Document ID: SEC-2013-2108-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2013-12-12T05:00Z

[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75631-75633]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29619]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71017; File No. SR-NASDAQ-2013-134]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
to Modify the Listing of Additional Shares Fees Payable by Non-U.S. 
Companies

December 6, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on November 29, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by NASDAQ. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is proposing to modify the listing of additional shares fees 
payable by non-U.S. companies.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, 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. The 
text of these statements may be examined at

[[Page 75632]]

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's listing of additional shares fees are designed, in part, 
to offset the costs of NASDAQ's regulatory program associated with 
oversight of listed companies, including the review of share issuances 
for compliance with the shareholder approval and voting rights rules, 
the regulatory review of entities and individuals that purchase a 
significant interest in a listed company in a transaction with the 
company, and NASDAQ's efforts to increase the transparency of 
interpretations of its rules. Currently, the applicable fees depend on 
whether the company is a domestic or non-U.S. company. Domestic 
companies pay a fee of $0.01 per share, subject to a minimum quarterly 
fee of $5,000, for any amount of shares in excess of 49,999 shares 
issued during a quarter, and a maximum fee of $65,000 per year.\3\ In 
contrast, non-U.S. companies pay a flat fee of $5,000 for any amount of 
shares in excess of 49,999 shares issued during a year.\4\ There is no 
fee for issuances of up to 49,999 shares per quarter for domestic 
companies and up to 49,999 shares per year for non-U.S. companies.
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    \3\ Rules 5910(b)(1) and 5920(b)(1).
    \4\ Rules 5910(b)(2) and 5920(b)(2).
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    NASDAQ proposes to make two changes to the listing of additional 
shares fees payable by non-U.S. companies. First, NASDAQ proposes to 
modify the rule such that a foreign company that is not a Foreign 
Private Issuer \5\ pays the same listing of additional shares fees as a 
domestic company. For purposes of NASDAQ's other rules, a foreign 
company that is not a Foreign Private Issuer is treated the same as a 
domestic company.\6\ Further, unlike a Foreign Private Issuer, a 
foreign company that is not a Foreign Private Issuer files the same 
quarterly reports as a domestic company \7\ and is typically not 
primarily traded on another marketplace. As such, NASDAQ believes it is 
appropriate to treat these companies the same as domestic companies for 
purposes of the listing of additional shares fee because they are 
subject to the same rules and generally trade primarily on NASDAQ.
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    \5\ ``Foreign Private Issuer'' is defined in Rule 3b-4 under the 
Act, 17 CFR 240.3b-4. See Rule 5005(a)(18). A foreign company that 
is not a Foreign Private Issuer would be considered a ``foreign 
issuer'' under Rule 3b-4. A foreign issuer is also defined to 
include a foreign government that issues securities.
    \6\ For example, while a Foreign Private Issuer can rely on an 
exemption from most of NASDAQ's corporate governance requirements 
under Rule 5615(a)(3), a foreign company that is not a Foreign 
Private Issuer is not eligible for that exemption.
    \7\ Under SEC Rule 13a-13(b)(2), 17 CFR 240.13a-13(b)(2), a 
Foreign Private Issuer is not required to file quarterly reports 
with the Commission.
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    Second, NASDAQ proposes to increase the listing of additional 
shares fee applicable to Foreign Private Issuers from $5,000 to $7,500 
per year effective January 1, 2014. As under the current rule, no fee 
would be charged for issuances of up to 49,999 shares per year. NASDAQ 
believes this change would reduce the current disparity in the listing 
of additional shares fees paid by Foreign Private Issuers, which also 
benefit from NASDAQ's regulatory program, and other companies, while 
still recognizing that those Foreign Private Issuers generally also 
trade on another marketplace and are subject to an exemption from many 
of NASDAQ's corporate governance rules. While the proposed $7,500 per 
year fee would exceed the $5,000 minimum fee applicable to companies 
that are not Foreign Private Issuers, NASDAQ believes that this higher 
fee is appropriate given that fee [sic] for Foreign Private Issuers is 
assessed annually, instead of quarterly, and that Foreign Private 
Issuers are not subject to per share fees, which can range as high as 
$65,000 per year.\8\
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    \8\ NASDAQ also proposes to make non-substantive changes to 
replace the term ``issuer'' with the defined term ``Company'' 
throughout the rules and to improve readability of the rule text.
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    NASDAQ will implement these changes on January 1, 2014.\9\ A 
foreign company that is not a Foreign Private Issuer will first owe the 
$0.01 per share listing of additional shares fee for the change in 
shares outstanding during its first fiscal quarter beginning on or 
after January 1, 2014.\10\ A Foreign Private Issuer will be subject to 
the new $7,500 fee for the change in its shares outstanding starting 
with its first fiscal year beginning on or after January 1, 2014.\11\ 
Following effectiveness, if a company ceases to be a Foreign Private 
Issuer, it will be assessed the listing of additional shares fee based 
on its new status effective with the start of its next fiscal year, 
when it is also required to start filing Forms 10-Q and 10-K.\12\ If a 
company becomes a Foreign Private Issuer, it similarly will become 
subject to the fee applicable to Foreign Private Issuers at the 
beginning of its next fiscal year.
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    \9\ Until January 1, 2014, the online NASDAQ rule book will 
reflect the currently effective fees with a note indicating that 
this fee change is pending and will become effective on January 1, 
2014. The online NASDAQ rule book will also contain a link to the 
text of the revised rule.
    \10\ For example, a company with a December 31st year end would 
first owe the fee under Rule 5910(b)(1) or Rule 5920(b)(1) for the 
change in its shares outstanding during its first quarter, as 
reflect [sic] in the difference between the shares outstanding 
reported on its Form 10-K for the year ended December 31, 2013, and 
its Form 10-Q for the quarter ended March 31, 2014.
    \11\ A Foreign Private Issuer with a December 31st fiscal year 
will first pay the new fee for shares issued between January 1, 2014 
and December 31, 2014 and will be billed for those share issuances 
based on the Form 20-F filed in 2015.
    \12\ A foreign company is required to determine whether it is a 
Foreign Private Issuer on an annual basis as of the end of its 
second fiscal quarter. If the company determines that it is no 
longer a Foreign Private Issuer, it must transition to domestic 
reporting status beginning on the first day of the next fiscal year. 
SEC Rule 3b-4(e), 17 CFR 240.3b-4(e).
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2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\13\ in general and with 
Sections 6(b)(4) and (5) of the Act,\14\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers and other persons using its 
facilities, and does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    NASDAQ believes that the proposed fees are reasonable and not 
unfairly discriminatory because they will better allocate costs of 
NASDAQ's regulatory program across the listed companies that benefit 
from that program. NASDAQ believes that the proposed $2,500 increase in 
the listing of additional shares fee applicable to Foreign Private 
Issuers is reasonable and an equitable allocation of a portion of the 
costs of NASDAQ's regulatory program, which benefits these companies. 
While the proposed $7,500 per year fee would exceed the $5,000 minimum 
quarterly fee applicable to companies that are not Foreign Private 
Issuers, NASDAQ believes that this higher fee is appropriate given that 
Foreign Private Issuers are not subject to per share fees, which can 
range as high as $65,000 per year. In addition, continuing a separate, 
lower fee for Foreign Private Issuers remains a reasonable and 
equitable allocation of fees because Foreign Private Issuers generally 
trade on another marketplace and have exemptions available to many of 
NASDAQ's governance rules,

[[Page 75633]]

including the shareholder approval and voting rights rules.
    NASDAQ also believes that it is reasonable and not unfairly 
discriminatory to charge a foreign company that is not a Foreign 
Private Issuer the same fee as a domestic company. The listing 
situation of a foreign company that is not a Foreign Private Issuer is 
more similar to a domestic company than it is to a Foreign Private 
Issuer in that a Foreign Private Issuer often will trade on another 
marketplace and is subject to exemptions from many of NASDAQ's 
corporate governance rules. On the other hand foreign companies that 
are not Foreign Private Issuers, like domestic companies, do not 
typically trade on other marketplaces and are not eligible to 
exemptions from the governance requirements. Similarly, a Foreign 
Private Issuer receives different treatment under the Commission's 
rules than a foreign company that is not a Foreign Private Issuer.\15\
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    \15\ For example, a Foreign Private Issuer is not required to 
file quarterly reports and is exempt from the proxy rules. See SEC 
Rules 13a-13(b)(2), 17 CFR 240.13a-13(b)(2), and 3a12-3(b), 17 CFR 
240.3a12-3(b).
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    Finally, NASDAQ believes that the proposed fees are consistent with 
the investor protection objectives of Section 6(b)(5) of the Act \16\ 
in that they are designed to promote just and equitable principles of 
trade, to remove impediments to a free and open market and national 
market system, and in general to protect investors and the public 
interest. Specifically, the fees are designed to ensure that there are 
adequate resources for NASDAQ's listing compliance program, which helps 
to assure that listing standards are properly enforced and investors 
are protected.
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    \16\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The market for 
listing services is extremely competitive and listed companies may 
freely choose alternative venues based on the aggregate fees assessed, 
and the value provided by each listing. This rule proposal does not 
burden competition with other listing venues, which are similarly free 
to set their fees. For these reasons, NASDAQ does not believe that the 
proposed rule change will result in any burden on competition for 
listings.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-134 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2013-134. This 
file number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. Copies of the 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-NASDAQ-2013-134 and should 
be submitted on or before January 2, 2014 
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-29619 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P