6072 Federal Register / Vol. 75, No. 24 / Friday, February 5, 2010 / Notices 

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

2 17 CFR 240.19b–4. 

3Nasdaq is also proposing to eliminate certain 

abbreviations that are used inconsistently and 

utilize defined terms, as appropriate, in Rules 5810 

and 5840, and to remove authority in Rule 

5810(c)(2)(C) that is duplicated in Rule 

5810(c)(2)(B). 

4See Securities Exchange Act Release No. 46267 

(September 2, 2009), 74 FR 46267 (‘‘Notice’’). 

5See letter from Barbara Roper, Director of 

Investor Protection, Consumer Federation of 

America, to Elizabeth M. Murphy, Secretary, 

Commission, dated September 28, 2009 (‘‘CFA 

Comment Letter’’); letter from Alan F. Eisenberg, 

Executive Vice President, Biotechnology Industry 

Organization (‘‘BIO’’) to Elizabeth M. Murphy, 

Secretary, Commission, dated September 29, 2009 

(‘‘BIO Comment Letter’’); and letter from Jason S. 

Frankl, Senior Managing Director, FTI Consulting 

(‘‘FTI’’), to Elizabeth M. Murphy, Secretary, 

Commission, dated October 5, 2009 (‘‘FTI Comment 

Letter’’). 

6See letter from Arnold Golub, Vice President 

and Associate General Counsel, Nasdaq, to 

Elizabeth Murphy, Secretary, Commission, dated 

December 28, 2009 (‘‘Nasdaq Response Letter’’). 

7Nasdaq Rule 5810(b)(3)(C). NASDAQ changed 

the period to regain compliance with the market 

value of listed securities requirement from 30 to 90 

days in January of last year. Securities Exchange 

Act Release No. 59291 (January 23, 2009), 74 FR 

5197 (January 29, 2009) (SR–NASDAQ–2009–002). 

8Nasdaq Rule 5810(b)(3)(D). 

9Nasdaq Rule 5810(b)(3)(A). 

http://www.sec.gov. Persons needing 

special accommodations to take part 

because of a disability should notify a 

contact person listed below. The public 

is invited to submit written statements 

to the Committee. 

The agenda for the meeting includes: 

(i) Consideration of a Committee recusal 

policy; (ii) report from the Education 

Subcommittee, including a presentation 

on the National Financial Capability 

Survey; (iii) report from the Investor as 

Purchaser Subcommittee, including a 

discussion of fiduciary duty and 

mandatory arbitration; (iv) report from 

the Investor as Owner Subcommittee, 

including recommendations for the 

Committee on Regulation FD and proxy 

voting transparency, as well as reports 

on a work plan for environmental, 

social, and governance disclosure and 

on financial reform legislation; and (v) 

discussion of next steps and closing 

comments. 

DATES: Written statements should be 

received on or before February 16, 2010. 

ADDRESSES: Written statements may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

submission form (http://www.sec.gov/ 

rules/other.shtml); or 

• Send an e-mail message to rulecomments@sec.gov. Please include File 

Number 265–25–03 on the subject line. 

Paper Comments 

• Send paper statements in triplicate 

to Elizabeth M. Murphy, Federal 

Advisory Committee Management 

Officer, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File No. 

265–25–03. This file number should be 

included on the subject line if e-mail is 

used. To help us process and review 

your statements more efficiently, please 

use only one method. The Commission 

will post all statements on the Advisory 

Committee’s Web site (http:// 

www.sec.gov/spotlight/ 

investoradvisorycommittee.shtml). 

Statements are 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 a.m. and 3 p.m. 

All statements received will be posted 

without change; we do not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Kayla J. Gillan, Deputy Chief of Staff, 

Office of the Chairman, at (202) 551– 

2100, or Owen Donley, Chief Counsel, 

Office of Investor Education and 

Advocacy, at (202) 551–6322, Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

6561. 

SUPPLEMENTARY INFORMATION: In 

accordance with Section 10(a) of the 

Federal Advisory Committee Act, 5 

U.S.C. App. 1, section 10(a), Kayla J. 

Gillan, Designated Federal Officer of the 

Committee, has approved publication of 

this notice. 

Dated: February 2, 2010. 

Elizabeth M. Murphy, 

Committee Management Officer. 

[FR Doc. 2010–2519 Filed 2–4–10; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61446; File No. SR– 

NASDAQ–2009–077] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving Proposed Rule Change To 

Modify the Procedures Followed When 

a Listed Company Falls Below Certain 

Listing Requirements 

January 29, 2010. 

I. Introduction 

On August 17, 2009, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

modify the length of certain compliance 

periods in Nasdaq’s continued listing 

requirements and to modify the time 

available for a company to provide a 

plan to regain compliance with certain 

listing requirements.3 The proposed rule 

change was published for comment in 

the Federal Register on September 8, 

2009.4 The Commission received three 

comment letters on the proposal.5 On 

December 28, 2009 the Exchange filed a 

response to the comment letter.6 This 

order approves the proposed rule 

change. 

II. Description of the Proposal 

Price Related Criteria 

Under Nasdaq’s current continued 

listing requirements relating to market 

value of listed securities, a company is 

considered to be non-compliant after 

falling below the standard for 10 

consecutive trading days.7 Thereafter, 

the company is provided 90 calendar 

days to regain compliance with the 

market value of listed securities 

requirement. Further, Nasdaq’s current 

continued listing rules relating to 

market value of publicly held shares 

provide that a company is deficient if it 

is below the standard for 30 consecutive 

trading days. Upon such failure, the 

company is provided with 90 calendar 

days to regain compliance.8

Nasdaq proposes to modify the length 

of time required to trigger noncompliance with the market value of 

listed securities requirement and to 

modify the compliance periods 

associated with the Exchange’s market 

value of listed securities and market 

value of publicly held shares continued 

listing requirements. Nasdaq notes that, 

under its bid price continued listing 

standard, if a company’s security has a 

closing bid price below $1.00 for 30 

consecutive trading days, it no longer 

meets the bid price requirement and is 

automatically provided 180 calendar 

days to regain compliance.9 Nasdaq 

asserts that because compliance with 

each of these rules is directly related to 

the price of an issuer’s security, the 

length of time to trigger noncompliance, and the amount of time 

afforded as a compliance period, should 

be consistent. As such, Nasdaq proposes 

to lengthen the period that a company 

would need to be below the market 


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10 In its filing, Nasdaq noted that it could apply 

its authority described in Nasdaq Rule 5100 to 

delist a security during a compliance period if the 

market value of listed securities or market value of 

publicly held shares was so low that delisting is 

necessary to maintain the quality of and public 

confidence in the market, to prevent fraudulent and 

manipulative acts and practices, and to protect 

investors and the public interest. 

11A company could only receive an extension up 

to this 18-month maximum length if: (i) It failed to 

comply during the automatic 180-day compliance 

period; (ii) the company appealed to a Hearings 

Panel; and (iii) the Nasdaq Listing and Hearing 

Review Council (‘‘Listing Council’’) determined to 

call the matter for review, stay the company’s 

delisting, and, after reviewing the company’s 

compliance plan, provide the company with the 

maximum 360-day period from the date of the Staff 

Delisting Determination to regain compliance. 

12Nasdaq Rule 5810(c)(2) and IM–5810–2 provide 

the procedures governing deficiencies for which a 

company may submit a plan of compliance to 

Nasdaq staff. Nasdaq has posted frequently asked 

questions at http://www.nasdaq.com/about/faqslisting-information-questions.stm#continued, which 

discuss the information a company should consider 

in preparing its plan of compliance. 

13Nasdaq anticipates that this authority would be 

used to address cases where the company could not 

timely submit its plan due to events outside the 

control of the company, such as when severe 

weather interferes with the company’s ability to 

provide the necessary information before the 

deadline. 

14Nasdaq states that staff will determine whether 

to allow the company additional time, and if so 

how much time to allow, based on a review of the 

company’s plan of compliance. 

15A company could only receive an extension up 

to this 18-month maximum length if: (i) After 

reviewing the company’s compliance plan, Nasdaq 

staff granted the company the maximum 180-day 

period to regain compliance; (ii) the company failed 

to comply within the time allowed by staff and 

appealed to a Hearings Panel; and (iii) the Nasdaq 

Listing Council determined to call the matter for 

review, stay the company’s delisting, and, after 

reviewing the company’s compliance plan, provide 

the company with the maximum 360-day period 

from the date of the Staff Delisting Determination 

to regain compliance. 

16For example, if a security is below the market 

value of listed securities requirement for 7 

consecutive trading days when the proposed rule is 

approved, the company would not be notified that 

it is deficient unless and until the security remains 

below the requirement for another 23 consecutive 

trading days, such that it remained below for a total 

of 30 consecutive trading days. 

17For example, if a company had been notified 

that its security was below either the market value 

of listed securities or market value of publicly held 

shares requirement 30 days before the proposed 

rule is approved, such that it had 60 days remaining 

in its compliance period, that compliance period 

would be extended by 90 days so that the company 

would have 150 days remaining in the compliance 

period. 18For example, if a company had been notified 

that its security was below either the market value 

of listed securities or market value of publicly held 

shares requirement 95 days before the proposed 

rule is approved, the company would not receive 

any additional time as a result of the proposed rule 

change. Such companies would continue through 

the Hearings and Appeals process, however, and 

could receive additional time as provided for in 

Nasdaq Rules 5815(c)(1)(A) and 5820(d)(1). 

19Nasdaq Rule 5810(c)(2)(B)(i). 

20The proposal to allow a company additional 

time at the end of its extension based on staff’s 

further review of the company is consistent with 

Nasdaq’s current practice of potentially allowing a 

company additional time if it was not initially 

granted the full 105 days allowed by current Nasdaq 

Rule 5810(c)(2)(B)(i). 

21Such companies would continue through the 

Hearings and Appeals process, however, and could 

receive additional time as provided for in Nasdaq 

Rules 5815(c)(1)(A) and 5820(d)(1). 

22See CFA Comment Letter, supra note 5. 

value of listed securities requirement 

before being considered non-compliant 

from 10 to 30 consecutive trading days. 

Nasdaq also proposes to extend from 90 

to 180 days the compliance period in 

which companies that are noncompliant with the market value of 

listed securities and market value of 

publicly held shares requirements can 

regain compliance.10 Nasdaq notes that 

it believes that the existing 90-day time 

frames do not provide sufficient time for 

a company to regain compliance. 

As revised, the maximum amount of 

time that could be afforded to a 

company that failed to meet the market 

value of listed securities or market value 

of publicly held shares requirements 

would be 18 months.11

Requirements With Respect to 

Compliance Plans 

Nasdaq also proposes to modify the 

periods applicable in cases where a 

company can provide Nasdaq staff with 

a plan to regain compliance, such as 

when a company fails to meet the 

minimum requirements for 

stockholders’ equity, the number of 

publicly held shares, or the number of 

shareholders.12 Currently, companies 

are provided 15 calendar days to submit 

a plan to regain compliance. Following 

a review of the plan, staff can grant the 

company a period of up to 105 calendar 

days from the initial notification of noncompliance for the company to regain 

compliance. Nasdaq proposes to 

increase the number of calendar days a 

company has to present its plan from 15 

to 45, and to permit staff to grant up to 

a 5-day extension of this period upon 

good cause shown.13 Nasdaq asserts that 

15 days is often insufficient for a 

company to formulate a meaningful 

plan, particularly in the current market 

and economic conditions. Further, 

Nasdaq proposes to increase from 105 to 

180 the number of calendar days for 

which staff can grant an extension of 

time to regain compliance from its 

initial notification of non-compliance.14

Nasdaq states that this additional time 

will better allow companies to 

implement a plan to regain compliance. 

As revised, the maximum amount of 

time that could be afforded to a 

company that failed to meet a listing 

requirement that allows the submission 

of a plan to regain compliance would be 

18 months.15

Implementation 

Nasdaq states that any company that 

had not yet been notified that it was 

non-compliant with the market value of 

listed securities requirement upon 

Commission approval of the proposed 

rule change will not be notified until 

they are below the requirement for 30 

consecutive trading days.16 Any 

company that has already been notified 

that it was non-compliant with either 

the market value of listed securities 

requirement or the market value of 

publicly held shares requirement and 

that is still in the 90 calendar day 

compliance period for such failure will 

have their compliance period extended 

until 180 calendar days from the date 

they were originally notified of the 

deficiency.17 No additional time will be 

provided to a company that has received 

a Staff Delisting Determination for 

failure to meet either of those 

requirements before the proposed rule 

change is approved.18

With respect to the proposed changes 

to the compliance plan process, if a 

company has not yet submitted its plan 

of compliance when the proposed rule 

change is approved, the deadline to 

submit that plan will be extended until 

45 days from the date of staff’s 

notification of the deficiency. If the 

company has submitted its plan of 

compliance when the proposed rule 

change is approved, but staff has not yet 

made a determination with respect to 

whether to grant additional time, staff 

will be permitted to grant the company 

up to 180 days from staff’s notification 

of the deficiency to regain compliance. 

If the company has already received an 

extension of time to regain compliance 

from staff when the proposed rule 

change is approved,19 at the end of that 

exception staff could, based on a review 

of the company at the time, grant 

additional time for the company to 

regain compliance, up to 180 days from 

staff’s original notification of the 

deficiency.20 No additional time will be 

provided to a company that has already 

received a Staff Delisting Determination 

at the time the proposed rule change is 

approved.21

III. Comment Summary 

In its comment letter, CFA raises 

several concerns regarding the 

Exchange’s proposal.22 First, CFA 

argues that the Exchange’s proposal will 

lead to a proliferation of lengthy 

automatic compliance periods for 

companies that fall below listing 

standards, potentially allowing large 

numbers of non-compliant companies to 


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23 Id. 

24The Exchange notes that such monitoring 

includes staff review of virtually every SEC filing 

made by listing companies, including proxies and 

annual and quarterly financial reports. See Nasdaq 

Response Letter, supra note 6, at 3. 

25See Nasdaq Response Letter, supra note 6, at 

1–2. 

26See CFA Comment Letter, supra note 5. 

27 Id. 

28See Nasdaq Response Letter, supra note 6, at 

1 and 3. 

29See Nasdaq Response Letter, supra note 6, at 

3. 

30See Nasdaq Response Letter, supra note 6, at 

3. 

31See Nasdaq Response Letter, supra note 6, at 

3. 

32See CFA Comment Letter, supra note 5. 

33 Id. 

34 In arriving at this figure, CFA is including in 

its calculation the 30-day period required to trigger 

non-compliance. 

35See CFA Comment Letter, supra note 5. 

36See Nasdaq Response Letter, supra note 6, at 

2. 

37See Nasdaq Response Letter, supra note 6, at 

2. 

38See Nasdaq Response Letter, supra note 6, at 

2 (citing Section 802.02 of the NYSE Listed 

Company Manual). Nasdaq notes that, as described 

in the notice of the proposed rule change, a 

company that receives a delisting letter after the 

180-day compliance period may appeal the 

delisting decision to the Hearings Panel, which can 

grant up to an additional 180 day to regain 

compliance. Thereafter, the company could remain 

listed for an additional 180 days if the Nasdaq 

Listing Council were to call the matter for review, 

stay the company’s delisting, and determine to 

grant additional time. In the Nasdaq Response 

Letter, the Exchange states that it would be highly 

unusual for the Listing Council to take such action 

and noted that it does not believe that the Listing 

Council has ever exercised its discretion to stay a 

delisting to allow a company additional time to 

regain compliance with a price-based listing 

requirement. 

39See Nasdaq Response Letter, supra note 6, at 

4. 

40 Id. 

41See CFA Comment Letter, supra note 5. 

42See supra note 10. 

43See CFA Comment Letter, supra note 5. 

44See FTI Comment letter, supra note 5. 

45See Nasdaq Response Letter, supra note 6, at 

5. 

46See CFA Comment Letter, supra note 5. The 

CFA Comment Letter also provides an additional 

recommendation that is not aimed at this particular 

rule proposal. Specifically, CFA argues that more 

should be done to require exchanges to identify and 

alert investors of noncompliant companies. Nasdaq 

responded to this assertion in its Response Letter 

remain listed for extended periods of 

time with little or no oversight.23 In 

response, the Exchange states that it 

continuously monitors each listed 

company for compliance with the listing 

rules and determines whether any 

public interest concerns exist that may 

make continued listing inappropriate.24

In particular, the Exchange notes that 

notwithstanding the automatic 

compliance periods, Nasdaq staff has 

the authority to apply additional and 

more stringent criteria to shorten a 

compliance period or delist a company 

before the end of the compliance period 

if it believes that the continued listing 

of a company would be contrary to the 

public interest.25

In addition, CFA notes that while 

Nasdaq has stated that the proposed rule 

change is intended to harmonize and 

ensure consistency in the compliance 

periods across its continued listing 

rules, Nasdaq has chosen to apply its 

least restrictive compliance period (i.e., 

its longest compliance period of 180 

days).26 The CFA asserts that if 

harmonization is needed, Nasdaq 

should instead ‘‘harmonize up, not 

down’’ and apply its shorter compliance 

periods consistently across its rules.27 In 

the Nasdaq Response Letter, the 

Exchange asserts that its experience has 

shown that many of the current 

compliance periods are too short, 

particularly given the extraordinary 

volatility in the securities markets over 

the past decade.28 Specifically, the 

Exchange notes that in its experience, 

and as also noted in the BIO Comment 

Letter, the existing time periods do not 

sufficiently account for daily market 

fluctuations, and given the changes that 

have taken place in the financial 

markets, the existing time periods are 

unreasonably short.29 Further, the 

Exchange notes that the proposed longer 

compliance periods are in line with the 

compliance periods afforded by other 

exchanges.30 For example, Nasdaq states 

that the NYSE Amex rules provide that 

staff can grant a company up to 18 

months to regain compliance with its 

market value of publicly held shares 

requirement, and the NYSE rules allow 

staff to provide a company with up to 

18 months to regain compliance with its 

market capitalization requirement.31

CFA also argues that the proposal to 

allow an automatic 180-day grace period 

for the market value of publicly held 

shares and market value of listed 

securities requirements raises particular 

concerns.32 Specifically, CFA states that 

the market value standard is an 

alternative to the stockholders’ equity 

requirement, and thus companies listing 

under this standard are companies that 

fail to meet the minimum stockholders’ 

equity requirement.33 Further, CFA 

notes that Nasdaq recently extended the 

period to regain compliance with the 

market value of listed securities 

requirement from 30 to 90 days, and 

that this proposed rule change would 

now allow a company a total of 210 

days of non-compliance before a 

hearing.34 CFA also questions why the 

180-day automatic grace period is 

preferable to a case-by-case review.35

The Exchange responds that these 

revised time periods are consistent with 

the Exchange’s current bid price rule.36

Specifically, like the bid price rule, a 

company would be found to be noncompliant only after it falls below the 

current threshold for 30 days and would 

thereafter be afforded 180 days to regain 

compliance.37 Nasdaq also notes that 

the maximum total time period that a 

company that failed to meet the market 

value of listed securities or market value 

of publicly held shares requirements 

could remain listed would be 18 

months, which is consistent with the 

compliance periods available at other 

markets.38 With regard to CFA’s 

suggestion that Nasdaq should consider 

a case-by-case review of companies 

below the requirements rather than 

granting an automatic 180-day 

compliance period, Nasdaq states that 

for price-related listing requirements, 

automatic periods provide a transparent, 

objective process, which is more 

appropriate than subjective reviews.39

Further, it notes that such a process 

provides clear guidance to companies 

and their investors.40

CFA also asserts that Nasdaq should 

be required to provide a variety of 

additional information to support its 

proposal.41 For example, CFA suggests 

that Nasdaq should provide further data 

regarding its discretionary authority to 

delist a security during a compliance 

period; 42 supplementary information 

regarding compliance plans and 

compliance periods granted by staff; and 

statistics on the 180-day plan process 

that was adopted last fall for companies 

that are late in filing their periodic 

reports.43 The FTI Comment Letter 

expressed support for this portion of 

CTA’s comment letter asserting that 

Nasdaq should be required to provide 

additional information and rationale in 

support of its proposal.44 In response, 

the Exchange states that the request for 

additional information is not 

appropriate or necessary for 

consideration of the proposed rule 

change. Rather, Nasdaq asserts that the 

proposed rule change satisfies the 

relevant statutory standards, and data 

concerning Nasdaq’s historic 

enforcement of listing standards is 

already disclosed in Nasdaq OMX’s 

public filings with the Commission and 

is not necessary for consideration of this 

proposal.45

Finally, the CFA Comment Letter 

suggests that the Commission should 

review the economic impact of the 

proposed rule change on the exchange 

and should require greater 

independence in Nasdaq’s delisting 

process if such rule changes are found 

to benefit Nasdaq’s financial position.46


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by noting that companies are required to make 

public disclosure that they are non-compliant with 

listing standards, and Nasdaq includes the company 

on the list of non-compliant companies on its Web 

site and displays such information to investors 

viewing the company’s quotation. Further, Nasdaq 

has a display requirement for vendors that display 

Nasdaq’s data feed, which requires them to show 

the company’s noncompliance. Nasdaq did 

acknowledge that vendors that do not obtain 

quotation information from Nasdaq may not display 

this information. See Nasdaq Response Letter, supra 

note 6, at footnote 4. 

47See FTI Comment Letter, supra note 5, at 1. 

48See Nasdaq Response Letter, supra note 6, at 

1. 

49See Nasdaq Response Letter, supra note 6, at 

1. 

50See id. at 2. 

51See id. 

52See id. 

53See id. Nasdaq notes, however, that it would 

be highly unusual for the Listing Council to take 

such action. 

54See id. 

55See BIO Comment Letter, supra note 5. 

56 Id. 

57 Id. In addition, the BIO Comment Letter 

provided requests for Nasdaq to further modify 

certain of its continued listing standards and 

compliance periods. Because those requests do not 

relate to the current proposed rule change before 

the Commission, they will not be discussed in this 

Order. 

58 15 U.S.C. 78f(b)(5). 

59 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). 

60Under Nasdaq’s current rules, if a company’s 

security has a closing bid price below $1 for 30 

consecutive trading days, it is deemed to be noncompliant with the bid price requirement and is 

automatically provided 180 calendar days to regain 

compliance. See Nasdaq Rule 5810(b)(3)(A). 

61As noted, this maximum 18 month compliance 

time only exists assuming every maximum 

compliance period is granted and an appeal was 

called for review by Nasdaq’s Listing Council. See 

supra note 11. 

62See supra note 38. 

63See supra note 11. 

64See Section 802.02 of the NYSE Listed 

Company Manual and Section 1009 of the NYSE 

Amex Company Guide. 

FTI also expressed support for this 

portion of the CFA Comment Letter.47 In 

its response, Nasdaq states that it has a 

transparent, independent enforcement 

process in place to support its listing 

standards.48 Specifically, Nasdaq notes 

that its staff has very limited discretion 

to grant an extension to a company that 

does not comply with a listing 

requirement, and many rules provide for 

automatic compliance periods rather 

than compliance periods determined by 

Nasdaq staff.49 The Nasdaq Response 

Letter also describes the independence 

of the delisting process with regard to 

price-based listing requirements.50 In 

particular, Nasdaq notes that after the 

180-day automatic compliance periods 

runs, Nasdaq staff has no discretion to 

allow the company to continue trading 

and must issue a delisting letter.51 A 

company may appeal that delisting 

letter to a Hearings Panel, which is 

independent of Nasdaq and includes no 

Nasdaq employees.52 Thereafter, 

another independent body, the Nasdaq 

Listing and Hearing Review Council 

(‘‘Listing Council’’), would be the only 

body with the ability to call the matter 

for review and determine to grant 

additional time to the company.53

Nasdaq also states that its Listing 

Qualifications Department is housed in 

a regulation group that is 

organizationally and institutionally 

separate than its business lines and is 

directly accountable to the Regulatory 

Oversight Committee of the Nasdaq 

Board.54

The BIO Comment Letter generally 

supported the Exchange’s proposal.55 In 

particular, the BIO Comment Letter 

stated that extending the number of 

days from 10 to 30 to trigger noncompliance with the market value of 

listed securities requirement would 

allow biotechnology companies to 

regain some stability during daily 

market fluctuations that persist for 

emerging biotechnology companies.56

The BIO Comment Letter also expressed 

support for the portion of the proposal 

providing companies 45 days to submit 

a plan to regain compliance, noting that 

this increase will provide companies the 

necessary time to work with their 

investors to secure a long-term plan that 

will bring them back into compliance 

with listing standards.57

IV. Discussion 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b)(5) of the Act,58 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.59

The Commission notes that the 

development and enforcement of 

adequate standards governing the initial 

and continued listing of securities on an 

exchange is an activity of critical 

importance to financial markets and the 

investing public. The Commission 

continues to believe that enforcement of 

continued listing standards are 

important to ensure that only companies 

suitable for listing remain trading on 

national securities exchanges. While the 

Commission would be concerned about 

any national securities exchange’s 

proposal that would allow companies 

falling below continued listing 

standards to remain listed for an 

extended period of time, the 

Commission has determined to approve 

the Nasdaq’s proposal for the reasons 

discussed below. 

The Commission believes that the 

Exchange’s proposal to extend from 90 

to 180 days the period in which 

companies, that are non-compliant with 

the market value of listed securities and 

market value of publicly held shares 

requirements, can regain compliance, 

will better align the compliance period 

for these continued listing standards 

with the automatic 180 day compliance 

period already provided in Nasdaq’s 

rules for noncompliance with the bid 

price requirement, as well as the rules 

of other markets. As such, the 

Commission believes that the proposal 

should reduce investor confusion over 

the compliance periods available under 

Nasdaq’s price-related continued listing 

requirements.60 Further, the change 

should provide companies with 

additional time to take actions that may 

be necessary to regain compliance, such 

as obtaining shareholder approval and 

registering shares. 

The CFA Comment Letter takes issue 

with the extension of the automatic 

compliance period for these continued 

listing standards to 180 days, expressing 

concern about non-compliant 

companies remaining listed on the 

Exchange for extended periods of time. 

However, as the Exchange has 

represented in the Notice and in the 

Nasdaq Response Letter, the maximum 

amount of time that could be afforded 

to a company that falls out of 

compliance with the market value of 

listed securities or market value of 

publicly held shares requirements 

would be 18 months.61 The Exchange 

further stated in its Response Letter that 

it is highly unusual for the Listing 

Council to stay a company’s delisting 

and grant additional time to regain 

compliance and that it does not believe 

that the Listing Council has ever 

exercised its discretion to take such 

action for a price-based delisting 

decision.62 The Commission also notes 

that this maximum length of time of 18 

months 63 is consistent with the 

maximum amount of time that the 

NYSE and NYSE Amex can provide for 

a listed company to regain compliance 

with its similar continued listing 

standards.64 Further, the Exchange has 

represented that it has the authority 

under Nasdaq Rule 5100 to delist a 


srobinson on DSKHWCL6B1PROD with NOTICES
6076 Federal Register / Vol. 75, No. 24 / Friday, February 5, 2010 / Notices 

65See Nasdaq Response Letter, supra note 6, at 

3. 

66See Nasdaq Response Letter, supra note 6, at 

3. 

67See Nasdaq Rule 5810(c)(2) and IM–5812. 

68See supra note 15. 69See supra note 64. 70Section 802.02 of the NYSE Listed Company 

Manual. 71For example, if the plan is submitted 45 days 

after notification of non-compliance, staff could 

only grant an additional 135 days to regain 

compliance. 

72The Commission notes that as a registered 

national securities exchange, the Commission has 

oversight over Nasdaq’s enforcement of its rules, 

including the delisting rules and process. 

73See supra note 64. 

74 15 U.S.C. 78s(b)(2). 

security during a compliance period if 

the market value of listed securities or 

market value of publicly held shares 

was so low that delisting is necessary to 

maintain the quality of and public 

confidence in the market, to prevent 

fraudulent and manipulative acts and 

practices, and to protect investors and 

the public interest. Notwithstanding the 

lengthened automatic compliance 

periods afforded to issuers under the 

proposed rule change, the Commission 

expects Nasdaq to use its authority to 

delist issuers in a prompt, efficient and 

fair manner where necessary and 

appropriate in accordance with Nasdaq 

Rule 5100, especially in those situations 

where the market value of a company’s 

stock is so low as to make continued 

trading unwarranted. 

The Commission also believes that 

Nasdaq’s proposal to extend the period 

that a company would need to be below 

the minimum market value of listed 

securities requirement before being 

deemed non-compliant from 10 to 30 

consecutive trading days is appropriate 

and consistent with the Act. The 

Commission notes that this change will 

further harmonize Nasdaq’s pricerelated continued listing requirements, 

as the bid price and market value of 

publicly held shares requirements 

currently provide that a company is not 

deficient until it falls below the 

respective standard for 30 consecutive 

trading days. Further, as noted in the 

Nasdaq Response Letter, this time 

period is consistent with, and in some 

cases more stringent than, the threshold 

time periods on other exchanges. 

Specifically, on NYSE Amex, a 

company is deemed to be noncompliant with the market value of 

publicly held shares requirement only 

after it has been below the standard for 

90 consecutive days.65 In addition, a 

company is considered non-compliant 

with the NYSE’s market capitalization 

requirement after the company falls 

below the standard for 30 consecutive 

trading days.66

With regard to deficiencies for which 

a company can provide staff with a plan 

to regain compliance,67 the Commission 

believes that increasing from 105 to 180 

the maximum number of calendar days 

for which staff can grant an extension of 

time from its initial notification of noncompliance will provide companies 

with additional time that may be 

necessary to implement a plan to regain 

compliance where appropriate. The 

Commission notes that the maximum 

time period of 180 days is not an 

automatic grace period, but rather each 

company’s compliance period will be 

determined by Nasdaq staff after review 

of the company’s compliance plan. 

Accordingly, the Commission expects 

Nasdaq staff to conduct a thorough caseby-case review of each company’s plan 

of compliance, and make an 

individualized determination as to the 

extension of time that is appropriate for 

a particular company. In addition, even 

with this change, the Commission notes 

that the total maximum amount of time 

that could be afforded to a company that 

failed to meet a listing requirement that 

allows for the submission of a plan to 

regain compliance would be 18 months, 

and this maximum 18 months assumes 

all compliance periods are extended to 

the permissible maximum during the 

appeal process by the Hearings Panel 

and Listing Council.68 As discussed 

above, this time period is consistent 

with the maximum amount of time a 

company is permitted to regain 

compliance with similar continued 

listing standards under NYSE’s rules.69

The Commission believes that 

Nasdaq’s proposal to increase from 15 to 

45 days the length of time a company 

has to submit a plan to regain 

compliance should provide companies 

with additional time to devise a 

meaningful and workable plan to regain 

compliance. Further, the Commission 

notes that this revised time period is 

consistent with the NYSE’s rules, which 

generally provide a company with 45 

days from receipt of a letter of noncompliance to submit a plan to regain 

compliance.70 We further note that the 

45 days does not extend the maximum 

time period the staff can allow for 

compliance.71

Finally, the Commission notes that 

while the additional, specific 

information that the CFA argued should 

be provided by Nasdaq on issues such 

as the historic enforcement of Nasdaq’s 

listing standards might be useful for 

many purposes, it agrees with Nasdaq 

that such data and information is not 

required in order for the Commission to 

find that the current proposed rule 

change is consistent with the Act.72 In 

addition, the Commission believes that 

the CFA’s call for greater independence 

in Nasdaq’s delisting process is not an 

issue that is directly before the 

Commission in this proposed rule 

change. The rules governing and 

outlining the current delisting process 

of the Exchange have been reviewed by 

the Commission and approved as being 

consistent with the Act. As noted above, 

many of the changes proposed in the 

current rule filing involve the 

lengthening of automatic threshold or 

compliance periods that are not subject 

to the discretion of Nasdaq staff. While 

Nasdaq is lengthening from 105 to 180 

the maximum number of calendar days 

for which staff can grant an extension of 

time for compliance with regard to those 

deficiencies for which a company can 

provide staff with a plan to regain 

compliance, the Commission does not 

believe that this changes the 

independence of the Hearings Panel and 

Listing Council. Although we recognize 

that the staff will have more discretion 

in setting the initial length of the 

compliance period for certain 

deficiencies, upon appeal, any delisting 

for non-compliance will continue to be 

reviewed by independent panels. In 

addition, as noted, the maximum length 

of time permitted under the proposed 

rule change is consistent with other 

markets’ rules.73

In summary, as noted above, the 

Commission believes that enforcement 

of continued listing standards is of 

critical importance to our financial 

markets and investing public and, 

among other things helps to ensure that 

exchange traded securities have 

adequate depth and liquidity necessary 

to promote fair and orderly markets. 

While the Nasdaq’s rule proposal does 

extend the time frames a company can 

continue to trade while out of 

compliance with certain continued 

listing standards, the changes are 

consistent with that of other national 

securities exchanges and do provide 

transparency to the delisting process. 

We also continue to expect Nasdaq, as 

they have represented, to monitor 

companies that are out of compliance 

and delist them promptly should there 

be public interest or other concerns that 

make continued trading unwarranted. 

For the reasons noted above, the 

Commission believes that the proposed 

rule change is reasonable and consistent 

with the Act. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,74 that the 


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Federal Register / Vol. 75, No. 24 / Friday, February 5, 2010 / Notices 6077 

75 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4At present, all System routing tables include 

NASDAQ’s affiliate, NASDAQ OMX BX (‘‘BX’’). 

Thus, all routed orders have the opportunity to 

route to this venue, with the exception of DOT 

orders routed directly to the NYSE or NYSE Amex 

opening or closing processes and directed orders 

that are directed to route to venues other than BX. 

proposed rule change (SR–NASDAQ– 

2009–077) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.75

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–2500 Filed 2–4–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61460; File No. SR– 

NASDAQ–2010–018] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify 

NASDAQ’s Order Routing Rule 

February 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 January 

29, 2010, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’ or the ‘‘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. Nasdaq has 

designated the proposed rule change as 

constituting a rule change under Rule 

19b–4(f)(6) under the Act,3 which 

renders the proposal effective upon 

filing with the Commission. 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 is filing this proposed 

rule change to amend Rule 4758 to 

describe available routing options in 

greater detail, to modify an existing 

routing option, and to add a new routing 

option. NASDAQ proposes to 

implement the rule change on February 

1, 2010. The text of the proposed rule 

change is available at http:// 

nasdaq.cchwallstreet.com/, at the 

Exchange’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 

NASDAQ is amending Rule 4758, 

which describes its order routing 

processes, to describe existing order 

routing options with greater specificity, 

to modify an existing routing option, 

and to add a new routing option. 

Currently, routing options available 

through NASDAQ are all variations of 

three main routing options, known as 

DOT, STGY, and SCAN. Although the 

rule language for these routing options 

describes the available variations of the 

main options in general terms, 

NASDAQ believes that understanding of 

these options would be enhanced by 

describing the different versions as 

separately named routing options. 

NASDAQ is also amending Rule 4758 to 

include a definition of ‘‘System routing 

table,’’ defined as the proprietary 

process for determining the specific 

trading venues to which the NASDAQ 

System routes orders and the order in 

which it routes them. The definition 

reflects the fact that NASDAQ, like 

other trading venues, maintains 

different routing tables for different 

routing options and modifies them on a 

regular basis to reflect assessments 

about the destination markets. Such 

assessments consider factors such as a 

destination’s latency, fill rates, 

reliability, and cost. Accordingly, the 

definition specifies that NASDAQ 

reserves the right to maintain a different 

routing table for different routing 

options and to modify routing tables at 

any time without notice.4 All routing 

complies with the requirements of Rule 

611 of Regulation NMS. 

• DOT is a routing option for orders 

that the entering firm wishes to 

designate for participation in the NYSE 

or NYSE Amex opening or closing 

processes. DOT orders do not check the 

NASDAQ book prior to routing directly 

to NYSE or NYSE Amex. After 

attempting to execute at NYSE or NYSE 

Amex, DOT orders thereafter check the 

NASDAQ book for available shares and 

are then converted into SCAN or STGY 

orders, depending on the designation of 

the entering firm. If a DOT order 

designated to participate in the opening 

process is entered after 9:30 a.m., 

moreover, it will be converted into a 

SCAN or STGY order, depending on the 

designation of the entering firm. 

• DOTI is a routing option under 

which orders check the NASDAQ book 

and destinations on the DOTI System 

routing table and then are sent to NYSE 

or NYSE Amex. Such orders do not 

return to the NASDAQ book if they are 

not executed, but rather remain on the 

NYSE or NYSE Amex book until 

executed, cancelled, or expired. 

• STGY is a routing option under 

which orders check the NASDAQ book, 

check destinations on the STGY System 

routing table, and then return to the 

NASDAQ book. After returning to the 

NASDAQ book, a STGY order will 

subsequently route out to another 

market center if it posts a bid or offer 

that locks or crosses the STGY order. 

• SKNY is a form of STGY in which 

the entering party instructs the System 

to bypass any market centers included 

in the STGY System routing table that 

are not posting Protected Quotations 

within the meaning of Regulation NMS. 

• SCAN is a routing option under 

which orders check the NASDAQ book, 

check destinations on the SCAN System 

routing table, and then return to the 

NASDAQ book. After returning to the 

NASDAQ book, a SCAN order will not 

subsequently route out to another 

market center if it posts a bid or offer 

that locks or crosses the SCAN order. 

• SKIP is a form of SCAN in which 

the entering party instructs the System 

to bypass any market centers included 

in the SCAN System routing table that 

are not posting Protected Quotations 

within the meaning of Regulation NMS. 

• TFTY is a routing option that was 

formerly comprised within the 

definition of SCAN. TFTY orders 

currently do not check the NASDAQ 

book for available shares prior to routing 

to destinations on the TFTY System 

routing table. Thereafter, they return to 

the NASDAQ book and, like SCAN 

orders, do not route out again. TFTY is 

being modified by this proposed rule 


srobinson on DSKHWCL6B1PROD with NOTICES