Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify Rule IM-5900-7 To Adjust the Entitlement to Services of Acquisition Companies, 69881-69884 [2016-24279]

Download as PDF Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2016–62. This file number should be included on the subject line if email 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 20549–1090, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also 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–NYSE– 2016–62 and should be submitted on or before October 28, 2016. VI. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 2, prior to the thirtieth day after the date of publication of notice of Amendment No. 2 in the Federal Register. As described above, the Exchange proposes to amend its rules to comply with the Plan and clarify other rules related to LULD and Trading Collars. The Commission believes that the proposals related to LULD Price Bands and Trading Collars should provide clarity on instances where they are not in the MPV. The Commission believes that the proposals related to the Pilot are designed to ensure compliance with the Plan. The Commission notes that the Pilot is scheduled to start on October 3, 2016, and accelerated approval would VerDate Sep<11>2014 17:36 Oct 06, 2016 Jkt 241001 ensure that the rules of the Exchange would be in place for the start of the Pilot. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,37 to approve the proposed rule change, as modified by Amendment No. 2, on an accelerated basis. VII. Conclusion It is therefore ordered that, pursuant to Section 19(b)(2) of the Act,38 the proposed rule change (SR–NYSE–2016– 62), as modified by Amendment No. 2, be and hereby is approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.39 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–24284 Filed 10–6–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79025; File No. SR– NASDAQ–2016–106] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify Rule IM–5900–7 To Adjust the Entitlement to Services of Acquisition Companies October 3, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on September 22, 2016, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory 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 modify the treatment of acquisition companies under IM–5900–7. The text of the proposed rule change is available on the Exchange’s Web site 37 15 U.S.C. 78s(b)(2). 38 Id. 39 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 69881 at https://nasdaq.cchwallstreet.com, at the principal office of the Exchange, 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to modify IM–5900– 7 to change the treatment of acquisition companies under that rule. Nasdaq offers complimentary services under IM–5900–7 to companies listing on the Nasdaq Global and Global Select Markets in connection with an initial public offering, upon emerging from bankruptcy, or in connection with a spin-off or carve-out from another company (‘‘Eligible New Listings’’) and to companies that switch their listing from the New York Stock Exchange (‘‘NYSE’’) to the Global or Global Select Markets (‘‘Eligible Switches’’).4 Nasdaq believes that the complimentary service program offers valuable services to newly listing companies, designed to help ease the transition of becoming a public company or switching markets, makes listing on Nasdaq more attractive to these companies, and also provides Nasdaq Corporate Solutions the opportunity to demonstrate the value of its services and forge a relationship with the company. The services offered include a whistleblower hotline, investor relations Web site, disclosure services for earnings or other press releases, webcasting, market analytic tools, and may include market advisory 4 See Exchange Act Release No. 65963 (December 15, 2011), 76 FR 79262 (December 21, 2011) (SR– NASDAQ–2011–122) (adopting IM–5900–7); Exchange Act Release No. 72669 (July 24, 2014), 79 FR 44234 (July 30, 2014) (SR–NASDAQ–2014–058) (adopting changes to IM–5900–7); Exchange Act Release No. 78806 (September 9, 2016), 81 FR 63523 (September 15, 2016) (SR–NASDAQ–2016– 098). These adopting releases are collectively referred to as the ‘‘Prior Filings.’’ E:\FR\FM\07OCN1.SGM 07OCN1 69882 Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES tools such as stock surveillance. Depending on a company’s market capitalization and whether it is an Eligible New Listing or an Eligible Switch, the value of the services provided range from $141,000 to $754,000, and one-time development fees of approximately $3,500 are waived.5 In addition, all companies listed on Nasdaq receive services from Nasdaq, including Nasdaq Online and the Market Intelligence Desk. Generally, Nasdaq will not permit the initial or continued listing of a company that has no specific business plan or that has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies. However, in the case of a company whose business plan is to complete an initial public offering and engage in a merger or acquisition with one or more unidentified companies within a specific period of time (an ‘‘Acquisition Company’’), Nasdaq will permit the listing if the company meets all applicable initial listing requirements, as well as the additional conditions described in IM–5101–2. These additional conditions generally require, among other things, that at least 90% of the gross proceeds from the initial public offering must be deposited in a ‘‘deposit account,’’ as that term is defined in the rule, and that the company complete within 36 months, or a shorter period identified by the company, one or more business combinations having an aggregate fair market value of at least 80% of the value of the deposit account at the time of the agreement to enter into the initial combination. Acquisition Companies do not have operating businesses and tend to trade infrequently and in a tight range until the company completes an acquisition. In addition, Acquisition Companies issue few press releases and frequently do not have detailed Web sites. Therefore, upon listing, these companies do not generally need shareholder communication services, market analytic tools or market advisory tools, and generally would only benefit from the complimentary whistleblower hotline provided under IM–5900–7.6 Accordingly, Nasdaq proposes to 5 The exact values are set forth in IM–5900–7 and no change to these services or their values is proposed in this filing. 6 It typically takes more than two years for an Acquisition Company to identify a target and complete an acquisition. As a result, the term of any complimentary services offered to an Acquisition Company under IM–5900–7 as an Eligible New Listing would usually expire before the company acquired a target and began operating as an operating company that could benefit from the services. VerDate Sep<11>2014 17:36 Oct 06, 2016 Jkt 241001 provide that an Acquisition Company listing on the Global Market 7 before it has satisfied the requirement of IM– 5101–2(b), whether as an Eligible New Listing or an Eligible Switch, will not receive complimentary services under IM–5900–7.8 However, once an Acquisition Company completes a business combination with an operating company, the combined company is much like any other newly public company and could benefit from the complimentary services Nasdaq offers other newly public companies. Accordingly, Nasdaq proposes to include in the definition of an ‘‘Eligible New Listing’’ that receives complimentary services under IM– 5900–7 an Acquisition Company that completes a business combination that satisfies the conditions in IM–5101–2(b) and that lists on the Global or Global Select Market in conjunction with that business combination.9 For purposes of IM–5900–7, Nasdaq will treat a company previously listed on the Capital Market as listing on the Global or Global Select Market in conjunction with a business combination that satisfies the conditions in IM–5101–2(b) if it files an application to list on the Global or Global Select Market before completing the combination and demonstrates compliance with all applicable criteria within 60 days of completing the business combination. This additional time may be required, in some cases, to allow the issuance of shares in the transaction and then for the newly formed entity to obtain information from third parties to demonstrate compliance with the shareholder and public float requirements. If the Acquisition Company is listed on the Global Market at the time it completes a business combination that satisfies the conditions in IM–5101–2(b) and remains listed on the Global Market or transfers to the Global Select Market, the complimentary period will commence on the date of such business combination.10 If the Acquisition Company is listed on the Capital Market at the time it completes the business 7 Rule 5310(i) provides that a company subject to IM–5101–2 is not eligible to list on the Global Select Market. 8 To date, all companies listing under IM–5101– 2 have listed on the Capital Market. The services described in IM–5900–7 are not available to companies listing on the Capital Market. 9 The company would receive the same services under IM–5900–7, with the same value, as any other Eligible New Listing. 10 An Acquisition Company must meet the initial listing requirements at the time of its business combination even if it is already listed on the Global Market. See IM–5101–2(d). PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 combination that satisfies the conditions in IM–5101–2(b), the complimentary period will commence on the date of listing on the Global or Global Select Market.11 In either case, however, if the company lists on the Global or Global Select Market and begins to use a particular service provided under IM– 5900–7 within 30 days after the date of the business combination, the complimentary period for that service will begin on the date of first use. Nasdaq also proposes to delete a reference in the existing rule text to ‘‘NASDAQ’’ when referring to the Global and Global Select Markets, to conform to other references to the Global and Global Select Markets within the rule. Finally, Nasdaq proposes to update the introductory note in IM– 5900–7 to include the specific date that a prior change to the rule was approved. This change is designed to ease understanding of the rule and eliminate the need to cross-reference the approval order for that prior change. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,12 in general, and Section 6(b)(4), in particular, in that the proposal is designed, among other things, to provide for the equitable allocation of reasonable dues, fees, and other charges among Nasdaq members and issuers and other persons using its facilities. Nasdaq also believes that the proposed rule change is consistent with Section 6(b)(5) in that it is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Nasdaq faces competition in the market for listing services,13 and competes, in part, by offering valuable services to companies. Nasdaq believes that it is reasonable to offer complimentary services to attract and retain listings as part of this competition. All similarly situated companies are eligible for the same package of services. Nasdaq also believes it is reasonable, and not unfairly discriminatory, to offer 11 An Acquisition Company that was listed on the Capital Market before the business combination would remain on the Capital Market until it demonstrates compliance with the applicable Global or Global Select Market initial listing criteria. 12 15 U.S.C. 78f. 13 The Justice Department has noted the intense competitive environment for exchange listings. See ‘‘NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandon Their Proposed Acquisition of NYSE Euronext After Justice Department Threatens Lawsuit’’ (May 16, 2011), available at https://www.justice.gov/atr/ public/press_releases/2011/271214.htm. E:\FR\FM\07OCN1.SGM 07OCN1 mstockstill on DSK3G9T082PROD with NOTICES Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices complimentary services to a company described in IM–5101–2 that acquires an operating business, ceases to be an Acquisition Company, and lists (or remains listed) on the Global or Global Select Market. When a company described in IM–5101–2 acquires an operating business and ceases to be an Acquisition Company, the company is similar to other Eligible New Listings, such as initial public offerings, and will have increased need to focus on identifying and communicating with its shareholders. Like the other Eligible New Listings that receive complimentary services under the existing rule, these companies are transitioning to the traditional public company model and the complimentary services provided will help ease that transition. In addition, these companies will be purchasing many of these services for the first time, and offering complimentary services will provide Nasdaq Corporate Solutions the opportunity to demonstrate the value of its services and forge a relationship with the company at a time when it is choosing its service providers. For these reasons, Nasdaq believes it is not an inequitable allocation of fees nor unfairly discriminatory to offer the services to a company described in IM– 5101–2 when it completes a business combination satisfying IM–5101–2(b). In addition, because Acquisition Companies described in IM–5101–2 have little use for services upon listing, and because they will be eligible to receive services if they complete a business combination satisfying IM– 5101–2(b), Nasdaq does not think it is unfairly discriminatory to modify the rule so that a company described in IM– 5101–2 does not receive services upon listing. An Acquisition Company could list on the Global Market at the time of its initial public offering, but never complete an acquisition that satisfies the requirements of IM–5101–2(b). While under the proposed rule change such a company would never receive complimentary services, Nasdaq does not believe that the services generally would be useful to the Acquisition Company and the Acquisition Company therefore would not suffer any meaningful detriment as a consequence. Allowing an Acquisition Company up to 30 days after completing a business combination to start using the complimentary services reflects Nasdaq’s experience that it can take companies a period of time to review and complete necessary contracts and training following their becoming eligible for those services. Allowing this modest 30-day period, if the company VerDate Sep<11>2014 17:36 Oct 06, 2016 Jkt 241001 needs it, helps ensure that the company will have the benefit of the full period permitted under the rule to actually use the services, thus giving companies the full intended benefit. Defining a company to be listing in conjunction with a business combination that satisfies the conditions in IM–5101–2(b) to include a company listed on the Capital Market that both filed an application to list on the Global or Global Select Market before completing the business combination and demonstrated compliance with all applicable criteria for the Global or Global Select Market within 60 days of completing the business combination reflects Nasdaq’s experience that such a company may need a period of as long as 60 days to obtain information from third parties to demonstrate compliance with the listing requirements. Beginning the complimentary period for a company in this situation on the date of its listing on the Global or Global Select Market is consistent with the period provided to other Eligible New Listings and Eligible Switches, which begins on the date of listing. Moreover, prior to that point, there is no certainty as to whether the company will qualify for the Global or Global Select Market and be eligible to receive the services and, as a result, complimentary services could not be provided prior to that date. Nasdaq believes that this 60-day period appropriately recognizes the practical problem that a company may have with demonstrating compliance with the initial listing requirements for the Global or Global Select Market at exactly the time of its business combination. However, a company that takes advantage of this time period cannot further extend the start of the complimentary period by using an additional 30-day period to start using the complimentary services. Nasdaq further believes that it is not unfairly discriminatory to limit this 60day period to Acquisition Companies transitioning from the Capital Market to the Global or Global Select Market and to not also extend it to Acquisition Companies already listed on the Global Market. An Acquisition Company that is listed on the Global Market was required to have 400 round lot holders upon initially listing and is required to have 400 total holders for continued listing. As a result, Nasdaq expects it would be rare for a company already on the Global Market to need additional time to demonstrate compliance with this, or other, initial listing requirement. Nasdaq believes that this is a nondiscriminatory reason to distinguish between these types of companies. PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 69883 B. Self-Regulatory Organization’s Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The proposed rule change reflects Nasdaq’s ongoing assessment of the competitive market for listings and does not place any unnecessary burden on that competition. In many cases, an Acquisition Company will consider transferring to a new listing venue when it completes a business combination. The proposed rule change will allow Nasdaq to compete to retain these companies by offering them a package of complimentary services that assists their transition to being a traditional public company. Nasdaq believes that when the complimentary period ends, a former Acquisition Company that had acquired an operating business will be more likely to continue to use the Nasdaq Corporate Solutions service or a competing service, whereas otherwise they may not be exposed to the value of these services and therefore may not purchase any. This will create additional users of the service class and enhance competition among service providers. In addition, other service providers can also offer similar services to companies, thereby increasing competition to the benefit of those companies and their shareholders. Accordingly, Nasdaq does not believe the proposed rule change will impose 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 No written comments were either solicited or 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 (i) as the Commission may designate up to 60 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. E:\FR\FM\07OCN1.SGM 07OCN1 69884 Federal Register / Vol. 81, No. 195 / Friday, October 7, 2016 / Notices 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: • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2016–106 on the subject line. mstockstill on DSK3G9T082PROD with NOTICES • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2016–106. This file number should be included on the subject line if email 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2016–106 and should be submitted on or before October 28, 2016. CFR 200.30–3(a)(12). 17:36 Oct 06, 2016 BILLING CODE 8011–01–P [Investment Company Act Release No. 32– 300; File No. 812–14583] Legg Mason Global Asset Management Trust, et al.; Notice of Application October 3, 2016. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order pursuant to: (a) Section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) granting an exemption from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint arrangements and transactions. Applicants request an order that would permit certain registered open-end management investment companies to participate in a joint lending and borrowing facility. AGENCY: Paper Comments VerDate Sep<11>2014 [FR Doc. 2016–24279 Filed 10–6–16; 8:45 am] SECURITIES AND EXCHANGE COMMISSION Electronic Comments 14 17 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Robert W. Errett, Deputy Secretary. Jkt 241001 Legg Mason Global Asset Management Trust, Legg Mason Global Asset Management Variable Trust, Legg Mason Partners Income Trust, Legg Mason Partners Institutional Trust, Legg Mason Partners Money Market Trust, Legg Mason Partners Premium Money Market Trust, Legg Mason Partners Variable Income Trust, Master Portfolio Trust, and Western Asset Funds, Inc., registered under the Act as open-end management investment companies with one or more series, and Legg Mason Partners Fund Advisor, LLC (the ‘‘Adviser’’), registered as an investment adviser under the Investment Advisers Act of 1940. FILING DATES: The application was filed on November 27, 2015, and amended on May 5, 2016. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission APPLICANTS: PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 by 5:30 p.m. on October 28, 2016 and should be accompanied by proof of service on the applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to Rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090; Applicants, c/o: Bryan Chegwidden, Esq., Rope & Gray LLP, 1211 Avenue of the Americas, New York, NY 10036, and Robert I. Frenkel, Legg Mason & Co., LLC, 100 First Stamford Place, Stamford, CT 06902. FOR FURTHER INFORMATION CONTACT: Judy T. Lee, Senior Special Counsel, at (202) 551–6259 or Sara Crovitz, Assistant Chief Counsel, at (202) 551–6720 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. Summary of the Application 1. Applicants request an order that would permit the applicants to participate in an interfund lending facility where each Fund could lend money directly to and borrow money directly from other Funds to cover unanticipated cash shortfalls, such as unanticipated redemptions or trade fails.1 The Funds will not borrow under the facility for leverage purposes and the loans’ duration will be no more than 7 days.2 2. Applicants anticipate that the proposed facility would provide a borrowing Fund with a source of 1 Applicants request that the order apply to the applicants and to any existing or future registered open-end management investment company or series thereof for which the Adviser or any successor thereto or an investment adviser controlling, controlled by, or under common control with the Adviser or any successor thereto serves as investment adviser (each a ‘‘Fund’’ and collectively the ‘‘Funds’’ and each such investment adviser an ‘‘Adviser’’). For purposes of the requested order, ‘‘successor’’ is limited to any entity that results from a reorganization into another jurisdiction or a change in the type of a business organization. 2 Any Fund, however, will be able to call a loan on one business day’s notice. E:\FR\FM\07OCN1.SGM 07OCN1

Agencies

[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)]
[Notices]
[Pages 69881-69884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24279]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79025; File No. SR-NASDAQ-2016-106]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Modify Rule IM-5900-7 To 
Adjust the Entitlement to Services of Acquisition Companies

October 3, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on September 22, 2016, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to modify the treatment of acquisition 
companies under IM-5900-7.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to modify IM-5900-7 to change the treatment of 
acquisition companies under that rule.
    Nasdaq offers complimentary services under IM-5900-7 to companies 
listing on the Nasdaq Global and Global Select Markets in connection 
with an initial public offering, upon emerging from bankruptcy, or in 
connection with a spin-off or carve-out from another company 
(``Eligible New Listings'') and to companies that switch their listing 
from the New York Stock Exchange (``NYSE'') to the Global or Global 
Select Markets (``Eligible Switches'').\4\
---------------------------------------------------------------------------

    \4\ See Exchange Act Release No. 65963 (December 15, 2011), 76 
FR 79262 (December 21, 2011) (SR-NASDAQ-2011-122) (adopting IM-5900-
7); Exchange Act Release No. 72669 (July 24, 2014), 79 FR 44234 
(July 30, 2014) (SR-NASDAQ-2014-058) (adopting changes to IM-5900-
7); Exchange Act Release No. 78806 (September 9, 2016), 81 FR 63523 
(September 15, 2016) (SR-NASDAQ-2016-098). These adopting releases 
are collectively referred to as the ``Prior Filings.''
---------------------------------------------------------------------------

    Nasdaq believes that the complimentary service program offers 
valuable services to newly listing companies, designed to help ease the 
transition of becoming a public company or switching markets, makes 
listing on Nasdaq more attractive to these companies, and also provides 
Nasdaq Corporate Solutions the opportunity to demonstrate the value of 
its services and forge a relationship with the company. The services 
offered include a whistleblower hotline, investor relations Web site, 
disclosure services for earnings or other press releases, webcasting, 
market analytic tools, and may include market advisory

[[Page 69882]]

tools such as stock surveillance. Depending on a company's market 
capitalization and whether it is an Eligible New Listing or an Eligible 
Switch, the value of the services provided range from $141,000 to 
$754,000, and one-time development fees of approximately $3,500 are 
waived.\5\ In addition, all companies listed on Nasdaq receive services 
from Nasdaq, including Nasdaq Online and the Market Intelligence Desk.
---------------------------------------------------------------------------

    \5\ The exact values are set forth in IM-5900-7 and no change to 
these services or their values is proposed in this filing.
---------------------------------------------------------------------------

    Generally, Nasdaq will not permit the initial or continued listing 
of a company that has no specific business plan or that has indicated 
that its business plan is to engage in a merger or acquisition with an 
unidentified company or companies. However, in the case of a company 
whose business plan is to complete an initial public offering and 
engage in a merger or acquisition with one or more unidentified 
companies within a specific period of time (an ``Acquisition 
Company''), Nasdaq will permit the listing if the company meets all 
applicable initial listing requirements, as well as the additional 
conditions described in IM-5101-2. These additional conditions 
generally require, among other things, that at least 90% of the gross 
proceeds from the initial public offering must be deposited in a 
``deposit account,'' as that term is defined in the rule, and that the 
company complete within 36 months, or a shorter period identified by 
the company, one or more business combinations having an aggregate fair 
market value of at least 80% of the value of the deposit account at the 
time of the agreement to enter into the initial combination.
    Acquisition Companies do not have operating businesses and tend to 
trade infrequently and in a tight range until the company completes an 
acquisition. In addition, Acquisition Companies issue few press 
releases and frequently do not have detailed Web sites. Therefore, upon 
listing, these companies do not generally need shareholder 
communication services, market analytic tools or market advisory tools, 
and generally would only benefit from the complimentary whistleblower 
hotline provided under IM-5900-7.\6\ Accordingly, Nasdaq proposes to 
provide that an Acquisition Company listing on the Global Market \7\ 
before it has satisfied the requirement of IM-5101-2(b), whether as an 
Eligible New Listing or an Eligible Switch, will not receive 
complimentary services under IM-5900-7.\8\
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    \6\ It typically takes more than two years for an Acquisition 
Company to identify a target and complete an acquisition. As a 
result, the term of any complimentary services offered to an 
Acquisition Company under IM-5900-7 as an Eligible New Listing would 
usually expire before the company acquired a target and began 
operating as an operating company that could benefit from the 
services.
    \7\ Rule 5310(i) provides that a company subject to IM-5101-2 is 
not eligible to list on the Global Select Market.
    \8\ To date, all companies listing under IM-5101-2 have listed 
on the Capital Market. The services described in IM-5900-7 are not 
available to companies listing on the Capital Market.
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    However, once an Acquisition Company completes a business 
combination with an operating company, the combined company is much 
like any other newly public company and could benefit from the 
complimentary services Nasdaq offers other newly public companies. 
Accordingly, Nasdaq proposes to include in the definition of an 
``Eligible New Listing'' that receives complimentary services under IM-
5900-7 an Acquisition Company that completes a business combination 
that satisfies the conditions in IM-5101-2(b) and that lists on the 
Global or Global Select Market in conjunction with that business 
combination.\9\
---------------------------------------------------------------------------

    \9\ The company would receive the same services under IM-5900-7, 
with the same value, as any other Eligible New Listing.
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    For purposes of IM-5900-7, Nasdaq will treat a company previously 
listed on the Capital Market as listing on the Global or Global Select 
Market in conjunction with a business combination that satisfies the 
conditions in IM-5101-2(b) if it files an application to list on the 
Global or Global Select Market before completing the combination and 
demonstrates compliance with all applicable criteria within 60 days of 
completing the business combination. This additional time may be 
required, in some cases, to allow the issuance of shares in the 
transaction and then for the newly formed entity to obtain information 
from third parties to demonstrate compliance with the shareholder and 
public float requirements.
    If the Acquisition Company is listed on the Global Market at the 
time it completes a business combination that satisfies the conditions 
in IM-5101-2(b) and remains listed on the Global Market or transfers to 
the Global Select Market, the complimentary period will commence on the 
date of such business combination.\10\ If the Acquisition Company is 
listed on the Capital Market at the time it completes the business 
combination that satisfies the conditions in IM-5101-2(b), the 
complimentary period will commence on the date of listing on the Global 
or Global Select Market.\11\ In either case, however, if the company 
lists on the Global or Global Select Market and begins to use a 
particular service provided under IM-5900-7 within 30 days after the 
date of the business combination, the complimentary period for that 
service will begin on the date of first use.
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    \10\ An Acquisition Company must meet the initial listing 
requirements at the time of its business combination even if it is 
already listed on the Global Market. See IM-5101-2(d).
    \11\ An Acquisition Company that was listed on the Capital 
Market before the business combination would remain on the Capital 
Market until it demonstrates compliance with the applicable Global 
or Global Select Market initial listing criteria.
---------------------------------------------------------------------------

    Nasdaq also proposes to delete a reference in the existing rule 
text to ``NASDAQ'' when referring to the Global and Global Select 
Markets, to conform to other references to the Global and Global Select 
Markets within the rule. Finally, Nasdaq proposes to update the 
introductory note in IM-5900-7 to include the specific date that a 
prior change to the rule was approved. This change is designed to ease 
understanding of the rule and eliminate the need to cross-reference the 
approval order for that prior change.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\12\ in general, and Section 
6(b)(4), in particular, in that the proposal is designed, among other 
things, to provide for the equitable allocation of reasonable dues, 
fees, and other charges among Nasdaq members and issuers and other 
persons using its facilities. Nasdaq also believes that the proposed 
rule change is consistent with Section 6(b)(5) in that it is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
---------------------------------------------------------------------------

    Nasdaq faces competition in the market for listing services,\13\ 
and competes, in part, by offering valuable services to companies. 
Nasdaq believes that it is reasonable to offer complimentary services 
to attract and retain listings as part of this competition. All 
similarly situated companies are eligible for the same package of 
services.
---------------------------------------------------------------------------

    \13\ The Justice Department has noted the intense competitive 
environment for exchange listings. See ``NASDAQ OMX Group Inc. and 
IntercontinentalExchange Inc. Abandon Their Proposed Acquisition of 
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16, 
2011), available at https://www.justice.gov/atr/public/press_releases/2011/271214.htm.
---------------------------------------------------------------------------

    Nasdaq also believes it is reasonable, and not unfairly 
discriminatory, to offer

[[Page 69883]]

complimentary services to a company described in IM-5101-2 that 
acquires an operating business, ceases to be an Acquisition Company, 
and lists (or remains listed) on the Global or Global Select Market. 
When a company described in IM-5101-2 acquires an operating business 
and ceases to be an Acquisition Company, the company is similar to 
other Eligible New Listings, such as initial public offerings, and will 
have increased need to focus on identifying and communicating with its 
shareholders. Like the other Eligible New Listings that receive 
complimentary services under the existing rule, these companies are 
transitioning to the traditional public company model and the 
complimentary services provided will help ease that transition. In 
addition, these companies will be purchasing many of these services for 
the first time, and offering complimentary services will provide Nasdaq 
Corporate Solutions the opportunity to demonstrate the value of its 
services and forge a relationship with the company at a time when it is 
choosing its service providers. For these reasons, Nasdaq believes it 
is not an inequitable allocation of fees nor unfairly discriminatory to 
offer the services to a company described in IM-5101-2 when it 
completes a business combination satisfying IM-5101-2(b).
    In addition, because Acquisition Companies described in IM-5101-2 
have little use for services upon listing, and because they will be 
eligible to receive services if they complete a business combination 
satisfying IM-5101-2(b), Nasdaq does not think it is unfairly 
discriminatory to modify the rule so that a company described in IM-
5101-2 does not receive services upon listing.
    An Acquisition Company could list on the Global Market at the time 
of its initial public offering, but never complete an acquisition that 
satisfies the requirements of IM-5101-2(b). While under the proposed 
rule change such a company would never receive complimentary services, 
Nasdaq does not believe that the services generally would be useful to 
the Acquisition Company and the Acquisition Company therefore would not 
suffer any meaningful detriment as a consequence.
    Allowing an Acquisition Company up to 30 days after completing a 
business combination to start using the complimentary services reflects 
Nasdaq's experience that it can take companies a period of time to 
review and complete necessary contracts and training following their 
becoming eligible for those services. Allowing this modest 30-day 
period, if the company needs it, helps ensure that the company will 
have the benefit of the full period permitted under the rule to 
actually use the services, thus giving companies the full intended 
benefit.
    Defining a company to be listing in conjunction with a business 
combination that satisfies the conditions in IM-5101-2(b) to include a 
company listed on the Capital Market that both filed an application to 
list on the Global or Global Select Market before completing the 
business combination and demonstrated compliance with all applicable 
criteria for the Global or Global Select Market within 60 days of 
completing the business combination reflects Nasdaq's experience that 
such a company may need a period of as long as 60 days to obtain 
information from third parties to demonstrate compliance with the 
listing requirements. Beginning the complimentary period for a company 
in this situation on the date of its listing on the Global or Global 
Select Market is consistent with the period provided to other Eligible 
New Listings and Eligible Switches, which begins on the date of 
listing. Moreover, prior to that point, there is no certainty as to 
whether the company will qualify for the Global or Global Select Market 
and be eligible to receive the services and, as a result, complimentary 
services could not be provided prior to that date. Nasdaq believes that 
this 60-day period appropriately recognizes the practical problem that 
a company may have with demonstrating compliance with the initial 
listing requirements for the Global or Global Select Market at exactly 
the time of its business combination. However, a company that takes 
advantage of this time period cannot further extend the start of the 
complimentary period by using an additional 30-day period to start 
using the complimentary services.
    Nasdaq further believes that it is not unfairly discriminatory to 
limit this 60-day period to Acquisition Companies transitioning from 
the Capital Market to the Global or Global Select Market and to not 
also extend it to Acquisition Companies already listed on the Global 
Market. An Acquisition Company that is listed on the Global Market was 
required to have 400 round lot holders upon initially listing and is 
required to have 400 total holders for continued listing. As a result, 
Nasdaq expects it would be rare for a company already on the Global 
Market to need additional time to demonstrate compliance with this, or 
other, initial listing requirement. Nasdaq believes that this is a non-
discriminatory reason to distinguish between these types of companies.

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

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The proposed rule 
change reflects Nasdaq's ongoing assessment of the competitive market 
for listings and does not place any unnecessary burden on that 
competition. In many cases, an Acquisition Company will consider 
transferring to a new listing venue when it completes a business 
combination. The proposed rule change will allow Nasdaq to compete to 
retain these companies by offering them a package of complimentary 
services that assists their transition to being a traditional public 
company.
    Nasdaq believes that when the complimentary period ends, a former 
Acquisition Company that had acquired an operating business will be 
more likely to continue to use the Nasdaq Corporate Solutions service 
or a competing service, whereas otherwise they may not be exposed to 
the value of these services and therefore may not purchase any. This 
will create additional users of the service class and enhance 
competition among service providers.
    In addition, other service providers can also offer similar 
services to companies, thereby increasing competition to the benefit of 
those companies and their shareholders. Accordingly, Nasdaq does not 
believe the proposed rule change will impose 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

    No written comments were either solicited or 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 (i) as the Commission may 
designate up to 60 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

[[Page 69884]]

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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-106 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-106. This 
file number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-106 and should 
be submitted on or before October 28, 2016.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24279 Filed 10-6-16; 8:45 am]
 BILLING CODE 8011-01-P
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