Document ID: SEC-2010-0584-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-04-20T04:00Z

[Federal Register: April 20, 2010 (Volume 75, Number 75)]
[Notices]               
[Page 20651-20653]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20ap10-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61904; File No. SR-NASDAQ-2010-047]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Global Select Market Initial Listing Requirements

April 14, 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 April 6, 2010, The NASDAQ Stock Market LLC (``Nasdaq'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by Nasdaq. Nasdaq has designated the proposed rule 
change as constituting a non-controversial 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq is filing this proposed rule change to amend the Global 
Select initial listing requirements and to make a technical conforming 
correction to a rule cross reference. The text of the proposed rule 
change is below. Proposed new language is in italics and proposed 
deletions are in brackets.
* * * * *

5310. Definitions and Computations

    (a)-(d) No change.
    (e) In the case of a Company listing in connection with its initial 
public offering, compliance with the market capitalization requirements 
of Rules 5315(f)(3)(B), [and] (C) and (D) will be based on the 
Company's market capitalization at the time of listing.
    (f)-(h) No change.
    (i) A Company whose business plan is to complete an initial public 
offering and engage in a merger or acquisition with one or more 
unidentified companies within a specific period of time, as described 
in IM-5101-2, is not eligible to list on the Nasdaq Global Select 
Market.

5315. Initial Listing Requirements for Primary Equity Securities

    Rule 5310 provides guidance about computations made under this Rule 
5315.
    (a)-(e) No change.
    (f)
    (1) No change.
    (2) Market Value Requirement
    The Publicly Held Shares shall meet one of the following:
    (A)-(B) No change.
    (C) A Market Value of at least $45[70] million in the case of: (i) 
A Company listing in connection with its initial public offering; and 
(ii) a Company that is affiliated with, or a spin-off from, another 
Company listed on the Global Select Market; or [and (iii)]
    (D) A Market Value of at least $70 million in the case of a closed 
end management investment company registered under the Investment 
Company Act of 1940.
    (3) Valuation Requirement
    A Company, other than a closed end management investment company, 
shall meet the requirements of sub-paragraph (A), (B), [or] (C), or (D) 
below:
    (A)-(B) No change.
    (C)(i) Average market capitalization of at least $850 million over 
the prior 12 months, and (ii) total revenue of at least $90 million in 
the previous fiscal year[.]; or
    (D)(i) Market capitalization of at least $160 million, (ii) total 
assets of at least $80 million for the most recently completed fiscal 
year, and (iii) stockholders' equity of at least $55 million.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq proposes to amend Rule 5315(f)(3) to adopt a fourth initial 
listing standard for listing on the Nasdaq Global Select Market. This 
standard would permit listing if the company has: (i) $80 million in 
total assets, (ii) $55 million in stockholders' equity and (iii) $160 
million of market capitalization. Companies qualifying under this 
standard will also have to meet all other requirements of Rule 5315, 
including the ownership and market value requirements contained in Rule 
5315(f) and, upon listing, would be subject to the Global Market 
continued listing standards.
    Nasdaq believes that this new listing standard will continue to 
ensure that only companies of a significant size and financial standing 
will be able to list on the Global Select Market. In addition, the new 
listing standard will permit certain companies that qualify for listing 
today on other national securities exchanges to also qualify for the 
Global Select Market. In that regard, Nasdaq notes that the Commission 
recently approved a similar alternative standard for listing on the New 
York Stock Exchange, Inc. (``NYSE'').\4\ This new NYSE alternative 
allows a company to list if it has total assets of at least $75 
million, stockholders' equity of at least $50 million, and a global 
market capitalization of at least $150 million. The proposed 
requirements for initial listing on the Nasdaq Global Select Market are 
higher than those adopted by the NYSE.
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    \4\ Securities Exchange Act Release No. 58934 (November 12, 
2008), 73 FR 69708 (SR-NYSE-2008-098, modifying Section 102.01C of 
the Listed Company Manual).
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    Like companies listing under the current Global Select Market 
initial listing standards, companies listing under the proposed new 
standard must

[[Page 20652]]

also comply with the continued listing standards of Nasdaq's Global 
Market.\5\ While in some cases based on different criteria, these 
continued listing standards are generally the same as or lower than 
those of the NYSE. Nasdaq believes that its Global Market continued 
listing standards, which Nasdaq strictly applies, are designed to 
ensure that only companies of adequate size and stature remain listed 
on Nasdaq.
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    \5\ Under Rule 5450, a company's primary equity security must 
qualify under at least one of three standards for continued listing: 
Equity (Rule 5450(b)(1)); Market Value (Rule 5450(b)(2)); or Total 
Assets/Total Revenue (Rule 5450(b)(3)).
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    Nasdaq is also proposing to reduce the market value of publicly 
held shares (``MVPHS'') requirement contained in Rule 5315(f)(2)(C) 
from $70 million to $45 million for companies listing in connection 
with an initial public offering or that are affiliated with, or a spin-
off from, another company listed on the Global Select Market.\6\ Nasdaq 
believes that this proposed reduction in the market value of publicly 
held shares requirement to $45 million for companies that are new to 
the public markets will enable otherwise qualified companies to qualify 
for the Global Select Market and is similar to a recent change by the 
NYSE. In that regard, Nasdaq notes that the NYSE recently adopted a $40 
million public float requirement applicable to initial public offerings 
and spin-offs for listing on the NYSE.\7\ Nasdaq notes that the 
proposed $45 million market value of publicly held shares requirement 
is higher than the analogous NYSE requirement.\8\
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    \6\ Closed-end funds will continue to be required to have a 
minimum of $70 million of MVPHS. Nasdaq does not believe that it is 
unfairly discriminatory to apply different public float requirements 
to closed-end funds given that they are subject to their own 
separate listing standards and have characteristics that make them 
significantly different from operating companies.
    \7\ Securities Exchange Act Release No. 60501 (August 13, 2009), 
74 FR 42348 (August 21, 2009) (SR-NYSE-2009-080, approving changes 
to Section 102.01B of the Listed Company Manual).
    \8\ Id.
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    In addition, Nasdaq proposes to add Rule 5310(i) to provide that a 
company whose business plan is to complete an initial public offering 
and engage in a merger or acquisition with one or more unidentified 
companies within a specific period of time is not eligible to list on 
the Global Select Market.\9\
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    \9\ These companies are commonly referred to as special purpose 
acquisition companies or SPACs. See IM-5101-2. SPACs cannot 
currently list on the Global Select Market because they would not be 
able to meet any of the existing Valuation Requirement alternatives 
in Rule 5315(f)(3). The addition of proposed Rule 5310(i) will 
clarify that they also cannot list under the proposed new standards.
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    Nasdaq believes that the proposed Global Select Market listing 
standards will continue to exceed the standards established by Rule 
3a51-1 of the Exchange Act \10\ (the ``Penny Stock Rules''), and notes 
that, in approving the NYSE's assets and equity test and reduced public 
float requirement, the Commission found that the NYSE's rules exceeded 
those standards.\11\
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    \10\ 17 CFR 240.3a51-1.
    \11\ Securities Exchange Act Release Nos. 58934 and 60501, supra 
notes 4 and 7.
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    The requirement in Rule 5315(f)(3)(A) for a minimum of $2.2 million 
income from continuing operations exceeds the $750,000 income 
requirement of SEC Rule 3a51-1(a)(2)(i)(A)(3). In addition, companies 
qualifying under this Rule must have at least three years of positive 
income, thus satisfying the requirement in SEC Rule 3a51-1(a)(2)(i)(B) 
that a company have a minimum one year operating history. Rule 
5315(f)(3)(B) requires an average market capitalization of at least 
$550 million over the prior 12 months; Rule 5315(f)(3)(C) requires an 
average market capitalization of at least $850 million over the prior 
12 months; and proposed Rule 5315(f)(3)(D) would require a minimum 
market capitalization of $160 million, as well as equity of at least 
$55 million. Nasdaq believes that each of these requirements satisfy 
the requirements of SEC Rules 3a51-1(a)(2)(i)(A)(2) and 3a51-
1(a)(2)(i)(B) that a company have a market value of listed securities 
of at least $50 million. While SEC Rule 3a51-1(a)(2)(i)(A)(2) requires 
a market value of listed securities of $50 million calculated over a 90 
consecutive day period, the $50 million in market value of listed 
securities requirement is far lower than the requirements of the Nasdaq 
rule, including the $160 million of market capitalization required 
under proposed Rule 5315(f)(3)(D). As such, Nasdaq believes that 
proposed rule is comparable to, and arguably more stringent than, the 
$50 million market value of listed securities requirement of SEC Rule 
3a51-1(a)(2)(i)(A)(2) and (B).
    Nasdaq believes that its Global Select Market's rules will also 
exceed the Penny Stock Rules remaining stock price and distribution 
requirements. Rule 5315(e)(1) requires companies initially listing on 
Nasdaq to have a minimum bid price of $4 per share, thereby satisfying 
the $4 requirement of SEC Rule 3a51-1(a)(2)(i)(C). Rule 5315(f)(1) 
requires a company's securities to have either 450 round lot holders or 
at least 2,200 total holders, although if a company is publicly traded 
and has an average monthly trading volume over the prior 12 months of 
at least 1.1 million shares per month, it can list with 550 total 
holders. Nasdaq believes that these requirements are comparable to, or 
more stringent than, the requirement of SEC Rule 3a51-1(a)(2)(i)(D) 
that a security have at least 300 round lot holders, and satisfy the 
same objective by assuring adequate liquidity in the security.\12\
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    \12\ Nasdaq notes that each of these requirements exceed the 
comparable requirements of the NYSE and that the Commission did not 
raise concerns under the Penny Stock Rules in connection with the 
NYSE adopting standards comparable to those proposed herein. See 
Securities Exchange Act Release No. 60501, supra, note 7; Securities 
Exchange Act Release No. 58934, supra, note 4.
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    Last, SEC Rule 3a51-1(a)(2)(i)(E) requires at least 1 million 
publicly held shares with a market value of at least $5 million. Rule 
5315(e)(2) requires all securities listing on the Nasdaq Global Select 
Market to have at least 1.25 million publicly held shares. In addition, 
Rule 5215(f)(2), as proposed to be amended, would require a minimum $45 
million market value of publicly held shares. As such, Nasdaq believes 
its initial listing standards for the Global Select Market continue to 
meet or exceed the requirements of the Penny Stock Rules.
    Nasdaq also believes that, the addition of the new valuation 
requirement does not change the fact that the Nasdaq Global Market 
quantitative continued listing standards are reasonably related to the 
quantitative initial listing standards of the Global Select Market, as 
required by SEC Rule 3a51-1(a)(2)(ii). The quantitative continued 
listing standards, which are not changing as a result of this proposed 
rule change, require a company to maintain either $10 million in 
stockholders' equity, $50 million in market value of listed securities, 
or total assets and total revenue of at least $50 million each for the 
most recently completed fiscal year or two of the three most recently 
completed fiscal years, along with other requirements.\13\
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    \13\ Rule 5450(b).
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    Companies listing under the proposed Global Select Market listing 
standards would have to comply with these requirements, as well as all 
other applicable Nasdaq listing rules, including Nasdaq's corporate 
governance requirements. As with all other listing applicants, Nasdaq 
reserves the right to apply its discretionary authority to deny initial 
or continued listing to any company seeking to list under the proposed 
standards if Nasdaq determines that the listing of such

[[Page 20653]]

company is contrary to the public interest.\14\
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    \14\ See Rule 5101 and IM-5101-1.
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    Nasdaq is also making a minor technical correction to Rule 
5315(f)(3)(C)(i) to insert an omitted word.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\15\ in general and with 
Sections 6(b)(5) of the Act,\16\ 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 rule change is 
designed to provide an additional Global Select Market initial listing 
standard under which a company may qualify and modify the market value 
of publicly held shares requirement for certain companies. Nasdaq 
believes that these changes are consistent with the investor protection 
objectives of the Act in that the proposed requirements remain at a 
level high enough so that only companies that are suitable for listing 
on the Global Select Market will qualify to list.
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    \15\ 15 U.S.C. 78f.
    \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.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \17\ of the Act and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. Nasdaq has provided the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of the 
proposed rule change.
    Nasdaq believes that the proposed rule change does not 
significantly affect the protection of investors or the public interest 
because the changes proposed herein allow only companies of adequate 
size and quality to list their shares on the Nasdaq Global Select 
Market. Nasdaq notes that the proposed new listing requirements are 
more stringent than recently-approved initial listing standards of the 
NYSE and exceed the requirements of the Penny Stock Rules. 
Consequently, Nasdaq believes the proposed rule change does not raise 
any novel regulatory issues or significantly affect the protection of 
investors or the public interest. Companies listing under the proposed 
Global Select Market listing requirements would have to comply with all 
other applicable Nasdaq listing rules, including Nasdaq's corporate 
governance requirements.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2010-047 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-2010-047. 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 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-
NASDAQ-2010-047, and should be submitted on or before May 11, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-9033 Filed 4-19-10; 8:45 am]
BILLING CODE 8011-01-P