Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices 62779

6 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter to Jack Drogin, Senior Special

Counsel, Division of Market Regulation

(‘‘Division’’), Commission, from Robert E. Aber,

Senior Vice President and General Counsel, Nasdaq,

dated April 7, 2000 (‘‘Amendment No. 1’’).

Amendment No. 1 clarifies that the proposed time

frame for gaining compliance with the continued

inclusion market capitalization standards applies to

issuers listed on both The Nasdaq SmallCap Market

and the Nasdaq National Market. In addition,

Amendment No. 1 clarifies that the method for

regaining compliance with the continued inclusion

requirement for the number of market makers set

forth in Rule 4310(c)(8)(A) applies to issuers listed

on both The Nasdaq SmallCap Market and the

Nasdaq National Market. Finally, Amendment No.

1 makes certain technical corrections to the

proposed rule change.

4See Letter to Jack Drogin, Senior Special

Counsel, Division, Commission, from Robert E.

Aber, Senior Vice President and General Counsel,

Nasdaq, dated April 25, 2000 (‘‘Amendment No.

2’’). Amendment No. 2 clarifies that Rule

4310(c)(8)(C) is being amended to specify time

frames for determining when an issuer is noncompliant or has regained compliance with the

Association’s market capitalization standards.

Amendment No. 2 also clarifies that the NASD’s

Rule 4300 series contains the qualification

requirements for all securities included in The

Nasdaq Stock Market while the Rule 4400 Series

sets forth additional requirements for those

securities designated for the Nasdaq National

Market.

5Securities Exchange Act Release No. 42876 (May

31, 2000), 65 FR 36198.

6See Letter to Jack Drogin, Senior Special

Counsel, Division, Commission, from John

Nachman, Nasdaq, dated October 4, 2000

(‘‘Amendment No. 3’’). Amendment No. 3

withdraws proposed Rule 4200(a)(20), which

defines market capitalization, and renumbers the

remaining provisions of Rule 4200(a) accordingly.

7Although the time frames regarding compliance

with the continued inclusion market capitalization

standards are proposed to be set forth only in Rule

4310(c)(8)(A), these time frames, like those for the

minimum bid price and market value of public

float, are applicable to issuers listed on both The

Continued

impediments to a free and open market

and to protect investors and the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose any

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve 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 is

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549–0609. 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 inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the CBOE. All

submissions should refer to File No.

SR–CBOE–00–21 and should be

submitted by November 9, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26804 Filed 10–18–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43435; File No. JR–NASA–

99–69]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change and

Notice of Filing and Order Granting

Accelerated Approval of Amendment

No. 3 Thereto by the National

Association of Securities Dealers, Inc.

Amending Certain Listing Standards of

the Nasdaq Stock Market, Inc.

October 11, 2000.

I. Introduction

On November 22, 1999, the National

Association of Securities Dealers, Inc.

(‘‘NASA’’ or ‘‘Association’’), through its

wholly owned subsidiary, The Nasdaq

Stock Market, Inc. (‘‘Nasdaq’’),

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘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

amending certain Nasdaq listing

standards. The Association submitted

Amendments No. 1 3 and No. 2 4 to the

proposed rule change on April 10, 2000,

and April 27, 2000, respectively. The

proposed rule change was published in

the Federal Register for comment on

June 7, 2000.5 The Association

submitted Amendment No. 3 to the

proposed rule change on October 5,

2000.6 This order approves the

proposed rule change, as amended by

Amendments No. 1 and 2, and grants

accelerated approval to Amendment No.

3.

II. Description of the Proposed Rule

Change

Nasdaq is proposing to amend its

listing standards to: (1) Codify the time

frames for determining compliance with

the continued inclusion requirements

for market capitalization and number of

market makers; (2) clarify the need for

shareholder approval for a transaction

in which the potential issuance of

shares could exceed the applicable

threshold; (3) codify the method used to

determine whether an American

Depository Receipt complies with the

listing standards; (4) clarify that rights

are subject to initial inclusion

standards; (5) clarify that the publicly

held shares, market value of publicly

held shares, and bid price initial

inclusion requirements do not apply to

rights and warrants to be listed on the

Nasdaq National Market.

Compliance With the Continued

Inclusion Requirements for Market

Capitalization and Number of Market

Makers

Rules 4310(c)(2)(B)(ii) and

4450(b)(1)(A) set forth the market

capitalization standards for continued

inclusion on The Nasdaq SmallCap

Market and the Nasdaq National Market,

respectively. These rules, however,

unlike the bid price requirement, do not

provide time frames for determining

when an issuer is non-complaint or

when it has regained compliance with

these standards. Accordingly, Nasdaq

proposes to amend Rule 4310(c)(8)(C) 7

62780 Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices

Nasdaq SmallCap Market and the Nasdaq National

Market. See Amendments No. 1 and 2, supra notes

3 and 4.

8Although this proposed rule, like the minimum

bid price requirement, states that compliance may

be regained by meeting the applicable standard for

a minimum of ten consecutive business days,

issuers are also required to demonstrate more than

mere temporary compliance in order to protect the

interests of prospective investors. See, e.g., RyanMurphy, Inc., Securities Exchange Act Rel. No.

38999 (Sept. 2, 1997).

9Although the method of regaining compliance

with the continued inclusion requirement for the

number of market makers is proposed to be set forth

only in Rule 4310(c)(8)(A), the method for regaining

compliance is applicable to issuers listed on both

The Nasdaq SmallCap Market and the Nasdaq

National Market. See Amendments No. 1 and 2,

supra notes 3 and 4.

10 Issuers, however, must continue to comply

with the requirement that there be at least 450,000

warrants outstanding immediately after the public

distribution as set forth in existing NASD Rule

4420(d)(1). This rule is also being amended to

clarify existing Nasdaq policy that there must be

450,000 rights outstanding immediately after the

public distribution.

11 15 U.S.C. 78o–3.

12 15 U.S.C. 78o–3(b)(6).

13 In approving this rule change, the Commission

has considered the proposal’s impact on efficiency,

competition, and capital formation. 15 U.S.C. 78c(f).

to clarify that a failure to meet the

market capitalization continued

inclusion requirement shall result if the

deficiency continues for a period of ten

consecutive business days and that

compliance may be regained by meeting

the applicable standard for a minimum

of ten consecutive business days.8

Rule 4310(c)(8)(A) provides that an

issuer that fails to meet the continued

inclusion requirements for the number

of market makers has 30 calendar days

to regain compliance. The rule,

however, does not indicate how the

issuer can regain compliance.

Consequently, Nasdaq proposes to

amend this rule to provide that

compliance is achieved by meeting the

applicable standard for a minimum of

ten consecutive business days, which is

similar to the method for determining

compliance with the bid price

requirement.9

Shareholder Approval for the Potential

Issuance of Shares

Rules 4310(c)(25)(i)(b) and (d),

4320(e)(21)(G)(i)(b) and (d), and

4460(i)(1)(B) and (D) refer only to the

issuance of shares in conjunction with

the requirement for shareholder

approval, while Rules

4310(c)(25)(H)(i)(c)(2),

4320(e)(21)(H)(i)(c)(2), and

4460(i)(1)(C)(ii), require shareholder

approval based on the present or

potential issuance of shares.

Nevertheless, Nasdaq has stated that it

has consistently interpreted the former

shareholder approval rules as including

potential issuances in order to protect

shareholders’ right to vote on significant

corporate transactions. The proposed

rule changes would therefore conform

the language of these rules to clarify that

shareholder approval is required based

on the present or potential issuance of

shares.

Changes to Reflect the Underlying

Security for ADRs

Historically, Nasdaq states that it has

looked to the underlying security of an

American Depositary Receipt (‘‘ADR’’)

for determining compliance with certain

standards (e.g., round lot shareholders,

number of shares in the public float,

market value of public float, and market

capitalization). According to Nasdaq,

Rule 4320 provides the initial and

continued listing standards for ADRs,

but does not make clear whether the

underlying security should be

considered when determining whether

these standards have been met. The

proposed rule change would clarify that

the underlying security should be

considered when determining

compliance in the case of ADRs. In

addition, the proposed rule change

would clarify the continued inclusion

time frame requirements for ADRs for

market capitalization purposes.

Rights and Warrants

Rule 4420(d)(1) does not currently

reference the initial listing of rights on

the Nasdaq National Market. This Rule

also states that warrants to purchase

designated securities may be listed on

the Nasdaq National Market provided

that they substantially meet the initial

inclusion requirements applicable to

common stock. Consistent with the

industry practices for pricing this type

of security, Nasdaq states that it has not

historically required issuers to satisfy

the publicly held shares, market value

of publicly held shares, or bid price

initial inclusion standards. As such,

Nasdaq proposes to amend this rule to

clarify that the initial inclusion rules

apply to rights as well as warrants and

that issuers are not required to satisfy

the publicly held shares, market value

of publicly held shares, or bid price

initial inclusion standards with respect

to rights or warrants.10

III. Discussion

The Commission finds that the

proposed rule change is consistent with

section 15A of the Act 11 and the rules

and regulations applicable to a national

securities association. In particular, the

Commission finds the proposed rule

change is consistent with section

15A(b)(6) of the Act, 12 which requires

the rules of an association to be

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.13

Preliminarily, the Commission notes

that the development and enforcement

of adequate standards governing the

listing of securities on an exchange is of

critical importance to our financial

markets and to the investing public.

Listing standards serve as a means for a

self-regulatory organization to screen

issuers and to provide listed status only

to bona fide companies with, among

other things, substantial float, investor

base and trading interest to ensure

sufficient liquidity for fair and orderly

markets. Additionally, the development

and adherence to listing maintenance

standards are equally as important.

Once an issuer has been approved for

listing, ongoing monitoring of the status

and trading characteristics of that issuer

ensures that standards for trading depth

and liquidity are continually met, again

to the benefit of the investing public.

Finally, the Commission notes that

initial listing and maintenance

standards that are not sufficiently clear

may not benefit issuers, the public

interest, or our capital markets and

indeed may impede a free and open

market. Therefore, the Commission

believes that the proposed rule change

will promote the purposes of the Act by

explicitly codifying and clarifying

certain provisions of Nasdaq’s listing

and maintenance standards.

Compliance With the Continued

Inclusion Requirements for Market

Capitalization and Number of Market

Makers

The Commission finds that setting

forth the specific time frames for

determining noncompliance and

regaining compliance with Nasdaq’s

continued inclusion standards relating

to the number of market makers and

market capitalization removes

impediments to and perfect the

mechanism of a free and open market.

As currently stated, the continued

inclusion standards related to the

number of market makers only discusses

the time frame for determining when a

failure to meet the standards exists;

reference to time frames for determining

subsequent compliance by the issuer is

missing. Similarly, the continued

inclusion standards related to market

Federal Register / Vol. 65, No. 203 / Thursday, October 19, 2000 / Notices 62781

14See Nasdaq Rule 4450(d).

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

16 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

capitalization set forth neither the time

frames for determining non-compliance

nor compliance. Thus, the proposed

rule change provides additional

information that is critical to the

determination of an issuer’s continuing

compliance with the standards relating

to the number of market makers and

market capitalization should an issuer

fail to comply with either category.

Shareholder Approval for the Potential

Issuance of Shares

Making clear that shareholder

approval is required in the case of actual

or potential issuance of shares promotes

just and equitable principles of trade,

and removes an impediment to and

perfects the mechanism of a free and

open market and a national market

system. The Commission notes that

Nasdaq has consistently interpreted the

shareholder approval rules to include

the potential issuance of shares and

therefore the proposed rule change

explicitly codifies accepted practice.

Additionally, the Commission finds that

requiring shareholder approval for the

potential issuance of shares protects a

shareholder’s ability to vote on a

significant corporate transaction that

might affect the rights of the voting

shareholder.

Changes to Reflect the Underlying

Security for ADRs

The proposed rule change relating to

the requirement that the underlying

security be considered in determining

compliance with initial or continued

listing standards is appropriate because

Nasdaq has consistently looked to the

security underlying an ADR in other

contexts involving ADRs (e.g.,

determining round lot shareholders,

number of shares in the public float,

market value of public float, and market

capitalization). Thus, the proposed rule

change removes an impediment to and

perfects the mechanism of a free and

open market by conforming the analysis

of whether an ADR meets the initial or

continued listing standards to other

situations involving ADRs, and

explicitly making clear that Nasdaq

should consider the security underlying

the ADR. The proposed rule change also

protects the mechanism of a free and

open market by explicitly stating the

continued listing requirement time

frames for ADRs.

Rights and Warrants

Finally, the Commission believes that

the proposed rule change clarifying that

rights as well as warrants are subject to

the initial listing standards of Nasdaq

Rule 4420(d)(1) will protect investors

and the public interest. The

Commission notes that the continued

listing standards address both rights and

warrants,14 and thus the proposed rule

change rightly conforms the initial

listing standards to the continued listing

standards. Furthermore, the

Commission finds that clarifying that

rights and warrants need not meet the

publicly held shares, market value of

publicly held shares, or bid price initial

listing standards is in the public interest

because Nasdaq has represented that

industry practices for pricing rights and

warrants are such that Nasdaq has not

historically required issuers to satisfy

these requirements. Thus, the proposed

rule change clarifies that these

standards are not applicable to rights

and warrants. Furthermore, the

Commission notes that rights and

warrants will be to satisfy all other

initial inclusion requirements before

they can be listed on Nasdaq, which

should help to ensure that only bona

fide companies with substantial float,

investor base, and trading interest list

rights and warrants on Nasdaq.

Accelerated Approval of Amendment

No. 3

The Commission believes that it is

consistent with the protection of

investors and the public interest and

therefore finds good cause for approving

Amendment No. 3 to proposed rule

change prior to the thirtieth day after

the date of publication of notice thereof

in the Federal Register. Amendment

No. 3 merely withdraws the portion of

the proposed rule change that defines

market capitalization to enable Nasdaq

to more carefully consider how it wants

to define the term without delaying

approval of the remaining provisions of

the proposed rule change.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning Amendment No.

3, including whether the amendment is

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549–0609. Copies of the submissions,

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 inspection and copying at

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to the File No.

SR–NASD–99–69 and should be

submitted by November 9, 2000.

V. Conclusion

For the foregoing reasons, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and the rules

and regulations thereunder.

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,15 that the

amended proposed rule change (SR–

NASD–99–69) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Jonathan G. Katz,

Secretary.

[FR Doc. 00–26803 Filed 10–18–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43429; File No. SR–NYSE–

00–42]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by New York

Stock Exchange, Inc. Extending the

Pilot Fee Structure Governing the

Reimbursement of Member

Organizations for Costs Incurred in the

Transmission of Proxy and Other

Shareholder Communications

Materials

October 10, 2000.

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

Securities Exchange Act of 1934

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

thereunder,2 notice is hereby given that

on October 10, 2000, the New York

Stock Exchange, Inc. (‘‘Exchange’’ or

‘‘NYSE’’) filed with the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) the proposed rule

change as described in Items I, II, and

III below, which Items have been

prepared by the NYSE. The Commission

is publishing this notice to solicit

comments on the proposed rule change

from interested persons.