Document ID: SEC-2017-0065-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2017-01-17T05:00Z

[Federal Register Volume 82, Number 10 (Tuesday, January 17, 2017)]
[Notices]
[Pages 4947-4950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00783]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79770; File No. SR-NASDAQ-2016-173]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Reduce the All-Inclusive Annual Listing Fee for Limited Partnerships 
Listed on Nasdaq

January 10, 2017
    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 December 28, 2016, 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 the 
Exchange. 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

    The Exchange proposes to reduce the fees for limited partnerships 
listed on Nasdaq.
    While these amendments are effective upon filing, the Exchange has 
designated the proposed amendments to be operative on January 1, 2017.
    A notice of the proposed rule change for publication in the Federal 
Register is attached as Exhibit 1 [sic]. The text of the proposed rule 
change is set forth below. Proposed new language is italicized; deleted 
text is in brackets.
* * * * *

5910. The Nasdaq Global Market (including the Nasdaq Global Select 
Market)

* * * * *

IM-5910-1. All-Inclusive Annual Listing Fee

    (a)-(c) No change.
    (d) The All-Inclusive Annual Listing Fee will be calculated on 
total shares outstanding according to the following schedules:
    (1)-(3) No change.
    (4) Limited Partnerships (effective January 1, 2017):

Up to 75 million shares $37,500
75+ to 100 million shares $50,000
100+ to 125 million shares $62,500
125+ to 150 million shares $67,500
Over 150 million shares $77,500

    (e) No change.
* * * * *

5920. The Nasdaq Capital Market

* * * * *
    IM-5920-1. All-Inclusive Annual Listing Fee
    (a)-(c) No change.
    (d) The All-Inclusive Annual Listing Fee will be calculated on 
total shares outstanding according to the following schedules:
    (1)-(3) No change.
    (4) Limited Partnerships (effective January 1, 2017):

Up to 50 million shares $30,000
Over 50 million shares $37,500
    (e) No change.
* * * * *

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 proposes to reduce the fees for limited partnerships listed 
on Nasdaq.

[[Page 4948]]

Historically, certain of Nasdaq's corporate governance requirements, 
including most shareholder approval requirements (other than for equity 
compensation), most independence requirements (other than for audit 
committees at the general partner level), and the annual meeting 
requirement (unless required by statute or regulation in the state in 
which the limited partnership is formed or doing business or by the 
terms of the partnership's limited partnership agreement), have not 
been applied to limited partnerships because their structure typically 
requires that public investors have limited rights and that the general 
partners make all significant decisions about the operation of the 
company.\3\ As such, limited partners do not expect to have a voice in 
the operations of the partnership. Reduced corporate governance 
requirements for limited partnerships, in turn, result in Nasdaq 
expending fewer resources on monitoring and enforcing its rules because 
a significant portion of the regulatory cost Nasdaq incurs in 
connection with the continued listing of an issuer relates to the 
review by Nasdaq staff of complex transactions for compliance with 
Nasdaq's shareholder approval requirements, which limited partnerships 
are not subject to. Similarly, Nasdaq incurs lower regulatory costs in 
connection with the review by Nasdaq staff of limited partnerships' 
filings with the Commission because these issuers are not subject to 
most board and committee independence requirements (other than for 
audit committees at the general partner level), and most limited 
partnerships neither hold annual meetings nor file proxy statements. 
Accordingly, Nasdaq proposes to reduce the All-Inclusive Annual Listing 
Fee for limited partnerships listed on Nasdaq.
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    \3\ See Rule 5615(a)(4).
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    The proposed amendment will affect the All-Inclusive Annual Listing 
Fee schedule \4\ on the Nasdaq Global Market, the Nasdaq Global Select 
Market, and the Nasdaq Capital Market.\5\ In 2014, when Nasdaq adopted 
the All-Inclusive Annual Listing Fee schedule, Nasdaq considered 
various factors that distinguish companies, including market tier, 
shares outstanding, and security type, as well as the perceived use of 
various Nasdaq regulatory and support services by companies of various 
characteristics.\6\ Due to the relatively few limited partnerships 
listed on the Exchange at that time, Nasdaq's analysis did not focus on 
the special characteristics of the limited partnerships. Upon further 
consideration, Nasdaq now believes that the reduced regulatory 
oversight needed for limited partnerships warrants a reduced fee.
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    \4\ In 2014, Nasdaq adopted an All-Inclusive Annual Listing Fee 
schedule. Securities Exchange Act Release No. 73647 (November 19, 
2014), 79 FR 70232 (November 25, 2014) (SR-NASDAQ-2014-87). All 
newly listed companies are subject to the All-Inclusive fee 
structure and other listed companies can elect to be on the All-
Inclusive fee structure. All companies will be subject to the All-
Inclusive fee structure effective January 1, 2018.
    \5\ Listing Rule 5910 provides that fee schedules for the Nasdaq 
Global Select Market are the same fee schedules as for the Nasdaq 
Global Market.
    \6\ See Securities Exchange Act Release No. 73647, supra note 4.
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    As detailed in the proposed rule, for limited partnerships listed 
on the Capital Market the All-Inclusive Annual Listing Fee will range 
from $30,000 to $37,500. On the Global and Global Select Markets, the 
All-Inclusive Annual Listing Fee for limited partnerships will range 
from $37,500 to $77,500.\7\ The proposed fees will continue to be based 
on a limited partnership's total shares outstanding and will maintain 
the same pricing tiers based on shares outstanding as in the current 
fee schedule applicable to limited partnerships, except the tiers that 
otherwise would have their fees reduced below the minimum fee of 
$37,500 for the Global and Global Select Markets or $30,000 for the 
Capital Market are combined into a single pricing tier of up to 75 
million shares outstanding on the Global and Global Select Markets and 
of up to 50 million shares outstanding on the Capital Market.
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    \7\ The proposed fees are generally 50% less than the fees 
applicable to issuers of equity securities other than ADRs and 
Closed-End Funds. However, Nasdaq maintained a minimum fee of 
$37,500 for the Global and Global Select Markets and $30,000 for the 
Capital Market in recognition of the regulatory work Nasdaq must 
nonetheless perform and the benefits a limited partnership accrues 
with listing, and in consideration of the minimum fees set by 
Nasdaq's competitors.
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    Nasdaq notes that American Depositary Receipts (ADRs) and Closed-
end Funds also have different fee schedules than other listed equity 
securities. Nasdaq believes that the characteristics of ADRs and 
Closed-end Funds are different than the characteristics of limited 
partnerships and that it is therefore appropriate to apply a different 
fee schedule for limited partnerships.\8\
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    \8\ See Securities Exchange Act Release No. 73647, supra note 4, 
noting, among other differences, that the U.S. listing is not 
typically the issuer of an ADR's primary listing, and that Closed-
end Funds are particularly sensitive to the expenses they incur, 
given that they compete for investment dollars based on return, but 
are otherwise subject to the same regulatory requirements as other 
listed companies.
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    The proposed fee change will be operative January 1, 2017.
    Nasdaq notes that no other company will be required to pay higher 
fees as a result of the proposed amendments and represents that the 
proposed fee change will have no impact on the resources available for 
its regulatory programs.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\10\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility 
or system which the Exchange operates or controls, and is not designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4) and (5).
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    As a preliminary matter, Nasdaq competes for listings with other 
national securities exchanges and companies can easily choose to list 
on, or transfer to, those alternative venues. As a result, the fees 
Nasdaq can charge listed companies are constrained by the fees charged 
by its competitors and Nasdaq cannot charge prices in a manner that 
would be unreasonable, inequitable, or unfairly discriminatory.
    Nasdaq believes that the proposed fee change reducing the fee paid 
by limited partnerships is reasonable and not unfairly discriminatory 
because it recognizes the reduced regulatory cost Nasdaq incurs for 
limited partnerships. Specifically, certain of Nasdaq's corporate 
governance requirements, including most shareholder approval 
requirements (other than for equity compensation), most independence 
requirements (other than for audit committees at the general partner 
level), and the annual meeting requirement (unless required by statute 
or regulation in the state in which the limited partnership is formed 
or doing business or by the terms of the partnership's limited 
partnership agreement), do not apply to limited partnerships because 
their structure typically requires that public investors have limited 
rights and that the general partners make all significant decisions 
about the operation of the company. This allows Nasdaq to expend fewer 
resources on monitoring and enforcing its rules because a significant 
portion of the regulatory cost Nasdaq incurs in connection with the 
continued listing of an issuer relates to the review by Nasdaq staff of 
complex transactions for compliance with

[[Page 4949]]

Nasdaq's shareholder approval requirements, which limited partnerships 
are not subject to. Similarly, Nasdaq incurs lower regulatory costs in 
connection with the review by Nasdaq staff of limited partnerships' 
filings with the Commission because these issuers are not subject to 
most board and committee independence requirements (other than for 
audit committees at the general partner level), and most limited 
partnerships neither hold annual meetings nor file proxy statements. 
These reduced costs are a non-discriminatory reason to charge limited 
partnerships a lower All-Inclusive Annual Listing Fee.
    Currently, ADRs and Closed-end Funds also pay lower All-Inclusive 
Annual Listing Fees than other issuers of equity securities. Nasdaq 
believes it is appropriate to apply a fee schedule to limited 
partnerships that is different from those applicable to either ADRs or 
Closed-end Funds due to their differing characteristics. Specifically, 
Nasdaq charges lower listing fees for ADRs because, among other 
differences, the U.S. listing is not typically the issuer of an ADR's 
primary listing.\11\ Similarly, Nasdaq charges lower listing fees for 
Closed-end Funds because they are particularly sensitive to the 
expenses they incur, given that they compete for investment dollars 
based on return.\12\ As a result, offering a different discount to 
limited partnerships on the All-Inclusive Annual Fee schedule than to 
ADRs and Closed-end Funds is not inequitable or unfairly 
discriminatory.
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    \11\ See Securities Exchange Act Release No. 73647, supra note 
4.
    \12\ Id.
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    While the proposed fee reduction only applies to limited 
partnerships on the All-Inclusive Annual Fee schedule, Nasdaq notes 
that any currently listed limited partnership can opt into the All-
Inclusive Annual Fee schedule for 2017 prior to December 31, 2016, and 
that all companies will transition to that fee schedule in 2018. 
Moreover, Nasdaq accrues benefits from companies being on this 
schedule.\13\ These benefits to Nasdaq provide a reasonable basis for 
Nasdaq to adjust the fees only for limited partnerships on the All-
Inclusive Annual Fee schedule and, as a result, offering a discount 
only to limited partnerships on the All-Inclusive Fee schedule is not 
inequitable or unfairly discriminatory.
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    \13\ These benefits include eliminating the multiple invoices 
otherwise sent to a company each year and providing more certainty 
as to Nasdaq's revenues. See Securities Exchange Act Release No. 
73647, supra note 4.
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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 \14\ 
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 amount of revenue forgone by allowing 
limited partnerships to pay lower fees is not substantial, and the 
reduced fees may result in more limited partnerships listing on Nasdaq, 
thereby increasing the resources available for Nasdaq's listing 
compliance program, which helps to assure that listing standards are 
properly enforced and investors are protected. Consequently, Nasdaq 
believes that the potential loss of revenue from the reduction of fees 
payable by limited partnerships, as proposed, will not hinder its 
ability to fulfill its regulatory responsibilities.
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    \14\ 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)(ii) of the Act.\15\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-173 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-173. 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 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-NASDAQ-2016-173, and should 
be submitted on or before February 7, 2017.

[[Page 4950]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary,
[FR Doc. 2017-00783 Filed 1-13-17; 8:45 am]
 BILLING CODE 8011-01-P