Document ID: SEC-2013-1733-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2013-10-03T04:00Z

[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61408-61411]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24156]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70535; File No. SR-NASDAQ-2013-128]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the NASDAQ Listing Standards Related to Compliance Determinations 
for Market Value of Listed Securities and Market Value of Publicly-Held 
Shares Deficiencies

September 27, 2013.
    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 September 26, 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 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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[[Page 61409]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NASDAQ listing standards related 
to compliance determinations for Market Value of Listed Securities and 
Market Value of Publicly-Held Shares deficiencies. The text of the 
proposed rule change is below. Proposed new language is italicized; 
proposed deletions are in brackets.
* * * * *

5810. Notification of Deficiency by the Listing Qualifications 
Department

    When the Listing Qualifications Department determines that a 
Company does not meet a listing standard set forth in the Rule 5000 
Series, it will immediately notify the Company of the deficiency. As 
explained in more detail below, deficiency notifications are of four 
types:
    (1) Staff Delisting Determinations, which are notifications of 
deficiencies that, unless appealed, subject the Company to immediate 
suspension and delisting;
    (2) notifications of deficiencies for which a Company may submit a 
plan of compliance for staff review;
    (3) notifications of deficiencies for which a Company is entitled 
to an automatic cure or compliance period; and
    (4) Public Reprimand Letters.
    Notifications of deficiencies that allow for submission of a 
compliance plan or an automatic cure or compliance period may result, 
after review of the compliance plan or expiration of the cure or 
compliance period, in issuance of a Staff Delisting Determination or a 
Public Reprimand Letter.
    (a)-(b) No change.

(c) Types of Deficiencies and Notifications

    The type of deficiency at issue determines whether the Company will 
be immediately suspended and delisted, or whether it may submit a 
compliance plan for review or is entitled to an automatic cure or 
compliance period before a Staff Delisting Determination is issued. In 
the case of a deficiency not specified below, Staff will issue the 
Company a Staff Delisting Determination or a Public Reprimand Letter.
(1)-(2) No change.

(3) Deficiencies for which the Rules Provide a Specified Cure or 
Compliance Period

    With respect to deficiencies related to the standards listed in 
(A)-(E) below, Staff's notification will inform the Company of the 
applicable cure or compliance period provided by these Rules and 
discussed below. If the Company does not regain compliance within the 
specified cure or compliance period, the Listing Qualifications 
Department will immediately issue a Staff Delisting Determination 
letter.
    (A)-(B) No change.

(C) Market Value of Listed Securities

    A failure to meet the continued listing requirements for Market 
Value of Listed Securities shall be determined to exist only if the 
deficiency continues for a period of 30 consecutive business days. Upon 
such failure, the Company shall be notified promptly and shall have a 
period of 180 calendar days from such notification to achieve 
compliance. Compliance can be achieved by meeting the applicable 
standard for a minimum of 10 consecutive business days during the 180 
day compliance period, unless Staff exercises its discretion to extend 
this 10 day period as discussed in Rule 5810(c)(3)(F).

(D) Market Value of Publicly Held Shares

    A failure to meet the continued listing requirement for Market 
Value of Publicly Held Shares shall be determined to exist only if the 
deficiency continues for a period of 30 consecutive business days. Upon 
such failure, the Company shall be notified promptly and shall have a 
period of 180 calendar days from such notification to achieve 
compliance. Compliance can be achieved by meeting the applicable 
standard for a minimum of 10 consecutive business days during the 180 
day compliance period, unless Staff exercises its discretion to extend 
this 10 day period as discussed in Rule 5810(c)(3)(F).
    (E) No change.

(F) Staff Discretion Relating to the [Bid] Price-based Requirements

    If a Company fails to meet the Market Value of Listed Securities, 
Market Value of Publicly Held Shares, or Bid Price requirements, each 
of which is related to the Company's security price and collectively 
called the ``Price-based Requirements,'' compliance is generally 
achieved by meeting the requirement for a minimum of ten consecutive 
business days. However, Staff may, in its discretion, require a Company 
to [maintain a bid price of at least $1.00 per share] satisfy the 
applicable Price-based Requirement for a period in excess of ten 
consecutive business days, but generally no more than 20 consecutive 
business days, before determining that the Company has demonstrated an 
ability to maintain long-term compliance. In determining whether to 
require a Company to meet the [minimum $1.00 bid price standard] 
applicable Price-based-requirement beyond ten business days, Staff 
[will] may consider all relevant facts and circumstances, including 
without limitation[the following four factors]:
    (i) the margin of compliance (the amount by which a Company exceeds 
the [bid price is above the $1.00 minimum standard] applicable Price-
based Requirement);
    (ii) the trading volume (a lack of trading volume may indicate a 
lack of bona fide market interest in the security at the posted bid 
price);
    (iii) the Market Maker montage (the number of Market Makers quoting 
at or above $1.00 or the minimum price necessary to satisfy another 
Price-based Requirement; and the size of their quotes); and
    (iv) the trend of the stock price (is it up or down).
* * * * *

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
    The purpose of this proposed rule change is to increase 
transparency of the fact that NASDAQ Staff (``Staff'') may consider 
periods longer than ten days when evaluating whether a company has 
regained compliance with the minimum Market Value of Listed Securities 
(``MVLS'') and Market Value of Publicly-Held Shares (``MVPHS'') 
requirements, while also generally limiting such review to twenty days. 
Currently, NASDAQ Rules provide that compliance with the MVLS and MVPHS 
requirements ``can be achieved by meeting the applicable standard for a 
minimum of 10 consecutive business days.'' (emphasis added). As such,

[[Page 61410]]

while a company cannot regain compliance in a period less than ten 
days, the rule does not require Staff to limit its review for 
compliance with the MVLS and MVPHS requirements to exactly ten days. 
Further, Staff's broad discretionary authority under Rule 5101 supports 
Staff's consideration of a longer period when necessary.\3\
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    \3\ Rule 5101 provides NASDAQ with broad discretionary authority 
over the initial and continued listing of securities, and allows the 
application of additional or more stringent criteria for the 
continued listing of particular securities based on any event, 
condition, or circumstance that exists or occurs, even though the 
securities meet all enumerated criteria for initial or continued 
listing on NASDAQ.
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    By contrast, Rule 5810(c)(3)(F) explicitly describes Staff's 
discretion to extend the compliance period for a bid price deficiency 
beyond ten days (but generally not more than 20 days) and identifies 
factors for Staff to consider in making a decision to do so.\4\ In the 
ten years since adopting these factors,\5\ Staff has found them useful 
in determining whether to extend the bid price compliance period beyond 
ten days and thus typically uses these same factors, and, generally, 
the 20 day limit, when evaluating compliance with the MVLS and MVPHS 
requirements. The proposed change to Rule 5810(c)(3)(F) would describe 
this practice and thereby provide transparency to the manner in which 
Staff applies its existing discretion.
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    \4\ These factors are: (i) The margin of compliance; (ii) the 
trading volume; (iii) the market maker montage; and (iv) the trend 
of the stock price.
    \5\ Current Rule 5810(c)(3)(F) was originally adopted in 2003 as 
Rule 4310(c)(8)(E). Exchange Act Release No. 47181 (January 14, 
2003), 68 FR 3074 (January 22, 2003).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ in particular, in that it is designed 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. 
The proposed rule change will add greater transparency to the rule 
administration process by permitting issuers to better understand how 
NASDAQ evaluates compliance with the MVLS and MVPHS listing rules. At 
the same time, it describes NASDAQ Staff discretion to apply a higher 
standard in determining which companies are suitable for continued 
listing on the exchange, thus protecting investors.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In this regard, NASDAQ notes 
that the competition among exchanges for listings is robust and 
vigorous, and the proposed rule change is not intended, nor is it 
expected, to reduce or diminish such competition. The rule brings added 
transparency to NASDAQ's vigilant enforcement of the Listing Rules, 
which already allow NASDAQ Staff to use discretion to apply more 
stringent listing standards. However, it does not allow the Staff any 
discretion to apply diminished listing standards in order to attract or 
retain listing business. The proposed rule change offers NASDAQ no 
advantages over its competitors beyond those created by enhancing the 
Exchange's regulatory effectiveness.

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

    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)(ii) of the Act \8\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\9\ The proposed rule 
change will add greater transparency by clarifying how NASDAQ applies 
its existing authority to evaluate compliance with the MVLS and MVPHS 
listing rules for periods longer than ten consecutive business days. As 
such, given that the proposed change merely describes, and does not 
modify, NASDAQ's authority to determine compliance with the MVLS and 
MVPHS requirements, it does not significantly affect the protection of 
investors or the public interest and does not impose any significant 
burden on competition.
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    \8\ 15 U.S.C. 78s(b)(3)(a)(ii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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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-2013-128 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-2013-128. 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

[[Page 61411]]

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-2013-128 and should 
be submitted on or before October 24, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24156 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P