Document ID: SEC-2014-0948-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2014-06-10T04:00Z

[Federal Register Volume 79, Number 111 (Tuesday, June 10, 2014)]
[Notices]
[Pages 33239-33241]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13455]

[[Page 33239]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72311; File No. SR-NASDAQ-2014-058]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change to Amend IM-5900-7 to, Among 
Other Things, Modify the Free Services Offered to Certain Newly Listing 
Companies

June 4, 2014.
    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 May 27, 2014, 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. 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 the 
Substance of the Proposed Rule Change

    Nasdaq proposes to amend IM-5900-7 to modify the services offered 
to certain newly listing companies. Nasdaq will implement the proposed 
rule upon approval. However, any company that applies to list on Nasdaq 
before July 31, 2014, and lists before September 30, 2014, may elect to 
instead receive services under the terms of the rule as in effect 
before this amendment.\3\
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    \3\ Nasdaq will maintain, in its online rule book, 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 
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, 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
    In December 2011, Nasdaq adopted a rule to provide complimentary 
services to companies listing on the Nasdaq Global and Global Select 
Markets in connection with an initial public offering, upon emerging 
from bankruptcy, or in connection with a spin-off or carve-out from 
another company (``Eligible New Listings'') and to companies that 
switch their listing from the New York Stock Exchange to the Nasdaq 
Global or Global Select Markets (``Eligible Switches'').\4\ Under this 
rule, Eligible Switches with a market capitalization of $500 million or 
more receive complimentary services for four years from the date of 
their listing. All other Eligible Switches and Eligible New Listings 
receive complimentary services for two years from the date of their 
listing. In addition, Eligible Switches and Eligible New Listings with 
a market capitalization of $500 million or more receive additional 
services that companies with a market capitalization below $500 million 
do not receive (the ``Additional Services'').\5\
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    \4\ Exchange Act Release No. 65963 (December 15, 2011), 76 FR 
79262 (December 21, 2011) (SR-NASDAQ-2011-122, approving the 
adoption of IM-5900-7) (the ``Prior Filing'').
    \5\ The Additional Services include extra licenses for Directors 
Desk, additional press release distribution services and market 
surveillance tools.
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    Based on Nasdaq's experience with the program, Nasdaq now proposes 
to modify certain aspects of the program. First, Nasdaq proposes to 
increase the threshold for an Eligible Switch or Eligible New Listing 
to receive Additional Services from $500 million to $750 million or 
more in market capitalization. Nasdaq believes that this higher 
threshold better reflects the level where a company will most benefit 
from the Additional Services, and will most likely continue to purchase 
those services after the complimentary period has expired. In addition, 
Nasdaq believes that the higher threshold will better reflect the type 
of companies that, when listing on Nasdaq, will assist in Nasdaq's 
efforts to attract and retain other listings. Nasdaq also proposes to 
provide three years of services, instead of four, to Eligible Switches 
with a market capitalization of $750 million or more.
    Next, based on customer usage and demand for services, Nasdaq 
proposes to remove Directors Desk, an online board portal, from the 
program and instead offer companies four interactive webcasts, which 
can be used in connection with a company's quarterly earnings call. A 
number of companies have expressed interest in interactive webcasts 
during their discussions with Nasdaq and many purchase this service 
from NASDAQ OMX Corporate Solutions. Furthermore, Nasdaq has observed 
that companies offered the complimentary Directors Desk package may 
decline to use it, or may only use a few of the available seats. As 
such, Nasdaq believes that while the interactive webcasts may cost less 
than Directors Desk, the expected increase in utilization by companies 
could make this substitution more valuable to companies. Nasdaq also 
proposes to change its offer for market analytic tools from four users 
to two users. First, the price stated for four users is significantly 
below the current retail price of that offering, and companies could 
not renew the service for four users at that stated price. Nasdaq also 
has observed that many companies contracted for four users of the 
market analytic tools just because they were available, and not because 
they were actually needed by the company, and these companies may not 
be interested in continuing to pay for those users at the retail price 
when the package expires.
    Nasdaq also proposes to update the retail values for individual 
components and the total package in the rule text. These prices have 
changed since the original adoption of the rule based on enhancements 
to the services and as a result of the competitive environment in which 
NASDAQ OMX Corporate Solutions operates.
    The cumulative effect of these changes would reduce the stated 
annual value of the package from approximately $94,000 to approximately 
$70,000 for companies with a market capitalization of up to $750 
million and from approximately $169,000 to approximately $125,000 for 
companies with a market capitalization of $750 million or more.\6\ The 
stated annual value of the package available to Eligible New Listings 
and Eligible Switches with a market capitalization between $500 million 
and $750 million would change from approximately $169,000 to 
approximately $70,000.
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    \6\ The prior value for each package is the amount currently 
reflected in the rule text. The value of the proposed package is 
based on retail prices as of May 2014.
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    Finally, since adopting this program, companies have needed time 
after the listing date to complete the contracting process and training 
for the service, and therefore were unable to start using

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them until after their listing date. To address these situations, 
Nasdaq proposes to remove the language in IM-5900-7 that now states the 
complimentary period starts from the date of listing and add new 
paragraph (d) to describe the start of the complimentary period. Under 
the proposed rule, the complimentary period generally will begin on the 
listing date. However, if a company first uses a service within 30 days 
after the listing date, Nasdaq will use the date the company first uses 
that particular service as the start of the complimentary period, in 
order to help insure that eligible companies receive the full intended 
benefit.\7\ If the company does not actually start using a service 
within 30 days of its listing, the starting date of the period during 
which the complimentary services could be used would begin on the date 
of listing.\8\
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    \7\ The Commission notes that the proposed rule states that ``if 
an Eligible New Listing or Eligible Switch begins to use a 
particular service provided under [IM-5900-7] within 30 days after 
the date of listing, the complimentary period for that service will 
begin on the date of first use'' and ``in all other cases, the 
period for each complimentary service shall commence on the listing 
date.'' See proposed IM-5900-07(d).
    \8\ The proposed rule change would also modify the rule to 
consistently call the elements of the offering ``services'' instead 
of interchangeably using ``products'' and ``services''.
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    Nasdaq will implement the proposed rule upon approval. However, 
companies near a listing or switch may have relied upon the services 
described in the current rule in making their decision. As such, Nasdaq 
will allow any company that applies before July 31, 2014, and lists 
before September 30, 2014, to elect to receive services under the terms 
of the rule as in effect before this amendment.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\9\ in general, and Sections 
6(b)(4), 6(b)(5), and 6(b)(8), in particular, in that the proposal is 
designed, among other things, to provide for the equitable allocation 
of reasonable dues, fees, and other charges among Exchange members and 
issuers and other persons using its facilities and to promote just and 
equitable principles of trade, and is not designed to permit unfair 
discrimination between issuers, and that the rules of the Exchange do 
not impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In the Prior Filing, the 
Commission determined that existing IM-5900-7 is consistent with these 
provisions of the Act.\10\ The proposed rule change, which modifies the 
packages available to companies and provides some additional 
flexibility for companies to choose the starting date for the 
complimentary services available under IM-5900-7, does not change that 
conclusion.
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    \9\ 15 U.S.C. 78f.
    \10\ Exchange Act Release No. 65963, 76 FR at 79267.
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    Nasdaq faces competition in the market for listing services,\11\ 
and it competes, in part, by offering valuable services to companies, 
including services that ease the companies' transition to being public 
or listed on a new exchange. Nasdaq believes that the changes to the 
package, including the proposed substitution of webcasts for board 
portal tools, and the increased flexibility surrounding the start date 
of services will result in a more enticing package for potential new 
listings, even though the individual value of the services offered may 
be less, and therefore will enhance competition among listing 
exchanges. Nasdaq also does not believe that any of these changes 
impose an additional burden not necessary or appropriate in furtherance 
of the purposes of the Act on the competition between NASDAQ OMX 
Corporate Solutions and other service providers.
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    \11\ The Justice Department has noted the intense competitive 
environment for exchange listings. See ``NASDAQ OMX Group Inc. and 
IntercontinentalExchange Inc. Abandon Their Proposed Acquisition Of 
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16, 
2011), available at http://www.justice.gov/atr/public/press_releases/2011/271214.htm.
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    The change to the services in the packages is not designed to 
permit unfair discrimination. All listed companies receive services 
from Nasdaq, including Nasdaq Online and the Market Intelligence Desk 
and Nasdaq has justified why providing services to Eligible New 
Listings and Eligible Switches is not unfairly discriminatory in the 
Prior Filing. The proposed rule change would slightly reduce the value 
of the additional services provided to larger Eligible New Listings and 
Eligible Switches and therefore would reduce any discrimination between 
larger and smaller companies.
    Nasdaq also believes that the proposed change to allow Additional 
Services to Eligible New Listings and Eligible Switches with a market 
capitalization of $750 million or more, instead of $500 million or 
more, is not designed to permit unfair discrimination between issuers. 
In the Prior Filing, Nasdaq noted that it offers more services to 
larger companies because they need more and different governance, 
communication and intelligence services and because attracting these 
larger companies will likely bring greater future value to Nasdaq. The 
proposed change from $500 million to $750 million reflects Nasdaq's 
conclusion, based on its experience with the program, that this higher 
threshold is appropriate to differentiate the companies that will most 
benefit from the Additional Services and provide the most future value 
to Nasdaq. As such, Nasdaq does not believe that this change unfairly 
discriminates between issuers. In addition, the proposed change to 
reduce the free services available to larger Eligible Switches from 
four years to three years reduces an existing difference between 
Eligible Switches and other Eligible New Listings, and therefore also 
does not unfairly discriminate between issuers.
    Allowing companies up to 30 days after their listing to start using 
the services is a reflection of Nasdaq's experience that it can take 
companies a period of time to review and complete necessary contracts 
and training for services following their listing. Allowing this modest 
30 day period, if the company needs it, helps ensure that the company 
will have the benefit of the full period permitted under the rule to 
actually use the services, thereby enabling companies to receive the 
full intended benefit. This change also more closely aligns Nasdaq's 
treatment of these companies with other customers of NASDAQ OMX 
Corporate Solutions, who do not receive or pay for services until they 
are contracted. As such, the proposed change does not permit unfair 
discrimination or impose a burden on competition.

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. As described in the 
statutory basis section, above, the proposed rule change responds to 
competitive pressures in the market for listings. Nasdaq believes that 
the changes to the package and the increased flexibility surrounding 
the start date of services will result in a more enticing package for 
potential new listings, even though the individual value of the 
services offered may be less, and therefore will enhance competition 
among listing exchanges.
    In addition, the proposed rule change will result in fewer 
companies receiving the Additional Services and shorten the

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period for which some companies receive services, which may have the 
result of enhancing competition with other listing venues and with 
other service providers.
    Nasdaq does not believe that allowing companies up to an additional 
30 days to begin their complimentary period will cause any burden on 
competition. This change would only confer a short period prior to 
using services for companies that have already determined where to list 
and which services to use. In fact, a competing service provider could 
continue to offer its services during that 30 day period, which would 
enhance competition among service providers.
    Accordingly, Nasdaq does not believe the proposed rule change will 
impose 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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:

A. By order approve or disapprove such proposed rule change, or

B. institute proceedings to determine whether the proposed rule change 
should be 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-2014-058 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-2014-058. 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-2014-058 and should 
be submitted on or before July 1, 2014.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13455 Filed 6-9-14; 8:45 am]
BILLING CODE 8011-01-P