Document ID: SEC-2020-0013-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2020-01-03T05:00Z

[Federal Register Volume 85, Number 2 (Friday, January 3, 2020)]
[Notices]
[Pages 391-394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28414]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87870; File No. SR-NASDAQ-2019-095]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Exchange's All-Inclusive Annual Listing Fees for Exchange 
Traded Products

December 30, 2019.
    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 23, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') 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 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 modify the Exchange's all-inclusive annual 
listing fees for exchange traded products under Nasdaq Rule 5940(b). 
While changes proposed herein are effective upon filing, the Exchange 
has designated the proposed amendments to be operative on January 2, 
2020. Therefore, any exchange traded product that lists on Nasdaq 
before January 2, 2020 will be subject to the rule as in effect before 
this amendment.\3\
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    \3\ Nasdaq will maintain in its online rule book, until January 
2, 2020, a link to the text of the rule as in effect before this 
amendment.
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    The text of the proposed rule change is available on the Exchange's 
website 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 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 the proposed rule change is to modify the Exchange's 
all-inclusive annual listing fees (``All-Inclusive Annual Listing 
Fee'') for exchange traded products (``ETPs'') under Nasdaq Rule 
5940(b).\4\ As stated in Nasdaq Rule 5940(b)(1), the issuer of a series 
of Portfolio Depository Receipts, Index Fund Shares, Managed Fund 
Shares or other security listed under the Nasdaq Rule 5700 Series where 
no other fee schedule is specifically applicable listed on The Nasdaq 
Global Market pays to Nasdaq an All-Inclusive Annual Listing Fee, 
calculated on total shares outstanding (``TSO'') \5\ and as set forth 
in Nasdaq Rule 5940(b)(1).\6\ The proposed rule changes are designed to 
incentivize issuers to list new products, transfer existing products to 
the Exchange, and retain listings on the Exchange, which the Exchange 
believes will enhance competition both among issuers and listing 
venues, to the benefit of investors. In addition, and as described 
below, the proposed fee changes will also allow for increased 
investment by the Exchange into its ETP business and allow for 
enhancements that will benefit issuers of Nasdaq-listed ETPs and their 
investors.
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    \4\ See Nasdaq Rule 5940(b).
    \5\ In addition, proposed Nasdaq Rule 5940(b)(3) would calculate 
TSO as ``the aggregate number of shares, issued by one or more 
Companies with the same sponsor, of Portfolio Depository Receipts, 
Index Fund Shares, Managed Fund Shares or other security listed 
under the Nasdaq Rule 5700 Series where no other fee schedule is 
specifically applicable, listed on The Nasdaq Global Market as shown 
in the Company's most recent periodic report required to be filed 
with the Company's appropriate regulatory authority or in more 
recent information held by Nasdaq. For purposes of this rule, 
``sponsor'' is defined as an investment adviser (or investment 
advisers who are ``affiliated persons'' as defined in Section 
2(a)(3) of the Investment Company Act of 1940, as amended) to one or 
more Companies.''
    \6\ See Nasdaq Rule 5940(b)(1).
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    The fees in the current All-Inclusive Annual Listing Fee schedule 
have remained unchanged for more than 17 years since they were first 
adopted back in 2002.\7\ The ETP world has evolved greatly since 2002 
when ETPs in the U.S. numbered approximately 130 with total net assets 
of $102 billion. Compare this to 2018 when the number of ETPs in the 
U.S. had grown to over 2,300 with $3.37 trillion in total net 
assets.\8\
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    \7\ See Securities Exchange Act Release No. 45920 (May 13, 
2002), 67 FR 35605 (May 20, 2002) (SR-NASD-2002-45).
    \8\ See M. Sznuguera. Number of ETPs in the U.S. 2000-2018 (Mar. 
15, 2019) (Graph); Total net assets of ETFs in the U.S. 2002-2018 
(May 10, 2019) (Graph). Retrieved from Statista database.
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    Under the current All-Inclusive Annual Listing Fees schedule, 
included below, there are 17 pricing tiers. The tiers begin with the 
lowest pricing tier of $6,500 for TSOs of up to 1 million to the top 
pricing tier of $14,500 for TSOs over 16 million.
    As detailed in the charts below, the proposed new fee schedule 
reduces the number of pricing tiers from 17 to 10. The 10 new proposed 
pricing tiers begin with the lowest pricing tier of up to 1 million TSO 
to the top pricing tier for over 250 million TSO. The proposed All-
Inclusive Annual Listing Fees range from $6,000 to $50,000. In each 
case, the All-Inclusive Annual Listing Fee will be based on a sponsor's 
\9\ aggregate TSO.
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    \9\ As proposed, the term ``sponsor'' is defined as an 
investment adviser (or investment advisers who are ``affiliated 
persons'' as defined in Section 2(a)(3) of the Investment Company 
Act of 1940, as amended) to one or more Companies.
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    As a result of the Exchange simplifying the pricing tiers for its 
All-

[[Page 392]]

Inclusive Annual Fee for ETPs by reducing their number from 17 to 10, 
some sponsors may pay more while others may pay the same or less. 
Specifically, the Exchange will charge an All-Inclusive Annual Listing 
Fee for ETPs with the fewest total shares outstanding (sponsors with up 
to 1 million TSO) of $500 less.\10\ Sponsors in the next proposed 
pricing tier of 1+ to 5 million shares TSO will pay from $1,000 less to 
$500 more. Sponsors in the next proposed pricing tier of 5+ to 10 
million shares TSO will pay from $1,000 less to $1,000 more. Put 
another way, sponsors with a TSO up to the current TSO tier of 10 
million will see a minimal change to their All-Inclusive Annual Listing 
Fees ranging from $1,000 less to $1,000 more. Sponsors in the remaining 
proposed pricing tiers will pay more than in the current pricing 
schedule.
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    \10\ The All-Inclusive Annual Listing Fee would drop from $6,500 
to $6,000.
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    The current All-Inclusive Annual Fee for ETPs listed on The Nasdaq 
Global Market are as follows:

                        Exchange Traded Products
Up to 1 million shares..................................          $6,500
1+ to 2 million shares..................................           7,000
2+ to 3 million shares..................................           7,500
3+ to 4 million shares..................................           8,000
4+ to 5 million shares..................................           8,500
5+ to 6 million shares..................................           9,000
6+ to 7 million shares..................................           9,500
7+ to 8 million shares..................................          10,000
8+ to 9 million shares..................................          10,500
9+ to 10 million shares.................................          11,000
10+ to 11 million shares................................          11,500
11+ to 12 million shares................................          12,000
12+ to 13 million shares................................          12,500
13+ to 14 million shares................................          13,000
14+ to 15 million shares................................          13,500
15+ to 16 million shares................................          14,000
Over 16 million shares..................................          14,500
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    The proposed All-Inclusive Annual Fee for ETPs listed on The Nasdaq 
Global Market are as follows and effective January 2, 2020:

                        Exchange Traded Products
Up to 1 million shares..................................          $6,000
1+ to 5 million shares..................................           7,500
5+ to 10 million shares.................................          10,000
10+ to 25 million shares................................          15,000
25+ to 50 million shares................................          20,000
50+ to 75 million shares................................          25,000
75+ to 100 million shares...............................          30,000
100+ to 150 million shares..............................          35,000
150+ to 250 million shares..............................          40,000
250+ million shares.....................................          50,000
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    As described below, Nasdaq believes that the aforementioned 
proposed fee changes better reflect the value provided by the Exchange 
to issuers of ETPs.
    Nasdaq also proposes a change to Nasdaq Rule 5940(b)(3) as to how 
the Exchange calculates ``total shares outstanding'' by aggregating the 
number of shares of all Portfolio Depository Receipts, Index Fund 
Shares, Managed Fund Shares or other security listed under the Nasdaq 
Rule 5700 Series where no other fee schedule is specifically 
applicable, issued by one or more Companies \11\ with the same sponsor, 
listed on The Nasdaq Global Market, and to ensure that the All-
Inclusive Annual Listing Fees under Nasdaq Rule 5940(b)(1) are 
calculated correctly.\12\ Additionally, Nasdaq proposes to amend Nasdaq 
Rule 5940(b)(3) to define the term ``sponsor'' for the purposes of 
assessing the fees in Nasdaq Rule 5940(b)(1).\13\ Nasdaq believes the 
term ``sponsor'' is a frequently used term throughout the investment 
community to refer to the entity that oversees the issuers of ETPs and 
that the inclusion in the proposed rule language clarifies Nasdaq's 
method for calculating the All-Inclusive Annual Fee.
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    \11\ Nasdaq Rule 5005(a)(6) defines ``Company'' as ``the issuer 
of a security listed or applying to list on Nasdaq. For purposes of 
the Nasdaq Rule 5000 Series, the term ``Company'' includes an issuer 
that is not incorporated, such as, for example, a limited 
partnership.''
    \12\ This change will not result in any impact on sponsors 
because it reflects the Exchange's current practice.
    \13\ See supra note 9.
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    Nasdaq proposes to amend Nasdaq Rule 5940(b)(5) to clarify the 
application of the rule for market participants. Nasdaq also proposes 
to remove references to fees that are no longer applicable because they 
were superseded by new fee rates specified in the rule text.
Implementation Date
    While these changes are effective upon filing, Nasdaq has 
designated the proposed amendments to be operative on January 2, 
2020.\14\
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    \14\ Nasdaq will maintain in its online rule book, until January 
2, 2020, a link to the text of the rule as in effect before this 
amendment.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\15\ in general, and furthers the objectives of 
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ 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, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4) and (5).
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    Nasdaq believes that the proposed rule change is a reasonable, fair 
and equitable, and not unfairly discriminatory allocation of fees and 
other charges because the All-Inclusive Annual Fee for ETPs, as 
amended, provides sponsors with a fair and economical way to list 
multiple ETPs without incurring significant additional cost. Overall, 
Nasdaq believes that the proposed rule change is a reasonable attempt 
to attract new issuers and sponsors, retain existing listings on the 
Exchange, and is reasonable and necessary to support the enhanced 
services provided by the Exchange to issuers of ETPs and as discussed 
below.
    As discussed above, sponsors with an aggregate TSO up to the 
current TSO tier of 10 million will see a minimal change to their All-
Inclusive Annual Listing Fees ranging from $1,000 less to $1,000 more, 
while sponsors in the remaining proposed pricing tiers will pay more 
than in the current pricing schedule. Nasdaq believes charging a lower 
or slightly modified All-Inclusive Annual Fee for sponsors with smaller 
aggregate TSOs will serve to continue to encourage sponsors of smaller 
and new to market ETPs to list on the Exchange. Although there will be 
some fluctuation as to the amount sponsors will pay within the proposed 
lower TSO pricing tiers as compared with what sponsors currently pay 
under the lower TSO pricing tiers (generally, a relatively small amount 
more or a small amount less), as previously stated, this is to some 
extent a result of reducing the current 17 pricing tiers down to 10 
pricing tiers. The Exchange also believes that the reduction in the 
overall number of pricing tiers will serve to simplify, lessen 
confusion and increase the ease of use of the All-Inclusive Annual Fee 
schedule.
    The Exchange also believes that it is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and other 
charges to increase the All-Inclusive Annual Listing Fee for the other 
sponsors, as noted above and as set forth in the chart above, because 
of the increased value provided by the Exchange to issuers of ETPs 
since the Exchange first established the current rates over 17 years 
ago when the number of ETPs and the total net assets of exchange traded 
funds was much smaller.\17\ Nasdaq also believes it is not unfairly 
discriminatory to charge a higher All-Inclusive Annual Listing Fee for 
sponsors with a higher TSO because these proposed fees will be provided 
on an equal basis to all sponsors within the same TSO pricing tier. 
Additionally, the Exchange believes it is reasonable, fair and 
equitable, and not unfairly

[[Page 393]]

discriminatory for sponsors with larger TSOs to pay more since the 
Exchange expends more resources on these sponsors.
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    \17\ See supra note 8.
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    The Exchange notes that its general costs have increased, including 
due to price inflation. In addition, the Exchange continues to improve 
the value it provides to issuers of Nasdaq-listed ETPs through enhanced 
services. These improvements include the continued development and 
enhancement of Nasdaq's online tools, including the Nasdaq Listing 
Center and Reference Library, to the benefit of issuers of Nasdaq-
listed ETPs and prospective investors. In addition, the proposed 
increase will help Nasdaq continue to invest in these initiatives and 
its regulatory programs. The proposed fee change will also allow for 
increased investment by the Exchange into its ETP business, including 
operational support, reporting resources and trading market 
enhancements, which will benefit issuers of Nasdaq-listed ETPs and 
their investors.
    Nasdaq notes that it operates in a highly competitive market in 
which issuers can readily switch exchanges for their ETPs if they deem 
its All-Inclusive Annual Listing Fees excessive. In such an 
environment, Nasdaq must continually review its fees to assure that 
they remain competitive. As stated above, Nasdaq believes its All-
Inclusive Annual Fee for ETPs, as amended, is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and other 
charges since, in totality, it results in issuer fees that are very 
competitive with its competition in this space. Nasdaq notes that 
changes to its issuer fees can have a direct effect on the ability of 
the Exchange to compete for new listings and retain existing listings 
and serves to constrain such fees.
    The Exchange also believes that the proposed change to Nasdaq Rule 
5940(b)(3) as to the term ``total shares outstanding'' by aggregating 
the number of shares of all Portfolio Depository Receipts, Index Fund 
Shares, Managed Fund Shares or other security listed under the Nasdaq 
Rule 5700 Series where no other fee schedule is specifically 
applicable, issued by one or more Companies with the same sponsor, 
listed on The Nasdaq Global Market, to ensure that the calculation of 
the All-Inclusive Annual Listing Fees under Nasdaq Rule 5940(b)(1) 
reflects the Exchange's current practice,\18\ is consistent with 
Section 6(b)(5) of the Act 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 because it 
will increase the transparency of the assessment of the All-Inclusive 
Annual Listing Fees.
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    \18\ See supra note 12.
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    In addition, the Exchange believes that the proposed change to 
Nasdaq Rule 5940(b)(3) as to the term ``sponsor'' to define it as an 
investment adviser (or investment advisers who are ``affiliated 
persons'' as defined in Section 2(a)(3) of the Investment Company Act 
of 1940, as amended) to one or more Companies, is consistent with 
Section 6(b)(5) of the Act 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 because it 
increases the clarity of the rule.
    Additionally, Nasdaq believes the proposed change to Nasdaq Rule 
5940(b)(5) is consistent with Section 6(b)(5) of the Act 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 because it clarifies the application of the rule for 
market participants.
    The proposed removal of rule text relating to fees that are no 
longer applicable is ministerial in nature and has no substantive 
effect.

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 ETPs is competitive and sponsors may freely choose alternative 
venues. The proposal is a competitive proposal designed to implement 
pricing that better reflects the value, revenue and expenses associated 
with listing ETPs on the Exchange. Nasdaq notes that changes to its 
issuer fees can have a direct effect on the ability of the Exchange to 
compete for new listings and retain existing listings and serves to 
constrain such fees. For these reasons, Nasdaq does not believe that 
the proposed rule change will result in any undue burden on competition 
for listing ETPs.

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.\19\
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    \19\ 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-2019-095 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2019-095. 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE,

[[Page 394]]

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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2019-095 and should 
be submitted on or before January 24, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28414 Filed 1-2-20; 8:45 am]
 BILLING CODE 8011-01-P