Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing of Proposed Rule Change To Create a Listing Market on the Exchange, 54665-54671 [2010-22296]
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Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–62818; File No. SR–BX–
2010–059]
• 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–BATS–2010–022 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.
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All submissions should refer to File
Number SR–BATS–2010–022. 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 website 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 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–BATS–2010–022, and
should be submitted on or before
September 29, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Florence E. Harmon,
Deputy Secretary.
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
of Proposed Rule Change To Create a
Listing Market on the Exchange
September 1, 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 August
20, 2010, NASDAQ OMX BX, Inc.
(‘‘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 prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to create a
listing market, which will be called
‘‘BX.’’ Following Commission approval,
the Exchange will announce the
operational date of the new market in an
Equity Trader Alert and press release.
The proposed rules will become
effective on the operational date.
The text of the proposed rule change
is available at https://nasdaqomxbx
.cchwallstreet.com, at BX’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
[FR Doc. 2010–22294 Filed 9–7–10; 8:45 am]
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7 17
CFR 200.30–3(a)(12).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In connection with the acquisition of
the former Boston Stock Exchange by
The NASDAQ OMX Group, Inc., the
Exchange discontinued its listing
marketplace and delisted all securities
previously listed on the Exchange.3
Since January 2009, the Exchange has
operated as a trading venue only,
allowing market participants to trade
securities listed on other national
securities exchanges pursuant to
unlisted trading privileges.
The Exchange is proposing to begin
listing securities again, through the
creation of a new listing market, to be
called ‘‘BX.’’ BX will have minimal
quantitative listing standards, but have
qualitative requirements, which are, in
many respects, similar to those required
for listing on The NASDAQ Stock
Market (‘‘Nasdaq’’) and other national
securities exchanges.4 The Exchange
believes that this market will provide an
attractive alternative to companies being
delisted from another national securities
exchange for failure to meet quantitative
listing standards (including price or
other market value measures) and to
smaller companies contemplating an
initial exchange listing. The Exchange
further believes that the proposed listing
venue will provide a transparent, wellregulated marketplace for these
companies and their investors.5 As is
currently the case with respect to the
trading occurring on the Exchange
pursuant to unlisted trading privileges,
FINRA will regulate market activity and
staff of the Exchange will monitor realtime trading of securities listed on BX.
The Exchange expects that the
securities listed on BX will not be
classified as national market system
securities. As a result, BX-listed
securities will not be subject to a
national market system plan and will
not be subject to Regulation NMS under
3 See Securities Exchange Act Release No. 59265
(January 16, 2009), 74 FR 4790 (January 27, 2009)
(approving SR–BSE–2008–36 relating to the
delisting of all securities from the Exchange in
connection with the Exchange’s discontinuation of
trading).
4 The Exchange notes that not all qualitative
requirements imposed by other exchanges would be
required. See Listing Requirements, infra, for a full
discussion of the proposed quantitative and
qualitative requirements for listing on BX.
5 The Exchange will propose in a separate rule
filing changes to the BX Equities Platform to govern
trading of, and reporting of transactions in, these
listed securities and introducing and modifying
market data products to permit dissemination of
accurate quotation information and reporting of
transactions.
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the Act.6 BX-listed securities will trade
on the Exchange and could be traded
over-the-counter.7
Listing Requirements
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BX would list Common Stock,
Preferred Stock, Ordinary Shares,
Shares or Certificates of Beneficial
Interest of Trust, Limited Partnership
Interests, American Depositary Receipts
(ADR), American Depositary Shares
(ADS), Units, Rights and Warrants. To
be listed on BX, companies will need to
meet the following qualitative listing
standards, each of which is equivalent
to the comparable listing standard of
Nasdaq or is derived from the Federal
securities laws:
(a) The company must be registered
under Section 12(b) of the Act 8 and
current in its periodic filings with the
Commission and, as a result, subject to
the requirements of the Sarbanes-Oxley
Act of 2002 9 (proposed Rule 5210(a));
(b) The company must have a fully
independent Audit Committee
comprised of at least three members and
comply with the requirements of SEC
Rule 10A–3, promulgated under the
Act 10 (proposed Rule 5605(c));
(c) The company must have
independent directors make
compensation decisions for executive
officers (proposed Rule 5605(d));
(d) The company will be prohibited
from taking any corporate action with
the effect of nullifying, restricting or
disparately reducing the per share
voting rights of holders of an
outstanding class of the company’s
common stock registered pursuant to
Section 12 of the Act (proposed Rule
5640);
(e) The company’s auditor will be
required to be registered with the Public
Company Accounting Oversight
Board 11 (proposed Rules 5210(b) and
5250(c)(3));
(f) The company will be required to
hold an annual shareholders’ meeting
and solicit proxies for each
shareholders’ meeting (proposed Rule
5620);
(g) The company will be required to
obtain shareholder approval for the use
of equity compensation (proposed Rule
5635);
(h) The company will be required to
adopt a code of conduct, applicable to
6 17
CFR 242.600–612.
trades of BX-listed securities
would be reported to the FINRA Over-the-Counter
Reporting Facility.
8 15 U.S.C. 781(b).
9 15 U.S.C. 7201–7266.
10 17 CFR 240.10A–3.
11 See Section 102 of the Sarbanes-Oxley Act, 15
U.S.C. 7212.
7 Over-the-counter
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all directors, officers and employees
(proposed Rule 5610);
(i) The company will be required to
conduct an appropriate review and
oversight of all related party
transactions, to address potential
conflict of interest situations (proposed
Rule 5630);
(j) The company will be required to
disclose material information through
any Regulation FD compliant method
(or combination of methods) (proposed
Rule 5250(b) and IM–5250–1);
(k) The listed securities must be
eligible for a Direct Registration Program
operated by a clearing agency registered
under Section 17A of the Act 12
(proposed Rules 5210(c) and 5255);
(l) Public ‘‘shells’’ would not be
allowed to list (proposed Rule 5101);
and
(m) The Exchange will conduct a
public interest review of the company
and significant persons associated with
it (proposed Rule 5101 and IM–5101–1).
In addition, BX would apply the
following quantitative listing standards,
set out in proposed Rules 5505 (initial
listing) and 5550 (continued listing),
which are designed to assure a
minimum level of trading consistent
with a public market for the securities:
(a) 200,000 publicly held shares;
(b) 200 public shareholders, at least
100 of which must be round lot holders
for initial listing, and 200 public
shareholders for continued listing;
(c) A market value of listed securities
of at least $2 million for initial listing
and $1 million for continued listing;
(d) Two market makers; and
(e) A minimum initial listing price of
$0.25 per share for securities previously
listed on a national securities exchange
and $1.00 per share for securities
previously quoted in the over-thecounter market. For continued listing,
securities will be required to maintain a
minimum $0.05 per share bid price.
Further, with respect to companies not
previously listed on a national securities
exchange, BX will also require for initial
listing that the company have either $1
million stockholders’ equity or $5
million total assets, a one year operating
history, and a plan to maintain
sufficient working capital for the
company’s planned business for at least
twelve months after the first day of
listing.
The Exchange would also require that
rights and warrants will only be eligible
for initial and continued listing if the
underlying security is listed on BX or is
a covered security, as described in
12 15
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Section 18(b) of the Securities Act of
1933.13
The proposed listing standards are
designed to allow companies that are
being delisted from another national
securities exchange for failure to meet
that exchange’s quantitative listing
requirements the opportunity to provide
their investors with a better regulated,
more transparent trading environment
than may otherwise be available in the
over-the-counter markets. In addition,
the Exchange believes that allowing
these companies to continue trading on
a national securities exchange may
enable some institutional investors to
continue their ownership stake in the
company, which could provide greater
stability to the company’s shareholder
base and possibly avoid forced sales by
such investors.14 The Exchange also
believes that companies currently
traded over-the-counter could view this
market as an aspirational step towards
a listing on another national securities
exchange. The Exchange believes that
the agreement of such companies to
comply with the Exchange’s corporate
governance standards and the
application of the Exchange’s public
interest authority will provide
additional protections to their investors
than would be available in their present
trading venue. Moreover, the Exchange
believes that a BX listing could help
such companies raise capital, in turn
promoting job creation within the
United States. Finally, the Exchange
believes that BX will be a more
attractive alternative to domestic
companies that might otherwise have
considered a listing on non-U.S. junior
markets, which generally have lower
listing requirements.
Nonetheless, the Exchange recognizes
that the listing requirements for BX will
be lower than those of the NASDAQ
Stock Market and other national
securities exchanges. As such, to avoid
investor confusion, the listing rules of
BX will specify that a BX-listed
company should refer to its listing as on
the ‘‘BX’’ market, unless otherwise
required by applicable rules or
regulations, and that such company
should not represent that it is listed on
The NASDAQ Stock Market. Similarly,
in describing this listing venue, the
Exchange will generally refer to it as
‘‘BX’’ and not as NASDAQ OMX BX.
The Exchange will have the
discretionary authority to deny listing to
any otherwise qualified security when
13 15
U.S.C. 77r(b).
institutional investors have investment
policies that limit their ownership to securities
listed on a national securities exchange, or that
prohibit the ownership of securities that only are
traded in the over-the-counter market.
14 Many
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necessary to preserve and strengthen the
quality of and public confidence in its
market. Proposed IM–5101–1 provides a
non-exclusive description of
circumstances where the Exchange may
exercise that discretion, including when
an individual associated with the
company has a history of regulatory
misconduct. In that regard, the
Exchange intends to conduct
background investigations of officers
and directors and other significant
people associated with a company in
connection with its review of
applications for initial listing. The
Exchange also will not approve for
initial listing, or allow the continued
listing, of shell companies.15 This
prohibition is based on concerns that
the investors in shell companies are
unaware of the ultimate business in
which they are investing and that
trading in such securities is more
susceptible to market manipulation.
The Exchange proposes that any
company that meets the quantitative
(e.g., financial) requirements for listing
on Nasdaq will not be allowed to
initially list on BX. This will assure that
such companies only become listed on
the exchange with higher listing
standards.
Given that the Exchange expects to
list companies that do not meet the
quantitative listing requirements of the
primary existing national securities
exchanges, it is expected that BX-listed
companies will include smaller
companies and companies facing
business or other challenges. Thus, the
proposed quantitative standards for BX
were deliberately structured to be lower
than those of the other primary
exchanges. In that regard, the minimum
price requirement for listing on BX will
be $0.25 per share for a security
previously listed on another national
securities exchange and $1.00 per share
for a security previously quoted in the
over-the-counter market or listing in
connection with its initial public
offering. Until March 31, 2011, the
Exchange would consider any company
that was listed on another national
securities exchange at any time since
January 1, 2008, to be eligible to list
with a $0.25 per share price. The
Exchange believes it appropriate to
consider a company delisted since
January 1, 2008, as previously quoted on
another national securities exchange
because the BX market would not have
been available to such companies when
15 Proposed Rule 5101 sets forth a number of
factors that the Exchange will consider in
determining whether a Company is a shell,
including whether the Company is considered a
‘‘shell company’’ as defined in Rule 12b–2 under the
Act, 17 CFR 240.12b–2.
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they were delisted. The Exchange
believes it is reasonable to look back to
January 1, 2008, when the financial
markets began facing difficulties, which
resulted in an unusually large number
of companies being delisted.
Furthermore, the Exchange believes it is
appropriate to continue this treatment
until March 31, 2011, to assure that
such companies have an adequate
opportunity to learn about BX and
sufficient time to complete their
application and have that application
processed by the Exchange. After March
31, 2011, a company will be considered
to have been previously listed on a
national securities exchange, and
therefore eligible to list with a $0.25 per
share price, only if it was listed on such
an exchange at any time during the
three months prior to its listing on BX.
The Exchange believes that this threemonth period will allow the company
sufficient time to apply for listing on BX
and have its application processed.
For continued listing, a security will
be required to maintain a minimum
$0.05 per share bid price.16 If the
security does not maintain a minimum
$0.05 per share bid price for ten
consecutive trading days, Exchange staff
would issue a Staff Delisting
Determination and the security would
be suspended from trading on BX.17 A
company could appeal that
determination to a Hearings Panel,
however such an appeal would not stay
the suspension of the security.18 During
the Hearings Panel process, the security
could regain compliance by achieving a
$0.05 per share minimum bid price
while trading on another venue, such as
the over-the-counter market, for 10
consecutive days. However, if the
company has received three or more
Staff Delisting Determinations for failure
to comply with minimum price
requirement in the prior 12 months, the
company could only regain compliance
by achieving a closing bid price of $0.25
per share or more for at least 10
consecutive trading days. The Exchange
believes that this higher requirement for
companies that were previously noncompliant is appropriate to reduce the
likelihood of future instances of noncompliance and the concomitant
investor confusion concerning the
ability of the company to remain listed.
If the Hearings Panel determines that
the security has satisfied the applicable
16 The Exchange notes there is also no price
requirement for initial or continued listing on the
National Stock Exchange or for continued listing on
NYSE Amex and therefore that the proposed
continued listing requirement exceeds the
requirement of those exchanges.
17 Proposed Rule 4120(a)(12).
18 Proposed Rule 5815(a)(1)(C).
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standard to regain compliance, the
trading halt would be terminated and
the security would resume trading on
the Exchange.
To be eligible for initial listing, a
company not previously listed on a
national securities exchange must have
at least one year operating history, a
minimum of either $1 million in
stockholders’ equity or $5 million in
total assets, and demonstrate that it has
a plan to maintain sufficient working
capital for its planned business for at
least twelve months after the first day of
listing. The Exchange believes that these
requirements will help assure that a
company that was not previously
subject to exchange regulation
nonetheless has a credible and
sustainable business.
The Exchange believes that the
proposed public float, holder and
market maker requirements, together
with the minimum market value of
listed securities requirement, will assure
sufficient liquidity in listed securities.
In that regard, the Exchange notes that
the shareholder and publicly held
shares requirements are comparable to,
or higher than, requirements for listing
a preferred stock or secondary class of
common stock on the Nasdaq Capital
Market, which require 100 round lot
shareholders and 200,000 publicly held
shares. The Exchange is not aware of
any difficulties in the trading in
securities meeting these requirements.
Further, requiring two market makers
will assure competing quotations for
potential buyers and sellers of the
securities listed on BX. Finally, the
Exchange believes that the minimum
market value of listed securities
requirement will help assure that the
company issuing the securities is of a
sufficient size to generate interest from
investors and market participants.
While these proposed standards may be
lower than those of other exchanges,
investors will be protected by the fact
that securities listed on BX would be
considered penny stocks under
Exchange Act Rule 3a51–1, unless they
qualify for an exemption from the
definition of a penny stock.19 As such,
broker-dealers would be required to preapprove their customers for trading in
19 17 CFR 240.3a51–1. The Exchange is not
seeking an exemption from the penny stock rules
for securities listed on BX, however a security may
be excluded from the definition of a penny stock
as a result of the security having a price in excess
of $5 or its issuer having net tangible assets in
excess of $2 million (if the issuer has been in
continuous operation for at least three years) or $5
million (if the issuer has been in continuous
operation for less than three years) or average
revenue of at least $6 million for the last three
years. Rule 3a51–1(d) and (g), 17 CFR 240.3a51–1(d)
and (g).
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penny stocks and investors will obtain
the disclosures required to be made by
broker-dealers in connection with
penny stock transactions, providing
them with trade and market information
prior to effecting a transaction. Further,
there will be no ‘‘blue sky’’ exemption
available under Section 18 of the
Securities Act of 1933,20 so companies
will be required to satisfy State law
registration requirements and other
State laws that regulate the sale and
offering of securities.
The BX corporate governance
requirements are generally comparable
to those of the other exchanges. The
Exchange would require that a listed
company have an audit committee
comprised of at least three independent
directors that also meet the
requirements of SEC Rule 10A–3.21 For
a director to be considered an
independent director, the company’s
board would have to determine that the
individual does not have a relationship
which, in the board’s opinion, would
interfere with the exercise of
independent judgment in carrying out
the responsibilities of a director.22 The
board would be precluded from finding
a director independent based on certain
relationships, including if that director
is currently an employee of the
company or was employed by the
company during the prior three years
(including as an executive officer),
accepted certain compensation or
payments from the company during the
prior three years, or had a family
member with certain affiliations with
the company.23
The audit committee would be
required to have a charter setting out its
responsibilities, including the
committee’s purpose of overseeing the
accounting and financial reporting
processes of the company and the audits
of the company’s financial statements
and the responsibilities and authority
necessary to comply with SEC Rule
10A–3.24 The audit committee, or
another independent body of the board,
will also be required to conduct an
appropriate review and oversight of any
related party transaction.25 The
Exchange believes that this requirement
will limit the potential for self-dealing
in connection with any related party
transactions.
The Exchange would also require that
independent directors make
compensation decisions concerning the
chief executive officer and other
executive officers.26 Independent
directors would be required to meet on
a regular basis in executive sessions.27
These requirements for audit
committees, compensation decisions,
and executive sessions are identical to
those of Nasdaq and substantially
similar to those of the other national
securities exchanges and the Exchange
believes they will serve to empower the
independent directors of its listed
companies.
While the Exchange would require
that a listed company have at least three
independent directors to satisfy the
audit committee requirement described
above, it would not require that a
majority of the company’s board of
directors be independent or an
independent nomination committee
because the Exchange believes those
requirements could impose significant
additional costs on these smaller
companies and therefore discourage
companies from pursuing an otherwise
beneficial listing. In that regard, given
the significant responsibilities imposed
on audit and compensation committee
members, directors who serve on these
committees are sometimes reluctant to
serve on other committees. As such, if
BX were to also require an independent
nominations committee, companies may
have to increase the size of their boards
and add additional independent
directors. Similarly, requiring that
independent directors comprise a
24 Proposed
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20 15
U.S.C. 77r. Some State laws and regulations
may provide an exemption from certain registration
or ‘‘blue sky’’ requirements for companies listed on
the Boston Stock Exchange, based on the higher
listing standards previously applied by the former
Boston Stock Exchange. Proposed Rule 5001 would
provide that the Exchange will take action to delist
any company listed on BX that attempts to rely on
such an exemption. Companies will also agree not
to rely on any such exemption as a provision of the
BX Listing Agreement.
21 17 CFR 240.10A–3. See proposed Rule
5605(c)(2). Companies may be eligible for a phasein or cure period with respect to certain of these
requirements.
22 Proposed Rule 5605(a)(2) and IM–5605–1. The
proposed definition of an independent director is
identical to Nasdaq’s definition of an independent
director.
23 Id.
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Rule 5605(c)(1).
Rule 5630.
26 Proposed Rule 5605(d) and IM–5605–6. A
company can satisfy this requirement by having
their independent directors make these decisions in
executive session, or by having independent
directors sit on a compensation committee. If the
company chooses to use a compensation committee
and the committee is comprised of at least three
members, one director who is not independent as
defined in Rule 5605(a)(2) and is not a current
officer or employee or a Family Member of an
officer or employee, may be appointed to the
compensation committee under exceptional and
limited circumstances, provided the company
makes appropriate disclosure. Of course the
Exchange will adopt rules required by Section 952
of the Dodd-Frank Wall Street Reform and
Consumer Protection Act following the necessary
SEC rulemaking related to that provision.
27 Proposed Rule 5605(b).
25 Proposed
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majority of a company’s board could
also require companies to add
additional independent directors. In
each case, the need to add independent
directors would impose additional costs
on the company.28 Moreover, nothing in
the Commission’s rules or the Act
mandate these requirements.29
However, BX believes that the
requirement for executive sessions of
the independent directors will provide
a forum for the independent directors to
consider whether the governance
structure of the company is appropriate
and raise any concerns, notwithstanding
the lack of a majority independence and
nominations committee requirement.
Companies listing on BX will be
permitted to phase in compliance with
the audit committee and compensation
committee requirements following their
listing. With respect to the audit
committee requirements, a company
listing in connection with its initial
public offering would be required to
have one independent director on the
committee at the time of listing; a
majority of independent members
within 90 days of the date of
effectiveness of the company’s
registration statement; and all
independent members within one year
of the date of effectiveness of the
company’s registration statement. For
this purpose, a company will be
considered to be listing in conjunction
with an initial public offering only if it
meets the conditions in SEC Rule 10A–
3(b)(1)(iv)(A), namely that the company
was not, immediately prior to the
effective date of its registration
statement, required to file reports with
the Commission pursuant to Section
13(a) or 15(d) of the Act.
With respect to the compensation
committee requirement, a company
listing in connection with its initial
public offering, upon emerging from
bankruptcy, or that otherwise was not
subject to a substantially similar
requirement prior to listing (such as a
company only traded in the over-thecounter market) would be required to
have one independent director on the
committee at the time of listing; a
majority of independent members
within 90 days of listing; and all
independent members within one year
of listing. For this purposes, a company
28 The 2008–2009 Director Compensation Report
prepared by the National Association of Corporate
Directors (available from https://
www.nacdonline.org/) found that the median total
direct compensation per director was $78,060 for
smaller companies (defined as companies with
annual revenues of $50 to $500 million).
29 See, e.g., Item 407(a) of Regulation S–K, which
requires disclosure of non-independent directors
who serve on nomination committees, implicitly
allowing such service.
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will be considered to be listing in
conjunction with an initial public
offering if immediately prior to listing it
does not have a class of common stock
registered under the Act.
A company that transfers to BX from
another national securities exchange
with a substantially similar requirement
will be immediately subject to the audit
and compensation committee
requirements, provided that the
company will be afforded the balance of
any grace period afforded by the other
market.
The Exchange will require companies
to adopt a code of conduct applicable to
all directors, officers and employees.30
Any waivers of the code for directors or
executive officers must be approved by
the board and disclosed. The Exchange
believes that this requirement will help
promote the ethical behavior of
individuals associated with companies
listed on BX.
In addition, the Exchange will require
shareholder approval when a company
adopts or materially amends a stock
option or purchase plan or other equity
compensation arrangement pursuant to
which stock may be acquired by
officers, directors, employees, or
consultants.31 The Exchange would not
require shareholder approval for other
share issuances, however, given that the
companies expected to list on the
Exchange may have a greater need to
issue shares more frequently or more
quickly, due to their expected smaller
size and the business challenges they
may be facing. As such, the Exchange
believes that the cost and delay
associated with seeking approval for
share issuances would discourage
companies from pursuing an otherwise
beneficial listing.32 Nonetheless, the
Exchange will require listed Companies
to provide notice of any 5% change in
its shares outstanding 33 and the
Exchange Staff will review such
issuances for public interest concerns,
such as issuances significantly below
the market price or for the benefit of
related parties.
jlentini on DSKJ8SOYB1PROD with NOTICES
Review Process
Companies denied initial or
continued listing would be afforded a
review process similar to that contained
in the existing Rule 4800 Series of the
Exchange’s rules, which was modeled
30 Proposed
Rule 5610.
Rule 5635.
32 In this regard, the proposed rules are
comparable to the rules of the National Stock
Exchange, which require shareholder approval for
equity compensation issuances but not for other
share issuances. See National Stock Exchange Rule
15.6.
33 Proposed Rule 5250(e)(1).
31 Proposed
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on the process available to companies
listed on Nasdaq.34 The Exchange’s
Listing Qualifications staff only will be
able to allow time-limited exceptions for
certain deficiencies from the continued
listing standards, such as the failure to
file periodic reports, certain of the
corporate governance requirements and
any quantitative deficiency which does
not contain a compliance period.35
Other of the continued listing
requirements would provide for
automatic compliance periods,
including the market maker, market
value of publicly held shares and audit
committee requirements.36 If the
company fails to timely solicit proxies
or hold its annual meeting or fails to
meet the minimum price requirement,
or if staff has public interest concerns in
connection with the company, Listing
Qualifications staff will issue an
immediate delisting letter to the
company.37 Any other deficiency would
result in the Listing Qualifications staff
issuing a Public Reprimand Letter or a
delisting notification.38 Hearings Panels
composed of individuals not affiliated
with the Exchange would be permitted
to grant additional time to companies
that received a delisting notification, or
that were denied initial listing. A
company could appeal a decision of the
Hearings Panel to the Exchange Listing
and Hearing Review Council, which is
a committee appointed by the
Exchange’s Board to act for the Board
with respect to listing decisions.39 The
Listing and Hearing Review Council
decision would be final, unless it is
called for a discretionary review by the
Exchange Board.
Fees
Companies would be required to
submit an application review fee of
$7,500 with their application for listing
on BX, and would be required to pay a
$15,000 annual fee for the first class
listed on the Exchange and $5,000 for
each additional class. The annual fee
would be pro-rated for a company’s first
year of their listing. The application
review fee will allow the Exchange to
recover some of the costs associated
with the initial review of the company’s
application, including staff time and the
systems supporting the initial review
process. The annual fee would similarly
offset the staff and system costs of
continued monitoring of the company.
34 Nasdaq
Listing Rules 5800–5899.
Rule 5810(c)(2).
36 Proposed Rule 5810(c)(3).
37 Proposed Rule 5810(c)(1).
38 Proposed Rule 5810(c).
39 Section 6.1 of the By-Laws on NASDAQ OMX
BX, Inc.
35 Proposed
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54669
The proposed application and annual
fees are substantially less than those
charged by other national securities
exchanges.40 Companies that were
previously listed on Nasdaq would
receive a credit, which can only be used
to offset the annual fee, for any annual
fees paid to Nasdaq during the same
calendar year that they initially list on
BX, for the months following their
delisting from Nasdaq. The Exchange
believes this credit is a reasonable
allocation of fees under the Act because
the Exchange and Nasdaq have the same
ultimate parent, The NASDAQ OMX
Group, Inc., and the company will have
paid Nasdaq a non-refundable fee to
provide similar services as those that
will be provided by BX under its annual
fee. As such, the Exchange believes it
would be inequitable to charge the
company a second fee in the same year
to support the provision of those
services.
Fees would also be assessed for
certain one-time events, such as a
$7,500 fee for substitution listing events,
a $2,500 fee for record-keeping changes,
and a $4,000 or $5,000 fee for a written
or oral hearing, respectively. These fees
are identical to those charged on
Nasdaq.
Under Proposed Rule 5602, a
company considering a specific action
or transaction can request an
interpretation from the Exchange, and in
return, the Exchange will prepare a
responsive letter as to how the rules
apply to the proposed action or
transaction. No company is required to
request an interpretation, and staff will
orally discuss the application of the
Exchange’s rules with companies
without any additional charge.
However, if the company seeks a written
response, the Exchange proposes to
charge a $15,000 fee to recoup the cost
of staff’s time in reviewing and
responding to the request.41 The
Exchange believes that the fee is
appropriate, as the written response is
applicable only to the company that
requests it. The Exchange also believes
that the written interpretive process,
40 For example, the initial listing fees for listing
common stock on the NASDAQ Capital Market
range from $50,000 to $75,000 and the annual fees
are $27,500; the initial listing fees for listing
common stock on NYSE Amex range from $50,000
to $70,000 and the annual fees range from $27,500
to $40,000; the initial listing fees for listing
common stock on the New York Stock Exchange
range from $150,000 to $250,000 and the annual
fees range from $38,000 to $500,000. See Nasdaq
Rule 5920(a)(1) and (c)(1)(A), NYSE Amex Listed
Company Guide Sections 140 and 141, and NYSE
Listed Company Manual 902.03.
41 No fee would be charged in connection with
requests involving a company’s initial listing
application given that the company will pay an
application fee.
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Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices
and the associated fee, will provide an
additional public benefit in that staff
will prepare anonymous summaries of
interpretations, as well as frequently
asked questions based on requests
received from companies, including
those withdrawn before a written
response is issued. These summaries
and questions will be posted on the
Exchange’s Web site so that the general
public, practitioners, and other
companies can better understand how
the Exchange applies its rules and
policies. In this way, the overall need to
request such interpretations is
minimized, thus reducing burdens on
companies and staff alike.
jlentini on DSKJ8SOYB1PROD with NOTICES
Other Changes
As part of the proposed rule change,
the Exchange is deleting portions of the
Rule 4000 Series related to the listing
and trading of securities eligible to be
listed on BX and correcting crossreferences to those deleted sections. The
Exchange is maintaining those
provisions of the Rule 4000 applicable
to securities that will not be eligible to
be listed on BX, such as Portfolio
Depository Receipts, Index Fund Shares,
Trust Issued Receipts, Securities Linked
to the Performance of Indexes and
Commodities, and Managed Fund
Shares, to enable the continued trading
of such securities on the Exchange
pursuant to unlisted trading privileges.
The Exchange is deleting Rule 4430,
which provided listing criteria for
limited partnership rollup transactions
using language that was substantially
similar to language contained in FINRA
Rule 2310. Instead, the Exchange
addresses these issues in proposed Rule
5210(h). This rule adopts the same
approach taken by Nasdaq and NYSE
AMEX by incorporating the FINRA rule
by reference.42 In this manner, BX
satisfies the requirement of Section
6(b)(9) of the Exchange Act,43 which
requires that the rules of a national
securities exchange prohibit certain
limited partnership rollup transactions.
The Exchange is also moving the
additional requirements applicable to
the listing of securities issued by
NASDAQ OMX or its affiliates from
Rule 4370 to Rule 5701.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,44
in general and with Sections 6(b)(5) of
the Act,45 in particular in that it is
42 Nasdaq Rule 5210(h) and NYSE Amex Listed
Company Guide Section 126.
43 15 U.S.C. 78f(b)(9).
44 15 U.S.C. 78f.
45 15 U.S.C. 78f(b)(5).
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16:41 Sep 07, 2010
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designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The proposed new
listing venue will advance these goals
by allowing qualified issuers to list on
a transparent, well-regulated
marketplace with increased
transparency about the trading of these
securities, thereby protecting investors
and the public interest and helping to
prevent fraudulent and manipulative
acts and practices.
In addition, the Exchange believes
that the proposed market is consistent
with Section 17B of the Act, which
codifies Congress’ findings that it is in
the public interest and appropriate for
the protection of investors and the
maintenance of fair and orderly markets
to improve significantly the information
available to brokers, dealers, investors,
and regulators with respect to
quotations for and transactions in penny
stocks and that a fully implemented
automated quotation system for penny
stocks would meet the information
needs of investors and market
participants and would add visibility
and regulatory and surveillance data to
that market. Section 17B further
instructs the Commission to facilitate
the widespread dissemination of
reliable and accurate last sale and
quotation information with respect to
penny stocks, as the Exchange will for
securities listed on BX, through one or
more automated quotation systems
operated by a registered securities
association or a national securities
exchange, providing reliable pricing
information and reporting of
transactions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange 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.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BX–2010–059 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–BX–2010–059. 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
E:\FR\FM\08SEN1.SGM
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Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices
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–BX–
2010–059 and should be submitted on
or before September 29, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–22296 Filed 9–7–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Extending the Operation
of Its Supplemental Liquidity Providers
Pilot
September 1, 2010.
jlentini on DSKJ8SOYB1PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
27, 2010, NYSE Amex LLC (the
‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II, below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
operation of its Supplemental Liquidity
Providers Pilot (‘‘SLP Pilot’’ or ‘‘Pilot’’)
(See Rule 107B—NYSE Amex Equities),
currently scheduled to expire on
September 30, 3010, until the earlier of
the Securities and Exchange
Commission’s (‘‘SEC’’ or ‘‘Commission’’)
approval to make such Pilot permanent
or January 31, 2011. The text of the
proposed rule change is available on the
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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16:41 Sep 07, 2010
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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
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–62814; File No. SR–
NYSEAmex–2010–88]
46 17
Exchange’s Web site at https://
www.nyse.com, at the Exchange’s
principal office, at the Commission’s
Public Reference Room, and on the
Commission’s Web site at https://
www.sec.gov.
1. Purpose
The Exchange proposes to extend the
operation of its Supplemental Liquidity
Providers Pilot,3 currently scheduled to
expire on September 30, 2010, until the
earlier of Commission approval to make
such Pilot permanent or January 31,
2011.
Background
In October 2008, the New York Stock
Exchange LLC (‘‘NYSE’’) implemented
significant changes to its market rules,
execution technology and the rights and
obligations of its market participants all
of which were designed to improve
execution quality on the NYSE. These
changes were all elements of the NYSE’s
3 See Securities Exchange Act Release No. 61308
(January 7, 2010), 75 FR 2573 (January 15, 2010)
(SR–NYSEAmex–2009–98) (establishing the NYSE
Amex Equities SLP Pilot). See also Securities
Exchange Act Release No. 61841 (April 5, 2010), 75
FR 18560 (April 12, 2010) (SR–NYSEAmex–2010–
33) (extending the operation of the SLP Pilot to
September 30, 2010). See also Securities Exchange
Act Release No. 58877 (October 29, 2008), 73 FR
65904 (November 5, 2008) (SR–NYSE–2008–108)
(establishing the SLP Pilot). See also Securities
Exchange Act Release No. 59869 (May 6, 2009), 74
FR 22796 (May 14, 2009) (SR–NYSE–2009–46)
(extending the operation of the SLP Pilot to October
1, 2009). See also Securities Exchange Act Release
No. 60756 (October 1, 2009), 74 FR 51628 (October
7, 2009) (SR–NYSE–2009–100) (extending the
operation of the New Market Model and the SLP
Pilots to November 30, 2009). See also Securities
Exchange Act Release No. 61075 (November 30,
2009), 74 FR 64112 (December 7, 2009) (SR–NYSE–
2009–119) (extending the operation of the SLP Pilot
to March 30, 2010). See also Securities Exchange
Act Release No. 61840 (April 5, 2010), 75 FR 18563
(April 12, 2010) (SR–NYSE–2010–28) (extending
the operation of the SLP Pilot to September 30,
2010).
PO 00000
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Fmt 4703
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54671
and the Exchange’s enhanced market
model referred to as the ‘‘New Market
Model’’ (‘‘NMM Pilot’’).4 The NYSE SLP
Pilot was launched in coordination with
the NMM Pilot (see NYSE Rule 107B).
As part of the NMM Pilot, NYSE
eliminated the function of specialists on
the Exchange creating a new category of
market participant, the Designated
Market Maker or ‘‘DMM.’’ 5 Separately,
the NYSE established the SLP Pilot,
which established SLPs as a new class
of market participants to supplement
the liquidity provided by DMMs.6
The NYSE adopted NYSE Rule 107B
governing SLPs as a six-month pilot
program commencing in November
2008. This NYSE pilot has been
extended several times, most recently to
September 30, 2010.7 The NYSE is in
the process of requesting an extension of
their SLP Pilot until January 31, 2011 or
until the Commission approves the pilot
as permanent.8 The extension of the
NYSE SLP Pilot until January 31, 2011
runs parallel with the extension of the
NMM pilot: January 31, 2011, or until
the Commission approves the NMM
Pilot as permanent.
Proposal To Extend the Operation of the
NYSE Amex Equities SLP Pilot
NYSE Amex Equities established the
SLP Pilot to provide incentives for
quoting, to enhance competition among
the existing group of liquidity providers,
including the DMMs, and add new
competitive market participants. NYSE
Amex Equities Rule 107B is based on
NYSE Rule 107B. NYSE Amex Rule
107B was filed with the Commission on
December 30, 2009, as a ‘‘me too’’ filing
for immediate effectiveness as a pilot
program.9 The NYSE Amex Equities
SLP Pilot is scheduled to end operation
on September 30, 2010 or such earlier
time as the Commission may determine
to make the rules permanent.
The Exchange believes that the SLP
Pilot, in coordination with the NMM
4 See Securities Exchange Act Release No. 58845
(October 24, 2008), 73 FR 64379 (October 29, 2008)
(SR–NYSE–2008–46).
5 See NYSE Rule 103.
6 See NYSE and NYSE Amex Equities Rules 107B.
7 See Securities Exchange Act Release Nos. 58877
(October 29, 2008), 73 FR 65904 (November 5, 2008)
(SR–NYSE–2008–108) (adopting SLP pilot
program); 59869 (May 6, 2009), 74 FR 22796 (May
14, 2009) (SR–NYSE–2009–46) (extending SLP pilot
program until October 1, 2009); 60756 (October 1,
2009), 74 FR 51628 (October 7, 2009) (SR–NYSE–
2009–100) (extending SLP pilot program until
November 30, 2009) and 61075 (November 30,
2009), 74 FR 64112 (December 7, 2009) (SR–NYSE–
2009–119) (extending SLP pilot program until
March 30, 2010).
8 See SR–NYSE–2010–62.
9 See Securities Exchange Act Release No. 61308
(January 7, 2010), 75 FR 2573 (January 15, 2010)
(SR–NYSEAmex–2009–98).
E:\FR\FM\08SEN1.SGM
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]]>Agencies
[Federal Register Volume 75, Number 173 (Wednesday, September 8, 2010)]
[Notices]
[Pages 54665-54671]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-22296]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62818; File No. SR-BX-2010-059]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing of Proposed Rule Change To Create a Listing Market on the
Exchange
September 1, 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 August 20, 2010, NASDAQ OMX BX, Inc. (``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
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to create a listing market, which will be
called ``BX.'' Following Commission approval, the Exchange will
announce the operational date of the new market in an Equity Trader
Alert and press release. The proposed rules will become effective on
the operational date.
The text of the proposed rule change is available at https://nasdaqomxbx.cchwallstreet.com, at BX's principal office, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In connection with the acquisition of the former Boston Stock
Exchange by The NASDAQ OMX Group, Inc., the Exchange discontinued its
listing marketplace and delisted all securities previously listed on
the Exchange.\3\ Since January 2009, the Exchange has operated as a
trading venue only, allowing market participants to trade securities
listed on other national securities exchanges pursuant to unlisted
trading privileges.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 59265 (January 16,
2009), 74 FR 4790 (January 27, 2009) (approving SR-BSE-2008-36
relating to the delisting of all securities from the Exchange in
connection with the Exchange's discontinuation of trading).
---------------------------------------------------------------------------
The Exchange is proposing to begin listing securities again,
through the creation of a new listing market, to be called ``BX.'' BX
will have minimal quantitative listing standards, but have qualitative
requirements, which are, in many respects, similar to those required
for listing on The NASDAQ Stock Market (``Nasdaq'') and other national
securities exchanges.\4\ The Exchange believes that this market will
provide an attractive alternative to companies being delisted from
another national securities exchange for failure to meet quantitative
listing standards (including price or other market value measures) and
to smaller companies contemplating an initial exchange listing. The
Exchange further believes that the proposed listing venue will provide
a transparent, well-regulated marketplace for these companies and their
investors.\5\ As is currently the case with respect to the trading
occurring on the Exchange pursuant to unlisted trading privileges,
FINRA will regulate market activity and staff of the Exchange will
monitor real-time trading of securities listed on BX.
---------------------------------------------------------------------------
\4\ The Exchange notes that not all qualitative requirements
imposed by other exchanges would be required. See Listing
Requirements, infra, for a full discussion of the proposed
quantitative and qualitative requirements for listing on BX.
\5\ The Exchange will propose in a separate rule filing changes
to the BX Equities Platform to govern trading of, and reporting of
transactions in, these listed securities and introducing and
modifying market data products to permit dissemination of accurate
quotation information and reporting of transactions.
---------------------------------------------------------------------------
The Exchange expects that the securities listed on BX will not be
classified as national market system securities. As a result, BX-listed
securities will not be subject to a national market system plan and
will not be subject to Regulation NMS under
[[Page 54666]]
the Act.\6\ BX-listed securities will trade on the Exchange and could
be traded over-the-counter.\7\
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\6\ 17 CFR 242.600-612.
\7\ Over-the-counter trades of BX-listed securities would be
reported to the FINRA Over-the-Counter Reporting Facility.
---------------------------------------------------------------------------
Listing Requirements
BX would list Common Stock, Preferred Stock, Ordinary Shares,
Shares or Certificates of Beneficial Interest of Trust, Limited
Partnership Interests, American Depositary Receipts (ADR), American
Depositary Shares (ADS), Units, Rights and Warrants. To be listed on
BX, companies will need to meet the following qualitative listing
standards, each of which is equivalent to the comparable listing
standard of Nasdaq or is derived from the Federal securities laws:
(a) The company must be registered under Section 12(b) of the Act
\8\ and current in its periodic filings with the Commission and, as a
result, subject to the requirements of the Sarbanes-Oxley Act of 2002
\9\ (proposed Rule 5210(a));
---------------------------------------------------------------------------
\8\ 15 U.S.C. 781(b).
\9\ 15 U.S.C. 7201-7266.
---------------------------------------------------------------------------
(b) The company must have a fully independent Audit Committee
comprised of at least three members and comply with the requirements of
SEC Rule 10A-3, promulgated under the Act \10\ (proposed Rule 5605(c));
---------------------------------------------------------------------------
\10\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(c) The company must have independent directors make compensation
decisions for executive officers (proposed Rule 5605(d));
(d) The company will be prohibited from taking any corporate action
with the effect of nullifying, restricting or disparately reducing the
per share voting rights of holders of an outstanding class of the
company's common stock registered pursuant to Section 12 of the Act
(proposed Rule 5640);
(e) The company's auditor will be required to be registered with
the Public Company Accounting Oversight Board \11\ (proposed Rules
5210(b) and 5250(c)(3));
---------------------------------------------------------------------------
\11\ See Section 102 of the Sarbanes-Oxley Act, 15 U.S.C. 7212.
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(f) The company will be required to hold an annual shareholders'
meeting and solicit proxies for each shareholders' meeting (proposed
Rule 5620);
(g) The company will be required to obtain shareholder approval for
the use of equity compensation (proposed Rule 5635);
(h) The company will be required to adopt a code of conduct,
applicable to all directors, officers and employees (proposed Rule
5610);
(i) The company will be required to conduct an appropriate review
and oversight of all related party transactions, to address potential
conflict of interest situations (proposed Rule 5630);
(j) The company will be required to disclose material information
through any Regulation FD compliant method (or combination of methods)
(proposed Rule 5250(b) and IM-5250-1);
(k) The listed securities must be eligible for a Direct
Registration Program operated by a clearing agency registered under
Section 17A of the Act \12\ (proposed Rules 5210(c) and 5255);
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\12\ 15 U.S.C. 78q-1.
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(l) Public ``shells'' would not be allowed to list (proposed Rule
5101); and
(m) The Exchange will conduct a public interest review of the
company and significant persons associated with it (proposed Rule 5101
and IM-5101-1).
In addition, BX would apply the following quantitative listing
standards, set out in proposed Rules 5505 (initial listing) and 5550
(continued listing), which are designed to assure a minimum level of
trading consistent with a public market for the securities:
(a) 200,000 publicly held shares;
(b) 200 public shareholders, at least 100 of which must be round
lot holders for initial listing, and 200 public shareholders for
continued listing;
(c) A market value of listed securities of at least $2 million for
initial listing and $1 million for continued listing;
(d) Two market makers; and
(e) A minimum initial listing price of $0.25 per share for
securities previously listed on a national securities exchange and
$1.00 per share for securities previously quoted in the over-the-
counter market. For continued listing, securities will be required to
maintain a minimum $0.05 per share bid price.
Further, with respect to companies not previously listed on a national
securities exchange, BX will also require for initial listing that the
company have either $1 million stockholders' equity or $5 million total
assets, a one year operating history, and a plan to maintain sufficient
working capital for the company's planned business for at least twelve
months after the first day of listing.
The Exchange would also require that rights and warrants will only
be eligible for initial and continued listing if the underlying
security is listed on BX or is a covered security, as described in
Section 18(b) of the Securities Act of 1933.\13\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 77r(b).
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The proposed listing standards are designed to allow companies that
are being delisted from another national securities exchange for
failure to meet that exchange's quantitative listing requirements the
opportunity to provide their investors with a better regulated, more
transparent trading environment than may otherwise be available in the
over-the-counter markets. In addition, the Exchange believes that
allowing these companies to continue trading on a national securities
exchange may enable some institutional investors to continue their
ownership stake in the company, which could provide greater stability
to the company's shareholder base and possibly avoid forced sales by
such investors.\14\ The Exchange also believes that companies currently
traded over-the-counter could view this market as an aspirational step
towards a listing on another national securities exchange. The Exchange
believes that the agreement of such companies to comply with the
Exchange's corporate governance standards and the application of the
Exchange's public interest authority will provide additional
protections to their investors than would be available in their present
trading venue. Moreover, the Exchange believes that a BX listing could
help such companies raise capital, in turn promoting job creation
within the United States. Finally, the Exchange believes that BX will
be a more attractive alternative to domestic companies that might
otherwise have considered a listing on non-U.S. junior markets, which
generally have lower listing requirements.
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\14\ Many institutional investors have investment policies that
limit their ownership to securities listed on a national securities
exchange, or that prohibit the ownership of securities that only are
traded in the over-the-counter market.
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Nonetheless, the Exchange recognizes that the listing requirements
for BX will be lower than those of the NASDAQ Stock Market and other
national securities exchanges. As such, to avoid investor confusion,
the listing rules of BX will specify that a BX-listed company should
refer to its listing as on the ``BX'' market, unless otherwise required
by applicable rules or regulations, and that such company should not
represent that it is listed on The NASDAQ Stock Market. Similarly, in
describing this listing venue, the Exchange will generally refer to it
as ``BX'' and not as NASDAQ OMX BX.
The Exchange will have the discretionary authority to deny listing
to any otherwise qualified security when
[[Page 54667]]
necessary to preserve and strengthen the quality of and public
confidence in its market. Proposed IM-5101-1 provides a non-exclusive
description of circumstances where the Exchange may exercise that
discretion, including when an individual associated with the company
has a history of regulatory misconduct. In that regard, the Exchange
intends to conduct background investigations of officers and directors
and other significant people associated with a company in connection
with its review of applications for initial listing. The Exchange also
will not approve for initial listing, or allow the continued listing,
of shell companies.\15\ This prohibition is based on concerns that the
investors in shell companies are unaware of the ultimate business in
which they are investing and that trading in such securities is more
susceptible to market manipulation.
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\15\ Proposed Rule 5101 sets forth a number of factors that the
Exchange will consider in determining whether a Company is a shell,
including whether the Company is considered a ``shell company'' as
defined in Rule 12b-2 under the Act, 17 CFR 240.12b-2.
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The Exchange proposes that any company that meets the quantitative
(e.g., financial) requirements for listing on Nasdaq will not be
allowed to initially list on BX. This will assure that such companies
only become listed on the exchange with higher listing standards.
Given that the Exchange expects to list companies that do not meet
the quantitative listing requirements of the primary existing national
securities exchanges, it is expected that BX-listed companies will
include smaller companies and companies facing business or other
challenges. Thus, the proposed quantitative standards for BX were
deliberately structured to be lower than those of the other primary
exchanges. In that regard, the minimum price requirement for listing on
BX will be $0.25 per share for a security previously listed on another
national securities exchange and $1.00 per share for a security
previously quoted in the over-the-counter market or listing in
connection with its initial public offering. Until March 31, 2011, the
Exchange would consider any company that was listed on another national
securities exchange at any time since January 1, 2008, to be eligible
to list with a $0.25 per share price. The Exchange believes it
appropriate to consider a company delisted since January 1, 2008, as
previously quoted on another national securities exchange because the
BX market would not have been available to such companies when they
were delisted. The Exchange believes it is reasonable to look back to
January 1, 2008, when the financial markets began facing difficulties,
which resulted in an unusually large number of companies being
delisted. Furthermore, the Exchange believes it is appropriate to
continue this treatment until March 31, 2011, to assure that such
companies have an adequate opportunity to learn about BX and sufficient
time to complete their application and have that application processed
by the Exchange. After March 31, 2011, a company will be considered to
have been previously listed on a national securities exchange, and
therefore eligible to list with a $0.25 per share price, only if it was
listed on such an exchange at any time during the three months prior to
its listing on BX. The Exchange believes that this three-month period
will allow the company sufficient time to apply for listing on BX and
have its application processed.
For continued listing, a security will be required to maintain a
minimum $0.05 per share bid price.\16\ If the security does not
maintain a minimum $0.05 per share bid price for ten consecutive
trading days, Exchange staff would issue a Staff Delisting
Determination and the security would be suspended from trading on
BX.\17\ A company could appeal that determination to a Hearings Panel,
however such an appeal would not stay the suspension of the
security.\18\ During the Hearings Panel process, the security could
regain compliance by achieving a $0.05 per share minimum bid price
while trading on another venue, such as the over-the-counter market,
for 10 consecutive days. However, if the company has received three or
more Staff Delisting Determinations for failure to comply with minimum
price requirement in the prior 12 months, the company could only regain
compliance by achieving a closing bid price of $0.25 per share or more
for at least 10 consecutive trading days. The Exchange believes that
this higher requirement for companies that were previously non-
compliant is appropriate to reduce the likelihood of future instances
of non-compliance and the concomitant investor confusion concerning the
ability of the company to remain listed. If the Hearings Panel
determines that the security has satisfied the applicable standard to
regain compliance, the trading halt would be terminated and the
security would resume trading on the Exchange.
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\16\ The Exchange notes there is also no price requirement for
initial or continued listing on the National Stock Exchange or for
continued listing on NYSE Amex and therefore that the proposed
continued listing requirement exceeds the requirement of those
exchanges.
\17\ Proposed Rule 4120(a)(12).
\18\ Proposed Rule 5815(a)(1)(C).
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To be eligible for initial listing, a company not previously listed
on a national securities exchange must have at least one year operating
history, a minimum of either $1 million in stockholders' equity or $5
million in total assets, and demonstrate that it has a plan to maintain
sufficient working capital for its planned business for at least twelve
months after the first day of listing. The Exchange believes that these
requirements will help assure that a company that was not previously
subject to exchange regulation nonetheless has a credible and
sustainable business.
The Exchange believes that the proposed public float, holder and
market maker requirements, together with the minimum market value of
listed securities requirement, will assure sufficient liquidity in
listed securities. In that regard, the Exchange notes that the
shareholder and publicly held shares requirements are comparable to, or
higher than, requirements for listing a preferred stock or secondary
class of common stock on the Nasdaq Capital Market, which require 100
round lot shareholders and 200,000 publicly held shares. The Exchange
is not aware of any difficulties in the trading in securities meeting
these requirements. Further, requiring two market makers will assure
competing quotations for potential buyers and sellers of the securities
listed on BX. Finally, the Exchange believes that the minimum market
value of listed securities requirement will help assure that the
company issuing the securities is of a sufficient size to generate
interest from investors and market participants. While these proposed
standards may be lower than those of other exchanges, investors will be
protected by the fact that securities listed on BX would be considered
penny stocks under Exchange Act Rule 3a51-1, unless they qualify for an
exemption from the definition of a penny stock.\19\ As such, broker-
dealers would be required to pre-approve their customers for trading in
[[Page 54668]]
penny stocks and investors will obtain the disclosures required to be
made by broker-dealers in connection with penny stock transactions,
providing them with trade and market information prior to effecting a
transaction. Further, there will be no ``blue sky'' exemption available
under Section 18 of the Securities Act of 1933,\20\ so companies will
be required to satisfy State law registration requirements and other
State laws that regulate the sale and offering of securities.
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\19\ 17 CFR 240.3a51-1. The Exchange is not seeking an exemption
from the penny stock rules for securities listed on BX, however a
security may be excluded from the definition of a penny stock as a
result of the security having a price in excess of $5 or its issuer
having net tangible assets in excess of $2 million (if the issuer
has been in continuous operation for at least three years) or $5
million (if the issuer has been in continuous operation for less
than three years) or average revenue of at least $6 million for the
last three years. Rule 3a51-1(d) and (g), 17 CFR 240.3a51-1(d) and
(g).
\20\ 15 U.S.C. 77r. Some State laws and regulations may provide
an exemption from certain registration or ``blue sky'' requirements
for companies listed on the Boston Stock Exchange, based on the
higher listing standards previously applied by the former Boston
Stock Exchange. Proposed Rule 5001 would provide that the Exchange
will take action to delist any company listed on BX that attempts to
rely on such an exemption. Companies will also agree not to rely on
any such exemption as a provision of the BX Listing Agreement.
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The BX corporate governance requirements are generally comparable
to those of the other exchanges. The Exchange would require that a
listed company have an audit committee comprised of at least three
independent directors that also meet the requirements of SEC Rule 10A-
3.\21\ For a director to be considered an independent director, the
company's board would have to determine that the individual does not
have a relationship which, in the board's opinion, would interfere with
the exercise of independent judgment in carrying out the
responsibilities of a director.\22\ The board would be precluded from
finding a director independent based on certain relationships,
including if that director is currently an employee of the company or
was employed by the company during the prior three years (including as
an executive officer), accepted certain compensation or payments from
the company during the prior three years, or had a family member with
certain affiliations with the company.\23\
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\21\ 17 CFR 240.10A-3. See proposed Rule 5605(c)(2). Companies
may be eligible for a phase-in or cure period with respect to
certain of these requirements.
\22\ Proposed Rule 5605(a)(2) and IM-5605-1. The proposed
definition of an independent director is identical to Nasdaq's
definition of an independent director.
\23\ Id.
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The audit committee would be required to have a charter setting out
its responsibilities, including the committee's purpose of overseeing
the accounting and financial reporting processes of the company and the
audits of the company's financial statements and the responsibilities
and authority necessary to comply with SEC Rule 10A-3.\24\ The audit
committee, or another independent body of the board, will also be
required to conduct an appropriate review and oversight of any related
party transaction.\25\ The Exchange believes that this requirement will
limit the potential for self-dealing in connection with any related
party transactions.
---------------------------------------------------------------------------
\24\ Proposed Rule 5605(c)(1).
\25\ Proposed Rule 5630.
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The Exchange would also require that independent directors make
compensation decisions concerning the chief executive officer and other
executive officers.\26\ Independent directors would be required to meet
on a regular basis in executive sessions.\27\ These requirements for
audit committees, compensation decisions, and executive sessions are
identical to those of Nasdaq and substantially similar to those of the
other national securities exchanges and the Exchange believes they will
serve to empower the independent directors of its listed companies.
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\26\ Proposed Rule 5605(d) and IM-5605-6. A company can satisfy
this requirement by having their independent directors make these
decisions in executive session, or by having independent directors
sit on a compensation committee. If the company chooses to use a
compensation committee and the committee is comprised of at least
three members, one director who is not independent as defined in
Rule 5605(a)(2) and is not a current officer or employee or a Family
Member of an officer or employee, may be appointed to the
compensation committee under exceptional and limited circumstances,
provided the company makes appropriate disclosure. Of course the
Exchange will adopt rules required by Section 952 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act following the
necessary SEC rulemaking related to that provision.
\27\ Proposed Rule 5605(b).
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While the Exchange would require that a listed company have at
least three independent directors to satisfy the audit committee
requirement described above, it would not require that a majority of
the company's board of directors be independent or an independent
nomination committee because the Exchange believes those requirements
could impose significant additional costs on these smaller companies
and therefore discourage companies from pursuing an otherwise
beneficial listing. In that regard, given the significant
responsibilities imposed on audit and compensation committee members,
directors who serve on these committees are sometimes reluctant to
serve on other committees. As such, if BX were to also require an
independent nominations committee, companies may have to increase the
size of their boards and add additional independent directors.
Similarly, requiring that independent directors comprise a majority of
a company's board could also require companies to add additional
independent directors. In each case, the need to add independent
directors would impose additional costs on the company.\28\ Moreover,
nothing in the Commission's rules or the Act mandate these
requirements.\29\ However, BX believes that the requirement for
executive sessions of the independent directors will provide a forum
for the independent directors to consider whether the governance
structure of the company is appropriate and raise any concerns,
notwithstanding the lack of a majority independence and nominations
committee requirement.
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\28\ The 2008-2009 Director Compensation Report prepared by the
National Association of Corporate Directors (available from https://www.nacdonline.org/) found that the median total direct compensation
per director was $78,060 for smaller companies (defined as companies
with annual revenues of $50 to $500 million).
\29\ See, e.g., Item 407(a) of Regulation S-K, which requires
disclosure of non-independent directors who serve on nomination
committees, implicitly allowing such service.
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Companies listing on BX will be permitted to phase in compliance
with the audit committee and compensation committee requirements
following their listing. With respect to the audit committee
requirements, a company listing in connection with its initial public
offering would be required to have one independent director on the
committee at the time of listing; a majority of independent members
within 90 days of the date of effectiveness of the company's
registration statement; and all independent members within one year of
the date of effectiveness of the company's registration statement. For
this purpose, a company will be considered to be listing in conjunction
with an initial public offering only if it meets the conditions in SEC
Rule 10A-3(b)(1)(iv)(A), namely that the company was not, immediately
prior to the effective date of its registration statement, required to
file reports with the Commission pursuant to Section 13(a) or 15(d) of
the Act.
With respect to the compensation committee requirement, a company
listing in connection with its initial public offering, upon emerging
from bankruptcy, or that otherwise was not subject to a substantially
similar requirement prior to listing (such as a company only traded in
the over-the-counter market) would be required to have one independent
director on the committee at the time of listing; a majority of
independent members within 90 days of listing; and all independent
members within one year of listing. For this purposes, a company
[[Page 54669]]
will be considered to be listing in conjunction with an initial public
offering if immediately prior to listing it does not have a class of
common stock registered under the Act.
A company that transfers to BX from another national securities
exchange with a substantially similar requirement will be immediately
subject to the audit and compensation committee requirements, provided
that the company will be afforded the balance of any grace period
afforded by the other market.
The Exchange will require companies to adopt a code of conduct
applicable to all directors, officers and employees.\30\ Any waivers of
the code for directors or executive officers must be approved by the
board and disclosed. The Exchange believes that this requirement will
help promote the ethical behavior of individuals associated with
companies listed on BX.
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\30\ Proposed Rule 5610.
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In addition, the Exchange will require shareholder approval when a
company adopts or materially amends a stock option or purchase plan or
other equity compensation arrangement pursuant to which stock may be
acquired by officers, directors, employees, or consultants.\31\ The
Exchange would not require shareholder approval for other share
issuances, however, given that the companies expected to list on the
Exchange may have a greater need to issue shares more frequently or
more quickly, due to their expected smaller size and the business
challenges they may be facing. As such, the Exchange believes that the
cost and delay associated with seeking approval for share issuances
would discourage companies from pursuing an otherwise beneficial
listing.\32\ Nonetheless, the Exchange will require listed Companies to
provide notice of any 5% change in its shares outstanding \33\ and the
Exchange Staff will review such issuances for public interest concerns,
such as issuances significantly below the market price or for the
benefit of related parties.
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\31\ Proposed Rule 5635.
\32\ In this regard, the proposed rules are comparable to the
rules of the National Stock Exchange, which require shareholder
approval for equity compensation issuances but not for other share
issuances. See National Stock Exchange Rule 15.6.
\33\ Proposed Rule 5250(e)(1).
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Review Process
Companies denied initial or continued listing would be afforded a
review process similar to that contained in the existing Rule 4800
Series of the Exchange's rules, which was modeled on the process
available to companies listed on Nasdaq.\34\ The Exchange's Listing
Qualifications staff only will be able to allow time-limited exceptions
for certain deficiencies from the continued listing standards, such as
the failure to file periodic reports, certain of the corporate
governance requirements and any quantitative deficiency which does not
contain a compliance period.\35\ Other of the continued listing
requirements would provide for automatic compliance periods, including
the market maker, market value of publicly held shares and audit
committee requirements.\36\ If the company fails to timely solicit
proxies or hold its annual meeting or fails to meet the minimum price
requirement, or if staff has public interest concerns in connection
with the company, Listing Qualifications staff will issue an immediate
delisting letter to the company.\37\ Any other deficiency would result
in the Listing Qualifications staff issuing a Public Reprimand Letter
or a delisting notification.\38\ Hearings Panels composed of
individuals not affiliated with the Exchange would be permitted to
grant additional time to companies that received a delisting
notification, or that were denied initial listing. A company could
appeal a decision of the Hearings Panel to the Exchange Listing and
Hearing Review Council, which is a committee appointed by the
Exchange's Board to act for the Board with respect to listing
decisions.\39\ The Listing and Hearing Review Council decision would be
final, unless it is called for a discretionary review by the Exchange
Board.
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\34\ Nasdaq Listing Rules 5800-5899.
\35\ Proposed Rule 5810(c)(2).
\36\ Proposed Rule 5810(c)(3).
\37\ Proposed Rule 5810(c)(1).
\38\ Proposed Rule 5810(c).
\39\ Section 6.1 of the By-Laws on NASDAQ OMX BX, Inc.
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Fees
Companies would be required to submit an application review fee of
$7,500 with their application for listing on BX, and would be required
to pay a $15,000 annual fee for the first class listed on the Exchange
and $5,000 for each additional class. The annual fee would be pro-rated
for a company's first year of their listing. The application review fee
will allow the Exchange to recover some of the costs associated with
the initial review of the company's application, including staff time
and the systems supporting the initial review process. The annual fee
would similarly offset the staff and system costs of continued
monitoring of the company. The proposed application and annual fees are
substantially less than those charged by other national securities
exchanges.\40\ Companies that were previously listed on Nasdaq would
receive a credit, which can only be used to offset the annual fee, for
any annual fees paid to Nasdaq during the same calendar year that they
initially list on BX, for the months following their delisting from
Nasdaq. The Exchange believes this credit is a reasonable allocation of
fees under the Act because the Exchange and Nasdaq have the same
ultimate parent, The NASDAQ OMX Group, Inc., and the company will have
paid Nasdaq a non-refundable fee to provide similar services as those
that will be provided by BX under its annual fee. As such, the Exchange
believes it would be inequitable to charge the company a second fee in
the same year to support the provision of those services.
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\40\ For example, the initial listing fees for listing common
stock on the NASDAQ Capital Market range from $50,000 to $75,000 and
the annual fees are $27,500; the initial listing fees for listing
common stock on NYSE Amex range from $50,000 to $70,000 and the
annual fees range from $27,500 to $40,000; the initial listing fees
for listing common stock on the New York Stock Exchange range from
$150,000 to $250,000 and the annual fees range from $38,000 to
$500,000. See Nasdaq Rule 5920(a)(1) and (c)(1)(A), NYSE Amex Listed
Company Guide Sections 140 and 141, and NYSE Listed Company Manual
902.03.
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Fees would also be assessed for certain one-time events, such as a
$7,500 fee for substitution listing events, a $2,500 fee for record-
keeping changes, and a $4,000 or $5,000 fee for a written or oral
hearing, respectively. These fees are identical to those charged on
Nasdaq.
Under Proposed Rule 5602, a company considering a specific action
or transaction can request an interpretation from the Exchange, and in
return, the Exchange will prepare a responsive letter as to how the
rules apply to the proposed action or transaction. No company is
required to request an interpretation, and staff will orally discuss
the application of the Exchange's rules with companies without any
additional charge. However, if the company seeks a written response,
the Exchange proposes to charge a $15,000 fee to recoup the cost of
staff's time in reviewing and responding to the request.\41\ The
Exchange believes that the fee is appropriate, as the written response
is applicable only to the company that requests it. The Exchange also
believes that the written interpretive process,
[[Page 54670]]
and the associated fee, will provide an additional public benefit in
that staff will prepare anonymous summaries of interpretations, as well
as frequently asked questions based on requests received from
companies, including those withdrawn before a written response is
issued. These summaries and questions will be posted on the Exchange's
Web site so that the general public, practitioners, and other companies
can better understand how the Exchange applies its rules and policies.
In this way, the overall need to request such interpretations is
minimized, thus reducing burdens on companies and staff alike.
---------------------------------------------------------------------------
\41\ No fee would be charged in connection with requests
involving a company's initial listing application given that the
company will pay an application fee.
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Other Changes
As part of the proposed rule change, the Exchange is deleting
portions of the Rule 4000 Series related to the listing and trading of
securities eligible to be listed on BX and correcting cross-references
to those deleted sections. The Exchange is maintaining those provisions
of the Rule 4000 applicable to securities that will not be eligible to
be listed on BX, such as Portfolio Depository Receipts, Index Fund
Shares, Trust Issued Receipts, Securities Linked to the Performance of
Indexes and Commodities, and Managed Fund Shares, to enable the
continued trading of such securities on the Exchange pursuant to
unlisted trading privileges.
The Exchange is deleting Rule 4430, which provided listing criteria
for limited partnership rollup transactions using language that was
substantially similar to language contained in FINRA Rule 2310.
Instead, the Exchange addresses these issues in proposed Rule 5210(h).
This rule adopts the same approach taken by Nasdaq and NYSE AMEX by
incorporating the FINRA rule by reference.\42\ In this manner, BX
satisfies the requirement of Section 6(b)(9) of the Exchange Act,\43\
which requires that the rules of a national securities exchange
prohibit certain limited partnership rollup transactions.
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\42\ Nasdaq Rule 5210(h) and NYSE Amex Listed Company Guide
Section 126.
\43\ 15 U.S.C. 78f(b)(9).
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The Exchange is also moving the additional requirements applicable
to the listing of securities issued by NASDAQ OMX or its affiliates
from Rule 4370 to Rule 5701.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\44\ in general and with
Sections 6(b)(5) of the Act,\45\ in particular in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The proposed new listing
venue will advance these goals by allowing qualified issuers to list on
a transparent, well-regulated marketplace with increased transparency
about the trading of these securities, thereby protecting investors and
the public interest and helping to prevent fraudulent and manipulative
acts and practices.
---------------------------------------------------------------------------
\44\ 15 U.S.C. 78f.
\45\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In addition, the Exchange believes that the proposed market is
consistent with Section 17B of the Act, which codifies Congress'
findings that it is in the public interest and appropriate for the
protection of investors and the maintenance of fair and orderly markets
to improve significantly the information available to brokers, dealers,
investors, and regulators with respect to quotations for and
transactions in penny stocks and that a fully implemented automated
quotation system for penny stocks would meet the information needs of
investors and market participants and would add visibility and
regulatory and surveillance data to that market. Section 17B further
instructs the Commission to facilitate the widespread dissemination of
reliable and accurate last sale and quotation information with respect
to penny stocks, as the Exchange will for securities listed on BX,
through one or more automated quotation systems operated by a
registered securities association or a national securities exchange,
providing reliable pricing information and reporting of transactions.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-BX-2010-059 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-BX-2010-059. 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
[[Page 54671]]
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-BX-2010-059 and should be
submitted on or before September 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22296 Filed 9-7-10; 8:45 am]
BILLING CODE 8010-01-P
