51670 Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 42848 

(July 17, 2008), 73 FR 42848. 

4Specifically, the rule provides that, in 

determining whether a Reverse Merger has 

occurred, Nasdaq will consider all relevant factors 

including, but not limited to, changes in the 

management, board of directors, voting power, 

ownership, and financial structure of the issuer, as 

well as the nature of the businesses and relative size 

of the Nasdaq issuer and non-Nasdaq entity. 

Securities Exchange Act Release No. 44067 (March 

13, 2001), 66 FR 15515 (March 19, 2001) (SR–

NASD–01–01). 

5Securities Exchange Act Release No. 32264 (May 

4, 1993), 58 FR 27760 (May 11, 1993) (SR–NAS–93–

07). 

6See, e.g., Decision 2002/2003–9 of the Nasdaq 

Listing and Hearing Review Council (December 

2002), available at: http://www.nasdaq.com/about/ 

NLHRCDecisions20022003.pdf. 

7See Nasdaq IM–4350–1, footnote 4. 

8 15 U.S.C. 78f(b)(5). 

9 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). 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

19b–4 thereunder,2 a proposed rule 

change to clarify the application of 

certain Nasdaq listing rules when a 

Nasdaq-listed company combines with a 

non-Nasdaq entity. The proposed rule 

change was published for comment in 

the Federal Register on July 23, 2008.3

The Commission received no comments 

on the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

Nasdaq Rule 4340(a) requires that an 

issuer must apply for initial listing in 

connection with a transaction whereby 

the issuer combines with a non-Nasdaq 

entity, resulting in a change of control 

of the issuer and potentially allowing 

the non-Nasdaq entity to obtain a 

Nasdaq listing. The current Rule refers 

to such a transaction as a ‘‘Reverse 

Merger’’ and provides a non-exclusive 

list of factors that Nasdaq will consider 

to determine if a transaction should be 

considered a Reverse Merger for 

purposes of the Rule.4

Nasdaq notes that Rule 4340(a) was 

originally adopted in 1993 to address 

concerns associated with non-Nasdaq 

entities seeking a ‘‘backdoor listing’’ on 

Nasdaq through a business combination 

involving a Nasdaq issuer.5 In these 

combinations, a non-Nasdaq entity 

would purchase a Nasdaq issuer in a 

transaction that would result in the nonNasdaq entity obtaining a Nasdaq listing 

without qualifying for initial listing or 

being subject to the background checks 

and scrutiny normally applied to issuers 

seeking initial listing. 

While this Rule was originally 

adopted to deal with companies seeking 

a ‘‘backdoor listing’’ by acquiring a 

listed shell company, its language is not 

limited in that regard. Accordingly, 

Nasdaq states that it has applied the rule 

to any transaction where there is a 

change of control potentially allowing a 

non-Nasdaq entity to obtain a Nasdaq 

listing. For example, Nasdaq has 

applied the rule to mergers involving 

operating companies in substantially 

similar businesses and, in appropriate 

cases, to mergers of ‘‘equals,’’ where the 

companies are approximately the same 

size.6 This allows Nasdaq staff to review 

the post-transaction entity, including 

any new officers, directors and control 

persons, before the transaction is 

consummated, thereby allowing staff to 

confirm that the post-transaction entity 

will meet all initial listing criteria and 

that there are no public interest 

concerns. 

However, given the use of the term 

‘‘Reverse Merger’’ within Rule 4340(a), 

and the existence of a footnote in IM–

4350–1 referring to ‘‘backdoor 

listings,’’ 7 Nasdaq states that companies 

have expressed confusion as to the 

scope of the Rule. Nasdaq therefore 

proposes to remove these references 

from Rule 4340(a) and IM–4350–1 and 

instead refer simply to business 

combinations with non-Nasdaq entities 

resulting in a change of control. 

III. Discussion and Commission 

Findings 

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,8 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.9

The Commission believes that the 

proposed rule change will provide 

clarity to, and eliminate any ambiguity 

over, the scope of application of Nasdaq 

Rule 4340. In particular, the revised rule 

language will make clear that an issuer 

must satisfy the initial listing 

requirements whenever it enters into 

any transaction with a non-Nasdaq 

entity, resulting in a change of control 

of the listed company and potentially 

allowing the non-Nasdaq entity to 

obtain a Nasdaq listing. The 

Commission notes that the Rule will 

continue to apply to ‘‘backdoor listings’’

or ‘‘reverse mergers,’’ but that the 

proposed rule change will clarify that 

the Rule also applies to a broader 

category of business combinations that 

result in a change of control of the 

issuer. The Commission believes that, in 

the case of any transaction resulting in 

such a change of control, which 

includes a backdoor listing, it is 

important for Nasdaq to ensure that the 

company meets all initial listing criteria 

and is subject to the scrutiny normally 

applied to issuers seeking initial listing. 

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,10 that the 

proposed rule change (SR–NASDAQ–

2008–062) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20468 Filed 9–3–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58435; File No. SR–

NASDAQ–2008–070] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Regarding 

Fees and Credits for Members Using 

the Nasdaq Crossing Network 

August 27, 2008. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on August 

15, 2008, The NASDAQ Stock Market 

LLC (‘‘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. Pursuant to Section 

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

4(f)(2) thereunder,4 Nasdaq has 

designated this proposal as establishing 

or changing a due, fee, or other charge, 

which renders the proposed rule change 

effective upon filing. This rule proposal, 

which is effective upon filing with the 


sroberts on PROD1PC77 with NOTICES
Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 51671 

5Changes are marked to the rule text that appears 

in the electronic Nasdaq Manual found at http:// 

nasdaq.complinet.com. 

6See Securities Exchange Act Release No. 54248 

(July 31, 2006) (SR–NASDAQ–2006–019). Prior to 

the effective date of Nasdaq’s operation as an 

exchange for Nasdaq-listed securities, the rule 

governing the Nasdaq Crossing Network had been 

approved as an NASD rule (NASD Rule 4716). 

Securities Exchange Act Release No. 54101 (July 5, 

2006), 71 FR 39382 (July 12, 2006) (SR–NASD–

2005–140). 

7 15 U.S.C. 78f. 

8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78s(b)(3)(A)(ii). 

10 17 CFR 240.19b–4(f)(2). 

Commission, shall become operative on 

September 1, 2008. 

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 the [sic] 

Substance of the Proposed Rule Change 

Nasdaq is adopting a fee and credit 

schedule for the Nasdaq Crossing 

Network. 

The text of the proposed rule change 

is below. Proposed new language is in 

italics; proposed deletions are in 

brackets [sic].5

7018. Nasdaq Market Center Order 

Execution and Routing 

(a)–(e) No change. 

(f) Crossing Network 

All orders executed in the 

Nasdaq Crossing Network 

No charge for 

execution 

Credit for eligible executions 

through the Crossing Network from September 1, 

2008 through September 

30, 2008.

$0.0010 per 

share 

For the purposes of this subsection 

‘‘eligible executions’’ are all executions 

of trades through the Nasdaq Crossing 

Network other than those executions 

that have the same market participant 

on both sides of the trade. 

(f)–(h) Current subsections (f) through 

(h) will be renumbered as (g) through (i) 

without other modification. 

* * * * * 

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 

Nasdaq is adopting a fee and credit 

schedule for the Nasdaq Crossing 

Network. The Commission approved the 

Nasdaq Crossing Network on July 5, 

2006.6 The Nasdaq Crossing Network 

provides an execution option to market 

participants trading in Nasdaq and other 

exchange-listed securities that facilitates 

the execution of block trades quickly 

and anonymously, while minimizing 

market impact and associated price 

movements. The Nasdaq Crossing 

Network consists of a series of trading 

day (‘‘Intraday’’) and after hours (‘‘PostClose’’) Reference Price Crosses. 

Since Nasdaq launched the Crossing 

Network, Nasdaq has not charged a fee 

to members for executing orders through 

the Intraday or Post-Close Crosses. 

Under the rule change, although there 

will continue to be no fee associated 

with trading through the Crossing 

Network, member firms will be eligible 

for a credit of $0.0010 per share for 

orders executed through the Crossing 

Network during the month of 

September. The credit will not be 

subject to volume or use requirements. 

Trades that involve the same market 

participant on both sides of the 

transaction, however, will not be 

eligible for the credit. 

After the expiration of the 

promotional pricing on September 30, 

2008, order executions through the 

Crossing Network will continue to be 

offered to members at no charge. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,7 in 

general, and with Section 6(b)(4) of the 

Act,8 in particular, in that it provides for 

the equitable allocation of reasonable 

dues, fees and other charges among 

members and issuers and other persons 

using any facility or system which 

Nasdaq operates or controls. The 

promotional pricing for the Crossing 

Network is an equitable allocation of 

fees because the credit will apply 

equally to all members who execute 

orders through the Crossing Network. 

Furthermore, the credit is reasonable 

because it is intended to encourage 

participation in the Crossing Network, 

which would provide additional data to 

Nasdaq to evaluate the need for any 

future changes to the product or the 

relevant fee schedule. 

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 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act 9 and 

subparagraph (f)(2) of Rule 19b–4 

thereunder.10

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–2008–070 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2008–070. 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 


sroberts on PROD1PC77 with NOTICES
51672 Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Changes are marked to the rule text that appears 

in the electronic manual of Nasdaq found at http:// 

nasdaq.cchwallstreet.com. 

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 self-regulatory organization. 

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–2008–070, and 

should be submitted on or before 

September 25, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20516 Filed 9–3–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58440; File No. SR–

NASDAQ–2008–071] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Order Granting Accelerated 

Approval of Proposed Rule Change 

Relating to the Generic Listing 

Standards for Index Multiple Exchange 

Traded Fund Shares and Index Inverse 

Exchange Traded Fund Shares 

August 28, 2008. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on August 

20, 2008, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by Nasdaq. The 

Commission is publishing this notice 

and order to solicit comments on the 

proposed rule change from interested 

persons and to approve the proposal on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq is filing a proposed rule 

change to amend Nasdaq Rule 4420(j) to 

list and trade, or trade pursuant to 

unlisted trading privileges (‘‘UTP’’), 

shares of a series of Index Multiple 

Exchange Traded Fund Shares 

(‘‘Multiple Fund Shares’’) and Index 

Inverse Exchange Traded Fund Shares 

(‘‘Inverse Fund Shares’’) (collectively, 

the ‘‘Fund Shares’’). 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. 

Proposed new language is italicized; 

proposed deletions are in brackets.3

* * * * * 

4420. Quantitative Listing Criteria 

* * * * * 

(a)–(i) No Change. 

(j) Index Fund Shares 

(1) No Change 

(A) No Change 

(B)(i) The term ‘‘Index Fund Share’’

includes a security issued by an openend management investment company 

that seeks to provide investment results 

that either exceed the performance of a 

specified domestic equity, international 

or global equity, or fixed income index 

or a combination thereof by a specified 

multiple or that correspond to the 

inverse (opposite) of the performance of 

a specified domestic equity, 

international or global equity, or fixed 

income index or a combination thereof 

by a specified multiple. Such a security 

is issued in a specified aggregate 

number in return for a deposit of a 

specified number of shares of stock, a 

specified portfolio of fixed income 

securities or a combination of the above 

and/or cash as defined in subparagraph 

(1)(B)(ii) of this rule with a value equal 

to the next determined net asset value. 

When aggregated in the same specified 

minimum number, Index Fund Shares 

may be redeemed at a holder’s request 

by such open-end investment company 

which will pay to the redeeming holder 

the stock, fixed income securities or a 

combination thereof and/or cash with a 

value equal to the next determined net 

asset value. 

(ii) In order to achieve the investment 

result that it seeks to provide, such an 

investment company may hold a 

combination of financial instruments, 

including, but not limited to, stock 

index futures contracts; options on 

futures contracts; options on securities 

and indices; equity caps, collars and 

floors; swap agreements; forward 

contracts; repurchase agreements and 

reverse repurchase agreements (the 

‘‘Financial Instruments’’), but only to 

the extent and in the amounts or 

percentages as set forth in the 

registration statement for such Index 

Fund Shares. 

(iii) Any open-end management 

investment company which issues Index 

Fund Shares referenced in this 

subparagraph (1)(B) that seeks to 

provide investment results, before fees 

and expenses, in an amount that 

exceeds ¥200% of the percentage 

performance on a given day of a 

particular domestic equity, international 

or global equity or fixed income 

securities index or a combination 

thereof shall not be approved by the 

Exchange for listing and trading 

pursuant to Rule 19b–4(e) under the 

Securities Exchange Act of 1934. 

(iv) For the initial and continued 

listing of a series of Index Fund Shares 

referenced in the provisions of this 

subparagraph (1)(B) of this rule, the 

following requirements must be adhered 

to: 

Daily public Web site disclosure of 

portfolio holdings that will form the 

basis for the calculation of the net asset 

value by the issuer of such series, 

including, as applicable, the following 

instruments: 

a. The identity and number of shares 

held of each specific equity security; 

b. The identity and amount held for 

each specific fixed income security; 

c. The specific types of Financial 

Instruments and characteristics of such 

Financial Instruments; and 

d. Cash equivalents and the amount 

of cash held in the portfolio. 

If the Exchange becomes aware that 

the net asset value related to an Index 

Fund Shares included in the provisions 

of this subparagraph (1)(B)(ii) of this 

rule, is not being disseminated to all 

market participants at the same time or 

the daily public Web site disclosure of 

portfolio holdings does not occur, the 

Exchange shall halt trading in such 

series of Index Fund Share, as 

appropriate. The Exchange may resume 

trading in such Index Fund Shares only 

when the net asset value is disseminated 

to all market participants at the same 

time or the daily public Web site 


sroberts on PROD1PC77 with NOTICES