Federal Register / Vol. 83, No. 173 / Thursday, September 6, 2018 / Notices 45289 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 83618 

(July 11, 2018), 83 FR 33277. 

4 15 U.S.C. 78s(b)(2). 

5 Id. 

6 17 CFR 200.30–3(a)(31). 

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

2 17 CFR 240.19b–4. 

3See Section 102.03 of the NYSE Listed Company 

Manual and Section 104 of the NYSE American 

Company Guide. 

Commission a USPS Request to Add 

Priority Mail Contract 464 to 

Competitive Product List. Documents 

are available at www.prc.gov, Docket 

Nos. MC2018–218, CP2018–300. 

Elizabeth Reed, 

Attorney, Corporate and Postal Business Law. 

[FR Doc. 2018–19276 Filed 9–5–18; 8:45 am] 

BILLING CODE 7710–12–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84003; File No. SR– 

NASDAQ–2018–050] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Designation of a Longer Period for 

Commission Action on a Proposed 

Rule Change Relating to the First Trust 

Senior Loan Fund of First Trust 

Exchange Traded Fund IV 

August 30, 2018. 

On June 27, 2018, The Nasdaq Stock 

Market LLC (‘‘Nasdaq’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

modify certain aspects of the First Trust 

Senior Loan Fund, the shares of which 

have been approved by the Commission 

for listing and trading under Nasdaq 

Rule 5735. The proposed rule change 

was published for comment in the 

Federal Register on July 17, 2018.3 The 

Commission has received no comment 

letters on the proposed rule change. 

Section 19(b)(2) of the Act 4 provides 

that, within 45 days of the publication 

of notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. The 45th day after 

publication of the notice for this 

proposed rule change is August 31, 

2018. The Commission is extending this 

45-day time period. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to take action on the 

proposed rule change so that it has 

sufficient time to consider the proposed 

rule change. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,5 designates October 

15, 2018, as the date by which the 

Commission shall either approve or 

disapprove or institute proceedings to 

determine whether to disapprove the 

proposed rule change (File Number SR– 

NASDAQ–2018–050). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–19241 Filed 9–5–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84001; File No. SR– 

NASDAQ–2018–070] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

List and Trade Corporate NonConvertible Bonds on Nasdaq 

August 30, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 

27, 2018, The Nasdaq Stock Market LLC 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt 

listing and trading requirements and 

fees for non-convertible corporate 

bonds. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaq.cchwallstreet.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq is amending its rules to 

permit the initial and continued listing 

of and trading of non-convertible 

corporate debt securities (referred to 

herein as ‘‘bonds’’ or ‘‘non-convertible 

bonds’’) on Nasdaq and to establish fees 

for listing those bonds. While Nasdaq 

rules currently provide for the initial 

and continued listing of convertible 

bonds, Nasdaq believes that there may 

be a demand from certain types of 

investors for Exchange-listed nonconvertible bonds. Nasdaq also believes 

that this proposal will improve the 

public market for non-convertible bonds 

by promoting the fair and orderly 

operation of that market and by 

increasing the transparency of that 

market for securities that are listed 

pursuant to this proposal. Nasdaq is 

therefore amending the relevant listing 

and trading rules accordingly. 

Listing Rules 

First, Nasdaq proposes to adopt Rule 

5702 to permit the initial listing of nonconvertible bonds. For non-convertible 

bonds, Nasdaq proposes to require a 

minimum principal amount outstanding 

or market value of at least $5 million, 

instead of the minimum $10 million 

principal amount outstanding required 

for convertible debt under Rule 5515(b). 

Nasdaq notes that this requirement is 

the same as the initial listing 

requirement for bonds on the New York 

Stock Exchange LLC (‘‘NYSE’’) and 

NYSE American LLC (‘‘NYSE 

American’’), which both require that the 

debt issue have an aggregate market 

value or principal amount of no less 

than $5 million.3


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45290 Federal Register / Vol. 83, No. 173 / Thursday, September 6, 2018 / Notices 

4See Section 104 of the NYSE American 

Company Guide; Section 102.03 of the NYSE Listed 

Company Manual. 

5The Exchange proposes to amend Rule 

5810(c)(3) to provide that a failure to meet the 

continued listing requirements under Rule 

5702(b)(1) for a period of 30 consecutive business 

days will constitute a deficiency; in the event of a 

deficiency, the Exchange’s Listings Qualifications 

Department will promptly notify the deficient 

issuer and the issuer shall have a period of 180 

calendar days from such notification to regain 

compliance. Compliance will be deemed to be 

regained by meeting the applicable standard for a 

minimum of 10 consecutive business days, unless 

the Listing Qualifications Department exercises its 

discretion to extend this 10 day period as set forth 

in Rule 5810(c)(3)(G). 

6See Section 1003(b)(iv) of the NYSE American 

Company Guide. 

7The Exchange proposes to amend Rule 

5250(e)(3) to require issuers of non-convertible 

bonds to provide at least 10 calendar days advance 

notice to the Exchange of certain corporate actions, 

including redemptions (full or partial calls), tender 

offers, changes in par value, and changes in 

identifier (e.g., CUSIP number or symbol), by filing 

the appropriate form as Nasdaq shall designate. 

8Nasdaq notes that currently, the Rule 5600 

Series generally would apply to securities listed in 

this proposal. However, subsequent to this 

proposal, but prior to listing non-convertible bonds 

of issuers that have equity securities listed on NYSE 

or NYSE American, Nasdaq plans to submit a 

proposal to amend Rule 5615(a)(6) to state that the 

Rule 5600 Series does not generally apply to 

companies listing only preferred or debt securities 

on the Exchange. Under this proposal, companies 

listing only non-convertible bonds would be 

exempt from the Rules relating to Independent 

Directors (Rule 5605(b)), Audit Committee 

Requirements (Rule 5605(c)), Compensation 

Committee Requirements (Rule 5605(d)), 

Independent Director Oversight of Director 

Nominations (Rule 5605(e)), Code of Conduct (Rule 

5610), Meetings of Shareholders (Rule 5620), 

Review of Related Party Transactions (Rule 5630), 

Shareholder Approval (Rule 5635), and Voting 

Rights (Rule 5640). However, Rule 5615(a)(6) would 

state that such companies still must comply with 

Rule 5625, pursuant to which an issuer would 

provide Nasdaq with prompt notification after an 

executive officer of the company becomes aware of 

any noncompliance by the company with the 

requirements of the Rule 5600 Series. In addition, 

this amended Rule would require issuers of listed 

non-convertible bonds to comply with Rule 5605(c), 

which sets forth the requirements of the company’s 

audit committee, including its charter, composition, 

responsibilities and authority, to the extent required 

by Exchange Act Rule 10A–3. The Rule thereby 

would apply the requirements of Rule 10A–3 to the 

issuer’s audit committee. The Rule also would 

impose on the issuer the obligation to promptly 

notify Nasdaq after an executive officer of the issuer 

becomes aware of any noncompliance by the issuer 

with the requirements of the Rule 5600 series, such 

as noncompliance with the audit committee 

provisions that are required by Rule 10A–3 and set 

forth in Rule 5605(c). Nasdaq also notes that NYSE 

and NYSE American have adopted similar 

exemptions for both companies that list only 

preferred and debt securities. See Section 303A of 

the NYSE Listed Company Manual; see also Section 

801(g) of the NYSE American Company Guide. 

Finally, Nasdaq notes that the foregoing proposal 

would not apply to issuers of non-convertible bonds 

that have equity securities listed on Nasdaq. 

9Specifically, Section 12(a) requires that, in order 

for an exchange member, broker or dealer to effect 

a transaction in a security on a national securities 

exchange, a registration must be effective ‘‘as to 

such security for such exchange.’’ See 15 U.S.C. 

78(l)(a). 

10For purposes of the listing requirement that the 

non-convertible bond issuer also list a class of 

equity securities on Nasdaq, the issuer may list an 

equity security on the Nasdaq Capital Market, the 

Nasdaq Global Market, or the Nasdaq Global Select 

Market. 11The Exchange notes that upon the effective date 

of the proposal, it only expects to be capable of 

listing and trading non-convertible bonds of issuers 

that currently list equity securities on Nasdaq. The 

Exchange expects to be ready to list and trade bonds 

of issuers with equity securities listed on NYSE or 

NYSE American by the Second Quarter of 2019. 

The Exchange will issue a trader alert at least seven 

days in advance of accepting applications to list 

and trade bonds of issuers with equity securities 

listed on NYSE or NYSE American. 

The Exchange proposes to include language to 

this effect in the rule text, which it will then 

propose to remove after the Exchange begins listing 

and trading non-convertible bonds of issuers with 

equity securities listed on NYSE and NYSE 

American. 

12See Securities Exchange Act Release No. 80283 

(Mar. 21, 2017), 82 FR 15244 (Mar. 27, 2017) (SR– 

NYSEMKT–2017–14). 

13See Rule 5250(e)(4). 

In addition to Rule 5702(a)(1), Nasdaq 

also proposes to require satisfaction of 

the condition set forth in Rule 

5702(a)(2) for non-convertible bonds to 

be eligible for listing on the Exchange. 

This condition is that the issuer of the 

bond must have one class of equity 

security that is listed on Nasdaq, NYSE, 

or NYSE American. This condition is 

similar to one that NYSE and NYSE 

American impose.4

Nasdaq also proposes to add 

continued listing requirements under 

Rule 5702(b). Proposed Rule 5702(b)(1) 

would require, for continued listing, 

that a non-convertible bond issuance 

maintain a market value or principal 

amount outstanding of at least 

$400,000.5 Proposed Rule 5702(b)(2) 

would also require an issuer to meet its 

obligations on the listed non-convertible 

bonds, and Nasdaq proposes to amend 

Rule 5810(c)(1) to provide that a 

determination by the Exchange’s 

Listings Qualifications Department that 

the issuer has failed to meet its 

obligations on the bonds would result in 

their immediate suspension and the 

commencement of delisting 

proceedings. Nasdaq notes that these 

proposed continued listing standards for 

non-convertible bonds are the same as 

the listing requirements for bonds 

imposed by NYSE American.6

In addition to these quantitative 

requirements for listing non-convertible 

bonds, the issuer of listed bonds would 

also have to comply with other 

requirements that are generally 

applicable to companies listed on 

Nasdaq pursuant to Rule 5250. 

Specifically, Rule 5250(a) allows 

Nasdaq to request additional 

information, either public or nonpublic, deemed necessary to make a 

determination regarding a company’s 

continued listing. Rule 5250(b) requires 

issuers to make public disclosure of 

material information, disclosure of 

notification of deficiency, and 

disclosure of third party director and 

nominee compensation. Rule 5250(c) 

requires companies to file all required 

periodic financial reports. Rule 5250(d) 

requires the distribution of annual and 

interim reports. Rule 5250(e) sets forth 

various corporate events resulting in 

material changes that trigger the 

requirement for the issuer to submit 

certain forms to Nasdaq.7 Rule 5250(f) 

requires the issuers to pay all applicable 

fees set forth in the Rule 5900 series. 

In addition to the Exchange’s rules 

that would apply to an issuer of nonconvertible bonds that list on Nasdaq,8

the issuers of those bonds would have 

to register those securities pursuant to 

Section 12(a) of the Act.9 Among other 

things, the issuer is required to disclose 

information about the organization, 

financial structure, information about 

the nature of the business, certain 

information about the directors, officers 

and underwriters, material contracts, 

and balance sheets. As part of this 

proposal, Nasdaq is requiring that the 

issuer must currently list one class of an 

equity security on either Nasdaq,10

NYSE, or NYSE American,11 and so 

issuers may already disclose this 

information in connection with the 

listing of those securities. However, 

Section 12(a) also requires issuers to 

disclose information that is more 

specific to the security to be listed and 

traded on the Exchange, such as the 

terms, position, rights, and privileges of 

the different classes of securities 

outstanding, and the terms on which the 

issuer’s securities are to be, and during 

the preceding three years have been, 

offered to the public or otherwise. Given 

this requirement, Nasdaq’s proposal 

may increase the amount of information 

about non-convertible bonds that will be 

disclosed by the issuer than would 

otherwise be the case. 

Nasdaq proposes to amend Rule 

5515(b)(4) to change references from the 

American Stock Exchange to NYSE 

American to reflect the name change of 

that exchange.12

Nasdaq also proposes to amend the 

definition of a ‘‘substitution listing 

event’’ in Rule 5005 to include an 

additional event related to the listing of 

bonds. Specifically, Rule 5005(a)(40) 

will include a change in the obligor of 

a listed debt security as a ‘‘substitution 

listing event.’’ A Substitution Listing 

Event triggers certain reporting 

requirements to the Exchange.13 Nasdaq 

is proposing to make this change to both 

convertible and non-convertible bonds, 


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14See NYSE American Company Guide Section 

140. 

15See NYSE Listed Company Manual Section 

902.08. 

16See NYSE American Company Guide Section 

141. 

17See Section 902.08 of the NYSE Listed 

Company Manual. 

18Nasdaq will determine compliance with the 

listing requirements for non-convertible bonds 

based upon information it receives directly from 

issuers as well as data that it obtains from third 

party data providers. 

19Nasdaq notes that it also proposes to amend 

Rule 5250(e)(3) to require an issuer to provide at 

least 10 calendar days advance notice to Nasdaq of 

certain corporate actions relating to non-convertible 

bonds listed on the Nasdaq Bond Exchange, 

including redemptions (full or partial calls), tender 

offers, changes in par value, and changes in 

identifier (e.g., CUSIP number or symbol), by filing 

the appropriate form as designated by Nasdaq. 

These disclosures will aid the Listings Qualification 

Department in assessing an issuer’s compliance 

with the continuing listing standards set forth in 

proposed Rule 5702. 

20UCITS (Undertakings for Collective Investment 

in Transferable Securities) is a harmonized regime 

throughout Europe for the management and sale of 

mutual funds. A UCITS fund is essentially a mutual 

fund based in the European Union that meets these 

requirements and is therefore exempt from national 

regulation in individual European countries. Under 

UCITS III, a UCITS fund can invest in transferable 

securities, such as listed and publicly traded 

equities and bonds, deposits and money market 

instruments, other mutual funds, and financial 

derivative instruments, subject to diversification 

requirements. 

as both types of securities could 

potentially be subject to a change in the 

obligor of that bond, which Nasdaq 

believes should qualify as a substitution 

listing event. 

Nasdaq proposes to add fees in 

connection with listing non-convertible 

bonds. Specifically, Nasdaq proposes to 

add Rule 5935 to impose a nonrefundable application fee of $5,000 to 

list a class of non-convertible bonds 

pursuant to Rule 5702. Nasdaq proposes 

to waive this application fee if, in 

connection with a company’s 

application to list non-convertible 

bonds on Nasdaq, the company will be 

switching the listing market for such 

bonds from NYSE or NYSE American to 

Nasdaq. Nasdaq notes that NYSE 

American imposes an initial listing fee 

of $100 per $1 million principal amount 

(or fraction thereof) for listed bonds, 

with a minimum fee of $5,000 and a 

maximum fee of $10,000,14 while NYSE 

imposes an initial listing fee of $25,000 

on all listed bonds of NYSE equity 

issuers.15

Nasdaq also proposes to add an 

annual fee in connection with listing 

non-convertible bonds. Nasdaq proposes 

to add Rule 5935(b) to state that the 

issuer of each class of non-convertible 

bonds listed pursuant to Rule 5702 shall 

pay to Nasdaq an annual fee of $5,000. 

Moreover, the proposed Rule states that 

a company that switches its listing 

market for its non-convertible bonds 

from the New York Stock Exchange or 

NYSE American to Nasdaq will not be 

liable for the annual fee until January 1 

of the calendar year following the 

effective date of the non-convertible 

bonds listing on Nasdaq. Nasdaq notes 

that NYSE American assesses an annual 

listing fee of $5,000 for listed bonds and 

debentures of companies whose equity 

securities are not listed on NYSE 

American,16 while NYSE assesses an 

annual listing fee of $25,000 for listed 

bonds of NYSE equity issuers and 

affiliated companies.17

Nasdaq also proposes to clarify rule 

text relating to the listing fees for 

convertible bonds. Specifically, Rule 

5920(a)(2) specifies a fee of $1,000 or 

$50 per million dollars face amount of 

bonds outstanding, whichever is higher. 

Nasdaq proposes to clarify that this is an 

entry fee, and that it applies to 

convertible bonds only. Nasdaq is not 

charging an entry fee for nonconvertible bonds, as it believes that the 

proposed application fee will allow the 

Exchange to adequately recoup the 

expenses incurred by the Exchange in 

processing an issuer’s application to list 

those securities. 

Nasdaq believes that this proposal 

will improve the public debt market by 

increasing transparency for nonconvertible bonds that are listed 

pursuant to this proposal and the 

orderliness of the market for those 

securities. For example, Rule 5250(b)(1) 

requires listed companies to, except in 

unusual circumstances, disclose 

promptly to the public through any 

Regulation FD compliant method (or 

combination of methods) any material 

information that would reasonably be 

expected to affect the value of their 

securities or influence investors’ 

decisions.18 Nasdaq-listed companies 

must notify Nasdaq’s MarketWatch 

Department prior to the distribution of 

certain material news at least ten 

minutes prior to public announcement 

of the news when the public release of 

the information is made, from 7:00 a.m. 

to 8:00 p.m. E.T. As set forth in IM– 

5250–1, such events may include: (1) 

Financial-related disclosures, including 

quarterly or yearly earnings, earnings 

restatements, pre-announcements or 

guidance; (2) corporate reorganizations 

and acquisitions, including mergers, 

tender offers, asset transactions and 

bankruptcies or receiverships; (3) new 

products or discoveries, or 

developments regarding customers or 

suppliers (e.g., significant developments 

in clinical or customer trials, and 

receipt or cancellation of a material 

contract or order); (4) senior 

management changes of a material 

nature or a change in control; (5) 

resignation or termination of 

independent auditors, or withdrawal of 

a previously issued audit report; (6) 

events regarding the Company’s 

securities, such as defaults on senior 

securities, calls of securities for 

redemption, repurchase plans, stock 

splits or changes in dividends, changes 

to the rights of security holders, or 

public or private sales of additional 

securities; (7) significant legal or 

regulatory developments; or (8) any 

event requiring the filing of a Form 

8–K. 

Nasdaq’s MarketWatch Department 

monitors real time trading in all Nasdaq 

securities during the trading day for 

price and volume activity. In the event 

of certain price and volume movements, 

the MarketWatch Department may 

contact a company in order to ascertain 

the cause of the unusual market activity. 

For non-convertible bonds that are 

listed under this proposal, the issuer 

will be required to comply with these 

disclosure requirements and to update 

Nasdaq accordingly on any material 

information that would reasonably be 

expected to affect the value of their 

bonds or influence investors’ decisions. 

Depending on the nature of the event 

and the company’s views regarding the 

business advisability of disclosing the 

information, the MarketWatch 

Department may work with the 

company to accomplish a timely release 

of the information. Furthermore, 

depending on the materiality of the 

information and the anticipated effect of 

the information on the price of the 

Company’s bonds, the MarketWatch 

Department may advise the Company 

that a temporary trading halt is 

appropriate to allow for full 

dissemination of the information and to 

maintain an orderly market. For nonconvertible bonds that are listed on 

Nasdaq pursuant to this proposal, a 

trading halt will be initiated by the 

Exchange, pursuant to proposed Rule 

4000B(i). In these ways, Nasdaq believes 

that the proposal will increase 

transparency for bonds that are listed 

pursuant to this proposal and the 

orderliness of the market for those 

bonds.19

Nasdaq also believes that this 

proposal will benefit market 

participants by making non-convertible 

bonds more accessible to certain kinds 

of investors. For example, in the 

European Union, certain investors, such 

as so-called UCITS investment funds,20

may generally only hold 10% of assets 

in securities that are not listed on an 


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45292 Federal Register / Vol. 83, No. 173 / Thursday, September 6, 2018 / Notices 

21A ‘‘Member’’ means any registered broker or 

dealer that has been admitted to membership in 

Nasdaq. See Rule 0120(i). 

22The Nasdaq Bond Exchange will only trade 

non-convertible bonds that are listed on Nasdaq. 

23As noted earlier, at the launch date of the 

Nasdaq Bond Exchange, the Exchange expects that 

the system will be only capable of trading bonds of 

issuers that currently list equity securities on 

Nasdaq. The Exchange expects to be ready to list 

and trade bonds of issuers with equity securities 

listed on NYSE or NYSE American by the Second 

Quarter of 2019. See n.11, supra. 

24Proposed Rule 4000B defines a ‘‘User’’ as any 

Nasdaq Member that has elected, pursuant to the 

process described below, to receive access to the 

Nasdaq Bond Exchange. 

exchange or other regulated market 

meeting certain standards. 

Trading Rules 

In conjunction with its proposal to 

adopt rules to list non-convertible bonds 

on Nasdaq, the Exchange also proposes 

rules that will provide for the trading of 

such listed bonds. The Exchange notes 

that its proposed non-convertible bond 

trading system—to be known as the 

‘‘Nasdaq Bond Exchange’’—will offer 

Members,21 at its inception, certain core 

trading functionality that will be 

competitive with NYSE Bonds. 

However, the Exchange will reserve 

more sophisticated and elaborate 

functionality until such time as the 

Exchange observes that a sufficient 

demand exists for it.22

In many respects, the proposed 

trading system and the proposed rules 

that govern it are a pared down version 

of the NYSE Bonds system and NYSE 

Rule 86. That is, like NYSE Bonds, the 

Nasdaq Bond Exchange will be an 

electronic system for receiving, 

processing, executing, and reporting 

bids, offers and executions in bonds. 

Like NYSE Bonds, the Nasdaq Bond 

Exchange will display, match, and 

execute buy and sell orders on a price/ 

time basis. The Exchange, like NYSE 

and NYSE American, will also accept 

good-for-day limit orders and fill-or-kill 

orders, and it will trade bonds of issuers 

that have at least one class of equity 

securities listed on Nasdaq and NYSE or 

NYSE American.23 However, at its 

inception, the Nasdaq Bond Exchange 

will not have—as does NYSE Bonds— 

market makers, sponsored access, 

auctions, price collars, or certain order 

types (e.g., reserve orders, minimum 

quantity orders, good-til-cancelled 

orders, and timed orders). The Nasdaq 

Bond Exchange also will have only one 

trading session each day as opposed to 

NYSE Bonds, which has three sessions. 

Again, the Exchange may add such 

features and functionalities to the 

Nasdaq Bond Exchange in the future to 

the extent that it determines that a 

demand exists for them. The Exchange 

observes that users of NYSE Bonds do 

not appear to avail themselves of many 

of these features and functionalities, 

such that the Exchange does not believe 

that including them in the Nasdaq Bond 

Exchange is necessary for it to compete 

with NYSE Bonds. 

Order Types 

The proposed rules designate the 

types of orders that could be entered 

into the Nasdaq Bond Exchange. 

Initially, Users 24 of the Nasdaq Bond 

Exchange will be allowed to enter goodfor-day limit orders (‘‘Nasdaq Bond 

Exchange Good for Day Limit Orders’’), 

which are orders to buy or sell a stated 

quantity of units of bonds at a specified 

price or at a better price that, if not 

executed or cancelled, will expire at the 

end of the trading session on the day on 

which they are entered. Users will also 

be able to enter a Nasdaq Bond 

Exchange Fill-or-Kill All-Or-None Order 

(‘‘Nasdaq Bond Exchange FOK–AON 

Order’’), which is an order that is to be 

executed immediately in its entirety 

against one or more contra parties at the 

best price available, or if it is not 

executed immediately in its entirety, it 

is cancelled. All orders on the Nasdaq 

Bond Exchange will be displayed and 

will be anonymous. The Exchange will 

file a proposed rule change with the 

Commission and notify its members if 

and when additional order types 

become available for use. 

Trading Units 

The minimum unit of trading in the 

Nasdaq Bond Exchange is one bond 

unless the issuer otherwise specifies a 

larger minimum unit of trading in the 

bond indenture agreement. The Nasdaq 

Bond Exchange will accept and display 

bids and offers in bonds priced to three 

decimal places, as per market standard. 

Order Entry and Execution 

To post an order in a particular bond 

on the Nasdaq Bond Exchange, a User 

will be required to enter certain basic 

information including: CUSIP number, 

order quantity, order type (i.e., Nasdaq 

Bond Exchange Good for Day Limit 

Order); price (up to three decimals); and 

whether the order is buy or sell. 

The Nasdaq Bond Exchange will be an 

electronic order-driven matching 

system. Nasdaq Bond Exchange orders 

submitted by Users will be displayed, 

matched, and executed on a price/time 

priority basis. Orders that are 

marketable at the time of entry will be 

matched and executed. An order will be 

marketable when it entered the Nasdaq 

Bond Exchange system if contra side 

interest is available at that price or a 

better price. Nasdaq Bond Exchange 

Good for Day Limit Orders that are not 

marketable at the time of entry would 

post to the Nasdaq Bond Exchange order 

‘‘book.’’ 

The Nasdaq Bond Exchange will 

provide an exception to its normal 

price/time system to allow Users to 

avoid internalizing orders. Users may be 

interested in self-match prevention in 

order to run multiple strategies at once 

that may sit on opposite sides of the 

book. Pursuant to the proposed Rule 

4000B(h)(1)(C), which the Exchange 

adapts from Nasdaq Rule 4757(a)(4), 

Nasdaq will permit Users to direct that 

orders entered into the Nasdaq Bond 

Exchange will not execute against 

orders entered under the same MPID. In 

addition, the proposed Rule provides 

that Users using the FIX order entry 

protocol (discussed below) may assign 

to orders entered through a specific 

order entry port a unique group 

identification modifier that will prevent 

orders with such modifier from 

executing against each other. In such a 

case, the proposed Rule states that a 

User may elect from the following 

options: (i) Regardless of the size of the 

interacting orders, cancelling the oldest 

order in full; or (ii) regardless of the size 

of the interacting orders, cancelling the 

most recent of the orders in full. The 

foregoing options may be applied to all 

orders entered through a specific order 

entry port. 

An order designated for execution in 

the Bond Trading Session may be 

cancelled at any time as long as the 

order had not been executed. 

The Exchange will charge no fees for 

posting orders or executing trades on 

the Nasdaq Bond Exchange. If the 

Exchange decides to charge any such 

fees in the future, then the Exchange 

will submit a rule filing proposal to that 

effect to the Commission. 

Clearing 

Most orders matched on the Nasdaq 

Bond Exchange will be locked-in trades 

and will be submitted without an 

omnibus account to the National 

Securities Clearing Corporation using 

Universal Trade Capture and then to the 

Depository Trust Company (‘‘DTC’’) for 

clearance and settlement. Settlement of 

corporate bond trades will be consistent 

with current convention, i.e., two day 

settlement. Bonds that are not eligible 

for settlement at DTC will be settled 

manually (‘‘ex-clearing’’) between the 

two counterparties. 

Bond Trading Session 

The Nasdaq Bond Exchange would 

have one trading session per trading day 

from 8:30 a.m. until 4:00 p.m. E.T. (the 


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25See proposed Rule 4000B(b)(2)(C). 

26See Rule 11890(a)(2). 

27See id. 

28See id. 

29See id. 

30See id. 

31The criteria to be used to determine clearly 

erroneous executions of non-convertible bonds, 

which are set forth in proposed Rule 

11890(a)(2)(C)(4), are in lieu of the criteria presently 

used to determine clearly erroneous executions of 

equity securities, which are set forth in Rule 

11890(a)(2)(C)(1)–(C)(3). 

32See Rule 11890(a)(2)(B). 

33The Exchange notes that, pursuant to Article VI 

of the By-Laws of the Nasdaq Stock Market, LLC, 

at least 20 percent of the Nasdaq Review Council 

must consist of representatives of Members of the 

Exchange. Although the By-Laws do not specify any 

specific categories of Members that must be 

represented on the Review Council, the Exchange 

expects that the existing Member representatives 

will adequately represent the interests of Users in 

appeals of clearly erroneous determinations. If it 

becomes apparent to the Exchange that roster of the 

Nasdaq Review Council does not adequately 

represent the interests of Users, then it will, at the 

appropriate time, consider nominating one or more 

Users to the Council. 

34See Rule 11890(b)(i). 

35See id. 

36See id. 37See id. 38See id. 39See 17 CFR 240.12d2–2. 40See Rule 4000B(i)(2). 41See Id. 42See Id. 

‘‘Bond Trading Session’’). There will be 

no pre-market or post-market session. 

Instead, the Nasdaq Bond Exchange will 

immediately start processing orders as 

they are entered upon opening. Orders 

submitted outside of the Bond Trading 

Session will not be accepted. 

Clearly Erroneous Executions 

Bond trades on the Nasdaq Bond 

Exchange would be made subject to 

Exchange Rule 11890, which governs 

the process for addressing clearly 

erroneous trades. Within the context of 

bond trading on the Nasdaq Bond 

Exchange, a ‘‘clearly erroneous 

execution’’ will be one where there is an 

obvious error in any term, such as price, 

unit of trading, or identification of the 

bond.’’ 25 A User that receives an 

erroneous execution may request the 

Exchange review the transaction or the 

President of the Exchange, a senior level 

employee thereof, or a designated officer 

(a ‘‘Senior Official’’) may review an 

execution on their own initiative. A 

request for review of an execution must 

include certain information, including 

in pertinent part, information 

concerning the time of the transaction, 

security symbol, number of bonds, 

price, and factual basis for believing that 

the trade is clearly erroneous.26 The 

request for review would have to be 

submitted within 30 minutes of the 

trade in question.27 The other party (or 

parties) to the trade will be notified of 

the request for review.28 Thereafter, an 

Exchange official would review the 

transaction and would make a 

determination as to whether it was 

clearly erroneous.29 The reviewer could 

make this determination with or 

without supporting documentation from 

any party to the transaction.30 Pursuant 

to proposed Rule 11890(a)(2)(C)(4), 

determinations of a clearly erroneous 

execution will be made on a case-bycase basis, considering factors that 

include, but are not limited to, the 

following: (i) Execution price; (ii) 

volume and volatility of a bond; (iii) 

news released for the issuer or the bond 

and/or the related equity security; (iv) 

trading halts; (v) corporate actions; (vi) 

general market conditions; (vii) the 

rating of the bond; (viii) interest and/or 

coupon rate; (ix) maturity date; (x) yield 

curves; (xi) prior print, if available 

within a reasonable time frame; (xii) 

executions inconsistent with the trading 

pattern of a bond; (xiii) current day’s 

trading high/low; (xiv) recent day’s and 

week’s trading high/low; (xv) executions 

outside the 52 week high/low; (xvi) 

effect of a single large order creating 

several prints at various prices; and 

(xvii) quotes and executions of other 

market centers.31

If the reviewer determines that the 

execution was not clearly erroneous, 

then no corrective action will be taken 

in relation to the transaction. If the 

reviewer determines that the transaction 

were clearly erroneous, the transaction 

will be deemed null and void.32 If one 

party does not agree with the 

determination, then that party may 

request further review or an appeal to 

the Nasdaq Review Council pursuant to 

the procedures set forth in Rule 

11890(c). Depending on the outcome of 

the appeal, the transaction would either 

remain unchanged or be deemed null 

and void.33

Nasdaq Bond Exchange System 

Disruption or Malfunction or Equipment 

Changeover 

Rule 11890(b) further provides that, in 

the event of any system disruption, 

malfunction, or equipment changeover 

in the Nasdaq Bond Exchange trading 

facility, a Senior Official may, without 

the need for a request for review, review 

transactions affected by a system 

disruption, malfunction, or equipment 

changeover and decide if any 

transactions are erroneous.34 In such 

situations, the Senior Official could 

declare the transaction to be unchanged 

or null and void, appropriate.35 The 

Rule also provides that, absent 

extraordinary circumstances, any such 

action of the Senior Official shall be 

taken within 30 minutes of detection of 

the system disruption, malfunction, or 

equipment changeover, or an erroneous 

transaction resulting from such system 

problem.36 If an erroneous transaction 

occurred as a result of a system 

disruption, system malfunction, or 

equipment changeover, each party to the 

erroneous transaction will be notified of 

the situation and the specific action as 

soon as practicable.37 Thereafter, the 

User aggrieved by the action could 

appeal such action.38

Halting and Suspending Bond Trading 

on the Exchange 

Proposed Rule 4000B(i)(1) provides 

that the Exchange may halt or suspend 

trading in non-convertible bonds listed 

on the Nasdaq Bond Exchange when: (1) 

In the Exchange’s regulatory capacity, it 

is necessary or appropriate to maintain 

a fair and orderly market, to protect 

investors, or is in the public interest, 

due to extraordinary circumstances or 

unusual market conditions; (2) a class of 

equity that is issued by the same issuer 

as the non-convertible bond has been 

halted or suspended by, or de-listed 

from, the Exchange or by its primary 

listing market (NYSE or NYSE 

American), as applicable, for regulatory 

purposes; (3) news reports have a 

material impact on a non-convertible 

bond, its issuer, or related stock of its 

issuer; or (4) the non-convertible bond 

is to be called for redemption or will 

mature or become subject to retirement, 

and thereafter it will be subject to delisting, in which case the Exchange shall 

cease trading the non-convertible bond, 

effective not less than 10 days before the 

date when such de-listing becomes 

effective, pursuant to a de-listing 

application that the Exchange submits 

to the Commission on Form 25 and 

consistent with SEC Rule 12d2–2 39 and 

the Act. 

Pursuant to proposed Rule 

4000B(i)(2), when bond trading is halted 

under any of the circumstance described 

above, a halt message at the beginning 

and end of the halt will be disseminated 

to all Nasdaq Bond Market Users. This 

trading halt will be referred to as a 

‘‘Bond Halt.’’ 40 Upon commencement of 

a Bond Halt, all pending orders in the 

Nasdaq Bond Exchange will be 

cancelled.41 The Nasdaq Bond Exchange 

will resume accepting orders and 

trading once the Exchange declares an 

end to a Bond Halt.42

Dissemination of Trading Information 

The Exchange proposes to publicly 

disseminate a real-time bond data feed, 


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43Pursuant to FINRA Rule 6730(e)(2), 

transactions on the Nasdaq Bond Exchange need 

not be reported to FINRA’s Trade Reporting and 

Compliance Engine because only bonds listed on 

Nasdaq, a national securities exchange, may be 

traded on the Bond Exchange, and because bond 

transaction information will be disseminated 

publicly. 

44The Exchange notes that Users that already 

purchase FIX port connectivity to the Nasdaq Stock 

Exchange will need to obtain one or more 

additional FIX ports to connect to the Nasdaq Bond 

Exchange. 

45Separately from port connectivity, the 

Exchange notes that Users will need to establish 

physical connections to the Nasdaq Bond Exchange, 

as set forth in General 8 of the Nasdaq Rules. To 

the extent that a User already purchases physical 

connectivity to the Nasdaq Stock Exchange, that 

purchase will also provide for the User to connect 

to the Nasdaq Bond Exchange, such that the User 

will incur no additional fee for the new connection. 

New Users that do not already purchase physical 

connectivity to Nasdaq will need to do so, pursuant 

to General 8 of the Nasdaq Rules. 

46 17 CFR 240.17a–3 and 240.17a–4. 

47 15 U.S.C. 78f(b)(7). 

48See 17 CFR 242.1001, .1004. 

49 15 U.S.C. 78k(a). 

50 17 CFR 240.11a1–4(T). 

51 15 U.S.C. 78k(b). 

52 17 CFR 240.11b–1. 

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

54 15 U.S.C. 78f(b)(4), (5), and (7). 

which will be referred to as ‘‘Nasdaq 

Corporates Totalview.’’ 43 The Nasdaq 

Corporates Totalview data feed would 

reflect all orders in time sequence in the 

Nasdaq Bond Exchange order ‘‘book.’’ 

Because the Nasdaq Bond Exchange will 

be a purely order-driven system, the 

Exchange would not disseminate any 

information on a particular bond if there 

are no orders posted in the ‘‘book’’ for 

such bond. In addition to the Nasdaq 

Bond Exchange order ‘‘book,’’ the data 

feed also would include the last sale 

price as executions occur. The Nasdaq 

Corporates Totalview data feed will be 

available on a standalone basis free of 

charge to market participants, thirdparty data vendors, and other interested 

parties who request access and agree to 

the Exchange’s terms. If the Exchange 

decides to establish fees for the Nasdaq 

Corporates Totalview product at a later 

date, it will submit a separate rule filing. 

Access to the Nasdaq Bond Exchange 

System 

Only Members of the Exchange that 

have entered into a written service 

agreement with the Exchange (i.e., the 

‘‘Nasdaq U.S. Services Agreement’’) and 

that elect to receive access to the Nasdaq 

Bond Exchange on their Member 

application form, will be duly 

authorized Users that may receive such 

access. Existing Members of the 

Exchange will not be required to amend 

their Nasdaq U.S. Services Agreements 

to become Users and obtain access to 

the Nasdaq Bond Exchange; instead, 

existing Members simply will be 

required to complete a form, attached 

hereto as Exhibit 3 [sic], that indicates 

their interest in becoming Users and 

obtaining access. 

Users of the Nasdaq Bond Exchange 

will gain access to the system via direct 

or indirect electronic linkages utilizing 

the Financial Information Exchange or 

‘‘FIX’’ protocol. The FIX protocol is 

already used and widely accepted by 

Nasdaq market participants and will be 

used by the Nasdaq Bond Exchange 

Users for order entry, modification and 

cancellation, and message transmittal 

for all non-convertible bonds traded 

through the Nasdaq Bond Exchange. All 

of the communications protocols will be 

publicly available to allow Users and 

service bureaus to develop their own 

front-end software. Users will have the 

ability to establish connectivity to the 

Nasdaq Bond Exchange directly or 

through third-party connectivity 

providers, including a range of extranets 

and service bureaus, as set forth in 

General 8 of the Nasdaq Rules.44 The 

Exchange will not charge any fees for 

FIX port connectivity to the Nasdaq 

Bond Exchange or for connectivity to 

the Bond Exchange’s disaster recovery 

system.45

Reports and Recordkeeping 

Users of the Nasdaq Bond Exchange 

would have to comply with all relevant 

rules of the Exchange and the 

Commission in relation to reports and 

recordkeeping of transactions on the 

Nasdaq Bond Exchange, including Rules 

17a–3 and 17a–4 under the Act.46

Regulation 

The Exchange will leverage its 

existing infrastructure to operate a 

national securities exchange in 

compliance with Section 6 of the 

Exchange Act, and Section 6(b)(7) in 

particular,47 to regulate its nonconvertible bonds trading business and 

to enforce compliance with its Rules. 

Nasdaq’s existing disciplinary rules and 

processes, set forth in its Rule 8000 and 

9000 Series, will govern the discipline 

of Members that participate in corporate 

bond trading, just as it does for equities 

regulation, and Nasdaq will perform 

bond listing regulation as well as realtime surveillance of bond trading as it 

does today for equities. 

In particular, MarketWatch will 

perform real-time surveillance of the 

Nasdaq Bond Exchange for the purpose 

of maintaining a fair and orderly market 

at all times. As it does with Nasdaq’s 

equities trading, MarketWatch will 

monitor trading on the Nasdaq Bond 

Exchange market on a real-time basis to 

identify unusual trading patterns and 

determine whether particular trading 

activity requires further regulatory 

investigation. In addition, Nasdaq 

Regulation will oversee the process for 

determining and implementing trade 

halts and identifying and responding to 

unusual market conditions. 

System Information 

The Nasdaq Bond Exchange will 

operate out of the same data center in 

Carteret, New Jersey as does the Nasdaq 

Stock Market and other exchanges 

owned by Nasdaq, Inc., but it will use 

equipment that is separate from the 

equipment used by those exchanges. In 

addition, the Nasdaq Bond Exchange 

will have a backup data center that will 

be geographically diverse from the 

Carteret data center and that will be 

designed to resume operations of the 

Nasdaq Bond Exchange, in the event of 

a system failure, in accordance with the 

requirements of Regulation Systems 

Compliance and Integrity.48 The Nasdaq 

Bond Exchange will use Nasdaq’s 

flexible INET technology, which is 

easily scalable to higher volumes 

through the addition of more equipment 

in the data center. The Nasdaq Bond 

Exchange will be protected from 

unauthorized access through the same 

robust firewall protection already in use 

at Nasdaq, Inc.’s data centers. 

Applicability of Section 11(a) and (b) of 

the Act 

Section 11(a) of the Act 49 prohibits a 

member of a national securities 

exchange from effecting transactions on 

that exchange for its own account, the 

account of an associated person, or an 

account over which it or its associated 

person exercises investment discretion, 

unless an exception applies. This 

general prohibition would not impact 

trading on the Nasdaq Bond Exchange 

because Rule 11a1–4(T) under the Act 50

deems transactions in bonds on a 

national securities exchange for a 

member’s own account to be consistent 

with Section 11(a). Similarly, Section 

11(b) of the Act51 and Rule 11b–1 

thereunder,52 which pertain to 

specialists and market-makers, would 

not be implicated because there will be 

no specialists or market makers on the 

Nasdaq Bond Exchange. 

2. Statutory Basis 

Nasdaq believes that its proposal is 

consistent with Section 6(b) of the Act 53

in general, and furthers the objectives of 

Sections 6(b)(4), (b)(5), and (b)(7) of the 

Act,54 in particular. As discussed below, 

Nasdaq believes the proposal is 

consistent with Section 6(b)(4) of the 


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55 15 U.S.C. 78f(b)(4). 

56 15 U.S.C. 78f(b)(5). 

57 15 U.S.C. 78f(b)(7). 

58As noted above, Nasdaq proposes to amend 

Rule 5250(e)(3) to require an issuer to provide at 

least 10 calendar days advance notice to Nasdaq of 

certain corporate actions relating to non-convertible 

bonds listed on the Nasdaq Bond Exchange, 

including redemptions (full or partial calls), tender 

offers, changes in par value, and changes in 

identifier (e.g., CUSIP number or symbol), by filing 

the appropriate form as designated by Nasdaq. This 

proposal is consistent with the Act because it aid 

the Listings Qualification Department in assessing 

an issuer’s compliance with the continuing listing 

standards set forth in proposed Rule 5702. 

59Nasdaq is limiting this proposal to an issuer 

that is currently listing one class of an equity 

security on either Nasdaq, NYSE, or NYSE 

American. While the issuer may be required to 

make similar disclosures in connection with its 

listed equity security, Nasdaq may not receive such 

disclosures if the listing venue for that equity 

security is NYSE or NYSE American. As such, this 

proposal provides the Exchange with additional 

information related to listed companies that it may 

otherwise not possess. 

60Nasdaq notes that it presently waives entry fees 

for listing equity securities that transfer to Nasdaq 

from another national security exchange. See Rule 

5910(a)(7)(i) (Nasdaq Global and Global Select 

Markets); Rule 5920(a)(7)(i) (Nasdaq Capital 

Market); Rule 5940(a)(5)(i)(Exchange Traded 

Products). It also waives a portion of the annual fee 

for securities whose listings transfer from a national 

securities exchange to Nasdaq on an exclusive 

basis. See IM–5900–4. Nasdaq’s rationale for 

employing waivers in those instances is similar to 

that which Nasdaq asserts for its corporate bond 

listing programs. See, e.g., Securities Exchange Act 

Release No. 34–70418 (Sept. 16, 2013), 78 FR 57909 

(Sept. 20, 2013) (SR–NASDAQ–2013–115). 

61NYSE American charges an initial listing fee for 

bonds of $100 per $1 million principal amount (or 

fraction thereof) with a minimum fee of $5,000 and 

a maximum fee of $10,000. NYSE American also 

charges an annual fee of $5,000 for listed bonds and 

debentures of companies whose equity securities 

are not listed on NYSE American. See NYSE 

American Listed Company Guide Sections 140 and 

141. Meanwhile, NYSE charges an initial listing fee 

of $25,000 and an annual fee of $25,000 for listed 

debt of NYSE equity issuers and an initial listing 

fee of $45,000 and an annual listing fee of $45,000 

for listed debt of non-NYSE equity issuers. See 

Section 902.08 of the NYSE Listed Company 

Manual. 

Act 55 in that it provides for the 

equitable allocation of reasonable dues, 

fees, and other charges, and that it is 

consistent with Section 6(b)(5) of the 

Act 56 in that it is designed to promote 

just and equitable principles of trade, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest, and are not designed to 

permit unfair discrimination. Finally, 

the Exchange believes that the proposal 

is consistent with Section 6(b)(7) of the 

Act 57 in that it provides a fair procedure 

of discipline for those listing and 

trading non-convertible bonds on 

Nasdaq. 

Listing Rules 

The Exchange believes that its 

proposal to list non-convertible bonds 

will improve the quality of the public 

market for bonds by improving the 

transparency and the orderliness of the 

market. As discussed above, an issuer 

that lists bonds pursuant to this 

proposal will be required to disclose 

any material information that would 

reasonably be expected to affect the 

value of their securities or influence 

investors’ decisions, except in unusual 

circumstances.58 Through this 

requirement, Nasdaq will be able to 

evaluate such disclosure to determine if, 

among other things, a Bond Halt should 

be declared for that security.59 This 

proposal, in connection with Nasdaq’s 

proposal to trade such bonds, would 

also increase the amount of bondspecific information that would 

disclosed by issuers in fulfillment of the 

requirements of Section 12 of the Act. 

Nasdaq also believes that its proposed 

listing standards are consistent with the 

Act. Nasdaq notes that its proposed 

initial listing standards, set forth in Rule 

5702(a)—which require a minimum 

principal amount outstanding of the 

non-convertible bond or a market value 

of at least $5 million and the issuer of 

the non-convertible bond also having a 

class of equity listed on Nasdaq, NYSE, 

or NYSE American—are similar to the 

initial listing requirements for bonds 

listed on NYSE and NYSE American. 

Similarly, the continued listing 

requirement under Rule 5702(b)(1) that 

a non-convertible bond maintain a 

market value or principal amount of 

bonds outstanding of at least $400,000 

is similar to the listing requirement for 

bonds imposed by NYSE American. 

Nasdaq notes that, pursuant to Rule 

5702(b)(2), an issuer would also be 

required to meet its obligations on the 

listed non-convertible bonds, and that 

Nasdaq would initiate proceedings 

immediately under Rule 5810 

(Notification of Deficiency by the 

Listing Qualifications Department) if the 

issuer were unable to meet its 

obligations on its non-convertible 

bonds. Nasdaq believes that it is 

consistent with the Act to immediately 

institute immediate de-listing 

proceedings in this instance, rather than 

to first afford the issuer a time period 

during which it may regain compliance 

(i.e., the 180 calendar day period it 

proposes to provide when a bond fails 

to meet the quantitative requirements 

under Rule 5702(b)(1)) because a 

violation of a covenant, a default on 

interest payments, or another failure of 

an issuer to meet its obligations under 

a bond indenture, constitutes a breach 

of an issuer’s legal obligations to 

bondholders, and signals that a bond is 

not appropriate for continued listing on 

the Exchange. 

Nasdaq also believes that the change 

to the definition of a ‘‘substitution 

listing event’’ to include a change in the 

obligor of a listed non-convertible bond 

is consistent with the Act. Nasdaq is 

proposing to make this change to both 

convertible and non-convertible bonds, 

as both types of securities could 

potentially be subject to a change in the 

obligor of that bond, which Nasdaq 

believes should qualify as a substitution 

listing event. 

Likewise, it is consistent with the Act 

to amend Rule 5515(b)(4) to change 

existing references from the American 

Stock Exchange to NYSE American to 

ensure that our Rules regarding 

convertible debt are current and 

accurate with respect to the names of 

the exchanges they reference. 

Nasdaq believes that the proposed 

rule change is consistent with Section 

6(b)(4) in that it provides for the 

equitable allocation of reasonable dues, 

fees, and other charges among its 

members, issuers and other persons 

using its facilities. The proposed $5,000 

application fee and $5,000 annual fee 

will be equally applicable to any issuer 

seeking to list non-convertible bonds on 

Nasdaq, other than for those issuers that 

propose to switch their listings from 

NYSE or NYSE American to Nasdaq. 

Nasdaq’s proposal to waive the 

application fee and the first year’s 

annual fee for issuers that switch their 

listings to Nasdaq from NYSE or NYSE 

American is reasonable and equitable 

because such fees will otherwise serve 

as disincentives for issuers to switch 

their listings, particularly if they have 

already paid their annual fees to NYSE 

or NYSE American for the year in which 

a switch would otherwise occur.60 The 

waiver of the application fee is also 

equitable because it is Nasdaq’s 

experience that less work is required to 

process a listing application for a 

security that is already listed on another 

exchange than it is to process an 

application for listing a new security. 

The application and annual fees are also 

reasonable and equitable because they 

will support Nasdaq’s regulatory 

program to review and qualify debt 

issuances for listing. 

The proposed application and annual 

fees are competitive with the initial and 

annual fees that are currently assessed 

by NYSE and NYSE American for the 

listing of bonds.61

Nasdaq also notes that the proposed 

$5,000 initial listing fee is the same as 

the application fee it charges for 

convertible bonds. However, Nasdaq 

will not charge an entry fee (as it does 

for convertible bonds under the 


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62See Rule 5920(a)–(c). 

63See, e.g. NYSE American Listed Company 

Guide Sections 140 and 141 (NYSE American 

charges an initial listing fee for common stock that 

ranges from $50,000–$75,000 and an annual fee of 

between $40,000 and $50,000). 

64 15 U.S.C. 78f(b)(5). 65See n.60, supra. 

66See Securities Exchange Act Release No. 34– 

55496 (Mar. 20, 2007), 72 FR 14631 (Mar. 28, 2007). 

proposed amendment to Rule 

5920(a)(2)) because Nasdaq believes that 

the proposed application fee will allow 

the Exchange to adequately recoup its 

expenses incurred in processing an 

issuer’s application to list those bonds. 

Nasdaq proposes a flat $5,000 annual 

fee for non-convertible bonds in lieu of 

the variable annual fee that Nasdaq 

charges to issuers of convertible bonds 

($500 or $25 per million dollars face 

amount of debentures outstanding, 

whichever is greater, pursuant to Rule 

5920(c)(B)(2)) because the Exchange 

believes that issuers will prefer the 

simplicity and predictability of a flat 

fee. Moreover, the Exchange expects to 

list large issuances of non-convertible 

bonds, in which cases the annual fees 

for such bonds will be comparable to, if 

not lower than, the annual fees that 

Nasdaq charges for convertible bonds. 

These proposed listing fees for nonconvertible bonds are lower than 

Nasdaq’s initial and annual fees for 

equity securities, which range from 

$50,000—$75,000 for initial listing of 

equity securities, and from $32,000— 

$45,000 for annual listing of equity 

securities.62 Nasdaq competes for the 

listing of securities, including bonds, 

with NYSE and NYSE American, and 

the differential between its proposed 

listing fees for non-convertible bonds 

and its current listing fees for equity 

securities is similar to the differential 

for listing debt and equity securities on 

NYSE American.63

Nasdaq also believes that the 

proposed listing rules are consistent 

with Section 6(b)(5) of the Act 64 in that 

they serve the interests of the public and 

investors by facilitating competition in 

the market for listing corporate nonconvertible bonds. The proposed listing 

rules also are similar to those of NYSE 

and NYSE American, which the 

Commission has recognized as being 

equitable and adequately protective of 

the public interest. Furthermore, the 

Exchange believes that the proposed 

listing fees are equitable for the reasons 

set forth above. Meanwhile, the 

proposed waivers of application and 

first year annual fees for listings of nonconvertible bonds that switch to Nasdaq 

from NYSE or NYSE American are not 

unfairly discriminatory because, in 

absence of such waivers, issuers that 

have already paid such fees to list their 

bonds on another exchange would have 

a significant disincentive to switch their 

listing to Nasdaq as they would be 

required to pay twice for similar listing 

services. The proposed waiver of the 

application fee for bonds that switch to 

Nasdaq from another exchange is fair 

because it reflects the fact that less work 

is required by Nasdaq to process such 

applications than is required to process 

applications for newly-listed securities. 

Finally, as is discussed above, Nasdaq 

already employs similar fee waivers for 

listings of equity securities and 

exchange traded products.65

Finally, Nasdaq notes that it will 

apply the surveillance and enforcement 

infrastructure that it utilizes for listings 

on its other markets to ensure that 

issuers comply with initial and 

continuing listing requirements for nonconvertible corporate bonds and that the 

Exchange will take fair and appropriate 

action under the Nasdaq Rule 5800 

Series to address violations of those 

listing Rules. 

Trading Rules 

Nasdaq’s proposal to establish the 

Nasdaq Bond Exchange system to trade 

non-convertible corporate bonds listed 

on Nasdaq is also consistent with the 

Act. Nasdaq has designed the Nasdaq 

Bond Exchange to operate in accordance 

with the Act, the applicable rules of the 

Commission and of the Exchange, and 

the high standards that Nasdaq believes 

to be in evidence at all of Nasdaq, Inc.’s 

exchanges. The proposal will offer Users 

opportunities to trade non-convertible 

bonds through a fair, open, and wellregulated market. The proposal will 

promote the interests of the public and 

investors by providing for the entry into 

the marketplace of a new exchange 

venue for trading non-convertible 

corporate bonds. Such bonds presently 

are tradeable, other than on an over-thecounter basis, only on NYSE and NYSE 

American. The Nasdaq Bond Exchange 

will introduce competition into this 

space, and that competition will spur 

innovation, which in turn will benefit 

issuers, traders, and investors alike. 

The Nasdaq Bond Exchange is also 

designed to be a free, open, and fair 

marketplace. All Nasdaq Members will 

be eligible to become Users simply by 

electing to receive access. Moreover, 

Nasdaq proposes simple and 

straightforward rules to govern the 

operation of the Bond Exchange, 

including a familiar price-time 

allocation methodology, two basic order 

types, a single Bond Trading Session 

with no after-hours trading, and market 

data feed that will be disseminated, for 

free, to any member of the public that 

requests it and agrees to the Exchange’s 

terms and conditions of use. At the 

same time, the proposal will also 

include provisions that are endemic to 

orderly and well-regulated markets, 

including authority to impose trading 

halts and suspensions, in appropriate 

circumstances, and to unwind clearly 

erroneous trades pursuant to established 

procedures under Nasdaq Rule 11890 

and bond-specific criteria adapted from 

NYSE Rule 86. 

Nasdaq will also leverage the conduct 

rules, surveillance technology, and 

enforcement infrastructure that it 

utilizes with respect to its other markets 

to ensure that the Nasdaq Bond 

Exchange operates in a fair and orderly 

fashion and that Nasdaq prevents, 

detects, and addresses fraudulent and 

manipulative acts and practices. For 

example, Nasdaq’s MarketWatch 

Department will surveil the market and 

employ its SMARTS technology to 

detect suspicious or non-compliant 

behavior. Nasdaq’s existing disciplinary 

rules, as set forth in the Nasdaq Rule 

8000 and 9000 Series, will apply to 

Users of the Nasdaq Bond Exchange, 

and Nasdaq’s Regulation Department 

will, pursuant to these disciplinary 

rules, investigate and take fair and 

appropriate enforcement action to 

address violations of rules relevant to 

trading on the Nasdaq Bond Exchange 

or the conduct of Users. 

Moreover, the proposal provides for 

the equitable allocation of reasonable 

dues, fees, and other charges among its 

members, issuers and other persons 

using its facilities. Nasdaq will charge 

no fees to trade non-convertible bonds 

on the Nasdaq Bond Exchange, to obtain 

the FIX ports that are necessary to 

connect to the Nasdaq Bond Market, or 

to receive the Nasdaq Corporates 

Totalview data feed product. 

Additionally, to the extent that a User 

already purchases physical connectivity 

to Nasdaq pursuant to General 8, 

Sections 1 and 2 of the Nasdaq Rules, 

such a User could utilize its existing 

connectivity to connect to the Bond 

Exchange without any incurring 

additional fees to do so. 

Finally, Nasdaq notes that it has 

designed the Nasdaq Bond Exchange 

system to facilitate transactions in 

corporate bonds in a manner that is 

similar to, and competitive with, the 

existing NYSE Bonds trading system. 

The Commission has already deemed 

the design of NYSE Bonds to be 

consistent with the Act.66 Indeed, much 

of the language in proposed Rule 4000B, 

which will govern the Nasdaq Bond 

Exchange, is adapted from NYSE Rule 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 173 / Thursday, September 6, 2018 / Notices 45297 

67See n.11, supra. 68 17 CFR 200.30–3(a)(12). 

86, which governs NYSE Bonds. That is, 

like NYSE Bonds, the Nasdaq Bond 

Exchange will be an electronic system 

for receiving, processing, executing, and 

reporting bids, offers and executions in 

bonds. Like NYSE Bonds, the Nasdaq 

Bond Exchange will display, match and 

execute buy and sell orders on a price/ 

time basis. The Exchange, like NYSE, 

will also accept good-for-day limit 

orders and kill-or-fill orders, and it will 

trade bonds of issuers that have at least 

one class of equity securities listed on 

Nasdaq, NYSE, or NYSE American.67

To the extent that the Nasdaq Bond 

Exchange will differ from NYSE Bonds, 

these differences will render the Nasdaq 

Bond Exchange simpler than NYSE 

Bonds. At its inception, the Nasdaq 

Bond Exchange will not have—as does 

NYSE Bonds—market makers, 

sponsored access, auctions, price 

collars, or certain order types (e.g., 

reserve orders, minimum quantity 

orders, good-til-cancelled orders, and 

timed orders). The Nasdaq Bond 

Exchange also will have only one 

trading session each day as opposed to 

NYSE Bonds, which has three sessions. 

Although the Nasdaq Bond Exchange 

will initially lack these features of NYSE 

Bonds, Nasdaq believes that the 

platform nevertheless will have the 

features it needs to compete effectively 

with NYSE Bonds. The Exchange 

observes that Users of NYSE Bonds do 

not appear to avail themselves of many 

of its features and functionalities, such 

that the Exchange does not believe that 

the Nasdaq Bond Exchange needs these 

features and functionalities to compete 

with NYSE Bonds. In any event, the 

Exchange is committed to adding new 

features to the Nasdaq Bond Exchange 

in the future to the extent that Nasdaq 

determines that a demand exists for 

those features and that adding them will 

help the Nasdaq Bond Exchange 

compete successfully in the 

marketplace. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. Rather, the 

proposed rule change will promote 

competition among exchanges by 

allowing Nasdaq to list and trade nonconvertible bonds, which can currently 

be listed only on NYSE and NYSE 

American. The proposals will have the 

pro-competitive effect of spurring 

further initiative and innovation among 

market centers and market participants. 

Nasdaq notes that its proposed listing 

standards are consistent with the 

standards for initial and continued 

listing of bonds on NYSE and NYSE 

American. If issuers are unsatisfied with 

Nasdaq’s listing program or the fees 

charged for that program, these issuers 

can choose to list on these other 

markets. 

Likewise, the Exchange notes that its 

proposed system for trading nonconvertible bonds listed on Nasdaq—the 

Nasdaq Bond Exchange—will be 

competitive with NYSE Bonds. 

Although initially, the Nasdaq Bond 

Exchange will have more limited 

functionality than does NYSE Bonds, 

including with respect to order types, 

auctions, the number of trading 

sessions, and the use of market makers, 

the Exchange believes that the Nasdaq 

Bond Exchange will be competitive with 

NYSE Bonds because the Exchange has 

incorporated into the Nasdaq Bond 

Exchange those features of NYSE Bonds 

that its Users actually want and need 

when trading bonds and it excluded 

those they do not actually utilize. That 

said, the Exchange will add additional 

functionality and features to the Nasdaq 

Bond Exchange as demand warrants it 

to do so and to the extent that the 

Exchange deems it necessary to remain 

competitive with NYSE Bonds. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

shall: (a) By order approve or 

disapprove such proposed rule change, 

or (b) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2018–070 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2018–070. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of 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. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2018–070 and 

should be submitted on or before 

September 27, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.68

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–19239 Filed 9–5–18; 8:45 am] 

BILLING CODE 8011–01–P 


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