is tying its IDSs to its
listing services in violation of Section 1 of the Sherman Act.
According to Business Wire, a tying arrangement violates Section 1 of
the Sherman Act ``if the seller has appreciable economic power in the
tying product market and if the arrangement affects a substantial
volume of commerce in the tied market.'' \28\ Business Wire believes
that Nasdaq's free or discounted offerings meet the legal standard of a
tying arrangement in violation of the antitrust laws.\29\
---------------------------------------------------------------------------
\28\ See Business Wire Letter 1.
\29\ Business Wire believes that Nasdaq is tying together its
listing services and its IDSs because customers that list on Nasdaq
and are provided such free or discounted services will effectively
be precluded from switching to another source of IDSs since they
would be paying for Nasdaq's IDSs, whether they use them or not,
through the elevated listing fees. Business Wire further alleges
that Nasdaq has sufficient market power to coerce purchase of the
tied product since the only way to avoid the indirect cost of
Nasdaq's IDSs would be for a company to either not list on Nasdaq or
incur significant costs to move their listing to a different
exchange. Lastly, Business Wire asserts that the amount of commerce
affected in the IDSs' market is far above the ``not insubstantial''
requirement of the Sherman Act (asserting that Nasdaq is offering
millions of dollars of free wire distribution and other IDSs). See
Business Wire Letters 1 and 2.
---------------------------------------------------------------------------
Additionally, Business Wire alleges that Nasdaq, by offering free
or discounted IDSs, evinces an attempt to monopolize in violation of
Section 2 of the Sherman Act.\30\ Specifically, Business Wire alleges
that Nasdaq is engaging in predatory anti-competitive conduct. Business
Wire urges the Commission to ensure that no part of the proposed fee
increase is used to subsidize Nasdaq's provision of IDSs.
---------------------------------------------------------------------------
\30\ See Business Wire Letter 1.
---------------------------------------------------------------------------
Finally, Business Wire states that Nasdaq's offering of IDSs
creates a conflict of interest with its role as a self-regulatory
organization. For example, Business Wire believes that Nasdaq's role in
enforcing compliance with rules relating to the dissemination of
material information by listed companies could result in Nasdaq
effectively becoming the ``preferred provider'' of IDSs.\31\
Accordingly, Business Wire believes that not only should Nasdaq's
proposal be rejected, but that Nasdaq should be required to sell
GlobeNewswire or operate it on a strict arms-length basis.\32\
---------------------------------------------------------------------------
\31\ See Business Wire Letter 1; see also Business Wire Letter 2
(stating by ``intertwining its listing services with Globe's
Information Dissemination Services, Nasdaq is circumventing any
controls between its regulatory function and the non-regulated
services provided by its affiliated entities.'')
\32\ See Business Wire Letters 1 and 2.
---------------------------------------------------------------------------
IV. Response to Comments
In response to Business Wire's comments, Nasdaq asserts that its
proposed fee change satisfies the requirements of the Act.\33\
Specifically, Nasdaq states that its ``proposed fees are in all cases
equal to, or less than, the fees charges by other exchanges'' and are
supported by improvements to its market and regulatory process, as well
as by changes in the marketplace.\34\
---------------------------------------------------------------------------
\33\ See Nasdaq Letters 1, 3 and 4.
\34\ See Nasdaq Letter 4.
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According to Nasdaq, it must now ``spread its fixed costs,
including the costs for regulation, across fewer listed companies and
applicants than in the past.'' \35\ Specifically, Nasdaq states that
the number of companies listed on Nasdaq has declined approximately ten
percent, but that its regulatory costs have either remained constant or
increased.\36\ Nasdaq also asserts that the proposal does not permit
unfair discrimination between customers, issuers, brokers, or dealers.
According to Nasdaq the proposed fees are ``allocated based on shares
outstanding, as are Nasdaq's current fees and fees for other exchanges,
and that similarly situated companies would be charged the same fees.''
\37\
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\35\ See Nasdaq Letter 1.
\36\ See Nasdaq Letter 3. Nasdaq represents that from December
31, 2006 until December 31, 2009, the number of companies listed on
Nasdaq has declined from 3,193 companies to 2,852 companies.
\37\ See Nasdaq Letter 1.
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Further, in response to Business Wire's concern that Nasdaq's
proposed fees unduly burden competition in violation of Section 6(b)(8)
of the Act, Nasdaq believes that in assessing competition, the
Commission should be concerned with competition among the entities it
regulates, such as exchanges, brokers, dealers, and issuers, and not
competitive issues in other areas of the economy.\38\ Accordingly,
Nasdaq asserts that the only competitive impact of the proposed rule
change would be to allow Nasdaq ``to recover the costs of, and continue
to make, improvements to its market and regulatory process, and
[[Page 11961]]
therefore to continue to compete with other listing markets * * *.''
\39\ Nasdaq also believes that any potential conflicts of interest are
addressed by its separation of its regulatory functions, including the
listing department, from its business functions, as well as through the
rule filing process.\40\ Moreover, the effectiveness of its regulatory
program is subject to periodic Commission examination.\41\
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\38\ See Nasdaq Letter 1.
\39\ See Nasdaq Letter 1.
\40\ See Nasdaq Letter 1.
\41\ See Nasdaq Letter 1.
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Nasdaq also represents that its proposed fee changes are not
designed to recoup GlobeNewswire's costs,\42\ and that ``GlobeNewswire
is profitable on a stand-alone basis, even after considering the
marketing expenses it incurs when offering products for free on a trial
basis, and there is therefore no need for Nasdaq to cross-subsidize
GlobeNewswire * * *.'' \43\ According to Nasdaq, GlobeNewswire makes
promotional and partnership offers to current and prospective customers
as part of its marketing efforts.\44\ However, Nasdaq acknowledges that
such marketing efforts on behalf of NOCS, including GlobeNewswire,
``typically occur in meetings and discussions about the company's
choice of listing market.'' \45\ Nasdaq represents, however, that while
NOCS will continue to offer a sample of services on a complimentary or
discounted basis, such offers will be made regardless of where the
company is listed or determines to list.\46\ In addition, Nasdaq
represents that while NOCS, including GlobeNewswire, may offer, without
regard to the company's choice of listing market, promotional packages
of services to broad categories of companies with certain
characteristics, it will not offer any individually customized packages
of free or discounted services to any company.\47\ Accordingly, Nasdaq
believes that ``any discounts provided for NOCS products cannot be
misconstrued as being offered in connection with a company's listing on
Nasdaq.'' \48\
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\42\ See Nasdaq Letter 1.
\43\ See Nasdaq Letter 3.
\44\ See Nasdaq Letter 1.
\45\ See Nasdaq Letter 4.
\46\ Nasdaq represents that any future offers of free and
discounted services by NOCS will explicitly and expressly provide
that companies are free to accept the offer whether or not they
choose to list on Nasdaq. See Nasdaq Letter 4.
\47\ See Nasdaq Letter 4. Nasdaq has represented that it will
not offer any customized packages of free or discounted services,
unless the Commission specifically states that it is permitted to do
so. Telephone conversation on February 22, 2010 between Arnold
Golub, Vice President and Associate General Counsel, Nasdaq and
Sharon Lawson, Senior Special Counsel, Commission.
\48\ See Nasdaq Letter 4.
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Also, in response to Business Wire's antitrust claims, Nasdaq
disputes Business Wire's allegation that Nasdaq illegally ties
GlobeNewswire and other IDSs to a company's listing on Nasdaq.\49\
Nasdaq asserts that companies wishing to list on Nasdaq are not forced
to use IDSs provided by Nasdaq since neither the receipt of such
services nor a Nasdaq listing are conditioned on the other.\50\
Therefore, Nasdaq believes that the promotional offers for
GlobeNewswire services do not constitute tying.\51\ Nasdaq further
asserts that ``Business Wire's claim that the costs of the * * *
promotions are the unstated basis for Nasdaq's listing fee proposal is
pure speculation.'' \52\
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\49\ See Nasdaq Letter 2. Nasdaq maintains that NOCS, Nasdaq's
affiliate, has offered and plans to offer a limited amount of free
or discounted ``Core Services'' to all companies whether the company
is listed on Nasdaq or not.
\50\ According to Nasdaq, ``[i]llegal tying is the `seller's
exploitation of its control over the tying product * * * to force
the buyer into the purchase of a tied product * * * that the buyer
either did not want at all, or might have preferred to purchase
elsewhere on different terms.'' See Nasdaq Letter 2.
\51\ See Nasdaq Letter 2. Nasdaq asserts, among other things,
that any offers of GlobeNewswire free or discounted services when
competing for listings would fail the coercion element of the
Sherman Act, since Nasdaq is willing to and does offer the listing
service alone without the IDSs. Additionally, according to Nasdaq,
because Nasdaq must compete for listings, Nasdaq does not have the
requisite market power required under the Sherman Act for a tying
claim. See Nasdaq Letter 2.
\52\ See Nasdaq Letter 2.
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Finally, Nasdaq asserts that the promotional nature of the offering
alone precludes a predatory pricing claim constituting attempted
monopolization under Section 2 of the Sherman Act. Nasdaq notes that
courts routinely hold that promotional offers cannot constitute
predatory pricing.\53\
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\53\ Nasdaq further states that GlobeNewswire does not pose a
real danger of driving competitors from the market, since
GlobeNewswire only processes approximately 10 percent of corporate
news releases in the U.S. Nasdaq also notes the substantial
resources available to Business Wire. See Nasdaq Letter 2.
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V. Discussion and Commission's Findings
The Commission 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 exchange.\54\
Specifically, the Commission finds that the proposed rule change is
consistent with Sections 6(b)(4), (b)(5), and (b)(8) of the Act,\55\
which require, in part, that the rules of an exchange: (i) Provide for
the equitable allocation of reasonable dues, fees, and other charges
among its members and issuers and other persons using its facilities;
(ii) are not designed to permit unfair discrimination between
customers, issuers, brokers or dealers; and (iii) do not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
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\54\ In approving the proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\55\ 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8).
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The Commission believes that assurances it has received from Nasdaq
in response to the comments of Business Wire adequately address the
concerns expressed that Nasdaq is acting in an anti-competitive manner
that is inconsistent with the Act. Specifically, Nasdaq has represented
that promotional offers of IDSs made by its affiliate, NOCS, are made
regardless of whether or not a prospective customer is listed or may
become listed on Nasdaq. Furthermore, NOCS will limit its promotional
activities to: (1) Offering a free or discounted sampling of IDSs--its
``Core Services'' package--to all prospective customers; and (2)
perhaps offering other packages of complimentary or discounted IDSs to
broad categories of companies. In either case, the free or discounted
services offered by NOCS ``will explicitly and expressly provide that
companies will be free to accept the offer and test NOCS services
whether or not they choose to list on Nasdaq.'' \56\
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\56\ See Nasdaq Letter 4. In expressly and explicitly notifying
companies that permitted offers are not contingent on a Nasdaq
listing, Nasdaq further represents that any mention of a permitted
offer on a Nasdaq or NOCS Web site will also state that the offer is
not conditioned on the companies' choice of listing market. The
Commission notes it is important that any communications,
irrespective of the method, on permitted free or discounted services
make it expressly and explicitly clear that such services are
available whether or not the company lists on Nasdaq.
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Based on Nasdaq's representation that offers of IDSs by NOCS will
be made independent of the listing status of NOCS customers or
potential customers, as well as additional information contained in
Nasdaq's responses,\57\ the Commission does not believe that the
proposed increases in listing fees cross-subsidize NOCS services in any
way that constitutes an inappropriate burden on competition or an
inequitable allocation of fees, or fails to promote just and equitable
principles of trade, in a manner inconsistent with the Act.
Accordingly, we find that the proposed changes to Nasdaq listing fees
is consistent with the requirements of the
[[Page 11962]]
Act and, in particular, provides for an equitable allocation of
reasonable fees among its issuers consistent with Section 6(b)(4) of
the Act, does not unfairly discriminate between issuers consistent with
Section 6(b)(5) of the Act, and is consistent with Section 6(b)(8) of
the Act.
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\57\ See Nasdaq Letters 1-4.
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As to the concerns raised by Business Wire that the offering of
IDSs by NOCS creates a conflict of interest with Nasdaq's self-
regulatory functions since, among other things, Nasdaq enforces rules
relating to the dissemination of material information by listed
companies, Nasdaq has represented that it has effectively separated its
regulatory functions from its business functions, and that its business
functions, including those of NOCS, in no way influence the regulatory
oversight of listed companies and their disclosure requirements.\58\
The Commission believes that Nasdaq's assurances concerning the
separation of its business and regulatory functions adequately address
the conflict of interest concerns raised by Business Wire. The
Commission also notes that it oversees Nasdaq as a registered national
securities exchange, including the performance of its regulatory
functions in a manner consistent with the Act.
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\58\ Telephone conversation on March 5, 2010 between Arnold
Golub, Vice President and Associate General Counsel, Nasdaq and
Sharon Lawson, Senior Special Counsel, Commission.
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With respect to its application, annual, and entry fees, Nasdaq has
represented that the proposed increase in fees better reflects the
costs associated with, among other things, listing application reviews,
Nasdaq's new on-line application center, and enhancements to its
listings compliance systems.\59\ Moreover, Nasdaq notes that the number
of listed companies on Nasdaq has declined approximately 10% since
2006, so that its regulatory costs must be allocated among fewer listed
companies.\60\ Nasdaq further notes that, despite the decline in
listings, because of enhancements to its compliance programs and
changes in regulatory requirements, the number of issuer filings that
it reviews has substantially increased since 2002, and that the
workload to monitor compliance in recent years has increased due to
market conditions and other issues.
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\59\ See Nasdaq Letter 4.
\60\ See Nasdaq Letter 3.
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The Commission notes that Nasdaq's fees are comparable to and, in
some instances, less than similar fees of the New York Stock
Exchange.\61\ Further, the Commission did not receive any comment
letters from currently-listed Nasdaq companies or prospective listed
companies opposing the fee increase. Thus, the Commission finds that
Nasdaq's proposed fees are reasonable, equitably allocated among
issuers, and otherwise consistent with the requirements of the Act.
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\61\ See NYSE Sections 902.02 and 902.03 of the NYSE Listed
Company Manual.
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Finally, with respect to the increased fee for written
interpretations, Nasdaq has represented that the fee increase is
reasonable given the costs incurred by Nasdaq in connection with such
requests. Nasdaq is proposing to charge $15,000 for all written
interpretation requests, and eliminate the distinction between a
regular request, which currently costs $5,000, and an expedited request
which currently costs $15,000. Nasdaq noted that since January 2008,
the large majority of requests for a written interpretation (nearly
75%) are expedited reviews. While the Commission would be concerned if
the written interpretive fee was set at a level so high that issuers
were deterred from seeking such written interpretations when needed,
this does not appear to be the case since the majority of issuers today
elect to pay $15,000 for an expedited review. Accordingly, the
Commission believes that the proposed fee increase provides for the
equitable allocation of reasonable fees among issuers consistent with
Section 6(b)(4) of the Act, does not unfairly discriminate between
issuers consistent with Section 6(b)(5) of the Act, and is otherwise
consistent with the requirements of the Act. Moreover, the Commission
notes that with respect to interpretations, issuers will still continue
to receive oral interpretations at no charge.\62\
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\62\ See supra note 17.
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\63\ that the proposed rule change (SR-Nasdaq-2009-081) be, and it
hereby is, approved.
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\63\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\64\
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\64\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5413 Filed 3-11-10; 8:45 am]
BILLING CODE 8011-01-P
