Document ID: SEC-2008-0851-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2008-06-24T04:00Z

[Federal Register: June 24, 2008 (Volume 73, Number 122)]
[Notices]               
[Page 35716-35718]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jn08-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57981; File No. SR-NASDAQ-2008-037]

 
Self-Regulatory Organizations; The NASDAQ Stock Market, LLC; 
Order Approving Proposed Rule Change To Modify Certain of Nasdaq's 
Initial and Continued Listing Requirements To Replace the Round Lot 
Requirement in the Minimum Holder Requirements to Either Total or 
Public Shareholders

June 17, 2008.

I. Introduction

    On April 25, 2008, The NASDAQ Stock Market, LLC (``Exchange'' or 
``Nasdaq'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to change the shareholder minimum holder 
requirements for Nasdaq's continued listing standards. The proposed 
rule change was published in the Federal Register on May 13, 2008.\3\ 
The Commission received no comments on the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57795 (May 7, 2008), 
73 FR 27590.
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II. Description of the Proposal

    Nasdaq initial and continued listing standards require a Nasdaq-
listed company to meet and maintain, among other things, certain 
minimum number of round lot holders to demonstrate the security's 
liquidity. Nasdaq proposes to generally eliminate the requirement of 
round lot holders and replace it with different requirements, and to 
adopt new definitions with respect to these proposed changes.

A. Nasdaq Global Select Market and Nasdaq Global Market Continued 
Listing Standards--(1) First Class of Common Stock, Shares or 
Certificates of Beneficial Interest of Trusts, Limited Partnership 
Interests in Foreign or Domestic Issues and American Depositary 
Receipts and (2) Preferred Stock and Secondary Classes of Common Stock

    The current minimum requirement for continued listing under the 
Nasdaq Global Select Market and Nasdaq Global Market is 400 round lot 
shareholders for common stock and equivalent \4\ and 100 round lot 
shareholders for preferred stock and secondary classes of common 
stock.\5\ Nasdaq proposes to change these requirements to 400 ``total'' 
shareholders for common stock and equivalent \6\ and 100 ``public'' 
shareholders for preferred stock and secondary classes of common 
stock.\7\
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    \4\ See Nasdaq Rule 4450(a).
    \5\ See Nasdaq Rule 4450(h).
    \6\ See proposed Nasdaq Rule 4450(a).
    \7\ See proposed Nasdaq Rule 4450(h).
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B. Nasdaq Global Select Market Initial Listing Standards

    The current minimum requirement for initial listing under the 
Nasdaq Global Select Market is (1) a minimum of 550 beneficial 
shareholders and average monthly trading volume over the previous 12 
months of at least 1,100,000 shares per month; (2) a minimum of 2,200 
beneficial shareholders; or (3) a minimum of 450 beneficial round lot 
shareholders.\8\ Nasdaq proposes to change these holder requirements 
to: (1) A minimum of 550 ``total'' shareholders and average monthly 
trading volume over the previous 12 months of at least 1,100,000 shares 
per month; (2) a minimum of 2,200 ``total'' shareholders; or (3) a 
minimum of 450 ``round lot'' shareholders.\9\
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    \8\ See Nasdaq Rule 4426(b)(1).
    \9\ See proposed Nasdaq Rule 4426(b)(1).
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C. Nasdaq Capital Market Continued Listing Standards--(1) Domestic and 
Canadian Securities and (2) Non-Canadian Foreign Securities and 
American Depositary Receipts

    The current minimum requirement for continued listing for domestic 
and Canadian securities under the Nasdaq Capital Market is 300 round 
lot holders for common stock and 100 round lot holders for preferred 
stock and secondary classes of common stock.\10\ Nasdaq proposes to 
change these holder requirements to 300 public holders for common stock 
and 100 public holders for preferred stock and secondary classes of 
common stock.\11\
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    \10\ See Nasdaq Rule 4310(c)(6).
    \11\ See proposed Nasdaq Rule 4310(c)(6).
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    The current minimum requirement for continued listing for non-
Canadian foreign securities and American Depositary Receipts under the 
Nasdaq Capital Market is 300 round lot holders for common stock and 100 
round lot holders for preferred stock and secondary classes of common 
stock.\12\ Nasdaq proposes to change these holder requirements to 300 
public holders for common stock and 100 public holders for preferred 
stock and secondary classes of common stock.\13\
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    \12\ See Nasdaq Rule 4320(e)(4).
    \13\ See proposed Nasdaq Rule 4320(e)(4).
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D. Changes to Definitions

    Nasdaq also proposes to add a new definition of ``public holders'' 
to include beneficial holders and holders of record and exclude any 
holder who is, either directly or indirectly, an executive officer, 
director, or the beneficial holder of more than 10% of the total shares 
outstanding.\14\ In addition, Nasdaq proposes to add a new definition 
of ``total holders'' to include beneficial holders and holders of 
record.\15\ Finally, Nasdaq proposes to amend the definition of ``round 
lot holder'' to clarify that beneficial holders would be considered in 
addition to holders of record.\16\
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    \14\ See proposed Nasdaq Rule 4200(a)(32).
    \15\ See proposed Nasdaq Rule 4200(a)(38).
    \16\ See proposed Nasdaq Rule 4200(a)(33).
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange and, in 
particular, the requirements of Section 6(b) of the Act and the rules 
and regulations thereunder. Specifically, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the

[[Page 35717]]

Act,\17\ which requires that an exchange have rules designed, among 
other things, 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, to protect investors and the 
public interest, and to not permit unfair discrimination between 
customers, issuers, brokers, or dealers.\18\
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    \17\ 15 U.S.C. 78f(b)(5).
    \18\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rules' impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    The development and enforcement of adequate standards governing the 
initial and continued listing of securities on an exchange is an 
activity of critical importance to financial markets and the investing 
public. Listing standards, among other things, serve as a means for an 
exchange to screen issuers and to provide listed status only to bona 
fide companies that have or, in the case of an IPO, will have 
sufficient public float, investor base, and trading interest to provide 
the depth and liquidity necessary to promote fair and orderly markets. 
Adequate standards are especially important given the expectations of 
investors regarding exchange trading and the imprimatur of listing on a 
particular market. Once a security has been approved for initial 
listing, maintenance criteria allow an exchange to monitor the status 
and trading characteristics of that issue to ensure that it continues 
to meet the exchange's standards for market depth and liquidity so that 
fair and orderly markets can be maintained.

A. Nasdaq Global Select Market and Nasdaq Global Market Continued 
Listing Standards--(1) First Class of Common Stock, Shares or 
Certificates of Beneficial Interest of Trusts, Limited Partnership 
Interests in Foreign or Domestic Issues and American Depositary 
Receipts and (2) Preferred Stock and Secondary Classes of Common Stock

    Nasdaq proposes to change the continued listing standards of the 
Nasdaq Global Select Market and Nasdaq Global Market shareholder 
requirements from 400 round lot shareholders to 400 total shareholders, 
for common stock and equivalent, and from 100 round lot shareholders to 
100 public shareholders, for preferred stock and secondary classes of 
common stock. The Commission believes that the proposal would continue 
to ensure that securities listed on Nasdaq Global Select and Global 
Markets would have sufficient liquidity to promote fair and orderly 
markets. The Commission notes that other listing markets utilize the 
concept of total shareholders and public shareholders. For example, the 
New York Stock Exchange (``NYSE'') requires, among other things, 400 
total stockholders (record holders and beneficial holders) for 
continued listing of capital or common stock on NYSE.\19\ Further, the 
American Stock Exchange (``Amex'') requires, among other things, 300 
public shareholders for continued listing of common stock on its 
market.\20\ Accordingly, the Commission finds the proposal is 
consistent with the requirements of the Act.
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    \19\ See NYSE Listed Company Manual Section 802.01A.
    \20\ See Amex Company Guide Section 100(b)(i).
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B. Nasdaq Global Select Market Initial Listing Standards

    Nasdaq proposes to change the initial listing standards of the 
Nasdaq Global Select Market shareholder requirements from: (1) Minimum 
of 550 beneficial shareholders and average monthly trading volume over 
the previous 12 months of at least 1,100,000 shares per month; (2) 
minimum of 2,200 beneficial shareholders; or (3) minimum of 450 
beneficial round lot shareholders, to: (1) Minimum of 550 ``total'' 
shareholders and average monthly trading volume over the previous 12 
months of at least 1,100,000 shares per month; (2) minimum of 2,200 
``total'' shareholders; or (3) minimum of 450 ``round lot'' 
shareholders.
    The Commission believes that the proposal would ensure that 
securities to be listed on Nasdaq Global Select Market would have 
sufficient liquidity to promote fair and orderly markets. The 
Commission notes that other listing markets utilize the concept of 
total shareholders and ``round lot'' shareholders and the changes are 
similar to certain NYSE requirements \21\ Based on the foregoing, the 
Commission finds the proposal is consistent with the requirements of 
the Act.
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    \21\ See NYSE Listed Company Manual Section 102.01A. NYSE 
initial listing standards require, among other things: (1) 500 total 
stockholders and average monthly trading volume of 1,000,000 shares 
for most recent 12 months; or (2) 2,200 total stockholders and 
average monthly trading volume of 100,000 shares for most recent 6 
months; or (3) 400 round lot holders and 1,100,000 shares of 
publicly held shares, for initial listing on NYSE.
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C. Nasdaq Capital Market Continued Listing Standards--(1) Domestic and 
Canadian Securities and (2) Non-Canadian Foreign Securities and 
American Depositary Receipts

    Nasdaq proposes to change the minimum requirement for continued 
listing for domestic and Canadian securities under the Nasdaq Capital 
Market from 300 round lot holders for common stock and 100 round lot 
holders for preferred stock and secondary classes of common stock, to 
300 ``public'' holders for common stock and 100 ``public'' holders for 
preferred stock and secondary classes of common stock. In addition, 
Nasdaq proposes to change the minimum requirement for continued listing 
for non-Canadian foreign securities and American Depositary Receipts 
under the Nasdaq Capital Market from 300 round lot holders for common 
stock and 100 round lot holders for preferred stock and secondary 
classes of common stock to 300 ``public'' holders for common stock and 
100 ``public'' holders for preferred stock and secondary classes of 
common stock.
    The Commission finds the proposed change to the Nasdaq Capital 
Market common stock shareholder requirement is substantially similar to 
the Amex continued listing standards. Amex continued listing standards 
require, among other things, 300 public shareholders for continued 
listing.\22\
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    \22\ See Amex Company Guide Section 1003(b)(i)(B).
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    The Commission also finds that the proposed change to the Nasdaq 
Capital Market preferred stock shareholder requirement is substantially 
similar to the Nasdaq Global Market preferred stock continued listing 
standards. Nasdaq Global Market continued listing standards require, 
among other things, a minimum of 100 round lot shareholders for 
preferred stock continued listing.\23\ While the standards differ, the 
Commission believes that the proposed 100 public shareholders 
requirement for preferred stock would continue to ensure, at a minimum, 
an adequate level of liquidity as the round lot shareholder standard.
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    \23\ See Nasdaq Rules 4420(k) and 4450(h).
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D. Changes to Definitions

    In connection with the proposed changes above, Nasdaq also proposes 
to add a new definition of ``public holders'' to include beneficial 
holders and holders of record and exclude any holder who is, either 
directly or indirectly, an executive officer, director, or the 
beneficial holder of more than 10% of the total shares outstanding. In 
addition, Nasdaq proposes to add a new definition of ``total holders'' 
to include beneficial holders and holders of record. Finally, Nasdaq 
proposes to amend the definition of ``round lot holder'' to clarify 
that beneficial holders would be considered in addition to holders of 
record. As noted earlier, these

[[Page 35718]]

definitions are used by other exchanges and should help to ensure that 
Nasdaq's holder requirements will continue to provide an adequate level 
of liquidity to develop and maintain fair and orderly markets. 
Accordingly, the Commission finds that the proposed changes are 
consistent with the requirements of the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\24\ that the proposed rule change (SR-NASDAQ-2008-037) is hereby 
approved.
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    \24\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-14178 Filed 6-23-08; 8:45 am]

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