77036 Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / Notices 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 62818 

(September 1, 2010), 75 FR 54665 (‘‘Notice’’). 

4See Letters to Elizabeth M. Murphy, Secretary, 

Commission, from Tom A. Alberg, Managing 

Director and Founder, Madrona Venture Group, 

dated December 1, 2010 (‘‘Madrona Letter’’); 

Michael R. Trocchio, Bingham McCutchen LLP, 

dated October 3, 2010 (‘‘Pink OTC Markets Letter’’); 

and William F. Galvin, Secretary of the 

Commonwealth, Commonwealth of Massachusetts, 

dated September 28, 2010 (‘‘MSD Letter’’). 

5See Securities Exchange Act Release No. 63105 

(October 14, 2010), 75 FR 64772 (October 20, 2010). 

6See infra Section II for a description of 

Amendment No. 1. 

7This description does not review every rule 

proposed by BX that has been filed as part of its 

proposed rule change; rather, it focuses on the most 

prominent rules considered in review of the BX’s 

proposal. See Notice, supra note 3, for a description 

of the proposed rule change. See also Exhibit 5 to 

the Form 19b–4 for all the rules proposed by BX, 

available at http://www.sec.gov/rules/sro/bx/2010/ 

34-62818-ex5.pdf. 

8See Amendment No. 1. As originally proposed, 

the proposed rule change provided that a BX-listed 

company should refer to its listing as on the ‘‘BX.’’ 

9See Notice, supra note 3. 

10See 17 CFR 242.600 et seq. 

11OTC trades of BX-listed securities would be 

reported to the Financial Industry Regulatory 

Authority (‘‘FINRA’’) OTC Reporting Facility. See 

Notice, supra note 3. 12See 17 CFR 240.3a51–1. 13 15 U.S.C. 77r; Securities Act Rule 146. In 

addition, some state laws and regulations may 

provide an exemption from certain registration or 

‘‘blue sky’’ requirements for companies listed on the 

Boston Stock Exchange, based on the higher listing 

standards previously applied by the former Boston 

Stock Exchange. The proposed listing rules would 

provide that the Exchange will take action to delist 

any company listed on BX that attempts to rely on 

such an exemption. Companies would also agree 

not to rely on any such exemption as a provision 

of the BX Listing Agreement. 

14 15 U.S.C. 78l(b). 15 17 CFR 240.10A–3. Certain companies listing 

on BX will be permitted to phase in compliance 

with the audit committee and compensation 

committee requirements following their listing. 

With respect to the audit committee requirements, 

a company listing in connection with its initial 

public offering would be required to have one 

independent director on the committee at the time 

of listing; a majority of independent members 

within 90 days of the date of effectiveness of the 

company’s registration statement; and all 

independent members within one year of the date 

of effectiveness of the company’s registration 

statement. 

16With respect to the compensation committee 

requirement, a company listing in connection with 

its initial public offering, upon emerging from 

bankruptcy, or that otherwise was not subject to a 

substantially similar requirement prior to listing 

(such as a company only traded in the OTC market) 

would be required to have one independent director 

on the committee at the time of listing; a majority 

of independent members within 90 days of listing; 

and all independent members within one year of 

listing. 

subject line if e-mail 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 Web site (http://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 Web site 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. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NASDAQ–2010–158 and should be 

submitted on or before January 3, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–31051 Filed 12–9–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63448; File No. SR–BX– 

2010–059] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Order 

Instituting Proceedings To Determine 

Whether To Disapprove Proposed Rule 

Change, as Modified by Amendment 

No. 1, To Create a Listing Market on 

the Exchange 

December 7, 2010. 

I. Introduction 

On August 20, 2010, NASDAQ OMX 

BX (‘‘BX’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to create a new listing market. 

The proposed rule change was 

published for comment in the Federal 

Register on September 8, 2010.3 The 

Commission received three comments 

on the proposal.4 The Commission 

subsequently extended the time period 

in which to either approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change, to December 7, 

2010.5 On December 6, 2010, BX 

submitted Amendment No. 1 to the 

proposed rule change.6 This order 

institutes proceedings to determine 

whether to disapprove the proposed 

rule change, as modified by Amendment 

No. 1. Institution of disapproval 

proceedings, however, does not indicate 

that the Commission has formulated any 

conclusions with respect to any of the 

issues involved. 

II. Description of the Proposal 7

The Exchange proposes to create a 

new listing market, to be called the ‘‘BX 

Venture Market.’’ 8 The Exchange has 

stated that it expects that the securities 

listed on BX would not be classified as 

national market system (‘‘NMS’’) 

securities.9 As a result, BX-listed 

securities would not be subject to an 

NMS plan and would not be subject to 

Regulation NMS under the Act.10 BXlisted securities would trade on the 

Exchange and also could trade over-thecounter (‘‘OTC’’).11 Further, BX-listed 

securities would be considered penny 

stocks under Exchange Act Rule 3a51– 

1, unless they qualify for an exemption 

from the definition of a penny stock.12

No ‘‘blue sky’’ exemption would be 

available under Section 18 of the 

Securities Act of 1933 or the rule 

adopted thereunder,13 so companies 

would be required to satisfy state law 

registration requirements and other state 

laws that regulate the sale and offering 

of securities. In addition, BX would not 

list any company that meets the 

quantitative (e.g., financial) 

requirements for listing on The 

NASDAQ Stock Market LLC (‘‘Nasdaq’’). 

To qualify for initial listing on BX, a 

company must be registered under 

Section 12(b) of the Act 14 and be 

current in its periodic filings with the 

Commission. The company would also 

be required to have a fully independent 

audit committee comprised of at least 

three members and comply with the 

requirements of Rule 10A–3 under the 

Exchange Act.15 The company would be 

required to have its independent 

directors make compensation decisions 

for executive officers (either by having 

the independent directors meet in 

executive session or by having them sit 

on a compensation committee), and 

independent directors would be 

required to meet on a regular basis in 

executive sessions.16 The company’s 

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Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / Notices 77037 

17See Amendment No. 1. As originally proposed, 

a company would be considered to have been 

previously listed on another national securities 

exchange if it was listed on such exchange at any 

time during the three months before its listing on 

BX, or until March 31, 2011, if the company was 

listed on another national securities exchange at 

any time between January 1, 2008 and March 31, 

2011. 

18See infra Section II for examples of 

circumstances under which the Exchange would 

exercise such discretionary authority, as set out in 

Amendment No. 1. 

19See infra Section II for a more detailed 

discussion of public interest reviews, as set out in 

Amendment No. 1. 

20See id. 

21See Amendment No. 1. As originally proposed, 

a BX-listed company would have been required to 

maintain a minimum bid price of at least $0.05 per 

share. 

22See Amendment No. 1. As originally proposed, 

if a BX-listed security does not maintain a 

minimum bid price of $0.05 per share for ten 

consecutive trading days, Exchange staff would 

issue a Staff Delisting Determination and the 

security would be suspended from trading on BX. 

23See Amendment No. 1. As originally proposed, 

a BX-listed company could regain compliance by 

achieving a $0.05 per share minimum bid price 

while trading on another venue for ten consecutive 

trading days. 

24See Amendment No. 1. As originally proposed, 

a BX-listed company could only regain compliance 

by achieving a closing bid price of $0.25 per share 

for at least ten consecutive trading days. 

audit committee would be required to 

have a charter setting out its 

responsibilities. The audit committee, or 

another independent body of the board, 

would also be required to conduct 

appropriate review and oversight of any 

related party transactions. 

BX has proposed the following 

quantitative listing standards for the 

initial listing of securities that were not 

previously listed on a national securities 

exchange: (1) $1 million of stockholders’ 

equity or $5 million total assets; (2) 

200,000 publicly held shares; (3) 200 

public shareholders, at least 100 of 

which must be round lot holders; (4) $2 

million market value of listed securities; 

(5) $1.00 minimum bid price per share; 

(6) one year operating history; and (7) 

two registered and active market 

makers. In addition, the company would 

also be required to demonstrate that it 

has a plan to maintain sufficient 

working capital for its planned business 

for at least twelve months after the first 

day of listing. 

BX has proposed the following 

quantitative listing standards for the 

initial listing of securities that have 

previously been listed on a national 

securities exchange: (1) 200,000 

publicly held shares; (2) 200 public 

shareholders, at least 100 of which must 

be round lot holders; (3) $2 million 

market value of listed securities; (4) 

$0.25 minimum bid price per share; and 

(5) two registered and active market 

makers. A company would be 

considered to have been previously 

listed on another national securities 

exchange if it was listed on such 

exchange at any time during the three 

months before its listing on BX, or, until 

September 30, 2011, if the company was 

listed on another national securities 

exchange at any time between January 1, 

2008 and September 30, 2011.17

The Exchange would have the 

discretionary authority to deny listing to 

any otherwise qualified security when it 

is necessary to preserve and strengthen 

the quality of, and public confidence in, 

its market.18 The Exchange would 

conduct a public interest review of the 

company and significant persons 

associated with it.19 In that regard, the 

Exchange stated that it intends to 

conduct background investigations of 

officers and directors and other 

significant people associated with a 

company in connection with its review 

of applications for initial listing.20 In 

addition, the Exchange would not 

approve for listing or allow the 

continued listing of ‘‘shell’’ companies. 

For continued listing on BX, a 

security would be required to satisfy the 

following listing standards: (1) At least 

200,000 publicly held shares; (2) at least 

200 public shareholders; (3) market 

value of listed securities of at least $1 

million; (4) minimum bid price of at 

least $0.25 21 per share; and (5) at least 

two registered and active market 

makers. If the security does not 

maintain the minimum $0.25 per share 

bid price for twenty consecutive trading 

days,22 Exchange staff would issue a 

Staff Delisting Determination and the 

security would be suspended from 

trading on BX. A company could appeal 

that determination to a Hearings Panel; 

however, such an appeal would not stay 

the suspension of the security. During 

the Hearings Panel process, the security 

could regain compliance by achieving a 

$0.25 23 per share minimum bid price 

while trading on another venue, such as 

the OTC market, for ten consecutive 

days. However, if the company has 

received three or more Staff Delisting 

Determinations for failure to comply 

with the minimum bid price 

requirement in the prior twelve months, 

the company could only regain 

compliance by achieving a closing bid 

price of $0.25 per share or more for at 

least twenty consecutive trading days.24

Description of Amendment No. 1 

Amendment No. 1 makes the 

following modifications to the proposed 

rule change: 

• Renames the market from ‘‘BX’’ to 

‘‘BX Venture Market’’ to distinguish the 

BX Venture Market from Nasdaq, 

provides that the Exchange will monitor 

press releases issued by BX-listed 

companies and annually review their 

Web sites to determine how a company 

is referring to its listing, and provides 

that the Exchange will include 

information on its Web site describing 

the differences between the BX Venture 

Market and other national securities 

exchanges, including Nasdaq; 

• Provides that BX will disseminate 

quotation and transaction information 

about BX-listed securities and that this 

information will include a market center 

identifier; 

• Provides that BX will require data 

vendors to identify when the BX 

Venture Market is the listing market for 

a security and clearly differentiate those 

securities from securities listed on 

Nasdaq or other exchanges or traded 

OTC when displaying information to 

external users on their single security 

quotation screens; 

• States that listings and delistings 

will be processed by the staff in 

Nasdaq’s Listing Qualifications 

Department, who, according to the 

Exchange, are extremely experienced in 

regulatory analysis; states that BX will 

hire additional staff if the workload 

from the new BX Venture Market proves 

‘‘sufficiently high’’; and notes that the 

staff within the Listing Qualifications 

Department is now, and will continue to 

be, reviewed regularly by Nasdaq’s 

Chief Regulatory Officer and Regulatory 

Oversight Committee, and will also be 

reviewed by BX’s Regulatory Oversight 

Committee; 

• Prohibits the initial or continued 

listing of a company if any executive 

officer or director was involved in any 

event that occurred during the prior five 

years that is required to be disclosed 

under Items 401(f)(2)–(8) of Regulation 

S–K and that, in the case of a listed 

company, the company would be 

provided 30 days to remove the 

executive officer or director or be issued 

a delisting notification; 

• Provides that the Exchange would 

use its discretionary authority, where 

appropriate, to deny initial or continued 

listing in cases where: (1) An executive 

officer or director has reported 

misconduct that occurred between five 

and ten years before the disclosure or 

misconduct not required to be disclosed 

under Item 401 of Regulation S–K; or (2) 

an individual who is not an executive 

officer or director, but who has 

significant influence or importance to 

the company such as a control person or 

significant shareholder, has a history of 

regulatory misconduct; 

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77038 Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / Notices 

25See MSD Letter, supra note 4, at p. 2. 

26See id. 

27See id. 

28See id. 29See id. 30See id. 31See id. at p. 3. 32See Pink OTC Letter, supra note 4. 33See id. at p. 2. 34See id. 35See id. at p. 3. 

36See id. 

• Indicates that in connection with 

initial listing applications and when a 

new executive officer or director 

becomes associated with a BX-listed 

company, BX will conduct background 

investigations of executive officers, 

directors, and other significant 

associated people using public 

databases, and will retain outside firms 

to assist it in its review as needed, 

including investigative, accounting, and 

law firms, and provides that BX’s listing 

application will solicit information 

about certain legal or administrative 

proceedings against the company and its 

officers, directors, and 10% or greater 

shareholders; 

• Provides that the head of the 

Exchange’s Listing Department will be 

involved in all decisions concerning 

whether to permit or deny listing to a 

company based on a public interest 

concern and that the Exchange’s Chief 

Regulatory Officer will be required to 

approve the initial or continued listing 

of any company that has disclosed 

information about an executive officer, 

director, or control person under Items 

401(f)(2)–(8) of Regulation S–K that does 

not trigger the automatic bar described 

above; 

• Increases the continued listing price 

from $0.05 to $0.25 per share and 

provides that the Exchange will issue a 

Staff Delisting Determination and 

suspend a BX-listed security from 

trading on the Exchange if such security 

does not maintain the minimum 

continued listing price of $0.25 per 

share for twenty consecutive trading 

days, rather than for the originally 

proposed ten consecutive trading days; 

• Shortens the periods that a noncompliant company may remain listed 

by, for example, providing that a 

Hearings Panel would only be permitted 

to grant 90 calendar days for a company 

to regain compliance with a listing 

standard, instead of the 180 calendar 

days available on Nasdaq and providing 

that a company that falls below the 

market value of listed securities 

requirement would be provided a 90 

calendar day compliance period, instead 

of the 180 days available to a Nasdaqlisted company; 

• Undertakes to provide the 

Commission with: (1) Monthly reports 

describing developments on the BX 

Venture Exchange, including a list of 

companies added or removed from the 

market; and (2) quarterly reports from 

the Exchange’s Chief Regulatory Officer 

describing the listing and surveillance 

activities of the Exchange; 

• Requires listed companies to 

provide the Exchange with copies of any 

‘‘blue sky memoranda’’ prepared in 

connection with the issuance of shares, 

provides that BX will review these 

memoranda to assure that the company 

is not inappropriately relying on such a 

state blue sky exemption, agrees to take 

action to delist any BX-listed company 

that attempts to rely on such an 

exemption, and provides that 

companies will agree to not rely on any 

such exemption as a provision of the BX 

listing agreement; 

• Represents that FINRA will regulate 

market activity on the BX and that 

FINRA will enhance its review process 

by calibrating its surveillance patterns 

to detect potential issues that may arise 

in low priced stocks, noting that 

FINRA’s review will include the trading 

of BX-listed securities on the OTC 

market and that FINRA will review 

activity of its member firms quoting on 

the BX when conducting reviews of 

these firms, which will include ‘‘focused 

exams’’ concentrated on sales practices 

and firm oversight; 

• States that the SMARTS Group, a 

Nasdaq OMX company, will create a 

new suite of quoting and trading 

patterns to detect suspicious activity in 

low priced and less widely traded 

securities; and 

• Provides that BX will disseminate 

quotation and transaction information 

about BX-listed securities via several 

market data products to ensure broad 

dissemination of quotation and last sale 

information, and states that it is 

committed to ensuring that quotations 

and transaction information from BX are 

consolidated with similar information 

from OTC quotation and trading 

supervised by FINRA. 

III. Comment Letters 

The Commission received three 

comment letters on the proposal. The 

Massachusetts Securities Division 

(‘‘MSD’’) noted in its letter that, although 

BX proposes qualitative listing 

standards that resemble those of 

Nasdaq, the proposed quantitative 

listing standards will be far lower.25

MSD then noted that the laws of 

Massachusetts and 11 other states 

exempt securities listed on the ‘‘Boston 

Stock Exchange’’ from their securities 

laws registration requirements.26 MSD 

stated its belief that these exemptions 

were predicated on exchange-listed 

companies having met certain minimum 

quality criteria.27 MSD noted that the 

proposed rule change states that the BX 

market is not among the national 

securities exchanges enumerated in 

Section 18(b) of the Securities Act of 

1933 and that the securities listed on BX 

will not be preempted securities under 

that section.28 MSD also noted that the 

Exchange will require its listed 

companies to agree not to claim any 

state’s exchange-listing exemption for 

their securities and will delist securities 

of companies that claim such 

exemption.29 However, MSD expressed 

concern that these requirements will not 

prevent unscrupulous penny stock 

promoters or boiler room brokerages 

from asserting that the securities they 

are offering and selling are exempt from 

state registration because the securities 

are listed on the Exchange.30 MSD 

expressed further concern that because 

the Exchange is owned by and is under 

the supervision of the parent company 

of Nasdaq, the BX listing market will 

inappropriately borrow some of the 

prestige of Nasdaq, despite the steps 

that Nasdaq may take to promote BX as 

a separate listing market.31

Pink OTC Markets Inc. (‘‘Pink OTC’’) 

noted that there may be investor 

confusion with respect to the 

differences between Nasdaq-listed 

securities and BX-listed securities.32

Pink OTC further stated its belief that it 

is important that market data relative to 

BX-listed securities be disseminated in 

a manner that makes clear that BX-listed 

securities are not NMS securities, nor do 

they meet the normally higher listing 

standards for exchange-listed securities, 

including those of Nasdaq.33 To 

alleviate investor confusion, Pink OTC 

suggested that ticker symbols for BXlisted securities should differentiate 

such securities from other securities that 

meet the higher listing standards 

typically associated with listing on a 

national securities exchange.34

Pink OTC also stated its belief that 

quotation and transaction reports for 

BX-listed securities should not be 

disseminated under any NMS plan, nor 

commingled with NMS data by an NMS 

plan processor.35 In particular, Pink 

OTC stated its belief that Nasdaq should 

not be permitted to disseminate BXlisted securities market data 

commingled with the Nasdaq market 

data it disseminates under the Nasdaq 

UTP Plan.36

With respect to the BX’s proposed 

listing standards, Pink OTC argued that 

BX should not be permitted to allow 

phase-in compliance with the 

independent director requirements of 

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Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / Notices 77039 

37See id. at p. 6. 

38See id. at p. 6–7. 

39See Madrona Letter, supra note 4, at p. 1. 

40See id. 

41See id. at p. 1–2. 

42According to the Exchange, many institutional 

investors have investment policies that limit their 

ownership to securities listed on a national 

securities exchange, or that prohibit the ownership 

of securities that only are traded in the OTC market. 

See Notice, supra note 3. 

43For example, BX would require a BX-listed 

company to have only 200,000 publicly held shares, 

which is significantly lower than the number of 

publicly held shares required by exchanges with 

active listing programs today. See, e.g., NYSE Amex 

Company Guide Section 102(a) (requiring a 

minimum public distribution of 500,000 shares and 

800 public shareholders, or a minimum public 

distribution of 1 million shares and 400 public 

shareholders); NASDAQ Stock Market Rule 

5505(a)(2) (requiring a minimum of 1 million 

publicly held shares); and NYSE Listed Company 

Manual Section 102.01A (requiring a minimum of 

1.1 million publicly held shares). Even ‘‘Tier II’’ 

listing standards require listed companies to have 

at least 250,000 publicly held shares. See, e.g., 

CBOE Rule 31.6(3) (requiring at least 1 million 

publicly held shares for initial listing of research 

and development type issuers). 

44See, e.g., Exchange Act Section 6(b)(5). 

45See, e.g., Securities Exchange Act Release No. 

61912 (April 15, 2010), 75 FR 21094, 21094 (April 

22, 2010) (SR–NYSE–2010–15). 46See id. 47See id. 48 15 U.S.C. 78s(b)(2)(B). 49 15 U.S.C. 78f(b)(5). 

the audit and compensation committees 

for certain companies.37 Finally, Pink 

OTC recommended that the 

Commission consider requiring BX to 

conduct background checks and other 

similar reviews of potential listed 

companies and not merely rely on the 

documents presented by an issuer 

during the listing process.38

On the other hand, Madrona Venture 

Group noted that the BX listing market 

will have listing requirements and costs 

that are tailored to the economic reality 

of smaller companies, and that this 

market would be extremely helpful to 

young, high growth emerging companies 

by offering an alternative listing market 

for companies that wish to make an 

initial public offering, but do not meet 

the initial quantitative listing standards 

of the other national securities 

exchanges.39 Madrona Venture Group 

also stated its belief that the BX listing 

market could bolster capital markets 

and provide opportunities for small 

companies to transition from private to 

public ownership, to expand their 

financial resources, and to raise the 

capital they need for continued 

growth.40 Additionally, Madrona 

Venture Group stated its belief that the 

BX listing market would attract 

companies and capital that would 

otherwise be drawn to foreign markets, 

where regulatory costs and litigation 

risks are lower.41

IV. Proceedings To Determine Whether 

To Disapprove SR–BX–2010–059 and 

Grounds for Disapproval Under 

Consideration 

The Exchange’s proposal is presented 

as providing a transparent, wellregulated marketplace for the listing of 

companies that are being delisted from 

another national securities exchange for 

failure to meet quantitative listing 

standards (including price or other 

market value measures) and for 

companies with smaller market 

capitalization contemplating an initial 

exchange listing. The Exchange believes 

that a BX listing could help such 

companies raise capital, and in turn 

promote job creation within the United 

States. The Exchange also believes that 

there are benefits from exchange trading 

and surveillance. 

For example, the Exchange believes 

that a BX listing would allow the 

securities of companies that are being 

delisted from another national securities 

exchange for failure to meet that 

exchange’s quantitative listing 

requirements to continue to trade on a 

national securities exchange. This may 

enable some institutional investors to 

continue their ownership stake in those 

companies, which in turn could provide 

greater stability to the companies’ 

shareholder base.42 In addition, the 

Exchange believes that companies 

currently traded OTC could view the BX 

Venture Market as an aspirational step 

towards a listing on another national 

securities exchange and that the 

agreement of such companies to comply 

with the Exchange’s corporate 

governance standards along with the 

application of the Exchange’s public 

interest authority will provide 

additional protections to their investors. 

Finally, the Exchange believes that the 

BX Venture Market will be a more 

attractive alternative for domestic 

companies that might otherwise have 

considered a listing on non-U.S. junior 

markets which, according to the 

Exchange, generally have less vigorous 

listing requirements. 

The proposed BX listing standards 

discussed above, however, are 

significantly lower than the listing 

standards for other exchange-listed 

securities.43 These lower listing 

standards on BX may raise issues as to 

whether the proposed rule change is 

consistent with the Act. Among other 

things, listing standards must be 

designed to assure that there is 

sufficient liquidity for trading on an 

exchange and to reduce the likelihood 

of manipulation and fraud.44 The 

Commission believes that the 

development and enforcement of 

adequate standards governing the initial 

and continued listing of securities on an 

exchange are activities of critical 

importance to the financial markets and 

the investing public.45 Listing standards 

serve as a means for an exchange to 

screen issuers and to provide listed 

status only to bona fide companies that 

have, or in the case of an initial public 

offering will have, sufficient public 

float, investor base, and trading interest 

to provide the depth and liquidity 

necessary to promote fair and orderly 

markets.46 Adequate standards are 

especially important given the 

expectations of investors regarding 

exchange trading and the imprimatur of 

listing on a particular market.47 Once a 

security has been approved for initial 

listing, continued listing standards 

allow an exchange to monitor the status 

and trading characteristics of that 

security to ensure that it continues to 

meet the exchange’s standards for 

market depth and liquidity so that fair 

and orderly markets can be maintained, 

and so that only companies suitable for 

listing remain listed on a national 

securities exchange. 

The Commission notes that the 

Exchange has submitted Amendment 

No. 1 in an effort to address certain 

potential concerns with the proposed 

rule change. However, at this time and 

for the reasons noted below, the 

Commission is instituting proceedings 

pursuant to Section 19(b)(2)(B) of the 

Act 48 to determine whether the 

proposed rule change should be 

disapproved. Institution of such 

proceedings appears appropriate at this 

time in view of the legal and policy 

issues raised by the proposal. Institution 

of the proceedings, however, does not 

indicate that the Commission has 

formulated any conclusions with 

respect to any of the issues involved. 

Rather, as described in greater detail 

below, the Commission seeks and 

encourages interested persons to 

comment on the proposed rule change. 

The section of the Act applicable to 

the proposed rule change that provides 

the grounds for the disapproval (or 

approval) under consideration is 

Section 6(b)(5),49 which requires that 

the rules of an exchange be designed, 

among other things, 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. Specifically, the 

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77040 Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / Notices 

50See supra note 43. 51See, e.g., Securities Act Release No. 8878 

(December 19, 2007), 72 FR 73534, 73536 

(December 27, 2007) (S7–10–07) (stating that ‘‘[i]t 

has been observed that the securities of smaller 

public companies are comparatively more 

vulnerable to price manipulation than the securities 

of larger public companies’’). 

52Under Exchange Act Section 12(f)(1)(A) and 

Rule 12f–5 thereunder, a national securities 

exchange may trade exchange-listed securities on a 

UTP basis. See 15 U.S.C. 78l(f)(1)(A) and 17 CFR 

240.12f–5. Accordingly, other national securities 

exchanges would be able to trade BX-listed 

securities, without obtaining additional 

Commission approval. 

53Section 19(b)(2) of the Act, as amended by the 

Securities Acts Amendments of 1975, Public Law 

94–29, 89 Stat. 97 (1975), grants the Commission 

flexibility to determine what type of proceeding— 

either oral or notice and opportunity for written 

comments—is appropriate for consideration of a 

particular proposal by a self-regulatory 

organization. See Securities Acts Amendments of 

1975, Report of the Senate Committee on Banking, 

Housing and Urban Affairs to Accompany S. 249, 

S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 

Exchange is proposing initial and 

continued listing standards that are 

significantly lower than those of other 

exchanges with active listing markets.50

Among other things, this raises issues as 

to whether BX-listed securities could be 

more prone to manipulation by an 

individual or a few shareholders who 

acquire a dominant interest in the 

publicly-held shares compared to other 

exchange-listed securities. This issue is 

particularly pronounced with smaller 

company stocks, which historically 

have been the targets of manipulative 

schemes.51

The proposed rule change also raises 

issues as to whether investors will 

understand that BX-listed securities are 

very different from other exchangelisted securities, and could pose 

substantially more investment risk than 

those listed on other markets due, for 

example, to their size, financial 

condition, or limited operational 

history. This potential for investor 

confusion may be compounded because, 

as exchange-listed securities, other 

exchanges could trade them on an 

unlisted trading privileges (‘‘UTP’’) 

basis.52 Because the smaller BX-listed 

securities may be traded UTP on the 

same platform as larger companies 

listed by the primary listings markets, 

this raises issues as to whether investors 

could have even more difficulty 

distinguishing between BX-listed 

securities and other exchange-listed 

securities. 

At the same time, as noted above, the 

Commission acknowledges that the BX 

listing market would be an alternative to 

the OTC market and could provide 

important benefits to this market 

segment, including enhanced regulation 

and increased price transparency. In 

particular, BX’s proposed listing 

standards would be higher than the 

requirements for quoting on the OTC 

Bulletin Board, which does not have 

any listing requirements per se, but only 

requires issuers to remain current in 

their filings with the Commission or 

other applicable regulatory authorities. 

For example, as the Exchange notes, the 

agreement of BX-listed companies to 

comply with the Exchange’s corporate 

governance standards and the 

application of the Exchange’s public 

interest authority could provide 

additional protections to investors than 

the protections available at their present 

trading venue. The Commission also 

notes that trading in BX-listed securities 

would be subject to regulation through 

BX’s trading rules and surveillance 

authority. Additionally, the BX listing 

market could make it easier for 

companies with smaller market 

capitalization to raise capital, thereby 

promoting job creation. Finally, 

permitting companies with smaller 

market capitalization to list on BX could 

provide them with a viable alternative 

for U.S. listing to listing on non-U.S. 

markets that may be equivalent to the 

proposed BX market. 

V. Procedure: Request for Written 

Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data and 

arguments with respect to the issues 

identified above, as well as any others 

they may have identified with the 

proposal. In particular, the Commission 

invites the written views of interested 

persons concerning whether the 

proposed rule change is inconsistent 

with Section 6(b)(5) or any other 

provision of the Act, or the rules and 

regulations thereunder. Although there 

do not appear to be any issues relevant 

to approval or disapproval which would 

be facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b-4, any request for an 

opportunity to make an oral 

presentation.53

Interested persons are invited to 

submit written data, views and 

arguments regarding whether the 

proposed rule change should be 

disapproved by January 24, 2011. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by February 8, 2011. 

The Commission is asking that 

commenters address the merit of BX’s 

statements in support of the proposal, in 

addition to any other comments they 

may wish to submit about the proposed 

rule change. Specifically, the 

Commission is requesting comment on 

the following: 

• Do commenters agree with BX’s 

belief that the proposed BX listing 

market will provide a transparent, wellregulated marketplace for companies 

with smaller market capitalization 

contemplating an initial exchange 

listing and companies delisted from 

another national securities exchange for 

failure to meet quantitative listing 

standards? Why or why not? 

• Is the proposed vetting and due 

diligence process of prospective issuers 

on the BX listing market sufficient to 

prevent companies that might erode 

investor confidence (due to potential 

fraud) in the market from listing? Why 

or why not? 

• Given that BX-listed companies are 

likely to be smaller than listed 

companies on other exchanges, should 

BX undertake any additional measures 

(including additional surveillances) to 

reduce the risk of fraudulent and 

manipulative behavior with respect to 

the listing and/or trading of BX-listed 

securities? Why or why not? 

• Do commenters believe there is any 

likelihood of investor confusion 

regarding the BX listing market? Would 

investors be inclined to believe that a 

BX-listed company is listed on Nasdaq? 

Are the Exchange’s proposed actions to 

reduce or avoid investor confusion 

sufficient? Why or why not? If not, what 

additional measures should the 

Exchange undertake? 

• Do the proposed initial and 

continued listing standards for the BX 

listing market assure sufficient liquidity 

in listed securities? Why or why not? 

Are there other listing criteria that 

commenters would suggest to better 

assure sufficient liquidity in listed 

securities? 

• Are the proposed initial and 

continued listing standards for the BX 

listing market sufficiently designed to 

reduce the risk that an individual or 

small group of shareholders will be in 

a position to manipulate the listed 

security? Why or why not? 

• Are the proposed initial and 

continued listing standards and the 

delisting process for the BX listing 

market sufficiently designed to prevent 

stocks that are of a type that historically 

have been prone to fraudulent schemes 

from being listed? Why or why not? 

• Do commenters believe that the 

proposed delisting and appeals 

procedures and timeframes are 

sufficient and appropriate? Are the 

timeframes too long or too short? Why 

or why not? 

• Are the proposed corporate 

governance standards for the BX listing 

market sufficiently designed to assure 

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Federal Register / Vol. 75, No. 237 / Friday, December 10, 2010 / Notices 77041 

54 17 CFR 200.30–3(a)(57). 

an appropriate level of corporate 

governance? Why or why not? 

• Do commenters agree with the 

Exchange’s belief that a BX listing could 

help companies raise capital and thus 

promote job creation within the United 

States? Why or why not? 

• Has BX sufficiently addressed how 

quotations and transactions reports 

relating to BX-listed securities will be 

disseminated? Will this result in 

fragmentation of pricing information 

relating to these securities? Will this 

undermine the ability of investors to 

receive best execution? Why or why 

not? 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form http://www.sec.gov/ 

rules/sro.shtml; or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–BX–2010–059 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BX–2010–059. This file 

number should be included on the 

subject line if e-mail 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 Web site (http://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 Web site 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 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; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

publicly available. All submissions 

should refer to File Number SR–BX– 

2010–059 and should be submitted on 

or before January 24, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.54

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–31078 Filed 12–9–10; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice: 7251] 

60-Day Notice of Proposed Information 

Collections: Two Information 

Collections 

ACTION: Notice of request for public 

comments. 

SUMMARY: The Department of State is 

seeking Office of Management and 

Budget (OMB) approval for the 

information collections described 

below. The purpose of this notice is to 

allow 60 days for public comment in the 

Federal Register preceding submission 

to OMB. We are conducting this process 

in accordance with the Paperwork 

Reduction Act of 1995. 

• Title of Information Collection: 

Brokering Prior Approval (License). 

• OMB Control Number: 1405–0142. 

• Type of Request: Extension of 

Currently Approved Collection. 

• Originating Office: Bureau of 

Political-Military Affairs, Directorate of 

Defense Trade Controls, PM/DDTC. 

• Form Number: None. 

• Respondents: Business and 

Nonprofit Organizations. 

• Estimated Number of Respondents: 

1,515. 

• Estimated Number of Responses: 

150. 

• Average Hours per Response: 2 

hours. 

• Total Estimated Burden: 300 hours. 

• Frequency: On Occasion. 

• Obligation to Respond: Required to 

Obtain Benefits. 

• Title of Information Collection: 

Annual Brokering Report. 

• OMB Control Number: 1405–0141. 

• Type of Request: Extension of 

Currently Approved Collection. 

• Originating Office: Bureau of 

Political-Military Affairs, Directorate of 

Defense Trade Controls, PM/DDTC. 

• Form Number: None. 

• Respondents: Business and 

Nonprofit Organizations. 

• Estimated Number of Respondents: 

1,515. 

• Estimated Number of Responses: 

1,515. 

• Average Hours Per Response: 2 

hours. 

• Total Estimated Burden: 3,030 

hours. 

• Frequency: On Occasion. 

• Obligation to Respond: Mandatory. 

DATES: The Department will accept 

comments from the public up to 60 days 

from December 10, 2010. 

ADDRESSES: Comments and questions 

should be directed to Nicholas Memos, 

Office of Defense Trade Controls Policy, 

Department of State, who may be 

reached via the following methods: 

• E-mail: memosni@state.gov. 

• Mail: Nicholas Memos, SA–1, 12th 

Floor, Directorate of Defense Trade 

Controls, Bureau of Political-Military 

Affairs, U.S. Department of State, 

Washington, DC 20522–0112. 

• Fax: 202–261–8199. 

You must include the information 

collection title in the subject lines of 

your message/letter. 

FOR FURTHER INFORMATION CONTACT: 

Direct requests for additional 

information regarding the collection 

listed in this notice, including requests 

for copies of the information collection 

and supporting documents, to Nicholas 

Memos, PM/DDTC, SA–1, 12th Floor, 

Directorate of Defense Trade Controls, 

Bureau of Political-Military Affairs, U.S. 

Department of State, Washington, DC, 

20522–0112, who may be reached via 

phone at (202) 663–2804, or via e-mail 

at memosni@state.gov. 

SUPPLEMENTARY INFORMATION: We are 

soliciting public comments to permit 

the Department to: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of our 

functions. 

• Evaluate the accuracy of our 

estimate of the burden of the proposed 

collection, including the validity of the 

methodology and assumptions used. 

• Enhance the quality, utility, and 

clarity of the information to be 

collected. 

• Minimize the reporting burden on 

those who are to respond, including the 

use of automated collection techniques 

or other forms of technology. 

Abstract of proposed collection: The 

export, temporary import, temporary 

export and brokering of defense articles, 

defense services and related technical 

data are licensed by the Directorate of 

Defense Trade Controls in accordance 

with the International Traffic in Arms 

Regulations (22 CFR parts 120–130) and 

Section 38 of the Arms Export Control 

Act. Those of the public who 

manufacture or export defense articles, 

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