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, 59349-59353 [2020-20702]
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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.
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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,
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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
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
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 (1) adopt Listing
Rule IM–5315–2 to permit a company 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 the Exchange
(a ‘‘Direct Listing with a Capital
Raise’’); 3 (2) amend Rule 4702 to add a
new order type (the ‘‘Company Direct
Listing Order’’), which will be used
during the Nasdaq Halt Cross for the
shares offered by the company in a
Direct Listing with a Capital Raise; and
(3) amend Rules 4120(c)(9), 4573(a)(3)
and 4753(b)(2) to establish requirements
for disseminating information,
establishing the opening price and
initiating trading through the Nasdaq
Halt Cross in a Direct Listing with a
Capital Raise.
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Proposed Listing Rule IM–5315–2
Listing Rule IM–5315–1 provides
additional initial listing requirements
for listing a company that has not
previously had its common equity
securities registered under the Act on
the Nasdaq Global Select Market at the
time of effectiveness of a registration
statement filed solely for the purpose of
allowing existing shareholders to sell
their shares (a ‘‘Direct Listing’’). To
allow a company to also sell shares on
its own behalf in connection with its
initial listing upon effectiveness of a
registration statement, without a
traditional underwritten public offering,
the Exchange proposes to adopt Listing
Rule IM–5315–2. This proposed rule
would allow a company that has not
previously had its common equity
securities registered under the Act, to
list its common equity securities on the
Nasdaq Global Select Market at the time
of effectiveness of a registration
statement pursuant to which the
company itself will sell shares in the
opening auction on the first day of
trading on the Exchange.
3 A Direct Listing with a Capital Raise includes
situations where either: (i) Only the company itself
is selling shares in the opening auction on the first
day of trading; or (ii) the company is selling shares
and selling shareholders may also sell shares in
such opening auction.
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In considering the initial listing of a
company in connection with a Direct
Listing on the Nasdaq Global Select
Market, Listing Rule IM–5315–1
currently provides that the Exchange
will determine that such company has
met the applicable Market Value of
Unrestricted Publicly Held Shares
requirements based on the lesser of: (i)
An independent third-party valuation of
the company (a ‘‘Valuation’’); 4 and (ii)
the most recent trading price for the
company’s common stock in a Private
Placement Market where there has been
sustained recent trading. For a security
that has not had sustained recent
trading in a Private Placement Market 5
prior to listing, Nasdaq will determine
that such Company has met the Market
Value of Unrestricted Publicly Held
Shares requirement if the Company
satisfies the applicable Market Value of
Unrestricted Publicly Held Shares
requirement and provides a Valuation
evidencing a Market Value of Publicly
Held Shares of at least $250,000,000.
In contrast, when applying this
requirement to a Direct Listing with a
Capital Raise, the Exchange and
investors know the minimum price at
which the company can sell shares in
the offering, and therefore is proposing
the following:
• Nasdaq will calculate the value of
shares, including those being sold by
the company and those held by public
shareholders immediately prior to the
listing, using a price per share equal to
the price that is 20% below the lowest
price in the price range disclosed by the
issuer in its registration statement.6
Nasdaq also will determine whether the
company has met the applicable bid
price and market capitalization
requirements based on the same per
share price.
• In determining whether the
company satisfies the Market Value of
Unrestricted Publicly Held Shares for
initial listing on the Nasdaq Global
Select Market, the Exchange will deem
such Company to have met the
applicable requirement if the amount of
the Company’s Unrestricted Publicly
Held Shares before the offering, along
with the market value of the shares to
be sold by the company in the Direct
4 IM–5315–1 describes the requirement for a
Valuation, including the experience and
independence of the entity providing the Valuation.
5 Nasdaq defines ‘‘Private Placement Market’’ in
Listing Rule 5005(a)(34) as a trading system for
unregistered securities operated by a national
securities exchange or a registered broker-dealer.
6 As described below, the Nasdaq Halt Cross
would not execute at a price that is more than 20%
below the bottom of the disclosed range. Thus, this
is the minimum price at which the company could
list in connection with a Direct Listing with a
Capital Raise.
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Listing with a Capital Raise is at least
$110 million (or $100 million, if the
Company has stockholders’ equity of at
least $110 million).7
Officers, directors or owners of more
than 10% of the company’s common
stock prior to the opening auction may
purchase shares sold by the company in
the opening auction, provided that such
purchases are not inconsistent with
general anti-manipulation provisions,
Regulation M, and other applicable
securities laws. In addition, in the same
way as for shares of a company listing
following a traditional underwritten
IPO, such an insider owner may
purchase shares sold by other
shareholders or sell its own shares in
the opening auction and in trading after
the opening auction, to the extent not
inconsistent with general antimanipulation provisions, Regulation M,
and other applicable securities laws.
Except as proposed for a Direct Listing
with a Capital Raise, shares held by
these types of inside investors are not
included in calculations of Publicly
Held Shares for purposes of Exchange
listing rules.8 The Exchange notes that
such investors may acquire in secondary
market trades shares sold by the issuer
in a Direct Listing with a Capital Raise
that were included when calculating
whether the issuer meets the Market
Value of Unrestricted Publicly Held
Shares requirement for initial listing.
However, the Exchange notes that a
company listing in conjunction with a
Direct Listing with a Capital Raise will
be required to have a Market Value of
Unrestricted Publicly Held Shares much
higher than the Exchange’s minimum
$45 million Market Value of
Unrestricted Publicly Held Shares
requirement for a traditional
underwritten IPO. This heightened
requirement, along with the ability of all
investors to purchase shares in the
opening process on the Exchange,
should result in companies using a
Direct Listing a Capital Raise having
adequate public float and a liquid
trading market after the completion of
the opening auction.
7 For example, if the company is selling five
million shares in the opening auction and there are
45 million shares issued and outstanding
immediately prior to the listing that are eligible for
inclusion as unrestricted publicly-held shares based
on disclosure in the company’s registration
statement, then the Market Value of Unrestricted
Publicly Held Shares will be calculated based on a
combined total of 50 million shares. If the lowest
price of the price range disclosed in the company’s
registration statement is $10 per share, the
Exchange will attribute to the company a Market
Value of Unrestricted Publicly Held Shares of $400
million, based on a $8 price per share, which is
20% below the bottom of the disclosed range ($10).
8 Rule 5005(a)(35).
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Any company listing in connection
with a Direct Listing with a Capital
Raise would continue to be subject to,
and required to meet, all other
applicable initial listing requirements,
including the requirements to have the
applicable number of shareholders and
at least 1,250,000 Unrestricted Publicly
Held Shares outstanding at the time of
initial listing, and the requirement to
have a price per share of at least $4.00
at the time of initial listing.9
Proposed Listing Rule IM–5315–2 also
requires that securities listing in
connection with a Direct Listing with a
Capital Raise must begin trading on
Nasdaq following the initial pricing
through the Nasdaq Halt Cross, which is
described in Rules 4120(c)(8) and 4753.
To allow such initial pricing, the
company must, in accordance with Rule
4120(c)(9), have a broker-dealer serving
in the role of financial advisor to the
issuer of the securities being listed, who
is willing to perform the functions
under Rule 4120(c)(8) that are
performed by an underwriter with
respect to an initial public offering.10
Amendment to Rule 4702
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The Exchange proposes to amend
Rule 4702 to add a new order type, the
‘‘Company Direct Listing Order’’ or
‘‘CDL Order’’, which will be used for the
company’s order in a Direct Listing with
a Capital Raise. This will be a market
order entered for the quantity of shares
offered by the issuer, as disclosed in an
effective registration statement for the
offering that will execute at the price
determined in the Nasdaq Halt Cross. A
CDL Order may be entered only on
behalf of the issuer and the CDL Order
may not be cancelled or modified. Only
one Nasdaq member, representing the
issuer, may enter a CDL Order during a
Direct Listing with a Capital Raise.
Under Nasdaq rules, a market order,
such as the CDL Order, must be
executed in full at the price determined
in the Nasdaq Halt Cross. In addition,
all orders priced better than the price
9 See Listing Rules 5315(f)(1), (e)(1) and (2),
respectively. Rule 5315(f)(1) requires a security to
have: (A) At least 550 total holders and an average
monthly trading volume over the prior 12 months
of at least 1,100,000 shares per month; or (B) at least
2,200 total holders; or (C) a minimum of 450 round
lot holders and at least 50% of such round lot
holders must each hold unrestricted securities with
a market value of at least $2,500.
10 As noted below, the Exchange also proposes to
amend Rule 4120(c)(9) to specify that any services
provided by such financial advisor to the issuer of
a security, including a company listing in
connection with a Direct Listing with a Capital
Raise, must provide such services in a manner that
is consistent with all federal securities laws,
including Regulation M and other antimanipulation requirements.
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determined in the Nasdaq Halt Cross
also would need to be satisfied.
Amendments to Rules 4120(c)(9),
4753(a)(3) and 4753(b)(2)
Nasdaq proposes to amend Rules
4120(c)(9), 4573(a)(3) and 4753(b)(2) to
establish requirements for disseminating
information, establishing the opening
price and initiating trading through the
Nasdaq Halt Cross in a Direct Listing
with a Capital Raise.
Nasdaq proposes to add Rule
4120(c)(9)(B) to specify that in the case
of the Direct Listing with a Capital
Raise, a security shall not be released for
trading by Nasdaq unless the expected
price at which the cross would occur (as
defined in Rule 4120(c)(8)(A)(i)) is at or
above the price that is 20% below the
lowest price of the price range
established by the issuer in its effective
registration statement.11 This
requirement would be in addition to the
existing conditions described in Rule
4120(c)(8)(A)(i), (ii), and (iii), which
would continue to apply.12
Because the financial advisor is
responsible for determining when the
security subject to the Nasdaq Halt
Cross is ready to trade, these proposed
rule changes would make the financial
advisor responsible for determining
whether the Halt Cross for a Direct
Listing with a Capital Raise can
proceed. If there is insufficient buy
interest to satisfy the CDL Order as
required by this proposed rule, the cross
would not proceed and such security
would not begin trading. If the cross
cannot be conducted, the Exchange
would notify market participants via a
Trader Update that the Direct Listing
with a Capital Raise has been cancelled
and any orders for that security that
have been entered on the Exchange,
including the CDL Order, would be
cancelled back to the entering firms.
Because the CDL Order will be a
market order, if the Halt Cross proceeds,
that order will execute in full in the Halt
Cross, along with orders priced at or
better than the price determined in the
Halt Cross. As noted above, the Halt
Cross would not be allowed to proceed
if the price calculated is 20% or more
11 SEC Rule 430A and question 227.03 of the SEC
Staff’s Compliance and Disclosure Interpretations,
dated November 6, 2017, generally allow a
company to price a public offering 20% outside of
the disclosed price range without regard to the
materiality of the changes to the disclosure
contained in the company’s registration statement.
12 Rule 4120(c)(8)(A) provides that a security will
not be released for trading until Nasdaq receives
notice from the underwriter of the IPO or financial
advisor in the case of a Direct Listing that the
security is ready to trade, the system verifies that
all market orders will be executed in the cross, and
the price determined in the cross satisfies a price
validation test.
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59351
below the lowest price disclosed by the
company in its effective registration
statement. There would be no upper
limit to the price determined in the Halt
Cross.
Nasdaq also proposes changes to
Rules 4573(a)(3) and 4753(b)(2) to make
adjustments to the calculation of the
Current Reference Price, which is
disseminated in the Nasdaq Order
Imbalance Indicator, in the case of a
Direct Listing with a Capital Raise and
for how the price at which the Nasdaq
Halt Cross will execute. In each case,
where there are multiple prices that
would satisfy the conditions for
determining a price, Nasdaq proposes to
modify the fourth tie-breaker for a Direct
Listing with a Capital Raise, to use the
price closest to the price that is 20%
below the lowest price of the price range
disclosed by the issuer in its effective
registration statement.
Finally, Nasdaq proposes to amend
Rule 4120(c)(9) to specify that the
activities performed by a financial
advisor under Rule 4120(c)(8) must be
conducted in a manner that is consistent
with all federal securities laws,
including Regulation M and other antimanipulation requirements.13 This
change will apply to traditional Direct
Listings, as described under IM–5315–1,
IM–5405–1 and IM–5505–1, as well as
to Direct Listings with a Capital Raise,
as described under proposed IM–5315–
2.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,14 in general, and furthers the
objectives of Section 6(b)(5) of the Act,15
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
Nasdaq believes that the proposed
amendment to the listing requirements
is consistent with the protection of
investors. The proposal would require
that a company completing a Direct
Listing with a Capital Raise have an
aggregate market value of unrestricted
publicly-held shares immediately prior
to listing together with the market value
of shares the company sells in the
opening auction total at least $110
million (or $100 million, if the
Company has stockholders’ equity of at
13 Rule 4120(c)(8) describes the activities
performed by an underwriter in an IPO and by a
financial advisor in a Direct Listing.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
least $110 million), with such market
value calculated using a price per share
equal to 20% below the lowest price of
the price range established by the issuer
in its registration statement. While
officers, directors or owners of more
than 10% of the company’s common
stock prior to the opening auction may
purchase shares sold by the company or
other shareholders in the opening
transaction on Nasdaq, in the event that
such purchases are not inconsistent
with general anti-manipulation
provisions, Regulation M, and other
applicable securities laws, Nasdaq
expects that a company expecting to sell
a significant portion of its shares to
officers, directors and existing
significant shareholders would not
undertake a public listing through a
Direct Listing with a Capital Raise.
Nasdaq also notes that a company may
list on the Global Select Market in
connection with its initial public
offering with a market value of
unrestricted publicly held shares of $45
million and that unlike a company
listing in connection with a Direct
Listing that could qualify for the pricebased initial listing requirements based
on a Valuation, a company listing in
connection with a Direct Listing with a
Capital Raise, like an IPO, must qualify
for such requirements based on the
minimum price at which it could sell
shares in the offering. The higher
requirement, along with the ability of all
investors to purchase shares in the
opening process on the Exchange,
should result in companies using a
Direct Listing a Capital Raise having
adequate public float and a liquid
trading market after the completion of
the opening auction.
Nasdaq also believes that it is
consistent with the protection of
investors to calculate the security’s bid
price and values derived from the
security’s price using a price per share
equal to the price that is 20% below the
lowest price of the price range disclosed
by the issuer in its registration
statement. Commission rules and
interpretations generally allow the sale
of securities pursuant to an effective
registration statement at a price that is
20% below the lowest price of the price
range disclosed by the issuer in its
registration statement. As a result,
Nasdaq will allow the Halt Cross to take
place as low as this price, but no lower,
and so this is the minimum price at
which the company could be listed.
The proposed requirement that a
company that lists on the Nasdaq Global
Select Markets through a Direct Listing
with a Capital Raise must begin trading
of the company’s securities following
the initial pricing through the Halt Cross
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will promote fair and orderly markets by
protecting against volatility in the
pricing and initial trading of securities
covered by the proposed rule change.
Accordingly, Nasdaq believes these
changes, as required by Section 6(b)(5)
of the Exchange Act, are reasonably
designed to protect investors and the
public interest and promote just and
equitable principles of trade for the
opening of securities listing in
connection with a Direct Listing with a
Capital Raise on the Nasdaq Global
Select Market.
Nasdaq also believes that the
proposed adoption of the CDL Order
type in Rule 4702 and the addition of
requirements to the operation of the
Nasdaq Halt Cross in Rule 4120(c)(9)
will remove impediments to and perfect
the mechanism of a free and open
market and a national market system
because it would guarantee that the
Nasdaq Halt Cross would only occur
above a minimum specified price, as
described above, and, if the Halt Cross
occurs, all shares offered by the
company would be sold at no less than
such minimum price. Unlike an IPO, a
company listing through a Direct Listing
with a Capital Raise would not have an
underwriter to guarantee that a specified
number of shares would be sold by the
company at a price consistent with
disclosure in the company’s effective
registration statement. This certainty
would be effected in two ways. First, the
proposed CDL Order would be required
to be equal to the total number of shares
disclosed as being offered by the
company in the prospectus included in
the effective registration statement filed
in connection with its listing. The
Nasdaq Halt Cross would only occur if
all of the shares in this market order
could be executed. Second, the Nasdaq
Halt Cross would be required to occur
at a price per share no less than the
price that is 20% below the lowest price
of the price range disclosed by the
issuer in its registration statement.
Nasdaq further believes that these
proposed changes would remove
impediments to and perfect the
mechanism of a free and open market
and a national market system because
they are designed to function seamlessly
with the existing process for the Nasdaq
Halt Cross, including dissemination of
information about the expected price.
Nasdaq also believes that it is
consistent with the protection of
investors and the public interest to
remind financial advisors in a Direct
Listing, including Direct Listings with a
Capital Raise, that activities in
connection with the listing must be
conducted in a manner that is consistent
with the federal securities laws,
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Sfmt 4703
including Regulation M and other antimanipulation requirements.
Nasdaq believes that the proposed
rule change to modify the fourth tiebreaker used in calculating the Current
Reference Price disseminated in the
Nasdaq Order Imbalance Indicator and
the price at which the Nasdaq Halt
Cross will occur, protects investors and
the public interest. For a Direct Listing,
in using the Halt Cross to initiate the
initial trading in the company’s
securities, the Current Reference Price
and price at which the Nasdaq Halt
Cross will occur may be based on the
most recent transaction price in a
Private Placement Market where the
security has had recent sustained
trading in such a market over several
months; otherwise the price will be
determined by the Exchange in
consultation with a financial advisor to
the issuer. For an IPO, however, the
fourth tie-breaker used in calculating
the Current Reference Price, is the price
that is closest to the Issuer’s Initial
Public Offering Price. Because a Direct
Listing with a Capital Raise is similar to
an IPO in that the company sells
securities in the offering, the proposed
rule change provides that the forth tiebreaker in calculating the Current
Reference Price for such security is the
price that is closest to the price that is
20% below the lowest price of the price
range disclosed by the issuer in its
effective registration statement, which is
the minimum price at which the Halt
Cross will occur.
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. The
proposed amendments would not
impose any burden on competition, but
would rather increase competition. In
that regard, the Commission recently
approved a similar proposal to allow a
Direct Listing with a Capital Raise on
the New York Stock Exchange.16
Allowing Nasdaq to have similar rules
will give issuers interested in this
pathway to access the capital markets a
choice of listing venues, which will
enhance competition among exchanges.
16 Securities Exchange Act Release No. 89684
(August 26, 2020), 85 FR 54454 (September 1, 2020)
(approving SR–NYSE–2019–67). See also a letter
from J. Matthew DeLesDernier, Assistant Secretary,
the Office of the Secretary of the SEC, to John Carey
Senior Director, NYSE Group Inc., indicating that
the approval order is stayed until the Commission
orders otherwise. (Available at https://www.sec.gov/
rules/sro/nyse/2020/34-89684-carey-letter.pdf).
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Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / 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
up to 90 days (i) as the Commission may
designate 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
will: (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
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–2020–057 on the subject line.
jbell on DSKJLSW7X2PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2020–057. 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
19:59 Sep 18, 2020
Jkt 250001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20702 Filed 9–18–20; 8:45 am]
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
VerDate Sep<11>2014
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–2020–057, and
should be submitted on or before
October 13, 2020.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89870; File No. SR–Phlx–
2020–44]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 3304
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 3, 2020, Nasdaq PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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 amend
Rule 3304 (Data Feeds Utilized) to
change the primary and secondary
source of quotation data of certain
market centers in the list of proprietary
and network processor feeds that the
Exchange utilizes for the handling,
routing, and execution of orders as well
17 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
59353
as regulatory compliance processes
related to those functions.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/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
The Exchange proposes to update and
amend the data feeds table in Rule 3304,
which sets forth on a market-by-market
basis the specific proprietary and
network processor feeds that the
Exchange utilizes for the handling,
routing, and execution of orders, and for
performing the regulatory compliance
checks related to each of those
functions. Specifically, the table would
be amended to reflect that the Exchange
will receive a direct feed from NYSE
National, Inc. (‘‘NYSE National’’), NYSE
Chicago, Inc. (‘‘NYSE Chicago’’), and
Investors Exchange LLC (‘‘IEX’’) as its
primary quotation data source and CQS/
UQDF will become its secondary data
source for the handling, routing and
execution of orders and for performing
regulatory compliance processes related
to each of those functions. The change
to the primary sources reflects the
Exchange’s effort to include an
additional source in the event the
primary source is unable to provide
data.
The Exchange proposes to implement
the proposed rule change no later than
ninety (90) days following the effective
date of the proposed rule change. The
Exchange notes this additional time
gives the Exchange time to configure its
system accordingly.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
E:\FR\FM\21SEN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Notices]
[Pages 59349-59353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20702]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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 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
[[Page 59350]]
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 (1) adopt Listing Rule IM-5315-2 to permit a
company 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 the Exchange (a ``Direct Listing with a Capital Raise'');
\3\ (2) amend Rule 4702 to add a new order type (the ``Company Direct
Listing Order''), which will be used during the Nasdaq Halt Cross for
the shares offered by the company in a Direct Listing with a Capital
Raise; and (3) amend Rules 4120(c)(9), 4573(a)(3) and 4753(b)(2) to
establish requirements for disseminating information, establishing the
opening price and initiating trading through the Nasdaq Halt Cross in a
Direct Listing with a Capital Raise.
---------------------------------------------------------------------------
\3\ A Direct Listing with a Capital Raise includes situations
where either: (i) Only the company itself is selling shares in the
opening auction on the first day of trading; or (ii) the company is
selling shares and selling shareholders may also sell shares in such
opening auction.
---------------------------------------------------------------------------
Proposed Listing Rule IM-5315-2
Listing Rule IM-5315-1 provides additional initial listing
requirements for listing a company that has not previously had its
common equity securities registered under the Act on the Nasdaq Global
Select Market at the time of effectiveness of a registration statement
filed solely for the purpose of allowing existing shareholders to sell
their shares (a ``Direct Listing''). To allow a company to also sell
shares on its own behalf in connection with its initial listing upon
effectiveness of a registration statement, without a traditional
underwritten public offering, the Exchange proposes to adopt Listing
Rule IM-5315-2. This proposed rule would allow a company that has not
previously had its common equity securities registered under the Act,
to list its common equity securities on the Nasdaq Global Select Market
at the time of effectiveness of a registration statement pursuant to
which the company itself will sell shares in the opening auction on the
first day of trading on the Exchange.
In considering the initial listing of a company in connection with
a Direct Listing on the Nasdaq Global Select Market, Listing Rule IM-
5315-1 currently provides that the Exchange will determine that such
company has met the applicable Market Value of Unrestricted Publicly
Held Shares requirements based on the lesser of: (i) An independent
third-party valuation of the company (a ``Valuation''); \4\ and (ii)
the most recent trading price for the company's common stock in a
Private Placement Market where there has been sustained recent trading.
For a security that has not had sustained recent trading in a Private
Placement Market \5\ prior to listing, Nasdaq will determine that such
Company has met the Market Value of Unrestricted Publicly Held Shares
requirement if the Company satisfies the applicable Market Value of
Unrestricted Publicly Held Shares requirement and provides a Valuation
evidencing a Market Value of Publicly Held Shares of at least
$250,000,000.
---------------------------------------------------------------------------
\4\ IM-5315-1 describes the requirement for a Valuation,
including the experience and independence of the entity providing
the Valuation.
\5\ Nasdaq defines ``Private Placement Market'' in Listing Rule
5005(a)(34) as a trading system for unregistered securities operated
by a national securities exchange or a registered broker-dealer.
---------------------------------------------------------------------------
In contrast, when applying this requirement to a Direct Listing
with a Capital Raise, the Exchange and investors know the minimum price
at which the company can sell shares in the offering, and therefore is
proposing the following:
Nasdaq will calculate the value of shares, including those
being sold by the company and those held by public shareholders
immediately prior to the listing, using a price per share equal to the
price that is 20% below the lowest price in the price range disclosed
by the issuer in its registration statement.\6\ Nasdaq also will
determine whether the company has met the applicable bid price and
market capitalization requirements based on the same per share price.
---------------------------------------------------------------------------
\6\ As described below, the Nasdaq Halt Cross would not execute
at a price that is more than 20% below the bottom of the disclosed
range. Thus, this is the minimum price at which the company could
list in connection with a Direct Listing with a Capital Raise.
---------------------------------------------------------------------------
In determining whether the company satisfies the Market
Value of Unrestricted Publicly Held Shares for initial listing on the
Nasdaq Global Select Market, the Exchange will deem such Company to
have met the applicable requirement if the amount of the Company's
Unrestricted Publicly Held Shares before the offering, along with the
market value of the shares to be sold by the company in the Direct
Listing with a Capital Raise is at least $110 million (or $100 million,
if the Company has stockholders' equity of at least $110 million).\7\
---------------------------------------------------------------------------
\7\ For example, if the company is selling five million shares
in the opening auction and there are 45 million shares issued and
outstanding immediately prior to the listing that are eligible for
inclusion as unrestricted publicly-held shares based on disclosure
in the company's registration statement, then the Market Value of
Unrestricted Publicly Held Shares will be calculated based on a
combined total of 50 million shares. If the lowest price of the
price range disclosed in the company's registration statement is $10
per share, the Exchange will attribute to the company a Market Value
of Unrestricted Publicly Held Shares of $400 million, based on a $8
price per share, which is 20% below the bottom of the disclosed
range ($10).
---------------------------------------------------------------------------
Officers, directors or owners of more than 10% of the company's
common stock prior to the opening auction may purchase shares sold by
the company in the opening auction, provided that such purchases are
not inconsistent with general anti-manipulation provisions, Regulation
M, and other applicable securities laws. In addition, in the same way
as for shares of a company listing following a traditional underwritten
IPO, such an insider owner may purchase shares sold by other
shareholders or sell its own shares in the opening auction and in
trading after the opening auction, to the extent not inconsistent with
general anti-manipulation provisions, Regulation M, and other
applicable securities laws. Except as proposed for a Direct Listing
with a Capital Raise, shares held by these types of inside investors
are not included in calculations of Publicly Held Shares for purposes
of Exchange listing rules.\8\ The Exchange notes that such investors
may acquire in secondary market trades shares sold by the issuer in a
Direct Listing with a Capital Raise that were included when calculating
whether the issuer meets the Market Value of Unrestricted Publicly Held
Shares requirement for initial listing. However, the Exchange notes
that a company listing in conjunction with a Direct Listing with a
Capital Raise will be required to have a Market Value of Unrestricted
Publicly Held Shares much higher than the Exchange's minimum $45
million Market Value of Unrestricted Publicly Held Shares requirement
for a traditional underwritten IPO. This heightened requirement, along
with the ability of all investors to purchase shares in the opening
process on the Exchange, should result in companies using a Direct
Listing a Capital Raise having adequate public float and a liquid
trading market after the completion of the opening auction.
---------------------------------------------------------------------------
\8\ Rule 5005(a)(35).
---------------------------------------------------------------------------
[[Page 59351]]
Any company listing in connection with a Direct Listing with a
Capital Raise would continue to be subject to, and required to meet,
all other applicable initial listing requirements, including the
requirements to have the applicable number of shareholders and at least
1,250,000 Unrestricted Publicly Held Shares outstanding at the time of
initial listing, and the requirement to have a price per share of at
least $4.00 at the time of initial listing.\9\
---------------------------------------------------------------------------
\9\ See Listing Rules 5315(f)(1), (e)(1) and (2), respectively.
Rule 5315(f)(1) requires a security to have: (A) At least 550 total
holders and an average monthly trading volume over the prior 12
months of at least 1,100,000 shares per month; or (B) at least 2,200
total holders; or (C) a minimum of 450 round lot holders and at
least 50% of such round lot holders must each hold unrestricted
securities with a market value of at least $2,500.
---------------------------------------------------------------------------
Proposed Listing Rule IM-5315-2 also requires that securities
listing in connection with a Direct Listing with a Capital Raise must
begin trading on Nasdaq following the initial pricing through the
Nasdaq Halt Cross, which is described in Rules 4120(c)(8) and 4753. To
allow such initial pricing, the company must, in accordance with Rule
4120(c)(9), have a broker-dealer serving in the role of financial
advisor to the issuer of the securities being listed, who is willing to
perform the functions under Rule 4120(c)(8) that are performed by an
underwriter with respect to an initial public offering.\10\
---------------------------------------------------------------------------
\10\ As noted below, the Exchange also proposes to amend Rule
4120(c)(9) to specify that any services provided by such financial
advisor to the issuer of a security, including a company listing in
connection with a Direct Listing with a Capital Raise, must provide
such services in a manner that is consistent with all federal
securities laws, including Regulation M and other anti-manipulation
requirements.
---------------------------------------------------------------------------
Amendment to Rule 4702
The Exchange proposes to amend Rule 4702 to add a new order type,
the ``Company Direct Listing Order'' or ``CDL Order'', which will be
used for the company's order in a Direct Listing with a Capital Raise.
This will be a market order entered for the quantity of shares offered
by the issuer, as disclosed in an effective registration statement for
the offering that will execute at the price determined in the Nasdaq
Halt Cross. A CDL Order may be entered only on behalf of the issuer and
the CDL Order may not be cancelled or modified. Only one Nasdaq member,
representing the issuer, may enter a CDL Order during a Direct Listing
with a Capital Raise.
Under Nasdaq rules, a market order, such as the CDL Order, must be
executed in full at the price determined in the Nasdaq Halt Cross. In
addition, all orders priced better than the price determined in the
Nasdaq Halt Cross also would need to be satisfied.
Amendments to Rules 4120(c)(9), 4753(a)(3) and 4753(b)(2)
Nasdaq proposes to amend Rules 4120(c)(9), 4573(a)(3) and
4753(b)(2) to establish requirements for disseminating information,
establishing the opening price and initiating trading through the
Nasdaq Halt Cross in a Direct Listing with a Capital Raise.
Nasdaq proposes to add Rule 4120(c)(9)(B) to specify that in the
case of the Direct Listing with a Capital Raise, a security shall not
be released for trading by Nasdaq unless the expected price at which
the cross would occur (as defined in Rule 4120(c)(8)(A)(i)) is at or
above the price that is 20% below the lowest price of the price range
established by the issuer in its effective registration statement.\11\
This requirement would be in addition to the existing conditions
described in Rule 4120(c)(8)(A)(i), (ii), and (iii), which would
continue to apply.\12\
---------------------------------------------------------------------------
\11\ SEC Rule 430A and question 227.03 of the SEC Staff's
Compliance and Disclosure Interpretations, dated November 6, 2017,
generally allow a company to price a public offering 20% outside of
the disclosed price range without regard to the materiality of the
changes to the disclosure contained in the company's registration
statement.
\12\ Rule 4120(c)(8)(A) provides that a security will not be
released for trading until Nasdaq receives notice from the
underwriter of the IPO or financial advisor in the case of a Direct
Listing that the security is ready to trade, the system verifies
that all market orders will be executed in the cross, and the price
determined in the cross satisfies a price validation test.
---------------------------------------------------------------------------
Because the financial advisor is responsible for determining when
the security subject to the Nasdaq Halt Cross is ready to trade, these
proposed rule changes would make the financial advisor responsible for
determining whether the Halt Cross for a Direct Listing with a Capital
Raise can proceed. If there is insufficient buy interest to satisfy the
CDL Order as required by this proposed rule, the cross would not
proceed and such security would not begin trading. If the cross cannot
be conducted, the Exchange would notify market participants via a
Trader Update that the Direct Listing with a Capital Raise has been
cancelled and any orders for that security that have been entered on
the Exchange, including the CDL Order, would be cancelled back to the
entering firms.
Because the CDL Order will be a market order, if the Halt Cross
proceeds, that order will execute in full in the Halt Cross, along with
orders priced at or better than the price determined in the Halt Cross.
As noted above, the Halt Cross would not be allowed to proceed if the
price calculated is 20% or more below the lowest price disclosed by the
company in its effective registration statement. There would be no
upper limit to the price determined in the Halt Cross.
Nasdaq also proposes changes to Rules 4573(a)(3) and 4753(b)(2) to
make adjustments to the calculation of the Current Reference Price,
which is disseminated in the Nasdaq Order Imbalance Indicator, in the
case of a Direct Listing with a Capital Raise and for how the price at
which the Nasdaq Halt Cross will execute. In each case, where there are
multiple prices that would satisfy the conditions for determining a
price, Nasdaq proposes to modify the fourth tie-breaker for a Direct
Listing with a Capital Raise, to use the price closest to the price
that is 20% below the lowest price of the price range disclosed by the
issuer in its effective registration statement.
Finally, Nasdaq proposes to amend Rule 4120(c)(9) to specify that
the activities performed by a financial advisor under Rule 4120(c)(8)
must be conducted in a manner that is consistent with all federal
securities laws, including Regulation M and other anti-manipulation
requirements.\13\ This change will apply to traditional Direct
Listings, as described under IM-5315-1, IM-5405-1 and IM-5505-1, as
well as to Direct Listings with a Capital Raise, as described under
proposed IM-5315-2.
---------------------------------------------------------------------------
\13\ Rule 4120(c)(8) describes the activities performed by an
underwriter in an IPO and by a financial advisor in a Direct
Listing.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Nasdaq believes that the proposed amendment to the listing
requirements is consistent with the protection of investors. The
proposal would require that a company completing a Direct Listing with
a Capital Raise have an aggregate market value of unrestricted
publicly-held shares immediately prior to listing together with the
market value of shares the company sells in the opening auction total
at least $110 million (or $100 million, if the Company has
stockholders' equity of at
[[Page 59352]]
least $110 million), with such market value calculated using a price
per share equal to 20% below the lowest price of the price range
established by the issuer in its registration statement. While
officers, directors or owners of more than 10% of the company's common
stock prior to the opening auction may purchase shares sold by the
company or other shareholders in the opening transaction on Nasdaq, in
the event that such purchases are not inconsistent with general anti-
manipulation provisions, Regulation M, and other applicable securities
laws, Nasdaq expects that a company expecting to sell a significant
portion of its shares to officers, directors and existing significant
shareholders would not undertake a public listing through a Direct
Listing with a Capital Raise. Nasdaq also notes that a company may list
on the Global Select Market in connection with its initial public
offering with a market value of unrestricted publicly held shares of
$45 million and that unlike a company listing in connection with a
Direct Listing that could qualify for the price-based initial listing
requirements based on a Valuation, a company listing in connection with
a Direct Listing with a Capital Raise, like an IPO, must qualify for
such requirements based on the minimum price at which it could sell
shares in the offering. The higher requirement, along with the ability
of all investors to purchase shares in the opening process on the
Exchange, should result in companies using a Direct Listing a Capital
Raise having adequate public float and a liquid trading market after
the completion of the opening auction.
Nasdaq also believes that it is consistent with the protection of
investors to calculate the security's bid price and values derived from
the security's price using a price per share equal to the price that is
20% below the lowest price of the price range disclosed by the issuer
in its registration statement. Commission rules and interpretations
generally allow the sale of securities pursuant to an effective
registration statement at a price that is 20% below the lowest price of
the price range disclosed by the issuer in its registration statement.
As a result, Nasdaq will allow the Halt Cross to take place as low as
this price, but no lower, and so this is the minimum price at which the
company could be listed.
The proposed requirement that a company that lists on the Nasdaq
Global Select Markets through a Direct Listing with a Capital Raise
must begin trading of the company's securities following the initial
pricing through the Halt Cross will promote fair and orderly markets by
protecting against volatility in the pricing and initial trading of
securities covered by the proposed rule change. Accordingly, Nasdaq
believes these changes, as required by Section 6(b)(5) of the Exchange
Act, are reasonably designed to protect investors and the public
interest and promote just and equitable principles of trade for the
opening of securities listing in connection with a Direct Listing with
a Capital Raise on the Nasdaq Global Select Market.
Nasdaq also believes that the proposed adoption of the CDL Order
type in Rule 4702 and the addition of requirements to the operation of
the Nasdaq Halt Cross in Rule 4120(c)(9) will remove impediments to and
perfect the mechanism of a free and open market and a national market
system because it would guarantee that the Nasdaq Halt Cross would only
occur above a minimum specified price, as described above, and, if the
Halt Cross occurs, all shares offered by the company would be sold at
no less than such minimum price. Unlike an IPO, a company listing
through a Direct Listing with a Capital Raise would not have an
underwriter to guarantee that a specified number of shares would be
sold by the company at a price consistent with disclosure in the
company's effective registration statement. This certainty would be
effected in two ways. First, the proposed CDL Order would be required
to be equal to the total number of shares disclosed as being offered by
the company in the prospectus included in the effective registration
statement filed in connection with its listing. The Nasdaq Halt Cross
would only occur if all of the shares in this market order could be
executed. Second, the Nasdaq Halt Cross would be required to occur at a
price per share no less than the price that is 20% below the lowest
price of the price range disclosed by the issuer in its registration
statement. Nasdaq further believes that these proposed changes would
remove impediments to and perfect the mechanism of a free and open
market and a national market system because they are designed to
function seamlessly with the existing process for the Nasdaq Halt
Cross, including dissemination of information about the expected price.
Nasdaq also believes that it is consistent with the protection of
investors and the public interest to remind financial advisors in a
Direct Listing, including Direct Listings with a Capital Raise, that
activities in connection with the listing must be conducted in a manner
that is consistent with the federal securities laws, including
Regulation M and other anti-manipulation requirements.
Nasdaq believes that the proposed rule change to modify the fourth
tie-breaker used in calculating the Current Reference Price
disseminated in the Nasdaq Order Imbalance Indicator and the price at
which the Nasdaq Halt Cross will occur, protects investors and the
public interest. For a Direct Listing, in using the Halt Cross to
initiate the initial trading in the company's securities, the Current
Reference Price and price at which the Nasdaq Halt Cross will occur may
be based on the most recent transaction price in a Private Placement
Market where the security has had recent sustained trading in such a
market over several months; otherwise the price will be determined by
the Exchange in consultation with a financial advisor to the issuer.
For an IPO, however, the fourth tie-breaker used in calculating the
Current Reference Price, is the price that is closest to the Issuer's
Initial Public Offering Price. Because a Direct Listing with a Capital
Raise is similar to an IPO in that the company sells securities in the
offering, the proposed rule change provides that the forth tie-breaker
in calculating the Current Reference Price for such security is the
price that is closest to the price that is 20% below the lowest price
of the price range disclosed by the issuer in its effective
registration statement, which is the minimum price at which the Halt
Cross will occur.
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. The proposed amendments would
not impose any burden on competition, but would rather increase
competition. In that regard, the Commission recently approved a similar
proposal to allow a Direct Listing with a Capital Raise on the New York
Stock Exchange.\16\ Allowing Nasdaq to have similar rules will give
issuers interested in this pathway to access the capital markets a
choice of listing venues, which will enhance competition among
exchanges.
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\16\ Securities Exchange Act Release No. 89684 (August 26,
2020), 85 FR 54454 (September 1, 2020) (approving SR-NYSE-2019-67).
See also a letter from J. Matthew DeLesDernier, Assistant Secretary,
the Office of the Secretary of the SEC, to John Carey Senior
Director, NYSE Group Inc., indicating that the approval order is
stayed until the Commission orders otherwise. (Available at https://www.sec.gov/rules/sro/nyse/2020/34-89684-carey-letter.pdf).
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[[Page 59353]]
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 up to 90 days (i) as the
Commission may designate 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 will: (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 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-2020-057 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-2020-057. 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-2020-057, and should be submitted
on or before October 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20702 Filed 9-18-20; 8:45 am]
BILLING CODE 8011-01-P
