11780 Federal Register / Vol. 87, No. 41 / Wednesday, March 2, 2022 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 92256 

(June 24, 2021), 86 FR 34815 (June 30, 2021) 

(‘‘Notice’’). Comments received on the proposal are 

available on the Commission’s website at: https:// 

www.sec.gov/comments/sr-nasdaq-2021-045/ 

srnasdaq2021045.htm. 

5 15 U.S.C. 78s(b)(2). 

6See Securities Exchange Act Release No. 92649, 

86 FR 46295 (August 18, 2021). The Commission 

designated September 28, 2021, as the date by 

which it should approve, disapprove, or institute 

proceedings to determine whether to disapprove the 

proposed rule change. 

7 15 U.S.C. 78s(b)(2)(B). 

8See Securities Exchange Act Release No. 93119 

(September 24, 2021), 86 FR 54262 (September 30, 

2021) (‘‘OIP’’). 

9See Securities Exchange Act Release No. 93830, 

86 FR 73071 (December 23, 2021). 

10On December 21, 2021, Nasdaq submitted 

Amendment No. 1, which was subsequently 

withdrawn. 

11See Securities Exchange Act Release No. 93924 

(January 6, 2022), 87 FR 1797 (January 12, 2022) 

(‘‘Amended Notice’’). 

12The reference to a registration statement refers 

to a registration statement effective under the 

Securities Act of 1933 (‘‘Securities Act’’). 

13A Direct Listing with a Capital Raise includes 

listings where either: (i) Only the company itself is 

For the Commission, by the Office of 

Municipal Securities, pursuant to delegated 

authority.1

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2022–04331 Filed 3–1–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–61, OMB Control No. 

3235–0073] 

Proposed Collection; Comment 

Request 

Upon Written Request Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Form S–3 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.), the Securities 

and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the collection of information 

summarized below. The Commission 

plans to submit this existing collection 

of information to the Office of 

Management and Budget for extension 

and approval. 

Form S–3 (17 CFR 239.13) is a short 

form registration statement used by 

domestic issuers to register a public 

offering of their securities under the 

Securities Act of 1933 (15 U.S.C. 77a et 

seq.). Form S–3 takes approximately 

466.4566 hours per response and is filed 

by approximately 1,651 issuers 

annually. We estimate that 25% of the 

466.4566 hours per response (116.6141 

hours) is prepared by the issuer for a 

total annual reporting burden of 192,530 

hours (116.6141 hours per response × 

1,651 responses). 

Written comments are invited on: (a) 

Whether this proposed collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

(b) the accuracy of the agency’s estimate 

of the burden imposed by the collection 

of information; (c) ways to enhance the 

quality, utility, and clarity of the 

information collected; and (d) ways to 

minimize the burden of the collection of 

information on respondents, including 

through the use of automated collection 

techniques or other forms of information 

technology. Consideration will be given 

to comments and suggestions submitted 

in writing within 60 days of this 

publication by May 2, 2022. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. 

Please direct your written comment to 

David Bottom, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o John 

Pezzullo, 100 F Street NE, Washington, 

DC 20549 or send an email to: PRA_

Mailbox@sec.gov. 

Dated: February 25, 2022. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2022–04387 Filed 3–1–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94311; File No. SR– 

NASDAQ–2021–045] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Order 

Disapproving a Proposed Rule 

Change, as Modified by Amendment 

No. 2, To Modify Certain Pricing 

Limitations for Companies Listing in 

Connection With a Direct Listing 

Primary Offering 

February 24, 2022 

On June 11, 2021, The Nasdaq Stock 

Market LLC (‘‘Nasdaq’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Exchange Act’’) 2 and Rule 

19b–4 thereunder,3 a proposed rule 

change to modify certain pricing 

limitations for companies listing in 

connection with a direct listing primary 

offering in which the company will sell 

shares itself in the opening auction on 

the first day of trading on the Exchange. 

The proposed rule change was 

published for comment in the Federal 

Register on June 30, 2021.4 On August 

12, 2021, pursuant to Section 19(b)(2) of 

the Exchange Act,5 the Commission 

designated a longer period within which 

to either approve or disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.6

On September 24, 2021, the 

Commission instituted proceedings 

under Section 19(b)(2)(B) of the 

Exchange Act 7 to determine whether to 

approve or disapprove the proposed 

rule change.8

On December 20, 2021, the 

Commission extended the time period 

for approving or disapproving the 

proposal to February 25, 2022.9 On 

December 22, 2021, the Exchange filed 

Amendment No. 2 to the proposed rule 

change, which superseded the proposed 

rule change as originally filed.10

Amendment No. 2 was published for 

comment in the Federal Register on 

January 12, 2022.11

This order disapproves the proposed 

rule change, as modified by Amendment 

No. 2, because, as discussed below, 

Nasdaq has not met its burden under the 

Exchange Act and the Commission’s 

Rules of Practice to demonstrate that its 

proposal is consistent with the 

requirements of Exchange Act Section 

6(b)(5), and, in particular, the 

requirement that the rules of a national 

securities exchange be designed to 

prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade, and 

protect investors and the public interest. 

I. Description of the Proposal, as 

Modified by Amendment No. 2 

Nasdaq Listing Rule IM–5315–2 

provides listing requirements for 

Nasdaq’s Global Select Market for a 

company that has not previously had its 

common equity securities registered 

under the Exchange Act to list its 

common equity securities on the 

Exchange at the time of effectiveness of 

a registration statement 12 pursuant to 

which the company will sell shares 

itself in the opening auction on the first 

day of trading on the Exchange (a 

‘‘Direct Listing with a Capital Raise’’).13


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selling shares in the opening auction on the first 

day of trading; or (ii) the company is selling shares 

and selling shareholders may also sell shares in 

such opening auction. See Nasdaq Listing Rule IM– 

5315–2. See also Securities Exchange Act Release 

No. 91947 (May 19, 2021), 86 FR 28169 (May 25, 

2021) (order approving rules to permit a Direct 

Listing with a Capital Raise and adopting related 

rules concerning how the opening transaction for 

such listing will be effected) (‘‘2021 Order’’). The 

Exchange’s rules provide for a company listing 

pursuant to a Direct Listing with a Capital Raise to 

list only on the Nasdaq Global Select Market. 

14See Nasdaq Listing Rule IM–5315–2. ‘‘Nasdaq 

Halt Cross’’ means the process for determining the 

price at which Eligible Interest shall be executed at 

the open of trading for a halted security and for 

executing that Eligible Interest. See Nasdaq Rule 

4753(a)(4). ‘‘Eligible Interest’’ means any quotation 

or any order that has been entered into the system 

and designated with a time-in-force that would 

allow the order to be in force at the time of the 

Nasdaq Halt Cross. See Nasdaq Rule 4753(a)(5). 

Pursuant to Nasdaq Rule 4120, the Exchange will 

halt trading in a security that is the subject of an 

initial public offering (or direct listing), and 

terminate that halt when the Exchange releases the 

security for trading upon certain conditions being 

met, as discussed further below. See Nasdaq Rule 

4120(a)(7) and (c)(8). 

15The Exchange states that references in the 

proposal to the price range established by the issuer 

in its effective registration statement refer to the 

price range disclosed in the prospectus in such 

effective registration statement. See Amended 

Notice, supra note 11, 87 FR at 1799 n.14. 

Throughout this order, we refer to this as the 

‘‘disclosed price range.’’ 

16See proposed Nasdaq Rule 4120(c)(9)(B)(vii)c. 

See also Amended Notice, supra note 11, 87 FR at 

1799. 

17See proposed Nasdaq Rule 4120(c)(9)(B)(vii)c.3. 

18See Nasdaq Rule 4120(c)(9)(B). 

19A ‘‘Company Direct Listing Order’’ or ‘‘CDL 

Order’’ is a market order that may be entered only 

on behalf of the issuer and may be executed only 

in the Nasdaq Halt Cross for a Direct Listing with 

a Capital Raise. The CDL Order is entered without 

a price (with a price later set in accordance with 

the requirements of Nasdaq Rule 4120(c)(9)(B)), 

must be for the quantity of shares offered by the 

issuer as disclosed in its effective registration 

statement, must be executed in full in the Nasdaq 

Halt Cross, and may not be canceled or modified. 

See Nasdaq Rule 4702(b)(16). 

20See Amended Notice, supra note 11, 87 FR at 

1799. The Exchange represents that in such event, 

because the Nasdaq Halt Cross cannot be 

conducted, the Exchange would postpone and 

reschedule the offering and notify participants via 

a Trader Update that the Direct Listing with a 

Capital Raise scheduled for that date has been 

cancelled and any orders for that security that have 

been entered on the Exchange would be cancelled 

back to the entering firms. See id. 

21See id. The Exchange states that a Direct Listing 

with a Capital Raise could maximize the chances 

of more efficient price discovery of the initial 

public sale of securities for issuers and investors, 

because, unlike in a traditional firm commitment 

underwritten public offering (‘‘IPO’’), the initial sale 

price is determined based on market interest and 

the matching of buy and sell orders in an auction 

open to all market participants. See id. 

22See id. at 1800. The Exchange states that if an 

offering cannot be completed due to lack of investor 

interest, there is likely to be a substantial amount 

of negative publicity for the company and the 

offering may be delayed or cancelled. See id. 

23See id. 

24See id. 

25See id. 

26See id. 

Securities qualified for listing under 

Nasdaq Listing Rule IM–5315–2 must 

begin trading on the Exchange following 

the initial pricing through the 

mechanism outlined in Nasdaq Rule 

4120(c)(9) and Nasdaq Rule 4753 for the 

opening auction, otherwise known as 

the Nasdaq Halt Cross.14 Currently, in 

the case of a Direct Listing with a 

Capital Raise, the Exchange will release 

the security for trading on the first day 

of listing if, among other things, the 

actual price calculated by the Nasdaq 

Halt Cross is at or above the lowest price 

and at or below the highest price of the 

price range established by the issuer in 

its effective registration statement 15 (the 

‘‘Pricing Range Limitation’’). The 

Exchange has proposed to modify the 

Pricing Range Limitation to provide that 

the Exchange would release the security 

for trading if (a) the actual price 

calculated by the Nasdaq Halt Cross is 

at or above the price that is 20% below 

the lowest price, and at or below the 

price that is 20% above the highest 

price, of the disclosed price range; or (b) 

the actual price calculated by the 

Nasdaq Halt Cross is at a price above the 

price that is 20% above the highest 

price of such price range, provided that, 

among other things, the company has 

publicly disclosed and certified to the 

Exchange that the company’s 

registration statement contains a 

sensitivity analysis explaining how the 

company’s plans would change if the 

actual proceeds from the offering exceed 

the amount assumed in such price range 

and that the company does not expect 

that such price would materially change 

the company’s previous disclosure in its 

effective registration statement.16 The 

Exchange would calculate the 20% 

threshold based on the maximum 

offering price set forth in the registration 

fee table in the company’s effective 

registration statement, which the 

Exchange argues is consistent with the 

Instruction to paragraph (a) of Securities 

Act Rule 430A.17 The Exchange has also 

proposed to make related conforming 

changes. 

Currently Nasdaq Rule 4120(c)(9)(B) 

states that, notwithstanding the 

provisions of Nasdaq Rule 4120(c)(8)(A) 

and (c)(9)(A), in the case of a Direct 

Listing with a Capital Raise, for 

purposes of releasing securities for 

trading on the first day of listing, the 

Exchange, in consultation with the 

financial advisor to the issuer, will 

make the determination of whether the 

security is ready to trade. The Exchange 

will release the security for trading if: (i) 

All market orders will be executed in 

the Nasdaq Halt Cross; and (ii) the 

actual price calculated by the Nasdaq 

Halt Cross complies with the Pricing 

Range Limitation. The Exchange will 

postpone and reschedule the offering 

only if either or both of such conditions 

are not met.18 The Exchange states that 

if there is insufficient buy interest to 

satisfy the CDL Order 19 and all other 

market orders, as required by the 

current rule, or if the actual price 

calculated by the Nasdaq Halt Cross is 

outside the disclosed price range, the 

Nasdaq Halt Cross would not proceed 

and such security would not begin 

trading.20

According to the Exchange, based on 

conversations it has had with 

companies and their advisors, the 

Exchange believes that some companies 

may be reluctant to use the existing 

rules for a Direct Listing with a Capital 

Raise because of concerns about the 

Pricing Range Limitation.21 The 

Exchange states that the Pricing Range 

Limitation imposed on a Direct Listing 

with a Capital Raise (but not on a 

traditional IPO) increases the 

probability of a failed offering, because 

the offering cannot proceed without 

some delay not only due to lack of 

investor interest, but also if investor 

interest is greater than the company and 

its advisors anticipated.22 According to 

the Exchange, the Exchange believes 

that there may be instances of offerings 

where the price determined by the 

Exchange’s opening auction will exceed 

the highest price of the price range 

disclosed in the company’s effective 

registration statement.23 The Exchange 

states that, under the existing rule, a 

security subject to a Direct Listing with 

a Capital Raise cannot be released for 

trading by the Exchange if the actual 

price calculated by the Nasdaq Halt 

Cross is above the highest price of the 

disclosed price range.24 The Exchange 

further states that, in this case, the 

Exchange would have to cancel or 

postpone the offering until the company 

amends its effective registration 

statement, and that, at a minimum, such 

a delay exposes the company to market 

risk of changing investor sentiment in 

the event of an adverse market event.25

In addition, the Exchange states that the 

determination of the public offering 

price of a traditional IPO is not subject 

to limitations similar to the Pricing 

Range Limitation for a Direct Listing 

with a Capital Raise, which, in the 

Exchange’s view, could make 

companies reluctant to use this 

alternative method of going public 

despite its expected potential benefits.26

The Exchange has proposed to modify 

the Pricing Range Limitation such that 

even if the actual price calculated by the 


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27See id. See also infra notes 31 and 33 and 

accompanying text. 

28See Nasdaq Rule 4120(c)(7)(A) and proposed 

Nasdaq Rule 4120(c)(9)(B)(iii)–(v) for a description 

of the ‘‘Display Only Period.’’ 

29See Amended Notice, supra note 11, 87 FR at 

1800; proposed Nasdaq Rule 4120(c)(9)(B)(vii)c.2. 

30See Amended Notice, supra note 11, 87 FR at 

1800. 

31See id. The Exchange states that Securities Act 

Rule 457 permits issuers to register securities either 

by specifying the quantity of shares registered, 

pursuant to Rule 457(a), or the proposed maximum 

aggregate offering amount, and the Exchange 

proposes to require that companies selling shares 

through a Direct Listing with a Capital Raise will 

register securities by specifying the quantity of 

shares registered and not a maximum offering 

amount. See id. at 1800 n.20. The Exchange also 

states that the Exchange believes that the proposed 

modification of the Pricing Range Limitation is 

consistent with the protection of investors, because, 

according to the Exchange, this approach is similar 

to the pricing of an IPO where an issuer is permitted 

to price outside of the disclosed price range in 

accordance with the SEC Staff’s guidance. See id. 

at 1802. 

32See id. at 1800. 

33See id. 

34See id. 

35See id. 

36See id. See Nasdaq Rule 4753(a)(3) for a 

description of the ‘‘Current Reference Price’’ and 

Nasdaq Rule 4120(c)(8)(A) and proposed Nasdaq 

Rule 4120(c)(9)(B)(v)–(vii) for a description of the 

‘‘Pre-Launch Period.’’ 

37See Amended Notice, supra note 11, 87 FR at 

1800–01. 

38See id. at 1801. 

39See id. 

40See id. 

41See proposed Nasdaq Rule 4120(c)(9)(B)(vii). 

42See Amended Notice, supra note 11, 87 FR at 

1801. 

43See id. 

44See id. 

Nasdaq Halt Cross is outside the 

disclosed price range, the Exchange 

would release a security for trading if 

the actual price at which the Nasdaq 

Halt Cross would occur is at or above 

the price that is 20% below the lowest 

price of the disclosed price range and at 

or below the price that is 20% above the 

highest price of the disclosed price 

range, provided all other necessary 

conditions are satisfied, and that the 

company has specified the quantity of 

shares registered, as permitted by 

Securities Act Rule 457.27 In addition, 

under the proposal, the Exchange would 

release the security for trading, provided 

all other necessary conditions are 

satisfied, at a price more than 20% 

above the highest price of the disclosed 

price range, if the company publicly 

disclosed and has certified to the 

Exchange prior to the beginning of the 

Display Only Period 28 that the company 

does not expect that such offering price 

would materially change the company’s 

previous disclosure in its effective 

registration statement, the company’s 

registration statement contains a 

sensitivity analysis explaining how the 

company’s plans would change if the 

actual proceeds from the offering exceed 

the amount assumed in the price range 

established by the issuer in its effective 

registration statement, and the price 

range in the preliminary prospectus 

included in its effective registration 

statement is a bona fide price range in 

accordance with Item 501(b)(3) of 

Regulation S–K.29 The Exchange states 

that the goal of the requirement is to 

have disclosure that allows investors to 

see how changes in share price ripple 

through critical elements of the 

disclosure.30

The Exchange states that it believes 

that its proposed approach is consistent 

with Securities Act Rule 430A and staff 

guidance, which, according to the 

Exchange, generally allow a company to 

price a public offering 20% outside of 

the disclosed price range without regard 

to the materiality of the changes to the 

disclosure contained in the company’s 

registration statement.31 According to 

the Exchange, the Exchange believes 

such guidance also allows deviation 

above the price range beyond the 20% 

threshold if such change or deviation 

does not materially change the previous 

disclosure.32 The Exchange states that, 

accordingly, the Exchange believes that 

a company listing in connection with a 

Direct Listing with a Capital Raise can 

specify the quantity of shares registered, 

as permitted by Securities Act Rule 457, 

and, when an auction prices outside of 

the disclosed price range, use a Rule 

424(b) prospectus, rather than a posteffective amendment, when either (i) the 

20% threshold noted in Rule 430A is 

not exceeded, regardless of the 

materiality or non-materiality of 

resulting changes to the registration 

statement disclosure that would be 

contained in the Rule 424(b) prospectus, 

or (ii) there is a deviation above the 

price range beyond the 20% threshold 

noted in Rule 430A if such deviation 

would not materially change the 

previous disclosure, in each case 

assuming the number of shares issued is 

not increased from the number of shares 

disclosed in the prospectus.33 The 

Exchange states that, for the purposes of 

this rule, the 20% threshold would be 

calculated based on the maximum 

offering price set forth in the registration 

fee table, and that this method of 

calculation is consistent with the SEC 

Staff’s guidance on Securities Act Rule 

430A.34

According to the Exchange, given that 

there may be a Direct Listing with a 

Capital Raise that could price outside of 

the disclosed price range and that there 

may be no upside limit above which the 

Nasdaq Halt Cross could not proceed, 

the Exchange proposes to enhance 

transparency by providing readily 

available, real time pricing information 

to investors.35 To that end, the Exchange 

states that it would disseminate, free of 

charge, the Current Reference Price on 

a public website, such as Nasdaq.com, 

during the Pre-Launch Period and 

indicate whether the Current Reference 

Price is within the disclosed price 

range.36 The Exchange also proposes to 

adopt a new Price Volatility Constraint 

and disseminate information about 

whether the Price Volatility Constraint 

has been satisfied, which will indicate 

whether the security may be ready to 

trade.37 The ‘‘Price Volatility 

Constraint’’ would require that the 

Current Reference Price has not 

deviated by 10% or more from any 

Current Reference Price within the 

previous 10 minutes.38 The Exchange 

states that the Price Volatility Constraint 

would provide investors with notice 

that the Nasdaq Halt Cross nears 

execution.39 The Pre-Launch Period 

would continue until the Price 

Volatility Constraint has been 

satisfied.40 Further, the Pre-Launch 

Period shall end, and the security shall 

be released for trading when the 

Exchange, in consultation with the 

financial advisor to the issuer, makes 

the determination that the security is 

ready to trade and the conditions in 

proposed Nasdaq Rule 4120(c)(9)(B)(vii) 

and (viii) are met.41

The Exchange also proposes to 

prohibit market orders (other than by 

the company through its CDL Order) 

from the opening of a Direct Listing 

with a Capital Raise.42 The Exchange 

states that this would assure that 

investors only purchase shares at a price 

at or better than the price they 

affirmatively set, after having the 

opportunity to review the company’s 

effective registration statement, 

including the sensitivity analysis 

describing how the company would use 

any additional proceeds raised.43

In addition, the Exchange states that 

to protect investors and assure that they 

are informed about the attributes of a 

Direct Listing with a Capital Raise, the 

Exchange proposes to impose specific 

requirements on Nasdaq members with 

respect to a Direct Listing with a Capital 

Raise.44 These rules would require 

members to provide to a customer, 

before that customer places an order to 

be executed in the Nasdaq Halt Cross, a 

notice describing the mechanics of 

pricing a security subject to a Direct 

Listing with a Capital Raise in the 


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45See id. 

46See id. The Exchange states that an information 

circular is an industry-wide, free service provided 

by the Exchange. See id. at 1801 n.21. 

47See id. at 1801. 

48See id.; proposed Nasdaq Rule 4120(c)(9)(B)(i). 

49See Amended Notice, supra note 11, 87 FR at 

1801. 

50See id. The Exchange states that it believes that 

investors have become familiar with the approach 

of pricing an IPO outside of the price range stated 

in an effective registration statement. See id. at 

1803. 

51See id. at 1801. 

52See id. 

53See id. 

54See id. 

55See id. 

56See Amended Notice, supra note 11, 87 FR at 

1802. 

57See id. The Exchange would select an upper 

price band and a lower price band with the default 

for an upper and lower price band set at zero. The 

Exchange represents that if a security does not pass 

the price validation test, the Exchange may select 

different price bands before recommencing the 

process to release the security for trading. See id. 58See id. 59See Nasdaq Listing Rule 5005(a)(23) and (45) 

for the definitions of ‘‘Market Value’’ and 

‘‘Unrestricted Publicly Held Shares,’’ respectively. 60See Nasdaq Listing Rule 5315(f)(2). 61See Nasdaq Listing Rule IM–5315–2. The 

Exchange will determine that the company has met 

the applicable bid price and market capitalization 

requirements based on the same per share price. See 

id. 

62See Amended Notice, supra note 11, 87 FR at 

1801. 

63See id. 

Nasdaq Halt Cross, including 

information regarding the location of the 

public website where the Exchange 

would disseminate the Current 

Reference Price.45

The Exchange states that to assure 

that members have the necessary 

information to be provided to their 

customers, the Exchange proposes to 

distribute, at least one business day 

prior to the commencement of trading of 

a security listing in connection with a 

Direct Listing with a Capital Raise, an 

information circular to its members.46

This information circular would 

describe any special characteristics of 

the offering and the Exchange’s rules 

that apply to the initial pricing through 

the mechanism outlined in Nasdaq Rule 

4120(c)(9)(B) and Nasdaq Rule 4753 for 

the opening auction, including 

information about the notice that 

members must provide to their 

customers.47 The information circular 

would also describe other requirements 

that: (a) Require members to use 

reasonable diligence in regard to the 

opening and maintenance of every 

account, to know (and retain) the 

essential facts concerning every 

customer and concerning the authority 

of each person acting on behalf of such 

customer; (b) require members in 

recommending transactions for a 

security subject to a Direct Listing with 

a Capital Raise to have a reasonable 

basis to believe that (i) the 

recommendation is suitable for a 

customer given reasonable inquiry 

concerning the customer’s investment 

objectives, financial situation, needs, 

and any other information known by 

such members, and (ii) the customer can 

evaluate the special characteristics, and 

is able to bear the financial risks, of an 

investment in such security; and (c) 

require members not to accept market 

orders to be executed in the Nasdaq Halt 

Cross.48 The Exchange states that these 

member requirements are intended to 

remind members of their obligations to 

‘‘know their customers,’’ increase 

transparency of the pricing mechanisms 

of a Direct Listing with a Capital Raise, 

and help assure that investors have 

sufficient price discovery information.49

The Exchange represents that in each 

instance of a Direct Listing with a 

Capital Raise, the Exchange’s 

information circular would inform 

market participants that the auction 

could price up to 20% below the lowest 

price of the price range and would 

specify that price. The Exchange also 

represents that it would indicate in such 

circular whether or not there is an 

upside limit above which the Nasdaq 

Halt Cross could not proceed, based on 

the company’s certification.50

The Exchange states that to assure 

that the issuer has the ability, prior to 

the completion of the offering, to 

provide any necessary additional 

disclosures that are dependent on the 

price of the offering, the Exchange 

proposes to introduce to the operation 

of the Nasdaq Halt Cross a brief PostPricing Period, in circumstances where 

the actual price calculated by the 

Nasdaq Halt Cross is above the price 

that is 20% above the highest price of 

the price range established by the issuer 

in its effective registration statement.51

Specifically, in such circumstances, the 

Exchange would initiate a ‘‘Post-Pricing 

Period’’ following the calculation of the 

actual price.52 During the Post-Pricing 

Period, the issuer must confirm to the 

Exchange that no additional disclosures 

are required under the federal securities 

laws based on the actual price 

calculated by the Nasdaq Halt Cross. 

Further, during this period no 

additional orders for the security could 

be entered in the Nasdaq Halt Cross, and 

no existing orders could be modified.53

The Exchange states that the security 

would be released for trading 

immediately following the Post-Pricing 

Period.54 However, if the Company 

cannot provide the required 

confirmation, then the Exchange would 

postpone and reschedule the offering.55

The Exchange also proposes to clarify 

several provisions of existing Nasdaq 

Rule 4120(c)(9) without changing 

them.56 Specifically, the Exchange 

proposes to clarify the mechanics of the 

Nasdaq Halt Cross by specifying that the 

Exchange will initiate a 10-minute 

Display Only Period only after the CDL 

Order has been entered and that the 

Exchange shall select price bands for 

purposes of applying the price 

validation test in the Nasdaq Halt Cross 

in connection with a Direct Listing with 

a Capital Raise.57 The Exchange 

proposes to clarify that the ‘‘actual 

price,’’ as the term is used in the rule, 

is the Current Reference Price at the 

time the system applies the price 

validation test.58

Nasdaq Listing Rule IM–5315–2 

provides that in determining whether a 

company listing in connection with a 

Direct Listing with a Capital Raise 

satisfies the Market Value of 

Unrestricted Publicly Held Shares 59 for 

initial listing on the Nasdaq Global 

Select Market, the Exchange will deem 

such company to have met the 

applicable requirement 60 if the amount 

of the company’s Unrestricted Publicly 

Held Shares before the offering, along 

with the market value of the shares to 

be sold by the company in the 

Exchange’s opening auction in the 

Direct Listing with a Capital Raise, is at 

least $110 million (or $100 million, if 

the company has stockholders’ equity of 

at least $110 million). For this purpose, 

under current rules, the Market Value of 

Unrestricted Publicly Held Shares will 

be calculated using a price per share 

equal to the lowest price of the 

disclosed price range.61 The Exchange 

states that because the Exchange 

proposes to allow the opening auction 

to price up to 20% below the lowest 

price of the disclosed price range, the 

Exchange proposes to make a 

conforming change to Nasdaq Listing 

Rule IM–5315–2 to provide that the 

price used to determine such company’s 

compliance with the required Market 

Value of Unrestricted Publicly Held 

Shares would be the price per share 

equal to the price that is 20% below the 

lowest price of the disclosed price 

range.62 The Exchange further states that 

this is the minimum price at which the 

company could qualify to be listed.63

The Exchange states that any 

company listing in connection with a 

Direct Listing with a Capital Raise 

would continue to be subject to, and 

required to meet, all other applicable 

initial listing requirements, including 

the requirements to have the applicable 

number of shareholders and at least 


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64See id. at 1801–02 (citing Nasdaq Listing Rules 

5315(e)(1) and (2) and 5315(f)(1)). 

65See proposed Nasdaq Listing Rule IM–5315–2. 

66See proposed Nasdaq Rules 4753(a)(3)(A)(iv)c. 

and 4753(b)(2)(D)(iii). 

67See Nasdaq Rule 4753(a)(3) for a description of 

the ‘‘Order Imbalance Indicator.’’ 

68See Amended Notice, supra note 11, 87 FR at 

1802. 

69See 15 U.S.C. 78s(b)(2)(C). 

70See 15 U.S.C. 78s(b)(2)(C)(i). 

71See 15 U.S.C. 78s(b)(2)(C)(ii); and see also 17 

CFR 201.700(b)(3). 

72 17 CFR 201.700(b)(3). 

73See id. 

74See id. 

75Susquehanna Int’l Group, LLP v. Securities and 

Exchange Commission, 866 F.3d 442, 447 (D.C. Cir. 

2017). 

76The Commission has stated in approving 

national securities exchange listing requirements 

that the development and enforcement of adequate 

standards governing the listing of securities on an 

exchange is an activity of critical importance to the 

financial markets and the investing public. In 

addition, once a security has been approved for 

initial listing, maintenance criteria allow an 

exchange to monitor the status and trading 

characteristics of that issue to ensure that it 

continues to meet the exchange’s standards for 

market depth and liquidity so that fair and orderly 

markets can be maintained. See, e.g., 2021 Order, 

supra note 13, 86 FR at 28172 n.47; Securities 

Exchange Act Release Nos. 90768 (December 22, 

2020), 85 FR 85807, 85811 n.55 (December 29, 

2020) (SR–NYSE–2019–67) (‘‘NYSE 2020 Order’’); 

82627 (February 2, 2018), 83 FR 5650, 5653 n.53 

(February 8, 2018) (SR–NYSE–2017–30) (‘‘NYSE 

2018 Order’’); 81856 (October 11, 2017), 82 FR 

48296, 48298 (October 17, 2017) (SR–NYSE–2017– 

31); 81079 (July 5, 2017), 82 FR 32022, 32023 (July 

11, 2017) (SR–NYSE–2017–11). The Commission 

has stated that adequate listing standards, by 

promoting fair and orderly markets, are consistent 

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

they are, among other things, designed to prevent 

fraudulent and manipulative acts and practices, 

promote just and equitable principles of trade, and 

protect investors and the public interest. See, e.g., 

2021 Order, supra note 13, 86 FR at 28172 n.47; 

NYSE 2020 Order, 85 FR at 85811 n.55; NYSE 2018 

Order, 83 FR at 5653 n.53; Securities Exchange Act 

Release Nos. 87648 (December 3, 2019), 84 FR 

67308, 67314 n.42 (December 9, 2019) (SR– 

NASDAQ–2019–059); 88716 (April 21, 2020), 85 FR 

23393, 23395 n.22 (April 27, 2020) (SR–NASDAQ– 

2020–001). 

77See Amended Notice, supra note 11, 87 FR at 

1802. 

1,250,000 Unrestricted Publicly Held 

Shares outstanding at the time of initial 

listing, and the requirement to have a 

price per share of at least $4.00 at the 

time of initial listing.64 The Exchange 

also proposes to amend Nasdaq Listing 

Rule IM–5315–2 to specify that a 

company offering securities for sale in 

connection with a Direct Listing with a 

Capital Raise must register securities by 

specifying the quantity of shares 

registered, as permitted by Securities 

Act Rule 457(a), and that securities 

qualified for listing under Nasdaq 

Listing Rule IM–5315–2 must satisfy the 

additional requirements of Nasdaq Rule 

4120(c)(9)(B).65

Finally, the Exchange has proposed to 

amend Nasdaq Rules 4753(a)(3)(A) and 

4753(b)(2) to conform the requirements 

for disseminating information and 

establishing the opening price through 

the Nasdaq Halt Cross in a Direct Listing 

with a Capital Raise to the proposed 

amendment to allow the opening 

auction to price as much as 20% below 

the lowest price of the disclosed price 

range.66 Specifically, the Exchange 

proposes changes to Nasdaq Rules 

4753(a)(3)(A) and 4753(b)(2) to make 

adjustments to the calculation of the 

Current Reference Price, which is 

disseminated in the Nasdaq Order 

Imbalance Indicator,67 and to the 

calculation of the price at which the 

Nasdaq Halt Cross will execute, for a 

Direct Listing with a Capital Raise. 

Under these rules currently, where there 

are multiple prices that would satisfy 

the conditions for determining the price, 

the fourth tie-breaker for a Direct Listing 

with a Capital Raise is the price that is 

closest to the lowest price of the 

disclosed price range. The Exchange 

states that, to conform these rules to the 

proposed modification of the price 

range within which the opening auction 

would proceed, the Exchange proposes 

to modify the fourth tie-breaker for a 

Direct Listing with a Capital Raise to use 

the price closest to the price that is 20% 

below the lowest price of the disclosed 

price range.68

II. Discussion and Commission 

Findings 

Under Section 19(b)(2)(C) of the 

Exchange Act,69 the Commission shall 

approve a proposed rule change of a 

self-regulatory organization if it finds 

that such proposed rule change is 

consistent with the requirements of the 

Exchange Act, and the rules and 

regulations thereunder that are 

applicable to such organization.70 The 

Commission shall disapprove a 

proposed rule change if it does not make 

such a finding.71 The Commission’s 

Rules of Practice, under Rule 700(b)(3), 

state that the ‘‘burden to demonstrate 

that a proposed rule change is 

consistent with the Exchange Act and 

the rules and regulations thereunder 

. . . is on the self-regulatory 

organization that proposed the rule 

change’’ and that a ‘‘mere assertion that 

the proposed rule change is consistent 

with those requirements . . . is not 

sufficient.’’ 72

The description of a proposed rule 

change, its purpose and operation, its 

effect, and a legal analysis of its 

consistency with applicable 

requirements must all be sufficiently 

detailed and specific to support an 

affirmative Commission finding,73 and 

any failure of the self-regulatory 

organization to provide this information 

may result in the Commission not 

having a sufficient basis to make an 

affirmative finding that a proposed rule 

change is consistent with the Exchange 

Act and the applicable rules and 

regulations.74 Moreover, ‘‘unquestioning 

reliance’’ on a self-regulatory 

organization’s representations in a 

proposed rule change is not sufficient to 

justify Commission approval of a 

proposed rule change.75

For the reasons discussed below, the 

Commission is disapproving the 

proposed rule change because the 

information before the Commission is 

insufficient to support a finding that the 

proposed rule change is consistent with 

the requirements of the Exchange Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange. Specifically, the 

Commission concludes that the 

Exchange has not met its burden to 

demonstrate that the proposed rule 

change is consistent with Section 6(b)(5) 

of the Exchange Act, and in particular 

the requirements that a national 

securities exchange’s rules be designed 

to prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and to 

protect investors and the public interest. 

The Commission has consistently 

recognized the importance of national 

securities exchange listing standards. 

Among other things, such listing 

standards help ensure that exchangelisted companies will have sufficient 

public float, investor base, and trading 

interest to provide the depth and 

liquidity necessary to promote fair and 

orderly markets.76

The Exchange proposes to modify its 

rules concerning pricing restrictions for 

the opening auction on the first day of 

trading for a Direct Listing with a 

Capital Raise. Instead of imposing the 

Pricing Range Limitation, which limits 

the price of the opening transaction to 

the price range disclosed in the issuer’s 

effective registration statement, the 

proposal would allow the opening 

auction to proceed at a price up to 20% 

above or below the disclosed price 

range, or at a price more than 20% 

above the disclosed price range if 

certain additional conditions are met. 

The Exchange states that it believes 

that its proposal to modify the Pricing 

Range Limitation is consistent with the 

protection of investors and argues that 

the proposal is similar to the pricing 

flexibility that is permitted for a firm 

commitment underwritten IPO.77

However, in the context of a firm 


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78Starting at the beginning of the Display Only 

Period, the Exchange would begin disseminating 

the Order Imbalance Indicator, which includes the 

Current Reference Price and other order 

information, every second. See proposed Nasdaq 

Rule 4120(c)(9)(B)(iv). 

79Registration statements for initial public 

offerings typically provide disclosure based on an 

assumed offering price equal to the mid-point of the 

disclosed price range. They may or may not contain 

additional information explaining how the 

disclosure would change, including how the 

issuer’s plans and financial condition would be 

affected, given specified changes in the assumed 

offering price. Moreover, the proposed Nasdaq rule 

would impose no such obligation on offerings that 

price up to 20% above the high end or 20% below 

the low end of the disclosed price range. As a 

result, if the opening auction price is substantially 

below the low end of the disclosed price range, 

depending on what information the issuer had 

provided prior to effectiveness of the registration 

statement, the issuer may need to provide 

additional disclosure relating to, among other 

things, changes in the planned use of offering 

proceeds, liquidity, or material risk factors. 

80See Letter from Nikolai Utochkin, Counsel, 

Listing and Governance, Nasdaq (December 21, 

2021), at 8 (‘‘Nasdaq Letter’’). 

81See proposed Nasdaq Rule 4120(c)(9)(B)(viii) 

(stating ‘‘. . . Nasdaq shall postpone and 

reschedule the pricing of the security only if the 

conditions in paragraphs (vii) a. and b., above, are 

not met.’’). 

82One commenter opposing the proposal raises 

concerns about the potential absence of material 

information concerning the final offering price prior 

to the time of the sale of shares in a Direct Listing 

with a Capital Raise. See Letter from Jeffrey P. 

Mahoney, General Counsel, Council of Institutional 

Investors (October 21, 2021), at 2 (‘‘CII Letter’’). 

This commenter states that its sensitivity to this 

lack of disclosure in the Exchange proposal is 

heightened by its broader concerns about the loss 

of investor protections relating to direct listings 

generally, including the difficulties of investors in 

bringing claims under Section 11 of the Securities 

Act for material misstatements or omissions in 

direct listing registration statements. The 

commenter argues that investors in direct listings, 

including Direct Listings with a Capital Raise, are 

likely to continue to have ‘‘fewer legal rights than 

investors in a traditional initial public offering.’’ 

See id. at 4. The Exchange has not responded to this 

commenter’s concerns, including the concern 

relating to ‘‘tracing’’ share purchases for purposes 

of Section 11 claims, in its proposal. 

83See OIP, supra note 8. 

84See Nasdaq Letter, at 3. See also id. at 7–8 

(describing the requirements that would apply to an 

offering that prices more than 20% above the high 

end of the disclosed price range). 

commitment underwritten IPO, the IPO 

price is determined prior to the time of 

sale to the underwriters and initial 

investors, which takes place in advance 

of the opening transaction on the 

Exchange. Accordingly, issuers and 

underwriters have the ability to provide 

investors with any necessary additional 

disclosures prior to completing the 

offering, including those that are 

dependent on the price of the offering, 

and to delay the offering if necessary to 

provide any such disclosures. In 

contrast, in the context of a Direct 

Listing with a Capital Raise, the IPO 

price is the opening auction price on the 

Exchange, so that the IPO price and 

proceeds to the issuer are not known by 

the issuer and market participants until 

the securities are sold to investors in the 

opening transaction on the Exchange. 

The Exchange’s current rules for a 

Direct Listing with a Capital Raise 

require it to postpone and reschedule 

the offering if the opening auction price 

does not fall within the disclosed price 

range, so that issuers are able to update 

any disclosures if necessary before 

proceeding with an offering outside of 

the disclosed price range. However, as 

discussed below, the Exchange’s 

proposal to expand Direct Listings with 

a Capital Raise would not ensure, in all 

cases, that issuers conducting a Direct 

Listing with a Capital Raise would have 

an opportunity to convey additional 

material information to investors, if 

needed, prior to the time of sale. 

As discussed above, in cases where 

the opening auction price will be more 

than 20% above the high end of the 

disclosed price range, an issuer would 

have to have previously certified to the 

Exchange and publicly disclosed, prior 

to the beginning of the Display Only 

Period,78 that it does not expect such 

price to materially change the issuer’s 

previous disclosure in its effective 

registration statement. In such cases, 

when the opening auction price will be 

more than 20% above the high end of 

the disclosed price range, the issuer 

would then need to confirm to the 

Exchange again, during the Post-Pricing 

Period, that no additional disclosures 

are required under the federal securities 

laws based on the actual price 

calculated in the auction. If the issuer 

could not provide the required 

confirmation, the Exchange would 

postpone and reschedule the offering. 

However, the Exchange does not 

propose to apply these additional 

protections to a Direct Listing with a 

Capital Raise where the opening auction 

price will be outside of the disclosed 

price range, but up to 20% above the 

high end or 20% below the low end of 

such disclosed price range. In these 

cases, the Exchange has not proposed 

any mechanism by which an issuer or 

the Exchange could postpone or 

reschedule the offering, even if the 

disclosures included in the registration 

statement are not based on an opening 

auction price that is outside the 

disclosed price range.79 The Exchange 

argues that under its proposal an issuer 

in a Direct Listing with a Capital Raise 

would have the same ability as an issuer 

in a firm commitment underwritten IPO 

to delay an offering at any time.80 Under 

Nasdaq’s proposal, however, should 

concerns arise relating to the adequacy 

of the disclosure for an offering that 

prices within 20% of the disclosed price 

range, the Nasdaq procedures would not 

give the issuer the option to halt or 

delay the offering once the issuer 

submits its order. If the opening auction 

price would be up to 20% above the 

high end or 20% below the low end of 

the disclosed price range and the 

conditions in proposed Nasdaq Rule 

4120(c)(9)(B)(vii)(a) and (b) and the 

Price Volatility Constraint are met, the 

opening auction would proceed.81

Accordingly, the Commission does not 

believe that the proposal adequately 

addresses how an issuer would be able 

to disclose any additional material 

information related to the final offering 

price prior to the time of sale in a Direct 

Listing with a Capital Raise where the 

actual price calculated in the opening 

auction is higher or lower than, but no 

more than 20% outside of, the disclosed 

price range.82 In these cases, the 

inability of an issuer to provide 

potentially material disclosures to 

investors in a timely manner prior to the 

sale of securities continues to raise 

investor protection concerns under 

Section 6(b)(5) of the Exchange Act.83

Therefore, the Exchange has not met its 

burden to demonstrate that its proposal 

is consistent with the Exchange Act. 

Similarly, in cases where the opening 

auction price will be more than 20% 

above the high end of the disclosed 

price range, the issuer would have to 

have included in its registration 

statement a sensitivity analysis 

explaining how the issuer’s plans would 

change if the actual proceeds from the 

offering exceeded the amount assumed 

in the disclosed price range. The 

Exchange states that requiring this 

sensitivity analysis is designed to 

protect investors because it allows 

investors to see how changes in the 

share price ripple through critical 

elements of the companies’ disclosure.84

However, this sensitivity analysis is not 

required under the Exchange’s proposal 

in cases where the actual price 

calculated in the opening auction for a 

Direct Listing with a Capital Raise is 

higher or lower than, but no more than 

20% outside of, the disclosed price 

range. This could result in an offering 

proceeding without investors having the 

opportunity to receive additional 

material information, such as a 

sensitivity analysis, in these cases. As 

noted above, the Commission believes 

this could raise investor protection 

concerns under Section 6(b)(5) of the 

Exchange Act. 

In addition, the Exchange proposes to 

establish a Price Volatility Constraint, 

which would require that the Current 


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85See supra notes 37–39 and accompanying text. 

86Proposed Nasdaq Rule 4120(c)(9)(B)(vii). 

87Amended Notice, supra note 11, 87 FR at 1800– 

01. See proposed Nasdaq Rule 4120(c)(9)(B)(v) 

stating that the Price Volatility Constraint 

‘‘indicates that the security may be ready to trade.’’ 

See also Nasdaq Letter, at 7 (‘‘Then, Nasdaq will 

publicly indicate when the Price Volatility 

Constraint has been met, thus providing investors 

with real time information that the price discovery 

process nears completion and the security is ready 

to trade shortly.’’) 

88The Exchange’s proposal states that investors 

could enter additional orders or cancel existing 

orders throughout the pre-opening process until the 

actual opening auction price is calculated; 

therefore, the Current Reference Price may change 

throughout this time period. See proposed Nasdaq 

Rule 4120(c)(9)(B)(v) and (viii)(b). 

89These conditions also include a determination 

that the issuer’s CDL Order will be executed in full 

in the Nasdaq Halt Cross, a price validation test, 

and satisfaction of the pricing conditions. See 

proposed Nasdaq Rule 4120(c)(9)(B)(vii). 

90Rule 700(b)(3), Commission Rules of Practice, 

17 CFR 201.700(b)(3). 

91 15 U.S.C. 78f(b)(5). 

92 In disapproving the proposed rule change, the 

Commission has considered its impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). According to the Exchange, the 

proposal would give issuers additional flexibility in 

becoming a public company, and in that way 

promote competition among service providers, such 

as underwriters and other advisers, to such 

companies. See Amended Notice, supra note 11, 87 

FR at 1804. One commenter expresses its belief that 

the ability for companies to raise primary capital in 

a direct listing provides companies with additional 

choice and flexibility as they consider alternatives 

to going public and, therefore, helps facilitate 

capital formation. See Letter from Evan Damast, 

Global Head of Equity and Fixed Income Syndicate, 

Morgan Stanley (July 21, 2021); Letter from Evan 

Damast, Global Head of Equity and Fixed Income 

Syndicate, Morgan Stanley (February 1, 2022). 

Another commenter states that adding a primary 

capital raise to a direct listing would advance the 

efficiency and openness of the U.S. capital markets 

and solve a conflict of interest problem. See Letter 

from Bill Gurley, General Partner, Benchmark 

(February 2, 2022). See also Letter from Ran D. BenTzur and Jennifer J. Hitchcock, Fenwick & West LLP 

(February 1, 2022) (stating that the proposal would 

mitigate issuers’ reluctance to use a Direct Listing 

with a Capital Raise because traditional IPOs are 

not subject to similar price range limitations); Letter 

from Barry McCarthy (February 1, 2022) (stating 

that Direct Listings with a Capital Raise are the next 

logical evolution of a direct listing, but will not 

work with the current price range constraints). 

Another commenter states that it believes the 

proposal would stimulate a vibrant ecosystem of 

data and analytics and fintech companies to further 

refine IPO pricing accuracy and broaden investor 

participation, thus improving capital 

intermediation for U.S. markets. See Letter from 

Burke Dempsey, EVP Head of Investment Banking, 

Wedbush Securities Inc. (August 9, 2021). For the 

reasons discussed throughout, however, the 

Commission is disapproving the proposed rule 

change because it does not find that the proposed 

rule change is consistent with the Exchange Act. 

93 15 U.S.C. 78s(b)(2). 

94 17 CFR 200.30–3(a)(12). 

Reference Price not deviate by 10% or 

more from any Current Reference Price 

in the previous 10 minutes, as a 

condition to the opening auction in a 

Direct Listing with a Capital Raise.85

Specifically, the Exchange’s proposal 

provides that ‘‘[t]he Pre-Launch Period 

shall continue until the Price Volatility 

Constraint is satisfied.’’ 86 The Exchange 

also proposes to disseminate 

information about whether the Price 

Volatility Constraint has been satisfied, 

which, according to the Exchange, ‘‘will 

indicate whether the security is ready to 

trade,’’ and ‘‘will provide investors with 

notice that the Cross nears 

execution.’’ 87 Once the Price Volatility 

Constraint is satisfied, however, there 

are additional conditions that must be 

met before the opening cross will occur 

and in the intervening period the 

expected opening auction price may 

change because orders can continue to 

be entered and cancelled.88 Specifically, 

the Exchange, in consultation with the 

financial advisor to the issuer, must 

make the determination that the security 

is ready to trade, and several additional 

conditions specified in proposed 

Nasdaq Rule 4120(c)(9)(B)(vii) and (viii) 

must be met, including the potential 

initiation and conclusion of a PostPricing Period.89 Thus, it would appear 

that there could be a substantial price 

change during the period of time 

between the Exchange’s dissemination 

of the fact that the Price Volatility 

Constraint has been satisfied and the 

actual execution of the opening cross for 

a Direct Listing with a Capital Raise. In 

such event, investors could be misled 

that the opening cross ‘‘nears 

execution’’ and that the disseminated 

Current Reference Price will likely be 

close to the opening auction price when, 

in fact, the auction may not occur for a 

considerable time and the opening 

auction price may differ substantially. 

The Exchange has not addressed this 

potential discrepancy between the 

stated purpose of the proposed 

dissemination of the Price Volatility 

Constraint, and its potential application 

in practice, or explained how this result 

would be consistent with the protection 

of investors, the public interest, or the 

other requirements of Section 6(b)(5) of 

the Exchange Act. 

As stated above, under the 

Commission’s Rules of Practice, the 

‘‘burden to demonstrate that a proposed 

rule change is consistent with the 

Exchange Act and the rules and 

regulations issued thereunder . . . is on 

the self-regulatory organization that 

proposed the rule change.90 For the 

foregoing reasons, the Exchange has not 

met its burden to demonstrate that its 

proposal is consistent with the 

Exchange Act. In particular, the 

Exchange has not adequately 

demonstrated that its proposal to allow 

a Direct Listing with a Capital Raise to 

proceed at an opening auction price that 

falls outside of the disclosed price range 

is consistent with investor protection, 

the public interest, and other relevant 

provisions of Section 6(b)(5) of the 

Exchange Act. 91 Accordingly, for the 

reasons set forth above, the Commission 

must disapprove the proposed rule 

change, as modified by Amendment No. 

2, because the Exchange has not met its 

burden to demonstrate that the proposal 

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

Exchange Act.92

III. Conclusion 

The Commission does not find, 

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

Exchange Act,93 that the proposed rule 

change is consistent with the Exchange 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange, and, in particular, 

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

Act. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act, 

that the proposed rule change (SR– 

NASDAQ–2021–045), as modified by 

Amendment No. 2, be, and hereby is, 

Disapproved. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.94

Eduardo Aleman, 

Assistant Secretary. 

[FR Doc. 2022–04336 Filed 3–1–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

34516; File No. 812–15282] 

Northern Lights Fund Trust IV, et al. 

February 24, 2022. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’). 

ACTION: Notice. 

Notice of an application under section 

6(c) of the Investment Company Act of 

1940 (the ‘‘Act’’) for an exemption from 

sections 2(a)(32), 5(a)(1) and 22(d) of the 

Act and rule 22c–1 under the Act and 

under sections 6(c) and 17(b) of the Act 

for an exemption from sections 17(a)(1) 

and 17(a)(2) of the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order (‘‘Order’’) that permits: 

(a) ActiveShares ETFs (as described in 

the Reference Order (as defined below)) 

to issue shares (‘‘Shares’’) redeemable in 

large aggregations only (‘‘creation 

units’’); (b) secondary market 

transactions in Shares to occur at 

negotiated market prices rather than at 

net asset value; and (c) certain affiliated 


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