Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Modify Certain Initial Listing Liquidity Requirements, 12608-12611 [2025-04343]

Download as PDF 12608 Federal Register / Vol. 90, No. 51 / Tuesday, March 18, 2025 / Notices Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to amend the supervisory reporting process for TPHs as discussed herein in Rules 8.16 and 9.2 to conform to the requirements of FINRA and NYSE in relevant part, which may simplify the annual supervisory reporting procedures for members of the Exchange that are also participants on NYSE and/ or members of FINRA. The Commission does not believe the proposal introduces any novel regulatory issues. Accordingly, the Commission designates the proposed rule change to be operative upon filing.10 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. khammond on DSK9W7S144PROD with NOTICES III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act.11 Comments may be submitted electronically by using the Commission’s internet comment form (https://www.sec.gov/rules-regulations/ self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-CBOE-2025015) or by sending an email to rulecomments@sec.gov. Please include file 10 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 11 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. VerDate Sep<11>2014 16:20 Mar 17, 2025 Jkt 265001 number SR–CBOE–2025–015 on the subject line. Alternatively, paper comments may be sent to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–CBOE–2025– 015. 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-regulations/ self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-CBOE-2025015). Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CBOE–2025–015 and should be submitted on or before April 8, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–04325 Filed 3–17–25; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–102622; File No. SR– NASDAQ–2024–084) Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Modify Certain Initial Listing Liquidity Requirements March 12, 2025 I. Introduction On December 12, 2024, The Nasdaq Stock Market LLC (‘‘Nasdaq’’) 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 modify Listing Rules 5405 and 5505 to (1) require that a company listing on the Nasdaq Global Market or Nasdaq Capital Market in connection with an initial public offering (‘‘IPO’’) satisfy the applicable minimum Market 12 17 CFR 200.30–3(a)(12) and (59). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 Value of Unrestricted Publicly Held Shares requirement solely from the proceeds of the offering; and (2) make similar changes affecting companies that uplist to Nasdaq Global Market or Nasdaq Capital Market from the U.S. over-the-counter (‘‘OTC’’) market in conjunction with a public offering. The proposed rule change was published for comment in the Federal Register on December 30, 2024.3 On February 5, 2025, the Exchange filed Amendment No. 1 to the proposed rule change, which superseded the original proposed rule change in its entirety.4 On February 11, 2025, pursuant to Section 19(b)(2) of the Exchange Act,5 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.6 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, and is approving the proposed rule change, as modified by Amendment No. 1, on an accelerated basis. II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 7 Nasdaq Listing Rules require that a company applying for initial listing on the Exchange must have a minimum Market Value of Unrestricted Publicly Held Shares.8 For initial listing on the 3 See Securities Exchange Act Release No. 101978 (Dec. 19, 2024), 89 FR 106717 (Dec. 30, 2024) (‘‘Notice’’). Comments on the proposed rule change are available at: https://www.sec.gov/comments/srnasdaq-2024-084/srnasdaq2024084.htm. 4 The full text of Amendment No. 1 is available on the Commission’s website at: https:// www.sec.gov/comments/sr-nasdaq-2024-084/ srnasdaq2024084-565255-1620762.pdf (‘‘Amendment No. 1’’). Amendment No. 1 makes minor changes to improve the clarity and readability of the proposal and provides that the proposed changes will become operative 30 days after approval by the Commission. 5 15 U.S.C. 78s(b)(2). 6 See Securities Exchange Act Release No. 102389 (Feb. 11, 2025), 90 FR 9771 (Feb. 18, 2025) (designating March 30, 2025, as the date by which the Commission shall either approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change). 7 All capitalized terms not otherwise defined in this order shall have the meanings set forth in the Nasdaq Listing Rules. 8 Unrestricted Publicly Held Shares are shares that are not held by an officer, director, or 10% shareholder of the company and which are not subject to resale restrictions of any kind. See Nasdaq Listing Rule 5005(a)(46). The Exchange states that, like other liquidity requirements, the Market Value of Unrestricted Publicly Held Shares standard is meant to ensure that there is sufficient liquidity to provide price discovery and support an efficient and orderly market for the company’s securities. See Notice at 106718. E:\FR\FM\18MRN1.SGM 18MRN1 Federal Register / Vol. 90, No. 51 / Tuesday, March 18, 2025 / Notices khammond on DSK9W7S144PROD with NOTICES Nasdaq Global Market, a company must have a minimum Market Value of Unrestricted Publicly Held Shares of $8 million under the Income Standard, $18 million under the Equity Standard, and $20 million under either the Market Value or Total Assets/Total Revenue Standards.9 For initial listing on the Nasdaq Capital Market, a company must have a minimum Market Value of Unrestricted Publicly Held Shares of $5 million under the Net Income Standard, and $15 million under either the Equity or Market Value of Listed Securities Standards.10 In addition, to qualify for initial listing on Nasdaq Global Market or Nasdaq Capital Market, a company trading on the OTC market prior to listing must currently satisfy either a minimum daily trading volume on the OTC market of 2,000 shares over the past 30 trading days with trading occurring in at least 50% of those days (the ‘‘ADV Requirement’’) or, alternatively, list in connection with a firm commitment underwritten public offering of at least $4 million.11 The Exchange states that, in the case of a company listing in conjunction with a public offering, previously issued shares registered for resale (‘‘Resale Shares’’), and not held by an officer, director, or 10% shareholder of the company, are counted as Unrestricted Publicly Held Shares in addition to the shares being sold in an offering.12 The Exchange also states that it has observed that the companies that meet the applicable Market Value of Unrestricted Publicly Held Shares requirement through an IPO by including Resale Shares have experienced higher volatility on the date of listing than those of similarly situated companies that meet the requirement with only the proceeds from the offering.13 According to the Exchange, the Resale Shares may not contribute to liquidity to the same degree as the shares sold in the public offering.14 The Exchange states that, as such, it is appropriate to modify the rules to exclude the Resale Shares from the calculation of Market Value of Unrestricted Publicly Held Shares for 9 See Nasdaq Listing Rules 5405(b)(1)(C), 5405(b)(2)(C), 5405(b)(3)(B), and 5405(b)(4)(B). 10 See Nasdaq Listing Rules 5505(b)(1)(B), 5505(b)(2)(C), and 5505(b)(3)(C). 11 See Nasdaq Listing Rules 5405(a) and 5505(a). The Exchange states that this alternative recognizes that where a company is listing in connection with a significant firm commitment underwritten public offering the liquidity characteristics of its prior trading will change and reflect the offering, just like in an IPO, and shares in the offering will be the primary source of liquidity and price discovery upon listing. See Notice at 106718. 12 See Notice at 106718. 13 See id. 14 See id. VerDate Sep<11>2014 16:20 Mar 17, 2025 Jkt 265001 the initial listing of companies listing in conjunction with an IPO.15 The Exchange also states that it is appropriate to treat a company that is uplisting from the OTC market while relying on the alternative to the ADV Requirement (i.e., listing in connection with a firm commitment underwritten public offering of a specified size) in a similar manner because the liquidity in such listings is also expected to be supported by the offering.16 First, the Exchange proposes to modify Nasdaq Listing Rules 5405(b) and 5505(b) to provide that a company listing in connection with an IPO, including through the issuance of American Depository Receipts, must satisfy the applicable Market Value of Unrestricted Publicly Held Shares requirement for each initial listing standard for primary equity securities 17 with the proceeds of that offering. Secondly, with respect to a company uplisting from the OTC market, the Exchange proposes to modify the alternative to the ADV Requirement in Nasdaq Listing Rules 5405(a)(4) and 5505(a)(5). As revised, a company relying on this alternative will be required to satisfy the applicable Market Value of Unrestricted Publicly Held Shares requirement with only the proceeds from the offering. As a result, the Exchange also proposes to modify Nasdaq Listing Rules 5405(a)(4) and 5505(a)(5) to increase the size of the required public offering for this alternative to the ADV Requirement from $4 million to $5 million for Nasdaq Capital Market applicants and $8 million for Nasdaq Global Market applicants to align with the minimum Market Value of Unrestricted Publicly Held Shares requirement for each market.18 If the company qualifies under a standard other than the income standard, the minimum raise instead will have to satisfy the Market Value of Unrestricted Publicly Held Shares requirement of the applicable standard.19 15 See id. id. 17 See supra notes 9 and 10. 18 See id. 19 Specifically, for a company listing on the Nasdaq Global Market under the Equity Standard or the Market Value or Total Assets/Total Revenue Standards, the required public offering size will be at least $18 million and $20 million, respectively. See Nasdaq Listing Rules 5405(b)(2)(C), 5405(b)(3)(B), and 5405(b)(4)(B). Similarly, for a company listing on the Nasdaq Capital Market under the Equity Standard or the Market Value of Listed Securities Standard, the required public offering size will be at least $15 million. See Nasdaq Listing Rules 5505(b)(1)(B) and 5505(b)(2)(C). 16 See PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 12609 The Exchange states that the proposed changes will become operative 30 days after approval by the Commission.20 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.21 In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Exchange Act,22 which requires, among other things, that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The development and enforcement of meaningful listing standards for an exchange is of critical importance to financial markets and the investing public. Among other things, such listing standards help ensure that exchangelisted companies will have sufficient public float, investor base, and trading interest to provide the depth and liquidity to promote fair and orderly markets.23 Meaningful listing standards also are important given investor expectations regarding the nature of securities that have achieved an exchange listing, and the role of an exchange in overseeing its market and assuring compliance with its listing standards.24 20 See Amendment No. 1 at 7. approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 22 15 U.S.C. 78f(b)(5). 23 Adequate listing standards, by promoting fair and orderly markets, are consistent with Section 6(b)(5) of the Exchange Act, in that they are, among other things, designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and protect investors and the public interest. See, e.g., Securities Exchange Act Release No. 100816 (Aug. 26, 2024), 89 FR 70674, 70677 n.47 (Aug. 30, 2024) (SR– NASDAQ–2024–019). 24 See, e.g., Securities Exchange Act Release No. 86314 (July 5, 2019), 84 FR 33102 (July 11, 2019) (SR–NASDAQ–2019–009) (Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, To Revise the Exchange’s Initial Listing Standards Related to Liquidity). See also Securities Exchange Act Release No. 81856 (Oct. 11, 2017), 82 FR 48296, 48298 (Oct. 21 In E:\FR\FM\18MRN1.SGM Continued 18MRN1 12610 Federal Register / Vol. 90, No. 51 / Tuesday, March 18, 2025 / Notices khammond on DSK9W7S144PROD with NOTICES The Exchange has proposed to make more rigorous certain of its initial listing standards for the Nasdaq Global Market and Nasdaq Capital Market to help assure that an adequate level of liquidity exists for securities that are listing on the Exchange for the first time. Specifically, the Exchange proposes that a company listing in connection with an IPO, including through the issuance of American Depository Receipts, must satisfy the applicable minimum Market Value of Unrestricted Publicly Held Shares requirement with only the proceeds from the offering. The Exchange also proposes that a company uplisting from the OTC market based on the minimum required size of its firm commitment underwritten public offering, rather than the ADV Requirement, must satisfy this requirement with only the proceeds from that offering. The Exchange’s initial listing standards currently do not exclude Resale Shares from the calculation of Market Value of Unrestricted Publicly Held Shares. According to the Exchange, companies that list on the Exchange for the first time through an IPO and meet the applicable Market Value of Unrestricted Publicly Held Shares requirement by relying on Resale Shares experience higher volatility than companies that meet such requirement based on the proceeds of the offering and Resale Shares may not contribute to liquidity of companies’ securities to the same extent as shares included in the public offering.25 The Exchange also states that companies uplisting from the OTC market while relying on the alternative to the ADV Requirement do so with the expectation that liquidity of the companies’ securities will be supported by the offering.26 The proposed amendments to exclude Resale Shares from the calculation of these initial listing requirements pertaining to the Market Value of Unrestricted Publicly Held Shares and, with respect to a company uplisting from the OTC market, the size of a company’s firm commitment underwritten public offering should 17, 2017) (SR–NYSE–2017–31) (Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend the Listed Company Manual To Adopt Initial and Continued Listing Standards for Subscription Receipts) (stating that ‘‘[a]dequate standards are especially important given the expectations of investors regarding exchange trading and the imprimatur of listing on a particular market’’ and that ‘‘[o]nce a security has been approved for initial listing, maintenance criteria allow an exchange to monitor the status and trading characteristics of that issue . . . so that fair and orderly markets can be maintained’’). 25 See supra notes 14–15 and accompanying text. 26 See supra note 18 and accompanying text. VerDate Sep<11>2014 16:20 Mar 17, 2025 Jkt 265001 allow the Exchange to better determine whether a security has adequate liquidity and thus is suitable for listing and trading on the Exchange. Accordingly, the amendments to the Exchange’s initial listing standards should help to ensure that the Exchange lists only securities with a sufficient market, with adequate depth and liquidity, and with sufficient investor interest to support an exchange listing.27 For these reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the requirements of the Exchange Act. IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule Change Interested persons are invited to submit written data, views, and arguments concerning whether the proposed rule change, as modified by Amendment No. 1, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– NASDAQ–2024–084 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–2024–084. 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 27 The Commission received one comment letter that was generally supportive of the proposal. See Letter from Damon D. Testaverde, Chairman of Network 1 Financial Securities, Inc., dated Jan. 21, 2025 (‘‘Network 1 Letter’’). This commenter also recommended additional changes to the Exchange’s listing standards and raised other areas of concerns for the Commission’s consideration. See id. These additional recommendations are not before the Commission in the proposal being considered herein. In approving this proposal, the Commission is finding the proposal before us consistent with the Exchange Act. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–NASDAQ–2024–084, and should be submitted on or before April 8, 2025. V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 1 in the Federal Register. The changes in Amendment No. 1 provide greater clarity to the proposal. These changes include (1) elaborating on the relevant Market Value of Unrestricted Publicly Held Shares requirements that a company uplisting from the OTC market to the Nasdaq Global Market or Nasdaq Capital Market in connection with a public offering will be subject to; and (2) clarifying, in the example regarding companies that are subject to higher initial listing standards than companies impacted by the proposed change, that the example refers to a Direct Listing in which a company’s security has not had sustained recent trading in a Private Placement Market prior to listing.28 This clarification and additional information assists the Commission in evaluating the proposal and determining that the proposal is consistent with the Act. Further, Amendment No. 1 does not modify the operation or meaning of the proposed changes, which were published for comment in the Federal Register.29 Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,30 to approve the proposed rule change, as 28 See Amendment No. 1 at 7, 10. supra note 3. 30 15 U.S.C. 78s(b)(2). 29 See E:\FR\FM\18MRN1.SGM 18MRN1 Federal Register / Vol. 90, No. 51 / Tuesday, March 18, 2025 / Notices modified by Amendment No. 1, on an accelerated basis. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,31 that the proposed rule change (SR– NASDAQ–2024–084), as modified by Amendment No. 1, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–04343 Filed 3–17–25; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–102632; File No. SR– CboeBZX–2025–036] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend the Rule Governing the Listing and Trading of Shares of the Franklin Ethereum ETF To Permit Staking March 12, 2025. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 10, 2025, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. khammond on DSK9W7S144PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change BZX Exchange, Inc. (‘‘BZX’’ or the ‘‘Exchange’’) is filing with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) a proposed rule change to amend the Franklin Ethereum ETF (the ‘‘Fund’’), a series of the Franklin Ethereum Trust (the ‘‘Trust’’), shares (the ‘‘Shares’’) of which have been approved by the Commission to list and trade on the Exchange pursuant to BZX Rule 14.11(e)(4), to permit staking of the ether held by the Fund. 31 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 32 17 VerDate Sep<11>2014 16:20 Mar 17, 2025 Jkt 265001 The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission approved the Exchange’s proposal to list and trade shares (the ‘‘Shares’’) of the Fund on the Exchange pursuant to Exchange Rule 14.11(e)(4), Commodity-Based Trust Shares, on May 23, 2024.3 Exchange Rule 14.11(e)(4) governs the listing and trading of Commodity-Based Trust Shares, which means a security (a) that is issued by a trust that holds (1) a specified commodity deposited with the trust, or (2) a specified commodity and, in addition to such specified commodity, cash; (b) that is issued by such trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying commodity and/or cash; and (c) that, when aggregated in the same specified minimum number, may be redeemed at a holder’s request by such trust which will deliver to the redeeming holder the quantity of the underlying commodity and/or cash. The Shares are issued by the Fund, which is a series of the Trust. 3 See Securities Exchange Act Release Nos. 100218 (May 22, 2024) 89 FR 46499 (May 29, 2024) (SR–CboeBZX–2024–018) (Notice of Filing of Amendment No. 1 to a Proposed Rule Change Relating To List and Trade Shares of the Franklin Ethereum ETF, a Series of the Franklin Ethereum Trust, Under BZX Rule 14.11(e)(4), CommodityBased Trust Shares) (‘‘Eth ETP Amendment No. 1’’); 100224 (May 23, 2024) 89 FR 46937 (May 30, 2024) (SR–CboeBZX–2024–018) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to List and Trade Shares of Ether-Based Exchange-Traded Products) (the ‘‘Approval Order’’). PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 12611 The Trust was formed as a Delaware statutory trust on February 8, 2024. Based on discussions with the Sponsor, the Exchange proposes to amend several portions of the Eth ETP Amendment No. 1 in order to allow the staking of the ether held by the Fund. First, the Exchange proposes to delete the following representation in the Eth ETP Amendment No. 1 that provides that the Fund will not engage in staking: 4 Neither the Trust or the Fund, nor the Sponsor, nor the Custodian, nor any other person associated with the Trust or Fund will, directly or indirectly, engage in action where any portion of the Fund’s ETH becomes subject to the Ethereum proof-ofstake validation or is used to earn additional ETH or generate income or other earnings. The Exchange also proposes to add the following ‘‘Staking’’ section following the ‘‘The Custodian’’ section 5 of the Eth ETP Amendment No. 1: Staking The Sponsor may, from time to time, stake a portion of the Fund’s ether on behalf of the Fund through one or more trusted staking providers, which may include the Custodian, an affiliate of the Custodian or an affiliate of the Sponsor (‘‘Staking Providers’’). In consideration for any staking activity in which the Fund may engage, the Fund would receive certain staking rewards of ether tokens, which may be treated as income to the Fund. The Staking Process In the second half of 2020, the Ethereum network began the first of several stages of an upgrade culminating in a transition referred to as the ‘‘Merge.’’ The Merge amended the Ethereum network’s consensus mechanism to a process known as proof-of-stake. Proof-ofstake was intended to address the perceived shortcomings of the proof-of-work consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known under proof-of-work as ‘‘miners’’). In a proof-of-work consensus mechanism, miners effectively compete to be the first in time to solve the cryptographic puzzle that would allow them to be the only validator permitted to validate the block and thus be the only ones to receive the resulting block reward. Miners who are not first in time (and thus are not permitted to be validators) will have effectively expended significant labor and computing power for no gain. In a proof-of-stake mechanism, by contrast, a single validator is randomly selected to solve the cryptographic puzzle needed to validate a block, which it proposes to a committee of other validators, who vote for whether to include the block (or not). This proof-of-stake system reduces the computational work performed—and energy expended—to validate each block compared to proof-of-work. 4 See 5 See E:\FR\FM\18MRN1.SGM Eth ETP Amendment No. 1 at 46505. Eth ETP Amendment No. 1 at 46506–46507. 18MRN1

Agencies

[Federal Register Volume 90, Number 51 (Tuesday, March 18, 2025)]
[Notices]
[Pages 12608-12611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04343]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102622; File No. SR-NASDAQ-2024-084)


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Modify Certain Initial Listing Liquidity Requirements

March 12, 2025

I. Introduction

    On December 12, 2024, The Nasdaq Stock Market LLC (``Nasdaq'') 
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 
modify Listing Rules 5405 and 5505 to (1) require that a company 
listing on the Nasdaq Global Market or Nasdaq Capital Market in 
connection with an initial public offering (``IPO'') satisfy the 
applicable minimum Market Value of Unrestricted Publicly Held Shares 
requirement solely from the proceeds of the offering; and (2) make 
similar changes affecting companies that uplist to Nasdaq Global Market 
or Nasdaq Capital Market from the U.S. over-the-counter (``OTC'') 
market in conjunction with a public offering. The proposed rule change 
was published for comment in the Federal Register on December 30, 
2024.\3\ On February 5, 2025, the Exchange filed Amendment No. 1 to the 
proposed rule change, which superseded the original proposed rule 
change in its entirety.\4\ On February 11, 2025, pursuant to Section 
19(b)(2) of the Exchange Act,\5\ the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\6\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 101978 (Dec. 19, 
2024), 89 FR 106717 (Dec. 30, 2024) (``Notice''). Comments on the 
proposed rule change are available at: https://www.sec.gov/comments/sr-nasdaq-2024-084/srnasdaq2024084.htm.
    \4\ The full text of Amendment No. 1 is available on the 
Commission's website at: https://www.sec.gov/comments/sr-nasdaq-2024-084/srnasdaq2024084-565255-1620762.pdf (``Amendment No. 1''). 
Amendment No. 1 makes minor changes to improve the clarity and 
readability of the proposal and provides that the proposed changes 
will become operative 30 days after approval by the Commission.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 102389 (Feb. 11, 
2025), 90 FR 9771 (Feb. 18, 2025) (designating March 30, 2025, as 
the date by which the Commission shall either approve, disapprove, 
or institute proceedings to determine whether to disapprove the 
proposed rule change).
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    The Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1, and is approving 
the proposed rule change, as modified by Amendment No. 1, on an 
accelerated basis.

II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1 7
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    \7\ All capitalized terms not otherwise defined in this order 
shall have the meanings set forth in the Nasdaq Listing Rules.
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    Nasdaq Listing Rules require that a company applying for initial 
listing on the Exchange must have a minimum Market Value of 
Unrestricted Publicly Held Shares.\8\ For initial listing on the

[[Page 12609]]

Nasdaq Global Market, a company must have a minimum Market Value of 
Unrestricted Publicly Held Shares of $8 million under the Income 
Standard, $18 million under the Equity Standard, and $20 million under 
either the Market Value or Total Assets/Total Revenue Standards.\9\ For 
initial listing on the Nasdaq Capital Market, a company must have a 
minimum Market Value of Unrestricted Publicly Held Shares of $5 million 
under the Net Income Standard, and $15 million under either the Equity 
or Market Value of Listed Securities Standards.\10\ In addition, to 
qualify for initial listing on Nasdaq Global Market or Nasdaq Capital 
Market, a company trading on the OTC market prior to listing must 
currently satisfy either a minimum daily trading volume on the OTC 
market of 2,000 shares over the past 30 trading days with trading 
occurring in at least 50% of those days (the ``ADV Requirement'') or, 
alternatively, list in connection with a firm commitment underwritten 
public offering of at least $4 million.\11\
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    \8\ Unrestricted Publicly Held Shares are shares that are not 
held by an officer, director, or 10% shareholder of the company and 
which are not subject to resale restrictions of any kind. See Nasdaq 
Listing Rule 5005(a)(46). The Exchange states that, like other 
liquidity requirements, the Market Value of Unrestricted Publicly 
Held Shares standard is meant to ensure that there is sufficient 
liquidity to provide price discovery and support an efficient and 
orderly market for the company's securities. See Notice at 106718.
    \9\ See Nasdaq Listing Rules 5405(b)(1)(C), 5405(b)(2)(C), 
5405(b)(3)(B), and 5405(b)(4)(B).
    \10\ See Nasdaq Listing Rules 5505(b)(1)(B), 5505(b)(2)(C), and 
5505(b)(3)(C).
    \11\ See Nasdaq Listing Rules 5405(a) and 5505(a). The Exchange 
states that this alternative recognizes that where a company is 
listing in connection with a significant firm commitment 
underwritten public offering the liquidity characteristics of its 
prior trading will change and reflect the offering, just like in an 
IPO, and shares in the offering will be the primary source of 
liquidity and price discovery upon listing. See Notice at 106718.
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    The Exchange states that, in the case of a company listing in 
conjunction with a public offering, previously issued shares registered 
for resale (``Resale Shares''), and not held by an officer, director, 
or 10% shareholder of the company, are counted as Unrestricted Publicly 
Held Shares in addition to the shares being sold in an offering.\12\ 
The Exchange also states that it has observed that the companies that 
meet the applicable Market Value of Unrestricted Publicly Held Shares 
requirement through an IPO by including Resale Shares have experienced 
higher volatility on the date of listing than those of similarly 
situated companies that meet the requirement with only the proceeds 
from the offering.\13\ According to the Exchange, the Resale Shares may 
not contribute to liquidity to the same degree as the shares sold in 
the public offering.\14\ The Exchange states that, as such, it is 
appropriate to modify the rules to exclude the Resale Shares from the 
calculation of Market Value of Unrestricted Publicly Held Shares for 
the initial listing of companies listing in conjunction with an 
IPO.\15\ The Exchange also states that it is appropriate to treat a 
company that is uplisting from the OTC market while relying on the 
alternative to the ADV Requirement (i.e., listing in connection with a 
firm commitment underwritten public offering of a specified size) in a 
similar manner because the liquidity in such listings is also expected 
to be supported by the offering.\16\
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    \12\ See Notice at 106718.
    \13\ See id.
    \14\ See id.
    \15\ See id.
    \16\ See id.
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    First, the Exchange proposes to modify Nasdaq Listing Rules 5405(b) 
and 5505(b) to provide that a company listing in connection with an 
IPO, including through the issuance of American Depository Receipts, 
must satisfy the applicable Market Value of Unrestricted Publicly Held 
Shares requirement for each initial listing standard for primary equity 
securities \17\ with the proceeds of that offering.
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    \17\ See supra notes 9 and 10.
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    Secondly, with respect to a company uplisting from the OTC market, 
the Exchange proposes to modify the alternative to the ADV Requirement 
in Nasdaq Listing Rules 5405(a)(4) and 5505(a)(5). As revised, a 
company relying on this alternative will be required to satisfy the 
applicable Market Value of Unrestricted Publicly Held Shares 
requirement with only the proceeds from the offering. As a result, the 
Exchange also proposes to modify Nasdaq Listing Rules 5405(a)(4) and 
5505(a)(5) to increase the size of the required public offering for 
this alternative to the ADV Requirement from $4 million to $5 million 
for Nasdaq Capital Market applicants and $8 million for Nasdaq Global 
Market applicants to align with the minimum Market Value of 
Unrestricted Publicly Held Shares requirement for each market.\18\ If 
the company qualifies under a standard other than the income standard, 
the minimum raise instead will have to satisfy the Market Value of 
Unrestricted Publicly Held Shares requirement of the applicable 
standard.\19\
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    \18\ See id.
    \19\ Specifically, for a company listing on the Nasdaq Global 
Market under the Equity Standard or the Market Value or Total 
Assets/Total Revenue Standards, the required public offering size 
will be at least $18 million and $20 million, respectively. See 
Nasdaq Listing Rules 5405(b)(2)(C), 5405(b)(3)(B), and 
5405(b)(4)(B). Similarly, for a company listing on the Nasdaq 
Capital Market under the Equity Standard or the Market Value of 
Listed Securities Standard, the required public offering size will 
be at least $15 million. See Nasdaq Listing Rules 5505(b)(1)(B) and 
5505(b)(2)(C).
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    The Exchange states that the proposed changes will become operative 
30 days after approval by the Commission.\20\
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    \20\ See Amendment No. 1 at 7.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Exchange Act and the rules and regulations 
thereunder applicable to a national securities exchange.\21\ In 
particular, the Commission finds that the proposed rule change, as 
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the 
Exchange Act,\22\ which requires, among other things, that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest, and not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \21\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
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    The development and enforcement of meaningful listing standards for 
an exchange is of critical importance to financial markets and the 
investing public. Among other things, such listing standards help 
ensure that exchange-listed companies will have sufficient public 
float, investor base, and trading interest to provide the depth and 
liquidity to promote fair and orderly markets.\23\ Meaningful listing 
standards also are important given investor expectations regarding the 
nature of securities that have achieved an exchange listing, and the 
role of an exchange in overseeing its market and assuring compliance 
with its listing standards.\24\
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    \23\ Adequate listing standards, by promoting fair and orderly 
markets, are consistent with Section 6(b)(5) of the Exchange Act, in 
that they are, among other things, designed to prevent fraudulent 
and manipulative acts and practices, promote just and equitable 
principles of trade, and protect investors and the public interest. 
See, e.g., Securities Exchange Act Release No. 100816 (Aug. 26, 
2024), 89 FR 70674, 70677 n.47 (Aug. 30, 2024) (SR-NASDAQ-2024-019).
    \24\ See, e.g., Securities Exchange Act Release No. 86314 (July 
5, 2019), 84 FR 33102 (July 11, 2019) (SR-NASDAQ-2019-009) (Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 3, To Revise the Exchange's Initial Listing 
Standards Related to Liquidity). See also Securities Exchange Act 
Release No. 81856 (Oct. 11, 2017), 82 FR 48296, 48298 (Oct. 17, 
2017) (SR-NYSE-2017-31) (Notice of Filing of Amendment No. 1 and 
Order Granting Accelerated Approval of a Proposed Rule Change, as 
Modified by Amendment No. 1, To Amend the Listed Company Manual To 
Adopt Initial and Continued Listing Standards for Subscription 
Receipts) (stating that ``[a]dequate standards are especially 
important given the expectations of investors regarding exchange 
trading and the imprimatur of listing on a particular market'' and 
that ``[o]nce a security has been approved for initial listing, 
maintenance criteria allow an exchange to monitor the status and 
trading characteristics of that issue . . . so that fair and orderly 
markets can be maintained'').

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[[Page 12610]]

    The Exchange has proposed to make more rigorous certain of its 
initial listing standards for the Nasdaq Global Market and Nasdaq 
Capital Market to help assure that an adequate level of liquidity 
exists for securities that are listing on the Exchange for the first 
time. Specifically, the Exchange proposes that a company listing in 
connection with an IPO, including through the issuance of American 
Depository Receipts, must satisfy the applicable minimum Market Value 
of Unrestricted Publicly Held Shares requirement with only the proceeds 
from the offering. The Exchange also proposes that a company uplisting 
from the OTC market based on the minimum required size of its firm 
commitment underwritten public offering, rather than the ADV 
Requirement, must satisfy this requirement with only the proceeds from 
that offering.
    The Exchange's initial listing standards currently do not exclude 
Resale Shares from the calculation of Market Value of Unrestricted 
Publicly Held Shares. According to the Exchange, companies that list on 
the Exchange for the first time through an IPO and meet the applicable 
Market Value of Unrestricted Publicly Held Shares requirement by 
relying on Resale Shares experience higher volatility than companies 
that meet such requirement based on the proceeds of the offering and 
Resale Shares may not contribute to liquidity of companies' securities 
to the same extent as shares included in the public offering.\25\ The 
Exchange also states that companies uplisting from the OTC market while 
relying on the alternative to the ADV Requirement do so with the 
expectation that liquidity of the companies' securities will be 
supported by the offering.\26\
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    \25\ See supra notes 14-15 and accompanying text.
    \26\ See supra note 18 and accompanying text.
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    The proposed amendments to exclude Resale Shares from the 
calculation of these initial listing requirements pertaining to the 
Market Value of Unrestricted Publicly Held Shares and, with respect to 
a company uplisting from the OTC market, the size of a company's firm 
commitment underwritten public offering should allow the Exchange to 
better determine whether a security has adequate liquidity and thus is 
suitable for listing and trading on the Exchange. Accordingly, the 
amendments to the Exchange's initial listing standards should help to 
ensure that the Exchange lists only securities with a sufficient 
market, with adequate depth and liquidity, and with sufficient investor 
interest to support an exchange listing.\27\
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    \27\ The Commission received one comment letter that was 
generally supportive of the proposal. See Letter from Damon D. 
Testaverde, Chairman of Network 1 Financial Securities, Inc., dated 
Jan. 21, 2025 (``Network 1 Letter''). This commenter also 
recommended additional changes to the Exchange's listing standards 
and raised other areas of concerns for the Commission's 
consideration. See id. These additional recommendations are not 
before the Commission in the proposal being considered herein. In 
approving this proposal, the Commission is finding the proposal 
before us consistent with the Exchange Act.
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    For these reasons, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Exchange Act.

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning 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-2024-084 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-2024-084. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-NASDAQ-2024-084, and should 
be submitted on or before April 8, 2025.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
1 in the Federal Register. The changes in Amendment No. 1 provide 
greater clarity to the proposal. These changes include (1) elaborating 
on the relevant Market Value of Unrestricted Publicly Held Shares 
requirements that a company uplisting from the OTC market to the Nasdaq 
Global Market or Nasdaq Capital Market in connection with a public 
offering will be subject to; and (2) clarifying, in the example 
regarding companies that are subject to higher initial listing 
standards than companies impacted by the proposed change, that the 
example refers to a Direct Listing in which a company's security has 
not had sustained recent trading in a Private Placement Market prior to 
listing.\28\ This clarification and additional information assists the 
Commission in evaluating the proposal and determining that the proposal 
is consistent with the Act. Further, Amendment No. 1 does not modify 
the operation or meaning of the proposed changes, which were published 
for comment in the Federal Register.\29\ Accordingly, the Commission 
finds good cause, pursuant to Section 19(b)(2) of the Act,\30\ to 
approve the proposed rule change, as

[[Page 12611]]

modified by Amendment No. 1, on an accelerated basis.
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    \28\ See Amendment No. 1 at 7, 10.
    \29\ See supra note 3.
    \30\ 15 U.S.C. 78s(b)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\31\ that the proposed rule change (SR-NASDAQ-2024-084), 
as modified by Amendment No. 1, be, and it hereby is, approved on an 
accelerated basis.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04343 Filed 3-17-25; 8:45 am]
BILLING CODE 8011-01-P
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