Document ID: SEC-2019-0199-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2019-02-22T05:00Z

[Federal Register Volume 84, Number 36 (Friday, February 22, 2019)]
[Notices]
[Pages 5787-5791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03033]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85156; File No. SR-NASDAQ-2019-001]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt Listing Standards for Direct Listings and Clarify Related Rules

February 15, 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 February 14, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II 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 amend and clarify certain aspects of the 
listing process for Direct Listings.
    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
    Nasdaq recognizes that some companies that have sold common equity 
securities in private placements, which have not been listed on a 
national securities exchange or traded in the over-the-counter market 
pursuant to FINRA Form 211 immediately prior to the initial pricing, 
may wish to list those securities to allow existing shareholders to 
sell their shares. In particular, a company whose stock is not 
previously registered under the Exchange Act may wish to list on the 
Nasdaq Global Select Market without a related underwritten offering 
upon effectiveness of a registration statement registering only the 
resale of shares sold by the company in earlier private placements. The 
proposed Listing Rule IM-5315-1 sets forth listing requirements for 
such securities (a ``Direct Listing'') and describes how the Exchange 
will calculate compliance with the Nasdaq Global Select Market initial 
listing standards related to the requirements based on the price of a 
security, including the bid price, market capitalization and Market 
Value of Publicly Held Shares.
    Nasdaq also proposes to modify Nasdaq Rule 4753 to more clearly 
describe the role of a broker-dealer serving as a financial advisor to 
the issuer of a security listing on the Nasdaq Global Select Market 
under proposed Rule IM-5315-1.
Calculation of Price-Based Initial Listing Requirements
    Direct Listings are subject to all initial listing requirements 
applicable to equity securities and, subject to applicable exemptions, 
the corporate governance requirements set forth in the Rule 5600 
Series. To provide transparency to the initial listing process, the 
Exchange proposes to adopt Listing Rule IM-5315-1, which will state how 
the Exchange calculates the initial listing requirements based on the 
price of a security, including the bid price, market capitalization and 
market value of publicly held shares for a Direct Listing on the Nasdaq 
Global Select Market.\3\
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    \3\ This rule filing affects only companies listing on the 
Nasdaq Global Select Market. Nasdaq intends to subsequently file a 
proposed rule change under Section 19(b) of the Act to adopt 
requirements for the Nasdaq Capital and Global Markets applicable to 
companies which have not been listed on a national securities 
exchange or traded in the over-the-counter market pursuant to FINRA 
Form 211 immediately prior to the initial pricing and wish to list 
their securities to allow existing shareholders to sell their shares 
and clarify the use of the IPO Cross for initial pricing of such 
securities.
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    Nasdaq also proposes to require that a company that lists on the 
Nasdaq Global Select Market through a Direct Listing do so at the time 
of effectiveness of a registration statement filed under the Securities 
Act of 1933 solely for the purpose of allowing existing shareholders to 
sell their shares. This interpretative material would describe when a 
company whose stock is not previously registered under the Exchange Act 
may list on the Nasdaq Global Select Market, where such company is 
listing without a related underwritten offering upon effectiveness of a 
registration statement registering only the resale of shares sold by 
the company in earlier private placements.
    Under IM-5315-1, Nasdaq would require that a company listing on the 
Nasdaq Global Select Market through a Direct Listing provide Nasdaq an 
independent third-party valuation (a ``Valuation''). Any Valuation used 
for this purpose must be provided by an entity that has significant 
experience and demonstrable competence in the provision of such 
valuations. The Valuation must be of a recent date as of the time of 
the approval of the company for listing and the evaluator must have 
considered, among other factors, the annual financial statements 
required to be included in the registration statement, along with 
financial statements for any completed fiscal

[[Page 5788]]

quarters subsequent to the end of the last year of audited financials 
included in the registration statement. Nasdaq will consider any market 
factors or factors particular to the listing applicant that would cause 
concern that the value of the company had diminished since the date of 
the Valuation and will continue to monitor the company and the 
appropriateness of relying on the Valuation up to the time of listing. 
Nasdaq may withdraw its approval of the listing at any time prior to 
the listing date if it believes that the Valuation no longer accurately 
reflects the company's likely market value.\4\
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    \4\ In addition, under Listing Rule 5101 Nasdaq has broad 
discretionary authority to deny initial listing, apply additional or 
more stringent criteria for the initial or continued listing of 
particular securities, or suspend or delist particular securities 
based on any event, condition, or circumstance that exists or occurs 
that makes initial or continued listing of the securities on Nasdaq 
inadvisable or unwarranted in the opinion of Nasdaq, even though the 
securities meet all enumerated criteria for initial or continued 
listing on Nasdaq.
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    Nasdaq proposes to require that a valuation agent will not be 
considered independent if:
     At the time it provides such Valuation, the valuation 
agent or any affiliated person or persons beneficially own in the 
aggregate as of the date of the valuation, more than 5% of the class of 
securities to be listed, including any right to receive any such 
securities exercisable within 60 days.
     The valuation agent or any affiliated entity has provided 
any investment banking services to the listing applicant within the 12 
months preceding the date of the Valuation. For purposes of this 
provision, ``investment banking services'' includes, without 
limitation, acting as an underwriter in an offering for the issuer; 
acting as a financial adviser in a merger or acquisition; providing 
venture capital, equity lines of credit, PIPEs (private investment, 
public equity transactions), or similar investments; serving as 
placement agent for the issuer; or acting as a member of a selling 
group in a securities underwriting.
     The valuation agent or any affiliated entity has been 
engaged to provide investment banking services to the listing applicant 
in connection with the proposed listing or any related financings or 
other related transactions.
    For a security that has had sustained recent trading in a Private 
Placement Market \5\ prior to listing, Nasdaq will determine a 
company's price, market capitalization and market value of publicly 
held shares based on the lesser of: (i) The value calculable based on 
the Valuation; and (ii) the value calculable based on the most recent 
trading price in a Private Placement Market.
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    \5\ Nasdaq proposes to define ``Private Placement Market'' in 
Listing Rule 5005(a)(34) as a trading system for unregistered 
securities operated by a national securities exchange or a 
registered broker-dealer.
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    As set forth in IM-5315-1(d), to determine compliance with the 
price-based requirements and suitability for listing on the Exchange, 
Nasdaq will examine the trading price trends for the stock in the 
Private Placement Market over a period of several months prior to 
listing and will only rely on a Private Placement Market price if it is 
consistent with a sustained history over that several month period 
evidencing a market value in excess of Nasdaq's market value 
requirement. Nasdaq believes that the price from such sustained trading 
in a Private Placement Market for the issuer's securities is predictive 
of the price in the market for the common stock that will develop upon 
listing of the securities on Nasdaq.
    Alternatively, in the absence of any recent sustained trading in a 
Private Placement Market over a period of several months,\6\ Nasdaq 
will determine that the company has met the market value of publicly 
held shares requirement for listing on the Nasdaq Global Select Market 
if the company provides a Valuation evidencing a market value of 
publicly held shares of at least $250,000,000. Nasdaq believes that 
some companies that are clearly large enough to be suitable for listing 
on the Exchange do not have sustained trading in their securities on a 
Private Placement Market prior to going public and that a recent 
Valuation indicating at least $250 million in market value of publicly 
held shares will give a significant degree of comfort that the company 
will meet the applicable market value of publicly held shares 
requirement upon commencement of trading.\7\ Nasdaq believes that it is 
unlikely that any Valuation would reach a conclusion that is incorrect 
to the degree necessary for a company using this provision to fail to 
meet the applicable requirement upon listing, in particular because any 
Valuation used for this purpose must be provided by a valuation agent 
that meets the independence requirements of proposed Listing Rule IM-
5315-1(f) and has significant experience and demonstrable competence in 
the provision of such valuations. Nasdaq will also determine the bid 
price and market capitalization based on such Valuation.\8\
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    \6\ Limited trading in the Private Placement Market may not be 
sufficient for the Exchange to reach a conclusion that the company 
meets the applicable price-based requirements.
    \7\ See Listing Rule 5315(f)(2), which generally requires a 
market value of publicly held shares of at least $110 million or 
$100 million if the company has stockholders' equity of at least 
$110 million.
    \8\ Nasdaq will calculate a per share price by dividing the 
Market Value of Publicly Held Shares evidenced by the Valuation by 
the number of Publicly Held Shares and the market capitalization by 
multiplying that per share price by the total number of shares 
outstanding.
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Foreign Exchange Listings
    For a company transferring from a foreign regulated exchange where 
there is a broad, liquid market for the company's shares, or listing on 
Nasdaq while trading on such exchange, Nasdaq will determine that the 
company has met the applicable price-based requirements based on the 
recent trading in such market. Nasdaq believes that the price of the 
issuer's securities from such broad and liquid trading is predictive of 
the price in the market for the common stock that will develop upon 
listing of the securities on Nasdaq. While this is consistent with 
Nasdaq's current practice, Listing Rule IM-5315-1(c) will clarify that 
a company transferring from a foreign regulated exchange where there is 
a broad, liquid market for the company's shares or listing on Nasdaq 
while trading on such exchange is not subject to the new requirements 
applicable to Direct Listings.
Clarification of the Role of a Financial Advisor in a Direct Listing
    In 2014, Nasdaq first adopted rules to allow the use of the Nasdaq 
IPO Halt Cross to initiate trading in securities that have not been 
listed on a national securities exchange or traded in the over-the-
counter market pursuant to FINRA Form 211 immediately prior to the 
initial pricing and described the role of financial advisors in that 
process.\9\ At that time, the Exchange added new Rule 4120(c)(9) \10\ 
to set forth the process by which trading commences in such securities. 
Under that rule, securities of companies that have not previously been 
listed on a national securities exchange or traded in the over the 
counter market pursuant to FINRA Form 211 immediately prior to listing 
on Nasdaq can be launched for trading using the same crossing mechanism 
available for IPOs outlined in Rule 4120(c)(8) and Rule 4753 (the ``IPO

[[Page 5789]]

Cross''). Prior to that rule change, securities of companies that were 
not conducting IPOs were released using the Halt Cross outlined in Rule 
4120(c)(7), which differed from the IPO Cross.\11\
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    \9\ Securities Exchange Act Release No. 71931 (April 11, 2014), 
79 FR 21829 (April 17, 2014) (SR-NASDAQ-2014-032) (the ``2014 Rule 
Change'').
    \10\ In 2014, Nasdaq filed SR-NASDAQ-2014-081 modifying the 
functions that are performed by an underwriter with respect to an 
initial public offering and renumbered certain paragraphs of Rule 
4120. Securities Exchange Act Release No. 73399 (October 21, 2014), 
79 FR 63981 (October 27, 2014) (approving SR-NASDAQ-2014-81). All 
references in this filing are to the renumbered rules, as currently 
in effect.
    \11\ The Halt Cross process has a shorter quoting period (five 
minutes) and provides no ability to extend the quoting period in the 
event trading interest or volatility in the market appears likely to 
have a material impact on the security, unless there is an order 
imbalance as defined in the rule. See the 2014 Rule Change for 
additional details on the differences between the Halt Cross and the 
IPO Cross.
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    The 2014 Rule Change extended the safeguards contained in the IPO 
Cross to securities that have not been listed on a national securities 
exchange or traded in the over-the-counter market pursuant to FINRA 
Form 211 immediately prior to the initial pricing and established that 
a broker-dealer serving in the role of financial advisor to the issuer 
could serve in the same capacity for such securities as the underwriter 
does for IPOs. Specifically, Rule 4120(c)(9) provides that the IPO 
Cross process described in Rules 4120 and 4753 is available to 
securities that have not been listed on a national securities exchange 
or traded in the over-the-counter market pursuant to FINRA Form 211 
immediately prior to the initial pricing where ``a broker-dealer 
serving in the role of financial advisor to the issuer of the 
securities being listed is willing to perform the functions under Rule 
4120(c)(8) that are performed by an underwriter with respect to an 
initial public offering.'' \12\
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    \12\ Subsequent to the 2014 Rule Change Nasdaq expanded and 
elaborated the functions that are performed by an underwriter with 
respect to an initial public offering. See footnote 10, above. Rule 
4120(c)(9) requires a broker-dealer serving in the role of a 
financial advisor to the issuer of the securities being listed to 
perform all such functions in order for the issuer to utilize the 
IPO Cross for the initial pricing of the security.
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    Rule 4753 provides the definition of Current Reference Price and a 
description of the calculation of the price at which the Nasdaq Halt 
Cross will occur.\13\ In each case, the applicable price could be 
determined based on the issuer's IPO price.\14\ In the absence of an 
IPO price from the underwriter, Nasdaq believes that the only viable 
options are to rely on a price from recent sustained trading the 
Private Placement Market \15\ or one provided by the financial advisor 
to the company.
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    \13\ Rules 4753(a)(3)(A) and 4753(b)(2)(D).
    \14\ Rules 4753(a)(3)(A)(iv)a. and 4753(b)(2)(D)(i). The price 
closest to the ``Issuer's Initial Public Offering Price'' is the 
fourth tie-breaker in these rules, applicable when no single price 
is determined from the three prior tests.
    \15\ As described above, Nasdaq believes that the price from 
such recent sustained trading in a Private Placement Market for the 
issuer's securities is predictive of the price in the market for the 
common stock that will develop upon listing of the securities on 
Nasdaq.
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    When Nasdaq added Rule 4120(c)(9) in 2014, it cross-referenced Rule 
4753 but did not modify it. Nasdaq now proposes to amend Rule 4753, 
based on the same rationale that supported the 2014 Rule Change, to 
elaborate in its rules the role of a financial advisor to the issuer of 
a security that is listing under IM-5315-1.\16\ Nasdaq has successfully 
employed, in limited circumstances, the IPO Cross for securities that 
have not been listed on a national securities exchange or traded in the 
over-the-counter market pursuant to FINRA Form 211 immediately prior to 
the initial pricing since 2014 \17\ and continues to believe that 
financial advisors to issuers seeking to utilize that process are well 
placed to perform the functions that are currently performed by 
underwriters with respect to an initial public offering.
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    \16\ Specifically, Nasdaq stated that ``an advisor, with market 
knowledge of the book and an understanding of the company and its 
security, would be well placed to provide advice on when the 
security should be released for trading.'' The 2014 Rule Change at 
21830.
    \17\ Among other instances, Nasdaq utilized the IPO Cross for 
the initial pricing of the common stock of American Realty Capital 
Healthcare Trust, Inc. as indicated in the 2014 Rule Change.
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    Specifically, Nasdaq proposes to amend Rules 4753(a)(3)(A)(iv) and 
4753(b)(2)(D) \18\ to state that in the case of the initial pricing of 
a Direct Listing (i.e., a security qualifying for listing under Listing 
Rule IM-5315-1), the fourth tie-breaker in calculating each of the 
Current Reference Price disseminated in the Nasdaq Order Imbalance 
Indicator and the price at which the Nasdaq Halt Cross will occur, 
respectively, shall be: (i) For a security that has had recent 
sustained trading in a Private Placement Market prior to listing,\19\ 
the most recent transaction price in that market or, (ii) if there is 
not such sustained trading in a Private Placement Market, a price 
determined by the Exchange in consultation with the financial advisor 
to the issuer identified pursuant to Rule 4120(c)(9). As described 
above, where there is recent sustained trading in a Private Placement 
Market, Nasdaq believes that the price from such recent sustained 
trading in a Private Placement Market for the issuer's securities is 
predictive of the price in the market for the common stock that will 
develop upon listing of the securities on Nasdaq and that it is 
therefore appropriate to use the price from such trading to determine 
the Current Reference Price and the price at which the Nasdaq Halt 
Cross will occur. In cases where there is not recent sustained trading 
in the Private Placement Market, Nasdaq believes that the financial 
advisor to the issuer of a Direct Listing security is well suited to 
advise the company and Nasdaq as to the appropriate price to determine 
the forth tie-breaker in calculating the Current Reference Price for 
the security and the price at which the Nasdaq Halt Cross will occur 
because of the financial advisor's market knowledge of buying and 
selling interest and understanding of the company and its security.\20\
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    \18\ Nasdaq also proposes to make non-substantive changes to 
renumber the subparagraphs of these rules to reflect the proposed 
additional rule text.
    \19\ The term ``recent sustained trading'' in proposed Rules 
4753(a)(3)(A)(iv)b. and (b)(2)(D)(ii) relies on the requirement in 
proposed Rule IM-5315-1(d) that there be a sustained history of 
trading over a period of several months prior to listing in order 
for Nasdaq to rely on a Private Placement Market price.
    \20\ While Nasdaq and NYSE each have different market 
structures, the proposed calculation of Current Reference Price is 
similar to how ``Reference Price'' is calculated under NYSE Rule 15.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\21\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\22\ in particular, in that it is designed 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 
transaction 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.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
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Calculation of Price-Based Initial Listing Requirements
    The proposed rule change to require a Valuation and describe how 
Nasdaq will calculate compliance with the price-based requirements for 
listing on the Nasdaq Global Select Market is designed to protect 
investors and the public interest because any company relying solely on 
a Valuation will have to evidence at least $250 million in market value 
of publicly held shares, which will give a significant degree of 
comfort that the company will meet the applicable market value of 
publicly held shares requirement upon commencement of trading.\23\ 
Nasdaq's existing requirements, including the generally applicable $110 
million

[[Page 5790]]

requirement for market value of publicly held on the Nasdaq Global 
Select Market, are designed to protect investors and serve to help 
assure that securities listed on Nasdaq have sufficient investor 
interest and will trade in a liquid manner. In addition, establishing 
independence standards for the party providing a Valuation will ensure 
that the entity providing a Valuation for purposes of listing on Nasdaq 
will have a significant level of independence from the listing 
applicant and thereby enhance the reliability of such Valuation. 
Finally, in addition to the proposed new requirements, Direct Listings 
are subject to all initial listing requirements applicable to equity 
securities and, subject to applicable exemptions, the corporate 
governance requirements set forth in the Rule 5600 Series. As such, 
Nasdaq believes these provisions protect investors and the public 
interest in accordance with Section 6(b)(5) of the Exchange Act.
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    \23\ See Listing Rule 5315(f)(2), which generally requires a 
market value of publicly held shares of at least $110 million or 
$100 million if the company has stockholders' equity of at least 
$110 million.
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    The proposed rule change also protects investors and the public 
interest by requiring either that there be sustained recent trading in 
the Private Placement Market or that the company provide a Valuation 
demonstrating $250 million market value of publicly held shares. Nasdaq 
believes that the price from such sustained trading in the Private 
Placement Market for the issuer's securities is predictive of the price 
in the market for the common stock that will develop upon listing of 
the securities on Nasdaq and that qualifying a company based on the 
lower of that trading price or the Valuation helps assure that the 
company satisfies Nasdaq's requirements. Alternatively, in the absence 
of recent sustained trading in the Private Placement Market, the 
requirement to demonstrate a market value of publicly held shares of at 
least $250 million, similarly helps assure that the company satisfies 
Nasdaq's requirement by imposing a standard that is more than double 
the otherwise applicable standard.\24\
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    \24\ See footnote 7, above.
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    The proposed requirement that a company that lists on the Nasdaq 
Global Select Market through a Direct Listing must do so at the time of 
effectiveness of a registration statement filed under the Securities 
Act of 1933 solely for the purpose of allowing existing shareholders to 
sell their shares is designed to protect investors and the public 
interest, because it will ensure such companies satisfy the rigorous 
disclosure requirements under the Securities Act of 1933 and are 
subject to review by Commission staff.
    Finally, the proposal to rely on the price from the existing 
trading market for a company transferring from a foreign regulated 
exchange or listing on Nasdaq while trading on such exchange is 
consistent with the protection of investors because the price from the 
broad and liquid trading market for the issuer's securities is 
predictive of the price in the market for the common stock that will 
develop upon listing of the securities on Nasdaq. This provision 
applies only where there is a broad, liquid market for the company's 
shares in its country of origin and is designed to clarify that a 
company transferring from a foreign regulated exchange or listing on 
Nasdaq while trading on such exchange that satisfies Listing Rule IM-
5315-1(c) is not subject to the new requirements applicable to Direct 
Listings. Enhancing transparency around this requirement will promote 
just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transaction in 
securities, remove impediments to and perfect the mechanism of a free 
and open market and a national market system and protect investors and 
the public interest.
Clarification of the Role of a Financial Advisor in a Direct Listing
    The proposed rule change to clarify the fourth tie-breaker used in 
calculating the Current Reference Price disseminated in the Nasdaq 
Order Imbalance Indicator and the price at which the Nasdaq Halt Cross 
will occur, protects investors and the public interest by more fully 
describing the role of a financial advisor to the issuer of a Direct 
Listing security that is not the subject of an IPO, but that has not 
been listed on a national securities exchange or traded in the over-
the-counter market pursuant to FINRA Form 211 immediately prior to the 
initiation of trading on Nasdaq. The proposed rule change establishes 
that in such a case the Current Reference Price and price at which the 
Nasdaq Halt Cross will occur will be the most recent transaction price 
in a Private Placement Market where the security has had recent 
sustained trading in such a market over several months; otherwise the 
price will be determined by the Exchange in consultation with a 
financial advisor to the issuer. Where there has been sustained recent 
trading on a Private Placement Market over several months, Nasdaq 
believes the most recent price from such trading is predictive of the 
price that will develop upon listing of the securities on Nasdaq. Where 
there is not such sustained recent trading, Nasdaq notes that financial 
advisors have been performing the functions of the underwriter in the 
IPO Halt Cross on a limited basis since 2014 and have market knowledge 
of buying and selling interest and an understanding of the company and 
its security. As such, Nasdaq believes that the rule change will 
promote fair and orderly markets because these mechanisms of 
establishing the Current Reference Price and the price at which the 
Nasdaq Halt Cross will occur will help protect against volatility in 
the pricing and initial trading of the securities covered by the 
proposed rule change. Accordingly, Nasdaq believes these changes, as 
required by Section 6(b)(5) of the Exchange Act, are reasonably 
designed to protect investors and the public interest and promote just 
and equitable principles of trade for the opening of securities listing 
in connection with a Direct Listing.

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.
    The proposed rule change to adopt IM-5315-1 is designed to provide 
transparency to the mechanism of listing securities in connection with 
a Direct Listing that is appropriately protective of investors and is 
not designed to limit the ability of the issuers of those securities to 
list them on any other national securities exchange. The market for 
listing services is extremely competitive and the proposed rule change 
adopts changes similar to those already approved for another 
market.\25\ Because issuers have a choice to list their securities on a 
different national securities exchange, the Exchange does not believe 
that the proposed listing standards impose a burden on competition.
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    \25\ See Securities Exchange Act Release No. 82627 (February 2, 
2018), 83 FR 5650 (February 8, 2018) (Approving SR-NYSE-2017-30 to 
amend NYSE Listed Company Manual to provide for the listing of 
companies that list without a prior Exchange Act registration and 
that are not listing in connection with an underwritten initial 
public offering and certain related changes).
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    In addition, the proposed change is designed to more fully describe 
the application of the IPO Halt Cross to a Direct Listing and the role 
of a financial advisor in the determination of the forth tie-breaker in 
calculating the Current Reference Price for the security and the price 
at which the Nasdaq Halt Cross will occur. The proposed rule change

[[Page 5791]]

will have no impact on competition as it merely designed to insure that 
the Current Reference Price and the price at which the Nasdaq Halt 
Cross will occur is appropriately calculated for listings under IM-
5315-1.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \26\ and Rule 19b-4(f)(6) thereunder.\27\ 
Because the 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) of the Act and Rule 19b-4(f)(6)(iii) thereunder. \28\
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    \26\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \27\ 17 CFR 240.19b-4(f)(6).
    \28\ In addition, Rule 19b-4(f)(6)(iii) 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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    A proposed rule change filed under Rule 19b-4(f)(6) \29\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\30\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. In its filing with the 
Commission, Nasdaq has asked the Commission to waive the 30-day 
operative delay to allow Nasdaq to apply the proposed rules to the 
initial listing and pricing of potential listings on the Nasdaq Global 
Select Market where the company's stock is not previously registered 
under the Exchange Act and the company is seeking to list without a 
related underwritten offering upon effectiveness of a registration 
statement registering only the resale of shares sold by the company in 
earlier private placements. Nasdaq stated that Nasdaq believes that no 
benefit would be served by delaying the application of the rule.
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    \29\ 17 CFR 240.19b-4(f)(6).
    \30\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission notes that Nasdaq's proposed rule changes are 
substantially similar to the rules of another exchange that were 
approved previously by the Commission as consistent with the Act after 
being published in the Federal Register for notice and comment.\31\ For 
these reasons, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest and hereby waives the 30-day operative delay and 
designates the proposed rule change operative upon filing.\32\
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    \31\ See Securities Exchange Act Release No. 82627, note 25, 
supra; Securities Exchange Act Release No. 58550 (September 15, 
2008), 73 FR 54442 (September 19, 2008) (SR-NYSE-2008-68).
    \32\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \33\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \33\ 15 U.S.C. 78s(b)(2)(B).
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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-2019-001 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-2019-001. 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, 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 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-2019-001, and should be submitted 
on or before March 15, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03033 Filed 2-21-19; 8:45 am]
 BILLING CODE 8011-01-P