15552 Federal Register / Vol. 74, No. 64 / Monday, April 6, 2009 / Notices 

3See Securities Exchange Act Release No. 59407 

(February 13, 2009), 74 FR 8132. 

4See BOX Rules Chapter V, Section 18(e). 

5BOX has clarified that there are two types of 

quotes/orders that could have a price better than the 

PIP start price: (1) An Auto Auction Order 

(‘‘AAO’’); and (2) an order that is in the process of 

being filtered by the BOX Trading Host pursuant to 

BOX Rules Chapter V, Section 16. Electronic mail 

from Wayne Pestone, Chief Legal Officer, Boston 

Options Exchange, dated March 30, 2009. 

6These proprietary quotes or orders will continue 

to be available for execution with all other types of 

quotes and orders as currently permissible under 

BOX Rules. 

7See proposed BOX Rules Chapter V, Section 

18(e)(i). Orders on the BOX Book will include AAO 

Limit Orders on the BOX Book. The AAO will 

immediately execute against the PIP Order at the 

AAO Limit Order Price (i.e. the displayed price at 

the minimum trading increment). 

8See proposed BOX Rules Chapter V, Section 

18(e)(iii). 

9 15 U.S.C. 78f(b)(5). 

10 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

11The Commission notes that it also recently 

approved an ISE proposed rule change that permits 

ISE members to enter an order into the PIM at a 

price that is equal to the NBBO when the ISE’s best 

bid or offer is inferior to the NBBO. See Securities 

Exchange Act Release No. 57847 (May 21, 2008), 73 

FR 30987 (May 29, 2008) (SR–ISE–2008–29). 

12See BOX Rules Chapter V, Section 18(e)(ii). 

13See BOX Rules, Chapter V, Section 18(e)(i). 

Specifically, BOX’s PIP permits market-makers to 

submit competing orders for their own account and 

all non-market-maker members (referred to as 

‘‘Order Flow Providers’’) to submit competing 

orders for their own account or for the account of 

public customers or non-market-maker brokerdealers. 

14See BOX Rules, Chapter V, Section 17. 

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. 

the national best bid or offer (‘‘NBBO’’). 

The proposed rule change was 

published for comment in the Federal 

Register on February 23, 2009.3 The 

Commission received no comments on 

the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

The Exchange’s PIP currently allows 

Options Participants to enter two-sided 

orders for execution at a price that 

improves upon the NBBO.4 The 

customer side of the order (‘‘PIP Order’’) 

is submitted to the PIP with a matching 

guaranteed contra order (the ‘‘Primary 

Improvement Order’’), equal to the full 

size of the PIP Order. Under the current 

rules of the Boston Options Exchange 

Group, LLC (‘‘BOX’’), the Primary 

Improvement Order must represent a 

higher bid (lower offer) than that of the 

NBBO at the time of the commencement 

of the PIP. The PIP Order is then 

exposed to all Options Participants to 

give them an opportunity to participate 

in the trade at the proposed cross price 

or better. 

The Exchange proposes to modify its 

rules to permit an Options Participant to 

enter a Primary Improvement Order into 

the PIP at a price that is equal to the 

NBBO at the time of the commencement 

of the PIP. In addition, the Exchange 

proposes that, at the commencement of 

the PIP, all quotes and orders on the 

BOX Book prior to the PIP Broadcast 

that are equal to or better than 5 the 

Primary Improvement Order price (i.e., 

the PIP start price), except any 

proprietary quote or order from the 

Options Participant who submitted the 

Primary Improvement Order,6 will be 

immediately executed against the PIP 

Order in price/time priority.7 At the 

conclusion of the PIP, the PIP Order will 

be matched against the best prevailing 

quote(s) or order(s) on BOX in 

accordance with the current PIP rule, 

except the Exchange proposes that any 

pre-PIP Broadcast proprietary quote or 

order from the Options Participant who 

submitted the Primary Improvement 

Order will not be executed against the 

PIP Order.8

III. Discussion 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b)(5) of the Act,9 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of, a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest.10

The Commission believes that the 

proposed rule change will continue to 

provide customers with an opportunity 

for price improvement over the NBBO.11

The Commission notes that once a 

Primary Improvement Order is 

submitted into the PIP auction, the 

Primary Improvement Order may not be 

cancelled.12 Therefore, the PIP Order 

submitted to the PIP auction will be 

guaranteed an execution price of at least 

the NBBO and, moreover, will be given 

an opportunity for execution at a price 

better than the NBBO. Further, BOX’s 

current rules provide for broad 

participation in a PIP auction,13 which 

should provide the opportunity for a 

meaningful, competitive auction. 

Moreover, the Commission believes that 

the proposal may encourage increased 

participation in the PIP by BOX 

members willing to trade with the PIP 

Order at the NBBO but not better than 

the NBBO. Increased participation 

would decrease the proportion of a PIP 

Order that would be internalized by the 

submitting Options Participant. 

The Commission also notes that the 

proposal will maintain the priority of 

pre-existing orders on the BOX Book by 

providing that all quotes and orders on 

the BOX Book prior to the PIP Broadcast 

that are equal to or better than the 

Primary Improvement Order price will 

be immediately executed against the PIP 

Order in price/time priority (except any 

proprietary quote or order from the 

Options Participant that submitted the 

Primary Improvement Order). Further, 

the Commission notes that by 

precluding these proprietary orders and 

quotes from immediately executing 

against the PIP Order, the proposal is 

consistent with BOX rules that provide 

that an Options Participant may not 

execute as principal an order it 

represents as agent unless the agency 

order is given an opportunity to first 

interact with other trading interest.14

Accordingly, the Commission finds 

that the proposed rule change is 

consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–BX–2009– 

008) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–7588 Filed 4–3–09; 8:45 am] 

BILLING CODE 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59663; File No. SR– 

NASDAQ–2009–018] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Revisions and Restructuring of the 

NASDAQ Listing Rules 

March 31, 2009. 

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 March 12, 

2009, The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 74, No. 64 / Monday, April 6, 2009 / Notices 15553 

3Exhibits 5A, 5B, and 5C are available on the 

Commission’s Web site (http://www.sec.gov/). 

4The Listing Rules are divided into different 

sections within the 4000 Series, with each section 

numbered as a 100th of 4000 (e.g., 4100 ‘‘General’’, 

4200 ‘‘Definitions,’’ etc.). Nasdaq also refers to these 

sections as Series when making reference to all 

rules that fall under the section. For example, Rule 

4310 would be said to reside in the 4300 Series. 

Nasdaq uses the same convention for referring to 

sections of the proposed 5000 Series. 

5Nasdaq determined to leave certain rules that do 

not relate to the listing of Company securities in the 

4000 Series. 

in Items I, II, and III below, which Items 

have been prepared by Nasdaq. Nasdaq 

included in its proposed rule change 

Exhibit 5A, which is the text of the 

proposed rule change; Exhibit 5B, 

which is a copy of the current 4000 

Series rules as they currently exist 

which are being proposed for 

amendment in Exhibit 5A; and Exhibit 

5C, which is a table that shows the 

location of the old rules to where they 

now reside in the new rule text.3 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 

Nasdaq proposes a rule change to 

reorganize the rules relating to the 

qualification, listing, and delisting of 

companies listed, or applying to list on 

Nasdaq (‘‘Companies’’). Nasdaq is 

proposing to house these rules, which 

are currently found in the 4000 Series 

of the Marketplace Rules, into a clearer 

and more intuitive structure under a 

new 5000 Series. In addition, Nasdaq 

has taken this opportunity to eliminate 

redundancies and clarify the language 

used for the rule text. The text of the 

proposed rule change is available from 

Nasdaq’s Web site at http:// 

nasdaq.cchwallstreet.com, at Nasdaq’s 

principal office, and at the 

Commission’s Public Reference Room. 

The new rules shall become operative 

on April 13, 2009. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of, and basis for, the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below, and 

is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq proposes to reorganize the 

rules applicable to the qualification, 

listing, and delisting of Companies on 

Nasdaq (the ‘‘Listing Rules’’), which are 

found in the Rule 4000 Series of the 

Nasdaq manual (the ‘‘4000 Series’’), in 

an effort to make the rules more 

transparent and clear.4 As these rules 

have evolved over the last thirty years, 

they have become very complex and can 

be difficult to navigate, especially for 

those who are unfamiliar with their 

structure. Nasdaq believes that there are 

opportunities to reduce redundancies 

and greatly improve the overall 

organization of the Listing Rules. As 

such, Nasdaq proposes to remove the 

listing rules from the 4000 Series and 

restate them in a simpler, more 

transparent and reader-friendly format 

in the proposed Rule 5000 Series (the 

‘‘5000 Series’’), which is presently 

unused. 

Nasdaq represents that it is not 

making any substantive changes to the 

Listing Rules in this proposal. Rather, as 

described in greater detail below, 

Nasdaq proposes to: (1) Reorganize and 

recast much of the old 4000 Series into 

a more logical structure; (2) apply plain 

English principles where needed; (3) 

add descriptive titles and introductory 

language; (4) define terms for 

consistency; (5) delete obsolete or 

incongruent rules; and (6) add or amend 

rule text where appropriate to remove 

ambiguity, to clarify existing practices, 

and to resolve ongoing questions from 

the public. To assist with understanding 

the changes made to the Listing Rules, 

Nasdaq created a table that maps the 

location of every existing Listing Rule in 

the 4000 Series to its place in the 

proposed new 5000 Series. The table 

provides both the old rule number and 

rule text, together with the revised rule 

text and new rule citation to the rule’s 

location in the proposed 5000 Series. In 

addition, the table provides a brief 

description of the changes made to the 

old rule. Nasdaq also notes in the table 

rules that have been left in the 4000 

Series,5 rules that have been deleted 

altogether, and any newly-created rules 

added to the proposed 5000 Series (such 

as a new defined term). Nasdaq believes 

that, when the table is read in 

conjunction with this filing, readers will 

have a clear understanding of the 

changes made to the 4000 Series. 

Organization 

The current 4000 Series contains the 

initial and continued listing standards 

for all three Nasdaq market tiers: The 

Nasdaq Global Select Market, The 

Nasdaq Global Market, and The Nasdaq 

Capital Market. In addition to listing 

standards, the 4000 Series also contains 

rules relating to trading of, and market 

making in, Nasdaq securities, as found 

in the 4100, 4600 and 4700 Series. The 

rules relating to the listing of securities 

are found in the 4200, 4300, 4400, 4500, 

and 4800 Series. Specifically, the 4200 

Series sets forth general definitions; the 

4300 Series sets forth qualitative listing 

standards for all Nasdaq market tiers, as 

well as initial and continued listing 

requirements for the Capital Market; the 

4400 Series contains the initial listing 

requirements for the Global Select 

Market and Global Market, and the 

continued listing requirements for the 

Global Market, including requirements 

for listing other securities, such as Index 

Warrants and SEEDS; the 4500 Series 

contains all the fees required to be paid 

for listing on Nasdaq; and finally, the 

4800 Series contains the requirements 

and procedures regarding Nasdaq’s 

appellate process for a Company denied 

initial or continued listing. 

Each of Nasdaq’s three market tiers 

has its own specific listing standards 

that are progressively more stringent 

than the tier below. Today, the listing 

rules are all derived from the rules 

applicable to the Capital Market, so 

readers must have a working knowledge 

of the Capital Market rules to 

understand the listing requirements of 

the other tiers. The need to reference 

back to the Capital Market rules when 

reading the Global Market or Global 

Select Market rules is often confusing, 

and is made particularly difficult given 

that the rules applicable to the Capital 

Market and the other tiers are located far 

from each other in the current rules. 

Nasdaq proposes to organize the new 

Listing Rules by placing all quantitative 

tier-specific initial and continued listing 

standards within individual rule 

sections. Thus, the requirements for the 

Nasdaq Global Select Market will be 

contained in the proposed 5300 Series, 

the requirements for the Nasdaq Global 

Market will be contained in the 

proposed 5400 Series, and the 

requirements for the Nasdaq Capital 

Market will be contained in the 

proposed 5500 Series. Nasdaq is also 

proposing to create a new 5000 Series 

that contains general definitions 

applicable to Companies, a new 5100 

Series that contains a description of 

Nasdaq’s discretionary authority, and a 

new 5200 Series that contains 

qualitative requirements relating to all 

Companies seeking to list or already 

listed on Nasdaq. Nasdaq is proposing 

to create a new 5600 Series that contains 

a stand-alone rule set dedicated to the 


pwalker on PROD1PC71 with NOTICES
15554 Federal Register / Vol. 74, No. 64 / Monday, April 6, 2009 / Notices 

6The new listing standards are titled ‘‘Market 

Value Standard’’ and ‘‘Total Assets/Total Revenue 

Standard.’’ 

7Rule 4420(c)(6) requires that ‘‘The issuer has: 

(A) A market value of listed securities of $75 

million (currently traded issuers must meet this 

requirement and the bid price requirement under 

Rule 4420(c)(3) for 90 consecutive trading days 

prior to applying for listing); or (B) total assets and 

total revenue of $75 million each for the most 

recently completed fiscal year or two of the last 

three most recently completed fiscal years.’’ 

8 5200 Series. 

9Rule 5205. 

10Rule 5210. 

11Rules 5215–5290. 

12 5700 Series. 

13 5600 Series. 

corporate governance requirements for 

all Nasdaq-listed Companies. Last, 

Nasdaq is proposing a new 5700 Series 

that contains the requirements for 

listing other securities, a new 5800 

Series that contains the requirements 

and processes relating to a Company 

that fails to meet a listing standard, and 

a new 5900 Series that contains the fees 

required to be paid for listing on 

Nasdaq. 

Within the proposed 5300, 5400 and 

5500 Series, which, as noted, are each 

dedicated to a particular market, Nasdaq 

has organized all applicable quantitative 

initial and continued listing standards. 

Each of these three Series uses a 

numbering convention whereby the 

rules applicable to initial listing range 

from 01 to 49 and the continued listing 

rule numbers range from 50 to 99. For 

example, all initial listing rules 

applicable to the Nasdaq Global Market 

are housed in Rules 5405 through 5415, 

while the Global Market continued 

listing rules are housed in Rules 5450 

through 5460. Nasdaq believes that both 

new readers and those familiar with the 

current rule structure will find the 

information they seek much more 

quickly under the new rule structure. 

Nasdaq has also divided the 

quantitative listing standards in the old 

rules into two subcategories in the new 

rules: listing requirements and listing 

standards. Under the new rules, listing 

requirements are quantitative metrics, 

all of which a company must meet for 

initial or continued listing on a 

particular tier. Listing standards consist 

of bundles of quantitative metrics; 

however, unlike listing requirements, a 

company must meet at least one listing 

standard to become listed or to continue 

listing. For example, the three Entry 

Standards found in current Rule 

4420(a)–(c) contain certain repetitive 

quantitative requirements relating to bid 

price, publicly held shares, and round 

lot shareholders. Nasdaq took these 

common quantitative metrics and 

placed them in new Rule 5405(a) as 

initial listing requirements. For each 

bundle of quantitative requirements that 

remained under each old entry 

standard, Nasdaq created individual 

listing standards. It should be noted 

that, under old Entry Standard 3 found 

in Rule 4420(c), Nasdaq was able to 

create two new listing standards in the 

proposed new 5000 Series, Rules 

5405(b)(3) and (4).6 Under the old rule, 

Entry Standard 3 contained an 

alternative quantitative listing 

requirement of either a market value of 

listed securities of $75 million or total 

assets and total revenue of $75 million 

each.7 Nasdaq believes that the two 

metrics are better understood as 

separate, stand-alone listing standards. 

The remaining Entry Standard 3 

quantitative metrics are either captured 

under the new listing requirements or 

duplicated in each of the newly-created 

listing standards. Like all changes 

proposed by Nasdaq in this filing, this 

new structure is not a substantive 

change and in no way changes the 

application of the listing standards 

under the existing rules. 

As noted, Nasdaq has created a standalone section in the proposed 5000 

Series for rules that apply to all tiers of 

securities,8 which includes an overview 

of the application process,9

prerequisites for applying to list,10 and 

other obligations and requirements for 

listing.11 In addition, Nasdaq has 

created a stand-alone section for listing 

standards applicable to ‘‘other 

securities,’’ which includes listing 

requirements for Exchange Traded 

Funds, Index-Linked Securities, 

Selected Equity-linked Debt Securities, 

Trust Issued Receipts, and Index 

Warrants, as well as generic standards.12

Nasdaq’s corporate governance 

standards are also contained in a single, 

stand-alone section.13

Also included in the proposed 5000 

Series are the rules relating to fees 

currently found in the 4500 Series. 

Nasdaq proposes moving the 4500 

Series to the new 5900 Series with only 

minor non-substantive changes that do 

not affect the fees charged by Nasdaq. 

Nasdaq proposes, however, moving Rule 

4550, which relates to written 

interpretations of Nasdaq rules, to the 

proposed 5600 Series. Nasdaq believes 

that it is more appropriate to move Rule 

4550 to the proposed 5600 Series, which 

relates to corporate governance 

requirements, since the vast majority of 

interpretations are requested for 

corporate governance rules. Nasdaq has, 

however, provided a cross-reference to 

proposed new Rule 5600, which houses 

Rule 4550, in the introductory 

paragraph to the proposed 5900 Series. 

Nasdaq has sought to clarify the 

process that applies to companies that 

fail to meet Nasdaq’s listing standards, 

which is currently found in the 4800 

Series. Although the 4800 Series rules 

are roughly organized chronologically, 

progressing from the initial 

identification of a deficiency through 

the Nasdaq hearings and appeals 

processes, Nasdaq believes that the 

individual sections could be 

reorganized into a more intuitive 

structure. With respect to the initial 

identification of deficiencies, Nasdaq 

has attempted to make clear both what 

steps Nasdaq will take with respect to 

particular deficiencies, and what 

obligations and options deficient 

companies may have. Nasdaq has also 

reorganized the rule text relating to the 

hearings and appellate processes, so that 

in each section the reader will find all 

information related to the process for 

each level of review. 

Nasdaq also identified instances of 

unnecessary duplication of rule text 

found in individual Series of the current 

rules as well. For example, Rules 4310 

and 4320 set forth certain listing 

requirements applicable to domestic, 

Canadian, non-Canadian foreign 

securities, and American Depository 

Receipts. Rule 4310 sets forth the listing 

requirements for domestic and Canadian 

securities, whereas Rule 4320 sets forth 

the listing requirements for nonCanadian foreign securities and 

American Depository Receipts. 

Although stand alone rules, there is 

much duplication of rule text between 

the two rules. Accordingly, Nasdaq is 

proposing to combine these rules and 

any other such duplicative rule text, 

where possible, throughout the 

proposed 5000 Series. In combining 

these two rules, Nasdaq has retained the 

domestic and Canadian continued 

listing market maker requirement that 

allows one market maker entering a 

stabilizing bid to count toward the total 

number of market makers required by 

the rules. Nasdaq notes that the 

proposed new Capital Market continued 

listing rules makes it permissive for 

non-Canadian foreign securities to count 

a market maker entering a stabilizing 

bid toward the required number of 

market makers, which was not explicitly 

stated in the old rules. 

Nasdaq determined to leave certain 

rules that do not relate to the listing of 

Company securities in the 4000 Series. 

For example, Rules 4100 through 4120 

relate to the trading of listed Company 

securities on the market. Nasdaq 

believes these rules are more 

appropriately left in a stand-alone 

section, apart from the proposed 5000 

Series, which addresses the listing and 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 74, No. 64 / Monday, April 6, 2009 / Notices 15555 

14The Commission notes that the proposed rule 

text for new Rule 5000(a)(33) in Exhibit 5A is 

correct. However, in Exhibit 5C, on page 569, the 

column in the table setting forth the new rule text 

does not have the correct definition for ‘‘Publicly 

Held Shares.’’ Specifically, the definition for 

Publicly Held Shares should read ‘‘* * * means 

shares not held directly or indirectly by an officer, 

director or any person who is the beneficial owner 

of more than 10 percent of the total shares 

outstanding. Determinations of beneficial 

ownership in calculating publicly held shares shall 

be made in accordance with Rule 13d–3 under the 

Act.’’ 

15 17 CFR 240.13d–3. 

16 Id. 

17 17 CFR 240.16a–1(a)(2). 

delisting of Company securities. 

Likewise, Nasdaq determined to leave 

certain definitions found in the 4200 

Series that do not relate to listed 

Companies. Nasdaq also determined to 

leave Rule 4370 in the 4000 Series. Rule 

4370 concerns additional requirements 

for the listing of Nasdaq or Nasdaq 

affiliate securities on Nasdaq. Because 

the rule is specific to Nasdaq and does 

not apply to Companies generally, 

Nasdaq determined it would be 

confusing and add little value if placed 

in the proposed 5000 Series. 

Plain English 

Nasdaq’s primary goal in reworking 

the Listing Rules was to make them 

more clear and transparent. As noted 

above, the 4000 Series evolved over 

many years and were drafted by 

multiple individuals. As a consequence, 

the 4000 Series was not written with a 

consistent voice. Nasdaq has taken this 

opportunity to, where needed, make 

plain English changes to the 4000 Series 

and re-write certain rule text with a 

consistent voice to clarify provisions 

that have historically caused confusion, 

while ensuring not to change the 

meaning of the reworked rules. In some 

cases, this meant eliminating redundant 

language throughout the proposed rule 

text. In other instances, Nasdaq replaced 

inconsistently used terms with a single 

term used throughout the new rules. 

Descriptive Titles and Introductory 

Language 

Nasdaq renamed many existing rules, 

using more descriptive titles that 

provide a better cue as to what follows. 

Nasdaq has also added descriptive 

introductory language to many sections 

of the proposed new 5000 Series, which 

Nasdaq believes provides readers with a 

logical roadmap to what follows in each 

section. For example, Nasdaq has added 

a new introduction to the Listing Rules 

titled ‘‘5000 Series: The Qualification, 

Listing, and Delisting of Companies’’ 

under which is provided a description 

of what readers will find under each 

section of the proposed 5000 Series. 

Likewise, Nasdaq added descriptive 

introductory language to the beginning 

of the proposed 5000, 5400, 5600, and 

5700 Series, and added to the proposed 

5500 and 5800 Series rewritten 

introductory language taken from the 

4300 and 4800 Series, respectively. 

Defined Terms 

Nasdaq has created, modified, or 

deleted several definitions in the 

process of incorporating the 4000 Series 

into the proposed new 5000 Series. In 

certain cases, such as the new definition 

of ‘‘Bid Price,’’ Nasdaq sought to add 

certainty to a term that had been used 

in the Listing Rules, but not defined 

historically. Nasdaq’s new definition 

clarifies that the term ‘‘Bid Price’’ is the 

closing bid price, which Nasdaq has 

always used as the metric for 

determining bid price. A common and 

recurring inquiry by investors and 

companies alike, Nasdaq believes that 

the clarifying language will help to 

answer a common question. In other 

cases, Nasdaq modified a term or its 

definition to make it more accurate or 

precise. As another example, under the 

old rules the Adjudicatory Body 

responsible for reviewing decisions of 

the Listing Qualifications Department 

was named the Listing Qualifications 

Panel, notwithstanding that it was in no 

way associated with the Listing 

Qualifications Department. When read 

together with Rule 4815, which 

generally prohibits ex parte 

communications between the Listing 

Qualifications Department and the 

Listing Qualifications Panel, Nasdaq 

thought it appropriate to rename the 

Listing Qualifications Panel the 

Hearings Panel so that there is no 

confusion surrounding the 

independence of the adjudicator. 

Nasdaq is proposing to create a new 

defined term, ‘‘Company,’’ as found in 

new Rule 5000(a)(6). Both the terms 

‘‘company’’ and ‘‘issuer’’ are used 

synonymously throughout the current 

4000 Series, however, neither term is 

defined. In the proposed new definition, 

Nasdaq is defining a Company as the 

issuer of a security listed or applying to 

list on Nasdaq. Nasdaq is also making it 

clear that, for purposes of the 5000 

Series, the term Company includes an 

issuer that is not incorporated, such as 

a limited partnership. Nasdaq notes that 

the inclusion of issuers that are not 

incorporated is consistent with Nasdaq’s 

current rules, as such issuers are able to 

list on Nasdaq pursuant to specific 

listing rules. 

In a similar regard, Nasdaq is 

proposing to define a new term, 

‘‘Shareholder.’’ In the current 4000 

Series, there is no single defined term 

that represents the owner of a security 

that is listed or that is in the listing 

application process. Nasdaq is 

proposing in new Rule 5000(a)(37) to 

define Shareholder as a record or 

beneficial owner of a security listed or 

applying to list. Nasdaq is including in 

the definition of Shareholder limited 

partners and owners of depository 

receipts or units. The inclusive 

definition of Shareholder does not 

change in the proposed 5000 Series how 

the rules applicable to such owners are 

applied currently under the 4000 Series. 

Nasdaq has created new terms 

‘‘Publicly Held Shares’’ and ‘‘Public 

Holders’’ in proposed Rules 5000(a)(33) 

and (a)(34).14 The new definition of 

Publicly Held Shares is derived from 

Rules 4310(c)(7)(C) and 4420(e). Rule 

4310(c)(7)(C) is a Capital Market rule, 

which states that shares held directly or 

indirectly by any officer or director of 

the Company and by any person who is 

the beneficial owner of more than 10 

percent of the total shares outstanding 

are not considered to be publicly held. 

Rule 4420(e) is a Global Market rule that 

provides, among other things, that the 

method for calculating beneficial 

ownership when determining publicly 

held shares shall be made in accordance 

with Rule 13d–3 under the Act.15

Nasdaq has historically used the 

methodology found in Rule 13d–3 

under the Act 16 when determining 

beneficial ownership for purposes of 

calculating publicly held shares, 

regardless of market. By also excluding 

shares that are indirectly held by 

officers and directors, the proposed 

rules would also provide transparency 

to Nasdaq’s view that immediate family 

members of an Executive Officer, 

director, or 10 percent holder are also 

not Public Holders, and the shares they 

hold are not Publicly Held Shares, to the 

extent those shares are considered 

beneficially owned by the Executive 

Officer, director or 10 percent holder 

pursuant to Rule 16a–1(a)(2) under the 

Act.17

Nasdaq has also created a new 

definition of ‘‘filed with Nasdaq’’ in 

proposed Rule 5000(a)(15). The new 

definition is derived from Rules 

4310(c)(14) and 4320(e)(12), which 

provide that Companies do not have to 

submit paper copies of filings to Nasdaq 

if these filings have been filed with the 

Commission via the EDGAR System. 

Nasdaq uses the term throughout the 

4000 Series and proposed 5000 Series. 

Nasdaq believes the addition of the new 

definition will help inform readers of 

how to satisfy the requirement in the 

various contexts that it is used in the 

rules. 


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18 15 U.S.C. 78l(i). 19 15 U.S.C. 78l(b). 20The Commission notes that the proposed rule 

text for new Rule 5205(b) in Exhibit 5A is correct. 

However in Exhibit 5C, on page 398, the column 

in the table setting forth the new rule text does not 

use the new defined term Other Regulatory 

Authority, and should read ‘‘A Company’s 

compliance with the initial listing criteria will be 

determined on the basis of the Company’s most 

recent information filed with the Commission or 

Other Regulatory Authority and information 

provided to Nasdaq. The Company shall certify, at 

or before the time of listing, that all applicable 

listing criteria have been satisfied.’’ 

21 17 CFR 240.10A–3. 22 15 U.S.C. 78l(k). 

Nasdaq is proposing to define a new 

term, ‘‘Other Regulatory Authority’’ in 

Rule 5000(a)(31). The new term 

includes regulators other than the 

Commission with which certain 

Companies must file documentation. In 

particular, certain Companies are 

regulated by a bank or savings authority 

identified in Section 12(i) under the 

Act,18 and others may be subject to an 

exemption issued by the Commission 

that permits the listing of the security, 

notwithstanding its failure to be 

registered pursuant to Section 12(b) 

under the Act.19 Nasdaq is proposing to 

add the new defined term to certain 

sections of 5000 Series concerning filing 

obligations to make clear that filing 

requirements are applicable to 

Companies that are required to file with 

the Commission or with an Other 

Regulatory Authority.20

Nasdaq is proposing to define the 

term ‘‘Public Reprimand Letter’’ in new 

Rule 5805(j), which means a letter 

issued by Staff or an Adjudicatory Body 

in cases where the Company has 

violated a Nasdaq corporate governance 

or notification listing standard (other 

than one required by Rule 10A–3 of the 

Act 21) and Staff or the Adjudicatory 

Body determines that delisting is an 

inappropriate sanction. Although not a 

defined term under the 4000 Series, the 

term ‘‘public reprimand letter’’ occurs 

throughout the Listing Rules and was 

generally described by Rule 4801(k)(2), 

which provides one of two alternate 

definitions of the term ‘‘Staff 

Determination,’’ and also under Rule 

4811(e)(3), which describes an 

Adjudicatory Body’s authority to issue 

Decisions that are public reprimand 

letters. In the proposed definition in 

new Rule 5805(j), Nasdaq combines the 

concept in the old rules that a public 

reprimand letter may be issued by the 

Staff or an Adjudicatory Body into the 

definition of the new defined term. 

Deleted Rules 

Nasdaq has found that certain Listing 

Rules have historically caused 

confusion. In the majority of cases, such 

rules required minor clarifying changes 

or the application of plain English 

principles. In other cases, however, the 

confusion was due to a rule that ran 

contrary to other Listing Rules. For 

example, Nasdaq proposes deleting the 

first sentence to Rule 4802(b), which 

stated, ‘‘An issuer may file a written 

request for an exception to any of the 

standards set forth in the Rule 4000 

Series at any time during the pendency 

of a proceeding under the Rule 4800 

Series.’’ Pursuant to Rule 4804, Nasdaq 

informs a Company of its determination 

to limit or prohibit the initial or 

continued listing of a Company’s 

securities by way of a staff 

determination letter. Pursuant to Rule 

4805, a company may request a hearing 

within seven calendar days. Once a 

Company makes a timely appeal, any 

responses to additional staff deficiency 

letters must be made within the sevencalendar day timeframe. Nasdaq 

receives questions surrounding the 

conflicting meanings of these rules 

frequently. Nasdaq chose to eliminate 

the first sentence to Rule 4802(b), 

because, although a Company may 

submit a written request for an 

exception at any time in the hearings 

process, only a timely submission made 

pursuant to Rule 4805 is considered. As 

such, the sentence had little meaning 

when read together with the other rules. 

In the current 4000 Series, Nasdaq’s 

limited partnership rules incorporated 

the text from FINRA Rule 2810. As a 

consequence, much of the language 

provided in Nasdaq’s limited 

partnership rules mirror those of the 

FINRA rule, and required Nasdaq to 

define several terms used by FINRA. In 

the proposed new Rule 5210(h), Nasdaq 

has adopted the approach taken by the 

American Stock Exchange with respect 

to limited partnership rules and 

mirrored Amex Rule 126, which 

incorporates by reference FINRA Rule 

2810. Accordingly, it was not necessary 

to include in the proposed new 5000 

Series certain defined terms, which 

were provided in the old Listing Rules, 

due to the inclusion of the FINRA Rule 

2810 text. In addition, by referencing 

FINRA Rule 2810, Nasdaq was able to 

delete a substantial amount of text from 

Rule 4430 that mirrored the FINRA rule. 

This resulted in a much more 

streamlined presentation of the limited 

partnerships rules. 

Nasdaq identified two rules that, by 

design, have limited periods of 

applicability and whose periods have 

since expired. First, when Nasdaq 

created the Global Select Market, it 

adopted a series of new rules applicable 

exclusively to the new market segment. 

One such rule, IM 4425 described the 

initial process that Nasdaq used to 

determine which Companies would be 

assigned to the new market segment in 

conjunction with its launch. As such, 

the rule has no relevance to Companies 

going forward and accordingly Nasdaq 

has deleted it from the proposed new 

5000 Series. 

Similarly, in conjunction with 

Nasdaq’s registration as a national 

securities exchange Nasdaq adopted 

Rule 4305, which described the process 

for transitioning securities to the new 

Nasdaq exchange from the Nasdaq 

market. In particular, the rule made 

clear that securities listed on the old 

market’s Global Market or Capital 

Market will be listed on the respective 

Global Market or Capital Market of the 

new Nasdaq exchange. The rule also 

clarified that all notices and deficiencies 

existing at the time of the transfer to the 

Nasdaq exchange would continue to be 

recognized as proper notices and 

deficiencies. Nasdaq notes that Rule 

4305 is no longer relevant to Companies 

given that any notices or deficiencies 

received by Companies while listed on 

the old Nasdaq market have since been 

resolved, either by such Companies 

regaining compliance with listing 

standards or by exhausting any available 

appellate remedy. Accordingly, Rule 

4305 no longer serves a purpose and has 

not been included in the proposed new 

5000 Series. 

Added or Amended Rule Text 

Nasdaq also proposes to amend rule 

text to clarify the current application of 

existing rules. For example, Rule 

4310(c) provides a list of criteria that a 

Company or its security must meet in 

order to list on Nasdaq. Rule 4310(c)(11) 

requires, among other things, that 

Companies shall not currently be 

suspended from trading by the 

Commission pursuant to Section 12(k) 

under the Act.22 Companies must also 

be current in filing required reports 

when listing on Nasdaq, and remain 

current while listed on Nasdaq pursuant 

to Rules 4310(c)(14) and 4320(e)(12). 

Nasdaq has combined these 

requirements in proposed new Rule 

5210(e), which also clarifies that 

suspensions by appropriate regulatory 

authorities of a Company’s country of 

domicile are covered by the rule. 

Rules 4310(c)(14) and 4320(e)(12) 

require Companies applying to list on 

Nasdaq to provide three copies of all 

reports and other documents filed or 

required to be filed with the 

Commission. Companies that file using 

the Commission’s EDGAR System are 

exempted from this requirement. Rule 

4310(c)(14) further requires Companies 


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23 15 U.S.C. 78l(b). 

that are not required to file reports with 

the Commission to provide three copies 

of reports required to be filed with its 

appropriate regulatory authority to 

Nasdaq in connection with its 

application to list its securities. Nasdaq 

proposes to require only one copy of 

required reports for these Companies in 

proposed Rule 5205(d). Nasdaq believes 

that, for the few Companies that must 

provide copies of reports to Nasdaq, a 

single copy is sufficient for Nasdaq’s 

purposes. 

Nasdaq proposes combining Rule 

4310(c)(15) with Rule 4330, which 

describes a Company’s obligation to 

provide information to Nasdaq, into 

new Rule 5250(a). Rule 4310(c)(15) 

requires Companies to provide full and 

prompt responses to requests by Nasdaq 

for information related to unusual 

market activity or to events that may 

have a material impact on trading of its 

securities in Nasdaq. Rule 4330 sets 

forth Nasdaq’s general authority to 

request any additional information or 

documentation, public or non-public, 

deemed necessary to make a 

determination regarding a security’s 

initial or continued listing. In new Rule 

5250(a) Nasdaq clarifies that the 

responsibility to respond promptly to 

requests for information applies to 

requests both from Nasdaq, and from 

FINRA, acting on behalf of Nasdaq. 

FINRA provides certain regulatory 

services to Nasdaq and must have access 

to information to adequately perform 

such services. 

Rule 4310(c)(16) requires Companies 

to promptly disclose to the public any 

material information that would 

reasonably be expected to affect the 

value of its securities or influence 

investors’ decisions. Pursuant to the 

rule, if the information involves certain 

events set forth in IM–4120–1, 

Companies must provide prior notice of 

the disclosure to Nasdaq’s MarketWatch 

Department. Nasdaq is moving Rule 

4310(c)(16) to proposed new Rule 

5250(b)(1) with only minor changes. 

Nasdaq has, however, added clarifying 

language regarding the method by 

which notices to the MarketWatch 

Department should be made. As 

described in IM–4120–1, and proposed 

new IM–5250–1, prior notice of a 

required disclosure should be made 

through Nasdaq’s Web-based electronic 

disclosure system. 

Rule 4310(c)(23)(A), which applies to 

all Nasdaq tiers, was modified in the 

new rules to make clear that all 

securities listed on both the Capital 

Market and Nasdaq Global Market must 

have a Committee on Uniform Securities 

Identification Procedures number (a 

‘‘CUSIP number’’) or foreign equivalent. 

Currently, Rule 4310(c)(23)(A) requires 

that domestic securities have a CUSIP 

number; however, the rule does not 

require Canadian securities to have a 

CUSIP. Rule 4320, which applies to 

non-Canadian Foreign securities and 

American Depository Receipts, also 

does not have a similar identification 

assignment requirement. A CUSIP 

number is a security-specific number 

that identifies stocks of all registered 

U.S. and Canadian companies, and U.S. 

government and municipal bonds. 

Historically, Nasdaq has not explicitly 

required Canadian securities listed on 

Nasdaq to follow the general 

requirement that Nasdaq-listed 

securities have a CUSIP number; 

however, as a practical matter, all 

Canadian securities listed on Nasdaq 

have a CUSIP number. Likewise, 

although Nasdaq has not historically 

required an equivalent to the CUSIP 

number for non-Canadian foreign 

securities, all such securities currently 

listed on Nasdaq have an identifier. The 

use of a CUSIP number or foreign 

equivalent facilitates efficient clearing 

and settlement processes. Nasdaq 

believes that all securities listed on 

Nasdaq should have such a number to 

facilitate a fair and orderly market, and 

to date, all listed Companies have such 

a number. As such, Nasdaq is explicitly 

requiring all Nasdaq-listed securities to 

have a CUSIP number or equivalent, as 

denoted in proposed new Rule 

5210(g)(2). 

Rule 4320(e)(1) sets forth the Capital 

Market non-Canadian foreign securities 

and American Depository Receipt initial 

and continued listing requirements 

regarding market makers. Nasdaq is 

moving a part of Rule 4320(e)(1), which 

discusses how such a deficiency is 

determined and the timeframe in which 

to regain compliance, to proposed new 

Rule 5810(c)(3)(B). Unlike Rule 

4310(c)(8)(A), which is the Capital 

Market Domestic and Canadian 

Company continued listing requirement 

for Market Makers, Rule 4320(e)(1) is 

silent on how a Company can regain 

compliance with the non-Canadian 

foreign securities and American 

Depository Receipt continued listing 

Market Maker requirement. As a matter 

of practice, Nasdaq has applied the 

same test to non-Canadian foreign 

securities and American Depository 

Receipts as Domestic and Canadian 

issues. As such, proposed new Rule 

5810(c)(3)(B) applies both to Domestic 

and Canadian Companies, as well as 

non-Canadian foreign securities and 

American Depository Receipts, and 

includes a description of how 

compliance can be achieved based on 

Rule 4310(c)(8)(A). 

Nasdaq is proposing to divide Rules 

4310(c)(14) and 4320(e)(12), which set 

forth the requirement that Companies 

provide Nasdaq with three copies of all 

reports and other documents filed or 

required to be filed with the 

Commission, into two new rules. 

Proposed Rule 5205(d) applies to 

Companies seeking initial listing, and in 

which Nasdaq has proposed reducing 

the number of paper copies of required 

reports and documents that must 

provided to Nasdaq by Companies that 

do not file through EDGAR System from 

three to one. Proposed Rule 5250(c)(1) 

applies to the continued listing of 

securities and allows Companies that do 

not file through the Commission’s 

EDGAR System to comply with the rule 

by providing Nasdaq two copies of 

required reports and documents, which 

can be provided by e-mail. Nasdaq has 

also added a requirement to both of the 

proposed new rules not found in Rule 

4320(e)(12) that requires annual reports 

to contain audited financial statements. 

Rule 4310(c)(14) requires that Domestic 

and Canadian Companies have audited 

financial statements in their annual 

reports; however, there is not an 

analogous requirement for securities 

listed pursuant Rule 4320, 

notwithstanding that Companies listing 

non-Canadian foreign securities or 

American Depository Receipts must 

have audited financial statements in 

their annual reports pursuant to Rule 

4350(b)(1)(A). Accordingly, Nasdaq is 

adding clarifying language to make it 

clear that the audited financial 

statement requirement applies equally 

to all Companies. 

Rules 4310(c)(22) and 4420(h)(3) set 

forth the specific disclosure 

requirements for Companies applying to 

list units on the Capital Market and 

Global Market, respectively. Nasdaq 

proposes moving Rules 4310(c)(22) and 

4420(h)(3) to new Rules 5225(b) and 

5225(a), respectively. Although, no 

changes are made to the rule text in the 

new proposed rules, Nasdaq is making 

clear that when determining eligibility 

for listing units, all components of the 

unit must meet Nasdaq initial listing 

standards, including Rule 4310(a)(1), as 

found in proposed Rule 5210(a)(1), 

which require securities to be registered 

pursuant to Section 12(b) under the 

Act.23

Nasdaq has combined Rules 4340(b) 

and 4450(f), which concern Nasdaq’s 

process with respect to Companies in 

bankruptcy or the liquidation process. 

Under Rule 4300, Nasdaq has broad 


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discretionary authority over the initial 

and continued listing of securities on all 

Nasdaq market tiers, including using 

such authority when a Company files 

for protection under any provision of 

the Federal bankruptcy laws or 

comparable foreign laws. Rule 4340(b) 

details Nasdaq’s discretionary authority 

to delist a Company should it file for 

bankruptcy protection and describes 

further a Company’s obligations should 

Nasdaq not exercise its discretion to 

delist. Rule 4450(f) is a Global Market 

rule that restates Nasdaq’s authority to 

delist a Company should it file for 

bankruptcy stated in Rule 4340(b), but 

also provides that Nasdaq may delist a 

Company’s securities if it has 

announced that liquidation has been 

authorized by its board of directors and 

that it is committed to proceed. 

Although it has been a long-standing 

practice of Nasdaq to exercise its 

discretionary authority to delist a 

Company from any market tier should 

such a Company announce that 

liquidation has been authorized by its 

board, Rule 4340(b) was silent on how 

Nasdaq would proceed in cases 

involving Capital Market Companies. 

Accordingly, Nasdaq is combining Rule 

4340(b) and 4450(f) into new Rule 

5110(b) so that it is clear that any 

Nasdaq Company, regardless of tier, 

may be delisted should it announce that 

its board determined to liquidate the 

Company. 

Rule 4350(i)(3) describes what shares 

are considered for calculations 

involving shareholder approval. Often 

confusing to Companies, Nasdaq has 

rewritten the rule in proposed new Rule 

5635(e)(1) to clarify the application of 

the old rule by providing additional 

detail on the method used to calculate 

shares issued in a transaction, and the 

method to determine the number of 

shares outstanding. The new rule, 

however, does not change the 

application or calculation found in Rule 

4350(i)(3). 

Nasdaq proposes combining part of 

Rule 4410(a) and Rule 4330 into new 

Rule 5205(e). Rule 4410(a) is a Global 

Market rule that requires, in part, 

Companies to provide Nasdaq 

information relevant to an initial listing 

determination upon Nasdaq’s request. 

Rule 4330 sets forth Nasdaq’s general 

authority to request any additional 

information or documentation, public or 

non-public, deemed necessary to make 

a determination regarding a security’s 

initial or continued listing. Under the 

new combined Rule 5205(e), Nasdaq is 

applying the broader authority to 

request any information or 

documentation to make a an initial 

listing determination found in Rule 

4330, which currently applies to all 

market tiers. As a result, the new Rule 

will be a more accurate reflection of the 

already existing authority to request 

information found under Rule 4330. 

Nasdaq has made clarifying changes 

to Rule 4426(f), which explains what 

type of securities other than common 

stock may be included in the Global 

Select Market, as found under proposed 

new Rule 5320. Nasdaq has clarified the 

type of securities that may be listed on 

the Global Select Market by using the 

defined term Primary Equity Security to 

replace the term ‘‘common stock’’ and 

by noting the types of securities that are 

not eligible to be listed with a cross 

reference to the rule governing such 

securities’ listing. The defined term 

Primary Equity Security includes 

common stock in addition to Ordinary 

Shares, Shares or Certificates of 

Beneficial Interest of Trust, Limited 

Partnership Interests or American 

Depositary Receipts or American 

Depositary Shares, all of which are 

eligible for listing on the Global Select 

Market under the current rules. 

Nasdaq has expanded the scope of the 

4800 Series, now found in the 5800 

Series, to include details on deficiency 

processing. In the 4800 Series, for 

example, a description of the 

compliance periods available to a 

Company that failed to meet the bid 

price requirement was located in the 

4310, 4320 and 4450 Series. In the new 

rules, Nasdaq proposes consolidating all 

these descriptions into the 5800 Series. 

As a consequence, Nasdaq has changed 

the introductory language to the 4800 

Series that was previously contained in 

Rule 4802(a) and now found in the 

introduction to the 5800 Series to 

include more than procedures for the 

independent review of Nasdaq 

determinations. The new 5800 Series 

introduction describes all the 

procedures for Companies found to be 

deficient in Nasdaq listing 

requirements. 

Nasdaq is proposing to add new 

clarifying language to Rule 4802(c), 

found in proposed new Rule 5840(b). 

The proposed new rule clarifies that 

information compiled under the rule 

will be made part of the record, which 

includes any written notice provided by 

the Adjudicator requesting information, 

responses to the notice, and the 

information considered. Although this 

authority is also stated in Rule 4811, 

which concerns the record on review in 

a proceeding and can be found under 

Rule 5840, Nasdaq believes that it is 

appropriate to make this authority clear 

under proposed Rule 5840(b) as well. 

Nasdaq is proposing to make 

clarifying changes to Rule 4803, as 

found in new Rule 5810. Rule 4803(a) 

requires, among other things, staff of the 

Listing Qualifications Department to 

immediately notify a Company once the 

staff has determined that the Company 

does not meet a listing standard. This 

requirement is found in proposed new 

Rule 5810, which also provides 

additional clarifying information 

regarding the types of notifications sent 

by staff to Companies that fail to meet 

a listing standard. Nasdaq believes such 

clarifying information is helpful to 

Companies in understanding Nasdaq’s 

deficiency notice process. 

Nasdaq is proposing to make 

clarifying changes to Rule 4803(a)(3), 

which sets forth the process that Nasdaq 

Listing Qualifications Department staff 

will follow when it determines that a 

Company does not meet a listing 

standard that provides for a compliance 

period or certain standards that provide 

a cure period. The requirements of Rule 

4803(a)(3) are found in proposed new 

Rule 5810(c)(3). Proposed Rule 

5810(c)(3) also provides greater detail 

about the compliance periods and cure 

periods afforded under the rules 

implicated by Rule 4803(a)(3), since the 

relevant language formerly located in 

Rules 4310, 4320, 4350, 4360, and 4450 

has been incorporated into proposed 

new Rule 5810(c)(3). Nasdaq believes 

that consolidating the applicable rules 

under the new rule provides a more 

useful format, and that providing more 

descriptive information will help the 

reader to better understand the 

deficiency process. 

Nasdaq is proposing to make 

clarifying changes to Rule 4803(a)(4), 

which states that Nasdaq will issue a 

Staff Determination letter in all cases 

not noted in Rules 4803(a)(1)–(3). This 

requirement is found in proposed new 

Rule 5810(c), but because the new rule 

is structured as the introductory 

paragraph for various types of notices 

provided by staff, Nasdaq has added 

new descriptive information to Rule 

5810(c) that explains that the type of 

deficiency identified by Listing 

Qualifications Department staff will 

determine whether the Company will 

receive immediately a delisting 

determination resulting in the 

suspension of the Company’s securities 

unless appealed, or if the Company will 

be afforded the opportunity to provide 

staff with a compliance plan, or receive 

a cure period or compliance period 

prior to receiving a delisting 

determination. 

Nasdaq proposes clarifying changes to 

Rule 4804(a), as found in proposed new 

Rules 5810(a)(1)–(3). The old rule was 

significantly expanded to provide 

greater detail on the types of letters 


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issued by Staff, and the effects of these 

letters. Rule 4804(a) only specifies what 

is contained in a Staff Delisting 

Determination. Proposed Rules 

5810(a)(1)–(3) provide detail on what is 

contained in each type of deficiency 

letter. Similarly, Nasdaq has added 

clarifying language to Rules 4804(c)–(d), 

as found in proposed new Rule 5810(d). 

Rules 4804(c)–(d) discuss the written 

notices of additional deficiencies from 

Staff to Companies under the review of 

an Adjudicatory Body. New Rule 

5810(d) provides more clarity on 

notifications of additional deficiencies 

that are identified by Staff for a 

Company under the review of an 

Adjudicatory Body. 

Nasdaq Rule 4805 concerns requests 

for hearings before the Hearings Panel. 

Pursuant to the rule, a Company must 

request a hearing within seven calendar 

days of the Staff Determination. The 

rule, however, is unclear on the form 

that the request must be made (i.e., oral 

or written). In contrast, Rule 4807 

explicitly states that Companies 

requesting a review by the Nasdaq 

Listing and Hearing Review Council 

must do so in writing. Rule 4808 

concerns the reconsideration of both 

Hearings Panel and Nasdaq Listing and 

Hearing Review Council decisions. 

Pursuant to Rule 4808(a), a Company 

may request the Hearings Panel 

reconsider a Hearings Panel Decision 

upon the basis that a mistake of material 

fact existed at the time of the Decision. 

A similar provision applicable to 

Nasdaq Listing and Hearing Review 

Council Decisions is found in Rule 

4808(b). Rules 4808(a) and (b), however, 

are silent on the form that such requests 

must be made. Although it is common 

practice for Companies to submit 

requests pursuant to Rules 4805 and 

4808(a) and (b) in writing, Nasdaq 

believes that such a practice should be 

codified in the proposed 5800 Series. 

Written requests not only provide 

documentation of such requests, they 

also become part of the written record 

on review. Accordingly, Nasdaq is 

taking this opportunity to harmonize the 

process for these rules by requiring all 

such request to be in writing, as 

provided by proposed new Rules 5815, 

5820(a), 5815(d)(5), and 5820(e)(4). 

Nasdaq also proposes combining, in 

part, Rules 4804(e) and 4805(a). Rule 

4804 concerns written notices of staff 

determinations, and paragraph (e) states 

that a Company that fails to request a 

Panel hearing timely after receiving a 

Staff Determination, other than a Public 

Reprimand, will be subject to 

suspension and delisting. Rule 4805 

concerns requests for Panel hearings, 

and paragraph (a), among other things, 

sets forth the process for requesting a 

Panel hearing timely, yet does not 

mention that failure to request a hearing 

timely will result in suspension and 

delisting as discussed in Rule 4804(e). 

Nasdaq is proposing to combine the two 

rules into new Rule 5815(a)(2), which 

will provide a central location for all 

consequences resulting from failing to 

request a Panel hearing timely, and will 

make clear that such a failure will result 

in the immediate suspension and 

delisting. 

Nasdaq is proposing to make 

clarifying changes to Rule 4805(c), as 

found in new Rule 5815(a)(5). Rule 

4805(c) describes the nature of the 

written submission that a Company may 

provide as part of the hearings process, 

which could state the specific grounds 

for the Company’s contention that the 

Staff Determination was in error, or 

could request that the Hearings Panel 

grant the Company an exception to the 

listing standards, as permitted by Rule 

4802. Proposed new Rule 5815(a)(5) 

provides a more detailed description of 

the submission that a Company may 

submit to the Hearings Panel when 

seeking an exception to the listing 

standards. In particular, the new rule 

provides that a Company’s submission 

may be in the form of a written plan to 

regain compliance with Nasdaq listing 

standards together with a request that 

the Panel grant the Company an 

exception to the listing standards to 

regain compliance, as permitted by 

proposed new Rule 5815(c)(1)(A). 

Although not stated in the old rule, the 

ability to provide a plan of compliance 

and request an exception is implied by 

the fact that the Hearings Panel may 

grant exceptions to the listing standards. 

Nasdaq is also proposing to add further 

clarifying language that makes clear that 

the Hearings Panel will review the 

written record prior to the hearing, 

consistent with proposed new Rule 

5840(a), which addresses the record on 

review and captures much of the current 

rule that addresses the record on review, 

Rule 4811. 

Nasdaq is proposing clarifying 

changes to Rule 4806(a), which sets 

forth the Panel Hearing process. Rule 

4806(a) provides, among other things, 

that a Company may make a 

presentation as it deems appropriate to 

the Hearings Panel. Rule 4806(a) does 

not make a distinction between an oral 

hearing and a written hearing. Much of 

Rule 4806(a) is conveyed in new Rule 

5815(a)(6), which concerns 

presentations at Panel Hearings. In the 

proposed new rule, Nasdaq is making it 

clear that presentations by Companies 

are allowed only at oral hearings. The 

limitation to oral hearings is consistent 

with Nasdaq’s long-standing practice. 

Nasdaq is proposing to add clarifying 

language to Rule 4811(b), which 

concerns additional documents 

considered as part of the written record 

in a proceeding. Rule 4811(b) provides 

that if any additional information is 

considered as permitted by Rule 

4802(c), that information and any 

written submission addressing the 

significance of that information, shall be 

made part of the record. Rule 4802(c) 

provides, among other things, that an 

Adjudicator may request additional 

information from the Company or 

Listing Qualifications Department, and 

may consider information from any 

source it deems relevant. Rule 

4802(c)(2) provides that the Listing 

Qualifications Department and 

Company will be afforded written notice 

and an opportunity to address the 

significance of information from any 

source the Adjudicatory Body deems 

relevant to consider. Rule 4802(c)(2) 

does not, however, note that the 

information considered by Adjudicatory 

Body and any written submissions 

addressing the significance of such 

information by the Listing 

Qualifications Department or Company 

will be made part of the record. Nasdaq 

proposes combining Rules 4802(c)(2) 

and 4811(b) into new Rule 5840(b)(2), 

which will provide a single location for 

the rules applicable to information from 

sources other than the Listing 

Qualifications Department and 

Company considered by an 

Adjudicatory Body. 

Nasdaq is proposing clarifying 

changes to Rule 4811(e), which sets 

forth the scope of what action an 

Adjudicatory Body Decision may direct 

if it is determined that a Company failed 

to satisfy the quantitative standards or 

qualitative considerations set forth in 

the 4000 Series. Currently, Rule 4811(e) 

applies equally to the Hearings Panel, 

Listing Council and the Board. Nasdaq 

is proposing to house rules generally 

applicable to the review by the Hearings 

Panel, Listing Council, and Board under 

proposed new Rule Series 5815, 5820, 

and 5825, respectively. Proposed Rules 

5815(c)(1) and (2) address the scope of 

the Hearings Panel’s discretion, and 

contains the requirements found in Rule 

4811(e). Unlike Rule 4811(e), which 

describes only the action a Hearings 

Panel may take in issuing a decision if 

it concludes that a Company has failed 

to satisfy a qualitative or quantitative 

listing standard, proposed Rules 

5815(c)(1) and (2) describe the possible 

action the Hearings Panel may take in 

issuing a decision and is not limited to 

a determination that a Company has 


pwalker on PROD1PC71 with NOTICES
15560 Federal Register / Vol. 74, No. 64 / Monday, April 6, 2009 / Notices 

24 15 U.S.C. 78f. 

25 15 U.S.C. 78f(b)(5). 

26 Id. 

27 15 U.S.C. 78s(b)(3)(A). 

28 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the self-regulatory organization 

to give the Commission notice of its intent to file 

the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. Nasdaq has 

satisfied this requirement. 29 17 CFR 200.30–3(a)(12). 

failed to meet a listing standard. As 

such, proposed Rules 5815(c)(1) and (2) 

provide significantly greater clarity on 

the options available to the Hearings 

Panel when issuing a decision by 

including the alternatives should a 

Company regain compliance with an 

applicable standard during the Hearings 

process. In that regard, the new rule 

includes in Rule 5815(c)(1)(E) the 

Panel’s options when determining that a 

Company has evidenced compliance 

with all the applicable listing standards. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 6 under the Act,24

in general and with Section 6(b)(5) 

under the Act,25 in particular. Section 

6(b)(5) 26 requires that Nasdaq’s rule be 

designed to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Nasdaq believes that reorganizing the 

Listing Rules into a new, more intuitive 

structure will help avoid investor 

confusion and foster better 

understanding of Nasdaq’s listing 

requirements among both investors and 

companies alike. Nasdaq also believes 

that the use of plain English and 

descriptive language will help make the 

Listing Rules more accessible to the 

investing public. As such, Nasdaq 

believes the proposed rule change will 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and protect investors and the 

public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

On December 3, 2007, Nasdaq 

solicited comment from issuers on the 

impact of the revisions to the rules. 

Nasdaq received three responses to this 

solicitation, two from representatives of 

companies and one from a law firm. 

One of the commentators voiced 

support for the rule change. Two 

commentators suggested minor changes 

to enhance the readability and ease of 

use of the new rules. Specifically, one 

commentator suggested clarifying the 

meaning of a particular sentence, and 

the other suggested that Nasdaq use 

hyperlinks throughout the rule text to 

help readers navigate to rules or 

interpretive material referenced in the 

rule text. In response, Nasdaq has 

amended the sentence consistent with 

the comment. Nasdaq also plans on 

using hyperlinks within its on-line 

manual to simplify navigation. 

The third commentator requested 

clarification on Nasdaq’s changes so that 

he could more fully reply. This 

commentator did not provide a followon submission to Nasdaq. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days after the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 27 and Rule 19b– 

4(f)(6) thereunder.28

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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

Number SR–NASDAQ–2009–018 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2009–018. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Nasdaq 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NASDAQ–2009–018 and should be 

submitted on or before April 27, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–7630 Filed 4–3–09; 8:45 am] 

BILLING CODE 8010–01–P 


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