Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, 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, 12245-12250 [2021-04222]
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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Notices
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91205; File No. SR–
NASDAQ–2020–057]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendment No. 1, 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
February 24, 2021.
On September 4, 2020, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
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 the Exchange and to explain
how the opening transaction for such a
listing will be effected. The proposed
rule change was published for comment
in the Federal Register on September
21, 2020.3 On November 4, 2020,
pursuant to Section 19(b)(2) of the Act,4
the Commission designated a longer
period within which to either approve
or disapprove the proposed rule change,
or institute proceedings to determine
whether to disapprove the proposed
rule change.5 On December 17, 2020,
the Commission instituted proceedings
under Section 19(b)(2)(B) of the Act 6 to
determine whether to approve or
disapprove the proposed rule change.7
On February 22, 2021, the Exchange
filed Amendment No. 1 to the proposed
rule change, which superseded the
proposed rule change as originally filed,
and is described in Items I and II below,
which Items have been prepared by the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 89878
(September 15, 2020), 85 FR 59349 (September 21,
2020). Comments received on the proposal are
available on the Commission’s website at: https://
www.sec.gov/comments/sr-nasdaq-2020-057/
srnasdaq2020057.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 90331
(November 4, 2020), 85 FR 71708 (November 10,
2020).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 90717
(December 17, 2020), 85 FR 84025 (December 23,
2020).
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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
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 is filing this amendment to
SR–NASDAQ–2020–057 8 in order to: (i)
Require for the security to be released
for trading that the actual price
calculated by the cross be at or above
the lowest price and at or below the
highest price of the price range
established by the issuer in its effective
registration statement; (ii) provide that
the fourth tie-breaker used in
calculating the Current Reference Price
is the price that is closest to the lowest
price of the price range disclosed by the
issuer in its effective registration
statement; (iii) provide that for purposes
8 Securities Exchange Act Release No. 89878
(September 15, 2020), 85 FR 59349 (September 21,
2020) (the ‘‘Initial Proposal’’). The Commission
issued an Order Instituting Proceedings to
Determine Whether To Approve or Disapprove the
Initial Proposal. See Securities Exchange Act
Release No. 90717 (December 17, 2020), 85 FR
84025 (December 23, 2020) (the ‘‘OIP’’).
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12245
of qualifying a security under the
Listing Rules Nasdaq will calculate the
value of shares, and determine whether
the company has met the applicable
Market Value of Unrestricted Publicly
Held Shares, bid price and market
capitalization requirements, using a
price per share equal to the lowest price
in the price range disclosed by the
issuer in its effective registration
statement; (iv) provide that
notwithstanding the provisions of Rule
4120(c)(8)(A), Nasdaq, in consultation
with the financial advisor to the issuer,
will make the determination of whether
the security is ready to trade and
whether to reschedule the offering as
described in Rule 4120(c)(8)(A); and
make minor technical changes to
improve the clarity of this proposal.
Nasdaq believes that this amendment
addresses the issues raised by the
Commission in the OIP.9 This
amendment supersedes and replaces the
Initial Proposal in its entirety.
Nasdaq proposes to (i) 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’’); 10 (ii) 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
(iii) amend Rules 4120(c)(9), 4753(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.
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
9 Following approval of this proposed rule change
Nasdaq intends to file a separate proposal with the
Commission that will seek to modify the process for
a Direct Listing with a Capital Raise so that it would
operate in a manner similar to the Initial Proposal
and will seek to address the remaining issues raised
in the OIP.
10 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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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–5315–2.11 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’’); 12 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 13
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 because it is included in the
company’s registration statement, and
11 The Commission did not identify any concerns
with proposed Listing Rule IM–5315–2 in the OIP.
Accordingly, the only change to proposed IM–
5315–2 in this amendment is to reflect that the
minimum price at which the company can sell
shares is the lowest price in the price range
disclosed by the issuer in its effective registration
statement. In the Initial Proposal, Nasdaq proposed
to allow the company to sell shares at up to a 20%
discount to the lowest price in the price range
disclosed in the effective registration statement and
therefore also to calculate compliance with the
listing requirements based on that same price.
12 IM–5315–1 describes the requirement for a
Valuation, including the experience and
independence of the entity providing the Valuation.
13 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.
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therefore Nasdaq 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 lowest price in the price range
disclosed by the issuer in its registration
statement.14 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
Listing with a Capital Raise is at least
$110 million (or $100 million, if the
Company has stockholders’ equity of at
least $110 million).15
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 anti14 As described below, the Nasdaq Halt Cross
would not execute at a price that is 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.
15 See Listing Rules 5315(f)(2)(A) and (B) that
require the Market Value of Unrestricted Publicly
Held Shares for initial listing on the Nasdaq Global
Select Market, not in connection with an IPO, of at
least $110 million; or at least $100 million, if the
company has stockholders’ equity of at least $110
million, respectively. 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 $500 million, based on a $10 price
per share.
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manipulation provisions, Regulation M,
and other applicable securities laws.
Shares held by these types of inside
investors are not included in
calculations of Publicly Held Shares for
purposes of Exchange listing rules
except that, as proposed with respect to
a Direct Listing with a Capital Raise, all
shares sold by the company in the
offering and all shares held by Public
Holders prior to the offering will be
included in the calculation of Publicly
Held Shares, even if some of these
shares are purchased by inside
investors.16 The Exchange notes that
such investors may also 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.17 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 with a Capital Raise
having adequate public float and a
liquid trading market after the
completion of the opening auction.
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.18
Proposed Listing Rule IM–5315–2 also
requires that securities listing in
connection with a Direct Listing with a
16 Rule
5005(a)(35).
Listing Rules 5315(f)(2)(C) that requires the
Market Value of Unrestricted Publicly Held Shares
for initial listing on the Nasdaq Global Select
Market, in connection with an IPO, of at least $45
million.
18 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.
17 See
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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.19
However, as described in detail below,
Nasdaq proposes to modify Rule
4120(c)(9), in part related to certain
functions that are performed by an
underwriter in an IPO or a financial
advisor in a Direct Listing, to require
that in the case of a Direct Listing with
a Capital Raise, Nasdaq, in consultation
with the financial advisor to the issuer,
will make the determination of whether
the security is ready to trade and
whether to postpone and reschedule the
offering as described in Rule
4120(c)(8)(A).
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. The
price of the CDL Order will be set in
accordance with Rule 4120(c)(9)(B) that
requires, among other things, that the
CDL Order is executed at or above the
lowest price and at or below the highest
price of the price range established by
the issuer in its effective registration
statement.
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
19 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.20
Amendments to Rules 4120(c)(9),
4753(a)(3) and 4753(b)(2)
Nasdaq proposes to amend Rules
4120(c)(9), 4753(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.
Under the proposal, in the case of the
Direct Listing with a Capital Raise, a
security shall not be released for trading
by Nasdaq unless the actual price
calculated by the cross is at or above the
lowest price and at or below the highest
price of the price range established by
the issuer in its effective registration
statement.21 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, as modified by the proposed
changes to Rule 4120(c)(9), as described
below.22
Rules 4120(c)(8) and (9) provide that
the underwriter of the IPO, or the
financial advisor in a Direct Listing,
respectively, provide notice to Nasdaq
that the security subject to the Nasdaq
Halt Cross is ‘‘ready to trade.’’ 23 These
rules also provide that the underwriter
of the IPO, or the financial advisor in a
Direct Listing, with concurrence of
Nasdaq, may determine at any point
during the Halt Cross process up
through the conclusion of the prelaunch period to postpone and
reschedule the pricing of the security
subject to the Nasdaq Halt Cross.
However, Nasdaq proposes to require
that in the case of a Direct Listing with
20 The Commission did not identify any concerns
with the proposed changes to Rule 4702 in the OIP.
Accordingly, no changes to that proposed rule are
proposed in this amendment. Nasdaq notes that the
proposed CDL Order is similar in some respects to
a limit order because it cannot execute at a price
less than the lowest price in the price range
disclosed by the issuer in its effective registration
statement. As a market order, the CDL Order is
guaranteed to execute in the Nasdaq Halt Cross.
21 See Proposed Rule 4120(c)(9)(B).
22 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.
23 Rule 4120(c)(8)(A)(i) provides that Nasdaq
receives notice from the underwriter of the IPO that
the security is ready to trade. The Nasdaq system
will calculate the Current Reference Price at that
time and display it to the underwriter. If the
underwriter then approves proceeding, the Nasdaq
system will conduct certain validation checks.
Under this proposal, Nasdaq will take over these
functions of the underwriter, as described in detail
below.
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12247
a Capital Raise, Nasdaq, in consultation
with the financial advisor to the issuer,
will make the determination of whether
the security is ready to trade and
whether to postpone and reschedule the
offering as described in Rule
4120(c)(8)(A). Specifically, Nasdaq
auction technology displays the Current
Reference Price, which is the price at
which the auction can cross the largest
number of securities subject to the
Nasdaq Halt Cross. If the auction cannot
match all the entered orders at the
Current Reference Price, an imbalance
on the buy or sell side is displayed and
provided via Nasdaq data feeds. Nasdaq
would determine that the security is
ready to trade when Nasdaq believes,
based on the displayed information
referenced above, that a reasonable
volume of securities will cross on the
initial trade to minimize the immediate
price volatility following the initial
pricing.24 Nasdaq may consult with the
financial advisor to the issuer as to the
reasonableness of such volume but can
determine that the security is ready to
trade without such consultation. Once
Nasdaq has determined that the security
is ready to trade, which will satisfy the
requirement of Rule 4120(c)(8)(A)(i),
Nasdaq shall release the security for
trading if the conditions described in
Rules 4120(c)(8)(A)(ii) and (iii) are met
and the actual price calculated by the
Cross is at or above the lowest price and
at or below the highest price of the price
range established by the issuer in its
effective registration statement.
If there is insufficient buy interest to
satisfy the CDL Order, and all other
market orders, as required by this
proposed rule, or if the actual price
calculated by the Cross is outside the
price range established by the issuer in
its effective registration statement, the
Cross would not proceed and such
security would not begin trading. In
such event, because the Cross cannot be
conducted, the Exchange would
postpone and reschedule the offering
and notify market participants via a
Trader Update that the Direct Listing
with a Capital Raise scheduled for that
date has been cancelled and any orders
for that security that have been entered
24 Rules 4120(c)(8)(B) and (c)(9) provide that the
financial advisor selects certain price bands for
purposes of applying a price validation test that
occurs once the financial advisor notifies Nasdaq
that the security is ready to trade. Given that
Nasdaq proposes that in connection with a Direct
Listing with a Capital Raise Nasdaq, rather than the
financial advisor, determines that the security is
ready to trade, the financial advisor will have no
purpose in setting the bands. Accordingly, because
Nasdaq determines when the security is ready to
trade, it is appropriate for Nasdaq to set the price
bands. Nasdaq intends to set the price bands at
zero.
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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 actual price calculated by the
Cross is below the lowest price or above
the highest price of the price range
disclosed by the company in its
effective registration statement.
Nasdaq also proposes changes to
Rules 4753(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
lowest price of the price range disclosed
by the issuer in its effective registration
statement.
In this Amendment No. 1, Nasdaq
also proposes changes to address
concerns raised by the Commission in
the OIP relating to Rule 4120.
Specifically, consistent with Nasdaq’s
original intent, as revised, the price
bands established by Rule 4120(c)(8)
cannot act to cause the Halt Cross to
occur outside of the price range
disclosed by the issuer in its effective
registration statement because the actual
price calculated by the Cross is required
to be at or above the lowest price and
at or below the highest price of the price
range established by the issuer in its
effective registration statement.25
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 anti25 In addition, in the OIP the Commission
expressed concern that the financial advisor could,
in effect, cancel the non-cancellable CDL Order by
rescheduling the offering. To address this concern,
this amendment modifies the rules to provide that
Nasdaq, in consultation with the financial advisor
to the issuer, will make the determination of
whether the security is ready to trade and whether
to postpone and reschedule the offering as
described in Rule 4120(c)(8)(A). Finally, the
proposed changes to Rule 4753 have been modified
to reflect that the lowest price at which the Nasdaq
Halt Cross can occur is the lowest price of the price
range disclosed by the issuer in its effective
registration statement.
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manipulation requirements.26 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,27 in general, and furthers the
objectives of Section 6(b)(5) of the Act,28
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
least $110 million), with such market
value calculated using a price per share
equal to the lowest price of the price
range established by the issuer in its
effective 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 but
would raise capital in a private
placement or a similar transaction
instead. 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
26 Rule 4120(c)(8) describes the activities
performed by an underwriter in an IPO and by a
financial advisor in a Direct Listing.
27 15 U.S.C. 78f(b).
28 15 U.S.C. 78f(b)(5).
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Fmt 4703
Sfmt 4703
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 with 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 lowest price of the price
range disclosed by the issuer in its
effective registration statement. 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
because a substantial number of buy and
sell orders is expected to be executed in
the Halt Cross at a single price rather
than in the secondary trading at
fluctuating prices. 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
within the specified price range, as
described above, and, if the Halt Cross
occurs, all shares offered by the
company would be sold at such price.
Unlike an IPO, a company listing
through a Direct Listing with a Capital
Raise would not have an underwriter to
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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 that is within the
price range disclosed by the issuer in its
effective 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 believes that the CDL Order
and related clarifications will clearly
define the method by which the issuer
participates in the opening auction, to
prevent the issuer from being in a
position to improperly influence the
price discovery process, and to design
an auction that is otherwise consistent
with the disclosures in the registration
statement. Specifically, the CDL Order
entered on the company’s behalf could
not be executed at a price below the low
end or above the high end of the price
range in the company’s effective
registration statement and, as a market
order, the full quantity of shares in the
CDL Order would have to be executed
in the opening auction. In addition, the
CDL Order cannot be modified and the
financial advisor to the company will be
unable to reschedule the offering once it
begins. As such, Nasdaq believes that
the proposed process provides
reasonable assurance that the opening
auction and subsequent trading promote
fair and orderly markets and that the
proposed rules are designed to prevent
manipulative acts and practices, and
protect investors and the public interest
in accordance with Section 6(b)(5) of the
Exchange Act.
Nasdaq believes that it is consistent
with the protection of investors and the
public interest to require that in the case
of a Direct Listing with a Capital Raise,
Nasdaq, in consultation with the
financial advisor to the issuer, will
make the determination of whether the
security is ready to trade and whether
to postpone and reschedule the offering
as described in Rule 4120(c)(8)(A)
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because Nasdaq would determine that
the security is ready to trade when
Nasdaq believes, based on the available
information, that a reasonable volume of
securities will cross on the initial trade
to minimize the immediate price
volatility following the initial pricing.
Nasdaq also believes that its ability to
consult the financial advisor to the
issuer is consistent with the protection
of investors because the financial
advisor would be expected to gather
relevant information in connection with
the Direct Listing with a Capital Raise
by engaging in certain price discovery
activities with potential buyers and
sellers and such information could be
shared with Nasdaq. Nasdaq believes
that as part of their regular activities as
full-service broker-dealer, such firm’s
capital markets and sales and trading
desk personnel may contact or be
contacted by potential investors and
current holders of the securities subject
to the Nasdaq Halt Cross in the normal
course of their activities and may, in
that capacity, inform and educate
interested persons regarding the
company and obtain information
regarding pre-listing buying and selling
interest in such securities (including
with regard to price, volume and timing
expectations), which information may
also be provided to Nasdaq in order to
support an effective price discovery
process by Nasdaq.
Nasdaq notes that, as described above,
Nasdaq will be able to postpone and
reschedule the offering only if there is
insufficient buy interest to satisfy the
CDL Order, and all other market orders,
as required by this proposed rule, or if
the actual price calculated by the Cross
is outside the price range established by
the issuer in its effective registration
statement.
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 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
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
12249
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
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.
Finally, while a commenter expressed
concerns that that the expansion of
direct listings would compound
problems that shareholders face in
tracing their share purchases to a
registration statement,29 the
Commission has previously considered
and rejected these concerns.30 In that
regard, the Commission has determined
that investor protection concerns
relating to tracing challenges are not
unique to direct listings, including
where the company itself would sell
shares in the opening auction on the
first day of trading on the Exchange in
addition to, or instead of, facilitating
sales by selling shareholders (‘‘Primary
Direct Floor Listing’’), and stated that it
did not expect ‘‘any such tracing
challenges in this context to be of such
magnitude as to render the proposal
inconsistent with the Act.’’ 31 On the
other hand, the Commission found that
allowing a Primary Direct Floor Listing
‘‘will provide benefits to existing and
potential investors relative to firm
29 See Letter from Jeffrey P. Mahoney, General
Counsel, Council of Institutional Investors to
Secretary, Securities and Exchange Commission
(October 8, 2020), available at https://www.sec.gov/
comments/sr-nasdaq-2020-057/srnasdaq20200577888884-224228.pdf. See also Letter from Jeffrey P.
Mahoney, General Counsel, Council of Institutional
Investors to Secretary, Securities and Exchange
Commission (January 13, 2021), available at https://
www.sec.gov/comments/sr-nasdaq-2020-057/
srnasdaq2020057-8241868-227781.pdf.
30 Securities Exchange Act Release No. 89684
(August 26, 2020), 85 FR 54454 (September 1, 2020)
(approval by delegated authority of SR–NYSE–
2019–67). On December 22, 2020, the Commission
issued an order setting aside the action by delegated
authority and approving the proposed rule change.
Securities Exchange Act Release No. 90768
(December 22, 2020), 85 FR 85807 (December 29,
2020) (the ‘‘NYSE Approval’’).
31 NYSE Approval at 85816.
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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Notices
commitment underwritten offerings’’ 32
because the structure ‘‘has the potential
to broaden the scope of investors that
are able to purchase securities in an
initial public offering, at the initial
public offering price, rather than in
aftermarket trading’’ and ‘‘may allow for
efficiencies in IPO pricing and
allocation.’’ 33 Similarly, while the
commenter expressed concern that that
the expansion of direct listings may lead
to a decline in effective governance at
U.S. public companies, presumably
because of the lack of an underwriter in
the offering, Nasdaq believes that this
concern is unsubstantiated and
challenges in this context are not of
such magnitude as to render the
proposal inconsistent with the Act.
Moreover, in approving the Primary
Direct Floor Listing proposal the
Commission concluded that it ‘‘does not
view a firm commitment underwriting
as necessary to provide adequate
investor protection in the context of a
registered offering.’’ 34 As a result,
consistent with the purposes of the Act,
the proposed rule change may provide
investors with additional investment
opportunities and companies with more
options for becoming publicly traded.
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
Primary Direct Floor Listing on the New
York Stock Exchange.35 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.
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. 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:
SECURITIES AND EXCHANGE
COMMISSION
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.
Order Granting Application by Nasdaq
ISE, LLC for Exemption Pursuant to
Section 36(a) of the Exchange Act
From the Rule Filing Requirements of
Section 19(b) of the Exchange Act With
Respect to the Nasdaq Rule 1000
Series Incorporated by Reference
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 March
23, 2021 .
February 24, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–04222 Filed 3–1–21; 8:45 am]
32 Id.
BILLING CODE 8011–01–P
33 Id.
34 Id.
at 85815.
35 See NYSE Approval, above footnote 30.
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36 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00082
Fmt 4703
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[Release No. 34–91202]
Nasdaq ISE, LLC (the ‘‘Exchange’’) has
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) an
application for an exemption under
Section 36(a)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 from the rule filing requirements
of Section 19(b) of the Exchange Act 2
with respect to certain rules of The
Nasdaq Stock Market LLC (‘‘Nasdaq’’)
that the Exchange seeks to incorporate
by reference (‘‘Nasdaq Rule 1000
Series’’).3 Section 36(a)(1) of the
Exchange Act,4 subject to certain
limitations, authorizes the Commission
to conditionally or unconditionally
exempt any person, security, or
transaction, or any class thereof, from
any provision of the Exchange Act or
rule thereunder, if necessary or
appropriate in the public interest and
consistent with the protection of
investors.
The Exchange filed a proposed rule
change 5 under Section 19(b) of the
Exchange Act to replace its existing
membership rules, as set forth in
General 3 of its rulebook, with the Rule
1000 Series of the Nasdaq rulebook, as
such rules may be in effect from time to
time. Namely, in the proposed rule
change, the Exchange proposed to
incorporate by reference the Nasdaq
Rule 1000 Series such that Nasdaq Rule
1000 Series would be applicable to the
Exchange’s applicants, members,
associated persons, and other persons
subject to the Exchange’s jurisdiction as
though such rules were fully set forth
within the Exchange’s rulebook.6
1 15
U.S.C. 78mm(a)(1).
U.S.C. 78s(b).
3 See letter from Brett M. Kitt, Principal Associate
General Counsel, Nasdaq Inc., to J. Matthew
DeLesDernier, Assistant Secretary, Commission,
dated December 30, 2020 (‘‘Exemptive Request’’).
4 15 U.S.C. 78mm(a)(1).
5 See Securities Exchange Act Release No. 90903
(January 12, 2021), 86 FR 5284 (January 19, 2021)
(SR–ISE–2020–43). Although the proposed rule
change was filed pursuant to Section 19(b)(3)(A)(iii)
of the Exchange Act, and thereby became effective
upon filing with the Commission, the Exchange
stipulated in its proposal that the incorporation by
reference would not be operative until such time as
the Commission grants this Exemptive Request.
6 See note 5, supra.
2 15
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]]>Agencies
[Federal Register Volume 86, Number 39 (Tuesday, March 2, 2021)]
[Notices]
[Pages 12245-12250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04222]
[[Page 12245]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91205; File No. SR-NASDAQ-2020-057]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
1, 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
February 24, 2021.
On September 4, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to 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 the Exchange and to
explain how the opening transaction for such a listing will be
effected. The proposed rule change was published for comment in the
Federal Register on September 21, 2020.\3\ On November 4, 2020,
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a
longer period within which to either approve or disapprove the proposed
rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On December 17, 2020, the
Commission instituted proceedings under Section 19(b)(2)(B) of the Act
\6\ to determine whether to approve or disapprove the proposed rule
change.\7\ On February 22, 2021, the Exchange filed Amendment No. 1 to
the proposed rule change, which superseded the proposed rule change as
originally filed, and is 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, as modified by
Amendment No. 1, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 89878 (September 15,
2020), 85 FR 59349 (September 21, 2020). Comments received on the
proposal are available on the Commission's website at: https://www.sec.gov/comments/sr-nasdaq-2020-057/srnasdaq2020057.htm.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 90331 (November 4,
2020), 85 FR 71708 (November 10, 2020).
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 90717 (December 17,
2020), 85 FR 84025 (December 23, 2020).
---------------------------------------------------------------------------
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 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 is filing this amendment to SR-NASDAQ-2020-057 \8\ in order
to: (i) Require for the security to be released for trading that the
actual price calculated by the cross be at or above the lowest price
and at or below the highest price of the price range established by the
issuer in its effective registration statement; (ii) provide that the
fourth tie-breaker used in calculating the Current Reference Price is
the price that is closest to the lowest price of the price range
disclosed by the issuer in its effective registration statement; (iii)
provide that for purposes of qualifying a security under the Listing
Rules Nasdaq will calculate the value of shares, and determine whether
the company has met the applicable Market Value of Unrestricted
Publicly Held Shares, bid price and market capitalization requirements,
using a price per share equal to the lowest price in the price range
disclosed by the issuer in its effective registration statement; (iv)
provide that notwithstanding the provisions of Rule 4120(c)(8)(A),
Nasdaq, in consultation with the financial advisor to the issuer, will
make the determination of whether the security is ready to trade and
whether to reschedule the offering as described in Rule 4120(c)(8)(A);
and make minor technical changes to improve the clarity of this
proposal. Nasdaq believes that this amendment addresses the issues
raised by the Commission in the OIP.\9\ This amendment supersedes and
replaces the Initial Proposal in its entirety.
---------------------------------------------------------------------------
\8\ Securities Exchange Act Release No. 89878 (September 15,
2020), 85 FR 59349 (September 21, 2020) (the ``Initial Proposal'').
The Commission issued an Order Instituting Proceedings to Determine
Whether To Approve or Disapprove the Initial Proposal. See
Securities Exchange Act Release No. 90717 (December 17, 2020), 85 FR
84025 (December 23, 2020) (the ``OIP'').
\9\ Following approval of this proposed rule change Nasdaq
intends to file a separate proposal with the Commission that will
seek to modify the process for a Direct Listing with a Capital Raise
so that it would operate in a manner similar to the Initial Proposal
and will seek to address the remaining issues raised in the OIP.
---------------------------------------------------------------------------
Nasdaq proposes to (i) 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'');
\10\ (ii) 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 (iii) amend Rules 4120(c)(9), 4753(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.
---------------------------------------------------------------------------
\10\ 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
[[Page 12246]]
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.\11\ 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.
---------------------------------------------------------------------------
\11\ The Commission did not identify any concerns with proposed
Listing Rule IM-5315-2 in the OIP. Accordingly, the only change to
proposed IM-5315-2 in this amendment is to reflect that the minimum
price at which the company can sell shares is the lowest price in
the price range disclosed by the issuer in its effective
registration statement. In the Initial Proposal, Nasdaq proposed to
allow the company to sell shares at up to a 20% discount to the
lowest price in the price range disclosed in the effective
registration statement and therefore also to calculate compliance
with the listing requirements based on that same price.
---------------------------------------------------------------------------
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''); \12\ 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 \13\ 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.
---------------------------------------------------------------------------
\12\ IM-5315-1 describes the requirement for a Valuation,
including the experience and independence of the entity providing
the Valuation.
\13\ 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 because it is
included in the company's registration statement, and therefore Nasdaq
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
lowest price in the price range disclosed by the issuer in its
registration statement.\14\ Nasdaq also will determine whether the
company has met the applicable bid price and market capitalization
requirements based on the same per share price.
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\14\ As described below, the Nasdaq Halt Cross would not execute
at a price that is 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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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).\15\
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\15\ See Listing Rules 5315(f)(2)(A) and (B) that require the
Market Value of Unrestricted Publicly Held Shares for initial
listing on the Nasdaq Global Select Market, not in connection with
an IPO, of at least $110 million; or at least $100 million, if the
company has stockholders' equity of at least $110 million,
respectively. 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 $500 million, based on a $10
price per share.
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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. Shares held by these types of inside
investors are not included in calculations of Publicly Held Shares for
purposes of Exchange listing rules except that, as proposed with
respect to a Direct Listing with a Capital Raise, all shares sold by
the company in the offering and all shares held by Public Holders prior
to the offering will be included in the calculation of Publicly Held
Shares, even if some of these shares are purchased by inside
investors.\16\ The Exchange notes that such investors may also 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.\17\ 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 with a Capital Raise having adequate public float and a
liquid trading market after the completion of the opening auction.
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\16\ Rule 5005(a)(35).
\17\ See Listing Rules 5315(f)(2)(C) that requires the Market
Value of Unrestricted Publicly Held Shares for initial listing on
the Nasdaq Global Select Market, in connection with an IPO, of at
least $45 million.
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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.\18\
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\18\ 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.
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Proposed Listing Rule IM-5315-2 also requires that securities
listing in connection with a Direct Listing with a
[[Page 12247]]
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.\19\ However, as described in detail below, Nasdaq proposes to
modify Rule 4120(c)(9), in part related to certain functions that are
performed by an underwriter in an IPO or a financial advisor in a
Direct Listing, to require that in the case of a Direct Listing with a
Capital Raise, Nasdaq, in consultation with the financial advisor to
the issuer, will make the determination of whether the security is
ready to trade and whether to postpone and reschedule the offering as
described in Rule 4120(c)(8)(A).
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\19\ 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.
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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. The price of the CDL Order will be set in
accordance with Rule 4120(c)(9)(B) that requires, among other things,
that the CDL Order is executed at or above the lowest price and at or
below the highest price of the price range established by the issuer in
its effective registration statement.
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.\20\
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\20\ The Commission did not identify any concerns with the
proposed changes to Rule 4702 in the OIP. Accordingly, no changes to
that proposed rule are proposed in this amendment. Nasdaq notes that
the proposed CDL Order is similar in some respects to a limit order
because it cannot execute at a price less than the lowest price in
the price range disclosed by the issuer in its effective
registration statement. As a market order, the CDL Order is
guaranteed to execute in the Nasdaq Halt Cross.
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Amendments to Rules 4120(c)(9), 4753(a)(3) and 4753(b)(2)
Nasdaq proposes to amend Rules 4120(c)(9), 4753(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.
Under the proposal, in the case of the Direct Listing with a
Capital Raise, a security shall not be released for trading by Nasdaq
unless the actual price calculated by the cross is at or above the
lowest price and at or below the highest price of the price range
established by the issuer in its effective registration statement.\21\
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, as modified by the proposed changes to Rule
4120(c)(9), as described below.\22\
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\21\ See Proposed Rule 4120(c)(9)(B).
\22\ 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.
---------------------------------------------------------------------------
Rules 4120(c)(8) and (9) provide that the underwriter of the IPO,
or the financial advisor in a Direct Listing, respectively, provide
notice to Nasdaq that the security subject to the Nasdaq Halt Cross is
``ready to trade.'' \23\ These rules also provide that the underwriter
of the IPO, or the financial advisor in a Direct Listing, with
concurrence of Nasdaq, may determine at any point during the Halt Cross
process up through the conclusion of the pre-launch period to postpone
and reschedule the pricing of the security subject to the Nasdaq Halt
Cross.
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\23\ Rule 4120(c)(8)(A)(i) provides that Nasdaq receives notice
from the underwriter of the IPO that the security is ready to trade.
The Nasdaq system will calculate the Current Reference Price at that
time and display it to the underwriter. If the underwriter then
approves proceeding, the Nasdaq system will conduct certain
validation checks. Under this proposal, Nasdaq will take over these
functions of the underwriter, as described in detail below.
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However, Nasdaq proposes to require that in the case of a Direct
Listing with a Capital Raise, Nasdaq, in consultation with the
financial advisor to the issuer, will make the determination of whether
the security is ready to trade and whether to postpone and reschedule
the offering as described in Rule 4120(c)(8)(A). Specifically, Nasdaq
auction technology displays the Current Reference Price, which is the
price at which the auction can cross the largest number of securities
subject to the Nasdaq Halt Cross. If the auction cannot match all the
entered orders at the Current Reference Price, an imbalance on the buy
or sell side is displayed and provided via Nasdaq data feeds. Nasdaq
would determine that the security is ready to trade when Nasdaq
believes, based on the displayed information referenced above, that a
reasonable volume of securities will cross on the initial trade to
minimize the immediate price volatility following the initial
pricing.\24\ Nasdaq may consult with the financial advisor to the
issuer as to the reasonableness of such volume but can determine that
the security is ready to trade without such consultation. Once Nasdaq
has determined that the security is ready to trade, which will satisfy
the requirement of Rule 4120(c)(8)(A)(i), Nasdaq shall release the
security for trading if the conditions described in Rules
4120(c)(8)(A)(ii) and (iii) are met and the actual price calculated by
the Cross is at or above the lowest price and at or below the highest
price of the price range established by the issuer in its effective
registration statement.
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\24\ Rules 4120(c)(8)(B) and (c)(9) provide that the financial
advisor selects certain price bands for purposes of applying a price
validation test that occurs once the financial advisor notifies
Nasdaq that the security is ready to trade. Given that Nasdaq
proposes that in connection with a Direct Listing with a Capital
Raise Nasdaq, rather than the financial advisor, determines that the
security is ready to trade, the financial advisor will have no
purpose in setting the bands. Accordingly, because Nasdaq determines
when the security is ready to trade, it is appropriate for Nasdaq to
set the price bands. Nasdaq intends to set the price bands at zero.
---------------------------------------------------------------------------
If there is insufficient buy interest to satisfy the CDL Order, and
all other market orders, as required by this proposed rule, or if the
actual price calculated by the Cross is outside the price range
established by the issuer in its effective registration statement, the
Cross would not proceed and such security would not begin trading. In
such event, because the Cross cannot be conducted, the Exchange would
postpone and reschedule the offering and notify market participants via
a Trader Update that the Direct Listing with a Capital Raise scheduled
for that date has been cancelled and any orders for that security that
have been entered
[[Page 12248]]
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
actual price calculated by the Cross is below the lowest price or above
the highest price of the price range disclosed by the company in its
effective registration statement.
Nasdaq also proposes changes to Rules 4753(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 lowest price of the price
range disclosed by the issuer in its effective registration statement.
In this Amendment No. 1, Nasdaq also proposes changes to address
concerns raised by the Commission in the OIP relating to Rule 4120.
Specifically, consistent with Nasdaq's original intent, as revised, the
price bands established by Rule 4120(c)(8) cannot act to cause the Halt
Cross to occur outside of the price range disclosed by the issuer in
its effective registration statement because the actual price
calculated by the Cross is required to be at or above the lowest price
and at or below the highest price of the price range established by the
issuer in its effective registration statement.\25\
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\25\ In addition, in the OIP the Commission expressed concern
that the financial advisor could, in effect, cancel the non-
cancellable CDL Order by rescheduling the offering. To address this
concern, this amendment modifies the rules to provide that Nasdaq,
in consultation with the financial advisor to the issuer, will make
the determination of whether the security is ready to trade and
whether to postpone and reschedule the offering as described in Rule
4120(c)(8)(A). Finally, the proposed changes to Rule 4753 have been
modified to reflect that the lowest price at which the Nasdaq Halt
Cross can occur is the lowest price of the price range disclosed by
the issuer in its effective registration statement.
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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.\26\ 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.
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\26\ Rule 4120(c)(8) describes the activities performed by an
underwriter in an IPO and by a financial advisor in a Direct
Listing.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\27\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\28\ 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.
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\27\ 15 U.S.C. 78f(b).
\28\ 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 least $110 million), with such market value
calculated using a price per share equal to the lowest price of the
price range established by the issuer in its effective 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 but would raise capital
in a private placement or a similar transaction instead. 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 with 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 lowest price
of the price range disclosed by the issuer in its effective
registration statement. 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 because a substantial
number of buy and sell orders is expected to be executed in the Halt
Cross at a single price rather than in the secondary trading at
fluctuating prices. 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 within the specified price range, as described above, and, if the
Halt Cross occurs, all shares offered by the company would be sold at
such price. Unlike an IPO, a company listing through a Direct Listing
with a Capital Raise would not have an underwriter to
[[Page 12249]]
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 that is within the price range disclosed by the issuer in its
effective 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 believes that the CDL Order and related clarifications will
clearly define the method by which the issuer participates in the
opening auction, to prevent the issuer from being in a position to
improperly influence the price discovery process, and to design an
auction that is otherwise consistent with the disclosures in the
registration statement. Specifically, the CDL Order entered on the
company's behalf could not be executed at a price below the low end or
above the high end of the price range in the company's effective
registration statement and, as a market order, the full quantity of
shares in the CDL Order would have to be executed in the opening
auction. In addition, the CDL Order cannot be modified and the
financial advisor to the company will be unable to reschedule the
offering once it begins. As such, Nasdaq believes that the proposed
process provides reasonable assurance that the opening auction and
subsequent trading promote fair and orderly markets and that the
proposed rules are designed to prevent manipulative acts and practices,
and protect investors and the public interest in accordance with
Section 6(b)(5) of the Exchange Act.
Nasdaq believes that it is consistent with the protection of
investors and the public interest to require that in the case of a
Direct Listing with a Capital Raise, Nasdaq, in consultation with the
financial advisor to the issuer, will make the determination of whether
the security is ready to trade and whether to postpone and reschedule
the offering as described in Rule 4120(c)(8)(A) because Nasdaq would
determine that the security is ready to trade when Nasdaq believes,
based on the available information, that a reasonable volume of
securities will cross on the initial trade to minimize the immediate
price volatility following the initial pricing. Nasdaq also believes
that its ability to consult the financial advisor to the issuer is
consistent with the protection of investors because the financial
advisor would be expected to gather relevant information in connection
with the Direct Listing with a Capital Raise by engaging in certain
price discovery activities with potential buyers and sellers and such
information could be shared with Nasdaq. Nasdaq believes that as part
of their regular activities as full-service broker-dealer, such firm's
capital markets and sales and trading desk personnel may contact or be
contacted by potential investors and current holders of the securities
subject to the Nasdaq Halt Cross in the normal course of their
activities and may, in that capacity, inform and educate interested
persons regarding the company and obtain information regarding pre-
listing buying and selling interest in such securities (including with
regard to price, volume and timing expectations), which information may
also be provided to Nasdaq in order to support an effective price
discovery process by Nasdaq.
Nasdaq notes that, as described above, Nasdaq will be able to
postpone and reschedule the offering only if there is insufficient buy
interest to satisfy the CDL Order, and all other market orders, as
required by this proposed rule, or if the actual price calculated by
the Cross is outside the price range established by the issuer in its
effective registration statement.
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
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.
Finally, while a commenter expressed concerns that that the
expansion of direct listings would compound problems that shareholders
face in tracing their share purchases to a registration statement,\29\
the Commission has previously considered and rejected these
concerns.\30\ In that regard, the Commission has determined that
investor protection concerns relating to tracing challenges are not
unique to direct listings, including where the company itself would
sell shares in the opening auction on the first day of trading on the
Exchange in addition to, or instead of, facilitating sales by selling
shareholders (``Primary Direct Floor Listing''), and stated that it did
not expect ``any such tracing challenges in this context to be of such
magnitude as to render the proposal inconsistent with the Act.'' \31\
On the other hand, the Commission found that allowing a Primary Direct
Floor Listing ``will provide benefits to existing and potential
investors relative to firm
[[Page 12250]]
commitment underwritten offerings'' \32\ because the structure ``has
the potential to broaden the scope of investors that are able to
purchase securities in an initial public offering, at the initial
public offering price, rather than in aftermarket trading'' and ``may
allow for efficiencies in IPO pricing and allocation.'' \33\ Similarly,
while the commenter expressed concern that that the expansion of direct
listings may lead to a decline in effective governance at U.S. public
companies, presumably because of the lack of an underwriter in the
offering, Nasdaq believes that this concern is unsubstantiated and
challenges in this context are not of such magnitude as to render the
proposal inconsistent with the Act. Moreover, in approving the Primary
Direct Floor Listing proposal the Commission concluded that it ``does
not view a firm commitment underwriting as necessary to provide
adequate investor protection in the context of a registered offering.''
\34\ As a result, consistent with the purposes of the Act, the proposed
rule change may provide investors with additional investment
opportunities and companies with more options for becoming publicly
traded.
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\29\ See Letter from Jeffrey P. Mahoney, General Counsel,
Council of Institutional Investors to Secretary, Securities and
Exchange Commission (October 8, 2020), available at https://www.sec.gov/comments/sr-nasdaq-2020-057/srnasdaq2020057-7888884-224228.pdf. See also Letter from Jeffrey P. Mahoney, General
Counsel, Council of Institutional Investors to Secretary, Securities
and Exchange Commission (January 13, 2021), available at https://www.sec.gov/comments/sr-nasdaq-2020-057/srnasdaq2020057-8241868-227781.pdf.
\30\ Securities Exchange Act Release No. 89684 (August 26,
2020), 85 FR 54454 (September 1, 2020) (approval by delegated
authority of SR-NYSE-2019-67). On December 22, 2020, the Commission
issued an order setting aside the action by delegated authority and
approving the proposed rule change. Securities Exchange Act Release
No. 90768 (December 22, 2020), 85 FR 85807 (December 29, 2020) (the
``NYSE Approval'').
\31\ NYSE Approval at 85816.
\32\ Id.
\33\ Id.
\34\ Id. at 85815.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the 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 Primary Direct Floor Listing on the New York Stock
Exchange.\35\ 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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\35\ See NYSE Approval, above footnote 30.
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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. 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-2020-057 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 March 23, 2021 .
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04222 Filed 3-1-21; 8:45 am]
BILLING CODE 8011-01-P
