82098 Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Notices 

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; Michael R. Trocchio, 

Bingham McCutchen LLP, dated October 3, 2010; 

and William F. Galvin, Secretary of the 

Commonwealth, Commonwealth of Massachusetts, 

dated September 28, 2010. For a summary of these 

comments, see Securities Exchange Act Release No. 

63448 (December 7, 2010), 75 FR 77036 (December 

10, 2010) (‘‘Order Instituting Proceedings’’). 

5See Securities Exchange Act Release No. 63105 

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

6See Order Instituting Proceedings, supra note 4. 

7The Commission notes that BX has proposed, in 

this Amendment No. 1, to name the new listing 

market as ‘‘The BX Venture Market,’’ rather than 

‘‘BX.’’ 

8See Securities Exchange Act Release No. 59265 

(January 16, 2009), 74 FR 4790 (January 27, 2009) 

(approving SR–BSE–2008–36 relating to the 

delisting of all securities from the Exchange in 

connection with the Exchange’s discontinuation of 

trading). 

under management under $25 million; 

$150 for advisers with assets under 

management from $25 million to $100 

million; and $225 for advisers with 

assets under management of $100 

million or higher. The recommended 

initial IARD filing fees due beginning 

January 1, 2011 are $40 for advisers 

with assets under management under 

$25 million; $150 for advisers with 

assets under management from $25 

million to $100 million; and $225 for 

advisers with assets under management 

of $100 million or higher. The revised 

filing fees would apply to all annual 

updating amendments filed by SECregistered advisers beginning January 1, 

2011 and to all initial applications for 

registration filed by advisers applying 

for SEC registration beginning January 1, 

2011. 

On December 2, 2010 we issued a 

notice indicating our intent to charge 

revised fees IARD filing fees for advisers 

registering or registered with the 

Commission. The notice gave interested 

persons an opportunity to request a 

hearing and stated that an order 

instituting revised IARD filing fees 

would be issued unless a hearing was 

ordered. No request for a hearing has 

been filed, and no hearing has been 

ordered. 

It is therefore ordered, pursuant to 

Sections 204(b) and 206(A) of the 

Investment Advisers Act of 1940, that: 

For annual updating amendments to 

Form ADV filed on or after January 1, 

2011, the filing fee due from SECregistered advisers is $40 for advisers 

with assets under management under 

$25 million; $150 for advisers with 

assets under management from $25 

million to $100 million; and $225 for 

advisers with assets under management 

of $100 million or higher. 

For initial applications to register as 

an investment adviser with the SEC 

filed on or after January 1, 2011, the 

filing fee due from SEC-registered 

advisers is $40 for advisers with assets 

under management under $25 million; 

$150 for advisers with assets under 

management from $25 million to $100 

million; and $225 for advisers with 

assets under management of $100 

million or higher. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–32715 Filed 12–28–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63597; File No. SR–BX– 

2010–059] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

of Amendment No. 1 to Proposed Rule 

Change To Create a Listing Market on 

the Exchange 

December 22, 2010. 

On August 20, 2010, NASDAQ OMX 

BX, Inc. (the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’), pursuant to Section 

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

of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

create a listing market on the Exchange. 

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, the 

Exchange filed Amendment No. 1 to the 

proposed rule change as described in 

Items I and II below, which items have 

been prepared by the Exchange. On 

December 7, 2010, the Commission 

instituted proceedings to determine 

whether to disapprove the proposed 

rule change, as modified by Amendment 

No. 1.6 Although the Order Instituting 

Proceedings included a summary of 

Amendment No. 1, the Commission is 

publishing the full text of Amendment 

No. 1 for the benefit of interested 

persons who wish to comment on the 

proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

Amendment No. 1 to the Proposed Rule 

Change 

The Exchange proposes to create a 

listing market, which will be called 

‘‘BX’’ [sic].7 Following Commission 

approval, the Exchange will announce 

the operational date of the new market 

in an Equity Trader Alert and press 

release. The proposed rules will become 

effective on the operational date. 

The text of the proposed rule change 

is available at http:// 

nasdaqomxbx.cchwallstreet.com, at 

BX’s principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In connection with the acquisition of 

the former Boston Stock Exchange by 

The NASDAQ OMX Group, Inc., the 

Exchange discontinued its listing 

marketplace and delisted all securities 

previously listed on the Exchange.8

Since January 2009, the Exchange has 

operated as a trading venue only, 

allowing market participants to trade 

securities listed on other national 

securities exchanges pursuant to 

unlisted trading privileges. 

The Exchange is proposing to begin 

listing securities again, through the 

creation of a new listing market, to be 

called ‘‘The BX Venture Market.’’ The 

BX Venture Market will have minimal 

quantitative listing standards, but have 

qualitative requirements, which are, in 


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9The Exchange notes that not all qualitative 

requirements imposed by other exchanges would be 

required. See Listing Requirements, infra, for a full 

discussion of the proposed quantitative and 

qualitative requirements for listing on BX. 

10The Exchange will propose in a separate rule 

filing changes to the BX Equities Platform to govern 

trading of, and reporting of transactions in, these 

listed securities and introducing and modifying 

market data products to permit dissemination of 

accurate quotation information and reporting of 

transactions. 

11The Commission found that allowing all 

exchanges to utilize from one to five characters 

minimizes investor confusion when a company 

changes its listing from one venue to another. 

Securities Exchange Act Release No. 58904 

(November 6, 2008), 73 FR 67218 at 67227 

(November 13, 2008) (‘‘The Commission finds that 

allowing the automatic portability of a symbol in 

the event that an issuer transfers its listing to 

another exchange will further the purposes of the 

Act and should reduce investor confusion by 

allowing the symbol already associated with the 

issuer to continue to be used by the issuer on the 

new exchange.’’). The Commission also noted that 

the portability feature of the plan would promote 

‘‘competition among listing markets, including 

potential new listing markets.’’ Id. at 67224 

(emphasis added). 

12 Id. at 67225 (footnotes omitted). The Exchange 

notes that it will have listing standards approved 

by the Commission, including corporate governance 

requirements that comply with Rule 10A–3, and go 

far beyond those requirements. 

13 15 U.S.C. 78l(b). 

14 15 U.S.C. 7201–7266. 

15The Commission notes that the correct 

reference should be proposed Rule 5210(a) and 

5210(e). 

16 17 CFR 240.10A–3. 

17See Section 102 of the Sarbanes-Oxley Act, 15 

U.S.C. 7212. 

18 15 U.S.C. 78q–1. 

many respects, similar to those required 

for listing on The NASDAQ Stock 

Market (‘‘Nasdaq’’) and other national 

securities exchanges.9 The Exchange 

believes that this market will provide an 

attractive alternative to companies being 

delisted from another national securities 

exchange for failure to meet quantitative 

listing standards (including price or 

other market value measures) and to 

smaller companies contemplating an 

initial exchange listing. The Exchange 

further believes that the proposed listing 

venue will provide a transparent, wellregulated marketplace for these 

companies and their investors.10 As is 

currently the case with respect to the 

trading occurring on the Exchange 

pursuant to unlisted trading privileges, 

FINRA will regulate market activity and 

staff of the Exchange will monitor realtime trading of securities listed on the 

BX Venture Market. 

The Exchange will disseminate 

quotation and transaction information 

about securities listed on the BX 

Venture Market via several market data 

products to ensure broad dissemination 

of quotation and last sale information 

consistent with that provided by the 

network processors for national market 

system securities. This information will 

include a market center identifier and 

the Exchange will adopt a display 

requirement such that data vendors who 

receive data from the Exchange will 

have 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 

over-the-counter when displaying 

information to external users on their 

single security quotation screens. 

The Exchange is also committed to 

ensuring that quotations and transaction 

information from BX are consolidated 

fully with similar information from 

over-the-counter quoting and trading 

that FINRA supervises, and is working 

with FINRA in that regard. 

The assignment of symbols for 

companies listed on the BX Venture 

Market will be governed by the existing 

National Market System Plan for the 

Selection and Reservation of Securities 

Symbols, which is the exclusive means 

of allocating and using trading symbols. 

Pursuant to that Plan, securities listed 

on the BX Venture Market, like every 

other national securities exchange 

today, are eligible to have a trading 

symbol of from [sic] one to five 

characters. This eligibility is important 

because the BX Venture Market is 

intended to afford a listing venue for 

companies formerly listed on other 

national securities exchanges, which 

will want to retain their symbols.11 In 

approving the symbology Plan, the 

Commission distinguished securities 

listed on an exchange, which can trade 

with a symbol of from [sic] one to five 

characters, from those trading over the 

counter, which can trade only with a 

four or five character symbol, noting 

that ‘‘[e]xchange listing standards are 

approved by the Commission and must 

include corporate governance 

requirements that comply with Rule 

10A–3 under the Exchange [sic] Act. 

Issuers traded on over-the-counter 

equity venues (including the OTCBB 

and Pink Sheets) are not subject to such 

listing standards.’’ 12

Listing Requirements 

The BX Venture Market would list 

Common Stock, Preferred Stock, 

Ordinary Shares, Shares or Certificates 

of Beneficial Interest of Trust, Limited 

Partnership Interests, American 

Depositary Receipts (ADR), American 

Depositary Shares (ADS), Units, Rights 

and Warrants. To be listed on the BX 

Venture Market, companies will need to 

meet the following qualitative listing 

standards, each of which is equivalent 

to the comparable listing standard of 

Nasdaq or is derived from the Federal 

securities laws: 

(a) The company must be registered 

under Section 12(b) of the Act 13 and 

current in its periodic filings with the 

Commission and, as a result, subject to 

the requirements of the Sarbanes-Oxley 

Act of 2002 14 (proposed Rule 5210(a) 

[sic] 15); 

(b) The company must have a fully 

independent Audit Committee 

comprised of at least three members and 

comply with the requirements of SEC 

Rule 10A–3, promulgated under the 

Act 16 (proposed Rule 5605(c)); 

(c) The company must have 

independent directors make 

compensation decisions for executive 

officers (proposed Rule 5605(d)); 

(d) The company will be prohibited 

from taking any corporate action with 

the effect of nullifying, restricting or 

disparately reducing the per share 

voting rights of holders of an 

outstanding class of the company’s 

common stock registered pursuant to 

Section 12 of the Act (proposed Rule 

5640); 

(e) The company’s auditor will be 

required to be registered with the Public 

Company Accounting Oversight 

Board 17 (proposed Rules 5210(b) and 

5250(c)(3)); 

(f) The company will be required to 

hold an annual shareholders’ meeting 

and solicit proxies for each 

shareholders’ meeting (proposed Rule 

5620); 

(g) The company will be required to 

obtain shareholder approval for the use 

of equity compensation (proposed Rule 

5635); 

(h) The company will be required to 

adopt a code of conduct, applicable to 

all directors, officers and employees 

(proposed Rule 5610); 

(i) The company will be required to 

conduct an appropriate review and 

oversight of all related party 

transactions, to address potential 

conflict of interest situations (proposed 

Rule 5630); 

(j) The company will be required to 

disclose material information through 

any Regulation FD compliant method 

(or combination of methods) (proposed 

Rule 5250(b) and IM–5250–1); 

(k) The listed securities must be 

eligible for a Direct Registration Program 

operated by a clearing agency registered 

under Section 17A of the Act 18

(proposed Rules 5210(c) and 5255); 

(l) Public ‘‘shells’’ would not be 

allowed to list (proposed Rule 5101); 

and 

(m) The Exchange will conduct a 

public interest review of the company 

and significant persons associated with 


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19 15 U.S.C. 77r(b). 

20Many 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 over-the-counter market. 

21 17 CFR 229.401(f)(2)–(8). 

22The Exchange may, however, in rare 

circumstances, permit the listing of a company if, 

it (proposed Rule 5101 and IM–5101–1). 

A company would not be eligible for 

listing 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 Item 

401(f)(2)—(8) of Regulation S–K. 

In addition, the BX Venture Market 

would apply the following quantitative 

listing standards, set out in proposed 

Rules 5505 (initial listing) and 5550 

(continued listing), which are designed 

to assure a minimum level of trading 

consistent with a public market for the 

securities: 

(a) 200,000 publicly held shares; 

(b) 200 public shareholders, at least 

100 of which must be round lot holders 

for initial listing, and 200 public 

shareholders for continued listing; 

(c) A market value of listed securities 

of at least $2 million for initial listing 

and $1 million for continued listing; 

(d) Two market makers; and 

(e) A minimum initial listing price of 

$0.25 per share for securities previously 

listed on a national securities exchange 

and $1.00 per share for securities 

previously quoted in the over-thecounter market. For continued listing, 

securities will be required to maintain a 

minimum $0.25 per share bid price. 

Further, with respect to companies not 

previously listed on a national securities 

exchange, the BX Venture Market will 

also require for initial listing that the 

company have either $1 million 

stockholders’ equity or $5 million total 

assets, a one year operating history, and 

a plan to maintain sufficient working 

capital for the company’s planned 

business for at least twelve months after 

the first day of listing. 

The Exchange would also require that 

rights and warrants will only be eligible 

for initial and continued listing if the 

underlying security is listed on the BX 

Venture Market or is a covered security, 

as described in Section 18(b) of the 

Securities Act of 1933.19

The proposed listing standards are 

designed to allow companies that are 

being delisted from another national 

securities exchange for failure to meet 

that exchange’s quantitative listing 

requirements the opportunity to provide 

their investors with a better regulated, 

more transparent trading environment 

than may otherwise be available in the 

over-the-counter markets. In addition, 

the Exchange believes that allowing 

these companies to continue trading on 

a national securities exchange may 

enable some institutional investors to 

continue their ownership stake in the 

company, which could provide greater 

stability to the company’s shareholder 

base and possibly avoid forced sales by 

such investors.20 The Exchange also 

believes that companies currently 

traded over-the-counter could view this 

market as an aspirational step towards 

a listing on another national securities 

exchange. The Exchange believes that 

the agreement of such companies to 

comply with the Exchange’s corporate 

governance standards and the 

application of the Exchange’s public 

interest authority will provide 

additional protections to their investors 

than would be available in their present 

trading venue. Moreover, the Exchange 

believes that a listing on the BX Venture 

Market could help such companies raise 

capital, in turn promoting job creation 

within the United States. Finally, the 

Exchange believes that the BX Venture 

Market will be a more attractive 

alternative to domestic companies that 

might otherwise have considered a 

listing on non-U.S. junior markets, 

which generally have lower listing 

requirements. 

Nonetheless, the Exchange recognizes 

that the listing requirements for the BX 

Venture Market will be lower than those 

of the NASDAQ Stock Market and other 

national securities exchanges, and that 

the market will, therefore, attract 

smaller, less liquid companies, which 

may create higher risks for investors. As 

such, to avoid investor confusion, we 

will make every effort to distinguish the 

proposed BX Venture Market from the 

NASDAQ Stock Market, which is also 

owned by the NASDAQ OMX Group. In 

that regard, the listing rules of the BX 

Venture Market will specify that a BX 

Venture Market-listed company should 

refer to its listing as on the BX Venture 

Market, unless otherwise required by 

applicable rules or regulations, and that 

such company should never represent 

that it is listed on The NASDAQ Stock 

Market. To enforce this prohibition, the 

Exchange will monitor the press 

releases issued by a BX Venture Marketlisted company and will annually 

review the company’s Web site to 

determine how the company is referring 

to its listing. Similarly, in describing 

this listing venue, the Exchange will 

generally refer to it as the BX Venture 

Market and not as NASDAQ OMX BX. 

The Exchange will also include 

information on its Web site describing 

the differences between the BX Venture 

Market and other national securities 

exchanges, including Nasdaq. Finally, 

as noted earlier, the Exchange 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 over-the-counter 

when displaying information to external 

users on their single security quotation 

screens. 

The BX Venture Market will not 

initially list a company if an executive 

officer or director of the company was 

involved in any event that occurred 

during the prior five years that is 

required to be disclosed under Item 

401(f)(2)—(8) of Regulation S–K.21

These events include criminal 

convictions and pending charges, 

violations of securities laws, and court 

or administrative actions barring or 

limiting the individual from certain 

security related activities. Similarly, the 

Exchange will review proxy statements 

and other public filings of listed 

companies. If a listed company 

discloses a proceeding against an 

executive officer or director under Item 

401(f)(2)—(8) of Regulation S–K, the 

Exchange would provide the company 

with thirty days to remove the executive 

officer or director. If the company does 

not do so, the Exchange would send a 

delisting notification to the company. 

In addition, the Exchange will have 

the discretionary authority to deny 

listing to or delist any otherwise 

qualified security when necessary to 

preserve and strengthen the quality of 

and public confidence in its market. 

Proposed IM–5101–1 provides a nonexclusive description of circumstances 

where the Exchange may exercise that 

discretion, including when an 

individual associated with the company 

has a history of regulatory misconduct 

that does not implicate the automatic 

bar described above. This would arise, 

for example, where 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. This would also arise 

when an individual who is not an 

executive officer or director, but who 

has significant influence on or 

importance to the company, has a 

history of regulatory misconduct. In that 

regard, the Exchange ordinarily would 

apply its discretionary authority to deny 

initial or continued listing to a company 

if a control person, such as a significant 

shareholder, has a regulatory history, 

which is required to be disclosed under 

Item 401(g) of Regulation S–K.22 In 


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Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Notices 82101 

for example, the shareholder did not acquire its 

shares directly from the company and has no role 

in the management or operations of the company. 

23Proposed Rule 5101 sets forth a number of 

factors that the Exchange will consider in 

determining whether a Company is a shell, 

including whether the Company is considered a 

‘‘shell company’’ as defined in Rule 12b–2 under the 

Act, 17 CFR 240.12b–2. 

24The Exchange notes there is also no price 

requirement for initial or continued listing on the 

National Stock Exchange or for continued listing on 

NYSE Amex and therefore that the proposed 

continued listing requirement exceeds the 

requirement of those exchanges. 

25Proposed Rule 4120(a)(12). 

26Proposed Rule 5815(a)(1)(C). 

order to apply this authority, the 

Exchange intends to conduct 

background investigations of executive 

officers and directors and other 

significant people associated with a 

company in connection with its review 

of applications for initial listing, as well 

as whenever a new executive officer or 

director is associated with a BX Venture 

Market-listed company, using public 

databases, such as Lexis-Nexis. The 

Exchange will also retain outside firms 

to assist in its review as needed, 

including investigative, accounting and 

law firms. In that regard, the Exchange 

expects that it would especially rely on 

outside firms when researching a 

regulatory history that may have 

occurred in jurisdictions outside of the 

United States, where the availability of 

information and language barriers could 

otherwise complicate such research. 

The Exchange’s listing application will 

also solicit information about certain 

inquiries, investigations, lawsuits, 

litigation, arbitrations, hearings, or other 

legal or administrative proceedings 

against the Company and its executive 

officers, directors, and ten percent or 

greater shareholders. 

The head of the Exchange’s Listing 

Department, who will have no 

marketing responsibilities and will 

report to NASDAQ OMX’s Chief 

Regulatory Officer, will be involved in 

all decisions concerning whether to 

permit or deny listing to a company 

based on a public interest concern and 

the Exchange’s Chief Regulatory Officer 

will be required to approve the listing 

of any company that has disclosed 

information about an executive officer, 

director, or control person under Items 

401(f)(2)–(8) or 401(g) of Regulation 

S–K that does not trigger the automatic 

bar described above. 

The Exchange will not approve for 

initial listing, or allow the continued 

listing, of shell companies.23 This 

prohibition is based on concerns that 

the investors in shell companies are 

unaware of the ultimate business in 

which they are investing and that 

trading in such securities is more 

susceptible to market manipulation. 

BX listings and delistings will be 

processed by the same staff currently in 

Nasdaq’s Listing Qualifications 

Department, which presently includes 

13 continued listing analysts and four 

initial listing analysts. This staff is 

extremely experienced in regulatory 

analysis, with the average person having 

over ten years of experience at Nasdaq. 

Should the workload resulting from the 

new BX Venture Market prove 

sufficiently high, the Exchange and 

Nasdaq have each committed to hiring 

additional staff, as necessary. In that 

regard, the staffing within Listing 

Qualifications 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 the Exchange’s Regulatory 

Oversight Committee. 

The Exchange proposes that any 

company that meets the quantitative 

(e.g., financial) requirements for listing 

on Nasdaq will not be allowed to 

initially list on the BX Venture Market. 

This will assure that such companies 

only become listed on the exchange 

with higher listing standards. 

Given that the Exchange expects to 

list companies that do not meet the 

quantitative listing requirements of the 

primary existing national securities 

exchanges, it is expected that BX 

Venture Market-listed companies will 

include smaller companies and 

companies facing business or other 

challenges. Thus, the proposed 

quantitative standards for the BX 

Venture Market were deliberately 

structured to be lower than those of the 

other primary exchanges. In that regard, 

the minimum price requirement for 

listing on the BX Venture Market will be 

$0.25 per share for a security previously 

listed on another national securities 

exchange and $1.00 per share for a 

security previously quoted in the overthe-counter market or listing in 

connection with its initial public 

offering. Until September 30, 2011, the 

Exchange would consider any company 

that was listed on another national 

securities exchange at any time since 

January 1, 2008, to be eligible to list 

with a $0.25 per share price. The 

Exchange believes it appropriate to 

consider a company delisted since 

January 1, 2008, as previously quoted on 

another national securities exchange 

because the BX Venture Market would 

not have been available to such 

companies when they were delisted. 

The Exchange believes it is reasonable 

to look back to January 1, 2008, when 

the financial markets began facing 

difficulties, which resulted in an 

unusually large number of companies 

being delisted. Furthermore, the 

Exchange believes it is appropriate to 

continue this treatment until September 

30, 2011, to assure that such companies 

have an adequate opportunity to learn 

about the BX Venture Market and 

sufficient time to complete their 

application and have that application 

processed by the Exchange. After 

September 30, 2011, a company will be 

considered to have been previously 

listed on a national securities exchange, 

and therefore eligible to list with a $0.25 

per share price, only if it was listed on 

such an exchange at any time during the 

three months prior to its listing on the 

BX Venture Market. The Exchange 

believes that this three month period 

will allow the company sufficient time 

to apply for listing on the BX Venture 

Market and have its application 

processed. 

For continued listing, a security will 

be required to maintain a minimum 

$0.25 per share bid price.24 If the 

security does not maintain a minimum 

$0.25 per share bid price for 20 

consecutive trading days, Exchange staff 

would issue a Staff Delisting 

Determination and the security would 

be suspended from trading on the BX 

Venture Market.25 A company could 

appeal that determination to a Hearings 

Panel; however, such an appeal would 

not stay the suspension of the 

security.26 During the Hearings Panel 

process, the security could regain 

compliance by achieving a $0.25 per 

share minimum bid price while trading 

on another venue, such as the over-thecounter market, for ten consecutive 

days. However, if the company has 

received three or more Staff Delisting 

Determinations for failure to comply 

with minimum price requirement in the 

prior 12 months, the company could 

only regain compliance by achieving a 

closing bid price of $0.25 per share or 

more for at least 20 consecutive trading 

days. The Exchange believes that this 

higher requirement for companies that 

were previously non-compliant is 

appropriate to reduce the likelihood of 

future instances of non-compliance and 

the concomitant investor confusion 

concerning the ability of the company to 

remain listed. If the Hearings Panel 

determines that the security has 

satisfied the applicable standard to 

regain compliance, the trading halt 

would be terminated and the security 

would resume trading on the Exchange. 

To be eligible for initial listing, a 

company not previously listed on a 

national securities exchange must have 

at least one year operating history, a 

minimum of either $1 million in 


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27 17 CFR 240.3a51–1. The Exchange is not 

seeking an exemption from the penny stock rules 

for securities listed on BX; however, a security may 

be excluded from the definition of a penny stock 

as a result of the security having a price in excess 

of $5 or its issuer having net tangible assets in 

excess of $2 million (if the issuer has been in 

continuous operation for at least three years) or $5 

million (if the issuer has been in continuous 

operation for less than three years) or average 

revenue of at least $6 million for the last three 

years. Rule 3a51–1(d) and (g), 17 CFR 240.3a51–1(d) 

and (g). 

28 15 U.S.C. 77r. 

29Proposed Rule 5250(e)(7). The Exchange has 

proposed to add these requirements in response to 

comments submitted on the original proposal. 

30 17 CFR 240.10A–3. See proposed Rule 

5605(c)(2). Companies may be eligible for a phasein or cure period with respect to certain of these 

requirements. 

31Proposed Rule 5605(a)(2) and IM–5605–1. The 

proposed definition of an independent director is 

identical to Nasdaq’s definition of an independent 

director. 

32 Id. 

33Proposed Rule 5605(c)(1). 

34Proposed Rule 5630. 

35Proposed Rule 5605(d) and IM–5605–6. A 

company can satisfy this requirement by having 

their independent directors make these decisions in 

executive session, or by having independent 

directors sit on a compensation committee. If the 

company chooses to use a compensation committee 

and the committee is comprised of at least three 

members, one director who is not independent as 

defined in Rule 5605(a)(2) and is not a current 

officer or employee or a Family Member of an 

officer or employee, may be appointed to the 

compensation committee under exceptional and 

limited circumstances, provided the company 

makes appropriate disclosure. Of course the 

Exchange will adopt rules required by Section 952 

of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act following the necessary 

SEC rulemaking related to that provision. 

36Proposed Rule 5605(b). 

stockholders’ equity or $5 million in 

total assets, and 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. The Exchange believes that these 

requirements will help assure that a 

company that was not previously 

subject to exchange regulation 

nonetheless has a credible and 

sustainable business. 

The Exchange believes that the 

proposed public float, holder and 

market maker requirements, together 

with the minimum market value of 

listed securities requirement, will assure 

sufficient liquidity in listed securities. 

In that regard, the Exchange notes that 

the shareholder and publicly held 

shares requirements are comparable to, 

or higher than, requirements for listing 

a preferred stock or secondary class of 

common stock on the Nasdaq Capital 

Market, which require 100 round lot 

shareholders and 200,000 publicly held 

shares. The Exchange is not aware of 

any difficulties in the trading in 

securities meeting these requirements. 

Further, requiring two market makers 

will assure competing quotations for 

potential buyers and sellers of the 

securities listed on the BX Venture 

Market. Finally, the Exchange believes 

that the minimum market value of listed 

securities requirement will help assure 

that the company issuing the securities 

is of a sufficient size to generate interest 

from investors and market participants. 

While these proposed standards may be 

lower than those of other exchanges, 

investors will be protected by the fact 

that securities listed on the BX Venture 

Market would be considered penny 

stocks under Exchange Act Rule 3a51– 

1, unless they qualify for an exemption 

from the definition of a penny stock.27

As such, broker-dealers would be 

required to pre-approve their customers 

for trading in penny stocks and 

investors will obtain the disclosures 

required to be made by broker-dealers in 

connection with penny stock 

transactions, providing them with trade 

and market information prior to 

effecting a transaction. Further, there 

will be no ‘‘blue sky’’ exemption 

available under Section 18 of the 

Securities Act of 1933,28 so companies 

will be required to satisfy State law 

registration requirements and other 

State laws that regulate the sale and 

offering of securities. Because some 

State laws and regulations may provide 

an exemption from certain registration 

or ‘‘blue sky’’ requirements for 

companies listed on the former Boston 

Stock Exchange, based on the higher 

listing standards previously applied by 

that Exchange, proposed Rule 5001 

would provide that the Exchange will 

take action to delist any company listed 

on BX that attempts to rely on such an 

exemption. Companies will also agree 

not to rely on any such exemption as a 

provision of the BX Listing Agreement. 

Listed companies will be required to 

represent to the Exchange that they are 

not relying on any such exemption in 

connection with any securities offering 

and will be required to provide the 

Exchange with copies of any ‘‘blue sky 

memoranda’’ prepared in connection 

with the issuance of shares.29 These 

steps will allow the Exchange to assure 

that the company is not inappropriately 

relying on such an exemption. 

The BX Venture Market corporate 

governance requirements are generally 

comparable to those of the other 

exchanges. The Exchange would require 

that a listed company have an audit 

committee comprised of at least three 

independent directors that also meet the 

requirements of SEC Rule 10A–3.30 For 

a director to be considered an 

independent director, the company’s 

board would have to determine that the 

individual does not have a relationship 

which, in the board’s opinion, would 

interfere with the exercise of 

independent judgment in carrying out 

the responsibilities of a director.31 The 

board would be precluded from finding 

a director independent based on certain 

relationships, including if that director 

is currently an employee of the 

company or was employed by the 

company during the prior three years 

(including as an executive officer), 

accepted certain compensation or 

payments from the company during the 

prior three years, or had a family 

member with certain affiliations with 

the company.32

The audit committee would be 

required to have a charter setting out its 

responsibilities, including the 

committee’s purpose of overseeing the 

accounting and financial reporting 

processes of the company and the audits 

of the company’s financial statements 

and the responsibilities and authority 

necessary to comply with SEC Rule 

10A–3.33 The audit committee, or 

another independent body of the board, 

will also be required to conduct an 

appropriate review and oversight of any 

related party transaction.34 The 

Exchange believes that this requirement 

will limit the potential for self-dealing 

in connection with any related party 

transactions. 

The Exchange would also require that 

independent directors make 

compensation decisions concerning the 

chief executive officer and other 

executive officers.35 Independent 

directors would be required to meet on 

a regular basis in executive sessions.36

These requirements for audit 

committees, compensation decisions, 

and executive sessions are identical to 

those of Nasdaq and substantially 

similar to those of the other national 

securities exchanges and the Exchange 

believes they will serve to empower the 

independent directors of its listed 

companies. 

While the Exchange would require 

that a listed company have at least three 

independent directors to satisfy the 

audit committee requirement described 

above, it would not require that a 

majority of the company’s board of 

directors be independent or an 

independent nomination committee 

because the Exchange believes those 

requirements could impose significant 

additional costs on these smaller 

companies and therefore discourage 

companies from pursuing an otherwise 

beneficial listing. In that regard, given 

the significant responsibilities imposed 

on audit and compensation committee 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Notices 82103 

37The 2008–2009 Director Compensation Report 

prepared by the National Association of Corporate 

Directors (available from http:// 

www.nacdonline.org/) found that the median total 

direct compensation per director was $78,060 for 

smaller companies (defined as companies with 

annual revenues of $50 to $500 million). 

38See, e.g., Item 407(a) of Regulation S–K, which 

requires disclosure of non-independent directors 

who serve on nomination committees, implicitly 

allowing such service. 

39Proposed Rule 5610. 

40Proposed Rule 5635. 

41 In this regard, the proposed rules are 

comparable to the rules of the National Stock 

Exchange, which require shareholder approval for 

equity compensation issuances but not for other 

share issuances. See National Stock Exchange Rule 

15.6. 

42Proposed Rule 5250(e)(1). 

43Nasdaq Listing Rules 5800–5899. 

44Proposed Rule 5810(c)(2). 

45Proposed Rule 5810(c)(3). 

46Proposed Rule 5810(c)(1). 

47Proposed Rule 5810(c). 

48Section 6.1 of the By-Laws on NASDAQ OMX 

BX, Inc. 

members, directors who serve on these 

committees are sometimes reluctant to 

serve on other committees. As such, if 

the BX Venture Market were to also 

require an independent nominations 

committee, companies may have to 

increase the size of their boards and add 

additional independent directors. 

Similarly, requiring that independent 

directors comprise a majority of a 

company’s board could also require 

companies to add additional 

independent directors. In each case, the 

need to add independent directors 

would impose additional costs on the 

company.37 Moreover, nothing in the 

Commission’s rules or the Act mandate 

these requirements.38 However, the 

Exchange believes that the requirement 

for executive sessions of the 

independent directors will provide a 

forum for the independent directors to 

consider whether the governance 

structure of the company is appropriate 

and raise any concerns, notwithstanding 

the lack of a majority independence and 

nominations committee requirement. 

Companies listing on the BX Venture 

Market 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. For 

this purposes, a company will be 

considered to be listing in conjunction 

with an initial public offering only if it 

meets the conditions in SEC Rule 10A– 

3(b)(1)(iv)(A), namely that the company 

was not, immediately prior to the 

effective date of its registration 

statement, required to file reports with 

the Commission pursuant to Section 

13(a) or 15(d) of the Act. 

With 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 over-thecounter 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. For this purposes, a company 

will be considered to be listing in 

conjunction with an initial public 

offering if immediately prior to listing it 

does not have a class of common stock 

registered under the Act. 

A company that transfers to the BX 

Venture Market from another national 

securities exchange with a substantially 

similar requirement will be immediately 

subject to the audit and compensation 

committee requirements, provided that 

the company will be afforded the 

balance of any grace period afforded by 

the other market. 

The Exchange will require companies 

to adopt a code of conduct applicable to 

all directors, officers and employees.39

Any waivers of the code for directors or 

executive officers must be approved by 

the board and disclosed. The Exchange 

believes that this requirement will help 

promote the ethical behavior of 

individuals associated with companies 

listed on the BX Venture Market. 

In addition, the Exchange will require 

shareholder approval when a company 

adopts or materially amends a stock 

option or purchase plan or other equity 

compensation arrangement pursuant to 

which stock may be acquired by 

officers, directors, employees, or 

consultants.40 The Exchange would not 

require shareholder approval for other 

share issuances, however, given that the 

companies expected to list on the 

Exchange may have a greater need to 

issue shares more frequently or more 

quickly, due to their expected smaller 

size and the business challenges they 

may be facing. As such, the Exchange 

believes that the cost and delay 

associated with seeking approval for 

share issuances would discourage 

companies from pursuing an otherwise 

beneficial listing.41 Nonetheless, the 

Exchange will require listed Companies 

to provide notice of any 5% change in 

its shares outstanding 42 and the 

Exchange Staff will review such 

issuances for public interest concerns, 

such as issuances significantly below 

the market price or for the benefit of 

related parties. 

Review Process 

Companies denied initial or 

continued listing would be afforded a 

review process similar to that contained 

in the existing Rule 4800 Series of the 

Exchange’s rules, which was modeled 

on the process available to companies 

listed on Nasdaq.43 The Exchange’s 

Listing Qualifications staff only will be 

able to allow time-limited exceptions for 

certain deficiencies from the continued 

listing standards, such as the failure to 

file periodic reports, certain of the 

corporate governance requirements and 

any quantitative deficiency which does 

not contain a compliance period.44

Other of the continued listing 

requirements would provide for 

automatic compliance periods, 

including the market maker, market 

value of publicly held shares and audit 

committee requirements.45 If the 

company fails to timely solicit proxies 

or hold its annual meeting or fails to 

meet the minimum price requirement, 

or if staff has public interest concerns in 

connection with the company, Listing 

Qualifications staff will issue an 

immediate delisting letter to the 

company.46 Any other deficiency would 

result in the Listing Qualifications staff 

issuing a Public Reprimand Letter or a 

delisting notification.47 Hearings Panels 

composed of individuals not affiliated 

with the Exchange would be permitted 

to grant additional time to companies 

that received a delisting notification, or 

that were denied initial listing. A 

company could appeal a decision of the 

Hearings Panel to the Listing and 

Hearing Review Council, which is a 

committee appointed by the Exchange’s 

Board to act for the Board with respect 

to listing decisions.48 The Listing and 

Hearing Review Council decision would 

be final, unless it is called for a 

discretionary review by the Exchange 

Board. The compliance periods and 

discretion to allow a non-compliant 

company to remain listed are generally 

shorter on the BX Venture Exchange 

than would be allowed an equivalent 

company listed on Nasdaq. For 

example, 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 


srobinson on DSKHWCL6B1PROD with NOTICES
82104 Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Notices 

49SMARTS Group is a subsidiary of NASDAQ 

OMX. 

50For example, the initial listing fees for listing 

common stock on the NASDAQ Capital Market 

range from $50,000 to $75,000 and the annual fees 

are $27,500; the initial listing fees for listing 

common stock on NYSE Amex range from $50,000 

to $70,000 and the annual fees range from $27,500 

to $40,000; the initial listing fees for listing 

common stock on the New York Stock Exchange 

range from $150,000 to $250,000 and the annual 

fees range from $38,000 to $500,000. See Nasdaq 

Rule 5920(a)(1) and (c)(1)(A), NYSE Amex Listed 

Company Guide Sections 140 and 141, and NYSE 

Listed Company Manual 902.03. 

51No fee would be charged in connection with 

requests involving a company’s initial listing 

application given that the company will pay an 

application fee. 

52Nasdaq Rule 5210(h) and NYSE Amex Listed 

Company Guide Section 126. 

53 15 U.S.C. 78f(b)(9). 

180 calendar days available on Nasdaq. 

Similarly, 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 Nasdaq 

company. 

Oversight 

FINRA will regulate market activity 

on the BX Venture Market, as it does 

today for Nasdaq. Based on its breadth 

of experience overseeing the over-thecounter markets, FINRA will also 

enhance its review process by 

calibrating its surveillance patterns to 

detect potential issues that may arise 

particularly in low priced stocks. 

FINRA’s review will include trading 

which takes place on the over-thecounter market in securities listed on 

the BX Venture Market. In addition, 

SMARTS Group, which is a worldleading technology provider of market 

surveillance solutions to exchanges and 

regulators around the world,49 will 

create a new suite of quoting and 

trading patterns to detect suspicious 

activity in low priced and less widely 

traded securities. Further, FINRA will 

review the activity of member firms 

quoting on the BX Venture Market when 

conducting their reviews of these firms. 

This review will include ‘‘focused 

exams’’ concentrated on sales practices 

and firm oversight. 

The Exchange will provide a monthly 

report to the SEC staff describing any 

significant developments on the BX 

Venture Exchange, including companies 

added or removed from the market 

during that period. In addition, the 

Exchange’s Chief Regulatory Officer will 

provide quarterly reports describing the 

listing and surveillance activities of the 

Exchange during the prior quarter. The 

Exchange will also provide copies of the 

Listing Department’s procedures 

manuals to the Commission’s Office of 

Compliance, Inspections and 

Examinations. 

Fees 

Companies would be required to 

submit an application review fee of 

$7,500 with their application for listing 

on the BX Venture Market, and would 

be required to pay a $15,000 annual fee 

for the first class listed on the Exchange 

and $5,000 for each additional class. 

The annual fee would be pro-rated for 

a company’s first year of their listing. 

The application review fee will allow 

the Exchange to recover some of the 

costs associated with the initial review 

of the company’s application, including 

staff time and the systems supporting 

the initial review process. The annual 

fee would similarly offset the staff and 

system costs of continued monitoring of 

the company. The proposed application 

and annual fees are substantially less 

than those charged by other national 

securities exchanges.50 Companies that 

were previously listed on Nasdaq would 

receive a credit, which can only be used 

to offset the annual fee, for any annual 

fees paid to Nasdaq during the same 

calendar year that they initially list on 

the BX Venture Market, for the months 

following their delisting from Nasdaq. 

The Exchange believes this credit is a 

reasonable allocation of fees under the 

Act because the Exchange and Nasdaq 

have the same ultimate parent, The 

NASDAQ OMX Group, Inc., and the 

company will have paid Nasdaq a nonrefundable fee to provide similar 

services as those that will be provided 

by the Exchange under its annual fee. 

As such, the Exchange believes it would 

be inequitable to charge the company a 

second fee in the same year to support 

the provision of those services. 

Fees would also be assessed for 

certain one-time events, such as a 

$7,500 fee for substitution listing events, 

a $2,500 fee for record-keeping changes, 

and a $4,000 or $5,000 fee for a written 

or oral hearing, respectively. These fees 

are identical to those charged on 

Nasdaq. 

Under Proposed Rule 5602, a 

company considering a specific action 

or transaction can request an 

interpretation from the Exchange, and in 

return, the Exchange will prepare a 

responsive letter as to how the rules 

apply to the proposed action or 

transaction. No company is required to 

request an interpretation, and staff will 

orally discuss the application of the 

Exchange’s rules with companies 

without any additional charge. 

However, if the company seeks a written 

response, the Exchange proposes to 

charge a $15,000 fee to recoup the cost 

of staff’s time in reviewing and 

responding to the request.51 The 

Exchange believes that the fee is 

appropriate, as the written response is 

applicable only to the company that 

requests it. The Exchange also believes 

that the written interpretive process, 

and the associated fee, will provide an 

additional public benefit in that staff 

will prepare anonymous summaries of 

interpretations, as well as frequently 

asked questions based on requests 

received from companies, including 

those withdrawn before a written 

response is issued. These summaries 

and questions will be posted on the 

Exchange’s Web site so that the general 

public, practitioners, and other 

companies can better understand how 

the Exchange applies its rules and 

policies. In this way, the overall need to 

request such interpretations is 

minimized, thus reducing burdens on 

companies and staff alike. 

Other Changes 

As part of the proposed rule change, 

the Exchange is deleting portions of the 

Rule 4000 Series related to the listing 

and trading of securities eligible to be 

listed on the BX Venture Market and 

correcting cross-references to those 

deleted sections. The Exchange is 

maintaining those provisions of the Rule 

4000 applicable to securities that will 

not be eligible to be listed on the BX 

Venture Market, such as Portfolio 

Depository Receipts, Index Fund Shares, 

Trust Issued Receipts, Securities Linked 

to the Performance of Indexes and 

Commodities, and Managed Fund 

Shares, to enable the continued trading 

of such securities on the Exchange 

pursuant to unlisted trading privileges. 

The Exchange is deleting Rule 4430, 

which provided listing criteria for 

limited partnership rollup transactions 

using language that was substantially 

similar to language contained in FINRA 

Rule 2310. Instead, the Exchange 

addresses these issues in proposed Rule 

5210(h). This rule adopts the same 

approach taken by Nasdaq and NYSE 

AMEX by incorporating the FINRA rule 

by reference.52 In this manner, the 

Exchange satisfies the requirement of 

Section 6(b)(9) of the Exchange Act,53

which requires that the rules of a 

national securities exchange prohibit 

certain limited partnership rollup 

transactions. 

The Exchange is also moving the 

additional requirements applicable to 

the listing of securities issued by 

NASDAQ OMX or its affiliates from 

Rule 4370 to Rule 5701. 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Notices 82105 

54 15 U.S.C. 78f. 55 15 U.S.C. 78f(b)(5). 

56Section 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). 

57See Order Instituting Proceedings, supra note 4. 

58See id. 

59See id. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,54

in general and with Sections 6(b)(5) of 

the Act,55 in particular in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 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. The proposed new 

listing venue will advance these goals 

by allowing qualified issuers to list on 

a transparent, well-regulated 

marketplace with increased 

transparency about the trading of these 

securities, thereby protecting investors 

and the public interest and helping to 

prevent fraudulent and manipulative 

acts and practices. 

In addition, the Exchange believes 

that the proposed market is consistent 

with Section 17B of the Act, which 

codifies Congress’ findings that it is in 

the public interest and appropriate for 

the protection of investors and the 

maintenance of fair and orderly markets 

to improve significantly the information 

available to brokers, dealers, investors, 

and regulators with respect to 

quotations for and transactions in penny 

stocks and that a fully implemented 

automated quotation system for penny 

stocks would meet the information 

needs of investors and market 

participants and would add visibility 

and regulatory and surveillance data to 

that market. Section 17B further 

instructs the Commission to facilitate 

the widespread dissemination of 

reliable and accurate last sale and 

quotation information with respect to 

penny stocks, as the Exchange will for 

securities listed on the BX Venture 

Market, through one or more automated 

quotation systems operated by a 

registered securities association or a 

national securities exchange, providing 

reliable pricing information and 

reporting of transactions. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Procedure: Request for Written 

Comments 

In the Order Instituting Proceedings, 

the Commission requested 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 

invited 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. The 

Commission also stated that, 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.56

As noted in the Order Instituting 

Proceedings, interested persons are 

invited to submit written data, views 

and arguments regarding whether the 

proposed rule change should be 

disapproved by January 24, 2011.57 Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by February 8, 2011.58

In the Order Instituting Proceedings, 

the Commission asked 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.59 The Commission also 

specifically asked for 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 

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? 


srobinson on DSKHWCL6B1PROD with NOTICES
82106 Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Notices 

60 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. 63292 

(November 9, 2010), 75 FR 70319 (‘‘Notice’’). 

4See Registration Statement on Form N–1A for 

the Trust filed with the Commission on July 22, 

2010 (File Nos. 333–132380 and 811–21864) 

(‘‘Registration Statement’’). The Registration 

Statement became effective on September 20, 2010. 

5The Benchmark is designed to capture the 

economic benefit derived from rising or declining 

price trends in the commodity, currency, and U.S. 

Treasury futures markets. The Benchmark consists 

of U.S. listed futures contracts on sixteen tangible 

commodities and eight financial futures. The 

sixteen commodity futures contracts are on: light 

crude oil, natural gas, RBOB gas, heating oil, 

soybeans, corn, wheat, gold, silver, copper, live 

cattle, lean hogs, coffee, cocoa, cotton, and sugar. 

The eight financial futures contracts are on: the 

Australian dollar, British pound, Canadian dollar, 

Euro, Japanese yen, Swiss franc, U.S. Treasury 

Notes, and U.S. Treasury bonds. Each contract is 

sometimes referred to as a ‘‘Component’’ of the 

Benchmark. Additional information relating to the 

Benchmark, including, without limitation, the 

sector aggregations, weightings, and position 

methodology can be found in the Registration 

Statement and Notice. See Notice and Registration 

Statement, supra notes 3 and 4. 

6Additional information regarding the 

investments of the Fund can be found in the 

Registration Statement and Notice. See id. 

7The Fund’s investments in commodity futures 

contracts will be limited by the application of 

position limits imposed by the Commodity Futures 

Trading Commission and U.S. futures exchanges 

intended to prevent undue influence on prices by 

a single trader or group of affiliated traders. The 

Adviser represents that the Fund’s investment in 

futures contracts will be limited to investments in 

the U.S. listed futures contracts included in the 

Benchmark, except that the Fund may invest up to 

10% of its assets in U.S. listed commodity and 

currency futures contracts not included in the 

Benchmark in a manner designed to achieve its 

investment objective. 

8The Fund will enter into over-the-counter swap 

transactions only with respect to transactions based 

on (i) the return of the Benchmark or any subset of 

the Benchmark, (ii) any Component in the 

Benchmark, or (iii) any commodity or currency 

represented in the Benchmark. 

• 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 continue to 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.60

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32731 Filed 12–28–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63598; File No. SR– 

NYSEArca-2010–98] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change Relating to the 

Listing and Trading of Shares of the 

WisdomTree Managed Futures 

Strategy Fund 

December 22, 2010. 

I. Introduction 

On November 1, 2010, NYSE Arca, 

Inc. (‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’)1 and Rule 19b-4 

thereunder,2 a proposed rule change to 

list and trade shares (‘‘Shares’’) of the 

WisdomTree Managed Futures Strategy 

Fund (‘‘Fund’’) of the WisdomTree Trust 

(‘‘Trust’’) under NYSE Arca Equities 

Rule 8.600. The proposed rule change 

was published for comment in the 

Federal Register on November 17, 

2010.3 The Commission received no 

comments on the proposal. This order 

grants approval of the proposed rule 

change. 

II. Description of the Proposal 

The Exchange proposes to list and 

trade the Shares pursuant to NYSE Arca 

Equities Rule 8.600, which governs the 

listing and trading of Managed Fund 

Shares. The Shares will be offered by 

the Trust, which is registered with the 

Commission as an investment 

company.4 The Fund will be an actively 

managed exchange-traded fund. 

WisdomTree Asset Management, Inc. 

(‘‘Adviser’’) is the investment adviser to 

the Fund. WisdomTree Investments, 

Inc. is the parent company of the 

Adviser. Mellon Capital Management 

Corporation (‘‘Sub-Adviser’’) serves as 

the sub-adviser for the Fund. The Bank 

of New York Mellon is the 

administrator, custodian, and transfer 

agent for the Fund. ALPS Distributors, 

Inc. serves as distributor for the Fund. 

The Fund is managed using a strategy 

designed to provide returns that 

correspond to the performance of the 

Diversified Trends Indicator TM

(‘‘Benchmark’’).5 The Fund seeks to 

achieve its investment objective by 

investing substantially all of its assets in 

a combination of commodity- and 

currency-linked investments (including 

investments linked to U.S. Treasuries) 

designed to correspond to the 

performance of the Benchmark, and U.S. 

government securities (as defined in 

Section 3(a)(42) of the Act, ‘‘Government 

Securities’’) that serve as collateral or 

otherwise back the commodity- and 

currency-linked investments.6

Specifically, the Fund will invest at 

least 70% of its assets in a combination 

of: (i) listed commodity and financial 

futures contracts included in the 

Benchmark; 7 and (ii) forward currency 

contracts based on currencies 

represented in the Benchmark, in each 

case collateralized or otherwise backed 

by Government Securities. The Fund 

may invest up to 30% of its assets in a 

combination of swap transactions 8 and 


srobinson on DSKHWCL6B1PROD with NOTICES