Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reduce the Fees for Certain Investment Management Entities and Eligible Portfolio Companies, 47784-47787 [2017-22160]
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47784
Federal Register / Vol. 82, No. 197 / Friday, October 13, 2017 / Notices
the 30-day operative delay is consistent
with the protection of investors and the
public interest as it will allow the
Exchange to accurately represent the
fees it charges and thereby avoid
potential confusion of market
participants. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
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 email to rule-comments@
sec.gov. Please include File Number SR–
C2–2017–026 on the subject line.
asabaliauskas on DSKBBXCHB2PROD 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–C2–2017–026. 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
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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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–C2–
2017–026 and should be submitted on
or before November 3, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22158 Filed 10–12–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81838; File No. SR–
NASDAQ–2017–100]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Reduce the
Fees for Certain Investment
Management Entities and Eligible
Portfolio Companies
October 6, 2017.
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
September 26, 2017, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to reduce the
fees for certain Investment Management
Entities and Eligible Portfolio
Companies.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on January 1, 2018.
The text of the proposed rule change
is set forth below. Proposed new
language is italicized; deleted text is in
brackets.
*
*
*
*
*
5910. The Nasdaq Global Market
(Including the Nasdaq Global Select
Market)
*
*
*
*
*
IM–5910–1. All-Inclusive Annual
Listing Fee
(a)–(c) No change.
(d) The All-Inclusive Annual Listing
Fee will be calculated on total shares
outstanding according to the following
schedules:
(1)–(3) No change.
(4) Limited Partnerships [(effective
January 1, 2017)]:
Up to 75 million shares $37,500
75+ to 100 million shares $50,000
100+ to 125 million shares $62,500
125+ to 150 million shares $67,500
Over 150 million shares $77,500
(5) Investment Management Entities
and Eligible Portfolio Companies
(effective January 1, 2018):
Nasdaq will apply a 50% fee discount
to the annual fee otherwise owed under
paragraph (d)(1) of this rule for Eligible
Portfolio Companies and Investment
Management Entities that have one or
more Eligible Portfolio Companies. For
purposes of this rule, an ‘‘Investment
Management Entity’’ is a company listed
on Nasdaq or another national
securities exchange that manages
private investment vehicles not
registered under the Investment
Company Act. An ‘‘Eligible Portfolio
Company’’ of an Investment
Management Entity is a Nasdaq-listed
Company in which an Investment
Management Entity has owned at least
20% of the common stock on a
continuous basis since prior to that
company’s initial listing.
In order to qualify for this discount in
any calendar year, a Company, other
than a new listing, must submit
satisfactory proof to Nasdaq no later
than December 31st of the prior year
that it satisfies the requirements
specified above. A new listing that
satisfies these requirements is eligible
for the discount upon listing.
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Notwithstanding the foregoing, if an
Investment Management Entity or
Eligible Portfolio Company would
otherwise be subject to an All-Inclusive
Annual Fee that is lower than the fee
provided for in this paragraph (5), then
the alternative fee schedule shall apply.
(e) No change.
*
*
*
*
*
5920. The Nasdaq Capital Market
*
*
*
*
*
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IM–5920–1. All-Inclusive Annual
Listing Fee
(a)–(c) No change.
(d) The All-Inclusive Annual Listing
Fee will be calculated on total shares
outstanding according to the following
schedules:
(1)–(3) No change.
(4) Limited Partnerships [(effective
January 1, 2017)]:
Up to 75 million shares $30,000
Over 75 million shares $37,500
(5) Investment Management Entities
and Eligible Portfolio Companies
(effective January 1, 2018):
Nasdaq will apply a 50% fee discount
to the annual fee otherwise owed under
paragraph (d)(1) of this rule for Eligible
Portfolio Companies and Investment
Management Entities that have one or
more Eligible Portfolio Companies. For
purposes of this rule, an ‘‘Investment
Management Entity’’ is a company listed
on Nasdaq or another national
securities exchange that manages
private investment vehicles not
registered under the Investment
Company Act. An ‘‘Eligible Portfolio
Company’’ of an Investment
Management Entity is a Nasdaq-listed
Company in which an Investment
Management Entity has owned at least
20% of the common stock on a
continuous basis since prior to that
company’s initial listing.
In order to qualify for this discount in
any calendar year, a Company, other
than a new listing, must submit
satisfactory proof to Nasdaq no later
than December 31st of the prior year
that it satisfies the requirements
specified above. A new listing that
satisfies these requirements is eligible
for the discount upon listing.
Notwithstanding the foregoing, if an
Investment Management Entity or
Eligible Portfolio Company would
otherwise be subject to an All-Inclusive
Annual Fee that is lower than the fee
provided for in this paragraph (5), then
the alternative fee schedule shall apply.
(e) No change.
*
*
*
*
*
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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
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
Nasdaq proposes to reduce the fees for
certain Investment Management Entities
and Eligible Portfolio Companies. An
Investment Management Entity for
purposes of this provision would be
defined as a company listed on Nasdaq
or another national securities exchange
which manages private investment
vehicles that are not registered under
the Investment Company Act. There are
a small number of such companies that
engage in the business of managing such
private equity funds. Through these
private equity funds, Investment
Management Entities invest in private
companies. An ‘‘Eligible Portfolio
Company’’ of an Investment
Management Entity is a Nasdaq-listed
company in which the Investment
Management Entity has owned at least
20% of the common stock on a
continuous basis since prior to that
company’s initial listing.
Investment Management Entities
typically provide significant managerial
and advisory assistance to their
portfolio companies, in part, based on
their familiarity, as a public company
listed on a national securities exchange,
with the requirements for an exchange
listing. An Investment Management
Entity will frequently seek to exit its
funds’ investment in a privately-held
portfolio company by conducting an
initial public offering (IPO) on behalf of
that portfolio company. The Investment
Management Entity does not typically
sell shares in the IPO but, rather, shares
not sold in the IPO are gradually sold off
over a period of years in the public
market. While these Investment
Management Entities have control or
influence over the decision making of
their portfolio companies in both their
pre- and post-public phases, the
decision as to where to list is typically
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made jointly by the portfolio company’s
senior management team and the
Investment Management Entity. Nasdaq
benefits from its ongoing relationships
with these Investment Management
Entities (and members of the
management teams that had previously
dealt with Nasdaq) when competing for
the listing of their portfolio companies.
In addition, Nasdaq benefits from the
efficiencies in dealing with portfolio
companies that are benefiting from the
guidance and experience of the
Investment Management Entities to
which they are related.
Nasdaq incurs substantial costs in
connection with its marketing to
companies choosing a listing venue for
their IPO. In those cases where the
Exchange has a longstanding
relationship with the Investment
Management Entity controlling a listing
applicant, Nasdaq’s costs of marketing
to the prospect company can be much
lower than usual because of the
Investment Management Entity’s prior
experience with Nasdaq. Typically,
when pitching for the listing of a
company that is choosing a listing
venue for its IPO, Nasdaq incurs
significant expense, including the time
spent by its CEO and other senior
management in preparing for and
traveling to meetings with the prospect
company, travel costs, the cost of
developing pitching strategies and the
cost of producing marketing materials.
In addition, it has been the Exchange’s
experience that an Investment
Management Entity puts high-quality
and experienced management teams in
place at its portfolio companies prior to
listing and that the Investment
Management Entity continues to
provide significant support to those
companies after listing. Consequently,
those companies require lower levels of
support from Nasdaq’s business and
regulation departments to assist them in
navigating the initial and continued
listing process and Nasdaq devotes
significantly smaller staff resources to
those companies on average than to the
typical newly-listed company that is not
controlled prior to listing by an
Investment Management Entity.
Nasdaq believes that these cost
savings attributable to its relationship
with an Investment Management Entity
allow for a reduction in continued
listing fees to the Investment
Management Entities that are significant
shareholders in other Nasdaq-listed
companies, as well as to those portfolio
companies that have listed on Nasdaq as
a consequence of those relationships.
Nasdaq also believes that the proposed
fee reduction would provide an
incentive to Investment Management
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Entities to list on Nasdaq (or remain
listed) themselves, as well as to list
additional portfolio companies on
Nasdaq. Accordingly, Nasdaq proposes
to offer Eligible Portfolio Companies
and Investment Management Entities
that have one or more Eligible Portfolio
Companies listed on Nasdaq a 50%
discount to the annual fee otherwise
owed by issuers of equity securities.
A new listing that satisfies these
requirements will be eligible for the
discount upon listing based upon
Nasdaq’s review of public filings
disclosing ownership. In order to
qualify for this discount in any
subsequent calendar year, an issuer
must submit satisfactory proof to
Nasdaq no later than December 31st of
the prior year that it is eligible for the
discount.3 Investment Management
Entities that do not have Eligible
Portfolio Companies listed on Nasdaq,
are not eligible to receive the discount
and will be billed on the same fee
schedule as other equity securities.
The proposed amendment will affect
the All-Inclusive Annual Listing Fee
schedule 4 on the Nasdaq Global Market,
the Nasdaq Global Select Market and the
Nasdaq Capital Market.5 In 2014, when
Nasdaq adopted the All-Inclusive
Annual Listing Fee schedule, Nasdaq
considered various factors that
distinguish companies, including
market tier, shares outstanding and
security type, as well as the perceived
use of various Nasdaq regulatory and
support services by companies of
various characteristics.6 Due to the
relatively few Investment Management
Entities and Eligible Portfolio
Companies listed on the Exchange at
that time, Nasdaq’s analysis did not
focus on the special characteristics of
such companies. Upon further
consideration, Nasdaq now believes that
the cost savings attributable to its
relationship with Investment
Management Entities and generally
lower levels of support required for
Eligible Portfolio Companies and
Investment Management Entities with
3 Nasdaq will also review public filings to
determine if a company remains eligible to receive
a discount.
4 In 2014, Nasdaq adopted an All-Inclusive
Annual Listing Fee schedule. Securities Exchange
Act Release No. 73647 (November 19, 2014), 79 FR
70232 (November 25, 2014) (SR–NASDAQ–2014–
87). Since then, newly listed companies have been
subject to the All-Inclusive fee structure and other
listed companies could have elected to be on the
All-Inclusive fee structure. All companies will be
subject to the All-Inclusive fee structure effective
January 1, 2018.
5 Listing Rule 5910 provides that fee schedules for
the Nasdaq Global Select Market are the same fee
schedules as for the Nasdaq Global Market.
6 See Securities Exchange Act Release No. 73647,
supra note 4.
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listed Eligible Portfolio Companies
warrant a reduced fee.
Nasdaq notes that American
Depositary Receipts (ADRs), closed-end
funds and limited partnerships also
have different fee schedules than other
listed equity securities. Nasdaq believes
that the characteristics of ADRs, closedend funds and limited partnerships are
different than the characteristics of
Investment Management Entities and
Eligible Portfolio Companies and that it
is therefore appropriate to apply a
different fee schedule for Investment
Management Entities and Eligible
Portfolio Companies. If an Eligible
Portfolio Company or an Investment
Management Entity with listed Eligible
Portfolio Companies lists ADRs, or is a
closed-end fund or a limited
partnership, its All-Inclusive fee will be
the lower of: (i) The fee applicable to
ADRs, closed-end funds or limited
partnerships, as applicable, or (ii) the
50% fee discount to the fee applicable
to other equity securities listed on the
same tier.
Nasdaq notes that no other company
will be required to pay higher fees as a
result of the proposed amendments and
represents that the proposed fee change
will have no impact on the resources
available for its regulatory programs.
The proposed fee change will be
operative January 1, 2018.7
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,8 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,9 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using any facility or system
which the Exchange operates or
controls, and is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
As a preliminary matter, Nasdaq
competes for listings with other national
securities exchanges and companies can
easily choose to list on, or transfer to,
those alternative venues. As a result, the
fees Nasdaq can charge listed companies
are constrained by the fees charged by
its competitors and Nasdaq cannot
charge prices in a manner that would be
unreasonable, inequitable, or unfairly
discriminatory.
Nasdaq believes that the proposed fee
change reducing the fee paid by Eligible
Portfolio Companies and Investment
7 Nasdaq also proposes to delete an old effective
date from IM–5910–1(d)(4) and IM–5920–1(d)(4).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4) and (5).
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Management Entities with listed Eligible
Portfolio Companies is reasonable and
not unfairly discriminatory because it
recognizes the reduced regulatory and
business costs Nasdaq incurs for listing
these Investment Management Entities
and Eligible Portfolio Companies.
Specifically, Nasdaq benefits from
significant cost and resource-utilization
savings when listing portfolio
companies of Investment Management
Entities as it does not have to engage in
significant marketing efforts because the
decision makers at the Investment
Management Entity are already familiar
with Nasdaq. Typically when pitching
for the listing of a company that is
choosing a listing venue for its IPO,
Nasdaq incurs significant expense,
including: The time spent by its CEO
and other senior management in
preparing for and traveling to meetings
with the prospect company, travel costs,
the cost of developing pitching
strategies and the cost of producing
marketing materials. As Nasdaq saves
much of this expense when pitching to
a portfolio company of an Investment
Management Entity with which Nasdaq
has an established relationship, Nasdaq
believes that it is reasonable to share
some of those savings with listed
Investment Management Entities and
their Eligible Portfolio Companies. In
addition, Nasdaq typically has lower
costs and resource utilization in
connection with the initial and
continued listing of Eligible Portfolio
Companies than with other new listings,
as the Exchange benefits from dealing
with the high-quality and experienced
management teams Investment
Management Entities put in place at
portfolio companies prior to listing and
the ongoing relationship those
companies maintain with staff at the
Investment Management Entity, who
can share their experience as a public
company listed on a national securities
exchange. Nasdaq also believes that the
proposed discount is reasonable in that
it will create a reasonable commercial
incentive for Investment Management
Entities and the management of their
portfolio companies to consider listing
on Nasdaq and to remain listed.
Nasdaq believes that it is not unfairly
discriminatory to discount continued
listing fees as a means of recognizing its
cost savings related to the listing of an
Investment Management Entity and its
Eligible Portfolio Companies. This is
because a significant portion of the
Exchange’s savings arise from the
efficiencies it experiences on an ongoing
basis in dealing with Eligible Portfolio
Companies for such time as the
Investment Management Entity retains a
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Federal Register / Vol. 82, No. 197 / Friday, October 13, 2017 / Notices
significant investment and is thereby
motivated to provide ongoing advice
and assistance. These reduced costs are
a non-discriminatory reason to charge
an Investment Management Entity and
its Eligible Portfolio Companies a lower
All-Inclusive Annual Listing Fee.
Currently, ADRs, closed-end funds
and limited partnerships also pay lower
All-Inclusive Annual Listing Fees than
other issuers of equity securities.
Nasdaq believes it is appropriate to
apply a fee schedule to Investment
Management Entities and Eligible
Portfolio Companies that is different
from those applicable to either ADRs,
closed-end funds or limited
partnerships due to their differing
characteristics. Specifically, Nasdaq
charges lower listing fees for ADRs
because, among other differences, the
U.S. listing is not typically the issuer of
an ADR’s primary listing.10 Similarly,
Nasdaq charges lower listing fees for
closed-end funds because they are
particularly sensitive to the expenses
they incur, given that they compete for
investment dollars based on return.11
Finally, Nasdaq charges lower listing
fees for limited partnerships because
they are not subject to most corporate
governance requirements.12 As a result,
offering a different discount to
Investment Management Entities and
their Eligible Portfolio Companies on
the All-Inclusive Annual Fee schedule
than to ADRs, closed-end funds and
limited partnerships is not inequitable
or unfairly discriminatory.
While the proposed fee reduction
only applies to Investment Management
Entities and their Eligible Portfolio
Companies on the All-Inclusive Annual
Fee schedule, Nasdaq notes that all
companies will transition to that fee
schedule in 2018 at the same time that
this fee change will become effective.
Finally, Nasdaq believes that the
proposed fees are consistent with the
investor protection objectives of Section
6(b)(5) of the Act 13 in that they are
designed to promote just and equitable
principles of trade, to remove
impediments to a free and open market
and national market system, and in
general to protect investors and the
public interest. Specifically, the amount
of revenue forgone by allowing an
Investment Management Entity and its
Eligible Portfolio Companies to pay
lower fees is not substantial, and the
reduced fees may result in more
10 See
Securities Exchange Act Release No. 73647,
supra note 4.
11 Id.
12 See Securities Exchange Act Release No. 79770
(January 10, 2017), 82 FR 4947 (January 17, 2017)
(SR–NASDAQ–2016–173).
13 15 U.S.C. 78f(b)(5).
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Investment Management Entities and
their Eligible Portfolio Companies
listing on Nasdaq, thereby increasing
the resources available for Nasdaq’s
listing compliance program, which
helps to assure that listing standards are
properly enforced and investors are
protected. Consequently, Nasdaq
believes that the potential loss of
revenue from the reduction of fees for
Investment Management Entities and
their Eligible Portfolio Companies, as
proposed, will not hinder its ability to
fulfill its regulatory responsibilities.
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 market for listing services is
extremely competitive and listed
companies may freely choose alternative
venues based on the aggregate fees
assessed, and the value provided by
each listing. This rule proposal does not
burden competition with other listing
venues, which are similarly free to set
their fees. For these reasons, Nasdaq
does not believe that the proposed rule
change will result in any burden on
competition for listings.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
14 15
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U.S.C. 78s(b)(3)(A)(ii).
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47787
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–2017–100 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–2017–100. 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2017–100, and should be
submitted on or before November 3,
2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22160 Filed 10–12–17; 8:45 am]
BILLING CODE 8011–01–P
15 17
E:\FR\FM\13OCN1.SGM
CFR 200.30–3(a)(12).
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Agencies
[Federal Register Volume 82, Number 197 (Friday, October 13, 2017)]
[Notices]
[Pages 47784-47787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22160]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81838; File No. SR-NASDAQ-2017-100]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Reduce the Fees for Certain Investment Management Entities and Eligible
Portfolio Companies
October 6, 2017.
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 September 26, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to reduce the fees for certain Investment
Management Entities and Eligible Portfolio Companies.
While these amendments are effective upon filing, the Exchange has
designated the proposed amendments to be operative on January 1, 2018.
The text of the proposed rule change is set forth below. Proposed
new language is italicized; deleted text is in brackets.
* * * * *
5910. The Nasdaq Global Market (Including the Nasdaq Global Select
Market)
* * * * *
IM-5910-1. All-Inclusive Annual Listing Fee
(a)-(c) No change.
(d) The All-Inclusive Annual Listing Fee will be calculated on
total shares outstanding according to the following schedules:
(1)-(3) No change.
(4) Limited Partnerships [(effective January 1, 2017)]:
Up to 75 million shares $37,500
75+ to 100 million shares $50,000
100+ to 125 million shares $62,500
125+ to 150 million shares $67,500
Over 150 million shares $77,500
(5) Investment Management Entities and Eligible Portfolio Companies
(effective January 1, 2018):
Nasdaq will apply a 50% fee discount to the annual fee otherwise
owed under paragraph (d)(1) of this rule for Eligible Portfolio
Companies and Investment Management Entities that have one or more
Eligible Portfolio Companies. For purposes of this rule, an
``Investment Management Entity'' is a company listed on Nasdaq or
another national securities exchange that manages private investment
vehicles not registered under the Investment Company Act. An ``Eligible
Portfolio Company'' of an Investment Management Entity is a Nasdaq-
listed Company in which an Investment Management Entity has owned at
least 20% of the common stock on a continuous basis since prior to that
company's initial listing.
In order to qualify for this discount in any calendar year, a
Company, other than a new listing, must submit satisfactory proof to
Nasdaq no later than December 31st of the prior year that it satisfies
the requirements specified above. A new listing that satisfies these
requirements is eligible for the discount upon listing.
[[Page 47785]]
Notwithstanding the foregoing, if an Investment Management Entity
or Eligible Portfolio Company would otherwise be subject to an All-
Inclusive Annual Fee that is lower than the fee provided for in this
paragraph (5), then the alternative fee schedule shall apply.
(e) No change.
* * * * *
5920. The Nasdaq Capital Market
* * * * *
IM-5920-1. All-Inclusive Annual Listing Fee
(a)-(c) No change.
(d) The All-Inclusive Annual Listing Fee will be calculated on
total shares outstanding according to the following schedules:
(1)-(3) No change.
(4) Limited Partnerships [(effective January 1, 2017)]:
Up to 75 million shares $30,000
Over 75 million shares $37,500
(5) Investment Management Entities and Eligible Portfolio Companies
(effective January 1, 2018):
Nasdaq will apply a 50% fee discount to the annual fee otherwise
owed under paragraph (d)(1) of this rule for Eligible Portfolio
Companies and Investment Management Entities that have one or more
Eligible Portfolio Companies. For purposes of this rule, an
``Investment Management Entity'' is a company listed on Nasdaq or
another national securities exchange that manages private investment
vehicles not registered under the Investment Company Act. An ``Eligible
Portfolio Company'' of an Investment Management Entity is a Nasdaq-
listed Company in which an Investment Management Entity has owned at
least 20% of the common stock on a continuous basis since prior to that
company's initial listing.
In order to qualify for this discount in any calendar year, a
Company, other than a new listing, must submit satisfactory proof to
Nasdaq no later than December 31st of the prior year that it satisfies
the requirements specified above. A new listing that satisfies these
requirements is eligible for the discount upon listing.
Notwithstanding the foregoing, if an Investment Management Entity
or Eligible Portfolio Company would otherwise be subject to an All-
Inclusive Annual Fee that is lower than the fee provided for in this
paragraph (5), then the alternative fee schedule shall apply.
(e) No change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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
Nasdaq proposes to reduce the fees for certain Investment
Management Entities and Eligible Portfolio Companies. An Investment
Management Entity for purposes of this provision would be defined as a
company listed on Nasdaq or another national securities exchange which
manages private investment vehicles that are not registered under the
Investment Company Act. There are a small number of such companies that
engage in the business of managing such private equity funds. Through
these private equity funds, Investment Management Entities invest in
private companies. An ``Eligible Portfolio Company'' of an Investment
Management Entity is a Nasdaq-listed company in which the Investment
Management Entity has owned at least 20% of the common stock on a
continuous basis since prior to that company's initial listing.
Investment Management Entities typically provide significant
managerial and advisory assistance to their portfolio companies, in
part, based on their familiarity, as a public company listed on a
national securities exchange, with the requirements for an exchange
listing. An Investment Management Entity will frequently seek to exit
its funds' investment in a privately-held portfolio company by
conducting an initial public offering (IPO) on behalf of that portfolio
company. The Investment Management Entity does not typically sell
shares in the IPO but, rather, shares not sold in the IPO are gradually
sold off over a period of years in the public market. While these
Investment Management Entities have control or influence over the
decision making of their portfolio companies in both their pre- and
post-public phases, the decision as to where to list is typically made
jointly by the portfolio company's senior management team and the
Investment Management Entity. Nasdaq benefits from its ongoing
relationships with these Investment Management Entities (and members of
the management teams that had previously dealt with Nasdaq) when
competing for the listing of their portfolio companies. In addition,
Nasdaq benefits from the efficiencies in dealing with portfolio
companies that are benefiting from the guidance and experience of the
Investment Management Entities to which they are related.
Nasdaq incurs substantial costs in connection with its marketing to
companies choosing a listing venue for their IPO. In those cases where
the Exchange has a longstanding relationship with the Investment
Management Entity controlling a listing applicant, Nasdaq's costs of
marketing to the prospect company can be much lower than usual because
of the Investment Management Entity's prior experience with Nasdaq.
Typically, when pitching for the listing of a company that is choosing
a listing venue for its IPO, Nasdaq incurs significant expense,
including the time spent by its CEO and other senior management in
preparing for and traveling to meetings with the prospect company,
travel costs, the cost of developing pitching strategies and the cost
of producing marketing materials. In addition, it has been the
Exchange's experience that an Investment Management Entity puts high-
quality and experienced management teams in place at its portfolio
companies prior to listing and that the Investment Management Entity
continues to provide significant support to those companies after
listing. Consequently, those companies require lower levels of support
from Nasdaq's business and regulation departments to assist them in
navigating the initial and continued listing process and Nasdaq devotes
significantly smaller staff resources to those companies on average
than to the typical newly-listed company that is not controlled prior
to listing by an Investment Management Entity.
Nasdaq believes that these cost savings attributable to its
relationship with an Investment Management Entity allow for a reduction
in continued listing fees to the Investment Management Entities that
are significant shareholders in other Nasdaq-listed companies, as well
as to those portfolio companies that have listed on Nasdaq as a
consequence of those relationships. Nasdaq also believes that the
proposed fee reduction would provide an incentive to Investment
Management
[[Page 47786]]
Entities to list on Nasdaq (or remain listed) themselves, as well as to
list additional portfolio companies on Nasdaq. Accordingly, Nasdaq
proposes to offer Eligible Portfolio Companies and Investment
Management Entities that have one or more Eligible Portfolio Companies
listed on Nasdaq a 50% discount to the annual fee otherwise owed by
issuers of equity securities.
A new listing that satisfies these requirements will be eligible
for the discount upon listing based upon Nasdaq's review of public
filings disclosing ownership. In order to qualify for this discount in
any subsequent calendar year, an issuer must submit satisfactory proof
to Nasdaq no later than December 31st of the prior year that it is
eligible for the discount.\3\ Investment Management Entities that do
not have Eligible Portfolio Companies listed on Nasdaq, are not
eligible to receive the discount and will be billed on the same fee
schedule as other equity securities.
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\3\ Nasdaq will also review public filings to determine if a
company remains eligible to receive a discount.
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The proposed amendment will affect the All-Inclusive Annual Listing
Fee schedule \4\ on the Nasdaq Global Market, the Nasdaq Global Select
Market and the Nasdaq Capital Market.\5\ In 2014, when Nasdaq adopted
the All-Inclusive Annual Listing Fee schedule, Nasdaq considered
various factors that distinguish companies, including market tier,
shares outstanding and security type, as well as the perceived use of
various Nasdaq regulatory and support services by companies of various
characteristics.\6\ Due to the relatively few Investment Management
Entities and Eligible Portfolio Companies listed on the Exchange at
that time, Nasdaq's analysis did not focus on the special
characteristics of such companies. Upon further consideration, Nasdaq
now believes that the cost savings attributable to its relationship
with Investment Management Entities and generally lower levels of
support required for Eligible Portfolio Companies and Investment
Management Entities with listed Eligible Portfolio Companies warrant a
reduced fee.
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\4\ In 2014, Nasdaq adopted an All-Inclusive Annual Listing Fee
schedule. Securities Exchange Act Release No. 73647 (November 19,
2014), 79 FR 70232 (November 25, 2014) (SR-NASDAQ-2014-87). Since
then, newly listed companies have been subject to the All-Inclusive
fee structure and other listed companies could have elected to be on
the All-Inclusive fee structure. All companies will be subject to
the All-Inclusive fee structure effective January 1, 2018.
\5\ Listing Rule 5910 provides that fee schedules for the Nasdaq
Global Select Market are the same fee schedules as for the Nasdaq
Global Market.
\6\ See Securities Exchange Act Release No. 73647, supra note 4.
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Nasdaq notes that American Depositary Receipts (ADRs), closed-end
funds and limited partnerships also have different fee schedules than
other listed equity securities. Nasdaq believes that the
characteristics of ADRs, closed-end funds and limited partnerships are
different than the characteristics of Investment Management Entities
and Eligible Portfolio Companies and that it is therefore appropriate
to apply a different fee schedule for Investment Management Entities
and Eligible Portfolio Companies. If an Eligible Portfolio Company or
an Investment Management Entity with listed Eligible Portfolio
Companies lists ADRs, or is a closed-end fund or a limited partnership,
its All-Inclusive fee will be the lower of: (i) The fee applicable to
ADRs, closed-end funds or limited partnerships, as applicable, or (ii)
the 50% fee discount to the fee applicable to other equity securities
listed on the same tier.
Nasdaq notes that no other company will be required to pay higher
fees as a result of the proposed amendments and represents that the
proposed fee change will have no impact on the resources available for
its regulatory programs.
The proposed fee change will be operative January 1, 2018.\7\
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\7\ Nasdaq also proposes to delete an old effective date from
IM-5910-1(d)(4) and IM-5920-1(d)(4).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\8\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among members and issuers and other persons using any facility
or system which the Exchange operates or controls, and is not designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4) and (5).
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As a preliminary matter, Nasdaq competes for listings with other
national securities exchanges and companies can easily choose to list
on, or transfer to, those alternative venues. As a result, the fees
Nasdaq can charge listed companies are constrained by the fees charged
by its competitors and Nasdaq cannot charge prices in a manner that
would be unreasonable, inequitable, or unfairly discriminatory.
Nasdaq believes that the proposed fee change reducing the fee paid
by Eligible Portfolio Companies and Investment Management Entities with
listed Eligible Portfolio Companies is reasonable and not unfairly
discriminatory because it recognizes the reduced regulatory and
business costs Nasdaq incurs for listing these Investment Management
Entities and Eligible Portfolio Companies. Specifically, Nasdaq
benefits from significant cost and resource-utilization savings when
listing portfolio companies of Investment Management Entities as it
does not have to engage in significant marketing efforts because the
decision makers at the Investment Management Entity are already
familiar with Nasdaq. Typically when pitching for the listing of a
company that is choosing a listing venue for its IPO, Nasdaq incurs
significant expense, including: The time spent by its CEO and other
senior management in preparing for and traveling to meetings with the
prospect company, travel costs, the cost of developing pitching
strategies and the cost of producing marketing materials. As Nasdaq
saves much of this expense when pitching to a portfolio company of an
Investment Management Entity with which Nasdaq has an established
relationship, Nasdaq believes that it is reasonable to share some of
those savings with listed Investment Management Entities and their
Eligible Portfolio Companies. In addition, Nasdaq typically has lower
costs and resource utilization in connection with the initial and
continued listing of Eligible Portfolio Companies than with other new
listings, as the Exchange benefits from dealing with the high-quality
and experienced management teams Investment Management Entities put in
place at portfolio companies prior to listing and the ongoing
relationship those companies maintain with staff at the Investment
Management Entity, who can share their experience as a public company
listed on a national securities exchange. Nasdaq also believes that the
proposed discount is reasonable in that it will create a reasonable
commercial incentive for Investment Management Entities and the
management of their portfolio companies to consider listing on Nasdaq
and to remain listed.
Nasdaq believes that it is not unfairly discriminatory to discount
continued listing fees as a means of recognizing its cost savings
related to the listing of an Investment Management Entity and its
Eligible Portfolio Companies. This is because a significant portion of
the Exchange's savings arise from the efficiencies it experiences on an
ongoing basis in dealing with Eligible Portfolio Companies for such
time as the Investment Management Entity retains a
[[Page 47787]]
significant investment and is thereby motivated to provide ongoing
advice and assistance. These reduced costs are a non-discriminatory
reason to charge an Investment Management Entity and its Eligible
Portfolio Companies a lower All-Inclusive Annual Listing Fee.
Currently, ADRs, closed-end funds and limited partnerships also pay
lower All-Inclusive Annual Listing Fees than other issuers of equity
securities. Nasdaq believes it is appropriate to apply a fee schedule
to Investment Management Entities and Eligible Portfolio Companies that
is different from those applicable to either ADRs, closed-end funds or
limited partnerships due to their differing characteristics.
Specifically, Nasdaq charges lower listing fees for ADRs because, among
other differences, the U.S. listing is not typically the issuer of an
ADR's primary listing.\10\ Similarly, Nasdaq charges lower listing fees
for closed-end funds because they are particularly sensitive to the
expenses they incur, given that they compete for investment dollars
based on return.\11\ Finally, Nasdaq charges lower listing fees for
limited partnerships because they are not subject to most corporate
governance requirements.\12\ As a result, offering a different discount
to Investment Management Entities and their Eligible Portfolio
Companies on the All-Inclusive Annual Fee schedule than to ADRs,
closed-end funds and limited partnerships is not inequitable or
unfairly discriminatory.
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\10\ See Securities Exchange Act Release No. 73647, supra note
4.
\11\ Id.
\12\ See Securities Exchange Act Release No. 79770 (January 10,
2017), 82 FR 4947 (January 17, 2017) (SR-NASDAQ-2016-173).
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While the proposed fee reduction only applies to Investment
Management Entities and their Eligible Portfolio Companies on the All-
Inclusive Annual Fee schedule, Nasdaq notes that all companies will
transition to that fee schedule in 2018 at the same time that this fee
change will become effective.
Finally, Nasdaq believes that the proposed fees are consistent with
the investor protection objectives of Section 6(b)(5) of the Act \13\
in that they are designed to promote just and equitable principles of
trade, to remove impediments to a free and open market and national
market system, and in general to protect investors and the public
interest. Specifically, the amount of revenue forgone by allowing an
Investment Management Entity and its Eligible Portfolio Companies to
pay lower fees is not substantial, and the reduced fees may result in
more Investment Management Entities and their Eligible Portfolio
Companies listing on Nasdaq, thereby increasing the resources available
for Nasdaq's listing compliance program, which helps to assure that
listing standards are properly enforced and investors are protected.
Consequently, Nasdaq believes that the potential loss of revenue from
the reduction of fees for Investment Management Entities and their
Eligible Portfolio Companies, as proposed, will not hinder its ability
to fulfill its regulatory responsibilities.
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\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. The market for
listing services is extremely competitive and listed companies may
freely choose alternative venues based on the aggregate fees assessed,
and the value provided by each listing. This rule proposal does not
burden competition with other listing venues, which are similarly free
to set their fees. For these reasons, Nasdaq does not believe that the
proposed rule change will result in any burden on competition for
listings.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\14\
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2017-100 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-2017-100. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2017-100, and should
be submitted on or before November 3, 2017.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22160 Filed 10-12-17; 8:45 am]
BILLING CODE 8011-01-P