Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Complementary Services Offered by the Exchange Under Rule IM-5900-7, 25852-25856 [2019-11564]
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Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices
A proposed rule change filed under
Rule 19b–4(f)(6) 24 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),25 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange requests that the
Commission waive the 30-day operative
delay so that the proposal may become
operative immediately upon filing. The
Exchange believes that waiver of the
operative delay would allow Users to
have access to the Global OTC System
during the operative delay period and
would provide Users with options for
connectivity to trading and execution
services and the availability of products
and services. The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest.
Accordingly, the Commission waives
the 30-day operative delay and
designates the proposed rule change
operative upon filing.26
At any time within 60 days of the
filing of such 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 shall institute proceedings
under Section 19(b)(2)(B) 27 of the Act 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:
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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–
NYSEAMER–2019–21 on the subject
line.
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
26 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).
27 15 U.S.C. 78s(b)(2)(B).
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–NYSEAMER–2019–21. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEAMER–2019–21 and
should be submitted on or before June
25, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11557 Filed 6–3–19; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85957; File No. SR–
NASDAQ–2019–040]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Complementary Services Offered by
the Exchange Under Rule IM–5900–7
May 29, 2019.
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 May 16,
2019, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify the
treatment of direct listings including
Level 2 American Depository Receipts
(ADRs) under IM–5900–7, specify that
an Eligible New Listing includes Level
3 ADRs, update the values of certain
services, modify the market advisory
tools provided under IM–5900–7 to
certain new listings, and make certain
other clarifying changes.
The text of the proposed rule change
is available on the Exchange’s website 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.
1 15
28 17
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CFR 200.30–3(a)(12).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
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 (other than a company
listed under IM–5101–2), upon
emerging from bankruptcy, in
connection with a spin-off or carve-out
from another company, or in
conjunction with a business
combination that satisfies the conditions
in Nasdaq IM–5101–2(b) (‘‘Eligible New
Listings’’) and to companies (other than
a company listed under IM–5101–2)
switching their listing from the New
York Stock Exchange (‘‘NYSE’’) to the
Global or Global Select Markets
(‘‘Eligible Switches’’).3 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, and
makes listing on Nasdaq more attractive
to these companies. The services offered
include a whistleblower hotline,
investor relations website, disclosure
services for earnings or other press
releases, webcasting, market analytic
tools, and may include market advisory
tools such as stock surveillance
(collectively the ‘‘Service Package’’).4
Direct Listing
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Nasdaq recognizes that some
companies that have sold common
equity securities in private placements,
which have not been listed on a national
securities exchange or traded in the
over-the-counter market pursuant to
FINRA Form 211 immediately prior to
the initial pricing, may wish to list those
securities to allow existing shareholders
to sell their shares. Nasdaq previously
adopted requirements under IM–5315–1
applicable to such companies listing on
3 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); Exchange Act Release No. 79366 (November
21, 2016), 81 FR 85663 (November 28, 2016) (SR–
NASDAQ–2016–106); Exchange Act Release No.
82791 (February 28, 2018), 83 FR 9354 (March 5,
2018) (SR–NASDAQ–2018–15); Exchange Act
Release No. 82976 (March 30, 2018), 83 FR 14683
(April 5, 2018) (SR–NASDAQ–2018–23).
4 In addition, all companies listed on Nasdaq
receive other standard services from Nasdaq,
including Nasdaq Online and the Market
Intelligence Desk.
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the Nasdaq Global Select Market 5 and
now proposes to include in the
definition of an ‘‘Eligible New Listing’’
that receives complimentary services
under IM–5900–7 a company listing in
connection with a direct listing. This
change is consistent with the approach
approved by the Commission in the
rules of NYSE, which provides similar
services to direct listings.6
American Depository Receipts
U.S. investors often hold equity
securities of foreign issuers in the form
of ADRs. An ADR is a security that
represents an ownership interest in a
specified number of foreign securities
that have been placed with a depositary
financial institution by the issuer or
holders of such securities. An ADR is in
essence a substitute trading mechanism
for foreign securities allowing the issuer
or holder to transfer title to the
underlying foreign securities by delivery
of the ADR. The depositary is typically
a U.S. bank or trust company, and it
usually appoints a custodian to hold the
deposited securities in the home market
of the foreign issuer.7 The custodian is
often a bank, and may be a subsidiary
or branch of the depositary or a thirdparty institution with which the
5 Exchange Act Release No. 85156 (February 15,
2019), 84 FR 5787 (February 22, 2019).
6 Section 907.00 of the NYSE Listed Company
Manual provides that for the purposes of this
Section 907.00, the term ‘‘Eligible New Listing’’
means ‘‘any U.S. company that lists common stock
on the Exchange for the first time and any non-U.S.
company that lists an equity security on the
Exchange under Section 102.01 or 103.00 of the
Manual for the first time, regardless of whether
such U.S. or non-U.S. company conducts an
offering . . .’’ See Exchange Act Release No. 68143
(November 2, 2012), 77 FR 67053 (November 8,
2012) (SR–NYSE–2012–44); As subsequently
amended Section 907.00 of the NYSE Listed
Company Manual now provides that ‘‘the term
‘‘Eligible New Listing’’ means (i) any U.S. company
that lists common stock on the Exchange for the
first time and any non-U.S. company that lists an
equity security on the Exchange under Section
102.01 or 103.00 of the Manual for the first time,
regardless of whether such U.S. or non-U.S.
company conducts an offering and (ii) any U.S. or
non-U.S. company emerging from a bankruptcy,
spinoff (where a company lists new shares in the
absence of a public offering), and carve-out (where
a company carves out a business line or division,
which then conducts a separate initial public
offering).’’
7 ADRs have many characteristics of a domestic
equity security but also provide U.S. investors with
several attributes that are absent in direct
ownership of foreign securities. The depositary (or
the custodian) monitors the declaration of
dividends, collects them and converts them to U.S.
dollars for distribution. In addition, the clearance
and settlement process for ADRs generally is the
same as for other domestic securities that are traded
in the U.S. markets. Thus, investors can own an
interest in securities of foreign issuers while
holding securities that trade, clear and settle within
automated U.S. systems and within U.S.
timeframes.
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25853
depositary has a contractual custodian
relationship.
In order to list ADRs, Nasdaq requires
that such ADRs be sponsored. A
sponsored ADR facility is typically
established jointly by an issuer and a
depositary. The foreign issuer of the
deposited securities typically enters into
a deposit agreement with the depositary.
For a sponsored ADR, both the
depositary and the foreign company
sign the F–6 registration statement
under the Securities Act of 1933. The
deposit agreement sets out the rights
and responsibilities of the issuer and the
depositary, and the ADR holders as
third party beneficiaries. Each ADR
holder becomes a party to such
agreement through its holding of the
ADR.
Market participants describe
sponsored facilities in terms of three
categories, based on the extent to which
the issuer of the deposited securities has
accessed the U.S. securities market. A
‘‘Level 1 facility’’ is an ADR facility the
ADRs of which trade in the U.S. overthe-counter market and the foreign
issuer is not required to register with or
report to the Commission under Section
12 or 15 of the Exchange Act. ‘‘Level 2’’
refers to ADRs that are listed on a U.S.
stock exchange by a foreign issuer that
becomes subject to certain SEC
reporting requirements,8 but the foreign
issuer has not sold ADRs in the United
States in order to raise capital or effect
an acquisition. ‘‘Level 3’’ denotes ADRs
that are listed on a U.S. stock exchange
where the foreign issuer has sold ADRs
in the United States in a registered
public offering. A foreign issuer can
apply to list Level 2 or Level 3 ADRs on
any of Nasdaq’s market tiers.
Nasdaq proposes to include Level 2
ADRs in the definition of an ‘‘Eligible
New Listing’’ that receives
complimentary services under IM–
5900–7 when the ADRs are listed in
connection with a direct listing under
IM–5315–1(c). Nasdaq also proposes to
specify that an Eligible New Listing
includes Level 3 ADRs by stating that
the rule reference in IM–5900–7 to
listing ‘‘in connection with [the
company’s] initial public offering’’
means the initial public offering in the
United States, including ADRs, rather
than the initial public offering of the
underlying foreign securities in the
company’s home market. Such
companies would receive the same
services under IM–5900–7, with the
same value, as any other Eligible New
8 Following their listing on Nasdaq, such
companies will also be required to register and file
annual reports under the Exchange Act with the
Commission.
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Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices
Listing. This change is consistent with
the approach approved by the
Commission in the rules of NYSE,
which provides similar services to
companies listing ADRs in connection
with initial public offering or through a
direct listing.9
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Other Changes
As part of the Service Package,
Eligible New Listings and Eligible
Switches with a market capitalization of
$750 million or more currently receive
a choice of market advisory tools,
including a monthly ownership
analytics and event driven targeting
tool, as described in IM–5900–7(a)(iii).
Nasdaq has determined to discontinue
providing this tool because over time
Nasdaq observed that it receives
minimal interest from Nasdaq
customers, in particular because there is
considerable overlap in services with
the stock surveillance tool.10
Accordingly, Nasdaq proposes to
remove the monthly ownership
analytics and event driven targeting tool
from the list of available market
advisory tools under IM–5900–7(a) and
to renumber the remaining market
advisory tools accordingly.11
Nasdaq also proposes to update the
values of the services contained in IM–
5900–7 to their current values.
Depending on a company’s market
capitalization and whether it is an
Eligible New Listing or an Eligible
Switch, the total revised value of the
services provided ranges from $151,000
to $828,000, and one-time development
fees of approximately $5,000 are
waived.12
9 See footnote 6 above. Section 907.00 of the
NYSE Listed Company Manual provides that ‘‘an
‘‘equity security’’ means common stock or common
share equivalents such as ordinary shares, New
York shares, global shares, American Depository
Receipts, or Global Depository Receipts.’’ See
Exchange Act Release No. 68143 (November 2,
2012), 77 FR 67053 (November 8, 2012) (SR–NYSE–
2012–44).
10 Currently no company receives the monthly
ownership analytics and event driven targeting
service from Nasdaq.
11 The revised package of services will maintain
the same approximate retail value as the one
currently provided because Nasdaq presumed that
a company would use stock surveillance, which has
an approximate retail value of $56,500 as revised
($56,000 previously), and global targeting, which
has an approximate retail value of $44,000 rather
than the monthly ownership analytics and event
driven targeting, which has an approximate retail
value of $48,000, because there is considerable
overlap between the latter and the stock
surveillance service.
12 The exact values are set forth in proposed IM–
5900–7. Under the current rule the stated value of
the services provided ranges from $150,000 to
$824,000, and one-time development fees of
approximately $5,000 are waived. In describing the
total value of the services for companies that can
select more than one market advisory tool, Nasdaq
presumes that a company would use stock
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The proposed rule change will be
operative for new listings on or after the
effectiveness of this rule filing.
Companies that list before that date will
continue to receive services as described
in the current rule.
Finally, Nasdaq also proposes to make
non-substantive changes to update the
introductory note in IM–5900–7 and to
include the specific operative date of
the proposed rule change to ease
understanding of the rule.
Nasdaq represents, and this proposed
rule change will help ensure, that
individual listed companies, including
ADRs and direct listings, are not given
specially negotiated packages of
products or services to list, or remain
listed, which the Commission has
previously stated would raise unfair
discrimination issues under the
Exchange Act.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Exchange Act,13 in general, and
furthers the objectives of Section 6(b)(5)
of the Exchange Act,14 in particular, in
that it is designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest. Nasdaq also believes
that the proposed rule change is
consistent with the provisions Sections
6(b)(4),15 6(b)(5),16 and 6(b)(8),17 in that
the proposal is designed, among other
things, to provide for the equitable
allocation of reasonable dues, fees, and
other charges among Exchange members
and issuers and other persons using its
facilities and to promote just and
equitable principles of trade, and is not
designed to permit unfair
discrimination between issuers, and that
the rules of the Exchange do not impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
Nasdaq faces competition in the
market for listing services,18 and
surveillance, which has an approximate retail value
of $56,500 as revised ($56,000 previously), and
global targeting, which has an approximate retail
value of $44,000. Companies could, of course, select
different combinations of the three services offered,
but these other combinations would have lower
total approximate retail values. See Exchange Act
Release No. 78392 (July 22, 2016), 81 FR 49705,
49706 n.10 (July 28, 2016) (Notice of Filing for SR–
NASDAQ–2016–098).
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(5).
15 15 U.S.C. 78f(4).
16 15 U.S.C. 78f(5).
17 15 U.S.C. 78f(8).
18 The Justice Department has noted the intense
competitive environment for exchange listings. See
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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 previously
created different tiers of services based
on a market capitalization. As noted in
the Service Package filings, Nasdaq
believes that it is appropriate to offer
different services based on a company’s
market capitalization given that larger
companies generally will need more and
different governance, communication
and intelligence services.19
Nasdaq also believes it is reasonable,
and not unfairly discriminatory, to offer
complimentary services to a foreign
company listing Level 2 ADRs or a
domestic company listing in connection
with a direct listing under IM–5315–1.
Such companies are similar to other
Eligible New Listings, such as initial
public offerings of domestic companies,
and will have increased need to focus
on identifying and communicating with
its shareholders because they are listing
on a national securities exchange in the
U.S. for the first time. Like the other
Eligible New Listings that receive
complimentary services under the
existing rule, these companies are
transitioning to the traditional U.S.
public company model and the
complimentary services provided will
help ease that transition.20 In addition,
these companies will be purchasing
many of these services for the first time,
and offering complimentary services
will provide Nasdaq Corporate
Solutions and third-party service
providers 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
foreign company listing Level 2 ADRs or
a domestic company listing in
connection with a direct listing under
IM–5315–1. To the contrary, this
‘‘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.
19 Exchange Act Release No. 65963, 76 FR at
79265.
20 Although companies listing Level 2 ADRs may
have prior experience being a public company in
their home country, they, nonetheless, will be
transitioning to the traditional public company
model in the United States. Following their listing
on Nasdaq, such companies will also be required
to register and file annual reports under the
Exchange Act with the Commission.
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Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices
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proposed change will eliminate a
distinction between companies listing
common stock or ADRs through a direct
listing and companies listing through an
IPO.
Nasdaq believes that the proposed
change to specify that the rule reference
in IM–5900–7 to listing ‘‘in connection
with [the company’s] initial public
offering’’ means the initial public
offering in the United States, including
ADRs, rather than the initial public
offering of the underlying foreign
securities in the company’s home
market is consistent with Section 6(b)(5)
of the Exchange Act because it will
provide transparency in the rules and
address an ambiguity by specifying that
listing of Level 3 ADRs on Nasdaq is
considered an initial public offering
notwithstanding that the issuer of ADRs
may already be a public company in
their home country.
As described above, Nasdaq faces
competition in the market for listing
services, and competes, in part, by
offering valuable services to companies.
As part of the Service Package, Eligible
New Listings and Eligible Switches with
a market capitalization of $750 million
or more currently receive a choice of
market advisory tools, including a
monthly ownership analytics and event
driven targeting tool, as described in
IM–5900–7(a)(iii). Based on Nasdaq’s
experience with offering this service,
Nasdaq has determined to discontinue
providing this tool because over time
Nasdaq observed that this tool receives
minimal interest from Nasdaq
customers, in particular because the
stock surveillance tool and the monthly
ownership analytics and event driven
targeting tool have considerable overlap
between these services. Nasdaq believes
that the removal of the monthly
ownership analytics and event driven
targeting tool is not unfairly
discriminatory because all similarly
situated companies are eligible for the
same package of services. Moreover, no
company currently uses this service.
The Commission has previously
indicated pursuant to Section 19(b) of
the Exchange Act 21 that updating the
values of the services within the rule is
necessary,22 and Nasdaq does not
believe this update has an effect on the
allocation of fees nor does it permit
21 15
U.S.C. 78s(b).
22 See Exchange Act Release No. 72669 (July 24,
2014), 79 FR 44234 (July 30, 2014) (SR–NASDAQ–
2014–058) (footnote 39 and accompanying text:
‘‘We would expect Nasdaq, consistent with Section
19(b) of the Exchange Act, to periodically update
the retail values of services offered should they
change. This will help to provide transparency to
listed companies on the value of the free services
they receive and the actual costs associated with
listing on Nasdaq.’’)
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unfair discrimination, as issuers will
continue to receive the same services,
except for the monthly ownership
analytics and event driven targeting
tool, which will be removed as
described above. Further, this update
will enhance the transparency of
Nasdaq’s rules and the value of the
services it offers companies, thus
promoting just and equitable principles
of trade. As such, the proposed rule
change is consistent with the
requirements of Section 6(b)(4) and (5)
of the Exchange Act.
Finally, Nasdaq notes that the
proposed change to update the
introductory note in IM–5900–7 and to
include the specific operative date of
the proposed rule change is consistent
with Section 6(b)(5) of the Exchange Act
because it will clarify the rule without
making any substantive change.
Nasdaq represents, and this proposed
rule change will help ensure, that
individual listed companies are not
given specially negotiated packages of
products or services to list, or remain
listed, which the Commission has
previously stated would raise unfair
discrimination issues under the
Exchange Act.23
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Exchange Act. As
noted above, Nasdaq faces competition
in the market for listing services, and
competes, in part, by offering valuable
services to companies. The proposed
rule changes reflect that competition,
but do not impose any burden on the
competition with other exchanges.
Rather, Nasdaq believes the proposed
changes will result in more potential
listings being eligible to receive the
package and therefore will enhance
competition for new listings of ADRs
and companies listing in connection
with a direct listing under IM–5315–1.
Finally, the clarification that listing of
Level 3 ADRs on Nasdaq is considered
an initial public offering in the United
States will not impose any burden on
competition because it will provide
transparency in the rules and eliminate
an ambiguity. This change is consistent
with the approach approved by the
Commission in the rules of NYSE,
which provides similar services to
23 See Exchange Act Release No. 79366, 81 FR
85663 at 85665 (citing Securities Exchange Act
Release No. 65127 (August 12, 2011), 76 FR 51449,
51452 (August 18, 2011) (approving NYSE–2011–
20)).
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
25855
companies listing ADRs in connection
with initial public offering.24
Other exchanges 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 Exchange 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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A) of the Act 25 and Rule 19b–
4(f)(6) thereunder.26 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6)(iii) thereunder. 27
A proposed rule change filed under
Rule 19b–4(f)(6) 28 normally does not
become operative for 30 days after the
date of the filing. However, pursuant to
Rule 19b–4(f)(6)(iii),29 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. In
its filing with the Commission, Nasdaq
has asked the Commission to waive the
30-day operative delay to allow Nasdaq
to offer the Service Package to any
companies listing ADRs or common
stock through a direct listing during
such 30-day period. In addition, Nasdaq
has asked the Commission to waiver the
30-day operative delay in order to
immediately (i) reflect the accurate
values of the complimentary services in
Nasdaq’s rules, (ii) specify that
24 See
footnote 9 above.
U.S.C. 78s(b)(3)(A)(iii).
26 17 CFR 240.19b–4(f)(6).
27 In addition, Rule 19b–4(f)(6)(iii) requires a selfregulatory organization to give the Commission
written notice of its intent to file the proposed rule
change at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
28 17 CFR 240.19b–4(f)(6).
29 17 CFR 240.19b–4(f)(6)(iii).
25 15
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04JNN1
25856
Federal Register / Vol. 84, No. 107 / Tuesday, June 4, 2019 / Notices
companies listing Level 3 ADRs on
Nasdaq are considered to be listing in
connection with an initial public
offering in the United States, and (iii)
remove the monthly ownership
analytics and event driven targeting tool
from the list of available market
advisory tools under IM–5900–7(a).
The Commission notes that Nasdaq’s
proposal to offer the Service Package to
any companies listing ADRs or common
stock through a direct listing is
substantially similar to the rules of
another exchange that were approved
previously by the Commission as
consistent with the Act after being
published in the Federal Register for
notice and comment.30 In addition, the
Commission notes that the other
proposed amendments to Nasdaq’s rules
would enhance the transparency of IM–
5900–7 and eliminate a service that is
not used by any listed company. For
these reasons, the Commission believes
that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest and
hereby waives the 30-day operative
delay and designates the proposed rule
change operative upon filing.31
At any time within 60 days of the
filing of such 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.
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:
All submissions should refer to File
Number SR–NASDAQ–2019–040. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2019–040, and
should be submitted on or before June
25, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–11564 Filed 6–3–19; 8:45 am]
BILLING CODE 8011–01–P
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–2019–040 on the subject line.
khammond on DSKBBV9HB2PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85961; File No. SR–NYSE–
2019–30]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt a
Listing Fee Schedule for Pre-Revenue
Companies
May 29, 2019.
30 See
Securities Exchange Act Release No. 68143,
note 6 supra.
31 For purposes only of waiving the operative
delay, the Commission has considered the proposed
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
VerDate Sep<11>2014
17:16 Jun 03, 2019
Jkt 247001
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt a
listing fee schedule specific to
companies that have not generated any
significant revenues at the time of their
original listing. The proposed rule
change is available on the Exchange’s
website at www.nyse.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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange’s Global Market
Capitalization Test (as set forth in
Section 102.01C of the Exchange’s
Listed Company Manual (the
‘‘Manual’’)) allows the Exchange to list
companies that have not yet recorded
any significant revenues, provided the
issuer has at least a $200 million global
market capitalization and meets the
other requirements for listing. These
companies are typically engaged in
research and development (in many
cases they are biotechnology companies
focused on developing new drug
candidates) or are in the early stages of
commercialization of a product.
32 17
2 15
1 15
3 17
PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on May 16,
2019, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘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.
Frm 00127
Fmt 4703
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U.S.C. 78a.
CFR 240.19b–4.
04JNN1
]]>Agencies
[Federal Register Volume 84, Number 107 (Tuesday, June 4, 2019)]
[Notices]
[Pages 25852-25856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11564]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85957; File No. SR-NASDAQ-2019-040]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Complementary Services Offered by the Exchange Under
Rule IM-5900-7
May 29, 2019.
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 May 16, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify the treatment of direct listings
including Level 2 American Depository Receipts (ADRs) under IM-5900-7,
specify that an Eligible New Listing includes Level 3 ADRs, update the
values of certain services, modify the market advisory tools provided
under IM-5900-7 to certain new listings, and make certain other
clarifying changes.
The text of the proposed rule change is available on the Exchange's
website 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.
[[Page 25853]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
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 (other than a company listed under IM-
5101-2), upon emerging from bankruptcy, in connection with a spin-off
or carve-out from another company, or in conjunction with a business
combination that satisfies the conditions in Nasdaq IM-5101-2(b)
(``Eligible New Listings'') and to companies (other than a company
listed under IM-5101-2) switching their listing from the New York Stock
Exchange (``NYSE'') to the Global or Global Select Markets (``Eligible
Switches'').\3\ 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,
and makes listing on Nasdaq more attractive to these companies. The
services offered include a whistleblower hotline, investor relations
website, disclosure services for earnings or other press releases,
webcasting, market analytic tools, and may include market advisory
tools such as stock surveillance (collectively the ``Service
Package'').\4\
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\3\ 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); Exchange Act Release No.
79366 (November 21, 2016), 81 FR 85663 (November 28, 2016) (SR-
NASDAQ-2016-106); Exchange Act Release No. 82791 (February 28,
2018), 83 FR 9354 (March 5, 2018) (SR-NASDAQ-2018-15); Exchange Act
Release No. 82976 (March 30, 2018), 83 FR 14683 (April 5, 2018) (SR-
NASDAQ-2018-23).
\4\ In addition, all companies listed on Nasdaq receive other
standard services from Nasdaq, including Nasdaq Online and the
Market Intelligence Desk.
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Direct Listing
Nasdaq recognizes that some companies that have sold common equity
securities in private placements, which have not been listed on a
national securities exchange or traded in the over-the-counter market
pursuant to FINRA Form 211 immediately prior to the initial pricing,
may wish to list those securities to allow existing shareholders to
sell their shares. Nasdaq previously adopted requirements under IM-
5315-1 applicable to such companies listing on the Nasdaq Global Select
Market \5\ and now proposes to include in the definition of an
``Eligible New Listing'' that receives complimentary services under IM-
5900-7 a company listing in connection with a direct listing. This
change is consistent with the approach approved by the Commission in
the rules of NYSE, which provides similar services to direct
listings.\6\
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\5\ Exchange Act Release No. 85156 (February 15, 2019), 84 FR
5787 (February 22, 2019).
\6\ Section 907.00 of the NYSE Listed Company Manual provides
that for the purposes of this Section 907.00, the term ``Eligible
New Listing'' means ``any U.S. company that lists common stock on
the Exchange for the first time and any non-U.S. company that lists
an equity security on the Exchange under Section 102.01 or 103.00 of
the Manual for the first time, regardless of whether such U.S. or
non-U.S. company conducts an offering . . .'' See Exchange Act
Release No. 68143 (November 2, 2012), 77 FR 67053 (November 8, 2012)
(SR-NYSE-2012-44); As subsequently amended Section 907.00 of the
NYSE Listed Company Manual now provides that ``the term ``Eligible
New Listing'' means (i) any U.S. company that lists common stock on
the Exchange for the first time and any non-U.S. company that lists
an equity security on the Exchange under Section 102.01 or 103.00 of
the Manual for the first time, regardless of whether such U.S. or
non-U.S. company conducts an offering and (ii) any U.S. or non-U.S.
company emerging from a bankruptcy, spinoff (where a company lists
new shares in the absence of a public offering), and carve-out
(where a company carves out a business line or division, which then
conducts a separate initial public offering).''
---------------------------------------------------------------------------
American Depository Receipts
U.S. investors often hold equity securities of foreign issuers in
the form of ADRs. An ADR is a security that represents an ownership
interest in a specified number of foreign securities that have been
placed with a depositary financial institution by the issuer or holders
of such securities. An ADR is in essence a substitute trading mechanism
for foreign securities allowing the issuer or holder to transfer title
to the underlying foreign securities by delivery of the ADR. The
depositary is typically a U.S. bank or trust company, and it usually
appoints a custodian to hold the deposited securities in the home
market of the foreign issuer.\7\ The custodian is often a bank, and may
be a subsidiary or branch of the depositary or a third-party
institution with which the depositary has a contractual custodian
relationship.
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\7\ ADRs have many characteristics of a domestic equity security
but also provide U.S. investors with several attributes that are
absent in direct ownership of foreign securities. The depositary (or
the custodian) monitors the declaration of dividends, collects them
and converts them to U.S. dollars for distribution. In addition, the
clearance and settlement process for ADRs generally is the same as
for other domestic securities that are traded in the U.S. markets.
Thus, investors can own an interest in securities of foreign issuers
while holding securities that trade, clear and settle within
automated U.S. systems and within U.S. timeframes.
---------------------------------------------------------------------------
In order to list ADRs, Nasdaq requires that such ADRs be sponsored.
A sponsored ADR facility is typically established jointly by an issuer
and a depositary. The foreign issuer of the deposited securities
typically enters into a deposit agreement with the depositary. For a
sponsored ADR, both the depositary and the foreign company sign the F-6
registration statement under the Securities Act of 1933. The deposit
agreement sets out the rights and responsibilities of the issuer and
the depositary, and the ADR holders as third party beneficiaries. Each
ADR holder becomes a party to such agreement through its holding of the
ADR.
Market participants describe sponsored facilities in terms of three
categories, based on the extent to which the issuer of the deposited
securities has accessed the U.S. securities market. A ``Level 1
facility'' is an ADR facility the ADRs of which trade in the U.S. over-
the-counter market and the foreign issuer is not required to register
with or report to the Commission under Section 12 or 15 of the Exchange
Act. ``Level 2'' refers to ADRs that are listed on a U.S. stock
exchange by a foreign issuer that becomes subject to certain SEC
reporting requirements,\8\ but the foreign issuer has not sold ADRs in
the United States in order to raise capital or effect an acquisition.
``Level 3'' denotes ADRs that are listed on a U.S. stock exchange where
the foreign issuer has sold ADRs in the United States in a registered
public offering. A foreign issuer can apply to list Level 2 or Level 3
ADRs on any of Nasdaq's market tiers.
---------------------------------------------------------------------------
\8\ Following their listing on Nasdaq, such companies will also
be required to register and file annual reports under the Exchange
Act with the Commission.
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Nasdaq proposes to include Level 2 ADRs in the definition of an
``Eligible New Listing'' that receives complimentary services under IM-
5900-7 when the ADRs are listed in connection with a direct listing
under IM-5315-1(c). Nasdaq also proposes to specify that an Eligible
New Listing includes Level 3 ADRs by stating that the rule reference in
IM-5900-7 to listing ``in connection with [the company's] initial
public offering'' means the initial public offering in the United
States, including ADRs, rather than the initial public offering of the
underlying foreign securities in the company's home market. Such
companies would receive the same services under IM-5900-7, with the
same value, as any other Eligible New
[[Page 25854]]
Listing. This change is consistent with the approach approved by the
Commission in the rules of NYSE, which provides similar services to
companies listing ADRs in connection with initial public offering or
through a direct listing.\9\
---------------------------------------------------------------------------
\9\ See footnote 6 above. Section 907.00 of the NYSE Listed
Company Manual provides that ``an ``equity security'' means common
stock or common share equivalents such as ordinary shares, New York
shares, global shares, American Depository Receipts, or Global
Depository Receipts.'' See Exchange Act Release No. 68143 (November
2, 2012), 77 FR 67053 (November 8, 2012) (SR-NYSE-2012-44).
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Other Changes
As part of the Service Package, Eligible New Listings and Eligible
Switches with a market capitalization of $750 million or more currently
receive a choice of market advisory tools, including a monthly
ownership analytics and event driven targeting tool, as described in
IM-5900-7(a)(iii). Nasdaq has determined to discontinue providing this
tool because over time Nasdaq observed that it receives minimal
interest from Nasdaq customers, in particular because there is
considerable overlap in services with the stock surveillance tool.\10\
Accordingly, Nasdaq proposes to remove the monthly ownership analytics
and event driven targeting tool from the list of available market
advisory tools under IM-5900-7(a) and to renumber the remaining market
advisory tools accordingly.\11\
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\10\ Currently no company receives the monthly ownership
analytics and event driven targeting service from Nasdaq.
\11\ The revised package of services will maintain the same
approximate retail value as the one currently provided because
Nasdaq presumed that a company would use stock surveillance, which
has an approximate retail value of $56,500 as revised ($56,000
previously), and global targeting, which has an approximate retail
value of $44,000 rather than the monthly ownership analytics and
event driven targeting, which has an approximate retail value of
$48,000, because there is considerable overlap between the latter
and the stock surveillance service.
---------------------------------------------------------------------------
Nasdaq also proposes to update the values of the services contained
in IM-5900-7 to their current values. Depending on a company's market
capitalization and whether it is an Eligible New Listing or an Eligible
Switch, the total revised value of the services provided ranges from
$151,000 to $828,000, and one-time development fees of approximately
$5,000 are waived.\12\
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\12\ The exact values are set forth in proposed IM-5900-7. Under
the current rule the stated value of the services provided ranges
from $150,000 to $824,000, and one-time development fees of
approximately $5,000 are waived. In describing the total value of
the services for companies that can select more than one market
advisory tool, Nasdaq presumes that a company would use stock
surveillance, which has an approximate retail value of $56,500 as
revised ($56,000 previously), and global targeting, which has an
approximate retail value of $44,000. Companies could, of course,
select different combinations of the three services offered, but
these other combinations would have lower total approximate retail
values. See Exchange Act Release No. 78392 (July 22, 2016), 81 FR
49705, 49706 n.10 (July 28, 2016) (Notice of Filing for SR-NASDAQ-
2016-098).
---------------------------------------------------------------------------
The proposed rule change will be operative for new listings on or
after the effectiveness of this rule filing. Companies that list before
that date will continue to receive services as described in the current
rule.
Finally, Nasdaq also proposes to make non-substantive changes to
update the introductory note in IM-5900-7 and to include the specific
operative date of the proposed rule change to ease understanding of the
rule.
Nasdaq represents, and this proposed rule change will help ensure,
that individual listed companies, including ADRs and direct listings,
are not given specially negotiated packages of products or services to
list, or remain listed, which the Commission has previously stated
would raise unfair discrimination issues under the Exchange Act.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Exchange Act,\13\ in general, and furthers the objectives
of Section 6(b)(5) of the Exchange Act,\14\ in particular, in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest. Nasdaq also believes that the
proposed rule change is consistent with the provisions Sections
6(b)(4),\15\ 6(b)(5),\16\ and 6(b)(8),\17\ in that the proposal is
designed, among other things, to provide for the equitable allocation
of reasonable dues, fees, and other charges among Exchange members and
issuers and other persons using its facilities and to promote just and
equitable principles of trade, and is not designed to permit unfair
discrimination between issuers, and that the rules of the Exchange do
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(4).
\16\ 15 U.S.C. 78f(5).
\17\ 15 U.S.C. 78f(8).
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Nasdaq faces competition in the market for listing services,\18\
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 previously created different tiers of services based
on a market capitalization. As noted in the Service Package filings,
Nasdaq believes that it is appropriate to offer different services
based on a company's market capitalization given that larger companies
generally will need more and different governance, communication and
intelligence services.\19\
---------------------------------------------------------------------------
\18\ 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.
\19\ Exchange Act Release No. 65963, 76 FR at 79265.
---------------------------------------------------------------------------
Nasdaq also believes it is reasonable, and not unfairly
discriminatory, to offer complimentary services to a foreign company
listing Level 2 ADRs or a domestic company listing in connection with a
direct listing under IM-5315-1. Such companies are similar to other
Eligible New Listings, such as initial public offerings of domestic
companies, and will have increased need to focus on identifying and
communicating with its shareholders because they are listing on a
national securities exchange in the U.S. for the first time. Like the
other Eligible New Listings that receive complimentary services under
the existing rule, these companies are transitioning to the traditional
U.S. public company model and the complimentary services provided will
help ease that transition.\20\ In addition, these companies will be
purchasing many of these services for the first time, and offering
complimentary services will provide Nasdaq Corporate Solutions and
third-party service providers 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 foreign company listing Level
2 ADRs or a domestic company listing in connection with a direct
listing under IM-5315-1. To the contrary, this
[[Page 25855]]
proposed change will eliminate a distinction between companies listing
common stock or ADRs through a direct listing and companies listing
through an IPO.
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\20\ Although companies listing Level 2 ADRs may have prior
experience being a public company in their home country, they,
nonetheless, will be transitioning to the traditional public company
model in the United States. Following their listing on Nasdaq, such
companies will also be required to register and file annual reports
under the Exchange Act with the Commission.
---------------------------------------------------------------------------
Nasdaq believes that the proposed change to specify that the rule
reference in IM-5900-7 to listing ``in connection with [the company's]
initial public offering'' means the initial public offering in the
United States, including ADRs, rather than the initial public offering
of the underlying foreign securities in the company's home market is
consistent with Section 6(b)(5) of the Exchange Act because it will
provide transparency in the rules and address an ambiguity by
specifying that listing of Level 3 ADRs on Nasdaq is considered an
initial public offering notwithstanding that the issuer of ADRs may
already be a public company in their home country.
As described above, Nasdaq faces competition in the market for
listing services, and competes, in part, by offering valuable services
to companies. As part of the Service Package, Eligible New Listings and
Eligible Switches with a market capitalization of $750 million or more
currently receive a choice of market advisory tools, including a
monthly ownership analytics and event driven targeting tool, as
described in IM-5900-7(a)(iii). Based on Nasdaq's experience with
offering this service, Nasdaq has determined to discontinue providing
this tool because over time Nasdaq observed that this tool receives
minimal interest from Nasdaq customers, in particular because the stock
surveillance tool and the monthly ownership analytics and event driven
targeting tool have considerable overlap between these services. Nasdaq
believes that the removal of the monthly ownership analytics and event
driven targeting tool is not unfairly discriminatory because all
similarly situated companies are eligible for the same package of
services. Moreover, no company currently uses this service.
The Commission has previously indicated pursuant to Section 19(b)
of the Exchange Act \21\ that updating the values of the services
within the rule is necessary,\22\ and Nasdaq does not believe this
update has an effect on the allocation of fees nor does it permit
unfair discrimination, as issuers will continue to receive the same
services, except for the monthly ownership analytics and event driven
targeting tool, which will be removed as described above. Further, this
update will enhance the transparency of Nasdaq's rules and the value of
the services it offers companies, thus promoting just and equitable
principles of trade. As such, the proposed rule change is consistent
with the requirements of Section 6(b)(4) and (5) of the Exchange Act.
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\21\ 15 U.S.C. 78s(b).
\22\ See Exchange Act Release No. 72669 (July 24, 2014), 79 FR
44234 (July 30, 2014) (SR-NASDAQ-2014-058) (footnote 39 and
accompanying text: ``We would expect Nasdaq, consistent with Section
19(b) of the Exchange Act, to periodically update the retail values
of services offered should they change. This will help to provide
transparency to listed companies on the value of the free services
they receive and the actual costs associated with listing on
Nasdaq.'')
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Finally, Nasdaq notes that the proposed change to update the
introductory note in IM-5900-7 and to include the specific operative
date of the proposed rule change is consistent with Section 6(b)(5) of
the Exchange Act because it will clarify the rule without making any
substantive change.
Nasdaq represents, and this proposed rule change will help ensure,
that individual listed companies are not given specially negotiated
packages of products or services to list, or remain listed, which the
Commission has previously stated would raise unfair discrimination
issues under the Exchange Act.\23\
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\23\ See Exchange Act Release No. 79366, 81 FR 85663 at 85665
(citing Securities Exchange Act Release No. 65127 (August 12, 2011),
76 FR 51449, 51452 (August 18, 2011) (approving NYSE-2011-20)).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act. As noted above, Nasdaq
faces competition in the market for listing services, and competes, in
part, by offering valuable services to companies. The proposed rule
changes reflect that competition, but do not impose any burden on the
competition with other exchanges. Rather, Nasdaq believes the proposed
changes will result in more potential listings being eligible to
receive the package and therefore will enhance competition for new
listings of ADRs and companies listing in connection with a direct
listing under IM-5315-1. Finally, the clarification that listing of
Level 3 ADRs on Nasdaq is considered an initial public offering in the
United States will not impose any burden on competition because it will
provide transparency in the rules and eliminate an ambiguity. This
change is consistent with the approach approved by the Commission in
the rules of NYSE, which provides similar services to companies listing
ADRs in connection with initial public offering.\24\
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\24\ See footnote 9 above.
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Other exchanges 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 Exchange 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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \25\ and Rule 19b-4(f)(6) thereunder.\26\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder. \27\
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\25\ 15 U.S.C. 78s(b)(3)(A)(iii).
\26\ 17 CFR 240.19b-4(f)(6).
\27\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its
intent to file the proposed rule change at least five business days
prior to the date of filing of the proposed rule change, or such
shorter time as designated by the Commission. The Exchange has
satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \28\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\29\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. In its filing with the
Commission, Nasdaq has asked the Commission to waive the 30-day
operative delay to allow Nasdaq to offer the Service Package to any
companies listing ADRs or common stock through a direct listing during
such 30-day period. In addition, Nasdaq has asked the Commission to
waiver the 30-day operative delay in order to immediately (i) reflect
the accurate values of the complimentary services in Nasdaq's rules,
(ii) specify that
[[Page 25856]]
companies listing Level 3 ADRs on Nasdaq are considered to be listing
in connection with an initial public offering in the United States, and
(iii) remove the monthly ownership analytics and event driven targeting
tool from the list of available market advisory tools under IM-5900-
7(a).
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\28\ 17 CFR 240.19b-4(f)(6).
\29\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission notes that Nasdaq's proposal to offer the Service
Package to any companies listing ADRs or common stock through a direct
listing is substantially similar to the rules of another exchange that
were approved previously by the Commission as consistent with the Act
after being published in the Federal Register for notice and
comment.\30\ In addition, the Commission notes that the other proposed
amendments to Nasdaq's rules would enhance the transparency of IM-5900-
7 and eliminate a service that is not used by any listed company. For
these reasons, the Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest and hereby waives the 30-day operative delay and
designates the proposed rule change operative upon filing.\31\
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\30\ See Securities Exchange Act Release No. 68143, note 6
supra.
\31\ For purposes only of waiving the 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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At any time within 60 days of the filing of such 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.
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 [email protected]. Please include
File Number SR-NASDAQ-2019-040 on the subject line.
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-NASDAQ-2019-040. 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 website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2019-040, and should be submitted
on or before June 25, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11564 Filed 6-3-19; 8:45 am]
BILLING CODE 8011-01-P
