Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices 54665 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59265 

(January 16, 2009), 74 FR 4790 (January 27, 2009) 

(approving SR–BSE–2008–36 relating to the 

delisting of all securities from the Exchange in 

connection with the Exchange’s discontinuation of 

trading). 

4The Exchange notes that not all qualitative 

requirements imposed by other exchanges would be 

required. See Listing Requirements, infra, for a full 

discussion of the proposed quantitative and 

qualitative requirements for listing on BX. 

5The Exchange will propose in a separate rule 

filing changes to the BX Equities Platform to govern 

trading of, and reporting of transactions in, these 

listed securities and introducing and modifying 

market data products to permit dissemination of 

accurate quotation information and reporting of 

transactions. 

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–BATS–2010–022 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–BATS–2010–022. 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 website viewing and 

printing in the Commission’s Public 

Reference Room 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 offices of the 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–BATS–2010–022, and 

should be submitted on or before 

September 29, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–22294 Filed 9–7–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62818; File No. SR–BX– 

2010–059] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

of Proposed Rule Change To Create a 

Listing Market on the Exchange 

September 1, 2010. 

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, 2010, NASDAQ OMX BX, Inc. 

(‘‘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 the Exchange. 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 Substance 

of the Proposed Rule Change 

The Exchange proposes to create a 

listing market, which will be called 

‘‘BX.’’ Following Commission approval, 

the Exchange will announce the 

operational date of the new market in an 

Equity Trader Alert and press release. 

The proposed rules will become 

effective on the operational date. 

The text of the proposed rule change 

is available at http://nasdaqomxbx 

.cchwallstreet.com, at BX’s principal 

office, and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange 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. The 

Exchange 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 

In connection with the acquisition of 

the former Boston Stock Exchange by 

The NASDAQ OMX Group, Inc., the 

Exchange discontinued its listing 

marketplace and delisted all securities 

previously listed on the Exchange.3

Since January 2009, the Exchange has 

operated as a trading venue only, 

allowing market participants to trade 

securities listed on other national 

securities exchanges pursuant to 

unlisted trading privileges. 

The Exchange is proposing to begin 

listing securities again, through the 

creation of a new listing market, to be 

called ‘‘BX.’’ BX will have minimal 

quantitative listing standards, but have 

qualitative requirements, which are, in 

many respects, similar to those required 

for listing on The NASDAQ Stock 

Market (‘‘Nasdaq’’) and other national 

securities exchanges.4 The Exchange 

believes that this market will provide an 

attractive alternative to companies being 

delisted from another national securities 

exchange for failure to meet quantitative 

listing standards (including price or 

other market value measures) and to 

smaller companies contemplating an 

initial exchange listing. The Exchange 

further believes that the proposed listing 

venue will provide a transparent, wellregulated marketplace for these 

companies and their investors.5 As is 

currently the case with respect to the 

trading occurring on the Exchange 

pursuant to unlisted trading privileges, 

FINRA will regulate market activity and 

staff of the Exchange will monitor realtime trading of securities listed on BX. 

The Exchange expects that the 

securities listed on BX will not be 

classified as national market system 

securities. As a result, BX-listed 

securities will not be subject to a 

national market system plan and will 

not be subject to Regulation NMS under 


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54666 Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices 

6 17 CFR 242.600–612. 

7Over-the-counter trades of BX-listed securities 

would be reported to the FINRA Over-the-Counter 

Reporting Facility. 

8 15 U.S.C. 781(b). 

9 15 U.S.C. 7201–7266. 

10 17 CFR 240.10A–3. 

11See Section 102 of the Sarbanes-Oxley Act, 15 

U.S.C. 7212. 12 15 U.S.C. 78q–1. 

13 15 U.S.C. 77r(b). 

14Many institutional investors have investment 

policies that limit their ownership to securities 

listed on a national securities exchange, or that 

prohibit the ownership of securities that only are 

traded in the over-the-counter market. 

the Act.6 BX-listed securities will trade 

on the Exchange and could be traded 

over-the-counter.7

Listing Requirements 

BX would list Common Stock, 

Preferred Stock, Ordinary Shares, 

Shares or Certificates of Beneficial 

Interest of Trust, Limited Partnership 

Interests, American Depositary Receipts 

(ADR), American Depositary Shares 

(ADS), Units, Rights and Warrants. To 

be listed on BX, companies will need to 

meet the following qualitative listing 

standards, each of which is equivalent 

to the comparable listing standard of 

Nasdaq or is derived from the Federal 

securities laws: 

(a) The company must be registered 

under Section 12(b) of the Act 8 and 

current in its periodic filings with the 

Commission and, as a result, subject to 

the requirements of the Sarbanes-Oxley 

Act of 2002 9 (proposed Rule 5210(a)); 

(b) The company must have a fully 

independent Audit Committee 

comprised of at least three members and 

comply with the requirements of SEC 

Rule 10A–3, promulgated under the 

Act 10 (proposed Rule 5605(c)); 

(c) The company must have 

independent directors make 

compensation decisions for executive 

officers (proposed Rule 5605(d)); 

(d) The company will be prohibited 

from taking any corporate action with 

the effect of nullifying, restricting or 

disparately reducing the per share 

voting rights of holders of an 

outstanding class of the company’s 

common stock registered pursuant to 

Section 12 of the Act (proposed Rule 

5640); 

(e) The company’s auditor will be 

required to be registered with the Public 

Company Accounting Oversight 

Board 11 (proposed Rules 5210(b) and 

5250(c)(3)); 

(f) The company will be required to 

hold an annual shareholders’ meeting 

and solicit proxies for each 

shareholders’ meeting (proposed Rule 

5620); 

(g) The company will be required to 

obtain shareholder approval for the use 

of equity compensation (proposed Rule 

5635); 

(h) The company will be required to 

adopt a code of conduct, applicable to 

all directors, officers and employees 

(proposed Rule 5610); 

(i) The company will be required to 

conduct an appropriate review and 

oversight of all related party 

transactions, to address potential 

conflict of interest situations (proposed 

Rule 5630); 

(j) The company will be required to 

disclose material information through 

any Regulation FD compliant method 

(or combination of methods) (proposed 

Rule 5250(b) and IM–5250–1); 

(k) The listed securities must be 

eligible for a Direct Registration Program 

operated by a clearing agency registered 

under Section 17A of the Act 12

(proposed Rules 5210(c) and 5255); 

(l) Public ‘‘shells’’ would not be 

allowed to list (proposed Rule 5101); 

and 

(m) The Exchange will conduct a 

public interest review of the company 

and significant persons associated with 

it (proposed Rule 5101 and IM–5101–1). 

In addition, BX would apply the 

following quantitative listing standards, 

set out in proposed Rules 5505 (initial 

listing) and 5550 (continued listing), 

which are designed to assure a 

minimum level of trading consistent 

with a public market for the securities: 

(a) 200,000 publicly held shares; 

(b) 200 public shareholders, at least 

100 of which must be round lot holders 

for initial listing, and 200 public 

shareholders for continued listing; 

(c) A market value of listed securities 

of at least $2 million for initial listing 

and $1 million for continued listing; 

(d) Two market makers; and 

(e) A minimum initial listing price of 

$0.25 per share for securities previously 

listed on a national securities exchange 

and $1.00 per share for securities 

previously quoted in the over-thecounter market. For continued listing, 

securities will be required to maintain a 

minimum $0.05 per share bid price. 

Further, with respect to companies not 

previously listed on a national securities 

exchange, BX will also require for initial 

listing that the company have either $1 

million stockholders’ equity or $5 

million total assets, a one year operating 

history, and a plan to maintain 

sufficient working capital for the 

company’s planned business for at least 

twelve months after the first day of 

listing. 

The Exchange would also require that 

rights and warrants will only be eligible 

for initial and continued listing if the 

underlying security is listed on BX or is 

a covered security, as described in 

Section 18(b) of the Securities Act of 

1933.13

The proposed listing standards are 

designed to allow companies that are 

being delisted from another national 

securities exchange for failure to meet 

that exchange’s quantitative listing 

requirements the opportunity to provide 

their investors with a better regulated, 

more transparent trading environment 

than may otherwise be available in the 

over-the-counter markets. In addition, 

the Exchange believes that allowing 

these companies to continue trading on 

a national securities exchange may 

enable some institutional investors to 

continue their ownership stake in the 

company, which could provide greater 

stability to the company’s shareholder 

base and possibly avoid forced sales by 

such investors.14 The Exchange also 

believes that companies currently 

traded over-the-counter could view this 

market as an aspirational step towards 

a listing on another national securities 

exchange. The Exchange believes that 

the agreement of such companies to 

comply with the Exchange’s corporate 

governance standards and the 

application of the Exchange’s public 

interest authority will provide 

additional protections to their investors 

than would be available in their present 

trading venue. Moreover, the Exchange 

believes that a BX listing could help 

such companies raise capital, in turn 

promoting job creation within the 

United States. Finally, the Exchange 

believes that BX will be a more 

attractive alternative to domestic 

companies that might otherwise have 

considered a listing on non-U.S. junior 

markets, which generally have lower 

listing requirements. 

Nonetheless, the Exchange recognizes 

that the listing requirements for BX will 

be lower than those of the NASDAQ 

Stock Market and other national 

securities exchanges. As such, to avoid 

investor confusion, the listing rules of 

BX will specify that a BX-listed 

company should refer to its listing as on 

the ‘‘BX’’ market, unless otherwise 

required by applicable rules or 

regulations, and that such company 

should not represent that it is listed on 

The NASDAQ Stock Market. Similarly, 

in describing this listing venue, the 

Exchange will generally refer to it as 

‘‘BX’’ and not as NASDAQ OMX BX. 

The Exchange will have the 

discretionary authority to deny listing to 

any otherwise qualified security when 


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15Proposed Rule 5101 sets forth a number of 

factors that the Exchange will consider in 

determining whether a Company is a shell, 

including whether the Company is considered a 

‘‘shell company’’ as defined in Rule 12b–2 under the 

Act, 17 CFR 240.12b–2. 

16The Exchange notes there is also no price 

requirement for initial or continued listing on the 

National Stock Exchange or for continued listing on 

NYSE Amex and therefore that the proposed 

continued listing requirement exceeds the 

requirement of those exchanges. 

17Proposed Rule 4120(a)(12). 

18Proposed Rule 5815(a)(1)(C). 

19 17 CFR 240.3a51–1. The Exchange is not 

seeking an exemption from the penny stock rules 

for securities listed on BX, however a security may 

be excluded from the definition of a penny stock 

as a result of the security having a price in excess 

of $5 or its issuer having net tangible assets in 

excess of $2 million (if the issuer has been in 

continuous operation for at least three years) or $5 

million (if the issuer has been in continuous 

operation for less than three years) or average 

revenue of at least $6 million for the last three 

years. Rule 3a51–1(d) and (g), 17 CFR 240.3a51–1(d) 

and (g). 

necessary to preserve and strengthen the 

quality of and public confidence in its 

market. Proposed IM–5101–1 provides a 

non-exclusive description of 

circumstances where the Exchange may 

exercise that discretion, including when 

an individual associated with the 

company has a history of regulatory 

misconduct. In that regard, the 

Exchange intends to conduct 

background investigations of officers 

and directors and other significant 

people associated with a company in 

connection with its review of 

applications for initial listing. The 

Exchange also will not approve for 

initial listing, or allow the continued 

listing, of shell companies.15 This 

prohibition is based on concerns that 

the investors in shell companies are 

unaware of the ultimate business in 

which they are investing and that 

trading in such securities is more 

susceptible to market manipulation. 

The Exchange proposes that any 

company that meets the quantitative 

(e.g., financial) requirements for listing 

on Nasdaq will not be allowed to 

initially list on BX. This will assure that 

such companies only become listed on 

the exchange with higher listing 

standards. 

Given that the Exchange expects to 

list companies that do not meet the 

quantitative listing requirements of the 

primary existing national securities 

exchanges, it is expected that BX-listed 

companies will include smaller 

companies and companies facing 

business or other challenges. Thus, the 

proposed quantitative standards for BX 

were deliberately structured to be lower 

than those of the other primary 

exchanges. In that regard, the minimum 

price requirement for listing on BX will 

be $0.25 per share for a security 

previously listed on another national 

securities exchange and $1.00 per share 

for a security previously quoted in the 

over-the-counter market or listing in 

connection with its initial public 

offering. Until March 31, 2011, the 

Exchange would consider any company 

that was listed on another national 

securities exchange at any time since 

January 1, 2008, to be eligible to list 

with a $0.25 per share price. The 

Exchange believes it appropriate to 

consider a company delisted since 

January 1, 2008, as previously quoted on 

another national securities exchange 

because the BX market would not have 

been available to such companies when 

they were delisted. The Exchange 

believes it is reasonable to look back to 

January 1, 2008, when the financial 

markets began facing difficulties, which 

resulted in an unusually large number 

of companies being delisted. 

Furthermore, the Exchange believes it is 

appropriate to continue this treatment 

until March 31, 2011, to assure that 

such companies have an adequate 

opportunity to learn about BX and 

sufficient time to complete their 

application and have that application 

processed by the Exchange. After March 

31, 2011, a company will be considered 

to have been previously listed on a 

national securities exchange, and 

therefore eligible to list with a $0.25 per 

share price, only if it was listed on such 

an exchange at any time during the 

three months prior to its listing on BX. 

The Exchange believes that this threemonth period will allow the company 

sufficient time to apply for listing on BX 

and have its application processed. 

For continued listing, a security will 

be required to maintain a minimum 

$0.05 per share bid price.16 If the 

security does not maintain a minimum 

$0.05 per share bid price for ten 

consecutive trading days, Exchange staff 

would issue a Staff Delisting 

Determination and the security would 

be suspended from trading on BX.17 A 

company could appeal that 

determination to a Hearings Panel, 

however such an appeal would not stay 

the suspension of the security.18 During 

the Hearings Panel process, the security 

could regain compliance by achieving a 

$0.05 per share minimum bid price 

while trading on another venue, such as 

the over-the-counter market, for 10 

consecutive days. However, if the 

company has received three or more 

Staff Delisting Determinations for failure 

to comply with minimum price 

requirement in the prior 12 months, the 

company could only regain compliance 

by achieving a closing bid price of $0.25 

per share or more for at least 10 

consecutive trading days. The Exchange 

believes that this higher requirement for 

companies that were previously noncompliant is appropriate to reduce the 

likelihood of future instances of noncompliance and the concomitant 

investor confusion concerning the 

ability of the company to remain listed. 

If the Hearings Panel determines that 

the security has satisfied the applicable 

standard to regain compliance, the 

trading halt would be terminated and 

the security would resume trading on 

the Exchange. 

To be eligible for initial listing, a 

company not previously listed on a 

national securities exchange must have 

at least one year operating history, a 

minimum of either $1 million in 

stockholders’ equity or $5 million in 

total assets, and demonstrate that it has 

a plan to maintain sufficient working 

capital for its planned business for at 

least twelve months after the first day of 

listing. The Exchange believes that these 

requirements will help assure that a 

company that was not previously 

subject to exchange regulation 

nonetheless has a credible and 

sustainable business. 

The Exchange believes that the 

proposed public float, holder and 

market maker requirements, together 

with the minimum market value of 

listed securities requirement, will assure 

sufficient liquidity in listed securities. 

In that regard, the Exchange notes that 

the shareholder and publicly held 

shares requirements are comparable to, 

or higher than, requirements for listing 

a preferred stock or secondary class of 

common stock on the Nasdaq Capital 

Market, which require 100 round lot 

shareholders and 200,000 publicly held 

shares. The Exchange is not aware of 

any difficulties in the trading in 

securities meeting these requirements. 

Further, requiring two market makers 

will assure competing quotations for 

potential buyers and sellers of the 

securities listed on BX. Finally, the 

Exchange believes that the minimum 

market value of listed securities 

requirement will help assure that the 

company issuing the securities is of a 

sufficient size to generate interest from 

investors and market participants. 

While these proposed standards may be 

lower than those of other exchanges, 

investors will be protected by the fact 

that securities listed on BX would be 

considered penny stocks under 

Exchange Act Rule 3a51–1, unless they 

qualify for an exemption from the 

definition of a penny stock.19 As such, 

broker-dealers would be required to preapprove their customers for trading in 


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54668 Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices 

20 15 U.S.C. 77r. Some State laws and regulations 

may provide an exemption from certain registration 

or ‘‘blue sky’’ requirements for companies listed on 

the Boston Stock Exchange, based on the higher 

listing standards previously applied by the former 

Boston Stock Exchange. Proposed Rule 5001 would 

provide that the Exchange will take action to delist 

any company listed on BX that attempts to rely on 

such an exemption. Companies will also agree not 

to rely on any such exemption as a provision of the 

BX Listing Agreement. 

21 17 CFR 240.10A–3. See proposed Rule 

5605(c)(2). Companies may be eligible for a phasein or cure period with respect to certain of these 

requirements. 

22Proposed Rule 5605(a)(2) and IM–5605–1. The 

proposed definition of an independent director is 

identical to Nasdaq’s definition of an independent 

director. 

23 Id. 

24Proposed Rule 5605(c)(1). 

25Proposed Rule 5630. 

26Proposed Rule 5605(d) and IM–5605–6. A 

company can satisfy this requirement by having 

their independent directors make these decisions in 

executive session, or by having independent 

directors sit on a compensation committee. If the 

company chooses to use a compensation committee 

and the committee is comprised of at least three 

members, one director who is not independent as 

defined in Rule 5605(a)(2) and is not a current 

officer or employee or a Family Member of an 

officer or employee, may be appointed to the 

compensation committee under exceptional and 

limited circumstances, provided the company 

makes appropriate disclosure. Of course the 

Exchange will adopt rules required by Section 952 

of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act following the necessary 

SEC rulemaking related to that provision. 

27Proposed Rule 5605(b). 

28The 2008–2009 Director Compensation Report 

prepared by the National Association of Corporate 

Directors (available from http:// 

www.nacdonline.org/) found that the median total 

direct compensation per director was $78,060 for 

smaller companies (defined as companies with 

annual revenues of $50 to $500 million). 

29See, e.g., Item 407(a) of Regulation S–K, which 

requires disclosure of non-independent directors 

who serve on nomination committees, implicitly 

allowing such service. 

penny stocks and investors will obtain 

the disclosures required to be made by 

broker-dealers in connection with 

penny stock transactions, providing 

them with trade and market information 

prior to effecting a transaction. Further, 

there will be no ‘‘blue sky’’ exemption 

available under Section 18 of the 

Securities Act of 1933,20 so companies 

will be required to satisfy State law 

registration requirements and other 

State laws that regulate the sale and 

offering of securities. 

The BX corporate governance 

requirements are generally comparable 

to those of the other exchanges. The 

Exchange would require that a listed 

company have an audit committee 

comprised of at least three independent 

directors that also meet the 

requirements of SEC Rule 10A–3.21 For 

a director to be considered an 

independent director, the company’s 

board would have to determine that the 

individual does not have a relationship 

which, in the board’s opinion, would 

interfere with the exercise of 

independent judgment in carrying out 

the responsibilities of a director.22 The 

board would be precluded from finding 

a director independent based on certain 

relationships, including if that director 

is currently an employee of the 

company or was employed by the 

company during the prior three years 

(including as an executive officer), 

accepted certain compensation or 

payments from the company during the 

prior three years, or had a family 

member with certain affiliations with 

the company.23

The audit committee would be 

required to have a charter setting out its 

responsibilities, including the 

committee’s purpose of overseeing the 

accounting and financial reporting 

processes of the company and the audits 

of the company’s financial statements 

and the responsibilities and authority 

necessary to comply with SEC Rule 

10A–3.24 The audit committee, or 

another independent body of the board, 

will also be required to conduct an 

appropriate review and oversight of any 

related party transaction.25 The 

Exchange believes that this requirement 

will limit the potential for self-dealing 

in connection with any related party 

transactions. 

The Exchange would also require that 

independent directors make 

compensation decisions concerning the 

chief executive officer and other 

executive officers.26 Independent 

directors would be required to meet on 

a regular basis in executive sessions.27

These requirements for audit 

committees, compensation decisions, 

and executive sessions are identical to 

those of Nasdaq and substantially 

similar to those of the other national 

securities exchanges and the Exchange 

believes they will serve to empower the 

independent directors of its listed 

companies. 

While the Exchange would require 

that a listed company have at least three 

independent directors to satisfy the 

audit committee requirement described 

above, it would not require that a 

majority of the company’s board of 

directors be independent or an 

independent nomination committee 

because the Exchange believes those 

requirements could impose significant 

additional costs on these smaller 

companies and therefore discourage 

companies from pursuing an otherwise 

beneficial listing. In that regard, given 

the significant responsibilities imposed 

on audit and compensation committee 

members, directors who serve on these 

committees are sometimes reluctant to 

serve on other committees. As such, if 

BX were to also require an independent 

nominations committee, companies may 

have to increase the size of their boards 

and add additional independent 

directors. Similarly, requiring that 

independent directors comprise a 

majority of a company’s board could 

also require companies to add 

additional independent directors. In 

each case, the need to add independent 

directors would impose additional costs 

on the company.28 Moreover, nothing in 

the Commission’s rules or the Act 

mandate these requirements.29

However, BX believes that the 

requirement for executive sessions of 

the independent directors will provide 

a forum for the independent directors to 

consider whether the governance 

structure of the company is appropriate 

and raise any concerns, notwithstanding 

the lack of a majority independence and 

nominations committee requirement. 

Companies listing on BX will be 

permitted to phase in compliance with 

the audit committee and compensation 

committee requirements following their 

listing. With respect to the audit 

committee requirements, a company 

listing in connection with its initial 

public offering would be required to 

have one independent director on the 

committee at the time of listing; a 

majority of independent members 

within 90 days of the date of 

effectiveness of the company’s 

registration statement; and all 

independent members within one year 

of the date of effectiveness of the 

company’s registration statement. For 

this purpose, a company will be 

considered to be listing in conjunction 

with an initial public offering only if it 

meets the conditions in SEC Rule 10A– 

3(b)(1)(iv)(A), namely that the company 

was not, immediately prior to the 

effective date of its registration 

statement, required to file reports with 

the Commission pursuant to Section 

13(a) or 15(d) of the Act. 

With respect to the compensation 

committee requirement, a company 

listing in connection with its initial 

public offering, upon emerging from 

bankruptcy, or that otherwise was not 

subject to a substantially similar 

requirement prior to listing (such as a 

company only traded in the over-thecounter market) would be required to 

have one independent director on the 

committee at the time of listing; a 

majority of independent members 

within 90 days of listing; and all 

independent members within one year 

of listing. For this purposes, a company 


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30Proposed Rule 5610. 

31Proposed Rule 5635. 

32 In this regard, the proposed rules are 

comparable to the rules of the National Stock 

Exchange, which require shareholder approval for 

equity compensation issuances but not for other 

share issuances. See National Stock Exchange Rule 

15.6. 

33Proposed Rule 5250(e)(1). 

34Nasdaq Listing Rules 5800–5899. 

35Proposed Rule 5810(c)(2). 

36Proposed Rule 5810(c)(3). 

37Proposed Rule 5810(c)(1). 

38Proposed Rule 5810(c). 

39Section 6.1 of the By-Laws on NASDAQ OMX 

BX, Inc. 

40For example, the initial listing fees for listing 

common stock on the NASDAQ Capital Market 

range from $50,000 to $75,000 and the annual fees 

are $27,500; the initial listing fees for listing 

common stock on NYSE Amex range from $50,000 

to $70,000 and the annual fees range from $27,500 

to $40,000; the initial listing fees for listing 

common stock on the New York Stock Exchange 

range from $150,000 to $250,000 and the annual 

fees range from $38,000 to $500,000. See Nasdaq 

Rule 5920(a)(1) and (c)(1)(A), NYSE Amex Listed 

Company Guide Sections 140 and 141, and NYSE 

Listed Company Manual 902.03. 

41No fee would be charged in connection with 

requests involving a company’s initial listing 

application given that the company will pay an 

application fee. 

will be considered to be listing in 

conjunction with an initial public 

offering if immediately prior to listing it 

does not have a class of common stock 

registered under the Act. 

A company that transfers to BX from 

another national securities exchange 

with a substantially similar requirement 

will be immediately subject to the audit 

and compensation committee 

requirements, provided that the 

company will be afforded the balance of 

any grace period afforded by the other 

market. 

The Exchange will require companies 

to adopt a code of conduct applicable to 

all directors, officers and employees.30

Any waivers of the code for directors or 

executive officers must be approved by 

the board and disclosed. The Exchange 

believes that this requirement will help 

promote the ethical behavior of 

individuals associated with companies 

listed on BX. 

In addition, the Exchange will require 

shareholder approval when a company 

adopts or materially amends a stock 

option or purchase plan or other equity 

compensation arrangement pursuant to 

which stock may be acquired by 

officers, directors, employees, or 

consultants.31 The Exchange would not 

require shareholder approval for other 

share issuances, however, given that the 

companies expected to list on the 

Exchange may have a greater need to 

issue shares more frequently or more 

quickly, due to their expected smaller 

size and the business challenges they 

may be facing. As such, the Exchange 

believes that the cost and delay 

associated with seeking approval for 

share issuances would discourage 

companies from pursuing an otherwise 

beneficial listing.32 Nonetheless, the 

Exchange will require listed Companies 

to provide notice of any 5% change in 

its shares outstanding 33 and the 

Exchange Staff will review such 

issuances for public interest concerns, 

such as issuances significantly below 

the market price or for the benefit of 

related parties. 

Review Process 

Companies denied initial or 

continued listing would be afforded a 

review process similar to that contained 

in the existing Rule 4800 Series of the 

Exchange’s rules, which was modeled 

on the process available to companies 

listed on Nasdaq.34 The Exchange’s 

Listing Qualifications staff only will be 

able to allow time-limited exceptions for 

certain deficiencies from the continued 

listing standards, such as the failure to 

file periodic reports, certain of the 

corporate governance requirements and 

any quantitative deficiency which does 

not contain a compliance period.35

Other of the continued listing 

requirements would provide for 

automatic compliance periods, 

including the market maker, market 

value of publicly held shares and audit 

committee requirements.36 If the 

company fails to timely solicit proxies 

or hold its annual meeting or fails to 

meet the minimum price requirement, 

or if staff has public interest concerns in 

connection with the company, Listing 

Qualifications staff will issue an 

immediate delisting letter to the 

company.37 Any other deficiency would 

result in the Listing Qualifications staff 

issuing a Public Reprimand Letter or a 

delisting notification.38 Hearings Panels 

composed of individuals not affiliated 

with the Exchange would be permitted 

to grant additional time to companies 

that received a delisting notification, or 

that were denied initial listing. A 

company could appeal a decision of the 

Hearings Panel to the Exchange Listing 

and Hearing Review Council, which is 

a committee appointed by the 

Exchange’s Board to act for the Board 

with respect to listing decisions.39 The 

Listing and Hearing Review Council 

decision would be final, unless it is 

called for a discretionary review by the 

Exchange Board. 

Fees 

Companies would be required to 

submit an application review fee of 

$7,500 with their application for listing 

on BX, and would be required to pay a 

$15,000 annual fee for the first class 

listed on the Exchange and $5,000 for 

each additional class. The annual fee 

would be pro-rated for a company’s first 

year of their listing. The application 

review fee will allow the Exchange to 

recover some of the costs associated 

with the initial review of the company’s 

application, including staff time and the 

systems supporting the initial review 

process. The annual fee would similarly 

offset the staff and system costs of 

continued monitoring of the company. 

The proposed application and annual 

fees are substantially less than those 

charged by other national securities 

exchanges.40 Companies that were 

previously listed on Nasdaq would 

receive a credit, which can only be used 

to offset the annual fee, for any annual 

fees paid to Nasdaq during the same 

calendar year that they initially list on 

BX, for the months following their 

delisting from Nasdaq. The Exchange 

believes this credit is a reasonable 

allocation of fees under the Act because 

the Exchange and Nasdaq have the same 

ultimate parent, The NASDAQ OMX 

Group, Inc., and the company will have 

paid Nasdaq a non-refundable fee to 

provide similar services as those that 

will be provided by BX under its annual 

fee. As such, the Exchange believes it 

would be inequitable to charge the 

company a second fee in the same year 

to support the provision of those 

services. 

Fees would also be assessed for 

certain one-time events, such as a 

$7,500 fee for substitution listing events, 

a $2,500 fee for record-keeping changes, 

and a $4,000 or $5,000 fee for a written 

or oral hearing, respectively. These fees 

are identical to those charged on 

Nasdaq. 

Under Proposed Rule 5602, a 

company considering a specific action 

or transaction can request an 

interpretation from the Exchange, and in 

return, the Exchange will prepare a 

responsive letter as to how the rules 

apply to the proposed action or 

transaction. No company is required to 

request an interpretation, and staff will 

orally discuss the application of the 

Exchange’s rules with companies 

without any additional charge. 

However, if the company seeks a written 

response, the Exchange proposes to 

charge a $15,000 fee to recoup the cost 

of staff’s time in reviewing and 

responding to the request.41 The 

Exchange believes that the fee is 

appropriate, as the written response is 

applicable only to the company that 

requests it. The Exchange also believes 

that the written interpretive process, 


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54670 Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices 

42Nasdaq Rule 5210(h) and NYSE Amex Listed 

Company Guide Section 126. 43 15 U.S.C. 78f(b)(9). 44 15 U.S.C. 78f. 45 15 U.S.C. 78f(b)(5). 

and the associated fee, will provide an 

additional public benefit in that staff 

will prepare anonymous summaries of 

interpretations, as well as frequently 

asked questions based on requests 

received from companies, including 

those withdrawn before a written 

response is issued. These summaries 

and questions will be posted on the 

Exchange’s Web site so that the general 

public, practitioners, and other 

companies can better understand how 

the Exchange applies its rules and 

policies. In this way, the overall need to 

request such interpretations is 

minimized, thus reducing burdens on 

companies and staff alike. 

Other Changes 

As part of the proposed rule change, 

the Exchange is deleting portions of the 

Rule 4000 Series related to the listing 

and trading of securities eligible to be 

listed on BX and correcting crossreferences to those deleted sections. The 

Exchange is maintaining those 

provisions of the Rule 4000 applicable 

to securities that will not be eligible to 

be listed on BX, such as Portfolio 

Depository Receipts, Index Fund Shares, 

Trust Issued Receipts, Securities Linked 

to the Performance of Indexes and 

Commodities, and Managed Fund 

Shares, to enable the continued trading 

of such securities on the Exchange 

pursuant to unlisted trading privileges. 

The Exchange is deleting Rule 4430, 

which provided listing criteria for 

limited partnership rollup transactions 

using language that was substantially 

similar to language contained in FINRA 

Rule 2310. Instead, the Exchange 

addresses these issues in proposed Rule 

5210(h). This rule adopts the same 

approach taken by Nasdaq and NYSE 

AMEX by incorporating the FINRA rule 

by reference.42 In this manner, BX 

satisfies the requirement of Section 

6(b)(9) of the Exchange Act,43 which 

requires that the rules of a national 

securities exchange prohibit certain 

limited partnership rollup transactions. 

The Exchange is also moving the 

additional requirements applicable to 

the listing of securities issued by 

NASDAQ OMX or its affiliates from 

Rule 4370 to Rule 5701. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,44

in general and with Sections 6(b)(5) of 

the Act,45 in particular in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, 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. The proposed new 

listing venue will advance these goals 

by allowing qualified issuers to list on 

a transparent, well-regulated 

marketplace with increased 

transparency about the trading of these 

securities, thereby protecting investors 

and the public interest and helping to 

prevent fraudulent and manipulative 

acts and practices. 

In addition, the Exchange believes 

that the proposed market is consistent 

with Section 17B of the Act, which 

codifies Congress’ findings that it is in 

the public interest and appropriate for 

the protection of investors and the 

maintenance of fair and orderly markets 

to improve significantly the information 

available to brokers, dealers, investors, 

and regulators with respect to 

quotations for and transactions in penny 

stocks and that a fully implemented 

automated quotation system for penny 

stocks would meet the information 

needs of investors and market 

participants and would add visibility 

and regulatory and surveillance data to 

that market. Section 17B further 

instructs the Commission to facilitate 

the widespread dissemination of 

reliable and accurate last sale and 

quotation information with respect to 

penny stocks, as the Exchange will for 

securities listed on BX, through one or 

more automated quotation systems 

operated by a registered securities 

association or a national securities 

exchange, providing reliable pricing 

information and reporting of 

transactions. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange 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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the 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 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–BX–2010–059 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–BX–2010–059. 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 173 / Wednesday, September 8, 2010 / Notices 54671 

46 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 61308 

(January 7, 2010), 75 FR 2573 (January 15, 2010) 

(SR–NYSEAmex–2009–98) (establishing the NYSE 

Amex Equities SLP Pilot). See also Securities 

Exchange Act Release No. 61841 (April 5, 2010), 75 

FR 18560 (April 12, 2010) (SR–NYSEAmex–2010– 

33) (extending the operation of the SLP Pilot to 

September 30, 2010). See also Securities Exchange 

Act Release No. 58877 (October 29, 2008), 73 FR 

65904 (November 5, 2008) (SR–NYSE–2008–108) 

(establishing the SLP Pilot). See also Securities 

Exchange Act Release No. 59869 (May 6, 2009), 74 

FR 22796 (May 14, 2009) (SR–NYSE–2009–46) 

(extending the operation of the SLP Pilot to October 

1, 2009). See also Securities Exchange Act Release 

No. 60756 (October 1, 2009), 74 FR 51628 (October 

7, 2009) (SR–NYSE–2009–100) (extending the 

operation of the New Market Model and the SLP 

Pilots to November 30, 2009). See also Securities 

Exchange Act Release No. 61075 (November 30, 

2009), 74 FR 64112 (December 7, 2009) (SR–NYSE– 

2009–119) (extending the operation of the SLP Pilot 

to March 30, 2010). See also Securities Exchange 

Act Release No. 61840 (April 5, 2010), 75 FR 18563 

(April 12, 2010) (SR–NYSE–2010–28) (extending 

the operation of the SLP Pilot to September 30, 

2010). 

4See Securities Exchange Act Release No. 58845 

(October 24, 2008), 73 FR 64379 (October 29, 2008) 

(SR–NYSE–2008–46). 

5See NYSE Rule 103. 

6See NYSE and NYSE Amex Equities Rules 107B. 

7See Securities Exchange Act Release Nos. 58877 

(October 29, 2008), 73 FR 65904 (November 5, 2008) 

(SR–NYSE–2008–108) (adopting SLP pilot 

program); 59869 (May 6, 2009), 74 FR 22796 (May 

14, 2009) (SR–NYSE–2009–46) (extending SLP pilot 

program until October 1, 2009); 60756 (October 1, 

2009), 74 FR 51628 (October 7, 2009) (SR–NYSE– 

2009–100) (extending SLP pilot program until 

November 30, 2009) and 61075 (November 30, 

2009), 74 FR 64112 (December 7, 2009) (SR–NYSE– 

2009–119) (extending SLP pilot program until 

March 30, 2010). 

8See SR–NYSE–2010–62. 

9See Securities Exchange Act Release No. 61308 

(January 7, 2010), 75 FR 2573 (January 15, 2010) 

(SR–NYSEAmex–2009–98). 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

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–BX– 

2010–059 and should be submitted on 

or before September 29, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.46

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–22296 Filed 9–7–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62814; File No. SR– 

NYSEAmex–2010–88] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Extending the Operation 

of Its Supplemental Liquidity Providers 

Pilot 

September 1, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on August 

27, 2010, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II, below, which Items have 

been prepared by the self-regulatory 

organization. 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 

The Exchange proposes to extend the 

operation of its Supplemental Liquidity 

Providers Pilot (‘‘SLP Pilot’’ or ‘‘Pilot’’) 

(See Rule 107B—NYSE Amex Equities), 

currently scheduled to expire on 

September 30, 3010, until the earlier of 

the Securities and Exchange 

Commission’s (‘‘SEC’’ or ‘‘Commission’’) 

approval to make such Pilot permanent 

or January 31, 2011. The text of the 

proposed rule change is available on the 

Exchange’s Web site at http:// 

www.nyse.com, at the Exchange’s 

principal office, at the Commission’s 

Public Reference Room, and on the 

Commission’s Web site at http:// 

www.sec.gov. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to extend the 

operation of its Supplemental Liquidity 

Providers Pilot,3 currently scheduled to 

expire on September 30, 2010, until the 

earlier of Commission approval to make 

such Pilot permanent or January 31, 

2011. 

Background 

In October 2008, the New York Stock 

Exchange LLC (‘‘NYSE’’) implemented 

significant changes to its market rules, 

execution technology and the rights and 

obligations of its market participants all 

of which were designed to improve 

execution quality on the NYSE. These 

changes were all elements of the NYSE’s 

and the Exchange’s enhanced market 

model referred to as the ‘‘New Market 

Model’’ (‘‘NMM Pilot’’).4 The NYSE SLP 

Pilot was launched in coordination with 

the NMM Pilot (see NYSE Rule 107B). 

As part of the NMM Pilot, NYSE 

eliminated the function of specialists on 

the Exchange creating a new category of 

market participant, the Designated 

Market Maker or ‘‘DMM.’’ 5 Separately, 

the NYSE established the SLP Pilot, 

which established SLPs as a new class 

of market participants to supplement 

the liquidity provided by DMMs.6

The NYSE adopted NYSE Rule 107B 

governing SLPs as a six-month pilot 

program commencing in November 

2008. This NYSE pilot has been 

extended several times, most recently to 

September 30, 2010.7 The NYSE is in 

the process of requesting an extension of 

their SLP Pilot until January 31, 2011 or 

until the Commission approves the pilot 

as permanent.8 The extension of the 

NYSE SLP Pilot until January 31, 2011 

runs parallel with the extension of the 

NMM pilot: January 31, 2011, or until 

the Commission approves the NMM 

Pilot as permanent. 

Proposal To Extend the Operation of the 

NYSE Amex Equities SLP Pilot 

NYSE Amex Equities established the 

SLP Pilot to provide incentives for 

quoting, to enhance competition among 

the existing group of liquidity providers, 

including the DMMs, and add new 

competitive market participants. NYSE 

Amex Equities Rule 107B is based on 

NYSE Rule 107B. NYSE Amex Rule 

107B was filed with the Commission on 

December 30, 2009, as a ‘‘me too’’ filing 

for immediate effectiveness as a pilot 

program.9 The NYSE Amex Equities 

SLP Pilot is scheduled to end operation 

on September 30, 2010 or such earlier 

time as the Commission may determine 

to make the rules permanent. 

The Exchange believes that the SLP 

Pilot, in coordination with the NMM 


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