Document ID: SEC-2019-1832-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market, LLC
Posted Date: 2019-12-09T05:00Z

[Federal Register Volume 84, Number 236 (Monday, December 9, 2019)]
[Notices]
[Pages 67308-67318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26405]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87648; File No. SR-NASDAQ-2019-059]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Amendment No. 1 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Adopt Requirements for the Nasdaq Capital and Global Markets Applicable 
to Direct Listings

December 3, 2019.

I. Introduction

    On August 15, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt requirements for the 
Nasdaq Capital and Global Markets applicable to direct listings. The 
proposed rule change was published for comment in the Federal Register 
on September 4, 2019.\3\ On October 17, 2019, pursuant to Section 
19(b)(2) of the Exchange Act,\4\ the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
approve or disapprove the proposed rule change.\5\ On November 26, 
2019, the Exchange filed Amendment No. 1 to the proposed rule change, 
which replaced and superseded the proposed rule change as originally 
filed.\6\ The Commission received no comments on the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as modified by Amendment No. 1, from 
interested persons and is approving the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 86792 (August 28, 
2019), 84 FR 46580 (September 4, 2019) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 87328, 84 FR 56868 
(October 23, 2019). The Commission designated December 3, 2019, as 
the date by which the Commission shall approve the proposed rule 
change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the 
proposed rule change.
    \6\ Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2019-059/srnasdaq2019059-6482012-199454.pdf.
---------------------------------------------------------------------------

II. Exchange's Description of the Proposal, as Modified by Amendment 
No. 1

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq is filing this amendment to SR-NASDAQ-2019-059,\7\ which was 
published for comment by the Commission on August 28, 2019, in order 
to: (i) Specify that to constitute compelling evidence under the 
proposed Listing Rules IM-5405-1(a)(3) and IM-5505-1(a)(3), a tender 
offer by the company or an unaffiliated third party needs to be for 
cash and be commenced and completed within the prior six months; (ii) 
clarify that for affiliate participation to be considered de minimis 
under the proposed Listing Rules IM-5405-1(a)(3) and IM-5505-1(a)(3), 
the transaction must comply with the requirements of Listing Rules IM-
5405-1(a)(3)(ii)(C) or IM-5505-1(a)(3)(ii)(C) and the company must 
certify such compliance to Nasdaq in writing; (iii) update the preamble 
to proposed Listing Rules IM-5405-1 and IM-5505-1 to clarify that this 
Interpretative Material describes when a company whose stock is not 
previously registered under the Exchange Act may list on the Nasdaq 
Global or Capital 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; (iv) require that the examples of 
transactions that could constitute compelling evidence for purposes of 
Listing Rules IM-5405-1(a)(3) and IM-5505-1(a)(3) are exhaustive; (v) 
clarify that references to third parties mean unaffiliated third 
parties; and (vi) make minor technical changes to improve the 
structure, clarity and readability of the proposed rules.
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 86792 (August 28, 2019), 
84 FR 46580 (September 4, 2019) (the ``Initial Proposal'').
---------------------------------------------------------------------------

    For purposes of these proposed rule changes, all references to the 
term ``affiliate'' and derivatives of this term rely on the definition 
of ``affiliate'' in SEC Rule 10A-3(e). See 17 CFR 240.10A-3(e). This 
amendment supersedes and replaces the Initial Proposal in its entirety.
    Nasdaq recognizes that some companies, whose stock was not 
previously registered under the Exchange Act, 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. Nasdaq previously adopted requirements applicable to 
such Direct Listings listing on the Nasdaq Global Select Market \8\ and 
now

[[Page 67309]]

proposes to adopt requirements for the Nasdaq Global and Capital 
Markets.
---------------------------------------------------------------------------

    \8\ Securities Exchange Act Release No. 85156 (February 15, 
2019), 84 FR 5787 (February 22, 2019) (SR-NASDAQ-2019-001) (the 
``2019 Rule Change''). Nasdaq proposes to insert the defined term 
``Direct Listing'' into the existing language of Listing Rule IM-
5315-1 as follows: ``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 on Nasdaq (a 
``Direct Listing'').'' Nasdaq also proposes to update the title of 
Listing Rule IM-5315-1 without further modification to that rule 
section. Nasdaq intends to submit a subsequent rule filing to adopt 
a global definition for Direct Listings that will include the 
substantive provisions from the preamble to Listing Rule IM-5315-1 
and proposed Listing Rules IM-5405-1 and IM-5505-1.
---------------------------------------------------------------------------

    The proposed Listing Rules IM-5405-1 and IM-5505-1 describe when a 
company whose stock is not previously registered under the Exchange Act 
may list on the Nasdaq Global and Capital Markets, 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, set forth the additional 
listing requirements for Direct Listings on the Nasdaq Global and 
Capital Markets and describe how the Exchange will calculate compliance 
with the Nasdaq Global and Capital Markets initial listing standards 
related to the requirements based on the price of a security, including 
the bid price, Market Value of Listed Securities and Market Value of 
Unrestricted Publicly Held Shares.\9\
---------------------------------------------------------------------------

    \9\ On March 21, 2019, Nasdaq filed with the Commission a 
proposed rule change to revise the initial listing standards related 
to liquidity that, among other changes, added three new definitions 
to define ``restricted securities,'' ``unrestricted publicly held 
shares'' and ``unrestricted securities.'' This rule change was 
approved by the Commission effective July 5, 2019 and operative 
August 5, 2019. See Securities Exchange Act Release No. 86314 (July 
5, 2019), 84 FR 33102 (July 11, 2019).
---------------------------------------------------------------------------

    Nasdaq also proposes to modify Nasdaq Rule 4753 to clarify that the 
securities listed pursuant to Listing Rules IM-5405-1 and IM-5505-1 can 
use the same crossing mechanism available for IPOs outlined in Rule 
4120(c)(8) and Rule 4753 (the ``IPO Cross'').
    Finally, the proposed Listing Rules IM-5405-1 and IM-5505-1 require 
that such securities must begin trading on Nasdaq following the initial 
pricing through the IPO Cross. To allow such initial pricing, the 
company must: (i) In accordance with Rule 4120(c)(9), have a broker-
dealer serving in the role of financial advisor to the issuer of the 
securities being listed, who is willing to perform the functions under 
Rule 4120(c)(8) that are performed by an underwriter with respect to an 
initial public offering; and (ii) list upon effectiveness of a 
Securities Act of 1933 registration statement filed solely for the 
purpose of allowing existing shareholders to sell their shares.
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 Rules IM-5405-1 and IM-5505-1, which 
will state how the Exchange calculates the initial listing requirements 
based on the price of a security, including the bid price, Market Value 
of Listed Securities and Market Value of Unrestricted Publicly Held 
shares for a Direct Listing on the Nasdaq Global and Capital 
Markets.\10\
---------------------------------------------------------------------------

    \10\ Substantive provisions of Listing Rules IM-5405-1 and IM-
5505-1 are identical.
---------------------------------------------------------------------------

    Unless Nasdaq determines to accept evidence of the security's price 
based on a tender offer for cash by the company or an unaffiliated 
third party, a sale between unaffiliated third parties involving the 
company's equity securities, or equity security sales by the company, 
as described in more detail below, under Listing Rules IM-5405-1 and 
IM-5505-1, Nasdaq would generally require that a company listing on the 
Nasdaq Global and Capital Markets through a Direct Listing provide 
Nasdaq an independent third-party valuation (a ``Valuation''), as 
defined in Listing Rule IM-5315-1, that meets the requirements of 
Listing Rules IM-5315-1(e) and (f).
    Under Listing Rule IM-5315-1(e), 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 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.\11\
---------------------------------------------------------------------------

    \11\ 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.
---------------------------------------------------------------------------

    Under Listing Rule IM-5315-1(f), Nasdaq requires 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 \12\ prior to listing, Nasdaq will determine a 
company's price, Market Value of Listed Securities and Market Value of 
Unrestricted Publicly Held shares based on the lesser of: (i) The value 
calculable based on the Valuation \13\ and (ii) the value calculable 
based on the most recent trading price in a Private Placement 
Market.\14\
---------------------------------------------------------------------------

    \12\ Nasdaq defines ``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.
    \13\ As described in more detail below, under proposed Listing 
Rules IM-5405-1(a)(3) and IM-5505-1(a)(3), in lieu of a Valuation, 
Nasdaq may accept certain other compelling evidence of the 
security's price, Market Value of Listed Securities and Market Value 
of Unrestricted Publicly Held Shares.
    \14\ Proposed Listing Rules IM-5405-1(a)(1) and IM-5505-1(a)(1).
---------------------------------------------------------------------------

    Under Proposed Listing Rules IM-5405-1(a)(5) and IM-5505-1(a)(5), 
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

[[Page 67310]]

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,\15\ to 
determine that such company has met the applicable price-based initial 
listing requirements, Nasdaq proposes to require, under proposed 
Listing Rules IM-5405-1(a)(2) and IM-5505-1(a)(2) that a Valuation must 
evidence a price, Market Value of Listed Securities and Market Value of 
Unrestricted Publicly Held Shares that exceed 200% of the otherwise 
applicable requirement. Thus, to list on the Nasdaq Global Market, the 
Valuation must evidence a minimum bid price of at least $8 per share; 
Market Value of Unrestricted Publicly Held Shares of $16 million under 
the Income Standard; or Market Value of Unrestricted Publicly Held 
Shares of $36 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $40 million and Market Value of 
Listed Securities of $150 million under the Market Value Standard; or 
Market Value of Unrestricted Publicly Held Shares of $40 million under 
the Total Assets/Total Revenue Standard.\16\
---------------------------------------------------------------------------

    \15\ 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.
    \16\ See Listing Rules 5405(a) and (b), which generally require 
minimum bid price of at least $4 per share; Market Value of 
Unrestricted Publicly Held Shares of $8 million under the Income 
Standard; or Market Value of Unrestricted Publicly Held Shares of 
$18 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $20 million and Market Value of 
Listed Securities of $75 million under the Market Value Standard; or 
Market Value of Unrestricted Publicly Held Shares of $20 million 
under the Total Assets/Total Revenue Standard.
---------------------------------------------------------------------------

    To list on the Nasdaq Capital Market, the Valuation must generally 
evidence a minimum bid price of at least $8 per share; \17\ Market 
Value of Unrestricted Publicly Held Shares of $10 million under the Net 
Income Standard; or Market Value of Unrestricted Publicly Held Shares 
of $30 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $30 million and Market Value of 
Listed Securities of $100 million under the Market Value Standard.\18\
---------------------------------------------------------------------------

    \17\ A company listing equity securities under Listing Rule IM-
5505-1 is not eligible to rely on the reduced bid price requirement 
of Listing Rule 5505(a)(1)(B) given that such securities do not 
trade in a continuous market prior to listing while Listing Rule 
5505(a)(1)(B) requires that such security ``must meet the applicable 
closing price requirement for at least five consecutive business 
days prior to approval.''
    \18\ See Listing Rules 5505(a) and (b), which generally require 
minimum bid price of at least $4 per share; Market Value of 
Unrestricted Publicly Held Shares of $5 million under the Net Income 
Standard; or Market Value of Unrestricted Publicly Held Shares of 
$15 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $15 million and Market Value of 
Listed Securities of $50 million under the Market Value Standard.
---------------------------------------------------------------------------

    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. Nasdaq believes that for these companies a recent 
Valuation indicating that the company exceeds 200% of the otherwise 
applicable price-based requirement will give a significant degree of 
comfort that the company will meet the applicable initial listing 
price-based requirements upon commencement of trading. 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 initial listing 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, as 
required by Listing Rule IM-5315-1(e).
    Nasdaq further believes that in certain unique circumstances a 
company that is clearly large enough to be suitable for listing on the 
Exchange may provide other compelling evidence, subject to limitations 
described below, to demonstrate that it meets all applicable price-
based requirements without a Valuation. In such cases, Nasdaq under 
Proposed Listing Rules IM-5405-1(a)(3) and IM-5505-1(a)(3) may (but is 
not required to) accept other compelling evidence of the security's 
price, Market Value of Listed Securities and Market Value of 
Unrestricted Publicly Held Shares, including, a tender offer for cash 
by the company or an unaffiliated third party, a sale between 
unaffiliated third parties involving the company's equity securities, 
or equity security sales by the company.\19\
---------------------------------------------------------------------------

    \19\ See also, footnote 11 above.
---------------------------------------------------------------------------

    In order to be considered compelling evidence of the company's 
value, Nasdaq proposes to require that such transactions were recent, 
completed (and, in the case of a tender offer, commenced and completed) 
within the prior six months, and substantial in size, representing 
sales of at least 20% of the applicable Market Value of Unrestricted 
Publicly Held Shares requirement.\20\ In addition, to help assure that 
such transactions adequately support the value of the company, Nasdaq 
proposes to require that such transactions cannot involve affiliates of 
the company unless such participation is de minimis. To be considered 
de minimis, the transaction must comply with the requirement that and 
the company must certify to Nasdaq in writing that: Any affiliate's 
participation must be less than 5% of the transaction (and all 
affiliates' participation collectively must be less than 10% of the 
transaction), such participation must have been suggested or required 
by unaffiliated investors and the affiliates must not have participated 
in negotiating the economic terms of the transaction. The examples of 
transactions that could constitute compelling evidence for purposes of 
Listing Rules IM-5405-1 and IM-5505-1 are meant to be exhaustive. 
Finally, Nasdaq will examine any such evidence produced by the company 
to assure that it is indicative of the company's overall value. If, 
based on facts and circumstances, Nasdaq determines that such evidence 
is not reliable, Nasdaq will require a Valuation that meets the 
requirements of Listing Rules IM-5315-1(e) and (f) and the company must 
then satisfy the other standards in the rule that require a Valuation.
---------------------------------------------------------------------------

    \20\ Listing Rule 5405(b) generally requires, for a company 
listing on the Nasdaq Global Market, Market Value of Unrestricted 
Publicly Held Shares of $8 million under the Income Standard; Market 
Value of Unrestricted Publicly Held Shares of $18 million under the 
Equity Standard; Market Value of Unrestricted Publicly Held Shares 
of $20 million under the Market Value Standard; or Market Value of 
Unrestricted Publicly Held Shares of $20 million under the Total 
Assets/Total Revenue Standard. Listing Rule 5505(b) generally 
requires, for a company listing on the Nasdaq Capital Market, Market 
Value of Unrestricted Publicly Held Shares of $5 million under the 
Net Income Standard; Market Value of Unrestricted Publicly Held 
Shares of $15 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $15 million under the Market 
Value Standard.
---------------------------------------------------------------------------

    In order to determine that such company has met the applicable 
price-based initial listing requirements and to list on Nasdaq based on 
such evidence without a Valuation, Nasdaq proposes to require such 
evidence to show that the security's price, Market Value of Listed 
Securities and Market Value of Unrestricted Publicly Held Shares exceed 
250% of the otherwise applicable requirement. Thus, to list on the 
Nasdaq Global Market, the compelling evidence provided by the company 
must show a minimum bid

[[Page 67311]]

price of at least $10 per share; Market Value of Unrestricted Publicly 
Held Shares of $20 million under the Income Standard; or Market Value 
of Unrestricted Publicly Held Shares of $45 million under the Equity 
Standard; or Market Value of Unrestricted Publicly Held Shares of $50 
million and Market Value of Listed Securities of $187.5 million under 
the Market Value Standard; or Market Value of Unrestricted Publicly 
Held Shares of $50 million under the Total Assets/Total Revenue 
Standard.\21\
---------------------------------------------------------------------------

    \21\ See Listing Rules 5405(a) and (b), which generally require 
minimum bid price of at least $4 per share; Market Value of 
Unrestricted Publicly Held Shares of $8 million under the Income 
Standard; or Market Value of Unrestricted Publicly Held Shares of 
$18 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $20 million and Market Value of 
Listed Securities of $75 million under the Market Value Standard; or 
Market Value of Unrestricted Publicly Held Shares of $20 million 
under the Total Assets/Total Revenue Standard.
---------------------------------------------------------------------------

    To list on the Nasdaq Capital Market, such evidence must show a 
minimum bid price of at least $10 per share; Market Value of 
Unrestricted Publicly Held Shares of $12.5 million under the Net Income 
Standard; or Market Value of Unrestricted Publicly Held Shares of $37.5 
million under the Equity Standard; or Market Value of Unrestricted 
Publicly Held Shares of $37.5 million and Market Value of Listed 
Securities of $125 million under the Market Value Standard.\22\
---------------------------------------------------------------------------

    \22\ See Listing Rules 5505(a) and (b), which generally require 
minimum bid price of at least $4 per share; Market Value of 
Unrestricted Publicly Held Shares of $5 million under the Net Income 
Standard; or Market Value of Unrestricted Publicly Held Shares of 
$15 million under the Equity Standard; or Market Value of 
Unrestricted Publicly Held Shares of $15 million and Market Value of 
Listed Securities of $50 million under the Market Value Standard.
---------------------------------------------------------------------------

    Nasdaq believes that sales of the company's equity securities 
representing at least 20% of the applicable Market Value of 
Unrestricted Publicly Held Shares on the Nasdaq Capital Market thus 
demonstrating a payment in excess of $1 million for a company listing 
under the Net Income Standard or in excess of $3 million for a company 
listing under other standards,\23\ is compelling evidence that the sale 
is substantial enough in size to be indicative of the company's overall 
value.
---------------------------------------------------------------------------

    \23\ Id.
---------------------------------------------------------------------------

    Similarly, Nasdaq believes that sales of the company's equity 
securities representing at least 20% of the applicable Market Value of 
Unrestricted Publicly Held Shares on the Nasdaq Global Market thus 
demonstrating a payment in excess of $1.6 million for a company listing 
under the Net Income Standard, or in excess of $3.6 million for a 
company listing under the Equity Standard, or in excess of $4 million 
for a company listing under other standards,\24\ is compelling evidence 
that the sale is substantial enough in size to be indicative of the 
company's overall value.
---------------------------------------------------------------------------

    \24\ See footnote 21 above.
---------------------------------------------------------------------------

    Nasdaq believes that recent, substantial in size, arm's-length 
tender offers for cash by an unaffiliated third party, sales between 
unaffiliated third parties involving the company's equity securities, 
or equity security sales by the company, with de minimis insider 
participation, indicating the company exceeds 250% of the otherwise 
applicable price-based requirements will give a significant degree of 
comfort that the company will meet the applicable price-based 
requirements upon commencement of trading. Nasdaq also believes that 
recent, substantial in size (representing at least 20% of the 
applicable Market Value of Unrestricted Publicly Held Shares) tender 
offers for cash by the company indicating the company exceeds 250% of 
the otherwise applicable price-based requirements is compelling 
evidence of the company's value notwithstanding the company's 
involvement in the pricing of the transaction, because it is, in 
Nasdaq's view, unlikely that the company would misprice the securities 
purchased in a tender offer for cash to the degree necessary for a 
company using this provision to fail to meet the applicable initial 
listing requirement upon listing, in particular because of the 
substantial size of the transaction. In addition, Nasdaq believes that 
the new requirement that such securities must begin trading on Nasdaq 
following the initial pricing through the IPO Cross will help assure 
these securities begin trading close to their inherent value.
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 Rules IM-5405-1(a)(4) and IM-5505-
1(a)(4) 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 the Nasdaq Global or Capital Markets 
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 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.\25\ At that time, the Exchange added Rule 4120(c)(9) \26\ 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 IPO 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.\27\
---------------------------------------------------------------------------

    \25\ Securities Exchange Act Release No. 71931 (April 11, 2014), 
79 FR 21829 (April 17, 2014) (SR-NASDAQ-2014-032) (the ``2014 Rule 
Change''). 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.
    \26\ 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-2014-081). All 
references in this filing are to the renumbered rules, as currently 
in effect.
    \27\ 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.
---------------------------------------------------------------------------

    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

[[Page 67312]]

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.'' \28\
---------------------------------------------------------------------------

    \28\ 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 26, 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.
---------------------------------------------------------------------------

    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.\29\ In each case, the applicable price could be 
determined based on the issuer's IPO price.\30\ 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 \31\ or one provided by the financial advisor 
to the company.
---------------------------------------------------------------------------

    \29\ Rules 4753(a)(3)(A) and 4753(b)(2)(D).
    \30\ 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.
    \31\ 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. See also proposed Listing Rules IM-5405-1(a)(5) and IM-5505-
1(a)(5).
---------------------------------------------------------------------------

    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 \32\ and 
following the 2019 Rule Change. Nasdaq 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.
---------------------------------------------------------------------------

    \32\ 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.
---------------------------------------------------------------------------

    In the 2019 Rule Change, Nasdaq elaborated on the role of a 
financial advisor to the issuer of a security that is listing under IM-
5315-1.\33\ Nasdaq now proposes to amend Rule 4753 to allow for 
securities listed pursuant to Listing Rules IM-5405-1 and IM-5505-1 to 
be launched for trading using the IPO Cross, subject to additional 
requirements in the proposed Listing Rules IM-5405-1 and IM-5505-1.
---------------------------------------------------------------------------

    \33\ Specifically, Nasdaq amended Rules 4753(a)(3)(A)(iv) and 
4753(b)(2)(D) to state that in the case of the initial pricing of a 
Direct Listing for 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, 
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). See 
2019 Rule Change.
---------------------------------------------------------------------------

    Nasdaq also proposes to require that all securities listed under 
Listing Rules IM-5405-1 and IM-5505-1 must begin trading on Nasdaq 
following the initial pricing through the IPO Cross. To that end, 
Nasdaq proposes to cross reference Rule 4120(c)(8) in Listing Rules IM-
5405-1 and IM-5505-1 to require that the company, in accordance with 
Rule 4120(c)(9), must have a broker-dealer serving in the role of 
financial advisor to the issuer of the securities being listed, who is 
willing to perform the functions under Rule 4120(c)(8) that are 
performed by an underwriter with respect to an initial public offering. 
In addition, Nasdaq proposes to require that each company qualified for 
listing under Listing Rules IM-5405-1 and IM-5505-1 must list its 
securities upon effectiveness of a Securities Act of 1933 registration 
statement filed solely for the purpose of allowing existing 
shareholders to sell their shares.
    Finally, Nasdaq proposes to define ``Direct Listing'' in Listing 
Rule IM-5315-1 and update the title without further modification to 
that rule section. Nasdaq also proposes to update the reference to 
``direct listings under IM-5315-1'' in Listing Rule IM-5900-7 as a 
defined term without changing the substance of this rule.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\34\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\35\ 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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 and Capital Markets is designed to protect 
investors and the public interest because any company relying solely on 
a Valuation will have to demonstrate that the company exceeds 200% of 
the otherwise applicable price-based requirement, which will give a 
significant degree of comfort that upon commencement of trading the 
company will meet the applicable price-based requirements.\36\ In 
addition, having in place 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.
---------------------------------------------------------------------------

    \36\ See footnotes 21 and 22 above. The Commission notes that 
footnotes 16-18 above discuss the applicable requirements.
---------------------------------------------------------------------------

    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. Nasdaq's 
existing requirements 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. As such, Nasdaq believes 
these provisions protect investors and the public interest in 
accordance with Section 6(b)(5) of the Exchange Act.
    The proposed rule change also protects investors and the public 
interest by requiring that there be sustained recent trading in the 
Private Placement Market in order for a Direct Listing to rely on such 
price to demonstrate compliance with the applicable price-based 
requirements. 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 such

[[Page 67313]]

trading price or the Valuation helps assure that the company satisfies 
Nasdaq's requirements. In the absence of recent sustained trading in 
the Private Placement Market, the requirement to demonstrate that the 
company exceeds 200% of the otherwise applicable price-based 
requirement, similarly helps assure that the company satisfies Nasdaq's 
requirement by imposing a standard that is double the otherwise 
applicable standard.\37\
---------------------------------------------------------------------------

    \37\ See footnotes 21 and 22, above. The Commission notes that 
footnotes 16-18 above discuss the applicable requirements.
---------------------------------------------------------------------------

    The proposed rule change to allow a company in certain unique 
circumstances to list without a Valuation is designed to protect 
investors and the public interest because it requires such company to 
produce compelling evidence that the security's price, Market Value of 
Listed Securities and Market Value of Unrestricted Publicly Held Shares 
exceed 250% of the otherwise applicable requirement. Moreover, in order 
to be considered compelling, such evidence of the company's value must 
be based on a tender offer for cash by the company or an unaffiliated 
third party or on a sale between unaffiliated third parties involving 
the company's equity securities, or equity security sales by the 
company. In addition, such transactions must be recent, completed (and, 
in the case of a tender offer, commenced and completed) within the 
prior six months, and substantial in size, representing sales of at 
least 20% of the applicable Market Value of Unrestricted Publicly Held 
Shares requirement which helps assure, in Nasdaq's view, that the 
company satisfies the applicable price-based requirement upon 
commencement of trading on Nasdaq. Finally, recent, substantial in size 
(representing at least 20% of the applicable Market Value of 
Unrestricted Publicly Held Shares) tender offers for cash by the 
company indicating the company exceeds 250% of the otherwise applicable 
price-based requirements is compelling evidence of the company's value 
notwithstanding the company's involvement in the pricing of the 
transaction, because, in Nasdaq's view, it is unlikely that the company 
would misprice the securities purchased in a tender offer for cash to 
the degree necessary for a company using this provision to fail to meet 
the applicable initial listing requirement upon listing, in particular 
because of the substantial size of the transaction.
    The proposed rule change also protects investors and the public 
interest by requiring that for a company to demonstrate compliance with 
the applicable price-based requirements based on a tender offer for 
cash by the company or an unaffiliated third party, a sale between 
unaffiliated third parties involving the company's equity securities, 
or equity security sales by the company, because such transactions, in 
addition to being recent and substantial in size, must also have been 
conducted in a manner that helps assure that such transactions 
adequately support the value of the company. To that end, Nasdaq 
proposes to require that such transactions cannot involve affiliates of 
the company unless such participation is de minimis. To be considered 
de minimis, the transaction must comply with the requirement that and 
the company must certify to Nasdaq in writing that: Any affiliate's 
participation must be less than 5% of the transaction (and all 
affiliates' participation collectively must be less than 10% of the 
transaction), such participation must have been suggested or required 
by unaffiliated investors and the affiliates must not have participated 
in negotiating the economic terms of the transaction.
    The proposed requirement that a company that lists on the Nasdaq 
Global or Capital Markets through a Direct Listing must list 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 Rules IM-
5405-1(a)(4) or IM-5505-1(a)(4) 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.\38\
---------------------------------------------------------------------------

    \38\ Provisions of Listing Rules IM-5405-1(a)(4) and IM-5505-
1(a)(4) are identical to Listing Rule IM-5315-1(c) applicable to 
Direct Listings on the Nasdaq Global Select Market, which was 
adopted in the 2019 Rule Change.
---------------------------------------------------------------------------

Clarification of the Role of a Financial Advisor in a Direct Listing
    Nasdaq believes that the proposed rule change to modify 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. The 2019 Rule Change established that, in using the 
IPO Cross to initiate the initial trading in the company's securities, 
the Current Reference Price and price at which the Nasdaq Halt Cross 
will occur may be based on 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. The proposed rule change simply provides that in 
addition to the initial pricing of a security listing under Listing 
Rules IM-5315-1 the same process will occur for securities listing 
under IM-5405-1 or IM-5505-1.
    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 has not been such 
sustained recent trading, Nasdaq notes that financial advisors have 
been performing the functions of the underwriter in the IPO Cross on a 
limited basis since 2014 and following the 2019 Rule Change 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.

[[Page 67314]]

    Similarly, the proposed requirement that a company that lists on 
the Nasdaq Global or Capital Markets through a Direct Listing must 
begin trading of the company's securities following the initial pricing 
through the IPO Cross will promote fair and orderly markets by 
protecting against volatility in the pricing and initial trading of 
unseasoned 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 
on the Nasdaq Global or Capital Markets.
    Finally, Nasdaq believes that the proposed rule change to update 
the title of Listing Rule IM-5315-1, to insert the defined term 
``Direct Listing'' into the existing language of this rule and to 
update the reference to ``direct listings under IM-5315-1'' in Listing 
Rule IM-5900-7 using a defined term, does not change the substance of 
these rules and protects investors and the public interest by 
clarifying the applicability of these rules and making it easier to 
understand.

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 Listing Rules IM-5405-1 and IM-
5505-1 is designed to provide transparency to the mechanism of listing 
securities in connection with a Direct Listing on the Nasdaq Global or 
Capital Markets 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.
    In addition, the proposed change is designed to extend the 
availability of the IPO Cross to securities listing on Nasdaq under IM-
5405-1 or IM-5505-1 and thus impacts the determination of the initial 
pricing of securities upon listing Nasdaq and will have no impact on 
competition.

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. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Exchange Act and the rules and regulations 
thereunder applicable to a national securities exchange.\39\ In 
particular, the Commission finds that the proposed rule change, as 
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the 
Exchange Act,\40\ which requires, among other things, that the rules of 
a national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. Section 6(b)(5) 
of the Exchange Act \41\ also requires that the rules of an exchange 
not be designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \40\ 15 U.S.C. 78f(b)(5).
    \41\ Id.
---------------------------------------------------------------------------

    The Commission has consistently recognized the importance of 
exchange listing standards. Among other things, such listing standards 
help ensure that exchange listed companies will have sufficient public 
float, investor base, and trading interest to provide the depth and 
liquidity necessary to promote fair and orderly markets.\42\
---------------------------------------------------------------------------

    \42\ The Commission has stated in approving exchange listing 
requirements that the development and enforcement of adequate 
standards governing the listing of securities on an exchange is an 
activity of critical importance to the financial markets and the 
investing public. In addition, once a security has been approved for 
initial listing, maintenance criteria allow an exchange to monitor 
the status and trading characteristics of that issue to ensure that 
it continues to meet the exchange's standards for market depth and 
liquidity so that fair and orderly markets can be maintained. See, 
e.g., Securities Exchange Act Release Nos. 81856 (October 11, 2017), 
82 FR 48296, 48298 (October 17, 2017) (SR-NYSE-2017-31); 81079 (July 
5, 2017), 82 FR 32022, 32023 (July 11, 2017) (SR-NYSE-2017-11). The 
Commission notes that, in general, adequate listing standards, by 
promoting fair and orderly markets, are consistent with Section 
6(b)(5) of the Exchange Act, in that they are, among other things, 
designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, and protect 
investors and the public interest.
---------------------------------------------------------------------------

    The Exchange has stated that it recognizes that some companies 
whose stock was not previously registered under the Exchange Act and 
that have sold common equity securities in private placements, and 
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 on the 
Exchange to allow existing shareholders to sell their shares in an 
initial listing on the Exchange.\43\ The Exchange therefore has 
proposed to adopt listing requirements to permit it to list on the 
Nasdaq Global and Capital Markets securities of a company whose stock 
has not previously been registered under the Exchange Act and is 
listing, without a related underwritten offering, upon the 
effectiveness of a registration statement under the Securities Act of 
1933 (``Securities Act'') that is registering only the resale of shares 
sold by the company in earlier private placements (``Direct 
Listing'').\44\ The Exchange's listing standards currently contain 
requirements applicable to Direct Listings listed on the Nasdaq Global 
Select Market.\45\
---------------------------------------------------------------------------

    \43\ See supra note 8 and accompanying text.
    \44\ See proposed Nasdaq Rules IM-5405-1 and IM-5505-1. For 
purposes of this Discussion and Commission Findings section, the 
Commission refers to ``Direct Listing'' as defined in this 
paragraph. The Commission notes that Nasdaq has agreed to submit a 
subsequent proposed rule change that would adopt a global definition 
for Direct Listings that includes these characteristics as described 
in the preamble to Nasdaq Rule IM-5315-1 and proposed Nasdaq Rules 
IM-5405-1 and IM-5505-1. See supra note 8.
    \45\ See Nasdaq Rule IM-5315-1. See also Securities Exchange Act 
Release No. 85156 (February 15, 2019), 84 FR 5787 (February 22, 
2019) (SR-NASDAQ-2019-001) (notice of filing and immediate 
effectiveness of proposed rule change to adopt Nasdaq Rule IM-5315-
1). The Exchange's listing standards pertaining to Direct Listings 
on the Nasdaq Global Select Market are substantially similar to 
listing standards that the Commission approved for another exchange. 
See Securities Exchange Act Release Nos. 82627 (February 2, 2018), 
83 FR 5650 (February 8, 2018) (SR-NYSE-2017-30) (``2018 Order'') 
(approving listing standards for companies that list without a prior 
Exchange Act registration and that are not listing in connection 
with an underwritten initial public offering); 58550 (September 15, 
2008), 73 FR 54442 (September 19, 2008) (SR-NYSE-2008-68) (``2008 
Order'') (approving proposal to allow the exchange to determine that 
a company meets the exchange's market value listing requirements by 
relying on a third-party valuation of the company).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change will provide 
a means for a category of companies with securities that have not 
previously been traded on a public market that are listing only upon 
effectiveness of a selling shareholder registration statement, without 
a related underwritten offering, and that would not qualify to list 
under the Nasdaq Global Select Market standards, to list on the 
Exchange's other tiers.\46\ In

[[Page 67315]]

particular, for companies that otherwise meet the Exchange's listing 
standards for the Nasdaq Global Market or Nasdaq Capital Market, 
respectively,\47\ the proposed rule change sets forth how the Exchange 
will determine whether a company satisfies the initial listing 
requirements for these markets that are based on the price of security, 
which are currently the bid price, Market Value of Listed Securities, 
and Market Value of Unrestricted Publicly Held Shares requirements.\48\
---------------------------------------------------------------------------

    \46\ The Nasdaq Global Select Market has the highest 
quantitative listing requirements to list on Nasdaq, followed by the 
Nasdaq Global Market and then the Nasdaq Capital Market.
    \47\ Companies listing upon an effective registration statement 
would have to meet the distribution and minimum bid price 
requirements set forth in Nasdaq Rules 5405(a) or 5505(a) and one of 
the financial standards set forth in Nasdaq Rules 5405(b) or 
5505(b), as well as comply with all other applicable Nasdaq rules, 
including the corporate governance requirements. See supra notes 16-
18, 21-22, and accompanying text for a description of some of the 
requirements in Nasdaq Rules 5405(a) and (b) and 5505(a) and (b) and 
how they would apply to Direct Listings. See also infra note 75 and 
accompanying text.
    \48\ See proposed Nasdaq Rules IM-5405-1(a) and IM-5505-1(a). 
This Discussion and Commission Findings section refers to the bid 
price, Market Value of Listed Securities, and Market Value of 
Unrestricted Publicly Held Shares requirements as the ``price-based 
initial listing requirements.''
---------------------------------------------------------------------------

    Under the proposal, the Exchange would generally require a company 
listing securities under the proposed Direct Listing standards to 
provide an independent third-party Valuation that would be used as 
described below, with certain differences depending on whether or not 
there is sustained trading in a Private Placement Market, to determine 
whether the company has met the price-based initial listing 
requirements.\49\
---------------------------------------------------------------------------

    \49\ See proposed Nasdaq Rules IM-5405-1(a)(1) and (2) and IM-
5505-1(a)(1) and (2).
---------------------------------------------------------------------------

    For a company whose security has had sustained recent trading in a 
Private Placement Market, the Exchange generally will attribute a 
price, Market Value of Listed Securities, and Market Value of 
Unrestricted Publicly Held Shares to the company equal to the lesser of 
(i) the value calculable based on a Valuation and (ii) the value 
calculable based on the most recent trading price in a Private 
Placement Market.\50\ The Commission believes that using the lesser of 
these values to determine whether the company has met the Exchange's 
price-based initial listing requirements provides a reasonable means of 
assessing these metrics in the special circumstances where a company's 
stock is not previously registered under the Exchange Act and is 
listing upon effectiveness of a selling shareholder registration 
statement, without a related underwritten offering. The Commission has 
recognized that the most recent trading price in a Private Placement 
Market may be an imperfect indication as to the value of a security 
upon listing, in part because Private Placement Markets generally do 
not have the depth and liquidity and price discovery mechanisms found 
on public trading markets.\51\ The proposed rule requires, however, the 
Exchange to examine the trading price trends in the Private Placement 
Market over a period of several months prior to listing and specifies 
that the Exchange will only rely on a Private Placement Market price it 
if is consistent with a sustained history over a several month period 
evidencing a market value in excess of Nasdaq's market value 
requirement.\52\ The Commission therefore agrees with the Exchange that 
consideration of both of these values (i.e., the Valuation and trading 
on a Private Placement Market) should provide the Exchange with an 
estimation of a company's Market Value of Listed Securities, Market 
Value of Unrestricted Publicly Held Securities, and bid price that can 
support qualifying the company's securities for Exchange listing under 
the initial listing standards.\53\ Further, by assessing whether a 
company meets price-based initial listing requirements using the lesser 
of the Valuation and a value based on the most recent Private Placement 
Market trading, the Exchange will be using the more conservative 
estimate to determine whether the company qualifies to list under the 
Nasdaq Global or Capital Market standards.
---------------------------------------------------------------------------

    \50\ See proposed Nasdaq Rules IM-5405-1(a)(1) and IM-5505-
1(a)(1).
    \51\ See 2008 Order, supra note 45, 73 FR at 54443.
    \52\ See proposed Nasdaq Rules IM-5405-1(a)(5) and IM-5505-
1(a)(5). In relying on the price in a Private Placement Market, the 
Commission has previously stated that a national security exchange 
should consider the trading characteristics of the stock, including 
its trading volume and price volatility over a sustained period of 
time. See 2008 Order, supra note 45, 73 FR at 54444. See also infra 
note 71.
    \53\ See 2008 Order, supra note 45, 73 FR at 54443-44.
---------------------------------------------------------------------------

    For a company whose security has not had sustained recent trading 
in a Private Placement Market, the Exchange generally will determine 
that the company has met its bid price, Market Value of Listed 
Securities, and Market Value of Unrestricted Publicly Held Shares 
requirements if the company provides a Valuation evidencing that these 
metrics exceed 200% of the otherwise applicable requirements.\54\ 
According to the Exchange, ``a recent Valuation indicating that the 
company exceeds 200% of the otherwise applicable price-based 
requirement will give a significant degree of comfort that the company 
will meet the applicable initial listing price-based requirements upon 
commencement of trading.'' \55\ The Commission believes that requiring 
a company that does not have a recent and sustained history of trading 
its securities in a Private Placement Market to provide a Valuation 
that shows that the company exceeds 200% of the otherwise applicable 
price-based initial listing requirements could provide the Exchange 
with a reasonable level of assurance that the company will meet the 
Market Value of Listed Securities, Market Value of Unrestricted 
Publicly Held Shares, and bid price requirements to support listing on 
the Exchange and the maintenance of fair and orderly markets in 
accordance with the Exchange Act.
---------------------------------------------------------------------------

    \54\ See proposed Nasdaq Rules IM-5405-1(a)(2) and IM-5505-
1(a)(2). See also supra notes 16-18 and accompanying text, which set 
forth the increased requirements.
    \55\ See supra Section II.A.1, Calculation of Price-based 
Initial Listing Requirements.
---------------------------------------------------------------------------

    The Commission has previously recognized that a Valuation used to 
qualify a company for listing is only an estimate of what a company's 
true market value and security price will be upon commencement of 
public trading.\56\ The Exchange's rules seek to ensure that the 
Valuation used in the listing standards described above is reliable by 
requiring it to be provided by an independent third party that has 
significant experience and demonstrable competence in providing 
valuations of companies, and to be of a recent date as of the time of 
approval of the company for listing.\57\ The proposed independence 
criteria provide that the valuation agent will not be ``independent'' 
if the valuation agent, or any affiliated person, owns in the aggregate 
more than 5% of the securities to be listed,\58\ or has provided 
investment banking services to the company in the 12 months prior to 
the Valuation or in connection with the listing.\59\ The Commission 
believes that, consistent with Section 6(b)(5) of the Exchange Act and 
the protection of

[[Page 67316]]

investors, these independence requirements should help to ensure that 
the Valuation is reliable.\60\
---------------------------------------------------------------------------

    \56\ See 2008 Order, supra note 45, 73 FR at 54443.
    \57\ See proposed Nasdaq Rules IM-5405-1(a)(1) and (2) and IM-
5505-1(a)(1) and (2) (incorporating by reference Nasdaq Rule IM-
5315-1(e) and (f)). The Commission notes that Nasdaq Rule IM-5315-
1(e), incorporated by reference into proposed Nasdaq Rules IM-5405-
1(a)(1) and (2) and IM-5505-1(a)(1) and (2), includes additional 
requirements that must be satisfied before the Exchange can rely on 
a Valuation, such as requiring that the evaluator must have 
considered, among other factors, the annual financial statements 
required to be included in the registration statement.
    \58\ This calculation of ownership will include any right to 
receive such securities exercisable within 60 days.
    \59\ See proposed Nasdaq Rules IM-5405-1(a)(1) and (2) and IM-
5505-1(a)(1) and (2) (incorporating by reference Nasdaq Rule IM-
5315-1(f)).
    \60\ See 2018 Order, supra note 45, 83 FR at 5654 (approving 
independence standards for the entity conducting the valuation and 
other requirements that must be satisfied for the exchange to rely 
on a valuation).
---------------------------------------------------------------------------

    In addition, the Exchange will be able to approve a security for 
listing if, in lieu of a Valuation, the company provides other 
compelling evidence that the security's price, Market Value of Listed 
Securities, and Market Value of Unrestricted Publicly Held shares 
exceed 250% of the otherwise applicable requirement.\61\ The Exchange 
will be allowed to consider as compelling evidence a tender offer for 
cash by the company or an unaffiliated \62\ third party, sales between 
unaffiliated third parties involving the company's equity securities, 
or equity security sales by the company.\63\ The Commission believes 
that the Exchange's proposed requirements that limit the compelling 
evidence that the Exchange may accept in lieu of a Valuation to these 
specific types of transactions, and that require that such transactions 
must have been completed or, in the case of a tender offer, commenced 
and completed, within the prior six months, have represented at least 
20% of the applicable Market Value of Publicly Held Shares requirement, 
and not have involved the company's affiliates unless such 
participation meets the de minimis standards described below, should 
provide a reasonable basis for the Exchange to determine whether the 
transaction provides a reliable indication of the company's value.\64\ 
The specified requirements for affiliate participation to be considered 
de minimis,\65\ among other considerations, can aid the Exchange in 
assessing whether it can rely on the transaction, whether it be a sale 
or a tender offer, to qualify the company for listing. Further, the 
requirement that the company provide written certification to the 
Exchange of compliance with these new rules will provide clarity and 
give the Exchange a means to obtain necessary information to ensure 
compliance. With respect to a tender offer used as evidence of 
compliance with price-based initial listing requirements, the 
Commission also notes that the tender offer will be subject, at a 
minimum, to Section 14(e) of the Exchange Act and Regulation 14E 
thereunder.\66\ Finally, requiring that such evidence shows a value 
exceeding 250% of the otherwise applicable price-based initial listing 
requirements can provide the Exchange with some reasonable level of 
assurance that the company would satisfy the underlying price-based 
initial listing requirements.\67\
---------------------------------------------------------------------------

    \61\ See proposed Nasdaq Rules IM-5405-1(a)(3) and IM-5505-
1(a)(3). See also supra notes 21-22 and accompanying text, which set 
forth the increased requirements.
    \62\ The Commission notes that Nasdaq will rely on the 
definition of ``affiliate'' in SEC Rule 10A-3(e), 17 CFR 240.10A-
3(e), to determine if a party to a transaction is an affiliate of 
the company or a third-party participant is unaffiliated with the 
company. See supra Section I.A.1.
    \63\ See proposed Nasdaq Rules IM-5405-1(a)(3) and IM-5505-
1(a)(3).
    \64\ See proposed Nasdaq Rules IM-5405-1(a)(3)(i) and (ii) and 
IM-5505-1(a)(3)(i) and (ii).
    \65\ The de minimis standard requires that affiliate 
participation be less than 5% individually or less than 10% 
collectively, that participation be suggested or required by 
unaffiliated investors, and that affiliates not have participated in 
negotiating the economic terms of the transaction. See proposed 
Nasdaq Rules IM-5405-1(a)(3)(ii)(C)(1)-(3) and IM-5505-
1(a)(3)(ii)(C)(1)-(3).
    \66\ See 15 U.S.C. 78n(e) and 17 CFR 240.14e-1 to 17 CFR 
24.014e-8.
    \67\ See supra Section II.A.1, Calculation of Price-based 
Initial Listing Requirements (stating Nasdaq's belief that recent, 
substantial in size, arm's length tender offers for cash by an 
unaffiliated third party, sales between unaffiliated third parties 
involving the company's equity securities, or equity security sales 
by the company, with de minimis insider participation, indicating 
that the company exceeds 250% of the otherwise applicable price-
based requirements, will give a significant degree of comfort that 
the company will meet the applicable price-based initial listing 
requirements; and that, as to an issuer tender offer that is recent, 
substantial in size, and that indicates the company exceeds 250% of 
the otherwise applicable price based requirements, such a tender 
offer is, in Nasdaq's view, compelling evidence of the company's 
value because it is unlikely the company would misprice the 
securities purchased to the degree necessary to fail to meet the 
applicable initial listing requirements).
---------------------------------------------------------------------------

    The Commission notes that the Exchange is not required to accept 
other evidence in lieu of a Valuation as evidence of compliance with 
its price-based initial listing requirements.\68\ Additionally, in its 
proposal, the Exchange noted it has broad discretionary authority 
pursuant to Nasdaq Rule 5101 to consider whether a company may 
appropriately be listed on the Exchange.\69\ The proposed rule language 
requires, as noted above, that the Exchange will only rely on a price 
in a Private Placement Market if it is consistent with a sustained 
history of trading over several months evidencing a market value in 
excess of the listing requirement.\70\ In addition, in relying on the 
Valuation, Nasdaq has represented that it 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 continue to monitor the company and the 
appropriateness of relying on the Valuation up until the time of 
listing.\71\ Further, when considering whether to accept other 
compelling evidence of a company's value in lieu of a Valuation, the 
Exchange has stated that it will examine any such evidence produced by 
the company to assure that it is indicative of the company's overall 
value.\72\ Nasdaq has stated that, if based on the facts and 
circumstances, Nasdaq determines that such evidence is not reliable, 
the company will be required to provide a Valuation meeting the 
requirements of its rules.\73\ Such review of the transaction, as 
Nasdaq has indicated, should help it determine whether it is 
appropriate to rely on the transaction as providing a reliable 
indication of the company's value when qualifying companies for listing 
under the new listing standards.
---------------------------------------------------------------------------

    \68\ See proposed Nasdaq Rules IM-5405-1(a)(3) and IM-5505-
1(a)(3), which state that ``in lieu of a Valuation Nasdaq may (but 
is not required to) accept other compelling evidence.''
    \69\ See supra note 11. Nasdaq Rule 5101 states that the 
exchange has broad discretionary authority to deny initial listing, 
apply additional or more stringent criteria for initial or continued 
listing, 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 the Exchange 
inadvisable or unwarranted in the opinion of the Exchange, even 
though the securities meet all enumerated criteria for initial or 
continued listing on the Exchange.
    \70\ See supra note 52 and accompanying text. See also proposed 
Nasdaq Rules IM-5405-1(a)(5) and IM-5505-1(a)(5). As noted by Nasdaq 
in its filing, limited trading in a Private Placement Market may not 
be sufficient for the Exchange to reach a conclusion that the 
company meets the applicable price-based requirements. See supra 
note 15.
    \71\ See supra note 11 and accompanying text. Nasdaq further 
noted in its filing that it may withdraw its approval of the listing 
at any time prior to the listing date it if it believes that the 
Valuation no longer accurately reflects the company's likely market 
value. See supra note 11 and accompanying text.
    \72\ See supra Section II.A.1, Calculation of Price-based 
Initial Listing Requirements.
    \73\ See supra Section II.A.1, Calculation of Price-based 
Initial Listing Requirements. For the requirements for such 
Valuation, see Nasdaq Rule IM-5315-1(e) and (f) and proposed Nasdaq 
Rules IM-5405-1(a)(1) and (2) and IM-5505-1(a)(1) and (2).
---------------------------------------------------------------------------

    Based on the above, the Commission believes that the proposed 
initial listing requirements can provide a reasonable basis for the 
Exchange to find that a company has met the price-based initial listing 
requirements (i.e., bid price, Market Value of Listed Securities, and 
Market Value of Unrestricted Publicly Held Shares) to support listing 
on the Exchange and the maintenance of fair and orderly markets, 
thereby protecting investors and the public interest in accordance with 
Section 6(b)(5) of the Exchange Act. The Commission also notes that 
companies listing pursuant to the new provisions will still be required 
to meet the listing prerequisites

[[Page 67317]]

contained in Nasdaq Rule 5210, as well as the corporate governance 
requirements detailed in the 5600 series of rules. Furthermore, the 
Commission notes that companies listing pursuant to the proposed 
provisions will be required to comply with the distribution 
requirements contained in Nasdaq Rules 5405 and 5505, i.e., that the 
company have 400 or 300 Round Lot Holders, as applicable, and 1,100,000 
or 1,000,000 Unrestricted Publicly Held Shares, as applicable, and 
comply with other requirements that vary depending on which listing 
standard the company uses to qualify for listing.\74\ The Commission 
believes that these existing provisions should continue to help ensure 
that the company has the requisite liquidity for listing on the 
Exchange.
---------------------------------------------------------------------------

    \74\ For example, some of the listing standards require certain 
levels of shareholder equity or operating history. See Nasdaq Rules 
5405 and 5505.
---------------------------------------------------------------------------

    In addition, securities qualified for listing under the proposed 
listing requirements for the Nasdaq Global or Capital Markets, which 
are listing without a related underwritten public offering, must list 
upon effectiveness of a registration statement pursuant to the 
Securities Act filed solely for the purpose of allowing existing 
shareholders to sell their shares.\75\ The Commission believes that 
this requirement should help to ensure that investors and the market 
have access to complete, accurate, and reliable disclosure of material 
information needed for informed investment decisions and secondary 
market trading of the listed securities.
---------------------------------------------------------------------------

    \75\ See proposed Nasdaq Rules IM-5405-1(b)(ii) and IM-5505-
1(b)(ii).
---------------------------------------------------------------------------

    Under the proposed rule change, securities that are not listed in 
connection with an underwritten initial public offering and instead 
qualify for listing under the listing requirements for Direct Listings 
on the Nasdaq Global or Capital Markets must begin trading on the 
Exchange following initial pricing through the IPO Cross procedures and 
companies will be required to have a broker-dealer serving in the role 
of financial advisor to the issuer who is willing to perform the 
functions under Nasdaq Rule 4120(c)(8) related to the opening of 
trading in the security that would be performed by an underwriter in an 
underwritten initial public offering.\76\ The Commission notes that the 
Exchange's rules currently provide that, in the case of initial price 
of a security listed under the listing requirements for Direct Listings 
on the Nasdaq Global Select Market, the fourth tie-breaker used in 
calculating the Current Reference Price and determining the opening 
price of the security will be the most recent transaction price in the 
Private Placement Market (for a security that has had recent sustained 
trading in a Private Placement Market prior to listing) or the price 
determined by the Exchange in consultation with the financial advisor 
to the issuer.\77\ The proposal would extend these pricing provisions 
to Direct Listings on the Nasdaq Global and Capital Markets.\78\ The 
Commission believes that specifying that the IPO Cross must be used to 
open the securities, and relying on the most recent transaction price 
in the Private Placement Market or a price determined by the Exchange 
in consultation with the issuer's financial advisor for purposes of the 
fourth tie-breaker in the cross, should help establish a reliable 
Current Reference Price and the price at which the match will occur, 
and thereby facilitate the opening of these securities when trading 
first commences on the Exchange for certain securities not listed in 
connection with an underwritten IPO. The Commission believes these 
changes, consistent with 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 listed under the new standards.
---------------------------------------------------------------------------

    \76\ See proposed Nasdaq Rules IM-5405-1(b) and IM-5505-1(b).
    \77\ See Nasdaq Rules 4753(a)(3)(A)(iv)b. and (b)(2)(D)(ii).
    \78\ See proposed Nasdaq Rules 4753(a)(3)(A)(iv)b. and 
(b)(2)(D)(ii).
---------------------------------------------------------------------------

    The Exchange has also proposed that, for a company transferring 
from a foreign regulated exchange or concurrently listing on the 
Exchange and a foreign regulated exchange, the Exchange will determine 
that the company has met the applicable price-based requirements based 
on the most recent trading price in such market, provided that there is 
a broad, liquid market for the company's shares in its country of 
origin.\79\ The Commission believes that in these circumstances using 
the most recent trading price from the foreign regulated market will 
provide a reasonable basis for the Exchange to determine whether the 
company meets the Exchange's price-based based initial listing 
requirements, and provide clarity that other requirements described 
herein applicable to Direct Listing will not apply in such 
circumstances, thereby supporting listing on the Exchange and the 
maintenance of fair and orderly markets and the public interest in 
accordance with Section 6(b)(5) of the Exchange Act.
---------------------------------------------------------------------------

    \79\ See proposed Nasdaq Rules IM-5405-1(a)(4) and IM-5505-
1(a)(4). The Commission notes that these proposed rules are the same 
as existing Nasdaq Rule IM-5315-1(c), which applies to the Nasdaq 
Global Select Market, and will extend this provision to companies 
listing on the Nasdaq Global and Capital Markets.
---------------------------------------------------------------------------

    The Commission believes that the proposed changes to Nasdaq Rule 
IM-5315-1 to make Direct Listings, as described therein, a defined term 
and add to the caption that these requirements apply to the Nasdaq 
Global Select Market will provide clarity to the Exchange's rules. The 
Commission notes that the proposed rule change will not modify any 
substantive requirements for Direct Listings on the Nasdaq Global 
Select Market. The Commission also believes that updating the numbering 
for current Nasdaq Rule IM-5505 to proposed Nasdaq Rule IM-5505-2 and 
using the defined term Direct Listing in proposed Nasdaq Rule IM-5900-7 
are also non-substantive changes that will provide clarity to the 
Exchange's rules, consistent with the protection of investors and the 
public interest under Section 6(b)(5) of the Exchange Act.
    For the reasons discussed above, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with the Exchange Act.

IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    Interested persons are invited to submit written views, data, and 
arguments concerning whether Amendment No. 1 is consistent with the 
Exchange 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-2019-059 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-2019-059. 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/

[[Page 67318]]

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 the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2019-059 and should 
be submitted on or before December 30, 2019.

V. Accelerated Approval of the Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
1 in the Federal Register. The Commission notes that the original 
proposal was published for comment in the Federal Register and that the 
Commission received no comments on the proposal.\80\ The Commission 
notes that Amendment No. 1 clarifies and provides additional 
explanation relating to the proposed rule change. The changes and 
additional information in Amendment No. 1 assist the Commission in 
evaluating the Exchange's proposal and in determining that it is 
consistent with the Exchange Act. In particular, the Commission 
believes that the amendments and clarifications on what may constitute 
other compelling evidence in lieu of a Valuation, including what level 
of affiliate participation may be considered de minimis, that companies 
must provide written certification that they have met these 
requirements, that third party transactions must be between 
unaffiliated third parties, and that, as to tender offers, only cash 
tender offers can be compelling evidence will help the Exchange 
administer the requirements and provide clarity on what types of 
transactions may qualify. The Commission has also found that the 
proposal, as modified by Amendment No. 1, is consistent with the 
Exchange Act for the reasons discussed herein. Accordingly, the 
Commission finds good cause for approving the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis, pursuant to 
Section 19(b)(2) of the Exchange Act.\81\
---------------------------------------------------------------------------

    \80\ See Notice, supra note 3.
    \81\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\82\ that the proposed rule change (SR-NASDAQ-2019-059), 
as modified by Amendment No. 1 thereto, be, and it hereby is, approved 
on an accelerated basis.
---------------------------------------------------------------------------

    \82\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\83\
---------------------------------------------------------------------------

    \83\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-26405 Filed 12-6-19; 8:45 am]
 BILLING CODE 8011-01-P