Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change, As Modified by Amendment No. 1, To Treat as an Eligible Switch, for Purposes of IM-5900-7, an Acquisition Company That Switches From NYSE to Nasdaq After Announcing a Business Combination, 59346-59349 [2020-20700]
Download as PDF
<![CDATA[
59346
Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
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–BX–2020–026, and should
be submitted on or before October 13,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20698 Filed 9–18–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–154, OMB Control No.
3235–0122]
Submission for OMB Review;
Comment Request
jbell on DSKJLSW7X2PROD with NOTICES
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 17a–10
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
7 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
19:59 Sep 18, 2020
Jkt 250001
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 17a–10 (17 CFR 240.17a–10) under
the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.).
The primary purpose of Rule 17a–10
is to obtain the economic and statistical
data necessary for an ongoing analysis
of the securities industry. Paragraph
(a)(1) of Rule 17a–10 generally requires
broker-dealers that are exempted from
the requirement to file monthly and
quarterly reports pursuant to paragraph
(a) of Exchange Act Rule 17a–5 (17 CFR
240.17a–5) to file with the Commission
the Facing Page, a Statement of Income
(Loss), and balance sheet from Part IIA
of Form X–17A–5 1 (17 CFR 249.617),
and Schedule I of Form X–17A–5 not
later than 17 business days after the end
of each calendar year.
Paragraph (a)(2) of Rule 17a–10
requires a broker-dealer subject to Rule
17a–5(a) to submit Schedule I of Form
X–17A–5 with its Form X–17A–5 for the
calendar quarter ending December 31 of
each year. The burden associated with
filing Schedule I of Form X–17A–5 is
accounted for in the PRA filing
associated with Rule 17a–5.
Paragraph (b) of Rule 17a–10 provides
that the provisions of paragraph (a) do
not apply to members of national
securities exchanges or registered
national securities associations that
maintain records containing the
information required by Form X–17A–5
and which transmit to the Commission
copies of the records pursuant to a plan
which has been declared effective by the
Commission.
The Commission staff estimates that
approximately 46 broker-dealers will
spend an average of 12 hours per year
complying with Rule 17a–10. Thus, the
total compliance burden is estimated to
be approximately 552 burden-hours per
year.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
1 Form X–17A–5 is the Financial and Operational
Combined Uniform Single Report (‘‘FOCUS
Report’’), which is used by broker-dealers to
provide certain required information to the
Commission.
PO 00000
Frm 00068
Fmt 4703
Sfmt 4703
for Public Comments’’ or by using the
search function.
Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission, c/
o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: September 15, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20712 Filed 9–18–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89875; File No. SR–
NASDAQ–2020–060]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change, As
Modified by Amendment No. 1, To
Treat as an Eligible Switch, for
Purposes of IM–5900–7, an Acquisition
Company That Switches From NYSE to
Nasdaq After Announcing a Business
Combination
September 15, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 1, 2020, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
a proposed rule change. On September
14, 2020, the Exchange filed
Amendment No. 1 to the proposed rule
change, which amended and replaced
the proposed rule change in its entirety.
The proposed rule change, as modified
by Amendment No. 1, is described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change, as modified by
Amendment No. 1, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to treat as an
Eligible Switch, for purposes of IM–
5900–7, an Acquisition Company that
1 15
2 17
E:\FR\FM\21SEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
21SEN1
Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
switches from NYSE to Nasdaq after
announcing a business combination.
This Amendment No. 1 replaces and
supersedes the original filing in its
entirety.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
jbell on DSKJLSW7X2PROD with NOTICES
1. Purpose
Nasdaq proposes to modify IM–5900–
7 to treat as an Eligible Switch under
that rule any Acquisition Company (as
defined below) that both: (i) Switched
its listing from the New York Stock
Exchange (‘‘NYSE’’) to list on Nasdaq
under IM–5101–2 after the company
publicly announced that it entered into
a binding agreement for a business
combination; and (ii) subsequently
satisfies the conditions in IM–5101–2(b)
and lists on the Nasdaq Global or Global
Select Markets in conjunction with that
business combination.3
Nasdaq Rule IM–5101–2 imposes
additional listing requirements on a
company whose business plan is to
complete an initial public offering
(‘‘IPO’’) and engage in a merger or
acquisition with one or more
unidentified companies within a
specific period of time (‘‘Acquisition
Companies’’).4 An Acquisition
Company does not have an operating
business and tends to trade infrequently
and in a tight range until the company
completes an acquisition. Therefore,
these Acquisition Companies do not
3 This Amendment No. 1 replaces and supersedes
the original filing in its entirety to make clarifying
changes.
4 Securities Exchange Act Release No. 58228 (July
25, 2008), 73 FR 44794 (July 31, 2008) (adopting the
predecessor to IM–5101–2).
VerDate Sep<11>2014
19:59 Sep 18, 2020
Jkt 250001
generally need shareholder
communication services, market
analytic tools or market advisory tools
and, upon listing (whether as an IPO or
when switching from another market),
these Acquisition Companies do not
receive complimentary services from
Nasdaq under IM–5900–7.5 However, a
company completing a business
combination with a Nasdaq-listed
Acquisition Company is eligible to
receive services under IM–5900–7 when
it lists on the Nasdaq Global or Global
Select Market in conjunction with a
business combination that satisfies the
conditions in IM–5101–2(b).6 At this
point, the Acquisition Company
transitions to being an operating
company and has a similar need as
other companies for shareholder
communication services, market
analytic tools and market advisory tools.
For this purpose, the Acquisition
Company is treated as an ‘‘Eligible New
Listing’’ under the rule, similar to a
company listing in connection with its
IPO.7
Nasdaq treats a company that
switches its listing from NYSE to the
Nasdaq Global or Global Select Market
as an ‘‘Eligible Switch’’ and offers such
companies a package of services that
can be more valuable than the package
of services offered to Eligible New
Listings.8 This enhanced package, in
part, reflects the competition in the
market for listing services.
Under this construct, an Acquisition
Company listed on NYSE that switches
to Nasdaq as an Acquisition Company
would not receive any services when it
switches, even if it has already
announced its business combination,
but would receive services as an Eligible
New Listing when it completes a
business combination that satisfies the
5 See Securities Exchange Act Release No. 79366
(November 21, 2016), 81 FR 85663 (November 28,
2016).
6 IM–5900–7(e).
7 Under IM–5900–7 ‘‘Eligible New Listings’’
include ‘‘companies listing on the Global or Global
Select Markets in connection with their initial
public offering in the United States, including
American Depository Receipts (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, in connection
with a Direct Listing as defined in IM–5315–1
(including the listing of American Depository
Receipts), or in conjunction with a business
combination that satisfies the conditions in IM–
5101–2(b).’’
8 An Eligible Switch with a market capitalization
less than $750 million receives the same package
of services for the same two year term as an Eligible
New Listing. An Eligible Switch with a market
capitalization of $750 million of more receives
service with a higher total retail value than a
comparably sized Eligible New Listing and will
receive those services for four years instead of two
years.
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
59347
requirements of IM–5101–2(b). On the
other hand, if the company waits until
it completes a business combination and
then switches to Nasdaq, the company
would not be listing on Nasdaq as an
Acquisition Company under IM–5101–2
and the company would receive services
with a higher value as an Eligible
Switch.
Nasdaq believes that certain
companies may prefer to switch markets
after they announce their business
combination, but before they
consummate it, and that the competition
for listing such a company is similar to
the competition for a company that
qualifies as an Eligible Switch today.
Accordingly, Nasdaq proposes to treat
as an Eligible Switch any company that
switches its listing from NYSE and lists
on Nasdaq under IM–5101–2 after the
company has publicly announced that it
entered into a binding agreement for a
business combination and that
subsequently satisfies the conditions in
IM–5101–2(b) and lists on the Global or
Global Select Market in conjunction
with that business combination.9
Removing the existing incentive for
an Acquisition Company to delay
switching until the time of its business
combination will allow Nasdaq to
process both the removal of the
Acquisition Company and the
simultaneous addition of the operating
company, which will help ensure that
the transaction is processed smoothly
for the benefit of the company’s
investors. Otherwise, multiple markets
would need to carefully choreograph the
removal of the company’s securities
from one market, a change in the name
and symbol of the securities, and the
addition of securities to another market,
which all occurs in conjunction with a
significant corporate event—the closing
of the business combination.
Of course an Acquisition Company
could only switch its listing to Nasdaq
if it satisfies all of Nasdaq’s initial
listing requirements. In addition, the
combined company would again have to
satisfy all initial listing requirements at
the time of the business combination.10
As under existing rules, the Acquisition
Company itself would not receive
services as an Eligible Switch under the
proposed rule and the services would
only be available to the company upon
9 In the event that the Acquisition Company
terminates the business combination that was
announced when it switched it would not be
eligible to receive services as an Eligible Switch
under the proposed rule; however, if the
Acquisition Company subsequently completes a
different business combination it may be eligible to
receive services as an Eligible New Listing as
described in existing IM–5900–7(e).
10 See IM–5101–2(d) and (e).
E:\FR\FM\21SEN1.SGM
21SEN1
59348
Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
completing its business combination
and listing on the Nasdaq Global or
Global Select Markets pursuant to the
conditions described in IM–5900–7(e).11
Nasdaq notes that no other company
will be required to pay higher fees as a
result of the proposed amendments and
represents that providing these services
will have no impact on the resources
available for its regulatory programs.
Finally, Nasdaq proposes nonsubstantive technical amendments to
IM–5900–7. Specifically, Nasdaq
proposes to eliminate most of the
description of the history of the rule
from the rule text because it is no longer
applicable to any companies. However,
Nasdaq proposes to relocate to a new
paragraph (g) and make minor nonsubstantive changes to the discussion
about the 2018 change to the services
offered because some companies are
still eligible to receive services under
the rule in effect prior to the 2018
change.12 Nasdaq also proposes to
renumber other paragraphs of the rule in
order to improve the rules’ readability.
jbell on DSKJLSW7X2PROD with NOTICES
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 and is not designed to
permit unfair discrimination between
issuers. Nasdaq also believes that the
proposed rule change is consistent with
the provisions of Sections 6(b)(4),15 and
6(b)(8),16 in that the proposal is
11 Nasdaq has proposed to offer Acquisition
Companies listed on Nasdaq a complimentary
global targeting tool. See Exchange Act Release No.
89413 (July 28, 2020), 85 FR 46759 (August 3, 2020)
(SR–Nasdaq–2020–044). If approved, an
Acquisition Company that switches its listing to
Nasdaq after the public announcement that the
company entered into a binding agreement for the
business combination intended to satisfy the
conditions in IM–5101–2(b), as described herein,
would be eligible to receive that tool from the date
of listing until 60 days following the completion of
the business combination, or such time that the
Acquisition Company publicly announces that such
agreement is terminated.
12 See Securities Exchange Act Release No. 82976
(March 30, 2018), 83 FR 14683 (April 5, 2018) (SR–
NASDAQ–2018–023). This rule change became
operative for new listings on or after April 23, 2018.
An Eligible Switch that listed under the rule in
effect before this date could receive services under
the prior rule for up to four years from its listing
date.
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(8).
VerDate Sep<11>2014
19:59 Sep 18, 2020
Jkt 250001
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
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,17 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. In particular, Nasdaq
believes it is reasonable, and not
unfairly discriminatory, to treat an
Acquisition Company as an Eligible
Switch for purposes of IM–5900–7
following the public announcement of
the business combination that is
intended to satisfy the conditions in
Listing Rule IM–5101–2(b) because the
Acquisition Company may reconsider
its listing market at that time, in
connection with its rebranding and the
launch of the operating company as a
public company. Nasdaq believes that
treating the company as an Eligible
Switch would provide an incentive to
the company to list on Nasdaq.
In addition, Nasdaq believes that in
most instances involving an Acquisition
Company that has announced a business
combination, the operating company
plays a significant role in deciding
where to list the combined company.
Accordingly, it is not unfair to treat an
Acquisition Company that has
announced a business combination
differently from one that has not yet
made such an announcement. Nasdaq
believes it is not an inequitable
allocation of fees to treat an Acquisition
Company as an Eligible Switch
following the public announcement of
the business combination that is
intended to satisfy the conditions in
Listing Rule IM–5101–2(b) for these
same reasons and because the
consideration about whether to switch
markets is roughly the same for an
Acquisition Company that has publicly
announced a business combination as it
is for other companies that are
considered Eligible Switches.
Nasdaq also believes that the
proposed rule change is consistent with
the objectives of Section 6(b)(5) because
17 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.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
it will remove an impediment to a free
and open market and a national market
system, and will help to protect
investors by removing an impediment
for an Acquisition Company to switch
its listing prior to the closing of its
business combination. If a company is
forced to wait to switch to Nasdaq until
the time it closes the business
combination in order to be treated as an
Eligible Switch, additional risks can be
introduced into the process because
both the exchange transfer and the
closing of the transaction, which will
typically includes a concurrent name
and symbol change, must be
coordinated between two exchanges. In
contrast, if the Acquisition Company is
able to switch earlier, then there is no
additional cross-market coordination
required at the time of closing, which is
a significant step in the company’s lifecycle. The ability to switch before the
closing without an adverse effect in the
services that the company will receive
from Nasdaq reduces potential risks for
the company and its investors at the
time of closing of the business
combination and it will thereby remove
an impediment to a free and open
market and a national market system
and help to better protect investors.
The non-substantive changes to
eliminate non-applicable history from
the rule text and renumber and
reorganize the rule will improve the
rule’s readability and thereby remove an
impediment to a free and open market
and a national market system and help
to better protect investors.
Nasdaq further 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.18
Finally, Nasdaq also believes it is
reasonable to balance its need to remain
competitive with other listing venues,
while at the same time ensuring
adequate revenue to meet is regulatory
responsibilities. Nasdaq notes that no
other company will be required to pay
higher fees as a result of the proposed
amendments and it represents that
providing this service will have no
impact on the resources available for its
regulatory programs.
18 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)).
E:\FR\FM\21SEN1.SGM
21SEN1
Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
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 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 change reflects that competition,
but it does not impose any burden on
the competition with other exchanges.
Rather, Nasdaq believes the proposed
changes will enhance competition for
listings of Acquisition Companies.
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.
Nasdaq also notes that Nasdaq
Corporate Solutions competes with
other service providers in providing the
services that are offered to Eligible
Switches. To the extent that these other
providers believe that Nasdaq offering a
complimentary services for a limited
time creates a competitive burden on
their offerings, they are able to craft a
similar program to attract Acquisition
Companies that have publicly
announced a business combination to
their services.
jbell on DSKJLSW7X2PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
VerDate Sep<11>2014
19:59 Sep 18, 2020
Jkt 250001
including whether the proposed rule
change, as modified by Amendment No.
1, is consistent with the Act. Comments
may be submitted by any of the
following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2020–060 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–2020–060. 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–2020–060, and
should be submitted on or before
October 13, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20700 Filed 9–18–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89878; File No. SR–
NASDAQ–2020–057]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Allow Companies To List in
Connection With a Direct Listing With
a Primary Offering in Which the
Company Will Sell Shares Itself in the
Opening Auction on the First Day of
Trading on Nasdaq and To Explain
How the Opening Transaction for Such
a Listing Will Be Effected
September 15, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 4, 2020, 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 allow
companies to list in connection with a
primary offering in which the company
will sell shares itself in the opening
auction on the first day of trading on
Nasdaq and to explain how the opening
transaction for such a listing will be
effected.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, 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
1 15
19 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00071
Fmt 4703
Sfmt 4703
59349
2 17
E:\FR\FM\21SEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
21SEN1
]]>Agencies
[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Notices]
[Pages 59346-59349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20700]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89875; File No. SR-NASDAQ-2020-060]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change, As Modified by Amendment No.
1, To Treat as an Eligible Switch, for Purposes of IM-5900-7, an
Acquisition Company That Switches From NYSE to Nasdaq After Announcing
a Business Combination
September 15, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 1, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') a proposed rule change. On September 14,
2020, the Exchange filed Amendment No. 1 to the proposed rule change,
which amended and replaced the proposed rule change in its entirety.
The proposed rule change, as modified by Amendment No. 1, is described
in Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change, as modified by Amendment No. 1, 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 treat as an Eligible Switch, for purposes
of IM-5900-7, an Acquisition Company that
[[Page 59347]]
switches from NYSE to Nasdaq after announcing a business combination.
This Amendment No. 1 replaces and supersedes the original filing in its
entirety.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to modify IM-5900-7 to treat as an Eligible Switch
under that rule any Acquisition Company (as defined below) that both:
(i) Switched its listing from the New York Stock Exchange (``NYSE'') to
list on Nasdaq under IM-5101-2 after the company publicly announced
that it entered into a binding agreement for a business combination;
and (ii) subsequently satisfies the conditions in IM-5101-2(b) and
lists on the Nasdaq Global or Global Select Markets in conjunction with
that business combination.\3\
---------------------------------------------------------------------------
\3\ This Amendment No. 1 replaces and supersedes the original
filing in its entirety to make clarifying changes.
---------------------------------------------------------------------------
Nasdaq Rule IM-5101-2 imposes additional listing requirements on a
company whose business plan is to complete an initial public offering
(``IPO'') and engage in a merger or acquisition with one or more
unidentified companies within a specific period of time (``Acquisition
Companies'').\4\ An Acquisition Company does not have an operating
business and tends to trade infrequently and in a tight range until the
company completes an acquisition. Therefore, these Acquisition
Companies do not generally need shareholder communication services,
market analytic tools or market advisory tools and, upon listing
(whether as an IPO or when switching from another market), these
Acquisition Companies do not receive complimentary services from Nasdaq
under IM-5900-7.\5\ However, a company completing a business
combination with a Nasdaq-listed Acquisition Company is eligible to
receive services under IM-5900-7 when it lists on the Nasdaq Global or
Global Select Market in conjunction with a business combination that
satisfies the conditions in IM-5101-2(b).\6\ At this point, the
Acquisition Company transitions to being an operating company and has a
similar need as other companies for shareholder communication services,
market analytic tools and market advisory tools. For this purpose, the
Acquisition Company is treated as an ``Eligible New Listing'' under the
rule, similar to a company listing in connection with its IPO.\7\
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 58228 (July 25, 2008),
73 FR 44794 (July 31, 2008) (adopting the predecessor to IM-5101-2).
\5\ See Securities Exchange Act Release No. 79366 (November 21,
2016), 81 FR 85663 (November 28, 2016).
\6\ IM-5900-7(e).
\7\ Under IM-5900-7 ``Eligible New Listings'' include
``companies listing on the Global or Global Select Markets in
connection with their initial public offering in the United States,
including American Depository Receipts (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, in connection with a
Direct Listing as defined in IM-5315-1 (including the listing of
American Depository Receipts), or in conjunction with a business
combination that satisfies the conditions in IM-5101-2(b).''
---------------------------------------------------------------------------
Nasdaq treats a company that switches its listing from NYSE to the
Nasdaq Global or Global Select Market as an ``Eligible Switch'' and
offers such companies a package of services that can be more valuable
than the package of services offered to Eligible New Listings.\8\ This
enhanced package, in part, reflects the competition in the market for
listing services.
---------------------------------------------------------------------------
\8\ An Eligible Switch with a market capitalization less than
$750 million receives the same package of services for the same two
year term as an Eligible New Listing. An Eligible Switch with a
market capitalization of $750 million of more receives service with
a higher total retail value than a comparably sized Eligible New
Listing and will receive those services for four years instead of
two years.
---------------------------------------------------------------------------
Under this construct, an Acquisition Company listed on NYSE that
switches to Nasdaq as an Acquisition Company would not receive any
services when it switches, even if it has already announced its
business combination, but would receive services as an Eligible New
Listing when it completes a business combination that satisfies the
requirements of IM-5101-2(b). On the other hand, if the company waits
until it completes a business combination and then switches to Nasdaq,
the company would not be listing on Nasdaq as an Acquisition Company
under IM-5101-2 and the company would receive services with a higher
value as an Eligible Switch.
Nasdaq believes that certain companies may prefer to switch markets
after they announce their business combination, but before they
consummate it, and that the competition for listing such a company is
similar to the competition for a company that qualifies as an Eligible
Switch today. Accordingly, Nasdaq proposes to treat as an Eligible
Switch any company that switches its listing from NYSE and lists on
Nasdaq under IM-5101-2 after the company has publicly announced that it
entered into a binding agreement for a business combination and that
subsequently satisfies the conditions in IM-5101-2(b) and lists on the
Global or Global Select Market in conjunction with that business
combination.\9\
---------------------------------------------------------------------------
\9\ In the event that the Acquisition Company terminates the
business combination that was announced when it switched it would
not be eligible to receive services as an Eligible Switch under the
proposed rule; however, if the Acquisition Company subsequently
completes a different business combination it may be eligible to
receive services as an Eligible New Listing as described in existing
IM-5900-7(e).
---------------------------------------------------------------------------
Removing the existing incentive for an Acquisition Company to delay
switching until the time of its business combination will allow Nasdaq
to process both the removal of the Acquisition Company and the
simultaneous addition of the operating company, which will help ensure
that the transaction is processed smoothly for the benefit of the
company's investors. Otherwise, multiple markets would need to
carefully choreograph the removal of the company's securities from one
market, a change in the name and symbol of the securities, and the
addition of securities to another market, which all occurs in
conjunction with a significant corporate event--the closing of the
business combination.
Of course an Acquisition Company could only switch its listing to
Nasdaq if it satisfies all of Nasdaq's initial listing requirements. In
addition, the combined company would again have to satisfy all initial
listing requirements at the time of the business combination.\10\ As
under existing rules, the Acquisition Company itself would not receive
services as an Eligible Switch under the proposed rule and the services
would only be available to the company upon
[[Page 59348]]
completing its business combination and listing on the Nasdaq Global or
Global Select Markets pursuant to the conditions described in IM-5900-
7(e).\11\
---------------------------------------------------------------------------
\10\ See IM-5101-2(d) and (e).
\11\ Nasdaq has proposed to offer Acquisition Companies listed
on Nasdaq a complimentary global targeting tool. See Exchange Act
Release No. 89413 (July 28, 2020), 85 FR 46759 (August 3, 2020) (SR-
Nasdaq-2020-044). If approved, an Acquisition Company that switches
its listing to Nasdaq after the public announcement that the company
entered into a binding agreement for the business combination
intended to satisfy the conditions in IM-5101-2(b), as described
herein, would be eligible to receive that tool from the date of
listing until 60 days following the completion of the business
combination, or such time that the Acquisition Company publicly
announces that such agreement is terminated.
---------------------------------------------------------------------------
Nasdaq notes that no other company will be required to pay higher
fees as a result of the proposed amendments and represents that
providing these services will have no impact on the resources available
for its regulatory programs.
Finally, Nasdaq proposes non-substantive technical amendments to
IM-5900-7. Specifically, Nasdaq proposes to eliminate most of the
description of the history of the rule from the rule text because it is
no longer applicable to any companies. However, Nasdaq proposes to
relocate to a new paragraph (g) and make minor non-substantive changes
to the discussion about the 2018 change to the services offered because
some companies are still eligible to receive services under the rule in
effect prior to the 2018 change.\12\ Nasdaq also proposes to renumber
other paragraphs of the rule in order to improve the rules'
readability.
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 82976 (March 30,
2018), 83 FR 14683 (April 5, 2018) (SR-NASDAQ-2018-023). This rule
change became operative for new listings on or after April 23, 2018.
An Eligible Switch that listed under the rule in effect before this
date could receive services under the prior rule for up to four
years from its listing date.
---------------------------------------------------------------------------
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 and is not designed to permit unfair
discrimination between issuers. Nasdaq also believes that the proposed
rule change is consistent with the provisions of Sections 6(b)(4),\15\
and 6(b)(8),\16\ 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 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(8).
---------------------------------------------------------------------------
Nasdaq faces competition in the market for listing services,\17\
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. In
particular, Nasdaq believes it is reasonable, and not unfairly
discriminatory, to treat an Acquisition Company as an Eligible Switch
for purposes of IM-5900-7 following the public announcement of the
business combination that is intended to satisfy the conditions in
Listing Rule IM-5101-2(b) because the Acquisition Company may
reconsider its listing market at that time, in connection with its
rebranding and the launch of the operating company as a public company.
Nasdaq believes that treating the company as an Eligible Switch would
provide an incentive to the company to list on Nasdaq.
---------------------------------------------------------------------------
\17\ 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.
---------------------------------------------------------------------------
In addition, Nasdaq believes that in most instances involving an
Acquisition Company that has announced a business combination, the
operating company plays a significant role in deciding where to list
the combined company. Accordingly, it is not unfair to treat an
Acquisition Company that has announced a business combination
differently from one that has not yet made such an announcement. Nasdaq
believes it is not an inequitable allocation of fees to treat an
Acquisition Company as an Eligible Switch following the public
announcement of the business combination that is intended to satisfy
the conditions in Listing Rule IM-5101-2(b) for these same reasons and
because the consideration about whether to switch markets is roughly
the same for an Acquisition Company that has publicly announced a
business combination as it is for other companies that are considered
Eligible Switches.
Nasdaq also believes that the proposed rule change is consistent
with the objectives of Section 6(b)(5) because it will remove an
impediment to a free and open market and a national market system, and
will help to protect investors by removing an impediment for an
Acquisition Company to switch its listing prior to the closing of its
business combination. If a company is forced to wait to switch to
Nasdaq until the time it closes the business combination in order to be
treated as an Eligible Switch, additional risks can be introduced into
the process because both the exchange transfer and the closing of the
transaction, which will typically includes a concurrent name and symbol
change, must be coordinated between two exchanges. In contrast, if the
Acquisition Company is able to switch earlier, then there is no
additional cross-market coordination required at the time of closing,
which is a significant step in the company's life-cycle. The ability to
switch before the closing without an adverse effect in the services
that the company will receive from Nasdaq reduces potential risks for
the company and its investors at the time of closing of the business
combination and it will thereby remove an impediment to a free and open
market and a national market system and help to better protect
investors.
The non-substantive changes to eliminate non-applicable history
from the rule text and renumber and reorganize the rule will improve
the rule's readability and thereby remove an impediment to a free and
open market and a national market system and help to better protect
investors.
Nasdaq further 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.\18\
---------------------------------------------------------------------------
\18\ 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)).
---------------------------------------------------------------------------
Finally, Nasdaq also believes it is reasonable to balance its need
to remain competitive with other listing venues, while at the same time
ensuring adequate revenue to meet is regulatory responsibilities.
Nasdaq notes that no other company will be required to pay higher fees
as a result of the proposed amendments and it represents that providing
this service will have no impact on the resources available for its
regulatory programs.
[[Page 59349]]
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 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 change
reflects that competition, but it does not impose any burden on the
competition with other exchanges. Rather, Nasdaq believes the proposed
changes will enhance competition for listings of Acquisition Companies.
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.
Nasdaq also notes that Nasdaq Corporate Solutions competes with
other service providers in providing the services that are offered to
Eligible Switches. To the extent that these other providers believe
that Nasdaq offering a complimentary services for a limited time
creates a competitive burden on their offerings, they are able to craft
a similar program to attract Acquisition Companies that have publicly
announced a business combination to their services.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, 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-2020-060 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-2020-060. 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-2020-060, and should be submitted
on or before October 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2020-20700 Filed 9-18-20; 8:45 am]
BILLING CODE 8011-01-P
