Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Notices 23285

6 15 U.S.C. 78s(b)(3)(A).

7 17 CFR 240.19b–4(f)(5).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3See Letter from Sara Nelson Bloom, Associate

General Counsel, Nasdaq, to Katherine A. England,

Assistant Director, Division of Market Regulation,

Commission (April 25, 2001). In Amendment No. 1,

Nasdaq provided a chart that clarifies the proposed

schedule for implementing the new listing

standards and made certain technical corrections to

the proposal.

does not impose any significant burden

on competition, and that does not have

the effect of limiting the access to or

availability of the system, it has become

effective pursuant to Section 19(b)(3)(A)

of the Act 6 and subparagraph (f)(5) of

the Rule 19b–4 thereunder.7 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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. Copies of

the submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are fled with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

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

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the CBOE. All

submissions should refer to File No.

CBOE–2001–12 and should be

submitted by May 29, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–11474 Filed 5–7–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44243; File No. SR–NASD–

2001–14]

Self-Regulatory Organizations; Notice

of Filing and Order Accelerating Partial

Approval of Proposed Rule Change

and Amendment No. 1 Thereto by the

National Association of Securities

Dealers, Inc. To Modify Certain Initial

and Continued Listing Standards on

Nasdaq

May 1, 2001.

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

Securities Exchange Act of 1934

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

notice is hereby given that on March 8,

2001, the National Association of

Securities Dealers, Inc. (‘‘NASD’’),

through its subsidiary, The Nasdaq

Stock Market, Inc. (‘‘Nasdaq’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by Nasdaq. On

April 26, 2001, Nasdaq submitted

Amendment No. 1 to the proposal.3 The

proposal would modify certain initial

and continued listing standards on

Nasdaq. Nasdaq has also proposed a

pilot program that would give

immediate effectiveness to certain of the

new listing standards. The Commission

is publishing this notice and order to

solicit comments on the proposed rule

change from interested persons and to

grant accelerated approval to that

portion of the proposal relating to the

pilot program.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq has filed with the

Commission a proposal to amend NASD

Rules 4200, 4310, 4320, 4420, and 4450

and thereby modify certain quantitative

initial and continued listing standards

on Nasdaq. Nasdaq proposes to

implement a pilot program that would

allow issuers, with respect to certain of

the new standards, to comply with

either the existing standards or the

proposed new standards. The pilot

program is designed to ensure that

issuers that meet the new standards but

not the existing standards are not

delisted before the Commission takes

final action on the proposed rule

change. The standards that would be

included in the pilot are: (1) The new

bid price requirement found in NASD

Rule 4450(b)(4); and (2) the new equity

standard, which replaces the old net

tangible assets standard, found in NASD

Rules 4310(c)(2)(A)(i), 4310(c)(2)(B)(i),

4320(e)(2)(A)(i), 4320(e)(2)(B)(i),

4420(a)(5), 4420(b)(1), and 4450(a)(3).

Nasdaq has proposed that the pilot

program would expire on July 1, 2001,

or such earlier time as the Commission

takes action on the overall proposal.

Below is the text of the proposed rule

change. Proposed new language is

underlined; proposed deletions are in

brackets.

* * * * *

4200. Definitions

(a) For purposes of the Rule 4000

Series, unless the context requires

otherwise:

(1)–(27) No change.

(28) Reserved [‘‘Net Tangible Assets’’

shall mean total assets (including the

value of patents, copyrights and trade

marks but excluding the value of

goodwill) less total liabilities.]

(29)–(36) No change.

4310. Qualification Requirements for

Domestic and Canadian Securities

To qualify for inclusion in Nasdaq, a

security of a domestic or Canadian

issuer shall satisfy all applicable

requirements contained in paragraphs

(a) or (b), and (c) hereof.

(a)–(b) No change.

(c) In addition to the requirements

contained in paragraph (a) or (b) above,

and unless otherwise indicated, a

security shall satisfy the following

criteria for inclusion in Nasdaq:

(1) For initial inclusion, the issue

shall have three registered and active

market makers, and for continued

inclusion, the issue shall have two

registered and active market makers,

one of which may be a market maker

entering a stabilizing bid.

(2) (A) For initial inclusion, the issuer

shall have:

(i) [net tangible assets of $4 million]

stockholders’ equity of $5 million;

(ii) market capitalization of $50

million (currently traded issuers must

meet this requirement and the bid price

requirement under Rule 4310(c)(4) for

90 consecutive trading days prior to

applying for listing); or

(iii) net income of $750,000

(excluding extraordinary or nonrecurring items) in the most recently

completed fiscal year or in two of the

23286 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Notices

last three most recently completed fiscal

years.

(B) For continued inclusion, the

issuer shall maintain:

(i) [net tangible assets of $2 million]

stockholders’ equity of $2.5 million;

(ii) market capitalization of $35

million; or

(iii) net income of $500,000

(excluding extraordinary or nonrecurring items) in the most recently

completed fiscal year or in two of the

last three most recently completed fiscal

years.

(3)–(29) No change.

(d) No change.

4320. Qualification Requirements for

Non-Canadian Foreign Securities and

American Depositary Receipts

To qualify for inclusion in Nasdaq, a

security of a non-Canadian foreign

issuer, an American Depositary Receipt

(ADR) or similar security issued in

respect of a security of a foreign issuer

shall satisfy the requirements of

paragraphs (a), (b) or (c), and (d) and (e)

of this Rule.

(a)–(d) No change.

(e) In addition to the requirements

contained in paragraphs (a), (b) or (c),

and (d), the security shall satisfy the

following criteria for inclusion in

Nasdaq:

(1) No change.

(2) (A) For initial inclusion, the issuer

shall have:

(i) [net tangible assets of U.S. $4

million] stockholders’ equity of $5

million;

(ii) market capitalization of U.S. $50

million (currently traded issuers must

meet this requirement for 90 consecutive

trading days prior to applying for

listing;) or

(iii) net income of U.S. $750,000

(excluding extraordinary or nonrecurring items) in the most recently

completed fiscal year or in two of the

last three most recently completed fiscal

years.

(B) For continued inclusion, the

issuer shall maintain:

(i) [net tangible assets of U.S. $2

million] stockholders’ equity of $2.5

million;

(ii) market capitalization of U.S. $35

million; or

(iii) net income of U.S. $500,000

(excluding extraordinary or nonrecurring items) in the most recently

completed fiscal year or in two of the

last three most recently completed fiscal

years.

(C) An issuer’s [net tangible assets]

qualifications will be determined on the

basis of [a balance sheet] financial

statements prepared in accordance with

U.S. generally accepted accounting

principles or those accompanied by

detailed schedules quantifying the

differences between U.S. generally

accepted accounting principles and

those of the issuer’s country of domicile.

(D)–(E) No change.

(3)–(25) No change.

(f) No change.

4420. Quantitative Designation Criteria

In order to be designated for The

Nasdaq National Market, an issuer shall

be required to substantially meet the

criteria set forth in paragraphs (a), (b),

(c), (d), (e), (f), or (g) below. Initial

Public Offerings substantially meeting

such criteria are eligible for immediate

inclusion in The Nasdaq National

Market upon prior application and with

the written consent of the managing

underwriter that immediate inclusion is

desired. All other qualifying issues,

excepting special situations, are

included on the next inclusion date

established by Nasdaq.

(a) Entry Standard 1

(1) The issuer of the security had

annual pre-tax income of at least

$1,000,000 (excluding extraordinary or

non-recurring items) in the most

recently completed fiscal year or in two

of the last three most recently

completed fiscal years.

(2) There are at least 1,100,000

publicly held shares.

(3) The market value of publicly held

shares is at least $8 million.

(4) The bid price per share is $5 or

more.

(5) The issuer of the security has [net

tangible assets of at least $6 million]

stockholders’ equity of $15 million.

(6) The issuer has a minimum of 400

round lot stockholders.

(7) There are at least three registered

and active market makers with respect

to the security.

(b) Entry Standard 2

(1) The issuer of the security has [net

tangible assets of at least $18 million]

stockholders’ equity of at least $30

million.

(2) There are at least 1,100,000

publicly held shares.

(3) The market value of publicly held

shares is at least $18 million.

(4) The bid price per share is $5 or

more.

(5) There are at least three registered

and active market makers with respect

to the security.

(6) The issuer has a two-year

operating history.

(7) The issuer has a minimum of 400

round lot stockholders.

(c) Entry Standard 3

An issuer designated under this

paragraph does not also need to be in

compliance with the quantitative

criteria for initial inclusion in the Rule

4300 series.

(1) There are at least 1,100,000

publicly held shares.

(2) The market value of publicly held

shares is at least $20 million.

(3) The bid price per share is $5 or

more.

(4) There are at least four registered

and active market makers with respect

to the security.

(5) The issuer has a minimum of 400

round lot stockholders.

(6) The issuer has:

(A) a market capitalization 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.

(d)–(h) No change.

4450. Quantitative Maintenance

Criteria

After designation as a Nasdaq

National Market security, a security

must substantially meet the criteria set

forth in paragraphs (a) or (b), and (c),

(d), (e), and (f) below to continue to be

designated as a national market system

security. A security maintaining its

designation under paragraph (b) need

not also be in compliance with the

quantitative maintenance criteria in the

Rule 4300 series.

(a) Maintenance Standard 1—

Common Stock, Preferred Stock, Shares

or Certificates of Beneficial Interest of

Trusts and Limited Partnership Interests

in Foreign or Domestic Issues

(1) 750,000 shares publicly held;

(2) Market value of publicly held

shares of $5 million;

(3) The issuer has [net tangible assets

of at least $4 million] stockholders’

equity of at least $10 million;

(4) 400 stockholders of round lots;

and

(5) Minimum bid price per share of

$1.

(b) Maintenance Standard 2—

Common Stock, Preferred Stock, Shares

or Certificates of Beneficial Interest of

Trusts and Limited Partnership Interests

in Foreign or Domestic Issues

(1) The issuer has:

(A) a market capitalization of $50

million; or

(B) total assets and total revenue of

$50 million each for the most recently

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Notices 23287

4See infra Section V.

5See NYSE Rules 102 and 103 (initial listing

standards), 802 (continued listing standards); Amex

Listing Rules 102 (initial listing standards) and

1003 (continued listing standards.)

6See Securities Exchange Act Release No. 38961

(August 22, 1997), 62 FR 45895 (August 29, 1997)

(approving SR–NASD–97–16).

7Nasdaq has stated that this requirement would

not apply to an issuer listing as part of its initial

public offering, because the same concerns do not

exist.

completed fiscal year or two of the last

three most recently completed fiscal

years.

(2) 1,100,000 shares publicly held;

(3) Market value of publicly held

shares of $15 million;

(4) Minimum bid price per share of

[$5] $3;

(5) 400 stockholders of round lots;

and

(6) At least four registered and active

market makers.

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 and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. Nasdaq has prepared

summaries, set forth in Sections A, B,

and C below, of the most significant

aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The proposed rule change would: (1)

Replace the net tangible assets standard

with an equity standard; (2) require that

currently trading issuers applying for

initial listing under the market

capitalization alternative demonstrate

90 days of sustained compliance with

the bid price and market capitalization

requirements before they are eligible to

apply to become listed; (3) clarify the

Nasdaq will exclude extraordinary or

non-recurring items for purposes of

determining compliance with the

income standard; and (4) adjust the bid

price requirement associated with

continued listing on the Nasdaq

National Market under the market

capitalization standard from $5 or $3.

Nasdaq states that these changes were

designed to have minimal impact on

issuers in the marketplace while

providing greater transparency and

consistency.

In addition, Nasdaq has proposed a

pilot program that will allow issuers

that meet the new original listing and

maintenance standards but not the old

standards to remain listed on Nasdaq for

a short period while the Commission

considers the overall proposal.4

The Equity Standard

Companies may qualify for initial or

continued inclusion on the Nasdaq

National Market or the Nasdaq

SmallCap Market based, in part, on their

net tangible assets. Net tangible assets

are defined as total assets less total

liabilities less goodwill. Nasdaq

proposes to change from this net

tangible assets standard to an equity

standard for several reasons. First, the

equity standard is more transparent to

investors, as it is reflected in issuer

financial statements, as opposed to the

net tangible assets standard which must

be manually calculated. For this reason,

the equity standard will also provide a

better framework for complimentary

standards in Nasdaq’s developing

international markets. Second, the

change would respond to recent

accounting developments which may

tend to require an increase in the

booking of goodwill. Finally, the use of

an equity standard is consistent with

listing standards on the New York Stock

Exchange (‘‘NYSE’’) and the American

Stock Exchange.5

With respect to the Nasdaq National

Market, the $6 million net tangible

assets requirement for initial listing

under Entry Standard 1 (for companies

with pre-tax income of at least $1

million in the latest fiscal year or two

of the last three years) would be

changed to a $15 million stockholders’

equity requirement, and the $18 million

net tangible assets requirement under

Entry Standard 2 (for companies

without the above-referenced pre-tax

income) would be changed to $30

million in stockholders’ equity. In

addition, the $4 million net tangible

assets continued listing requirement

would be changed to $10 million in

stockholder’s equity. With respect to the

Small Cap Market, the $4 million net

tangible assets initial inclusion

requirement would be changed to $5

million in stockholders’ equity, and the

$2 million net tangible assets continued

inclusion requirement would be

changed to $2.5 million in stockholders’

equity.

Seasoning Period for Applicants Relying

on the Market Capitalization Standard

Companies may qualify for listing on

Nasdaq based, in part, on their market

capitalization. The market capitalization

listing standards were originally

adopted in 1997 to permit the inclusion

of certain financially sound issuers that

could not qualify under the net tangible

assets requirement as a result of

accounting conventions such as the

booking of goodwill associated with

various merger and acquisition activities

or significant depreciation charges.6

These standards permit an issuer to list

with a bid price of $5 and a market

capitalization of $75 million (in the case

of the Nasdaq National Market) or a bid

price of $4 and a market capitalization

of $50 million (in the case of the Nasdaq

SmallCap Market).

Since the adoption of the rule, Nasdaq

has noted certain instances where

publicly traded companies (including

companies quoted on the OTC Bulletin

Board) have applied to list on Nasdaq

based on the market capitalization

listing standards. In these

circumstances, companies may be able

to evidence compliance based on shortterm price reaction to favorable news,

which price increase may not be

sustainable over the long term.

Accordingly, Nasdaq proposes a

‘‘seasoning’’ period of 90 days of

currently traded issuers, such that an

issuer must maintain the required bid

price and market capitalization for that

period prior to applying for listing.

Nasdaq believes that this seasoning

period, especially when coupled with

the time necessary to review and

process any such application, would

provide assurance that a company

would be unable to secure a Nasdaq

listing based on an unsustainable, shortterm run-up in its stock price.7

Extraordinary and Non-Recurring

Income Items

The income standards for the Nasdaq

Stock Market currently make no

provision for the exclusion of

extraordinary or non-recurring items

when assessing an issuer’s compliance

with the income requirements for listing

on Nasdaq. However, Nasdaq believes

that it is appropriate to exclude

extraordinary and non-recurring income

items because they do not provide a

continuing benchmark of the issuer’s

financial performance. Accordingly,

Nasdaq proposes that the National

Market and SmallCap Market rules

relating to the income standards be

amended to indicate that the income

determination will exclude

extraordinary and non-recurring items.

23288 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Notices

8See NASD Rules 4420(c) and 4450(j).

9This table sets forth an implementation

schedule proposed by Nasdaq. It should not be

interpreted as suggesting that the Commission is

predisposed to approving the new standards on a

permanent basis.

10 15 U.S.C. 78o–3(b)(6).

Bid Price Standard for Issuers

Qualifying Under the Market

Capitalization Standard

Issuers that seek to qualify for the

Nasdaq National Market pursuant to the

market capitalization alternative 8 must

demonstrate a $5 bid price for both

initial and continued inclusion. Nasdaq

proposes to adjust the continued

inclusion standard, applicable to

Nasdaq National Market companies

qualifying under the market

capitalization standard, from $5 to $3.

This would harmonize this standard

with other standards by providing a

differential between the initial inclusion

and continued inclusion requirements.

Implementation

To minimize disruption to existing

issuers and to allow adequate time for

necessary corporate action to comply

with the stockholders’ equity standard,

Nasdaq proposes to provide its issuers

with 18 months following Commission

approval of the proposed pilot to come

into compliance with the new standard.

During this time, issuers that do not

meet the new stockholders’ equity

standard could qualify for continued

listing under the net tangible assets

standard.

Similarly, for issuers that applied for

listing prior to the effective date of the

rule, Nasdaq proposes that they

continue to be able to qualify for listing

under the listing standards in force at

the time of their application for a period

of 90 days from the effective date of the

proposed rule change, and thereafter

receive the same grace periods provided

to current issuers to come into

compliance with the new equity test.

Alternatively, such issuers may qualify

for listing under the new stockholders’

equity test for initial inclusion.

The graph below illustrates the

proposed schedule for implementation

of the new listing standards.9 The pilot

program is effective as of the date of this

release and will terminate upon the

earlier of July 1, 2001, or such time that

the Commission takes action on the

overall proposal. Implementation will

be complete 18 months following the

date of the Commission’s approval of

the pilot program.

PROPOSED IMPLEMENTATION SCHEDULE FOR SR–NASD–2001–14

Qualification standards Pilot program

90 Days following SEC approval order of permanent

rule

During 18 months following SEC approval order

of the pilot program

At expiration of 18 months

following SEC approval

order of the pilot program

Initial Listing Criteria: ....................................... ....................................... .......................................

Original Standards ..... Available (for net tangible

assets requirement only).

Available (for net tangible

assets requirement only).

Not available ..................... Not available.

New Standards ........... Available ............................ Available ............................ Available ............................ Available.

Continued Listing Criteria: ....................................... ....................................... .......................................

Original Standards ..... Available (for net tangible

assets requirement only).

Available (for net tangible

assets requirement only).

Not available..

New Standards ........... Available ............................ Available ............................ Available ............................ Available.

2. Statutory Basis

Nasdaq believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(6) of the

Act 10 in that it is designed to prevent

fraudulent and manipulative acts and

practices and to protect investors and

the public interest. As noted above,

Nasdaq states that the proposed rule

change is designed to have minimal

impact on issuers in the marketplace

while providing greater transparency

and consistency in its listing standards.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

Nasdaq does not believe that the

proposed rule change would result in

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reason for so finding, or (ii)

as to which the Nasdaq consents, the

Commission will:

(A) By order approve such proposed

rule change; or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change and Amendment No. 1 thereto

are consistent with the Act. Persons

making written submissions should file

six copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW, Washington, DC

20549–0609. Copies of the submission,

all subsequent amendments, all written

statements with respect to the proposed

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

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

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to File No.

SR–NASD–2001–14 and should be

submitted by May 29, 2001.

V. Accelerated Approval for Pilot

Program

Nasdaq has proposed a pilot program

that will operate for a short period while

the Commission considers the overall

proposal. During the pilot period,

currently listed issuers on Nasdaq that

might have difficulty meeting the old

maintenance standards would have the

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Notices 23289

11By approving the pilot, the Commission

permits Nasdaq, for the duration of the pilot period,

to replace the existing bid price and net tangible

assets standards with the new proposed standards.

However, if the pilot expires before the Commission

takes action on the proposed rule change, the old

standards would have to be reinstated because

Nasdaq would no longer have authority for the new

standards.

12For purposes of approving the pilot program on

an accelerated basis, the Commission has

considered the proposal’s impact on efficiency,

competition, and capital formation. See 15 U.S.C.

78c(f).

13 15 U.S.C. 78o–3(b)(6).

14See NASD Rules 4420(a)(5), 4420(b)(4), and

4420(c)(3).

15Compare NASD Rule 4420 (giving issuers of

Nasdaq National Market securities the option of

meeting one of three entry standards which include

requirements that the market value of publicly held

shares be at least $8 million, $18 million, or $20

million, respectively) with NASD Rule 4450 (giving

issuers of Nasdaq national Market securities the

option of meeting one of two maintenance

standards which include requirements that the

market value of publicly held shares be at least $5

million or $15 million, respectively).

16See Securities Exchange Act Release No. 42194

(December 1, 1999), 64 FR 69311 (December 10,

1999) approving SR–NYSE–99–29).

17See id., 64 FR at 69314.

18 15 U.S.C. 78s(b)(2).

19See Securities Exchange Act Release No. 41648

(July 26, 1999), 64 FR 41986 (August 2, 1999)

(publishing notice of SR–NYSE–99–29 and

approving on an accelerated basis a pilot program

relating to continued listing criteria); Securities

Exchange Act Release No. 41459 (May 27, 1999), 64

FR 30088 (June 4, 1999) (publishing notice of SR–

NYSE–99–17 and approving on an accelerated basis

a pilot program relating to original listing criteria).

20 15 U.S.C. 78s(b)(2).

21 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

option instead of meeting the new

maintenance standards. Similarly,

issuers that are applying for listing

could, during the pilot period, choose to

meet the proposed original listing

standards rather than the existing

original listing standards. The standards

that would be included in the pilot are:

(1) The new bid price requirement

found in NASD Rule 4450(b)(4); and (2)

the new stockholders’ equity standard,

which replaces the old net tangible

assets standard, found in NASD Rules

4310(c)(2)(A)(i), 4310(c)(2)(B)(i),

4320(e)(2)(A)(i), 4320(e)(2)(B)(i),

4420(a)(5), 4420(b)(1), and 4450(a)(3).

Nasdaq has proposed that the pilot

program would operate until July 1,

2001, or such earlier time as the

Commission acts on Nasdaq’s request

for permanent approval of the

proposal.11

The Commission finds that the

proposed pilot program is consistent

with the requirements of the Act and the

rules and regulations thereunder

applicable to the NASD.12 In particular,

the Commission believes that the

proposal is consistent with Section

15A(b)(6) of the Act.13 Section 15A(b)(6)

requires, among other things, that the

rules of a national securities association

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.

With respect to the pilot proposal to

lower the bid price requirement in

Maintenance Standard 2 of NASD rule

4450 from $5 to $3, the Commission

notes that the bid price requirement for

initial listing will remain $5.14 Nasdaq’s

listing rules generally establish a higher

initial requirement and a somewhat

lower continued requirement to allow

for market fluctuations.15 Establishing a

new bid price requirement of $3 for

continued listing would make this

standard similar to other existing

standards that require issuers to comply

with maintenance requirements that are

more flexible than the original listing

requirements. Accordingly, the

Commission believes it is reasonable

and consistent with the Act to approve

this aspect of the pilot program while

the Commission continues to study the

overall proposal by, among other things,

considering any public comments that

may be submitted.

With respect to the pilot proposal to

replace the net tangible assets standard

with a stockers’ equity standard, the

Commission notes that it has previously

approved a similar proposal to institute

market capitalization and stockholders’

equity requirements on the NYSE.16 In

that case, the Commission stated that

the amount of stockholders’ equity is

not an inappropriate measure of a

company’s suitability for listing on an

exchange.17 Accordingly, the

Commission believes it is reasonable

and consistent with the Act to approve

this aspect of the pilot program while

the Commission continues to study the

overall proposal by, among other things,

considering any public comments that

may be submitted.

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

Act,18 the Commission finds good cause

for approving the pilot program prior to

the thirtieth day after publication of the

filing of this proposal in the Federal

Register. The Commission believes that

accelerated approval of the pilot will

enable the Commission and Nasdaq to

gain experience with the new standards

before the Commission considers

granting them permanent approval.

Furthermore, the Commission notes that

accelerated approval of the pilot

program will allow certain issuers that

meet the proposed standards to remain

listed even if they might fail to meet the

existing standards. These companies, in

the absence of the pilot, would

immediately be subject to delisting as

required by the existing maintenance

criteria. If the Commission were

subsequently to approve the proposal on

a permanent basis, these companies

would be eligible to relist under the new

standards but only after delisting had

disrupted trading in their securities.

However, if the Commission were to

approve the pilot but not permanently

approve the proposal, these companies

would still have to be delisted, but the

timing of their delisting would have far

less potential for market disruption. In

the interests of reducing market

disruption, the Commission believes

that the better course of action would be

to approve the pilot program on an

accelerated basis. The Commission also

notes that it has approved similar pilot

programs on the NYSE relating to the

implementation of new listing

standards.19 Finally, the Commission

notes that the pilot will be of only short

duration, and the public will have an

opportunity to offer comments on all

aspects of the overall proposal.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,20 that the

proposed rule change (SR–NASD–2001–

14) is partially approved with respect to

the pilot program which will bend on

the earlier of July 1, 2001, or when the

Commission takes final action on the

overall proposal.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.21

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–11473 Filed 5–7–01; 8:45am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44246; File No. SR–NASD–

2001–29]

Self Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the National

Association of Securities Dealers, Inc.

To Establish the Nasdaq ReSource SM

Service

May 2, 2001.

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 April 24,

2001, the National Association of