Document ID: SEC-2006-0651-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2006-05-19T04:00Z

[Federal Register: May 19, 2006 (Volume 71, Number 97)]
[Notices]               
[Page 29195-29205]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19my06-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53799; File No. SR-NASDAQ-2006-007]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
and Amendment No. 1 Thereto to Create the Nasdaq Global Select Market 
and Rename the Nasdaq National Market

May 12, 2006.
    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 April 17, 2006, 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. Nasdaq has filed this proposal pursuant 
to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. On May 8, 2006, Nasdaq filed Amendment No. 1 to the 
proposed rule change.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ Amendment No. 1 replaced the original filing in its 
entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to rename the Nasdaq National Market as the Nasdaq 
Global Market and to create the Nasdaq Global Select Market, a new tier 
within the Nasdaq Global Market with higher initial listing 
standards.\6\ Nasdaq will implement the proposed rule on July 1, 2006.
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    \6\ In various places in the purpose section, Nasdaq clarified 
that the higher listing standards apply to initial listing 
standards. Telephone conversation between Arnold Golub, Associate 
Vice President, Nasdaq, and Mia Zur, Special Counsel, Division of 
Market Regulation (``Division''), Commission, on May 10, 2006.
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    The text of the proposed rule change is available on Nasdaq's Web 
site (http://www.nasdaq.com), at Nasdaq's principal office, and at the 

Commission's Public Reference Room. The text of the proposed rule 
change is included below. Proposed new language is italicized; 
deletions are [bracketed].
* * * * *
3350. Short Sale Rule
    (a) With respect to trades executed on Nasdaq, no member shall 
effect a short sale for the account of a customer or for its own 
account in a Nasdaq [National] Global Market security at or below the 
current best (inside) bid displayed in the Nasdaq Market Center when 
the current best (inside) bid is below the preceding best (inside) bid 
in the security. For purposes of this rule, the term ``customer'' 
includes a non-member broker-dealer.
    (b)-(g) No change.
    (h)(1) A member shall be permitted, consistent with its quotation 
obligations, to execute a short sale for the account of an options 
market maker that would otherwise be in contravention of this Rule, if:
    (A) The options market maker is registered with a qualified options 
exchange as a qualified options market maker in a stock options class 
on a Nasdaq [National] Global Market security or an options class on a 
qualified stock index; and
    (B) No change.
    (2) For purposes of this paragraph:
    (A)(i) An ``exempt hedge transaction,'' in the context of qualified 
options market makers in stock options classes, shall mean a short sale 
in a Nasdaq [National] Global Market security that was effected to 
hedge, and in fact serves to hedge, an existing offsetting options 
position or an offsetting options position that was created in a 
transaction(s) contemporaneous with the short sale,\1\ provided that 
when establishing the short position the options market maker is 
eligible to receive(s) good faith margin pursuant to Section 220.12 of 
Regulation T under the Act for that transaction.
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    \1\ The phrase contemporaneously established includes 
transactions occurring simultaneously as well as transactions 
occurring within the same brief period of time.
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    (ii) A ``exempt hedge transaction,'' in the context of qualified 
options market makers in stock index options classes, shall mean a 
short sale in a Nasdaq [National] Global Market security that was 
effected to hedge, and in fact serves to hedge, an existing offsetting 
stock index options position or an offsetting stock index options 
position that was created in a transaction(s) contemporaneous with the 
short sale, provided that:
    a.-c. No change.
    (iii) No change.
    (B) A ``qualified options market maker'' shall mean an options 
market maker who has received an appointment as a ``qualified options 
market maker'' for certain classes of stock options on Nasdaq 
[National] Global Market securities and/or index options on qualified 
stock indexes pursuant to the rules of a qualified options exchange.
    (C) No change.
    (D) A ``qualified stock index'' shall mean any stock index that 
includes one or more Nasdaq [National] Global Market securities, 
provided that more than 10% of the weight of the index is accounted for 
by Nasdaq [National] Global Market securities and provided further that 
the qualification of an index as a qualified stock index shall be 
reviewed as of the end of each calendar quarter, and the index shall 
cease to qualify if the value of the index represented by one or more 
Nasdaq [National] Global Market securities is less than 8% at the end 
of any subsequent calendar quarter.
    (E)-(F) No change.
    (i)(1) No change.
    (2) For purposes of this paragraph, an ``exempt hedge transaction'' 
shall mean a short sale in a Nasdaq [National] Global Market security 
that was effected to hedge, and in fact serves to hedge, an existing 
offsetting warrant position or an offsetting warrant position that was 
created in a transaction(s) contemporaneous with the short sale.\2\ 
Notwithstanding any other provision of this paragraph, any transaction 
unrelated to normal warrant market making activity, such as index 
arbitrage or risk arbitrage that in either case is independent of a 
warrant market maker's making functions, with not be considered an 
``exempt hedge transaction.''
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    \2\ The phrase contemporaneously established includes 
transactions occurring simultaneously as well as transactions 
occurring within the same brief period of time.
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    (3)-(4) No change.
    (j)-(k) No change.

[[Page 29196]]

IM-3350. Short Sale Rule

    (a)(1) In developing a Short Sale Rule for Nasdaq [National] Global 
Market securities, Nasdaq has adopted an exemption to the Rule for 
certain market making activity. This exemption is an essential 
component of the Rule because bona fide market making activity is 
necessary and appropriate to maintain continous, liquid markets in 
Nasdaq [National] Global Market securities. Rule 3350(c)(1) states that 
short selling prohibitions shall not apply to sales by registered 
Nasdaq market makers in connection with bona fide market making 
activity and specifies that transactions unrelated to normal market 
making activity, such as index arbitrage and risk arbitrage that are 
independent from a member's market making functions, will not be 
considered as bona fide market making. Thus two standards are to be 
applied: One must be a registered Nasdaq market maker and one must 
engage in ``bona fide'' market making activity to take advantage of 
this exemption. With this interpretation, Nasdaq wishes to clarify for 
members some of the factors that will be taken into consideration when 
reviewing market activity that may not be deemed to be bona fide market 
making activity and therefore would not be exempted from the Rule's 
application.
    (2)--(3) No change.
    (b) With respect to trades executed on or reported to Nasdaq, Rule 
3350 requires that no member shall effect a short sale for the account 
of a customer or for its own account in a Nasdaq [National] Global 
Market security at or below the current best (inside) bid displayed in 
the Nasdaq Market Center when the current best (inside) bid is below 
the proceeding best (inside) bid in the security. For purposes of this 
rule, the term ``customer'' includes a non-member broker-dealer. Nasdaq 
has determined that in order to effect a ``legal'' short sale when the 
current best bid is lower that the preceding best bid the short sale 
must be executed at a price of at least $0.01 above the current inside 
bid when the current inside spread is $0.01 or greater. The last sale 
report for such a trade would, therefore, be above the inside bid by at 
least $0.01.
    (c)-(d) No change.

4200. Definitions

    (a) For purposes of the Rule 4000 Series, unless the context 
requires otherwise:
    (1)-(24) No change.
    (25) [``Nasdaq National Market'' or ``NNM'' distinct tier of Nasdaq 
comprised of securities that meet the requirements of and are listed as 
Nasdaq National Market securities.] ``Nasdaq Global Market'' or ``NGM'' 
is a distinct tier of Nasdaq comprised of two segments: the Nasdaq 
Global Market and the Nasdaq Global Select Market. The Nasdaq Global 
Market is the successor to the Nasdaq National Market.
    (26) ``Nasdaq [National] Global Market security'' or ``[NNM] NGM 
security'' measn any security listed on Nasdaq which (1) satisfies all 
applicable requirements of the Rule 4300 Series and substantially meets 
the criteria set forth in the Rule 4400 Series; (2) is a right to 
purchase such security; (3) is a warrant to subscribe to such security; 
or (4) is an index warrant which substantially meets the criteria set 
forth in Rule 4420.
    (27) No change.
    (28) ``Nasdaq Capital Market security'' means any security listed 
on The Nasdaq Capital Market which (1) satisfies all applicable 
requirements of the Rule 4300 Series but that is not a Nasdaq 
[National] Global Market security; (2) is a right to purchase such 
security; or (3) is a warrant to subscribe to such security.
    (29) [Reserved.] ``Nasdaq Global Select Market'' or ``NGSM'' 
security is a segment of the Nasdaq Global Market comprised of NGM 
securities that met the requirements for initial inclusion contained in 
Rules 4425, 4426 and 4427.
     (3) [Reserved.] ``Nasdaq Global Select Market security'' or ``NGSM 
security'' means any security listed on Nasdaq and included in the 
Nasdaq Global Select segment of the Nasdaq Global Market.
    (31)-(39) No change.
    (b)-(c) No change.

4305. Transition of Securities Included on the Market Operated by The 
Nasdaq Stock Market, Inc.

    (a)-(c) No change.
    (d) Any issuer listed on the Nasdaq [National] Global Market or the 
Nasdaq Capital Market pursuant to paragraphs (a) or (b) above that had 
received any notice or was subject to any Rule of The Nasdaq Stock 
Market, Inc. as a facility of the NASD shall be treated as though such 
notice or such Rule was a notice from or a rule of Nasdaq in computing 
applicable times frames.

4310. Listing Requirements for Domestic and Canadian Securities

    To qualify for listing in Nasdaq, a security of a domestic or 
Canadian issuer shall satisfy all applicable requirements contained in 
paragraphs (a), (b), and (c) hereof. Issuers that meet these 
requirements, but that are not listed on the Nasdaq [National] Global 
Market, are listed on the Nasdaq Capital Market.
    (a)-(b) No change.
    (c) In addition to the requirements contained in paragraph (a) and 
(b) above, and unless otherwise indicated, a security shall satisfy the 
following criteria for listing on Nasdaq:
    (1)-(8) No change.
    (9)(A)-(b) No change.
    (C) In the case of index warrants, the criteria established in the 
Rule 4400 Series for Nasdaq [National] Global Market securities shall 
apply.
    (10)-(30) No change.
    (d) No change.

4320. Listing Requirements for Non-Canadian Foreign Securities and 
American Depositary Receipts

    To qualify for listing on Nasdaq, a security of non-Canadian 
foreign issuer, an American Depositary Receipt (ADR) or similar 
security issued in respect of a security of a foreign issuer shall 
satisfy the requirements of paragraphs (a), (b), and (e) of this Rule. 
Issuers that meet these requirements, but that are not listed on the 
Nasdaq [National] Global Market, are listed on the Nasdaq Capital 
Market.
    (a) A security of a foreign issuer, an ADR or similar security 
issued in respect of a security of a foreign issuer, other than a newly 
issued security, shall be considered for listing provided that it is:
    (1)-(2) No change.
    (b)-(f) No change.

4350. Qualitative Listing Requirements for Nasdaq [National Market and 
Nasdaq Capital Market] Issuers Except for Limited Partnerships

    (a)-(n) No change.

4350-1. Qualitative Listing Requirements for Nasdaq [National Market 
and Nasdaq Capital Market] Issuers Except for Limited Partnerships

    (a)-(h) No change.
IM-4390. Impact of Non-Designation of Dually Listed Securities
    To foster competition among markets and further the development of 
the national market system following the repeal of NYSE Rule 500, 
Nasdaq shall permit issuers whose securities are listed on the New York 
Stock Exchange to apply also to list those securities on the Nasdaq 
[National] Global Market [(``NNM'')] (``NGM''). Nasdaq shall make an 
independent determination of whether such issuers satisfy all 
applicable listing requirements and shall require issuers to enter into 
a dual listing agreement with Nasdaq.

[[Page 29197]]

    While Nasdaq shall certify such dually listed securities for 
listing on the [NGM] NGM, Nasdaq shall not exercise its authority under 
Rule 4390 separately to designate or register such dually listed 
securities as Nasdaq national market system securities within the 
meaning of Section 11A of the Act or the rules thereunder. As a result, 
these securities, which are already designated as national market 
system securities under the Consolidated Quotation Service (``CQS'') 
and Consolidated Tap Association national market system plans (``CQ and 
CTA Plans''), shall remain subject to those plans and shall not become 
subject to the Nasdaq UTP Plan, the national market system plan 
governing securities designated by Nasdaq. For purposes of the national 
market system, such securities shall continue to trade under their 
current one, two, or three-character ticker symbol. Nasdaq shall 
continue to send all quotations and transaction reports in such 
securities to the processor for the CTA Plan. In addition, dually 
listed issues that are currently eligible for trading via the 
Intermarket Trading System (``ITS'') shall remains so and continue to 
trade on the Nasdaq Intermarket trading platform as they do today.
    Through this interpretation, Nasdaq also resolves any potential 
conflicts that arise under Nasdaq rules as result of a single security 
being both a security object to the CQ and CTA Plans (a ``CQS 
Security''), which is subject to one set of rules, and a listed [NNM] 
NGM security, which is subject to a different set of rules. 
Specifically, dually listed securities shall be Nasdaq securities for 
purposes of rules related to listing and delisting, and shall remain as 
CQS securities under all other Nasdaq rules. Treating dually listed 
securities as CQS securities under Nasdaq rules is consistent with 
their continuing status as CQS securities under the CTA, CQ, and ITS 
national market system, as described above. This interpretation also 
preserves the status quo and avoids creating potential confusion for 
investors and market participants that currently trade these securities 
on Nasdaq.
    For example, Nasdaq shall continue to honor the trade halt 
authority of the primary market under the CQ and CT Plans. Nasdaq Rule 
4120(a)(2) and (3) governing CQS securities shall apply to dually 
listed securities, whereas Nasdaq Rule 4120(a)(1), (4), (5), (6), and 
(7) shall not. SEC Rule 10a-1 governing short sales of CQS securities 
shall continue to apply to dually listed securities, rather than Nasdaq 
Rule 3350 governing short sales of Nasdaq-listed securities. Market 
makers in dually listed securities shall retain all obligations imposed 
by the Nasdaq Rule 5200 Series regarding CQS securities rather than 
assuming the obligations appurtenant to Nasdaq-listed securities. The 
fees applicable to CQS securities set forth in Nasdaq Rule 7010 shall 
continue to apply to dually listed issues.

4400. NASDAQ [National] Global Market

4410. Applications for Listing

    (a) Application for listing on the Nasdaq [National] Global Market 
shall be on a form supplied by Nasdaq and signed by a corporate officer 
of the issuer. Compliance with the listing criteria will be determined 
on the basis of information filed with the appropriate regulatory 
authority and the records of Nasdaq as of the application date. Nasdaq 
may require the issuer to submit such other information as is relevant 
to a listing determination, including information required by paragraph 
(c) below.
    (b) Upon approval of a listing application, Nasdaq shall certify to 
the Commission, pursuant to Section 12(d) of the Act and the rules 
thereunder, that it has approved the security for listing and 
registration. Listing can commence only upon effectiveness of the 
security's registration pursuant to Section 12(d).
    (c) The security of an issuer that applies for listing on the 
Nasdaq Global Market and meets the requirements contained in Rules 4425 
through 4427, shall be listed on the Nasdaq Global Select Market.
    (d) Issuers that are listed on Nasdaq pursuant to the Rule 4300 
Series but that are not listed on the Nasdaq [National] Global Market, 
are listed on the Nasdaq Capital Market.

4420. Quantitative Listing Criteria

    In order to be listed on the Nasdaq [National] Global Market, an 
issuer shall be required to substantially meet the criteria set forth 
in paragraphs (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k) or 
(l) below.
    (a)-(e) No change.
    (f) Other Securities
    (1) No change.
    (2) Issuers of securities listed pursuant to this paragraph (f) 
must be listed on the Nasdaq [National] Global Market or the New York 
Stock Exchange (NYSE) or be an affiliate of a company listed on the 
Nasdaq [National] Global Market or the NYSE; provided, however, that 
the provisions of Rule 4450 will be applied to sovereign issuers of 
``other'' securities on a case-by-case basis.
    (3) No change.
    (g) Nasdaq will consider listing on the Nasdaq [National] Global 
Market Selected Equity-linked Debt Securities (SEEDS) that generally 
meet the criteria of this paragraph (g). SEEDS are limited-term, non-
convertible debt securities of an issuer where the value of the debt is 
based, at least in part, on the value of another issuer's common stock 
or non-convertible preferred stock (or sponsored American Depositary 
Receipts (ADRs) overlying such equity securities).
    (1) Issuer Listing Standards
    (A) The issuer of a SEEDS must be an entity that:
    (i) Is listed on the Nasdaq [National] Global Market or the New 
York Stock Exchange (NYSE) or is an affiliate of a company listed ont 
he Nasdaq [National] Global Market or the NYSE; provided, however, that 
the provisions of Rule 4450 will be applied to sovereign issuers of 
SEEDS on a case-by-case basis; and
    (ii) No change.
    (B) In addition, the market value of a SEEDS offering, when 
combined with the market value of all other SEEDS offerings previously 
completed by the issuer and traded on the Nasdaq [National] Global 
Market or another national securities exchange, may not be greater than 
25 percent of the issuer's net worth at the time of issuance.
    (2) No change.
    (3) Minimum Standards Applicable to the Linked Security
    An equity security on which the value of the SEEDS is based must:
    (A) No change.
    (B) Be issued by a company that has a continuous reporting 
obligation under the Act, and the security must be listed on the Nasdaq 
[National] Global Market or another national securities exchange and be 
subject to last sale reporting; and
    (C) No change.
    (4)-(5) No change.
    (h) Units
    (1) Initial and Continued Listing Requirements.
    (a) No change.
    (b) All debt components of a unit, if any, shall meet the following 
requirements:
    (i) No change.
    (ii) The issuer of the debt security must have equity securities 
listed on the Nasdaq [National] Global Market; and
    (iii) No change.
    (c) No change.
    (2) No change.
    (3) Disclosure Requirements for Units.
    Each Nasdaq [National] Global Market issuer of units shall include 
in its prospectus or other offering document used in connection with 
any offering of securities that is required to be filed

[[Page 29198]]

with the Commission under the federal securities laws and the rules and 
regulations promulgated thereunder a statement regarding any intention 
to delist the units immediately after the minimum inclusion period. The 
issuer of a unit shall further provide information regarding the terms 
and conditions of the components of the unit (including information 
with respect to any original issue discount or other significant tax 
attributes of any component) and the ratio of the components comprising 
the unit. An issuer shall also disclose when a component of the unit is 
separately listed on Nasdaq. These disclosures shall be made on the 
issuer's Web site, or if it does not maintain a Web site, in its annual 
report provided to unit holders. An issuer shall also immediately 
publicize through, at a minimum, a public announcement through the news 
media, any change in the terms of the unit, such as changes to the 
terms and conditions of any of the components (including changes with 
respect to any original issue discount or other significant tax 
attributes of any component), or to the ratio of the components within 
the unit. Such public notification shall be made as soon as practicable 
in relation to the effective date of the change.
    (i)-(m) No change.

4425. Nasdaq Global Select Market

    (a) An issuer that applies for listing on the Nasdsaq Global Market 
and meets the requirements for initial listing contained in Rule 4426 
shall be listed on the Nasdaq Global Select Market.
    (b) Each October, beginning in October 2007, Nasdaq will review the 
qualifications of all securities listed on the Nasdaq Global Market 
that are not included in the Nasdaq Global Select Market. Any security 
that meets the requirements for initial listing on the Nasdaq Global 
Select Market contained in Rule 4426 at the time of this review will be 
transferred to the Global Select Market the following January, provided 
it meets the continued listing criteria at that time. An issuer will 
not owe any application or entry fees in connection with such a 
transfer.
    (c) At any time, an issuer may apply to transfer a security listed 
on the Nasdaq Global Market to the Nasdaq Global Select Market. Such an 
application will be approved and affected as soon as practicable if the 
security meets the requirements for initial listing contained in Rule 
4226. An issuer will not owe any application or entry fees in 
connection with such a transfer.
    (d) At any time an issuer may apply to transfer a security listed 
on the Nasdaq Capital Market to the Nasdaq Global Select Market. Such 
an application will be approved and affected as soon as practicable if 
the security meets the requirements for initial listing contained in 
Rule 4426. An issuer transferring from the Nasdaq Capital Market to the 
Nasdaq Global Select Market will be required to pay the applicable fees 
contained in Rule 4510.
    (e) After initial inclusion on the Nasdaq Global Select Market, as 
issuer will remain on the Nasdaq Global Select Market provided it 
continues to meet the applicable requirements of the Rule 4300 and 4400 
Series, including the qualitative requirements of Rule 4350 and IM-
4300.
    (f) Notwithstanding any provision to the contrary, the security of 
any issuer that is non-compliant with a qualitative listing requirement 
that does not provide for a grace period, or where Nasdaq staff has 
raised a public interest concern, will not be permitted to transfer to 
the Global Steel Market until the underlying deficiency is resolved. In 
addition, any security that is below a quantitative continued listing 
requirement for the Nasdaq Global Market, even if the issuer has not 
been below the requirement for a sufficient period of time to be 
continued non-compliant, and any issuer in a grace or compliance period 
with respect to a quantitative listing requirement, will not be allowed 
to transfer from the Nasdaq Global or Capital Markets to the Nasdaq 
Global Select Market until the underlying deficiency is resolved. Nor 
will any issuer before a Nasdaq Listing Qualifications Panel be allowed 
to transfer to the Global Select Market until the underlying deficiency 
is resolved. An issuer that is in a grace or compliance period with 
respect to a qualitative listing standard, such as the cure period for 
filling an audit committee vacancy, will be allowed to transfer to the 
Global Select Market, subject to the continuation of that grace period.

IM-4425 Launch for the Nasdaq Select Market

    In connection with the initial launch of the Nasdaq Global Select 
Market in July 2006, Nasdaq will review all issuers' qualifications and 
assign qualified Global Market companies to the new Global Select 
segment. In addition, qualified Capital Market companies will be given 
the opportunity to be included in the new segment. In connection with 
this initial transfer to the Global Select Market, Nasdaq will begin to 
make its assessment using the most recent financial data filed as of 
April 28, 2006, and market data as of April 28, 2006. Nasdaq will treat 
as an IPO any company that initially listed as an IPO since May 1, 2005 
for purposes of the liquidity tests, because these companies would have 
insufficient market data to establish a 12-month trading history and 
may have had insufficient time to satisfy the market value of public 
float requirement applicable to other companies. Similarly, for 
purposes of the market capitalization requirements of Rules 4426(c)(2) 
and (c)(3), any company that initially listed as an IPO since May 1, 
2005 must have the appplicable average market capitalization from the 
date of listing. Nasdaq also notes that certain Nasdaq-listed issuers 
that qualify to initially list on the New York Stock Exchange (NYSE) 
will not be eligible to list on the Global Select Market. Nasdaq will 
allow (but not require) any Nasdaq-listed issuer that meets the NYSE 
initial listing standards as of July 2006 but that does not qualify for 
the Global Select segment when it is adopted to be included in the 
Global Select Market, subject to a grace period until January 1, 2008 
to achieve compliance with all listing criteria for the Global Select 
Market. Any issuer that avails itself of this grace period that has not 
achieved compliance with all listing criteria for the Global Select 
Market by January 1, 2008 will be moved to the Nasdaq Global Market. In 
addition, any issuer that avails itself of this grace period will 
remain subject to delisting in the event it fails to satisfy any of the 
continued listing requirements for the Nasdaq Global Market.

4426. Nasdaq Global Select Market Listing Requirements

    (a) For inclusion in the Nasdaq Global Select Market, an issuer 
must meet the requirements of paragraphs (b), (c), and (d) of this 
rule, and all applicable requirements of the Rule 4300 and 4400 Series, 
including the qualitative requirements of Rule 4350 and IM-4300. Rule 
4427 provides guidance about computations made under this Rule 4426.
    (b) Liquidity Requirements
    (1) The security must demonstrate either:
    (A) (i) a minimum of 550 beneficial shareholders, and
    (ii) an average monthly trading volume over the prior 12 months of 
at least 1,100,000 shares per months; or
    (B) a minimum of 2,200 beneficial shareholders; or
    (C) a minimum of 450 beneficial shareholders, in the case of: (i) 
an issuer listing in connection with its emergence

[[Page 29199]]

from a bankruptcy or reorganization proceeding; or (ii) an issuer that 
is affiliated with another company listed on the Global Select Market.
    (2) The security must have at least 1,250,000 publicly held shares; 
and
    (3) The publicly held shares must have either:
    (A) a market value of at least $110 million; or
    (B) a market value of at least $100 million, if the issuer has 
stockholders' equity of at least $110 million; or
    (C) a market value of at least $70 million in the case of: (i) an 
issuer listing in connection with its initial public offering; (ii) an 
issuer that is affiliated with, or a spin-off from, another company 
listed on the Global Select Market; and (iii) a closed end management 
investment company.
    (c) Financial Requirements. An issuer, other than a closed end 
management investment company, must meet the requirements of one of 
subparagraphs (1), (2) or (3) of this paragraph.
    (1) The issuer must have:
    (A) aggregate income from continuing operations before income taxes 
of at least $11 million over the prior three fiscal years;
    (B) positive income from continuing operations before income taxes 
in each of the prior three fiscal years; and
    (C) at least $2.2 million income from continuing operations before 
income taxes in each of the two most recent fiscal years; or
    (2) The issuer must have:
    (A) aggregate cash flows of at least $27.5 million over the prior 
three fiscal years;
    (B) positive cash flows in each of the prior three fiscal years; 
and
    (C) both:
    (i) average market capitalization of at least $550 million over the 
prior 12 months; and
    (ii) total revenue of at least $110 million in the previous fiscal 
year; or
    (3) The issuer must have both:
    (A) average market capitalization of at least $850 million over the 
prior 12 months; and
    (B) total revenue of at least $90 million in the previous fiscal 
year.
    (d) Price. For inclusion in the Nasdaq Global Select Market, an 
issuer not listed on the Nasdaq Global Market shall have a minimum bid 
price of $5 per share.
    (e) Closed End Management Investment Companies.
    (1) A closed end management investment company shall not be 
required to meet paragraph (c) of this Rule 4426.
    (2) In lieu of the requirement in paragraph (b)(3) of this Rule 
4426, a closed end management investment company that is listed 
concurrently with other closed end management investment companies that 
have a common investment adviser (or whose investment advisers are 
``affiliated persons'' as defined in the Investment Company Act of 
1940) (a ``Fund Family'') shall be eligible if: (A) the total market 
value of publicly held shares in such Fund Family is at least $220 
million; (B) the average market value of publicly held shares for all 
funds in the Fund Family is $50 million; and (C) each fund in the Fund 
Family has a market value of publicly held shares of at least $35 
million.
    (f) Other Classes of Securities. If the common stock of an issuer 
is included in the Nasdaq Global Select Market, any other security of 
that same issuer, such as other classes of common or preferred stock, 
that qualify for listing on the Nasdaq Global Market shall also be 
included in the Global Select Market.

Rule 4427. Computations and Definitions

    (a) In computing the number of publicly held shares for purposes 
for Rule 4426(b), Nasdaq will not consider shares held by an officer, 
director or 10% shareholder of the issuer.
    (b) In calculating income from continuing operations before income 
taxes for purposes of Rule 4426(c)(1), Nasdaq will rely on an issuer's 
financial information as filed with the Commission in the issuers's 
most recent periodic report and/or registration statement.
    (c) In calculating cash flows for purposes of Rule 4426(c)(2), 
Nasdaq will rely on the net cash provided by operating activities, as 
reported in the issuer's financial information as filed with the 
Commission in the issuer's most recent periodic report and/or 
registration statement, excluding changes in working capital or in 
operating assets and liabilities.
    (d) If an issuer does not have three years of publicly reported 
financial data, it may qualify under Rule 4426(c)(1) if it has:
    (1) reported aggregate income from continuing operations before 
income taxes of at least $11 million; and
    (2) positive income from continuing operations before income taxes 
in each of the reported fiscal years.
    (e) If an issuer does not have three years of publicly reported 
financial data, it may qualify under Rule 4426(c)(2) if it has:
    (1) reported aggregate cash flows of at least $27.5 million; and
    (2) positive cash flows in each of the reported fiscal years.
    (f) A period of less than three months shall not be considered a 
fiscal year, even if reported as a stub period in the issuer's publicly 
reported financial statements.
    (g) For purposes of Rule 4426, an issuer is affiliated with another 
company if that other company, directly or indirectly though one or 
more intermediaries, controls, is controlled by, or is under common 
control of the issuer. Control, for these purposes, means having the 
ability to exercise significant influence. Ability to exercise 
significant influence will be presumed to exist where the parent or 
affiliated company directly or indirectly owns 20% or more of the other 
company's voting securities, and also can be indicated by 
representation on the board of directors, participation in policy 
making processes, material intercompany transactions, interchange of 
managerial personnel, or technological dependency.
    (h) In the case of an issuer listing in connection with its initial 
public offering, compliance with the market capitalization requirements 
of Rules 4426(c)(2) and (c)(3) will be based on the company's market 
capitalization at the time of listing.

4430. Limited Partnership Rollup Listing Criteria

    In addition to meeting the quantitative criteria for Nasdaq 
[National] Global Market listing, an issuer that is formed as a result 
of a limited partnership rollup transaction, as defined in Rule 4200, 
must meet the criteria set forth below in order to be listed:
    (a)-(b) No change.

4440. Registration Standards

    (a) In addition to meeting the quantitative criteria and the 
limited partnership rollup criteria, if applicable, for Nasdaq 
[National] Global Market listing, the issue must also be:
    (1) Registered under Section 12(b) of the Act; or
    (2) Subject to an exemption issued by the Commission that permits 
the listing of the security notwithstanding its failure to be 
registered pursuant to Section 12(b).

4450. Quantitative Maintenance Criteria

    After listing as a Nasdaq [National] Global Market security, a 
security must substantially meet the criteria set forth in paragraphs 
(a) or (b), and (c), (d), (e), (f), (g), (h) or (i) below to continue 
to remain listed on the Nasdaq [National] Global Market. A security 
maintaining its listing under paragraph (b) need not

[[Page 29200]]

also be in compliance with the quantitative maintenance criteria in the 
Rule 4300 series.
    (a)-(c) No change.
    (d) Rights and Warrants
    Common stock of issuer must continue to be listed on the Nasdaq 
[National] Global Market.
    (e)-(h) No change.
    (i) Transfers between The Nasdaq [National] Global and Capital 
Markets For Bid Price Deficient Issuers
    (1) If a [National] Global Market issuer has not been deemed in 
compliance prior to the expiration of the compliance period for bid 
price provided in Rule 4450(e)(2), it may transfer to The Nasdaq 
Capital Market, provided that it meets all applicable requirements for 
initial listing on the Capital Market set forth in Rule 4310(c) or Rule 
4320(e), as applicable, other than the minimum bid price requirement. A 
Nasdaq [National] Global Market issuer transferring to The Nasdaq 
Capital Market must pay the entry fee set forth in Rule 4520(a). The 
issuer may also request a hearing to remain on The Nasdaq [National] 
Global Market pursuant to the Rule 4800 Series.
    (2) Following a transfer to The Nasdaq Capital Market pursuant to 
paragraph (1), a Nasdaq [National] Global Market issuer will be 
afforded the remainder any compliance period set forth in Rule 
4310(c)(8)(D) or Rule 4320(e)(2)(E)(ii) as if the issuer had been 
listed on The Nasdaq Capital Market. The compliance periods afforded by 
this rule and any time spent in the hearing process will be deducted in 
determining the length of the remaining applicable compliance periods 
on The Nasdaq Capital Market.

4510. The Nasdaq [National] Global Market

    (a) Entry Fee
    (1) An issuer that submits an application to list any class of its 
securities (not otherwise identified in this Rule 4500 series) on the 
Nasdaq [National] Global Market, shall pay to Nasdaq a fee calculated 
on total sharers outstanding, according to the following schedule. This 
fee will be assessed on the date of listing on the Nasdaq [National] 
Global Market, except for $5,000 which represents a non-refundable, 
application fee, and which must be submitted with the issuer's 
application.

Up to 30 million shares......................................   $100,000
30+ to 50 million shares.....................................    125,000
Over 50 million shares.......................................    150,000

    (2) Total shares outstanding means the aggregate of all classes of 
equity securities to be listed on the Nasdaq [National] Global Market 
as shown in the issuer's most recent periodic report or in more recent 
information held by Nasdaq or, in the case of new issues, as shown in 
the offering circular, required to be filed with the issuer's 
appropriate regulatory authority. In the case of foreign issuers, total 
shares outstanding shall include only those shares issued and 
outstanding in the United States.
    (3) A closed-end management investment company registered under the 
Investment Company Act of 1940, as amended (a ``Closed-End Fund''), 
that submits an application for listing on the Nasdaq [National] Global 
Market shall pay to Nasdaq an entry fee of $5,000 (of which $1,000 
represents a non-refundable, application fee).
    (4) An issuer that submits an application to list any class of 
rights on the Nasdaq [National] Global Market, shall pay, at the time 
of its application, a non-refundable application fee of $1,000 to 
Nasdaq.
    (5)-(6) No Change.
    (7) The fees described in this Rule 4510(a) shall not be applicable 
with respect to any securities that (i) are listed on another national 
securities exchange but not listed on Nasdaq, or (ii) are listed on the 
New York Stock Exchange and Nasdaq, if the issuer of such securities 
transfers their listing exclusively to the Nasdaq [National] Global 
Market.
    (8) No change.
    (b) Additional Shares
    (1) The issuer of each class of security that is a domestic issue 
which is listed on the Nasdaq [National] Global Market shall pay to 
Nasdaq the fee set forth in subparagraph (2) below in connection with 
the issuance of additional shares of each class of listed security.
    (2)-(5) No change.
    (c) Annual Fee--Domestic and Foreign Issues
    (1) The issuer of each class of securities (not otherwise 
identified in this Rule 4500 Series) that is a domestic or foreign 
issue listed on the Nasdaq [National] Global Market shall pay to Nasdaq 
an annual fee calculated on total shares outstanding according to the 
following schedule:

Up to 10 million shares......................................    $24,500
10+ to 25 million shares.....................................     30,500
25+ to 50 million shares.....................................     34,500
50+ to 75 million shares.....................................     44,500
75+ to 100 million shares....................................     61,750
Over 100 million shares......................................     75,000

    (2) No change.
    (3) If a class of securities is removed from the Nasdaq [National] 
Global Market that portion of the annual fees for such class of 
securities attributable to the months following the date of removal 
shall not be refunded, expect such portion shall be applied to the 
Nasdaq Capital Market fees for that calendar year.
    (4) Total shares outstanding means the aggregate of all classes of 
equity securities listed on the Nasdaq [National] Global Market as 
shown in the issuer's most recent periodic report required to be filed 
with the issuer's appropriate regulatory authority or in more recent 
information held by Nasdaq. In the case of foreign issuers, total 
shares outstanding shall include only those shares issued and 
outstanding in the United States.
    (5) No change.
    (d) Annual Fee--American Depository Receipts (ADRs) and Closed-End 
Funds
    (1) The issuer of each class of securities that is an ADR listed on 
The Nasdaq [National] Global Market shall pay to Nasdaq an annual fee 
calculated on ADRs outstanding according to the following schedule not 
to exceed $30,000 per issuer:

Up to 10 million ADRs........................................    $21,225
10+ to 25 million ADRs.......................................     26,500
25+ to 50 million ADRs.......................................     29,820
Over 50 million ADRs.........................................     30,000

    (2) ADRs outstanding means the aggregate of all classes of ADRs 
listed on the Nasdaq [National] Global Market as shown in the issuer's 
most recent periodic report required to be filed with the issuer's 
appropriate regulatory authority or in more recent information held by 
Nasdaq.
    (3) A Closed-End Fund listed on the Nasdaq [National] Global Market 
shall pay to Nasdaq an annual fee calculated based on total shares 
outstanding according to the following schedule:

Up to 5 million shares.......................................    $15,000
5+ to 10 million shares......................................     17,500
10+ to 25 million shares.....................................     20,000
25+ to 50 million shares.....................................     22,500
50+ to 100 million shares....................................     30,000
100+ to 250 million shares...................................     50,000
Over 250 million shares......................................     75,000

    (4) For the purpose of determining the total shares outstanding, 
fund sponsors may aggregate shares outstanding of all Closed-End Funds 
in the same fund family listed on the Nasdaq [National] Global Market 
or the Nasdaq Capital Market, as shown in the issuer's most recent 
periodic reports required to be filed with the appropriate regulatory 
authority or in more recent information held by Nasdaq. The maximum 
annual fee applicable to a fund family shall not exceed $75,000. For 
purposes of this rule, a ``fund family'' is defined as two or more 
Closed-End Funds that have a common investment adviser or have 
investment advisers who are ``affiliated persons'' as defined in 
Section 2(a)(3) of the Investment Company Act of 1940, as amended.
    (5) No change.

[[Page 29201]]

    (6) If a class of securities is removed from the Nasdaq [National] 
Global Market, that portion of the annual fees for such class of 
securities attributable to the months following the date of removal 
shall not be refunded, except such portion shall be applied to the 
Nasdaq Capital Market fees for that calendar year.
    (e)-(f) No change.

4520. The Nasdaq Capital Market

    (a)-(b) No change.
    (c) Annual Fee
    (1)-(4) No change.
    (5) If a class of securities is removed from the Nasdaq Capital 
Market, that portion of the annual fees for such class of securities 
attributable to the months following the date of removal shall not be 
refunded, except such portion shall be applied to Nasdaq [National] 
Global Market fees for that calendar year.
    (6) No change.
    (7) Notwithstanding paragraph (6), for the purpose of determining 
the total shares outstanding, fund sponsors may aggregate shares 
outstanding of all Closed-End Funds in the same fund family listed on 
the Nasdaq [National] Global Market and the Nasdaq Capital Market, as 
shown in the issuer's most recent periodic reports required to be filed 
with the appropriate regulatory authority or in more recent information 
held by Nasdaq. The maximum annual fee applicable to a fund family 
shall not exceed $75,000. For purposes of this rule, a ``fund family'' 
is defined as two or more Closed-End Funds that have a common 
investment adviser or have investment advisers who are ``affiliated 
persons'' as defined in Section 2(a)(3) of the Investment Company Act 
of 1940, as amended.
    (8) No change.
    (d)-(e) No change.

4530. Other Securities

    (a) Application Fee and Entry Fee.
    (1) When an issuer submits an application to list any Other 
Security or SEEDS on the Nadaq [National] Global Market qualified for 
listing under Rule 4420(f) or 4420(g), it shall pay a non-refundable 
Application Fee of $1,000.
    (2) When an issuer submits an application to list any Other 
Security or SEEDS on the Nasdaq [National] Global Market qualified for 
listing under Rule 4420(f) or 4420(g), it shall pay an Entry Fee 
calculated based on total shares outstanding according to the following 
schedule:

Up to 1 million shares.......................................     $5,000
1+ to 2 million shares.......................................     10,000
2+ to 3 million shares.......................................     15,000
3+ to 4 million shares.......................................     17,500
4+ to 5 million shares.......................................     20,000
5+ to 6 million shares.......................................     22,500
6+ to 7 million shares.......................................     25,000
7+ to 8 million shares.......................................     27,500
8+ to 9 million shares.......................................     30,000
9+ to 10 million shares......................................     32,500
10+ to 15 million shares.....................................     37,500
Over 15 million shares.......................................     45,000

    The applicable Entry Fee shall be reduced by any Entry Fees paid 
previously in connection with the initial listing during the current 
calendar year of any of the issuer's Other Securities and SEEDS on the 
Nasdaq [National] Global Market.
    (3) For the sole purpose of determining the Entry Fee, total shares 
outstanding means the aggregate of all classes of Other Securities and 
SEEDS of the issuer to be listed on the Nasdaq [National] Global Market 
in the current calendar year as shown in the issuer's most recent 
periodic report or in more recent information held by Nasdaq or, in the 
case of new issues, as shown in the offering circular, required to be 
filed with the issuer's appropriate regulatory authority.
    (4)-(5) No change.
    (b) Annual Fee
    (1) The issuer of Other Securities or SEEDS qualified under Rule 
4420(f) or 4420(g) for listing on the Nasdaq [National] Global Market 
shall pay to Nasdaq an Annual Fee calculated based on total shares 
outstanding according to the following schedule:

Up to 5 million shares.......................................    $15,000
5+ to 10 million shares......................................     17,500
10+ to 25 million shares.....................................     20,000
25+ to 50 million shares.....................................     22,500
Over 50 million shares.......................................     30,000

    (2) No change.
    (3) For the sole purpose of determining the Annual Fee, total 
shares outstanding means the aggregate of all classes of Other 
Securities and SEEDS of the issuer listed on the Nasdaq [National] 
Global Market, as shown in the issuer's most recent periodic report 
required to be filed with the issuer's appropriate regulatory authority 
or in more recent information held by Nasdaq.

4540. Portfolio Depository Receipts and Index Fund Shares

    (a) Entry Fee
    (1) When an issuer submits an application for listing a series of 
Portfolio Depository Receipts or Index Fund Shares on the Nasdaq 
[National] Global Market, it shall pay to Nasdaq a listing fee of 
$5,000 (which shall include a $1,000 non-refundable processing fee).
    (2) The Nasdaq Board of Directors or its designee may, in its 
discretion, defer or waive all or any part of the entry fee prescribed 
herein.
    (3) If the application is withdrawn or is not approved, the entry 
fee (less the non-refundable processing fee) shall be refunded.
    (b) Annual Fee
    (1) The issuer of a series of Portfolio Depository Receipts or 
Index Fund Shares listed on The Nasdaq [National] Global Market shall 
pay to Nasdaq an annual fee calculated on total shares outstanding 
according to the following schedule:

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

    (2) Total shares outstanding means the aggregate number of shares 
in all series of Portfolio Depository Receipts or Index Fund Shares to 
be listed on The Nasdaq [National] Global Market as shown in the 
issuer's most recent periodic report required to be filed with the 
issuer's appropriate regulatory authority or in more recent information 
held by Nasdaq.
    (3) No change.

4550. Written Interpretations of Nasdaq Listing Rules

    (a) An issuer listed on the Nasdaq Capital Market or the Nasdaq 
[National] Global Market may request from Nasdaq a written 
interpretation of the Rules contained in the 4000 through 4500 Series. 
In connection with such a request, the issuer must submit to Nasdaq a 
non-refundable fee of $2,000. A response to such a request generally 
will be provided within four weeks from the date Nasdaq receives all 
information necessary to respond to the request.
    (b)-(e) No change.

4701. Definitions.

    (a)-(ee) No change.
    (ff) The term ``UTP Exchange'' shall mean any registered national 
securities exchange that elects to participate in the Nasdaq Market 
Center and that has unlisted trading privileges in Nasdaq [National] 
Global Market securities pursuant to the Joint Self-Regulatory 
Organization Plan Governing the Collection, Consolidation and 
Dissemination Of Quotation and Transaction Information For Exchange-

[[Page 29202]]

Listed Nasdaq/National Market System Securities Traded On Exchanges On 
An Unlisted Trading Privilege Basis (``Nasdaq UTP Plan'').
    (gg)-(vv) No change.

6120. System Functions.

    (a) No change.
    (b) The Nasdaq system will provide the following risk management 
capabilities to clearing brokers that have executed an agreement 
authorizing the use of the Nasdaq Risk Management service:
    (1) No change.
    (2) Gross Dollar Thresholds (``Super Caps'') and Sizeable Limits 
Clearing brokers may establish, on an inter-day or intra-day basis, 
gross dollar thresholds (also known as ``Super Caps'') for purchases 
and sales for their correspondent executing brokers. When any of the 
correspondent's gross dollar thresholds are exceeded, notice will be 
furnished to the clearing broker and to Trade Reporting Facilities. In 
such event, Nasdaq Risk Management will automatically instruct Trade 
Reporting Facilities that any trade in excess of an applicable 
``sizable limit'' that is negotiated by the correspondent will be 
subject to review by the clearing broker until such time as the 
correspondent's trading activity no longer exceeds a gross dollar 
threshold. Specifically, the clearing broker will have 15 minutes from 
execution to review any single trade negotiated by the correspondent 
that equals or exceeds the applicable sizeable limit in order to decide 
to act as principal for the trade or to decline to act as principal. If 
the clearing broker does not affirmatively accept or decline the 
``sizeable trade,'' at the end of 15 minutes the system will instruct 
Trade Reporting Facilities to act in accordance with pre-established 
processing criteria, as described below.
    (A) ACT Workstation Users
    (i) Clearing brokers that use the ACT Workstation may establish 
gross dollar thresholds and sizeable limits for each of their 
correspondent executing brokers. They may establish different gross 
dollar thresholds and sizeable limits for each type of security (i.e., 
Nasdaq [National] Global Market, Nasdaq Capital Market, Consolidated 
Quotations Service, or OTC Bulletin Board), as well as an aggregate 
gross dollar threshold and sizeable limit for all types of securities.
    (ii)-(iii) No change.
    (B) Other Nasdaq Risk Management Users
    (i) Clearing brokers that do not use the ACT Workstation may 
establish aggregate gross dollar thresholds for each of their 
correspondent executing brokers, but may not establish gross dollar 
thresholds for each type of security (i.e., Nasdaq [National] Global 
Market, Nasdaq Capital Market, Consolidated Quotations Service, or OTC 
Bulletin Board).
    (ii)-(iii) No change.
    (3)-(5) No change.
    (6) Single Trade Limit
    Clearing brokers may request that the Nasdaq Risk Management 
service instruct Trade Reporting Facilities to provide 15 minutes from 
trade report input to review any single trade executed by their 
correspondent executing brokers that equals or exceeds a pre-
established limit in order to decide to act as principal for the trade 
or to decline to act as principal. If, however, the clearing firm does 
not affirmatively accept or decline the trade at the end of 15 minutes 
the system will instruct Trade Reporting Facilities to act in 
accordance with pre-established processing criteria, as described 
below.
    (A) ACT Workstation Users, Clearing brokers that use the ACT 
Workstation may establish single trade limits for each of their 
correspondent executing brokers, and may establish different limits for 
each type of security (i.e., Nasdaq [National] Global Market, Nasdaq 
Capital Market, Consolidated Quotations Service, or OTC Bulletin 
Board). Such clearing brokers may also establish the default processing 
criteria that will apply to trades that exceed the single trade limit 
after 15 minutes if the clearing broker does not affirmatively accept 
or decline the trade; the clearing broker may specify that the system 
will instruct Trade Reporting Facilities that such trades should be 
either automatically declined or automatically subjected to normal 
processing in which the clearing broker will act as principal to clear 
the trades.
    (B) No change.

7024. Nasdaq Revenue Sharing Program

    After Nasdaq earns total operating revenue sufficient to offset 
actual expenses and working capital needs, a percentage of all Market 
Participant Operating Revenue (``MPOR'') shall be eligible for sharing 
with Nasdaq Quoting Market Participants (as defined in Rule 4701). MPOR 
is defined as operating revenue that is generated by Nasdaq quoting 
Market Participants. MPOR consists of transaction fees, technology 
fees, and market data revenue that is attributable to Nasdaq quoting 
Market Participant activity in Nasdaq [National] Global Market, and 
Capital Market securities. MPOR shall not include any investment income 
or regulatory monies. The sharing of MPOR shall be based on each Nasdaq 
Quoting Market Participant's pro rata contribution to MPOR. In no event 
shall the amount of revenue shared with Nasdaq Quoting Market 
Participants exceed MPOR. To the extent market data revenue is subject 
to year-end adjustment, MPOR revenue may be adjusted accordingly.
* * * * *

H. 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
    Nasdaq proposes to rename the Nasdaq National Market as the Nasdaq 
Global Market to more accurately reflect the international reach and 
leadership of many of the companies listed on that market and the 
market itself.\7\
---------------------------------------------------------------------------

    \7\ The Nasdaq Global Market, including the Nasdaq Global Select 
segment described below, will be the successor to the Nasdaq 
National Market. As such, Nasdaq believes that all securities listed 
on the Nasdaq Global Market, including those on the Nasdaq Global 
Select Market, will be ``covered securities,'' as that term is 
defined in Section 18(b) of the Securities Act of 1933, 15 U.S.C. 
77r(b).
---------------------------------------------------------------------------

    Nasdaq also proposes to create a new segment within the Nasdaq 
Global Market. This new segment will be known as the Nasdaq Global 
Select Market, and new, higher initial listing requirements will apply 
to companies listing on the Nasdaq Global Select Market.\8\ All listing 
and trading rules applicable to securities on the Nasdaq Global Market 
will also apply to the Nasdaq Global Select Market.
---------------------------------------------------------------------------

    \8\ As described below, given that the Nasdaq Global Select 
Market is a segment of the Nasdaq Global Market, Nasdaq will apply 
the same continued listing requirements as are applicable to other 
companies on the Nasdaq Global Market, which are the existing 
listing requirements for the Nasdaq National Market.
---------------------------------------------------------------------------

    Listing Standards. As described below, issuers would be required to 
meet minimum liquidity measures and a financial test, as well as 
achieve a minimum bid price requirement.\9\

[[Page 29203]]

Nasdaq believes that the creation of this segment will more clearly 
align Nasdaq's financial and liquidity listing standards with its 
corporate governance standards \10\ and its regulatory enforcement 
program, as well as its trading system. While Nasdaq believes its 
existing standards protect investors, Nasdaq also believes that, to the 
extent these higher initial listing standards help attract and maintain 
listings on Nasdaq and identify companies that meet these high listing 
standards, investors will benefit.
---------------------------------------------------------------------------

    \9\ Nasdaq could deny listing to a company that meets these 
requirements based on public interest concerns, as described in 
existing Nasdaq Rule 4300 and Nasdaq IM-4300.
    \10\ Companies on the Nasdaq Global Select Market will be 
required to meet the same rigorous corporate governance standards 
applicable to companies on the Nasdaq Capital and Nasdaq Global 
Markets. These standards require a majority independent board, an 
independent audit committee, and for independent directors to 
participate in compensation and nomination decisions. Shareholders 
are also required to approve significant transactions and the use of 
equity compensation.
---------------------------------------------------------------------------

1. Liquidity Tests
    In order to quality for the Nasdaq Global Select Market, a company 
will be required to demonstrate either: (1) a minimum of 550 
shareholders and an average monthly trading volume over the prior 12 
months of at least 1,100,000 shares per month; or (2) a minimum of 
2,200 shareholders.

Average monthly trading volume.......................         >=1,100,00
                                   AND
Shareholders.........................................              >=550
                                   OR
Shareholders.........................................            >=2,200

    In addition, a company must have at least 1,250,000 publicly held 
shares. In computing the number of publicly held shares, Nasdaq will 
not consider shares held by an officer, director, or 10% shareholder of 
the company.

Publicly Held Shares.................................        >=1,250,000

    Finally, those publicly held shares must have a market value of at 
least $110 million; provided, however, that if the market value of 
publicly held shares is at least $100 million and the company has 
shareholders equity of at least $110 million, the company will also 
qualify.

Market Value of Publicly Held Shares.................     >=$110,000,000
                                   OR
Market Value of Publicly Held Shares.................     >=$100,000,000
                                   AND
Shareholders Equity..................................     >=$110,000,000

2. Financial Tests
    A company will also be required to meet one of there financial 
tests in order to qualify for listing on the Nasdaq Global Select 
Market. Specifically, companies will be required to demonstrate: (1) 
Aggregate pre-tax earnings of at least $11 million over the prior three 
years, with all three years having positive pre-tax earnings and the 
two most recent years having at least $2.2 million pre-tax earnings 
each; (2) aggregate cash flows of at least $27.5 million over the prior 
three years with all three years having positive cash flows, an average 
market capitalization of at least $550 million over the prior 12 
months, and total revenue of at least $110 million in the previous 
fiscal year; or (3) total revenue of at least $90 million in the 
previous fiscal year and an average market capitalization of at least 
$850 million over the prior 12 months. However, Nasdaq notes that the 
operating history requirements in Nasdaq Rule 4426(c)(1) and (c)(2), 
may be shortened to a lesser period if an issuer does not have three 
years of publicly reported financial data.\11\
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    \11\ The Commission notes that a period of less than three 
months shall not be considered a fiscal year. See Nasdaq Rule 
4427(f). Telephone conversation between Arnold Golub, Associate Vice 
President, Nasdaq, Florence Harmon, Senior Special Counsel, and Mia 
Zur, Special Counsel, Division, on May 12, 2006.

Three year aggregate pre-tax earnings................      >=$11,000,000
                                   AND
Pre-tax earnings in the two most recent years each...       >=$2,200,000
                                   AND
Third most recent year pre-tax earnings..............                 >0
                                   OR
Three year aggregate cash flows......................      >=$27,500,000
                                   AND
  Three most recent years' cash flow each............                 >0
                                   AND
Average 12 month market capitalization...............     >=$550,000,000
                                   AND
Total revenue........................................     >=$110,000,000
                                   OR
Total revenue........................................      >=$90,000,000
                                   AND
Average 12 month market capitalization...............     >=$850,000,000

    Nasdaq will determine compliance with the financial tests based on 
a company's publicly filed financial information. Thus, for example, as 
specified in proposed Nasdaq Rule 4427(b), pre-tax earnings will be the 
company's pre-tax income from continuing operations as filed with the 
Commission in the issuer's most recent periodic report and/or 
registration statement.
3. Price Test
    Any company newly listed on Nasdaq (both initial public offerings 
and seasoned companies) would be required to have a minimum $5 bid 
price to list on the Nasdaq Global Select Market. Companies switching 
from the Nasdaq Global Market would have previously satisfied the bid 
price requirement in connection with their initial listing and 
therefore will not be required to meet this requirement again when 
transferring to the new segment.
4. Other Provisions
    a company listing in connection with its emergence from a 
bankruptcy proceeding will be required to have 450 shareholders for 
listing, as will a company affiliated with another company listed on 
the Nasdaq Global Select Market. In these cases, Nasdaq believes that 
while the shareholder requirement is difficult to meet immediately upon 
listing because the stock is not initially widely distributed, shares 
are widely distributed following the initial listing. For similar 
reasons, the market value of publicly held shares requirement will be 
$70 million in the case of a company listing in connection with its 
initial public offering, a company that is affiliated with, or a 
spinoff from, another company listed on the Nasdaq Global Select 
Market, and a closed-end management investment company.
    Due to their unique nature, closed-end management investment 
companies will not be required to meet the financial requirements 
described above.\12\ Further, Nasdaq has proposed different liquidity 
standards for closed-end funds. Finally, if the primary class of a 
company is included in the Nasdaq Global Select Market, any secondary 
class of that same company, such as a secondary classes of common or a 
preferred stock, that qualifies for listing on the Nasdaq Global Market 
shall also be included in the Nasdaq Global Select Market.
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    \12\ While Nasdaq plans to list closed-end funds on the Nasdaq 
Global Select Market, there are not separate listing standards for 
structured products, index-linked notes, trust issued receipts, 
SEEDs, units, commodity-backed products, or Exchange Traded Funds.
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5. Continued Listing
    Following initial listing on the Nasdaq Global Select Market, 
securities will be subject to the continued listing standards that are 
currently applicable to the Nasdaq Global Market. Thus, companies must 
satisfy one of the

[[Page 29204]]

alternatives for continued listing contained in Nasdaq Rule 4450.\13\
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    \13\ Note that for inclusion on the Nasdaq Global Select Market, 
an initial public offering must be able to satisfy one of the 
alternatives for continued listing on the Nasdaq Global Market as 
contained in Nasdaq Rule 4450, as well as the requirements for 
initial inclusion on the Nasdaq Global Select Market. as a result, 
the initial listing standards will, in all cases, exceed the 
criteria set forth in Rule 3a51-1(a)(2) of the Act, 17 CFR 240.3a51-
1(a)(2).
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    Implementation. Prior to the planned July 1, 2006 launch of the new 
segment, Nasdaq will review all companies' qualifications and assign 
qualified Nasdaq Global Market companies to the new Nasdaq Global 
Select segment.\14\ In addition, qualified Nasdaq Capital Market 
companies will be given the opportunity to be included in the new 
segment.\15\ Thereafter, beginning in 2007, staff of the Nasdaq Listing 
Qualifications Department will review all Nasdaq Global Market 
companies' qualifications each October, and qualified Nasdaq Global 
Market companies will be automatically placed in the new segment the 
following January.\16\ While this review will occur automatically in 
October, a company may also apply to upgrade at any point. Companies 
transferring from Nasdaq Global market to the Nasdaq Global Select 
Market as part of this process will not be assessed entry or 
application fees. New Nasdaq Global Market listings will also be placed 
in the Nasdaq Global Select segment if they qualify, although they will 
be subject to the applicable entry and application fee schedule.
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    \14\ As a result of this review, no company then on the Nasdaq 
Global Market would be adversely affected. Note that the fees for 
the Nasdaq Global Market and the Nasdaq Global Select Market will be 
the same. See Nasdaq Rule 4510. Fees for securities listed on the 
Nasdaq Capital Market will continue to differ. See Nasdaq Rule 4520. 
Any company not qualifying for the Nasdaq Global Select Market would 
remain on the Nasdaq Global Market.
    \15\ See Nasdaq Rule 4425(d).
    \16\ Nasdaq believes that the delay from October to January is 
necessary to assure adequate time to complete the required review 
and notify issuers and market participants about the change. 
Nonetheless, to assure that no company is disadvantaged by this 
delay, a company that qualifies the Nasdaq Global Select Market when 
it is reviewed in October will be placed in that segment even if it 
falls below one or more of the initial listing requirements in 
January when the actual transfer takes place. However, a company 
that no longer meets the continued listing requirements for the 
Nasdaq Global Market in January would not be transferred to the 
Nasdaq Global Select Market, nor would a company that is delinquent 
in filing its periodic reports at the time of the transfer or where 
staff has raised public interest concerns.
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    As part of both the initial transfer of companies to the Nasdaq 
Global Select Market and Nasdaq's ongoing review of companies' 
eligibility to be included in the Nasdaq Global Select Market, a 
company that is in a grace or compliance period with respect to 
qualitative listing standard, such as the cure period allowed to 
companies that have a vacancy on their audit committee, will be allowed 
to transfer to the Nasdaq Global Select Market, subject to the 
continuation of that grace period. If a company is non-compliant with a 
qualitative listing requirement \17\ that does not provide for a grace 
period or if staff has raised a public interest concern, the company 
would not be permitted to transfer to the Nasdaq Global Select Market 
until the underlying deficiency is resolved. A company that is below a 
quantitative listing requirement even if the company has not been below 
the requirement for a sufficient period of time to be considered 
deficient,\18\ and a company in a grace or compliance period with 
respect to a quantitative listing requirement would not be allowed to 
transfer to the Nasdaq Global Select Market until the underlying 
deficiency is resolved, nor would any company before a Nasdaq Listing 
Qualifications Panel.
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    \17\ Qualitative listing requirements include those requirements 
contained in Nasdaq Rule 4350.
    \18\ For example, a security with a closing bid price below $1 
is not considered deficient until the security has closed below $1 
for 30 consecutive business days. Nonetheless, no security with a 
closing bid price below $1 would be permitted to list on the Nasdaq 
Global Select Market, even if it has closed above $1 in the prior 30 
business days.
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    In connection with the initial transfer of companies to the Nasdaq 
Global Select Market, Nasdaq proposes to allow (but not require) any 
Nasdaq-listed company that meets the New York Stock Exchange LLC 
(``NYSE'') initial listing standards as of July 1, 2006, but that does 
not then qualify for the new segment to be included in the Nasdaq 
Global Select Market, subject to an 18 month grace period, until 
January 1, 2008, to achieve compliance.\19\ During that grace period, 
these companies would have to achieve compliance with all applicable 
criteria for initial listing on the Nasdaq Global Select Market. Any 
company that has not achieved compliance with all listing criteria for 
the Nasdaq Global Select Market by January 2008 would be moved to the 
Nasdaq Global Market at that time.\20\
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    \19\ Certain companies will qualify for the NYSE but not the 
Nasdaq Global Select Market.
    \20\ Of course if any such company fails to meet the continued 
listing standards for the Nasdaq Global Market at any point, staff 
would begin proceedings under the Nasdaq rule 4800 Series with 
respect to that company.
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2. Statutory Basis
    Nasdaq believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 6 of the Act,\21\ in general, 
and with Section 6(b)(6) 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 transactions 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; 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \21\ 15 U.S.C. 78o-3.
    \22\ 15 U.S.C. 78o-3(b)(6).
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    Nasdaq believes that changing the name of the Nasdaq National 
Market to the Nasdaq Global Market will more accurately reflect the 
international reach and leadership of many of the companies listed on 
that market and the market itself. Further, Nasdaq believes that the 
creation of a market segment within the Nasdaq Global Market with 
higher initial listing standards will protect investors and the public 
interest and will foster competition among exchange markets.

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.

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

    The foregoing proposed rule change, as amended, is subject to 
Section 19(b)(3)(A)(iii) of the Act \23\ and Rule 19b-4(f)(6) 
thereunder, \24\ because the rule change does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; or (iii) become operative for 30 
days from the day on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest.\25\
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    \23\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ As required by Rule 19b-4(f)(6)(iii) of the Act, Nasdaq 
provided the Commission with written notice of its intent to file 
the proposed rule change, along with a brief description of the text 
of the proposed rule change, at least five business days prior to 
the date of the filing of the proposed rule change.

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[[Page 29205]]

    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate 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.\26\
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    \26\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). 
For the purposes of calculating the 60-day period within which the 
Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers that period 
to commence on May 8, 2006, the date Nasdaq filed Amendment No. 1 to 
the proposed rule change. See 15 U.S.C. 78s(b)(3)(C).
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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, as amended, 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2006-007 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2006-007. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NASDAQ. 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-2006-007 and should be submitted on or before 
June 9, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 06-4689 Filed 5-18-06; 8:45 am]

BILLING CODE 8010-01-M