Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt a New Rule Concerning Nasdaq's Ability To Request Information From a Listed Company Regarding the Number of Unrestricted Publicly Held Shares in Certain Circumstances and Halt Trading in the Company's Security Upon the Request, and in Certain Circumstances Request a Plan To Increase the Number of Unrestricted Publicly Held Shares to an Amount That Is Higher Than the Applicable Publicly Held Shares Requirement, 13954-13957 [2020-04790]
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Federal Register / Vol. 85, No. 47 / Tuesday, March 10, 2020 / Notices
annual burden of 348 hours and
$156,600.
PBGC is soliciting public comments
to—
• Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
• Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodologies and assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g. permitting electronic submission of
responses.
Issued in Washington, DC.
Hilary Duke,
Assistant General Counsel for Regulatory
Affairs, Pension Benefit Guaranty
Corporation.
Sean Robinson,
Attorney, Corporate and Postal Business Law.
[Release No. 34–88315; File No. SR–
NASDAQ–2019–091]
[FR Doc. 2020–04886 Filed 3–9–20; 8:45 am]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Adopt a
New Rule Concerning Nasdaq’s Ability
To Request Information From a Listed
Company Regarding the Number of
Unrestricted Publicly Held Shares in
Certain Circumstances and Halt
Trading in the Company’s Security
Upon the Request, and in Certain
Circumstances Request a Plan To
Increase the Number of Unrestricted
Publicly Held Shares to an Amount
That Is Higher Than the Applicable
Publicly Held Shares Requirement
BILLING CODE 7710–12–P
POSTAL SERVICE
International Product Change—Priority
Mail Express International, Priority Mail
International & First-Class Package
International Service Agreement
AGENCY:
ACTION:
Postal ServiceTM.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a Priority
Mail Express International, Priority Mail
International & First-Class Package
International Service contract to the list
of Negotiated Service Agreements in the
Competitive Product List in the Mail
Classification Schedule.
SUMMARY:
Date of notice: March 10, 2020.
FOR FURTHER INFORMATION CONTACT:
Christopher C. Meyerson, (202) 268–
7820.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on March 3, 2020,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express International,
Priority Mail International & First-Class
Package International Service Contract
1 to Competitive Product List.
Documents are available at
www.prc.gov, Docket Nos. MC2020–97
and CP2020–101.
SUPPLEMENTARY INFORMATION:
BILLING CODE 7709–02–P
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
ACTION:
SECURITIES AND EXCHANGE
COMMISSION
DATES:
[FR Doc. 2020–04848 Filed 3–9–20; 8:45 am]
AGENCY:
are available at www.prc.gov, Docket
Nos. MC2020–98, CP2020–103.
Postal ServiceTM.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
SUMMARY:
Christopher C. Meyerson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2020–04798 Filed 3–9–20; 8:45 am]
BILLING CODE 7710–12–P
Date of required notice March
10, 2020.
DATES:
FOR FURTHER INFORMATION CONTACT:
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87677
(December 6, 2019), 84 FR 67974 (December 12,
2019) (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 88028
(January 24, 2020), 85 FR 5500 (January 30, 2020).
The Commission designated March 11, 2020, as the
date by which it should approve, disapprove, or
institute proceedings to determine whether to
disapprove the proposed rule change.
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2 17
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on March 5, 2020,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 595 to
Competitive Product List. Documents
SUPPLEMENTARY INFORMATION:
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I. Introduction
On November 22, 2019, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt a rule specifying Nasdaq’s ability
to request information from a listed
company regarding the number of
unrestricted publicly held shares when
Nasdaq observes unusual trading
characteristics in a security or a
company announces an event that may
cause a contracting in the number of
unrestricted publicly held shares, halt
trading in such company’s securities
upon such a request, and potentially
request a listed company to increase its
number of unrestricted publicly held
shares. The proposed rule change was
published for comment in the Federal
Register on December 12, 2019.3 On
January 24, 2020, pursuant to Section
19(b(2) of the Act,4 the Commission
designated a longer period within which
to either approve the proposed rule
change, disapprove the proposed rule
change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 The Commission
1 15
Sean Robinson, 202–268–8405.
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received no comment letters on the
proposed rule change. This order
institutes proceedings under Section
19(b)(2)(B) of the Act 6 to determine
whether to approve or disapprove the
proposed rule change.
II. Description of the Proposal
Nasdaq’s current continued listing
standards require a listed company to
maintain a minimum number of
Publicly Held Shares,7 without
excluding Restricted Securities 8 from
such calculation.9 In contrast, for initial
listing, Nasdaq’s current rules, as
amended in 2019,10 require that a
company seeking to be listed on Nasdaq
have, among other things, a minimum
number of Unrestricted Publicly Held
Shares.11
Nasdaq has proposed to adopt new
Rule 5120, which would provide that,
while Nasdaq would not ordinarily
consider the number of Unrestricted
Publicly Held Shares of a listed
company’s security, Nasdaq may request
information from a company regarding
the number of Unrestricted Publicly
Held Shares if (1) Nasdaq observes
unusual trading characteristics in the
security; or (2) the company has
announced an event that may cause a
contraction in the number of
Unrestricted Publicly Held Shares.12
6 15
U.S.C. 78s(b)(2)(B).
Held Shares’’ is defined as ‘‘shares not
held directly or indirectly by an officer, director or
any person who is the beneficial owner of more
than 10 percent of the total shares outstanding.’’ See
Rule 5005(a)(35).
8 ‘‘Restricted Securities’’ is defined as ‘‘securities
that are subject to resale restrictions for any reason,
including but not limited to, securities: (1)
Acquired directly or indirectly from the issuer or
an affiliate of the issuer in unregistered offerings
such as private placements or Regulation D
offerings; (2) acquired through an employee stock
benefit plan or as compensation for professional
services; (3) acquired in reliance on Regulation S,
which cannot be resold within the United States; (4)
subject to a lockup agreement or a similar
contractual restriction; or (5) considered ‘restricted
securities’ under Rule 144.’’ See Rule 5005(a)(37).
9 See proposed Rule 5120. See also Notice, supra
note 3, 84 FR at 67974. For the continued listing
requirements relating to Publicly Held Shares, see
Rules 5450(b)(1)(B), (2)(B), and (3)(B), 5460(a)(1),
5550(a)(4), 5555(a)(3), and 5565(a).
10 See Securities Exchange Act Release No. 86314
(July 5, 2019), 84 FR 33102 (July 11, 2019) (SR–
NASDAQ–2019–009) (approving Nasdaq’s proposal
to, among other things, require that Restricted
Securities be excluded from Nasdaq’s calculation of
Publicly Held Shares for purposes of meeting initial
listing requirements).
11 ‘‘Unrestricted Publicly Held Shares’’ is defined
as ‘‘Publicly Held Shares that are Unrestricted
Securities.’’ See Rule 5005(a)(45). ‘‘Unrestricted
Securities’’ is defined as ‘‘securities that are not
Restricted Securities.’’ See Rule 5005(a)(46). For the
initial listing requirements relating to Unrestricted
Publicly Held Shares, see Rules 5315(e)(2),
5405(a)(2), 5415(a)(1), 5505(a)(2), 5510(a)(3), and
5520(g)(3).
12 See proposed Rule 5120.
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Proposed Rule 5120 also sets forth that
pursuant to Nasdaq’s authority under
Rule 4120(a)(5),13 Nasdaq may halt
trading in the security in connection
with such a request.14 When
considering whether a security has
unusual trading characteristics, the
proposed rule provides that Nasdaq may
review volume, price movements,
spread, and the presence or absence of
any news.15 Furthermore, the proposed
rule specifies the events that may cause
a contraction in the number of
Unrestricted Publicly Held Shares,
thereby possibly triggering a request for
additional information, to include
reverse stock splits, tender offers, stock
buybacks, or entering into contractual
agreements such as standstills or
lockups.16
Further, proposed Rule 5120 provides
that if information provided by the
company or otherwise obtained by
Nasdaq indicates that the number of
Unrestricted Publicly Held Shares for
the security is below the applicable
Publicly Held Shares requirement for
continued listing of the security, Nasdaq
generally would use its authority under
Rule 5101 17 to apply more stringent
criteria and request a plan to increase
the number of Unrestricted Publicly
Held Shares to an amount that is higher
than the applicable Publicly Held
Shares requirement.18 Such a plan
would generally be required to be
provided within 45 calendar days of the
request, as provided in the Rule 5800
Series.19
13 Rule 4120(a)(5) provides that Nasdaq ‘‘may halt
trading in a security listed on Nasdaq when Nasdaq
requests from the issuer information relating to: (A)
Material news; (B) the issuer’s ability to meet
Nasdaq listing qualification requirements, as set
forth in the Listing Rule 5000 Series; or (C) any
other information which is necessary to protect
investors and the public interest.’’
14 See proposed Rule 5120.
15 See proposed Rule 5120.
16 See proposed Rule 5120.
17 Rule 5101 states, in part, that Nasdaq ‘‘has
broad discretionary authority over the initial and
continued listing of securities in Nasdaq . . . .
[and] may use such discretion to . . . apply
additional or more stringent criteria for the initial
or continued listing of particular securities, or
suspend or delist particular securities based on any
event, condition, or circumstance that exists or
occurs that makes initial or continued listing of the
securities on Nasdaq inadvisable or unwarranted in
the opinion of Nasdaq, even though the securities
meet all enumerated criteria for initial or continued
listing on Nasdaq.’’
18 See proposed Rule 5120.
19 See proposed Rule 5120. Nasdaq has proposed
to make conforming changes to Rule 5810(c)(2)(A)
to add a deficiency under proposed Rule 5120 to
the list of deficiencies for which a company may
submit to the Exchange’s Listing Qualifications
Department a plan to regain compliance. Nasdaq
has also proposed to make other conforming and
non-substantive changes to Rule 5810(c)(2). See
proposed Rule 5810(c)(2). In addition, Nasdaq has
proposed non-substantive changes to Rule
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In support of its proposal, Nasdaq
stated that it believes that its previously
revised initial listing standards do not
sufficiently address listed companies
that may have Restricted Securities,
which could potentially result in a
security that is illiquid.20 Nasdaq noted
that illiquid securities may trade
infrequently and in a more volatile
manner, change hands at a price that
may not reflect their true market value,
and may be more susceptible to price
manipulation.21 According to Nasdaq,
the proposal would enhance
transparency 22 and ensure that
securities listed on Nasdaq are liquid
and have sufficient freely tradeable
shares to meet investor demand, thereby
reducing trading volatility and price
manipulation.23
III. Proceedings To Determine Whether
To Approve or Disapprove SR–
NASDAQ–2019–091 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act to determine
whether the proposal should be
approved or disapproved.24 Institution
of such proceedings is appropriate at
this time in view of the legal and policy
issues raised by the proposed rule
change, as discussed below. Institution
of disapproval proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved.
Pursuant to Section 19(b)(2)(B) of the
Act, the Commission is providing notice
5810(c)(3)(A) (which deals with a company’s failure
to meet the continued listing requirement for
minimum bid price) to revise the phrase ‘‘market
value of publicly held shares’’ to utilize the terms
‘‘Market Value’’ and ‘‘Publicly Held Shares,’’ which
are defined in Rule 5005(a). See proposed Rule
5810(c)(3)(A)(i) and (ii).
20 See Notice, supra note 3, 84 FR at 67974. For
example, Nasdaq stated that companies that were
not required to meet the newer initial listing
requirements may still have Restricted Securities
that are not freely tradeable, and a listed company
may conduct a transaction that decreases its
number of Unrestricted Publicly Held Shares. See
id.
21 See Notice, supra note 3, 84 FR at 67974.
Nasdaq stated that it has observed problems with
a small number of listed companies that have a
large number of Restricted Securities, and that such
companies may not have sufficient liquidity to meet
investor demand, particularly upon announcement
of material news, which may result in unusual
trading characteristics, such as extreme price
movements and unusually large bid-ask spreads.
See id.
22 According to Nasdaq, its existing rules would
currently allow it to apply additional criteria to a
listed company that satisfies all of the continued
listing requirements where there are indications
that there is insufficient liquidity in the security to
support fair and orderly trading. See Notice, supra
note 3, 84 FR at 67974, n.7 (citing Rule 5101).
23 See Notice, supra note 3, 84 FR at 67975.
24 15 U.S.C. 78s(b)(2)(B).
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of the grounds for disapproval under
consideration. The Commission is
instituting proceedings to allow for
additional analysis and input
concerning the proposed rule change’s
consistency with the Act 25 and, in
particular, with Section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange not be designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.26
Nasdaq is proposing to adopt a new
rule to specifically permit it to request
additional information from a listed
company regarding its number of
Unrestricted Publicly Held Shares if
Nasdaq observes unusual trading
characteristics in a listed company’s
security or if the listed company has
announced an event that may cause a
contraction in the number of
Unrestricted Publicly Held Shares.
Nasdaq acknowledges that its continued
listing standards currently require a
minimum number of Publicly Held
Shares, but not a minimum number of
Unrestricted Publicly Held Shares.
Nasdaq specifies, in the proposed rule,
that in considering whether there are
unusual trading characteristics in a
security for purposes of requesting
additional information on the number of
Unrestricted Publicly Held Shares,
Nasdaq may review volume, price
movements, spread, and the presence or
absence of any news. However, Nasdaq
does not state how these broad factors
would be considered in its
determination of whether there are
unusual trading characteristics to trigger
a request for additional information,
other than to note that the ‘‘unusual
trading characteristics’’ it has observed
in the past include ‘‘extreme price
movements’’ and ‘‘unusually large bid
ask spreads.’’ 27 In any case, whether
unusual trading characteristics, however
determined, would cause Nasdaq to
request additional information from a
listed company on the number of
Unrestricted Publicly Held Shares
appears to be subject to wide discretion
under the proposed rule.
Similarly, under the proposed rule,
Nasdaq may also request information on
the number of Unrestricted Publicly
Held Shares if the listed company has
announced an event that may cause a
contraction in the number of such
unrestricted shares, such as a reverse
stock split, tender offer, or stock
buyback. The Exchange has not
provided any specific explanation of
when such events would or would not
25 15
U.S.C. 78f(b)(5).
trigger a request for the number of
Unrestricted Publicly Held Shares, but
rather just provided that such events
‘‘may’’ trigger such a request, with the
result that this provision also appears to
be subject to wide discretion by Nasdaq.
Upon Nasdaq requesting additional
information on the number of
Unrestricted Publicly Held Shares, the
proposed rule then states that if the
information indicates the number of
such unrestricted shares are below the
applicable minimum number of
Publicly Held Shares continued listing
standard, Nasdaq generally will use its
authority under Rule 5101 to apply
more stringent criteria and request a
plan to increase the number of
Unrestricted Publicly Held Shares to an
amount that is higher than the
applicable minimum number of
Publicly Held Shares continued listing
standard. Nasdaq does not provide any
information in its filing regarding when
it generally will or will not use its
authority to request such a plan.
Moreover, should Nasdaq ask the listed
company to provide a plan to increase
the minimum number of Unrestricted
Publicly Held Shares, Nasdaq provides
no guidance on how it would determine
such minimum number, with the result
that this provision appears to be subject
to wide discretion by Nasdaq as well.
Nasdaq stated that its proposal is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers because,
while the proposed changes will only
apply to securities exhibiting unusual
trading characteristics and companies
that announce an event that may cause
a contraction in the number of
Unrestricted Publicly Held Shares,
Nasdaq will apply this standard to all
such securities listed on Nasdaq.28 As
discussed above, however, the
Exchange’s proposal provides it wide
discretion both (1) to determine whether
to request additional information from a
listed company on the number of
Unrestricted Publicly Held Shares; and
(2) if it does so, and that number is less
than the minimum number of Publicly
Held Shares, to establish the more
stringent requirements with respect to
the minimum number of Unrestricted
Publicly Held Shares. Accordingly, the
Commission believes there are questions
as to whether the proposal is consistent
with Section 6(b)(5) of the Act and its
requirement, among other things, that
the rules of a national securities
exchange not be designed to permit
unfair discrimination.
The Commission notes that under the
Commission’s Rules of Practice, the
26 Id.
27 See
Notice, supra note 3, 84 FR at 67974.
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28 See
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‘‘burden to demonstrate that a proposed
rule change is consistent with the
Exchange Act and the rules and
regulations issued thereunder . . . is on
the self-regulatory organization [‘SRO’]
that proposed the rule change.’’ 29 The
description of a proposed rule change,
its purpose and operation, its effect, and
a legal analysis of its consistency with
applicable requirements must all be
sufficiently detailed and specific to
support an affirmative Commission
finding,30 and any failure of an SRO to
provide this information may result in
the Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Exchange Act and the
applicable rules and regulations.31
For these reasons, the Commission
believes it is appropriate to institute
proceedings pursuant to Section
19(b)(2)(B) of the Act to determine
whether the proposal should be
approved or disapproved.
IV. Commission’s Solicitation of
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written view of interested
persons concerning whether the
proposal is consistent with Section
6(b)(5) or any other provision of the Act,
or the rules and regulations thereunder.
Although there do not appear to be any
issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.32
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by March 31, 2020. Any
person who wishes to file a rebuttal to
any other person’s submission must file
29 Rule 700(b)(3), Commission Rules of Practice,
17 CFR 201.700(b)(3).
30 See id.
31 See id.
32 Section 19(b)(2) of the Exchange Act, as
amended by the Securities Act Amendments of
1975, Public Law 94–29 (June 4, 1975), grants the
Commission flexibility to determine what type of
proceeding—either oral or notice and opportunity
for written comments—is appropriate for
consideration of a particular proposal by a selfregulatory organization. See Securities Act
Amendments of 1975, Senate Comm. on Banking,
Housing & Urban Affairs, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
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that rebuttal by April 14, 2020. The
Commission asks that commenters
address the sufficiency of the
Exchange’s statements in support of the
proposal which are set forth in the
Notice,33 in addition to any other
comments they may wish to submit
about the proposed rule change.
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–
NASDAQ–2019–091 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–2019–091. 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–2019–091 and
should be submitted on or before March
31, 2020. Rebuttal comments should be
submitted by April 14, 2020.
Notice, supra note 3.
CFR 200.30–3(a)(57).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04790 Filed 3–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88323; File No. SRCboeEDGA–2020–005]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
of a Proposed Rule Change To Amend
EDGA Rule 11.8(e), Which Describes
the Handling of MidPoint Discretionary
Orders Entered on the Exchange
March 5, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
28, 2020, Cboe EDGA Exchange, Inc.
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the 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
Cboe EDGA Exchange, Inc. (‘‘EDGA’’
or the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend EDGA Rule 11.8(e),
which describes the handling of
MidPoint Discretionary Orders entered
on the Exchange. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
33 See
1 15
34 17
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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13957
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
A MidPoint Discretionary Order
(‘‘MDO’’) is a limit order to buy that is
pegged to the national best bid (‘‘NBB’’),
with discretion to execute at prices up
to and including the midpoint of the
national best bid or offer (‘‘NBBO’’), or
a limit order to sell that is pegged to the
national best offer (‘‘NBO’’), with
discretion to execute at prices down to
and including the midpoint of the
NBBO.3 The purpose of the proposed
rule change is to amend EDGA Rule
11.8(e) to introduce two optional
instructions that Users would be able to
include on MDOs entered on the
Exchange. First, the Exchange would
allow Users to enter MDOs with an
offset to the NBBO, similar to orders
entered with a Primary Peg Instruction
today.4 Second, the Exchange would
allow Users to enter MDOs that include
a Quote Depletion Protection (‘‘QDP’’)
instruction that would disable
discretion for a limited period in certain
circumstances where the best bid or
offer displayed on the EDGA Book is
executed or cancelled below one round
lot. The Exchange believes that both of
these features would enhance the
usefulness of MDOs to members and
investors, and would allow the
exchange to better compete with other
national securities exchanges that
currently offer order types that include
similar features.
Offset Instruction
As explained, MDOs are pegged to the
same side of the NBBO, with discretion
to execute at prices to and including the
midpoint of the NBBO. An MDO is
therefore similar to an order entered
with both a Primary Peg instruction and
an instruction to exercise discretion to
the NBBO midpoint. It is also similar to
certain order types offered by other
national securities exchanges, including
Discretionary Peg Orders offered by the
Investors Exchange LLC (‘‘IEX’’).5
3 See
EDGA Rule 11.8(e).
EDGA Rule 11.6(j)(2).
5 See IEX Rule 11.190(b)(10). Discretionary Peg
Orders on IEX are posted at the less aggressive of
4 See
Continued
Sfmt 4703
E:\FR\FM\10MRN1.SGM
10MRN1
]]>Agencies
[Federal Register Volume 85, Number 47 (Tuesday, March 10, 2020)]
[Notices]
[Pages 13954-13957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04790]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88315; File No. SR-NASDAQ-2019-091]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change To Adopt a New Rule Concerning Nasdaq's Ability To
Request Information From a Listed Company Regarding the Number of
Unrestricted Publicly Held Shares in Certain Circumstances and Halt
Trading in the Company's Security Upon the Request, and in Certain
Circumstances Request a Plan To Increase the Number of Unrestricted
Publicly Held Shares to an Amount That Is Higher Than the Applicable
Publicly Held Shares Requirement
March 4, 2020.
I. Introduction
On November 22, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt a rule specifying Nasdaq's ability to
request information from a listed company regarding the number of
unrestricted publicly held shares when Nasdaq observes unusual trading
characteristics in a security or a company announces an event that may
cause a contracting in the number of unrestricted publicly held shares,
halt trading in such company's securities upon such a request, and
potentially request a listed company to increase its number of
unrestricted publicly held shares. The proposed rule change was
published for comment in the Federal Register on December 12, 2019.\3\
On January 24, 2020, pursuant to Section 19(b(2) of the Act,\4\ the
Commission designated a longer period within which to either approve
the proposed rule change, disapprove the proposed rule change, or
institute proceedings to determine whether to disapprove the proposed
rule change.\5\ The Commission
[[Page 13955]]
received no comment letters on the proposed rule change. This order
institutes proceedings under Section 19(b)(2)(B) of the Act \6\ to
determine whether to approve or disapprove the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 87677 (December 6,
2019), 84 FR 67974 (December 12, 2019) (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 88028 (January 24,
2020), 85 FR 5500 (January 30, 2020). The Commission designated
March 11, 2020, as the date by which it should approve, disapprove,
or institute proceedings to determine whether to disapprove the
proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal
Nasdaq's current continued listing standards require a listed
company to maintain a minimum number of Publicly Held Shares,\7\
without excluding Restricted Securities \8\ from such calculation.\9\
In contrast, for initial listing, Nasdaq's current rules, as amended in
2019,\10\ require that a company seeking to be listed on Nasdaq have,
among other things, a minimum number of Unrestricted Publicly Held
Shares.\11\
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\7\ ``Publicly Held Shares'' is defined as ``shares not held
directly or indirectly by an officer, director or any person who is
the beneficial owner of more than 10 percent of the total shares
outstanding.'' See Rule 5005(a)(35).
\8\ ``Restricted Securities'' is defined as ``securities that
are subject to resale restrictions for any reason, including but not
limited to, securities: (1) Acquired directly or indirectly from the
issuer or an affiliate of the issuer in unregistered offerings such
as private placements or Regulation D offerings; (2) acquired
through an employee stock benefit plan or as compensation for
professional services; (3) acquired in reliance on Regulation S,
which cannot be resold within the United States; (4) subject to a
lockup agreement or a similar contractual restriction; or (5)
considered `restricted securities' under Rule 144.'' See Rule
5005(a)(37).
\9\ See proposed Rule 5120. See also Notice, supra note 3, 84 FR
at 67974. For the continued listing requirements relating to
Publicly Held Shares, see Rules 5450(b)(1)(B), (2)(B), and (3)(B),
5460(a)(1), 5550(a)(4), 5555(a)(3), and 5565(a).
\10\ See Securities Exchange Act Release No. 86314 (July 5,
2019), 84 FR 33102 (July 11, 2019) (SR-NASDAQ-2019-009) (approving
Nasdaq's proposal to, among other things, require that Restricted
Securities be excluded from Nasdaq's calculation of Publicly Held
Shares for purposes of meeting initial listing requirements).
\11\ ``Unrestricted Publicly Held Shares'' is defined as
``Publicly Held Shares that are Unrestricted Securities.'' See Rule
5005(a)(45). ``Unrestricted Securities'' is defined as ``securities
that are not Restricted Securities.'' See Rule 5005(a)(46). For the
initial listing requirements relating to Unrestricted Publicly Held
Shares, see Rules 5315(e)(2), 5405(a)(2), 5415(a)(1), 5505(a)(2),
5510(a)(3), and 5520(g)(3).
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Nasdaq has proposed to adopt new Rule 5120, which would provide
that, while Nasdaq would not ordinarily consider the number of
Unrestricted Publicly Held Shares of a listed company's security,
Nasdaq may request information from a company regarding the number of
Unrestricted Publicly Held Shares if (1) Nasdaq observes unusual
trading characteristics in the security; or (2) the company has
announced an event that may cause a contraction in the number of
Unrestricted Publicly Held Shares.\12\ Proposed Rule 5120 also sets
forth that pursuant to Nasdaq's authority under Rule 4120(a)(5),\13\
Nasdaq may halt trading in the security in connection with such a
request.\14\ When considering whether a security has unusual trading
characteristics, the proposed rule provides that Nasdaq may review
volume, price movements, spread, and the presence or absence of any
news.\15\ Furthermore, the proposed rule specifies the events that may
cause a contraction in the number of Unrestricted Publicly Held Shares,
thereby possibly triggering a request for additional information, to
include reverse stock splits, tender offers, stock buybacks, or
entering into contractual agreements such as standstills or
lockups.\16\
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\12\ See proposed Rule 5120.
\13\ Rule 4120(a)(5) provides that Nasdaq ``may halt trading in
a security listed on Nasdaq when Nasdaq requests from the issuer
information relating to: (A) Material news; (B) the issuer's ability
to meet Nasdaq listing qualification requirements, as set forth in
the Listing Rule 5000 Series; or (C) any other information which is
necessary to protect investors and the public interest.''
\14\ See proposed Rule 5120.
\15\ See proposed Rule 5120.
\16\ See proposed Rule 5120.
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Further, proposed Rule 5120 provides that if information provided
by the company or otherwise obtained by Nasdaq indicates that the
number of Unrestricted Publicly Held Shares for the security is below
the applicable Publicly Held Shares requirement for continued listing
of the security, Nasdaq generally would use its authority under Rule
5101 \17\ to apply more stringent criteria and request a plan to
increase the number of Unrestricted Publicly Held Shares to an amount
that is higher than the applicable Publicly Held Shares
requirement.\18\ Such a plan would generally be required to be provided
within 45 calendar days of the request, as provided in the Rule 5800
Series.\19\
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\17\ Rule 5101 states, in part, that Nasdaq ``has broad
discretionary authority over the initial and continued listing of
securities in Nasdaq . . . . [and] may use such discretion to . . .
apply additional or more stringent criteria for the initial or
continued listing of particular securities, or suspend or delist
particular securities based on any event, condition, or circumstance
that exists or occurs that makes initial or continued listing of the
securities on Nasdaq inadvisable or unwarranted in the opinion of
Nasdaq, even though the securities meet all enumerated criteria for
initial or continued listing on Nasdaq.''
\18\ See proposed Rule 5120.
\19\ See proposed Rule 5120. Nasdaq has proposed to make
conforming changes to Rule 5810(c)(2)(A) to add a deficiency under
proposed Rule 5120 to the list of deficiencies for which a company
may submit to the Exchange's Listing Qualifications Department a
plan to regain compliance. Nasdaq has also proposed to make other
conforming and non-substantive changes to Rule 5810(c)(2). See
proposed Rule 5810(c)(2). In addition, Nasdaq has proposed non-
substantive changes to Rule 5810(c)(3)(A) (which deals with a
company's failure to meet the continued listing requirement for
minimum bid price) to revise the phrase ``market value of publicly
held shares'' to utilize the terms ``Market Value'' and ``Publicly
Held Shares,'' which are defined in Rule 5005(a). See proposed Rule
5810(c)(3)(A)(i) and (ii).
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In support of its proposal, Nasdaq stated that it believes that its
previously revised initial listing standards do not sufficiently
address listed companies that may have Restricted Securities, which
could potentially result in a security that is illiquid.\20\ Nasdaq
noted that illiquid securities may trade infrequently and in a more
volatile manner, change hands at a price that may not reflect their
true market value, and may be more susceptible to price
manipulation.\21\ According to Nasdaq, the proposal would enhance
transparency \22\ and ensure that securities listed on Nasdaq are
liquid and have sufficient freely tradeable shares to meet investor
demand, thereby reducing trading volatility and price manipulation.\23\
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\20\ See Notice, supra note 3, 84 FR at 67974. For example,
Nasdaq stated that companies that were not required to meet the
newer initial listing requirements may still have Restricted
Securities that are not freely tradeable, and a listed company may
conduct a transaction that decreases its number of Unrestricted
Publicly Held Shares. See id.
\21\ See Notice, supra note 3, 84 FR at 67974. Nasdaq stated
that it has observed problems with a small number of listed
companies that have a large number of Restricted Securities, and
that such companies may not have sufficient liquidity to meet
investor demand, particularly upon announcement of material news,
which may result in unusual trading characteristics, such as extreme
price movements and unusually large bid-ask spreads. See id.
\22\ According to Nasdaq, its existing rules would currently
allow it to apply additional criteria to a listed company that
satisfies all of the continued listing requirements where there are
indications that there is insufficient liquidity in the security to
support fair and orderly trading. See Notice, supra note 3, 84 FR at
67974, n.7 (citing Rule 5101).
\23\ See Notice, supra note 3, 84 FR at 67975.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
NASDAQ-2019-091 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act to determine whether the proposal should be
approved or disapproved.\24\ Institution of such proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposed rule change, as discussed below. Institution of
disapproval proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act, the Commission is
providing notice
[[Page 13956]]
of the grounds for disapproval under consideration. The Commission is
instituting proceedings to allow for additional analysis and input
concerning the proposed rule change's consistency with the Act \25\
and, in particular, with Section 6(b)(5) of the Act, which requires,
among other things, that the rules of a national securities exchange
not be designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.\26\
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\25\ 15 U.S.C. 78f(b)(5).
\26\ Id.
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Nasdaq is proposing to adopt a new rule to specifically permit it
to request additional information from a listed company regarding its
number of Unrestricted Publicly Held Shares if Nasdaq observes unusual
trading characteristics in a listed company's security or if the listed
company has announced an event that may cause a contraction in the
number of Unrestricted Publicly Held Shares. Nasdaq acknowledges that
its continued listing standards currently require a minimum number of
Publicly Held Shares, but not a minimum number of Unrestricted Publicly
Held Shares. Nasdaq specifies, in the proposed rule, that in
considering whether there are unusual trading characteristics in a
security for purposes of requesting additional information on the
number of Unrestricted Publicly Held Shares, Nasdaq may review volume,
price movements, spread, and the presence or absence of any news.
However, Nasdaq does not state how these broad factors would be
considered in its determination of whether there are unusual trading
characteristics to trigger a request for additional information, other
than to note that the ``unusual trading characteristics'' it has
observed in the past include ``extreme price movements'' and
``unusually large bid ask spreads.'' \27\ In any case, whether unusual
trading characteristics, however determined, would cause Nasdaq to
request additional information from a listed company on the number of
Unrestricted Publicly Held Shares appears to be subject to wide
discretion under the proposed rule.
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\27\ See Notice, supra note 3, 84 FR at 67974.
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Similarly, under the proposed rule, Nasdaq may also request
information on the number of Unrestricted Publicly Held Shares if the
listed company has announced an event that may cause a contraction in
the number of such unrestricted shares, such as a reverse stock split,
tender offer, or stock buyback. The Exchange has not provided any
specific explanation of when such events would or would not trigger a
request for the number of Unrestricted Publicly Held Shares, but rather
just provided that such events ``may'' trigger such a request, with the
result that this provision also appears to be subject to wide
discretion by Nasdaq.
Upon Nasdaq requesting additional information on the number of
Unrestricted Publicly Held Shares, the proposed rule then states that
if the information indicates the number of such unrestricted shares are
below the applicable minimum number of Publicly Held Shares continued
listing standard, Nasdaq generally will use its authority under Rule
5101 to apply more stringent criteria and request a plan to increase
the number of Unrestricted Publicly Held Shares to an amount that is
higher than the applicable minimum number of Publicly Held Shares
continued listing standard. Nasdaq does not provide any information in
its filing regarding when it generally will or will not use its
authority to request such a plan. Moreover, should Nasdaq ask the
listed company to provide a plan to increase the minimum number of
Unrestricted Publicly Held Shares, Nasdaq provides no guidance on how
it would determine such minimum number, with the result that this
provision appears to be subject to wide discretion by Nasdaq as well.
Nasdaq stated that its proposal is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers because,
while the proposed changes will only apply to securities exhibiting
unusual trading characteristics and companies that announce an event
that may cause a contraction in the number of Unrestricted Publicly
Held Shares, Nasdaq will apply this standard to all such securities
listed on Nasdaq.\28\ As discussed above, however, the Exchange's
proposal provides it wide discretion both (1) to determine whether to
request additional information from a listed company on the number of
Unrestricted Publicly Held Shares; and (2) if it does so, and that
number is less than the minimum number of Publicly Held Shares, to
establish the more stringent requirements with respect to the minimum
number of Unrestricted Publicly Held Shares. Accordingly, the
Commission believes there are questions as to whether the proposal is
consistent with Section 6(b)(5) of the Act and its requirement, among
other things, that the rules of a national securities exchange not be
designed to permit unfair discrimination.
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\28\ See Notice, supra note 3, 84 FR at 67975-76.
---------------------------------------------------------------------------
The Commission notes that under the Commission's Rules of Practice,
the ``burden to demonstrate that a proposed rule change is consistent
with the Exchange Act and the rules and regulations issued thereunder .
. . is on the self-regulatory organization [`SRO'] that proposed the
rule change.'' \29\ The description of a proposed rule change, its
purpose and operation, its effect, and a legal analysis of its
consistency with applicable requirements must all be sufficiently
detailed and specific to support an affirmative Commission finding,\30\
and any failure of an SRO to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Exchange Act and the
applicable rules and regulations.\31\
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\29\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\30\ See id.
\31\ See id.
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For these reasons, the Commission believes it is appropriate to
institute proceedings pursuant to Section 19(b)(2)(B) of the Act to
determine whether the proposal should be approved or disapproved.
IV. Commission's Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
view of interested persons concerning whether the proposal is
consistent with Section 6(b)(5) or any other provision of the Act, or
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\32\
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\32\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 31, 2020. Any person who wishes to file a rebuttal
to any other person's submission must file
[[Page 13957]]
that rebuttal by April 14, 2020. The Commission asks that commenters
address the sufficiency of the Exchange's statements in support of the
proposal which are set forth in the Notice,\33\ in addition to any
other comments they may wish to submit about the proposed rule change.
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\33\ See Notice, supra note 3.
---------------------------------------------------------------------------
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-2019-091 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-2019-091. 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-2019-091 and should be submitted
on or before March 31, 2020. Rebuttal comments should be submitted by
April 14, 2020.
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\34\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04790 Filed 3-9-20; 8:45 am]
BILLING CODE 8011-01-P
